The Oxford Handbook of Transformations of the State 9780199691586, 0199691584

Table of contents :
Cover
Series
The Oxford Handbook of Transformations of the State
Copyright
Contents
List of Figures and Tables
About the Contributors
1 Introduction: Transformations of the State
2 Changing Perspectives on the State
Part I The Emergence of Modern States
3 Varieties of State Experience
4 The Layered State: Pathways and Patterns of Modern Nation State Building
5 The Emergence of the New World States
6 State Formation and Transformation in Africa and Asia: The Third Phase of State Expansion
7 State Theory: Four Analytical Traditions
8 Limited Statehood: A Critical Perspective
9 State Transformations in Comparative Perspective
Part II Internationalization and the State
10 Internationalization and the State: Sovereignty as the External Side of Modern Statehood
11 Sovereign (In)Equality in the Evolution of the International System
12 The Competition State: The Modern State in a Global Economy
13 The Embedded State: The New Division of Labor in the Provision of Governance Functions
14 Multilevel Governance and the State
15 Beyond the State? Are Transnational Regulatory Institutions Replacing the State?
16 Security, Intervention, and the Responsibility to Protect: Transforming the State by Reinterpreting Sovereignty
17 Ambiguous Transformations: The 2007/08 International Financial Crisis and Changing Economic Roles of the State
18 Environmental Risks and the Changing Interface of Domestic and International Governance
Part III Contemporary Transformations of the Core OECD World of States
19 State Transformations among the Affluent Democracies
20 The Transformations of the Statist Model
21 From Industrial Corporatism to the Social Investment State
22 The Changing Role of the State in Liberal Market Economies
23 ISI States Reverse Course: From Import Substitution to Open Economy
24 Welfare State Transformation: Convergence and the Rise of the Supply-Side Model
25 The State and Gender Equality: From Patriarchal to Women- Friendly State?
26 From the Positive to the Regulatory State: A Transformation in the Machinery of Governance?
27 Migration and the Porous Boundaries of Democratic States
28 Plurinational States
29 The Changing Architecture of the National Security State
30 Transformations of the Democratic State
Part IV Post-Communist Peculiarities? State Transformations in the Former Communist World
31 The Peculiarities of Post-Communist State Development: Institutional Consolidation and Elite Competition
32 The Transformation of the State in Eastern Europe
33 Resources as Constraints? Natural Resource Wealth and the Possibility of Developmental States in the Former Soviet Union
34 The Transformation of the Russian State
35 China: Economic Liberalization, Adaptive Informal Institutions, and Party-State Resilience
Part V State Transformations in the Non-OECD World
36 States in the Global South: Transformations, Trends, and Diversity
37 Human Development, State Transformation, and the Politics of the Developmental State
38 Rentier States and State Transformations
39 Predatory States and State Transformation
40 State Failure and State Transformation
41 Ethnicity and State Transformation in the Global South
42 Democracy and Regime Change in the Global South: Causes and Trends
43 Emerging Welfare States in Latin America and East Asia
Part VI Conclusion
44 Conclusion: States Transforming
Name Index
Index of Subjects

Citation preview

The Oxford Handbook of

TRANSFORMATIONS OF THE STATE

The University of Bremen’s Transformations of the State Collaborative Research Centre (TranState, 2003–14) served as the institutional, intellectual, and administrative home for the preparation of this concluding Handbook. Funded by the Deutsche Forschungsgemeinschaft (German Research Foundation) TranState comprised some eighty researchers from all disciplines of the social sciences. Together, they have defined the multi-faceted modern state in four intersecting dimensions: resources, or control of the use of force and revenues; law, or jurisdiction and the courts; legitimacy, or the acceptance of political rule by the populace; welfare, or the facilitation of economic growth and social equality. The Oxford Handbook of the Welfare State (2010) focused on the welfare dimension, and this volume provides a multi-dimensional view of the entire state as a notion of governance and how it has developed under globalization. The North American partner in this undertaking is the University of North Carolina (UNC) at Chapel Hill Center for European Studies (CES) and European Union Center for Excellence (EUCE). Their mission is to advance understanding of the social, political, economic, and historical events that shape contemporary Europe, in particular the European integration project. Functioning nation states and an unprecedented multilevel, supranational form of statehood constitute the central premise of European integration—and understanding how states around the world have developed under globalization is crucial for that mission. Funding for the project has been provided by the European Union and the United States Department of Education. The contents, however, are the sole responsibility of the contributors and can in no way be taken to reflect the views of the European Union or the United States government.

THE OXFORD HANDBOOK OF

TRANSFORMATIONS OF THE STATE Edited by

S T E PH A N L E I BF R I E D, E V E LY N E H U BE R , M AT T H E W L A NGE , JONA H D.  L E V Y, F R A N K N U L L M E I E R , and

JOH N D.  S T E PH E NS

1

3 Great Clarendon Street, Oxford, ox2 6dp, United Kingdom Oxford University Press is a department of the University of Oxford. It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide. Oxford is a registered trade mark of Oxford University Press in the UK and in certain other countries © Oxford University Press 2015 The moral rights of the authors have been asserted First Edition published 2015 Impression:  1 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by licence or under terms agreed with the appropriate reprographics rights organization. Enquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Published in the United States of America by Oxford University Press 198 Madison Avenue, New  York, NY 10016, United States of America British Library Cataloguing in Publication Data Data available Library of Congress Control Number:  2014948252 ISBN 978–0–19–969158–6 Printed and bound by CPI Group (UK) Ltd, Croydon, cr0 4yy Links to third party websites are provided by Oxford in good faith and for information only. Oxford disclaims any responsibility for the materials contained in any third party website referenced in this work.

Contents

Preface

xi

Stephan Leibfried, Evelyne Huber, Matthew Lange, Jonah D. Levy, Frank Nullmeier, and John D. Stephens List of Figures and Tables About the Contributors

1. Introduction: Transformations of the State

xv xvii 1

Evelyne Huber, Matthew Lange, Stephan Leibfried, Jonah D. Levy, Frank Nullmeier, and John D. Stephens

2. Changing Perspectives on the State

33

Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier

PA RT I   T H E E M E RG E NC E OF MODE R N S TAT E S 3. Varieties of State Experience

61

John A. Hall

4. The Layered State: Pathways and Patterns of Modern Nation State Building

75

Philip Manow and Daniel Ziblatt

5. The Emergence of the New World States

99

Andrew S. Kelly and James Mahoney

6. State Formation and Transformation in Africa and Asia: The Third Phase of State Expansion

116

Matthew Lange

7. State Theory: Four Analytical Traditions

131

Matthias vom Hau

8. Limited Statehood: A Critical Perspective Thomas Risse

152

vi   Contents

9. State Transformations in Comparative Perspective

169

Jonah D. Levy

PA RT I I   I N T E R NAT IONA L I Z AT ION A N D  T H E  S TAT E 10. Internationalization and the State: Sovereignty as the External Side of Modern Statehood

193

Michael Zürn and Nicole Deitelhoff

C RUC I A L T Y PE S

11. Sovereign (In)Equality in the Evolution of the International System

221

Lora Anne Viola, Duncan Snidal, and Michael Zürn

12. The Competition State: The Modern State in a Global Economy

237

Philipp Genschel and Laura Seelkopf

13. The Embedded State: The New Division of Labor in the Provision of Governance Functions

253

Tine Hanrieder and Bernhard Zangl

14. Multilevel Governance and the State

269

Arjan H. Schakel, Liesbet Hooghe, and Gary Marks

15. Beyond the State? Are Transnational Regulatory Institutions Replacing the State?

286

Walter Mattli

C RUC I A L I S SU E S

16. Security, Intervention, and the Responsibility to Protect: Transforming the State by Reinterpreting Sovereignty

305

Christopher Daase

17. Ambiguous Transformations: The 2007/08 International Financial Crisis and Changing Economic Roles of the State

322

Eric Helleiner

18. Environmental Risks and the Changing Interface of Domestic and International Governance Klaus Dingwerth and Helge Jörgens

338

Contents   vii

PA RT I I I   C ON T E M P OR A RY T R A N SF OR M AT ION S OF T H E C OR E OE C D WOR L D OF S TAT E S 19. State Transformations among the Affluent Democracies

357

Jonah D. Levy, John D. Stephens, and Stephan Leibfried

C RUC I A L T Y PE S

20. The Transformations of the Statist Model

393

Jonah D. Levy

21. From Industrial Corporatism to the Social Investment State

410

Jingjing Huo and John D. Stephens

22. The Changing Role of the State in Liberal Market Economies

426

Peter A. Hall

23. ISI States Reverse Course: From Import Substitution to Open Economy

445

Herman Schwartz and Sebastián Etchemendy

C RUC I A L I S SU E S

24. Welfare State Transformation: Convergence and the Rise of the Supply-Side Model

465

Herbert Obinger and Peter Starke

25. The State and Gender Equality: From Patriarchal to WomenFriendly State?

482

Julia S. O’Connor

26. From the Positive to the Regulatory State: A Transformation in the Machinery of Governance?

499

Katharina Holzinger and Susanne K. Schmidt

27. Migration and the Porous Boundaries of Democratic States

516

Rainer Bauböck

28. Plurinational States Michael Keating

532

viii   Contents

29. The Changing Architecture of the National Security State

547

Andreas Busch

30. Transformations of the Democratic State

565

Frank Nullmeier, Steffen Schneider, and Andreas Hepp

PA RT I V   P O S T- C OM M U N I S T PE C U L I A R I T I E S? S TAT E T R A N SF OR M AT ION S I N T H E F OR M E R  C OM M U N I S T WOR L D 31. The Peculiarities of Post-Communist State Development: Institutional Consolidation and Elite Competition

587

Anna Grzymała-Busse and Pauline Jones Luong

32. The Transformation of the State in Eastern Europe

602

Milada Anna Vachudova

33. Resources as Constraints? Natural Resource Wealth and the Possibility of Developmental States in the Former Soviet Union

618

Pauline Jones Luong

34. The Transformation of the Russian State

637

Brian D. Taylor

35. China: Economic Liberalization, Adaptive Informal Institutions, and Party-State Resilience

654

Kellee S. Tsai

PA RT V   S TAT E T R A N SF OR M AT ION S I N  T H E  NON- OE C D WOR L D 36. States in the Global South: Transformations, Trends, and Diversity

673

Matthew Lange

C RUC I A L T Y PE S

37. Human Development, State Transformation, and the Politics of the Developmental State

691

Peter B. Evans and Patrick Heller

38. Rentier States and State Transformations David Waldner and Benjamin Smith

714

Contents   ix

39. Predatory States and State Transformation

730

William Reno

40. State Failure and State Transformation

745

Sven Chojnacki and Anne Menzel

C RUC I A L I S SU E S

41. Ethnicity and State Transformation in the Global South

763

Matthew Lange and Klaus Schlichte

42. Democracy and Regime Change in the Global South: Causes and Trends

779

Grigore Pop-Eleches and Graeme B. Robertson

43. Emerging Welfare States in Latin America and East Asia

796

Evelyne Huber and Sara Niedzwiecki

PA RT V I   C ONC LUS ION 44. Conclusion: States Transforming

815

Evelyne Huber, Matthew Lange, Stephan Leibfried, Jonah D. Levy, Frank Nullmeier, and John D. Stephens

Name Index Index of Subjects

841 867

Preface

For some decades now, the world’s national states have been opening their national economies and creating an international network of institutions and norms to oversee the resulting regional and global economies. This economic globalization, and the social globalization that accompanied it, has had feedback effects on the forms, functions, and effectiveness of national states. Geo-political events such as the end of the Cold War, asymmetrical warfare, and large-scale acts of terrorism have transformed the face of international politics while, on the domestic front, actors and demands have multiplied and citizens have voiced increased dissatisfaction with the performance of national political systems. Social scientists around the world have been observing and analyzing these developments for decades, and in 2007, Oxford University Press (OUP) editor Dominic Byatt decided it was time to assemble their research into a definitive report on the state of the national state. He queried Stephan Leibfried, director of the University of Bremen’s Transformations of the State Collaborative Research Center (TranState, 2003-14), about the possibility of assembling the OUP Handbook on the topic. Leibfried, an expert on OECD nation state development and welfare state politics with a background in law, recruited his colleague Frank Nullmeier, who specializes in political theory and the legitimacy of political systems. Working with the TranState managing director, Dieter Wolf, they prepared a rough outline for the volume and began to assemble a team of editors from both sides of the Atlantic: political scientists Evelyne Huber and John D. Stephens at the University of North Carolina in Chapel Hill are both wide-ranging comparativists who have studied the transformations in North and South American as well as European states; Jonah D. Levy at the University of California Berkeley is a comparative political scientist and expert on economic liberalization and its impact on the state; and sociologist Matthew Lange at McGill University in Montreal is a specialist on state-building in the Global South. Even this editorial team of six lacked the expertise on international relations needed to assemble Part II, “Internationalization of the State,” and we are particularly grateful to the two authors who came to the rescue. Michael Zürn, a specialist on global governance and international institutions at the Wissenschaftszentrum Berlin (WZB), and Nicole Deitelhoff, a specialist on international relations and principal investigator in the Cluster of Excellence on Normative Orders at the Goethe University Frankfurt, wrote the introduction to Part II (Chapter 10) and worked with its authors to create a comprehensive and cohesive treatment of the subject. In 2009, Huber and Stephens hosted a three-day meeting of the editors in Chapel Hill, North Carolina, and The Oxford Handbook of Transformations of the State and the “shape of things to come” began to emerge. OUP approved our expanded outline and author lineup, and in late 2010 the project was approved by the German Research Foundation (DFG) as an integral and concluding part of TranState activities during the center’s third and final phase of funding (2011–14).

xii   Preface Experts on state formation and development are relatively few and far between, and the team of authors we assembled was scattered across three continents. Two international workshops in the Fall of 2011 and Winter of 2012 enabled the editors and authors to discuss early drafts of the chapters face to face—one in northern Germany at the Hanse-Wissenschaftskolleg, and one in the US, at the University of North Carolina (UNC) Center for European Studies (CES) and European Union Center for Excellence (EUCE). John A. Hall’s critiques and recommendations during this period were especially helpful in shaping the fundamental chapters of Part I. Finally, in 2012, Huber and Stephens returned to the Hanse-Wissenschaftskolleg to focus on the introductory and concluding chapters and begin the final editing process, tasks which they carried on at UNC in 2013 and 2014. The tedious task of correcting the Handbook’s page proofs and checking citations a last time fell to Leibfried, Levy, and Lange in the Fall of 2014. The corrected proofs were checked by Stephan Leibfried, Steffen Schneider, and Monika Sniegs. Over the course of this long trajectory, a number of institutions and individuals whose names do not appear in the Table of Contents were essential. TranState and the CES/EUCE built on their Transatlantic Masters Program (TAM) partnership to provide infrastructure and generate the needed “transatlantic research space.” The research space for the Oxford Handbook was made possible by TranState, with generous funding from the DFG and the University of Bremen, and by grants to the CES from the EU’s European Union Center for Excellence and the US Department of Education National Resource Center programs. At the University of Bremen, Peter Boy and Dörthe Meyfeld built and managed the Handbook website. Monika Sniegs handled the word-processing and organizational tasks, Dörthe Hauschild the last round of copy-editing, and Dieter Wolf the administrative and financial issues: their mix of skill, good humor, no-nonsense North-German charm, and mild Southern—that is, Swabian—sarcasm kept the whole operation running smoothly. At UNC, Erica Edwards, Stephanie Volk, and Phil Daquila all helped to make the Winter 2012 workshop a success; Claire Greenstein made a substantial contribution to the chapter editing; and Santiago Anria checked and compiled the bibliographies. At the Hanse-Wissenschaftskolleg, which provided financial support and a venue for one of our workshops and research fellowships for two of our editors, Reto Weiler and Susanne Fuchs were gracious and flexible hosts. To all of them, we extend our sincere thanks. As we have seen in the aftermath of the financial crises of the past decade, and as this volume makes readily apparent, the era of the national state is long from being over. The careful scholarship assembled here shows that national states are required to stabilize and domesticate globalization—to handle and transform domestic conflict and make it work effectively across all sectors of society. The national state is neither withering away, a victim of globalization, nor slated for oblivion. It is, rather, the lynchpin of globalization: if we neglect or dismantle our national states, as many neoliberal pundits advocate, we effectively pull that lynchpin and trigger a vicious cycle of twenty-first century protectionist politics—to name just one of many troublesome consequences. The political scientists and sociologists writing here are not offering the philosopher’s gray-on-gray palette of wisdom about a dying era, like Hegel’s “owl of Minerva [which] spreads its wings only within the falling of the dusk.”1 The national state is alive and kicking, and the knowledge assembled

1  Georg Wilhelm Friedrich Hegel, 1952. The Philosophy of Right: The Philosophy of History, p. 7. Chicago, IL: Encyclopædia Britannica (first published 1821).

Preface   xiii in this handbook is part of a lively debate on its future, aimed at the researchers and leaders who must guide us through the coming decades. We have tried to capture the mood of this colorful debate in our cover images. The economically developed northern countries have long been the focus of most research on the nation state, but the jumble of flags on the front cover represents countries of the Global South and international organizations,5 as does this volume. The coin depicted on the spine contains ancient symbols of power and governance that date back to the earliest concepts of political rule and are still in use today. It is a Shekel minted in the Phoenician city of Tyre, located on an island just off the coast of present-day Lebanon. The letters to the left of the eagle’s breast give the date as the “19th year of the era of Tyre,” which corresponds to 107/8 bc. The club beneath the date belongs to the Phoenician god Melqart,2 who appears on the front of the coin and was the patron god of Tyre.3 The eagle was a typical symbol of the Ptolemaic Kingdom, which ruled the region for some three centuries. It was usually shown standing on a thunderbolt, but here it is perched on the prow of a small ship. Images of ships—that is, of “ships of state”—had been used as symbols of political and economic power or governance at least since Plato’s time.4 Both the eagle and the ship6 remain important symbols of power and the state in public discourse and national emblems to this day. Stephan Leibfried, Evelyne Huber, Matthew Lange, Jonah D. Levy, Frank Nullmeier, and John D. Stephens

2 

The Phoenician counterpart to the Greek god Heracles, sometimes spelled Melkart or Melqarth. We would like to thank Amelia Dowler, the British Museum’s Curator of Greek and Roman Provincial Coins, for information about the coin. 4  The word “govern” has its roots in the Latin word “gubernare,” which was derived from the Greek word for steering or piloting a ship, “kybernan.” 5  The flags shown are from left to right: European Union, Brazil, Belarus, and The Netherlands; Portugal, United Kingdom, Algeria, and China; USA, Australia, Germany, and France; Namibia, Chile, Japan, and South Africa; Croatia, India, Poland, and NATO; UN, Ireland, Mexico, and Russia. 6  For a first look at the ship metaphor, see on­l ine: Stephan Leibfried and Wolfgang Win­ter, “Ships of Church and State in the 16th Century Reformation and Counterreforma­tion. Set­ting Sail for the Modern State,” Florence, Italy: European University Institute, Max Weber Programme Lectures 5/2014. 3 

List of Figures and Tables

List of Figures 4.1 Level of democracy at the moment of the first introduction of one of the major social insurance schemes

86

4.2 Level of GDP per capita at the moment of the first introduction of one of the major social insurance schemes

87

8.1 Degrees of statehood on the globe, 2008

156

8.2 Service provision and degrees of statehood, 2010

160

14.1 Evolution of EU authority: policy scope and depth, 1957–2005

272

14.2 Regional authority over a long half-century, 1950–2007

273

15.1 Modes of global regulation: a typology

289

15.2 Privatization of regulation: range of outcomes

297

23.1 Average percent share of imports and exports in GDP, by decade

456

23.2 Inward and outward stock of foreign direct investment, 1980–2010 (average percentage of GDP for all eight countries)

456

23.3 Total public and private social spending as percentage of GDP, 1980–2003

458

23.4 Deviation of total public and private social spending as percentage of GDP from the average OECD level, 1980–2007

459

24.1 Average net replacement rate in 18 OECD countries, 1955–2000

466

24.2 Total public social expenditure as a percentage of GDP (left axis) and coefficient of variation (right axis), 1980–2012

471

24.3 Average net replacement rates (left axis) and coefficient of variation (right axis) of selected programs, 1971–2011

472

33.1 Evolution of the Human Development Index (HDI) by country, 1993–2009

624

33.2 Freedom House civil society scores, 1997–2010

627

34.1 Combined Worldwide Governance Indicator (WGI) scores for Russia, 1996–2011

648

36.1 Democracy by region, 1960–2003

675

36.2 World Bank Governance Indicators by region, 2010

676

36.3 Per capita GDP (in constant 2000 US$) by region, 1970–2009

677

36.4 Years of ethnic civil war in the Global South by decade, 1950–1999

684

41.1 The number of ethnic civil wars by region, 1955–2010

765

xvi    List of Figures and Tables 41.2 The prevalence of communal violence by region, 1960–2006

765

42.1 Evolution of regime type of region

785

42.2 Developmental characteristics by regime types

788

List of Tables 7.1 Four analytical traditions in state theory

133

12.1 The competition state: evidence from taxation

245

13.1 The sovereign state versus the embedded state

261

14.1 Evolution of EU versus national competence in policy fields

276

19.1 Labor market indicators

363

19.2 Inequality and poverty by welfare state regime

367

19.3 Welfare state indicators by regime

368

19.4 Indicators of the macro-economy

370

19.5 Definitions of variables in Tables 19.1–19.4 and data sources

372

21.1 Literacy scores and discretionary learning employment

419

25.1 Women aged 15–64 in the labor force, 1960–2010 (selected OECD countries arranged by welfare regime classification)

485

33.1 Government effectiveness

632

About the Contributors

Rainer Bauböck  is Professor of Social and Political Theory in the Department of Political and Social Sciences at the European University Institute, Fiesole near Florence, Italy. Email: [email protected] Andreas Busch is Professor of Comparative Politics and Political Economy in the Department of Political Science at the University of Göttingen, Germany. Email: Andreas. [email protected] Sven Chojnacki  is Professor of Comparative Politics and Peace and Conflict Research in the Department of Political and Social Sciences and Principal Investigator in the Collaborative Research Center “Governance in Areas of Limited Statehood” (2005–17), both at the Freie Universität Berlin, Germany. Email: [email protected] Christopher Daase is Professor of International Organizations at the Department of Social Sciences and Principal Investigator at the National Research Cluster “Normative Orders,” both at the Johann-Wolfgang-Goethe University, and Head of the Peace Research Institute (Hessische Stiftung für Friedens- und Konfliktforschung), all in Frankfurt a.M., Germany. Email: [email protected] and [email protected] Nicole Deitelhoff  is Professor of International Relations and Theories of Global Order at the Department of Social Sciences and Principal Investigator at the National Research Cluster “Normative Orders,” both at the Johann-Wolfgang-Goethe University, and Principal Investigator at the Peace Research Institute (Hessische Stiftung für Friedensund Konfliktforschung), all in Frankfurt a.M., Germany. Email: nicole.deitelhoff@ normativeorders.net and [email protected] Klaus Dingwerth was Assistant Professor of Political Science in the Department of Political Science, Faculty Associate in the Institute for Intercultural und International Studies (InIIS), and a close collaborator with the Collaborative Research Center on Transformations of the State (TranState, 2003–14), all at the University of Bremen, Germany; since Fall 2014, he has been Professor of Political Science in the Department of Political Science of the School of Economics and Political Science (SEPS) at the University St. Gallen, Switzerland. Email: [email protected] Sebastián Etchemendy is Associate Research Professor of Political Science in the Department of Political Science and International Studies of the University Torcuato Di Tella, Buenos Aires, Argentina; currently on leave as advisor to the Argentinian Minister of Labor. Email: [email protected] Peter B. Evans  is Professor Emeritus of Sociology in the Department of Sociology at the University of California at Berkeley, USA. Email: [email protected]

xviii   About the Contributors Philipp Genschel  is Professor of Political Science in the School of Humanities and Social Sciences (SHSS) of the Jacobs University Bremen, Principal Investigator in the Collaborative Research Center on Transformations of the State (TranState, 2003–14) at the University of Bremen, and faculty member of the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.)—a joint enterprise between the University of Bremen and Jacobs University Bremen located mostly at the University of Bremen—all in Bremen, Germany; as of Fall 2014, Genschel is seconded to the Department of Political and Social Sciences at the European University Institute, EUI, Fiesole near Florence, Italy. Email: [email protected] and [email protected] Anna Grzymała-Busse  is Ronald and Eileen Weiser Professor of European and Eurasian Studies in the Department of Political Science, Director of the Weiser Center for Europe and Eurasia, and Director of the Weiser Center for Emerging Democracies, all at the University of Michigan, Ann Arbor, MI, USA. Email: [email protected] John A.  Hall is James McGill Professor of Comparative Historical Sociology in the Department of Sociology at McGill University, Montreal, Quebec, Canada. Email: [email protected] Peter A.  Hall  is Krupp Foundation Professor of European Studies at the Department of Government and Faculty Associate of the Minda de Gunzburg Center for European Studies (CES), both at Harvard University, Cambridge, MA, USA; 2010 Fellow at the Hanse-Wissenschaftskolleg Institute for Advanced Study (HWK) in Northwest Germany in cooperation with the Collaborative Research Center on Transformations of the State (TranState, 2003–14) and the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.). Email: [email protected] Tine Hanrieder was a Researcher at the Ludwig-Maximilians-Universität in Munich, Germany from 2009 to 2014; from 2007 to 2009 she was Ph.D. Fellow in the first cohort of the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.). She has been working in the Global Governance division of the Social Science Center, Berlin (WZB) since 2014. Email: [email protected] Eric Helleiner  is Faculty of Arts Chair in International Political Economy and Professor in the Department of Political Science of the University of Waterloo, Waterloo, Ontario, Canada. Email: [email protected] Patrick Heller  is Professor of Sociology and International Studies in the Department of Sociology and Director of the Graduate Program in Development at the Watson Institute, both at Brown University, Providence, RI, USA. Email: [email protected] Andreas Hepp  is Professor of Media and Communication Studies in the Department of Cultural Studies, Director of the Center for Media, Communication and Information Sciences (ZEMKI), and Principal Investigator in the Collaborative Research Center on Transformations of the State (TranState, 2003–14), all at the University of Bremen, Bremen, Germany. Email: [email protected] Katharina Holzinger  is Professor for International Relations and Conflict Studies in the Department of Politics and Public Administration at the University of Konstanz, Germany. Email: [email protected]

About the Contributors    xix Liesbet Hooghe  is W.R. Kenan, Jr., Distinguished Professor of Political Science in the Department of Political Science of the University of North Carolina at Chapel Hill, USA, and Chair in Political Science, Department of Political Science and Public Administration of the Vrije Universiteit (VU), Amsterdam, The Netherlands; 2007/08 Fellow at the HanseWissenschaftskolleg Institute for Advanced Study (HWK) in Northwest Germany in cooperation with the Collaborative Research Center on Transformations of the State (TranState, 2003–14) and the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.). Email: [email protected] and [email protected] Evelyne Huber is Distinguished Professor of Political Science and Chair of the Department of Political Science at the University of North Carolina at Chapel Hill, USA; 2005 and 2013 Fellow at the Hanse-Wissenschaftskolleg Institute for Advanced Study (HWK) in Northwest Germany in cooperation with the Collaborative Research Center on Transformations of the State (TranState, 2003–14) and the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.) and its forerunner (GSSS, 2001–07). Email: [email protected] Jingjing Huo  is Associate Professor of Political Science in the Department of Political Sci­ ence at the University of Waterloo, Waterloo, Ontario, Canada. Email: [email protected] Pauline Jones Luong  is Professor of Political Science in the Department of Political Science and Director of the Islamic Studies Program, both University of Michigan, Ann Arbor, MI, USA. Email: [email protected] Helge Jörgens  is Managing Director of the Environmental Policy Research Center (FFU; Forschungszentrum für Umweltpolitik) at the Freie Universität Berlin, Germany. Email: [email protected] Michael Keating is Professor of Politics at the Universities of Aberdeen and Edinburgh and Director of the Scottish Centre on Constitutional Change, all in Scotland, UK. Email: [email protected] Andrew S. Kelly  received his Ph.D. from Northwestern in 2012 and spent two years at UC Berkeley as a Robert Wood Johnson Health Policy Research Scholar. He has been working at the Center for Tobacco Control Research and Education (CTCRE) at the University of California, San Francisco, since 2014. Email: [email protected] Matthew Lange  is Associate Professor of Sociology in the Department of Sociology at McGill University, Montreal, Canada. Email: [email protected] Stephan Leibfried  is Professor of Social and Public Policy in the Department of Political Science, Director of the Collaborative Research Center on Transformations of the State (TranState, 2003–14), Co-director of the Division “Institutions and History of the Welfare State” of the Center for Social Policy Research (ZeS), and faculty member of the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.), all at the University of Bremen, Bremen, Germany; he is also Research Professor at Jacobs University Bremen. Email: [email protected]

xx   About the Contributors Jonah D.  Levy is Associate Professor of Political Science in The Charles and Louise Travers Department of Political Science of the University of California at Berkeley, USA. Email: [email protected] James Mahoney  is Gordon Fulcher Professor in Decision-Making in the Department of Sociology and the Department of Political Science of Northwestern University, Evanston, IL, USA. Email: [email protected] Philip Manow  is Professor for Political Economy in the Department of Political Science, Co-Director of the “Economics” Division of the Centre for Social Policy Research (ZeS), since 2011 Principal Investigator in the Collaborative Research Center Transformations of the State (TranState, 2003–14), and faculty member of the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.), all at the University of Bremen, Bremen, Germany. Email: [email protected] Gary Marks is Burton Craige Professor of Political Science in the Department of Political Science of the University of North Carolina at Chapel Hill, USA, and Chair in Multilevel Governance, Department of Political Science and Public Administration of the Vrije Universiteit (VU), Amsterdam, The Netherlands; 2007/08 Fellow at the HanseWissenschaftskolleg Institute for Advanced Study (HWK) in Northwest Germany in cooperation with the Collaborative Research Center on Transformations of the State (TranState, 2003–14) and the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.). Email: [email protected] and [email protected] Walter Mattli is Professor of International Political Economy in the Department of Politics and International Relations and Fellow in Politics at St John’s College, both Oxford University, Oxford, UK. Email: [email protected] Anne Menzel  received her Ph.D. in 2013 from the Department of Political and Social Sciences of the Freie Universität Berlin, Germany. She has been working, since 2014, as a Visiting Research Fellow at the Collaborative Research Centre “Dynamics of Security: Types of Securitization from a Historical Perspective” of the Philipps University Marburg, the Justus Liebig University Gießen, and the Herder Institute for Historical Research on East Central Europe, all in Germany. Email: [email protected] Sara Niedzwiecki  received her Ph.D. from the Department of Political Science at the University of North Carolina at Chapel Hill, NC, USA; since Fall 2014, she has been Assistant Professor of Political Science at the University of New Mexico, Albuquerque, NM, USA. Email: [email protected] and [email protected] Frank Nullmeier is Professor of Political Science in the Department of Political Science, Director of the Division “Theory and Constitution of the Welfare State” of the Center for Social Policy Research (ZeS), Principal Investigator in the Collaborative Research Center on Transformations of the State (TranState, 2003–14), and faculty member of the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.), all at the University of Bremen, Bremen, Germany. Email: [email protected] and [email protected] Julia S. O’Connor  is Professor of Social Policy at the School of Criminology, Politics and Social Policy, and Faculty Associate in the Institute for Research in Social Sciences (IRiSS), both University of Ulster, Northern Ireland, UK. Email: [email protected]

About the Contributors    xxi Herbert Obinger  is Professor of Comparative Public and Social Policy in the Department of Political Science, Co-director of the Division “Institutions and History of the Welfare State” of the Centre for Social Policy Research (ZeS), Principal Investigator in the Collaborative Research Center on Transformations of the State (TranState, 2003–14), and faculty member of the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.), all at the University of Bremen, Bremen, Germany. Email: hobinger@ zes.uni-bremen.de Grigore Pop-Eleches  is Associate Professor of Politics and Public and International Affairs in The Woodrow Wilson School of Public and International Affairs of Princeton University, Princeton, NJ, USA. Email: [email protected] William Reno  is Professor of Political Science in the Department of Political Science and Director of the Program of African Studies at Northwestern University, Evanston, IL, USA. Email: [email protected] Thomas Risse  is Professor of International Politics at the Otto Suhr Institute for Political Science, Coordinator of the Collaborative Research Center “Governance in Areas of Limited Statehood,” and Co-Director of the DFG-Research College “The Transformative Power of Europe,” all at Freie Universität Berlin, Germany. Email: [email protected] Graeme B.  Robertson  is Associate Professor of Political Science in the Department of Political Science of the University of North Carolina at Chapel Hill, USA. Email: graeme@ email.unc.edu Arjan H. Schakel  is Assistant Professor in Research Methods in the Faculty of Arts and Social Sciences at Maastricht University, Maastricht, the Netherlands. Email: a.schakel@ maastrichtuniversity.nl Klaus Schlichte  is Professor of International Relations and Politics in a World Society in the Department of Political Science, Co-Director of the Institute for International and Intercultural Studies (InIIS), and Director of the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.), all at the University of Bremen, Bremen, Germany. Email: [email protected] Susanne K. Schmidt  is Professor of Policy Analysis in the Department of Political Science, Director of the Institute of Intercultural and International Studies (InIIS), since 2008 Principal Investigator in the Collaborative Research Center on Transformations of the State (TranState, 2003–14), and faculty member and former Dean of the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.), all at the University of Bremen, Bremen, Germany. Email: [email protected] Steffen Schneider  was Researcher in the Collaborative Research Center on Transfor­ mations of the State (TranState, 2003–14) and Lecturer in the Department of Political Science, both University of Bremen, Bremen, Germany. Email: steffen.schneider@sfb597. uni-bremen.de Herman Schwartz  is Professor of Politics in the Politics Department at the University of Virginia, Charlottesville, VA, USA, and Professor of Political Economy in the International Relations Department at City University London, UK. Email: [email protected]

xxii   About the Contributors Laura Seelkopf  was Postdoctoral Researcher at Jacobs University Bremen, and Researcher in the Collaborative Research Center on Transformations of the State (TranState, 2003–14) at the University of Bremen, Bremen, Germany; as of January 2015 she is Researcher at the Centre for Social Policy Research (ZeS), University of Bremen, Bremen, Germany. Email: [email protected] and [email protected] Benjamin Smith  is Associate Professor of Political Science and Research Foundation Professor in the Department of Political Science at the University of Florida, Gainesville, FL, USA. Email: [email protected] Duncan Snidal  is Professor of International Relations in the Department of Politics and International Relations of Oxford University and Fellow in International Relations at Nuffield College, University of Oxford, Oxford, UK. Email: [email protected] Peter Starke  is Associate Professor of Political Science at the Centre for Welfare State Research of the University of Southern Denmark, Odense, Denmark, as well as Affiliated Researcher at the Center for Social Policy Research (ZeS) and former Researcher at the Collaborative Research Center on Transformations of the State (TranState, 2003–14), both at the University of Bremen, Bremen, Germany. Email: [email protected] John D. Stephens  is Gerhard E. Lenski, Jr., Distinguished Professor of Political Science and Sociology in the Department of Political Science, and Director of the Center for European Studies (CES) and of the European Union Center for Excellence (EUCE), all at the University of North Carolina at Chapel Hill, USA; 2005 and 2013 he was Fellow at the Hanse-Wissenschaftskolleg Institute for Advanced Study (HWK) in Northwest Germany in cooperation with the Collaborative Research Center on Transformations of the State (TranState, 2003–14) and the Bremen International Graduate School of Social Sciences (BIGSSS, 2007 ff.) and its forerunner (GSSS, 2001–07). Email: [email protected] Brian D. Taylor  is Professor of Political Science at the Maxwell School of Citizenship and Public Affairs and Director of the Center for European Studies, both at Syracuse University, Syracuse, NY, USA. Email: [email protected] Kellee S. Tsai  is Professor of Social Science in the Division of Social Science and Head of the Division of Social Science of the Hong Kong University of Science and Technology, Hong Kong, China. Email: [email protected] Milada Anna Vachudova  is Associate Professor of Political Science in the Department of Political Science at the University of North Carolina at Chapel Hill, USA. Email: [email protected] Lora Anne Viola  is Assistant Professor of Foreign and Security Policy at the John F. Kennedy Institute of the Freie Universität Berlin, Germany. Email: [email protected] Matthias vom Hau  is Assistant Professor in Comparative Politics at the Barcelona Institute for International Studies (Institut Barcelona d’Estudis Internacionals), Barcelona, Spain. Email: [email protected] David Waldner is Associate Professor of Politics in the Department of Politics and Director of the Middle East Studies Program, both at The Woodrow Wilson University of Virginia, Charlottesville, VA, USA. Email: [email protected]

About the Contributors    xxiii Bernhard Zangl  is Professor of International Relations at the Geschwister-Scholl-Institut for Political Science of the Ludwig-Maximilians-University München, Munich, Germany; from 2003 to 2009 Principal Investigator in the Collaborative Research Center on Transformations of the State (TranState, 2003–14) at the University of Bremen, Bremen, Germany. Email: [email protected] Daniel Ziblatt  is Professor of Government, Department of Government, and Faculty Associate of the Minda de Gunzburg Center for European Studies (CES), both at Harvard University, Cambridge, MA, USA. Email: [email protected] Michael Zürn  is Professor of International Relations in the Department of Political and Social Sciences of the Freie Universität Berlin, Director of the Division “Global Governance” of the Science Center Berlin (WZB), and Co-Director of the WZB Rule of Law Center, all in Berlin, Germany; 2003 and 2004 founding Director of the Collaborative Research Center on Transformations of the State (TranState, 2003–14) at the University of Bremen, and from 2004 to 2009 founding Dean of the Hertie School of Governance, Berlin, Germany. Email: [email protected]

Chapter 1

I n troduction

Transformations of the State

Evelyne Huber, Matthew Lange, Stephan Leibfried, Jonah D. Levy, Frank Nullmeier, and John D. Stephens

The state remains the most important political unit of the modern world. In the most recent phase of globalization (Rieger and Leibfried 2003: 18 ff.; Osterhammel 2005b; Maier 2014) the role and position of the state has changed, but after a short intermezzo in which nothing less than the “end of the state” was frequently proclaimed, the social sciences have reached consensus about the ongoing centrality of states. This Handbook focuses on state transformations. Transformations are fundamental changes of the state. We take into consideration the entire period from the emergence of the nation state in Europe to the present, but we concentrate on state transformations over the past five decades. This Handbook presents the latest social science knowledge about the state and its transformations along with issues for further research. Transformations of the state are considered for all regions of the world, for countries in economically advanced and less developed regions, for young states and those which can look back at a long tradition of state development, for democratic states and authoritarian regimes, for countries with (previously) socialist economic systems and the states where the idea of liberal market economies originated, for states with a colonial past and their erstwhile colonial masters. It is challenging and ambitious to examine such a wide range of states and their transformations, even in an extensive Handbook profiting from the participation of a large number of leading experts. Before we present the history of state theories and extant research approaches to the study of statehood by Levy et al. in Chapter 2, this introduction develops an analytical framework that helps identify and grasp the diversity of state transformations. Our analytical framework includes categories for the analysis of the • determinants of state transformation (Section 1); • dimensions of state transformations (Section 2); and • intensity and extent of state transformations (Section 3). The chapter concludes with an outline of the organization of the Handbook (Section 4).

2    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens

1  The Determinants of State Transformation State transformations are of the utmost importance. Although they are hardly at the center of the state-centered literature, there are a variety of works that consider state transformations in different ways. Some focus on the origins of states and trace how states transformed over time to reach their “modern” forms. Others, mostly in the developed states, focus on particular types of state change, such as the expansion and contraction of welfare states, transformations in state economic activities, in their political structures, and in the public sphere, and also on state decentralization or internationalization; a whole series of transformation studies has pointed the way.1 More recently, a number of broader analyses of state transformation investigate how to build states after they have broken down, and others analyze how certain factors—most notably, globalization—potentially have enormous effects on states. Together, these subliteratures point to a variety of factors, some more influential than others, that promote major state transformations. In accordance with the main lines of discussion, we categorize these factors into three groups: international factors, domestic factors, and preexisting state structures.

International Determinants of State Transformation State power depends on the domination and pacification of a territory, its capacity for warfare, and the centralizing force of a higher level of bureaucratic administration. But these attributes are constitutive for states solely to the extent that they are recognized by other state powers. Thus, only the formation of an international sphere in which the related political units perceive each other as formally equal and legitimate made the enforcement of the state as the basic model of political unity and order possible. For the development of states, the international sphere therefore has constitutive significance. In the traditional view, the international system is not pre-structured politically. Rather, it is conceived as an initially anarchic interplay of states, despite the emergence of international law. A monopoly of legitimate coercion exists only within the territorial states. In the relationships among states, the outbreak of violence is a permanent threat. In this respect, war initially moves into the center of an explanation of state transformations. Charles Tilly’s work kick-started this area of study and left a lasting influence by emphasizing the utmost importance of international war (cf. now Hui 2005; Boucoyannis 2006). In his famous words, “[w]‌ar made the state, and the state made war” (1975: 42). His classic argument is that international warfare pushed state elites in Western Europe to reform the state in ways that improved their success at war. To avoid conquest by international

1  Palgrave Macmillan started a series on Transformations of the State in 2007, and more than 25 volumes have appeared since. For an overview, see Achim Hurrelmann et al. (2007) and Philipp Genschel and Bernhard Zangl (2014). For the first grand overview, see Stephan Leibfried and Michael Zürn (2005) and now Heinz Rothgang and Steffen Schneider (2015).

Introduction   3 competitors, state elites needed to implement major reforms to improve revenue collection and the capacity to organize mass warfare. Tilly also recognizes that international warfare made great demands on citizens and— over an extended period of time—forced the state to make concessions to their citizens in return for paying taxes and serving in the military. He therefore links international warfare to the development of representative government and the welfare state. Peter Flora and Arnold Heidenheimer (1981) also point to international warfare as a determinant of welfare state expansion. They differ from Tilly, however, because they pay less attention to the international environment creating a need for certain types of reform, although they discuss this. Instead, they focus on how international conflict created domestic consensus and how this consensus made the implementation of broad-based new policy possible, thereby initiating a dramatic expansion in the British welfare state during World War II. In particular, they claim that the war helped mend differences between Conservative, Labour, and Liberal parties, something exemplified by Churchill’s coalition government between 1940 and 1945. Dan Slater (2010) makes a similar argument in his analysis of state-building in Asia, finding that international threats made state expansion possible by improving consensus among competing political elites and that this consensus proved vital to the successful implementation of major political reforms. Colonization and imperial expansion, often resulting in “state death” (Fazal 2007), were other forms of a violent penetration of foreign territories. States conquer regions and impose their rule on foreign lands and peoples. Such foreign imposition has been extremely common throughout much of the world over the past millennium, most notably through overseas colonialism (Osterhammel 2005a). The resulting colonial states sometimes built a state apparatus from scratch and sometimes radically modified preexisting states but always followed basic elements of the state model developed in Western Europe (Lange 2009). The formation of administrative structures in the former colonies and the processes of decolonization were supported by factors that might previously have been described as “domestic,” intra-imperial factors, but which, with decolonization, turned into international factors in the twentieth century. Today, new forms of asymmetric warfare—typically conflicts between states and insurgents, or guerillas, who resort to unconventional warfare—may lead to the disintegration of the territory of these states and can affect surrounding states as well (Münkler 2005; Kaldor 2012). It is true that violence—as in civil wars—may arise from domestic factors, but states and other international actors play a prominent role in most forms of violent conflict. At the other, more peaceful extreme, the international environment can disseminate models of the state, or of major parts of it, by offering an example. Thomas Ertman (1997) notes that the dissemination of organizational models during the Early Modern period had major effects on the shape and capacities of Western European states. Outside Europe, several countries that successfully avoided colonialism copied Western states in an effort to reform their states to better defend themselves against colonial conquest, with Japan and Thailand being notable examples. Along these same lines, global institutionalists claim that global economic, political, and cultural institutions presently push the Western model of the state throughout the world, thereby promoting state isomorphism (Krücken and Drori 2009; on the limits, see Scott 2009). The international arena affects states or stateless territories in two very different ways: first, by coercion, imposition, and war; and, second, as a source of policy models adopted

4    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens by the states in a learning process. But we should not ignore types of international influence lying in between these extreme cases of coercion and persuasion. Often these state models or blueprints for policies have been adapted following an international trend or a fashion. In these cases, emulation is the mechanism that gives international developments influence at the level of states. The literature on diffusion and convergence (Simmons et al. 2008; Obinger et al. 2013) recognizes a fourth mechanism besides learning, emulation, and coercion: competition. It is the economic pressure to maintain or improve international competitiveness that guides states in their learning behavior. Changing older beliefs about appropriate economic strategies and learning processes may be part of this type of diffusion, but the adaptation of international concepts is primarily fostered by economic incentives and pressure. Major transformations of the international economy notably include the state-induced internationalization of capital markets, the growth of foreign direct investment, the emergence of global production chains, the growth of international trade, and the increase in international labor migration (Eichengreen 2008; Panitch and Gindin 2012). Under these conditions, states have to adequately integrate their economies into the world market and ensure the advantages of a strong domestic market. In order to understand external pressures on states, we have to understand changes in the international economy and system of states over the past half century, and we have to take into account that pressures from the international system are essentially different for states in different positions in the world economy and in the system of states. Immanuel Wallerstein (1984, 2011) conceptualized a rather rigidly structured world economic system. Without subscribing to his view of severely limited mobility in that system, we need to recognize the powerful systemic pressures operating on states. Today’s world is no longer the anarchic world of the early development phase of the international system. The number of international organizations has been growing since the nineteenth century. After World War II, a fundamental restructuring of the international system took place with the transfer of competences and authority to the newly created United Nations (UN). Although the UN does not have the means to implement a monopoly of coercion, this worldwide organization institutionalized formally, but not de facto, the obligation to refrain from the threat or use of force against the territorial integrity or political independence of any state, other than in cases of self-defense. The legal prohibition at least shifted the balance of proof for a legitimate intervention to the aggressor. The political and economical importance of International Financial Institutions (IFIs) such as the World Bank and the International Monetary Fund (IMF), both in the phase of the Cold War and the subsequent period of the Washington Consensus, is also considerable. The policies of many countries have been temporarily controlled by these organizations. Instead of a purely international world determined by states, a transnational sphere including states, international organizations (IOs), non-governmental organizations (NGOs), transnational organizations (TNOs),2 and supranational organizations such as the European Union (EU) has emerged as a form of distributed governance, usually referred to as “global governance.” It would certainly be wrong, however, to conclude that 2  “Transnational”

organizations combine private interest and international scope, whereas NGOs combine public interest and international reach. For example, international networks of companies, setting guidelines for the transport of “dangerous substances,” would be TNOs, not NGOs.

Introduction   5 these developments have ushered in the end of the state or a fundamental loss of state agency. States remain prominent as the key players of international politics, and hence power relations among states are still worth studying (Mann 1968–2013: vol. 4, 8–9). Significant shifts of equilibria have certainly occurred: for instance, the end of the Cold War, the emergence of the BRICs,3 and especially the economic rise of China to a top political and economic position, entail a transition from a bipolar world to a more complex global constellation of actors. The impact of the international system can be supportive of the development of state capacities, as it was in the cases of South Korea and Taiwan in the 1950s and 1960s. The geopolitical situation provided these countries with major incentives to strengthen their economic and security capacities. Moreover, the growing US and European economies provided the markets for their rapidly increasing low-wage manufacturing exports, thus consolidating these developmental states. In contrast, a negative impact became highly visible in the case of the debt crisis in Latin America in the 1980s. The international financial institutions and US agencies exerted very strong pressures for state-shrinking and for a reduction of all kinds of state functions, and these pressures succeeded in many countries. Finally, the international system can be relevant as a simple survival function for states, providing them with legal recognition and some foreign aid to ward off challengers, without effectively expanding their state capacities.

The Domestic Determinants of State Transformation Many explanations of state transformations in the established democracies focus on domestic factors. Previously highlighted factors include the expansion of the education sector, the strength of trade unions and left-wing political parties, and the role of national levels of industrialization, mass mobilization, and democratization. For instance, the growth of the welfare state may be explained as the outcome of a specific level of socioeconomic development or of a specific power balance between labor and capital. This onesided analytical focus on domestic factors has now been proven inadequate, even in the study of the most industrialized countries. In the post-World War II phase, international political and economic trends were also crucially important as explanatory factors. Today, the expansion of the EU has a major impact on—and occasionally even forces—national policies (Cowles et al. 2001; Wallace et al. 2015). Still, explanations of state transformations have to be grounded in a detailed analysis of domestic factors. The erstwhile focus on domestic structures in comparative politics scholarship may have reflected a problematic methodological nationalism. Yet replacing this approach with an equally one-sided focus on international diffusion processes and compliance with international norms would also be wrong. In order to be effective and meaningful, international influences must be built into and resonate with national political institutions and power relations, and hence domestic factors remain key variables in the explanation of state transformations.

3 

The acronym BRICS stands for: Brazil, Russia, India, China, and South Africa.

6    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens The political forces that trigger state transformations or stabilize existing state structures and the resources at their disposal certainly depend to a large extent on the level of economic development, as suggested by the many variants of modernization theory. Early or late industrialization, the size of the agrarian sector and of domestic markets, the greater or lesser endowment with natural resources, and nationally specific economic structures are all relevant factors that influence both the nature of state action at the national level as well as state transformations. The same is true for skill levels and the endowment with human capital, the expansion of the education sector, or the transition from Fordist to service economies. Besides economic development, the availability of raw materials and human resources is a further domestic determinant. Similarly, a number of works link state-building to the construction of an effective system of taxation, as such taxes were necessary for sustainable state expansion (Bräutigam et al. 2008). More recently, however, a number of scholars suggest that the availability of certain types of resources—natural resources—has negative effects on states (Gawrich et al. 2011). Some draw on Tilly’s classic argument and suggest that the availability of natural resources limits states’ needs to develop effective taxation systems. Others focus on lootable natural resources and find that they create opposition to states, thereby promoting anti-state violence and even state breakdown. Going beyond economic resources, one can certainly argue that states governing societies with stronger human resources have an advantage in adapting to the requirements of competition in the knowledge economy. In an effort to identify the causal pathways of state change, it is necessary to take the formation of social groups, the organization and mobilization of these groups, and related cleavages into account (Kriesi et al. 2008). Social structures, and especially socio-economic classes, represent the key intervening variable between economic development and political conflicts. These class structures vary considerably among world regions and countries, in line with their level of economic development. The size of the agrarian sector and the distribution of land are as important in this respect as the size of the informal sector and the timing and scope of the transition to service economies, resulting in more or less deindustrialization. And the size of a middle class with post-secondary education is as important as the dominance of big landowners, industrial entrepreneurs, or financial interests on the side of capital. Hence the analysis of social structures cannot draw on one-size-fits-all class typologies, and an exclusive focus on the working class is inappropriate for the analysis of many countries in the Global South, due to their high shares of informal workers. Rather than the strength of individual classes, however, one has to consider class constellations, or the distribution of power within complex social structures. The class structure of a given society is an important explanatory factor for the development of a democratic state and its level of democratization, and likewise for transitions from moderately democratic to authoritarian regimes. The literature on welfare state expansion offers similar findings, as the strength of labor creates strong domestic pressure pushing state elites to build welfare states or replacing state elites resisting this impulse with new democratically elected representatives of working and middle class interests (Huber and Stephens 2001). More broadly, Barrington Moore Jr.’s (1966) classic analysis notes that different class-based power configurations promoted different trajectories of state development, ranging from communist to fascist, to democratic. Specifically, bourgeois-dominated economic development generated pressures for democratization because it strengthened the

Introduction   7 organizational capacity of working and middle classes and weakened large landowners dependent on cheap labor, who were the key enemies of democracy (Rueschemeyer et al. 1992). Such a power-configuration view need not focus exclusively on class. Power can be based on a variety of factors, and other cleavages—such as ethnicity, religion, race or gender— are in some cases greatly influential. The basic mechanism here is that power is organized along different lines and that the constellation of power shapes state transformations. Religious cleavages influence the development of party systems and modify the effects of class structures (Kersbergen and Manow 2009). A further major divide is between ethnically homogenous polities and multi-ethnic, multi-cultural, or multi-religious polities (Stepan et al. 2011). When combined with socio-economic conflicts, ethnic conflicts may lead to secession and the formation of new states, civil wars, or even failed states. Alternatively, they may lead to reforms designed to accommodate the demands of ethno-nationalist movements for more power and resources, such as federalism, decentralization, and devolution. Race discrimination may have a strong and long-standing effect on the stalled democratization of a class segregationist state (United States) and on a caste-segregationist type of political system (South Africa). The differential integration of the sexes into rural and urban-industrial production regimes as well as changes in family structures in the wake of modernization processes are additional socio-structural factors whose importance is growing. However, social structures do not necessarily translate into specific state structures, either. The interests of classes, religious, and ethnic groups are shaped by the discourses of the general public or the more limited public spheres of these groups themselves; they are socially constructed and therefore depend on communication processes that unfold within civil society. Variations in the freedom of expression, in the development of mass media, and in terms of greater or lesser opportunities for social groups to organize as parties, interest groups, and other types of associations strongly influence the chances of successful political mobilization. In authoritarian regimes or illiberal democracies, the organization and mobilization of particular classes, and especially of underprivileged groups, is frequently repressed. Yet as soon as basic political rights are granted and democratic procedures are introduced, political forces that support the maintenance of democracy and further democratization are strengthened; the democratization of a state may thus become a self-reinforcing process. Yet even a broadly educated civil society is no more than an enabling domestic factor for state transformations. Whether civil society enables the organization of interests in parties and large associations, such as employers’ associations and unions, may be more crucial (Huber and Stephens 2012). The rise of Christian democratic parties in Europe and Latin America (Kalyvas 1996; Mainwaring and Scully 2003; Kaiser 2007) has structured the opportunities for state transformation quite differently than did two-party systems with a social democratic and a conservative-liberal party. Hence an explanation of state transformations in democracies, and even in authoritarian regimes dominated by a single party, must consider parties and party systems as key domestic factors. For instance, where social democratic parties have a strong hold on government power, whether alone or in coalitions, the welfare state is likely to expand more than it would elsewhere (Huber and Stephens 2001; Hemerijck 2013).

8    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens The coalition and cooperation potential of parties—itself determined by the class bases of party systems and the structures of civil society—and hence greater or lesser opportunities of political elite consensus create quite different types of political systems, as exemplified by the differences between majoritarian and consensus democracies (Lijphart 1999). These patterns of cooperation and conflict also matter in authoritarian regimes, especially in electoral autocracies, and in state formation processes: it is important to acknowledge the strength of competing political elites and factors that either cause one to gain power and influence over another or promote greater cooperation between formerly competing elites. Growing consensus among formerly competing power blocs promoted relatively rapid and extensive state change in Botswana, Malaysia, and elsewhere (Lange 2009; Slater 2010). This finding coincides with Matthew Lange and Dietrich Rueschemeyer’s (2005) more general claims that rapid state-building depends first and foremost on some minimum degree of elite consensus. A further group of domestic conditions that has received considerable attention is state-society relations. Sometimes the study of this bundle of explanatory factors is viewed as a distinct explanatory perspective (Migdal 2001; see also Migdal 2004). This perspective looks at how relations between state and societal actors affect the state and its transformations. Analyses using this perspective find that state transformations depend on resources, information, and manpower and that active relations with societal actors are valuable sources of all three. Close relationships between the state and civil society permit the use of societal resources for the formation of states. For example, Robert Putnam et al. (1993) famously found that robust civil society was vital to the success of decentralizing reforms in parts of Italy, offering evidence that it allowed the state to engage the public in the actual implementation of the reforms, improved the quality of leadership, and helped hold officials accountable. Similarly, a large literature on developmental states finds that state economic reforms depend greatly on state ties with societal actors, as the latter do much of the legwork and are an important source of information and knowledge (Evans 1995). Yet strong ties between state and society may also take the form of clientelism. Favored by specific electoral rules, parties in clientelist systems use the state apparatus, including public corporations, to supply party members and voters with employment and public contracts (Kitschelt and Wilkinson 2007). These parties and the state apparatus develop an arrangement that no longer guarantees state autonomy but rather advances the interests of parties, churches, and specific classes. Besides this partisan-economic use of the state and its resources, the instrumentalization or capturing of parts of the state apparatus by associations also exists: with the growth of the state apparatus and the differentiation of bureaucracies, individual segments of the state apparatus become directly linked to the interests of specific groups. The orientation of parties towards clientelistic politics and the capacity of associations, the rich, or individual corporations to capture state bureaucracies are key explanatory factors of state transformations in the state-society relations category (Hacker and Pierson 2010; Culpepper 2011). The engagement of society in state reforms, in turn, depends greatly on the legitimacy of the state and its leaders. According to Max Weber (1978 [1921/1922]: 211–301, esp. 211–216), legitimacy allows authorities to dominate others without having to resort to physical violence, and this ability to get citizens to follow state commands affects the possibility and type of state reforms. The willingness to respect state norms may vary:  Philip Gorski’s

Introduction   9 (2003) analysis of state origins in Europe, for example, finds that Calvinism promoted discipline and that disciplined populations facilitated state-building because the populace accepted and willingly followed state authority. A society’s distinct patterns of legitimation and its political ideologies may also facilitate state transformations if they move state institutions closer to widely accepted standards of legitimacy, and they may hinder change if they move in the opposite direction. The propensity to protest or to act independently beyond the state and its support programs may be more pronounced in some countries than in others, resulting in a greater distance between civil society and the state, or even strong skepticism with regard to the state. However, state transformations may not be influenced only by relations between state and society, but also by the state and its own structure.

The State Determinants of State Transformation It may appear counterintuitive to consider the state itself as a determinant of its own transformations. In early debates on state transformations the state was not perceived as an agent. Yet as a mere vector of societal forces, the state cannot have the autonomy required to be plausibly considered an independent explanatory factor. However, the state is more than the outcome of social forces. It is an active and effective mover of its own transformations (Leibfried and Zürn 2005; Levy 2006). The international relations literature conceptualizes the distinction between international and domestic factors as one that excludes any third category. By contrast, we consider states effecting their own transformations as a distinct category of domestic factors—or, maybe, a distinct category of its own. Extant comparative literature rather distinguishes between social developments, social structures, civil society, political actors, and movements as one set of domestic factors, and established institutional arrangements as another set. Hence, socio-structural, socio-economic, and actor-related forces are considered in isolation from the effects of core state institutions. Under the title of “domestic determinants,” we discuss the societal part, that is, the social forces within the boundaries of the (nation) state that act on state transformations. “State determinants” are those in which the states themselves act as agents and structures that prepare and adopt their own transformation. The state’s influence on its own development, the inertia of established institutional pathways, and the impulses of change or stability that stem from institutions and constitutions are thus considered separately. The relative importance of societal determinants is thus viewed as co-determined by the established state structure. The potential of a society to influence the state is in turn influenced by the openness of the political system, which is higher in democracies than in autocracies. The expansion of democratic procedures—elections, referenda, and other channels of participation—is also crucial for the extent to which the voice of minorities and underprivileged members of a society is heard. And conversely, state autonomy vis-à-vis civil society is greater in authoritarian regimes than in democratic states. In addition, traditions of political habits and orientations, which are reflected in political thought, can be distinguished into more state-centered and more society-centered cultures (Dyson 1980). These cultures make for weaker or stronger, more or less permeable boundary lines between state and society and thus facilitate (legitimate) or hinder (delegitimate) the crossing of these borders.

10    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens The state structure determines not only the openness to societal influences but also the greater or lesser political difficulty of achieving state transformations. If the constitutional structure contains many veto points—such as in presidentialism and bicameralism, or by judicial review and popular referenda—transformation is made difficult (Tsebelis 2002). In systems with many veto points, opponents of change have multiple entry points to the political process to defend the status quo, and the very availability of these entry points encourages pro-status quo forces to mobilize (Immergut 1992). This applies in extremis to a quasi-state organization like the EU, which, at its core, relies on the unanimity principle (Scharpf 2010). The more clearly state and society are separated from each other and mutually impermeable, the more likely are state transformations triggered by the state apparatus itself. In an actor-related perspective, then, bureaucratic elites reform the state apparatus, as for example in the Meiji Revolution in Japan. Such initiatives may be grounded in some understanding of the public interest, as by G.W.F. Hegel (cf. Avineri 1972), or reflect the interests of the administrative apparatus. In the field of social policy research, the introduction of social insurance under Bismarck provides the prototypical example for explanations of state change that focus on the political power of bureaucratic elites (Heclo 1974). However, in the context of such explanations, one has to examine whether there is an autonomous bureaucratic caste or a group linked to other social classes that acts in accordance with clientelistic politics. And even in the case of relative administrative autonomy, one has to clarify why administrators were strong enough to impose their will in the face of their country’s class constellation and partisan dynamics. Besides this actor-centered view of the state as determinant of state transformations, there are structuralist models of explanation, which link to the role of institutional and policy legacies. The literature points to two basic ways through which pre-existing state characteristics shape future state transformations: first, the characteristics of states dictate trajectories of state change; and, second, the characteristics of states mediate the impact of domestic and international factors on state transformations. The first basic way. State transformation appears to happen commonly in a path-dependent fashion, and this is a way in which the characteristics of states can shape their subsequent transformations. Path dependence suggests that dramatic transformations during critical junctures are commonly followed by extended periods of re-production and relatively long-lasting stability (Pierson 2011). Path dependence does not deny that states transform but claims that these changes build on the pre-existing structure in ways that do not radically alter them. A variety of mechanisms potentially promote path-dependent state transformations. Once states are present, for example, radical reforms are much more costly than more minor reforms that only modify the given state structure, thereby creating a first, cost-based mechanism of state re-production. Path-dependent state transformation can also be reinforced by a second mechanism: powerful interests frequently have a stake in the status quo and exert their power to prevent change. In the case of a federal system of government, this structure empowers regional authorities who, in turn, frequently use their power to oppose and obstruct any centralizing reforms (see Obinger et al. 2005). A third general mechanism is cognitive. It occurs when actors have cognitive blinders that impair their ability to seriously consider alternatives, thereby locking themselves into the status quo. So, if a federal government causes people to perceive it as the natural state structure, it

Introduction   11 helps to create cognitive frameworks that perpetuate the structure. Finally, there is a fourth mechanism: path dependence can be reinforced through norms and values. This can occur when individuals perceive the status quo as superior and therefore act in ways that perpetuate it. Thus, if an educational system socializes students to believe that a federal system of government is the most adequate form of rule, values can promote the maintenance of a federal system. The second basic way. State structures also determine state transformations through mediating the impact of domestic and international factors. The very characteristics of states shape how state actors deal with pressures for change. As such, states with certain traits might transform in ways different from states with other traits. Tilly’s claims about warfare and state-building offer one example. Miguel Centeno (2002) applies Tilly’s theory to Latin America and finds that conflict only promoted state-building when states already had a relatively high level of political authority (see also Centeno and Ferraro 2013: chs. 1–3). Similarly, Deborah Boucoyannis (2010) analyzes state-building in Europe but offers evidence that relatively high levels of state capacity were a necessary precondition for war-making to lead to state-making. When state capacity was limited, warfare served essentially as an added stress that contributed more to state breakdown than to state-building. This argument suggests that state transformation is characterized by virtuous and vicious circles, with the pre-existing characteristics dictating whether state transformations follow one or the other pattern. Many of the important forces shaping state transformations are located at the intersection of international and domestic politics. Along these lines, Paul Hirst and Grahame Thompson claim that states are now more important than ever because they must link local, national, international, and transnational institutions in order to create a coherent system of governance. “The nation state,” they write, “is central to this process of ‘suturing’: the policies and practices of states in distributing power upwards to the international level and downwards to subnational agencies are the ties that will hold the system of governance together” (1999: 270). This centrality of the state, in turn, highlights the important roles states play in mediating the transformative effects of domestic and international factors. All states face some of the same challenges, for example, environmental change, security threats from non-state actors, and competition in world markets. But all states face them from different positions in the world economy and in the system of states, with different organizational capacities and entrenched worldviews. These positions in turn heavily influence the ways in which states adapt.

An Integrative Perspective In order to understand the complex reality of state transformations, we need to transcend disciplinary and sub-field boundaries, adopting a more integrative approach that recognizes the importance of both domestic and international influences, as well as the ways in which states affect their own transformations. Such an integrative perspective regarding the explanation of state transformations requires a combination of the three groups of factors in a type of analysis that focuses on “constellations” (Leibfried and Zürn 2005; similarly now Le Galès 2014).

12    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens It is undoubtedly important to clarify the relative strength, the dominance, or the irrelevance of individual factors. There are cases in which the international sphere has no influence or class interests are dominant enough to trump even long-standing state structures. Yet cases in which the dominance of individual factors is conspicuous are infrequent. Usually all three bundles of factors have to be considered to explain state change. If so, however, it is insufficient to simply assign weights to these factors. Rather, one has to ask how exactly the factors are interrelated, why international influences are in some cases registered, welcomed, and even integrated into state structures while such influences are fought in other cases, and why domestic factors permit only very limited transformations of state structures. All of this requires a form of analysis that considers the interrelationships of these factors and their mutual positioning. It also requires the analysis to be focused on constellations. Given that there are multiple paths to the same type of state transformation (equifinality) as well as interaction effects that may exist between factors, such an analysis of constellations appears more realistic than alternative, presumably more parsimonious approaches. There are different ways to achieve such an analysis. Yet it is appropriate to conceptualize the interaction of factors and the change of political constellations as an expression of power relations (Huber and Stephens 2012). Thematic and disciplinary considerations also suggest a more integrative perspective. Much of the contemporary literature on state transformations is ghettoized by sub-field— or even by policy—or by substantive area of interest. International relations scholars tend to focus on international pressures that are challenging states, whereas scholars of comparative politics emphasize cross-national variation in response to common external challenges. Those interested in political economy generally analyze changes in economic and social policy-making, while those drawn to interstate relations examine the functioning of supranational institutions and their shaping via diplomatic and military affairs. In a similar spirit, we seek to transcend the divide between “high politics” and “low politics.” Position in the world economy and economic as well as human resources fundamentally shape the capacities of states as geopolitical or military actors. It is no coincidence that most of the countries spearheading the “responsibility to protect” against mass atrocity crimes are affluent democracies—claiming that sovereignty is not simply a right but a responsibility. That said, interactions among states, from regional integration agreements to the extreme of war, can reshape the distribution of economic resources. The creation of the European Common Market in 1957 and its development helped West European countries prosper. This large market then became a lure to countries on the European periphery—the Southern periphery in the 1980s, the Eastern periphery in the 1990s—and a means for bolstering their fledgling democracies (Wallace et al. 2015). The trajectory of the Common Market demonstrates the reciprocal influence between “low politics” (e.g. market integration) and “high politics” (e.g. the transformation of authoritarian and militarized countries on the European periphery into peaceful democracies). In this instance, the interplay between “high politics” and “low politics” traced a virtuous circle. Vicious circles are equally possible. The cumulating present troubles of the EU in its Eurozone offer an example (Genschel and Jachtenfuchs 2013). Currency integration may have appeared to be primarily about “low politics,” but it is affecting the “high politics” of democracy in Greece, Cyprus, Ireland, Spain, Portugal, and Italy. Each battle won on the fiscal stabilization front seems to be a battle lost on the domestic democratic front. Moreover, these battles are fueling a major decline in support for European

Introduction   13 integration among citizens in both donor and recipient countries. Thus, the “low politics” of currency integration appears to be undermining the “high politics” of European integration. Ultimately, then, an understanding of state transformations requires a focus on the interaction between the economic and geopolitical spheres. An analysis that captures “high politics” and “low politics” in their interdependence, that transcends (sub-) disciplinary boundaries where required, and that conceptualizes the determinants of state change as constellations opens up an integrative view of state transformations. Not every individual chapter should be expected to live up to this integrative perspective, but taken together the analyses offered by this Handbook trace the contours of such an integrative perspective.

2  The Dimensions of State Transformation By state transformations we mean fundamental shifts in the scope of state activities, bureaucratic capacities, purposes, instruments, and structures of authority. The literature makes various suggestions for the specification of dimensions of state transformations (Zürn and Leibfried 2005;4 Hay et al. 2006), but there is no established toolkit for the analysis of states, state transformations, and their basic elements or dimensions. We consider five dimensions of state transformation as a heuristic. State change may be confined to one of these dimensions. Other forms of state transformation may cover several or even all dimensions, and opposite trends in different dimensions may occur at the same time.

Scope of State Intervention The development of state capacities and the relationship between the state and civil society or the market economy is at the center of nearly all studies of state transformation. Which tasks and areas of responsibility are performed by the state, and which are left to the market and society? Does the state secure these forms of social self-organization or does it regulate, limit, and control particular societal developments in the name of a politically constructed common good? Is the state capable of performing the tasks it takes on? Does it have the bureaucratic capacity to do so (see later)? Key concepts for the characterization of types of state transformation relate to the scope of state responsibilities or to the scope of its intervention. The spectrum of state activities has ranged from the liberal minimal state to the totalitarian state. In communist countries, state intervention reached its pinnacle during these countries’ totalitarian phases—Stalinist USSR, Maoist China, Kimist North Korea—and remained at a high level even in moderate authoritarian phases. State control over the economy, temporarily even including the complete abolition of markets, required an extension of state power that the 4  For this combination of the four dimensions of state transformation Michael Zürn and Stephan Leibfried (2005: 2 f.) have coined the acronym “TRUDI”—which stands for Territorial control, the RUle of law, Democratic governance, and Intervention to promote social welfare—to denote the main powers of the ideal-type OECD state.

14    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens bureaucratic apparatus ultimately could not provide. Added to this was the political and ideological control of all social processes, which required the transformation of the state into an instrument of repression, a surveillance state, and an ideological center. Since the market orientation of China after 1978 and the demise of socialism in 1990/1991, government control of the economy via a planned economy has become extremely rare. The fall of communism ushered in worldwide limitations in the aspirations of the state to control the economy. However, differences between states in controlling and regulating the market economy remain significant. For the advanced capitalist societies, state intervention into the market economy and the varieties of capitalism play a central role (Hall and Soskice 2001; Hancké et al. 2007; Fioretos 2011). To what extent does the state act as an owner, producer, and employer, or merely as a regulator (Pierson 2004)? To what extent are state-owned enterprises part of the economy, and what is the size of the public sector (Schuster et al. 2013; Schmitt 2013)? Yet a full retreat of the state does not take place even where strong neoliberal and pro-market policies are preferred. In these cases the state is assigned the task of generating, managing, and stabilizing private markets (Gingrich 2011).5 The dimension of state intervention does not only refer to the relationship between the state and the economy. Other spheres of society may be subject to state control and regulation. Some societal spheres are traditionally viewed as core fields of public responsibility. What Michael Mann (1984) has called the “infrastructural power” of the state is apposite here, since it deals with a shift in emphasis from “despotic power” to an encompassing penetration of all of society by friendly state power.6 Are education and health defined as a public duty or not? The state changes as its infrastructural power is extended across society, though “despotic power” does not cease to exist. Nevertheless, the adoption of public responsibility for entire sectors may include the assignment of important tasks to social forces for implementing state policies so that they can remain important players in these fields, for example, private schools and hospitals, churches and charities. This leads to specific public-private mixes, corporatist-like arrangements including the state and churches or charities in the field of social services, or quasi-markets (Le Grand 2006). The scope of state responsibility and intervention also refers to the relationship between the state and the public sphere. In authoritarian regimes, state control of the public is a core element of the strategy of domination. In liberal and democratic regimes, the creation of and support for a free public as well as responsiveness towards the results of public deliberation are cornerstones of a principled limitation of state intervention. However, states may attempt to establish a centralized production of ideology backed up by repressive measures, or they may constitutionally bind themselves to the cultural and normative resources of a specific social actor, such as a religious organization or social movements. 5 

For an extant treatment of neoliberalism and the state see Plant (2010). According to Mann, “infrastructural power” is the state’s capacity to penetrate civil society in a cooperative fashion and to use that to enforce policy throughout its territory. Mann first developed the concept in 1984 in contrast to “despotic power,” i.e. the imposition of an elite’s will on society. The simplest contrast implied here is the one between power “through” versus power “over” society. (For a further use of the concept, see Slater 2008.) Naturally, most societies will be located in some “hybrid” in-between position. In his four-volume study Mann relies on this distinction in volumes 2 (1993: 59–61) and 3 (2012: 6–16, esp. 13), but not in volume 1 (1986: 4–10), and he seems to have given it up in volume 4 (2013: 1–2). For an earlier major study of state evolution, see Finer (1997). 6 

Introduction   15 Consequently, the state then obtains forms of a Christian or Islamic state, or a state bound by a specific secular ideology, rather than an open and therefore ideologically neutral state. It is well known that the scope of state intervention can increase as well as decline. Partly in response to concerns about governability and partly as a means of pursuing a neoliberal agenda, the Thatcher administration in Britain strengthened the central state by breaking the power of key interest groups, most notably the unions; abolishing certain local authorities; and beating back European integration (Gamble 1994). Law and order, or policing, is another area where British authorities expanded state responsibilities, a development that has been echoed in many other countries, including the US, as citizens and politicians demand protection against crime, terrorism, and illegal immigration. Ironically, those who have sought to spread the neoliberal model beyond the Anglo-American heartland have often lost sight of the fundamental importance of state power in forging and upholding a neoliberal order. By calling for a generalized rollback of the state, as opposed to a redeployment of the state on behalf of pro-competitive objectives, neoliberal enthusiasts have often precipitated or aggravated economic crises, thereby undermining public support for neoliberalism itself (Stiglitz 2007). Much of the discussion about the erosion of successful state intervention has focused on the role of international developments, such as globalization, that can narrow the scope for certain practices like Keynesian fine tuning or selective industrial policy—although these developments may create opportunities for new exercises of state power. Internal developments can also erode successful state intervention. Beginning in the late 1960s, state authorities in the core Organisation for Economic Co-operation and Development (OECD) countries were confronted by growing protests of students and new social movements along with an increasingly mobilized labor movement. A wave of worker strikes and factory occupations, starting with France’s near revolution in 1968 and culminating in Britain’s so-called “winter of discontent” in 1978/79 (Jenkins 1988), fueled the sense that democratic states were becoming “ungovernable” (Crozier et al. 1975). States can also fail in more piecemeal ways. In countries on the European periphery such as Greece or Cyprus, states appear to have lost much of their capacity for intervening in economic governance, raising sufficient revenues to fund critical missions, and providing public services in a cost-effective manner. This loss raises several important theoretical questions. One is whether countries such as Greece or Cyprus can extract sufficient concessions from international lenders, bond markets, and IFIs, as well as undertake sufficient internal reforms to regain their economic governance capacity (Bermeo and Pontusson 2012; Schäfer and Streeck 2013).

Bureaucratic Capacities The efficiency and effectiveness of states depend fundamentally on their organizational resources and bureaucratic capacities. States may extend their areas of responsibility without having the ability to perform new tasks. Only where bureaucratic capacity is high can an expansion of state intervention result in higher state capacity. An overload of the state or “state failures” may result from a gap between areas of intervention and bureaucratic capacity. Bureaucratic capacities in turn significantly depend on the success of the state in creating a bureaucratic organization close to the Weberian ideal type. Nowadays,

16    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens a functioning bureaucracy also needs to adapt business-oriented and managerial procedures (Pollitt and Bouckaert 2011). Bureaucratic capacities can both exceed and fall short of this ideal type of efficient hierarchical organization (for the latter on the US cf. Jacobs and King 2009). Bureaucracies may transform into a surveillance apparatus or run idle while raising the control capacity to the maximum. Bureaucratic capacity may also be too weak. In these cases, nepotism and corruption instead of legal rules characterize administrative life, or lobbying and the capture of agencies by specific social groups undermine the administrative obligation to follow the results of democratic decision-making. Moreover, the size of the administration and its degree of fragmentation may be crucial. A weak bureaucracy is not in a position to enforce the administrative penetration of diverse areas of society. Bureaucratic capacity also depends on a state’s greater or lesser centralization and on whether or not local governments are subordinated to the central or federal government.7 With the rise of international and supranational organizations, state bureaucracies are also required to deal with these new administrative units of different sizes and weights. Under such conditions, bureaucratic capacity is high when interdependencies between the various levels of authority and the interplay between administrative agencies can be managed effectively. In this context, states act as integral elements of a system of multilevel governance (Hooghe and Marks 2001). In the countries of the Global South, the onsite presence of international organizations plays a key role not least because of these organizations’ role as financiers (Risse 2011). In the affluent democracies, the fact that international organizations and the EU delegate the implementation of their decisions to the national bureaucracies is more important. International organizations and the EU have not established their own bureaucratic agencies at the country level and therefore do not possess enforcement power. However, in crisis situations, administrative oversight of national bureaucracies by international organizations such as the IMF, the European Central Bank (ECB), and the EU—often termed the Troika—may occur even in advanced industrialized countries, as could be seen in the wake of the 2008 financial crisis and the Troika’s role in the management of that crisis. With new transnational administrative agencies, new actors come into play. Shifts in the territorial organization of the state—whether from below through decentralization and federalization or from above via the pooling of sovereignty in international and supranational organizations such as the EU—have multiplied the number of stakeholders involved in decision-making while giving the stakeholders different weights. The proliferation of domestic interest groups and transnational NGOs has further fragmented the decision-making arenas. Rather than issuing orders, states participate in international institutions and negotiate agreements with a broad range of actors—be they public, private, domestic, international, or transnational. Undoubtedly, the emergence of strongly formalized and extensive multilevel politics, as exemplified by the EU, changes the overall capacity of the state. State capacities could be reduced, as an important strand of the literature points out. But this assessment might be premature. Even in the case of explicit shifts of competence, the rise of 7  When we inquire into the formation of new nation states, federal or quasi-federal sub-units that one might dub “segment-states” are regularly the foundation for achieving a breakaway (Roeder 2007; for the reverse process cf. Fazal 2007). Independence appears as an “administrative upgrade” of an existing “segment-state” (Roeder 2007: 10).

Introduction   17 international and supranational organizations does not necessarily lead to a decline in state or bureaucratic capacities. What may look like a loss of sovereignty for individual member states may turn out to be a gain of sovereignty and autonomy for the EU as a whole. Moreover, the calculation of gains and losses for member states is by no means straightforward, as these states gain—collectively exercised—leverage in the world market or world politics by pooling their sovereignty. The gain in political authority for the EU may thus even translate into increased capacities for individual member states. Thus, the state is strengthened by its integration into multilevel politics. Such calculations are reflected in the ongoing Europe-wide struggle over whether to grant the EU some power to tax or issue bonds or whether to let the EU run large-scale Keynesian spending programs that are no longer very effective if conducted solely at the national level. Due to the new ways of wielding influence at the international level, the state receives its own new possibilities for action.

Goals and Purposes Transformations of state areas of intervention and bureaucratic capacities are often preceded or accompanied by changes in the objectives of government action. But transformations of state purposes may also occur independently of these other transformations. States may use their expanding state capacities to stimulate growth or to initiate sustainable development, to reduce poverty, or to enhance the surveillance and ideological manipulation of the population. State capacities may thus serve diverse purposes. Hence, change in the purposes or goals of state action represents a third dimension of the transformations of the state. However, state capacities are often not neutral with regard to goals: some objectives require the removal or reduction of state capacity; infrastructural power of states in education makes it impossible to give economic elites complete control over the socialization of future generations. It is not unusual for state authorities to change fundamental objectives or identify new goals, whether for intellectual, economic, geostrategic, or political reasons. For example, during the initial stages of industrial development, state authorities tend to focus on economic growth, often to the exclusion of all other considerations, but over time, social protection generally moves onto the agenda, followed by environmental protection. Industrialization both generates demands for stricter environmental rules and provides the economic resources that make the costs of environmental protection affordable. Recent developments in China suggest that even authoritarian regimes can feel pressure to attenuate the environmental costs of industrialization, although democracies tend to be more responsive to citizen concerns. Much the same trajectory can be described in the case of social protection. Industrialization destroys traditional family-based modes of social protection and creates a number of risks for industrial workers—including ill health, workplace accidents, unemployment, and the inability to earn an income due to old age or disability. At the same time, it generates new actors, primarily unions, that push for new forms of social safety nets provided or at least guaranteed by the state, along with the fiscal resources to build these safety nets and other aspects of the welfare state. As in the case of environmental protection, social protection tends to emerge more rapidly and comprehensively under democratic regimes (Castles et al. 2010).

18    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens Non-economic processes can likewise lead to the identification of new goals. Changing social norms about such issues as the place of women and the functioning of families have fueled new agendas—in this instance, the promotion of gender equality through legal rights for women, public support for childcare, workplace reforms, and measures to enhance female political representation. Geopolitical shifts and shocks are another potential source of new state objectives. By lifting the threat of Soviet retaliation, the end of the Cold War opened opportunities for military intervention to defend human rights in troubled states, labeled the so-called “responsibility to protect,” or, in some cases, to depose unsavory regimes altogether. The end of the Cold War also expanded the possibilities for promoting democracy via both military and non-military means. Some of these goals changes have led authors to conceive of new state ideal-types, such as “competition state” (Cerny 2006), “trading state” (Rosecrance 1986)—now transfigured into a “virtual state” (Rosecrance 1996, 1999)—, “social security state” (Nullmeier/Rüb 1993),8 “women-friendly state” (Hernes 1987), and “national security state” (Stuart 2012), although these concepts have not entered common usage.

Instruments and Policy Tools A fourth form of state transformation concerns the instruments or policy tools deployed by state authorities. Governments are constantly looking for new ways to pursue their objectives more effectively or at lower cost. One example of instrument change is the movement from so-called “passive” to “active” labor market policies: instead of seeking to prevent poverty through “passive” transfer payments that pay people to remain outside the labor force, state authorities are increasingly pursuing “active” labor market policies that emphasize employment as the most effective means of escaping poverty (Huo 2009). The objective remains poverty prevention, but the policy tool becomes job promotion, as opposed to transfer payments. This shift in policy instruments may entail a combination of reduced state intervention in some areas (lower unemployment or disability benefits) and increased intervention in others (heightened surveillance and discipline of the unemployed, education and training services, job placement assistance, subsidies and tax benefits for those taking jobs, and expanded child care for working parents)—that is, of policy-dismantling (Bauer et al. 2012) and policy-building. The adoption of new policy tools, such as labor market activation, often occurs through international diffusion or borrowing spearheaded by policy experts (Orenstein 2008; Obinger et al. 2013). In other cases, though, new instruments are devised in response to crises or the failure of old instruments (Gourevitch 1986). The 9/11 attacks prompted authorities in the US and elsewhere to rethink the tools used to ensure national security 8  For Frank Nullmeier and Friedbert Rüb, the “social security state” is a state that pursues the overarching goal of ensuring the standard of living against certain standard risks of life, including old age, sickness, and unemployment. They contrast this state form with a current trend towards a “securitizing state” (Sicherungsstaat), i.e. securitizing the welfare state; for them this state form denotes a developed welfare state that no longer focuses primarily on outcomes, but rather shrinks its focus to its own internal consistency and affordability. On the same level as the “social security state” lies the French “state of providence” (l’état providence), except that this variant accents equity and solidarity in general (Ewald 1986).

Introduction   19 and to move beyond the projection of conventional military power against established states. Another failure, the financial meltdown of 2008, is leading governments to devise new regulations to try to safeguard financial stability (Admati and Hellwig 2013; more broadly on the crisis: Eichengreen and Pak 2012; Gourevitch 2013). In all of these instances, the basic goals of government policy have remained essentially the same, but the instruments deployed in the pursuit of these goals appear to be changing in significant ways. Sometimes these instrumental changes are perceived to be so encompassing and massive as to constitute a new kind of state, be it the “enabling state” (Gilbert and Gilbert 1989), the “social investment state” (Giddens 1998), the “regulatory state” (Majone 1994), or, now understood in an instrumental sense, the “national security state” (Stuart 2012), which, in an earlier incarnation, was called the “police state” (Wise 1976).

Structures of Authority and Political Communities A fifth type of state transformation concerns structures of authority and political communities. Of course, the most far-reaching changes affecting political representation and the structural character of the whole political system have been transitions to and away from democracy in many parts of the world, most notably Latin America and the former communist countries. In the twentieth century, a remarkable development took place. After a slow rise and proliferation of democracies at the beginning of the century, the process of democratization stopped from the 1920s to the end of World War II. In the second half of the century, the number of democracies increased to about 120, more than 60 percent of all independent states, accompanied by transitions from democracy to authoritarian regimes in a few countries. Yet the economic attractiveness of authoritarian regimes such as Singapore and China and the rise of an electoral authoritarianism signal that the process of global democratization might be reversible. Furthermore, the rapid spread of democracy (Acemoğlu and Robinson 2006; Tilly 2007; Norris 2012) led to strong differences among democracies. The literature differentiates between “hybrid,” “illiberal,” and “liberal” democracies besides more traditional dichotomies such as “consensus democracies” versus “majoritarian democracies” (Lijphart 1999; Kriesi et al. 2013). Yet even among the established OECD democracies, access to political power is changing. One such change is the incorporation of subordinate groups such as peasants and workers, which occurred historically through the extension of the suffrage and the forging of corporatist concertation. This process continues even today, as can be seen in the establishment of quotas for female representation on electoral lists or the right for immigrants to vote in local elections (McAdam et al. 2001; Tilly and Tarrow 2007). Constitutional reforms are another vehicle for modifying access to political power. Authorities in many countries have altered electoral laws or expanded the use of referenda, often in the name of making governments more responsive to the will of the people. Going in the opposite direction, the extension of judicial review and the delegation of key responsibilities to unelected bodies, such as central banks, have been motivated by the desire to remove certain kinds of decisions from the political arena. The modern states are predominantly nation states. They build their unity and their understanding as nation states on cultural, ethnic, political, or historical bonds. In addition, there are several countries that perceive themselves as

20    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens multinational units and have constructed other concepts of the unity of a political community. These different modes of establishing political unity are exposed to changes. Political identities based on categories of “the people” or “the nation” may be triggers for secession, mergers, or the redrawing of state boundaries. In most cases, the colonial heritage is a burden for any strategy of fostering national identities (Lange 2009). But in other cases, the definition of political communities may be under pressure. Political identities may shift, for example, from formerly national identities to a European or double identity (Risse 2010), without precluding processes of re-nationalization at any time.

3  Variation in State Transformations State transformations vary in their extent and intensity. The terms “reform” and “revolution” are traditionally used to denote more or less far-reaching state transformations. Many particularly important concepts for the analysis of state transformations originate in the study of revolutions. Given their pronounced event character, the formation and transformation of states in the wake of revolutionary—and typically violent—acts may be viewed as the most conspicuous form of change. Yet the point that state structures may even survive revolutions was made as early as 1856 by Alexis de Tocqueville in his classic The Old Regime and the Revolution (1998). Hence, while revolutions usually trigger state transformations, even the scope of revolutionary change may be limited. Elements of continuity, such as persisting bureaucratic or state capacities, must therefore not be neglected in the study of revolutionary change. Political regime change is located between reform and revolution on an intensity scale of state transformations. A revolution may bring about no more than political regime change, or it may completely overthrow a country’s social and political structures. In the long run, regime change—defined as the set of political transformations that usher in democratic regimes instead of authoritarian ones or vice versa—may revolutionize the entire state apparatus and its relationship with civil society. Thus, the study of regime change must take the dimensions and extent of state transformations into consideration. The utility of concepts such as revolution and regime change for the analysis of state transformations is limited, however. What is required is an analytical toolkit that enables researchers to disaggregate the relevant dimensions and to examine which kinds of change— if any—have occurred in each of them. The term “institutional change” denotes a rather more narrow type of state transformations than regime change. Examples include the reorganization of administrative or government structures, such as a shift of responsibilities between the three branches of government; transformations of this kind affect the intervention capacity or the power relationships of different political elites and social classes. Given the breadth of the term “institution,” this category of transformations covers a wide array of phenomena, and hence the intensity of state transformations cannot be inferred from a simple enumeration of institutional reforms, which may represent no more than irrelevant adaptations of formal institutional rules on one end of the spectrum or massive transformations of the entire state apparatus on the other (Ostrom 2005; Mahoney and Thelen 2010). The present volume nevertheless gives a lot of weight to gradual, limited transformations of state capacities, that is, transformations of the reform-type in the areas of economic,

Introduction   21 trade, financial, and budgetary policy. Such changes are not limited to a single policy area, but may encompass whole sectors, such as the totality of economic policy towards world markets. The transition from closed to open economies, or from import substitution industrialization (ISI) to neoliberalism is an example. This transformation reduced the state’s responsibilities in economic management and assigned a larger role to the market, and it reduced the state’s capacities to direct economic outcomes. The transformations of state capacities that encompass more than one policy field and also touch upon a country’s economic integration into the world market represent a type of gradual change that may well have a strong impact on social structures and the distribution of wealth. A gradual shift of state capacities may even have more far-reaching effects than wholesale institutional transformations of the state apparatus or a political regime change. Hence the analysis of state transformations must pay the requisite attention to gradual transformations. There is indeed a burgeoning literature on gradual change, although its focus has so far been on gradual institutional change (Mahoney and Thelen 2010). Yet there are equally important shifts at the level of one or more policy fields that, while leaving institutional arrangements intact, nevertheless transform the role of the state in society. For the OECD countries, these shifts will receive the greatest attention in the present volume. Of course, gradual shifts may in the long run usher in a situation in which even minor events trigger—relatively non-violent—revolutionary processes and radical state transformations. The combination of a reduced ability to deliver growth and long-simmering citizen dissatisfaction with corruption and political repression led to the implosion of communist states in Eastern Europe and the former Soviet Union in the late 1980s and early 1990s. The most sweeping state transformations are arguably those of the former communist countries. Here, a large number of countries experienced dramatic changes across multiple dimensions almost simultaneously. The transition from closed to open economies went along with the transition from planned to market economies and often from authoritarianism to democracy. In addition, in the former Soviet Union, Eastern Europe, and the former Yugoslavia, the exit from communism coincided with the redefinition of a number of national boundaries against a backdrop of longstanding repression of ethnic and religious divisions—in some cases, through violent means. Thus, state borders, regimes, responsibilities, and capacities all changed radically and virtually simultaneously. Equally dramatic are the cases of so-called “failed states,” such as Somalia or Mali, that is, previously functioning regimes, be they democratic or authoritarian, that have lost their fundamental capacity to monopolize organized force and thus have lost their capacities in all other areas, from economic management to social policy. The cases of partial or limited state transformation are not necessarily less significant or theoretically less revealing. For example, China has experienced fundamental economic change, while the political regime has remained largely intact, with the Chinese Communist Party continuing to monopolize power. The Chinese case poses the fundamental theoretical question of whether the relaxing of the state’s grasp in the economic arena must lead necessarily to a similar set of changes in the political arena. Is China an unstable halfway house, ripe for revolution—or, at least, democratic transition—or is it a stable alternative, a durable, non-democratic pathway to prosperity? Substantial state transformations may occur in a single country or in several countries at once. The most significant state transformations tend to extend beyond a single country, redefining the regimes, responsibilities, or capacities, of a number of states. Again,

22    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens the transition from ISI to the open economies occurred in virtually all Latin American countries, albeit in slightly different ways and at different speeds. Another example is the process of democratization that has transformed the regimes in states located in all parts of the world in recent decades. Therefore the extent of state transformations is crucially important. Which world regions are affected by which transformations? Are there ubiquitous trends or opposite developments in some regions? Is it thus possible to make general inferences about state transformations across countries and regions? Certain state theories and their propositions about transformation processes refer implicitly to a specific region such as the OECD, Europe, or affluent democracies, while ignoring developments in other parts of the world and are thus over-generalizing. Theoretical propositions that explicitly refer to the development of the state in all world regions may be found in the context of modernization theories. They posit that waves of social and economic modernization are linked to similar development patterns at the level of state capacities and state organization, and hence that state development follows in the wake of economic modernization. As a result, an essentially universal model of state development—with some nuances—is suggested. By contrast, other theories assume that late development and certain forms of integration into the world market result in specific state forms, and hence that early birds both require and tend to establish different state capacities than latecomers. Hence states presumably do not experience the same phases of one and the same model of development, differing only in the timing of development stages. Rather, from the very beginning of modernization and world market integration, states are pushed onto specific trajectories of state development. Different paths instead of mere phase shifts thus characterize state transformations across world regions. As these examples highlight, there is also regional variation in state transformations. This is hardly surprising, as different regions face different domestic environments, hold different positions within the global system, and have different state institutions and institutional histories. Because no two states are alike in this regard, all will necessarily transform differently. At the same time, common global factors are likely to promote general trends in state transformations across countries. In between these two extremes, states within particular regions are likely to have relatively similar domestic environments, have a similar position within the global system, and have similar states. In general, core OECD countries are relatively wealthy and democratic, have large and effective states, and have a privileged position within the international system. The states in former communist countries, though, are less wealthy and democratic and face particular state challenges resulting from the breakdown of the communist bloc and the introduction of capitalist economies. And many states in the Global South face their own challenges resulting from colonial legacies, ineffective states, relative poverty, and limited geopolitical power. The recognition of regional variation is therefore vital to any broad analysis of state transformations.

4  Organization of the Book The study of state transformations should not restrict itself to the proclamation of new state types like “neo-Schumpeterian workfare state,” “postmodern state,” or “social investment state.” Nor should it be grounded in assumptions about either a “crisis of the state”

Introduction   23 or the meta-stability of the state in a globalized world. Such formulas may be useful at best as a starting point for further research. Yet we require detailed empirical research to get a hold on the diversity of state transformations without sacrificing insights into the plurality of—possibly even contradictory—developments to classification exercises. This Handbook aims at a differentiated inventory of state transformations in all parts of the world over the last decades. This is possible only through the cooperation of a large number of researchers. The determinants of state transformations (Section 1 of this chapter), the categories of state dimensions (Section 2), the extent and intensity of state transformations and their variation (Section 3) discussed earlier help us to identify the relevant research issues. The individual chapters give priority to selected categories in line with their specific subject matter. To ensure a high degree of differentiation and sensitivity to the developments in individual countries or groups of countries, we classify the world of states into three large groups of countries: post-communist countries, Global South, and affluent democracies. Our Handbook provides an overview of the state transformations in all three groups and with reference to a large number of policy fields. Our Handbook is organized into five Parts, encompassing 44 chapters, along with two introductory chapters (Huber et al., Chapter 1; Levy et al., Chapter 2), a self-evaluative chapter (Levy, Chapter 9), and a concluding chapter (Huber et al., Chapter 44). The first two Parts of the book are primarily conceptual and historical in nature. Part I (3–9) analyzes theories and concepts of states plus the emergence of states over time, and Part II (10–18) deals with the state’s embeddedness in the international environment. The last three Parts focus on three regionally differentiated groups of states in the contemporary period, with Part III (19–30) exploring the affluent democracies, Part IV (31–35) the former communist world, and Part V (36–43) the developing—or non-developing—countries of the Global South.

The Emergence of Modern States Part I begins with a chapter (John Hall, Chapter 3) that examines the main theories and concepts of the state. Among the issues considered are: classical and contemporary attempts to define the state, the characteristics of the modern state that distinguish it from older political orders, and the sources of variation in state development. The ensuing chapters explore the historical emergence of states first in Europe (Manow and Ziblatt, Chapter 4), then in settler regions (Kelly and Mahoney, Chapter 5), and finally in post-colonial contexts (Lange, Chapter 6). These chapters pose the question of why states were established and why they took different forms in different places. The remaining chapters in Part I (7–9) examine the major social scientific attempts to theorize how states function and how they evolve (vom Hau, Chapter 7), including a critical perspective on the limited nature of the modern state (Risse, Chapter 8)9 and a self-evaluative, comparative—across time, policy, and place—perspective on the analyses of state transformations in the Handbook itself (Levy, Chapter 9). 9  This

contribution stands for a radically alternative approach to state analysis anchored mainly in international relations. It is pursued in depth at Berlin’s Collaborative Research Center on “Governance in Areas of Limited Statehood.” The contours of this approach are outlined in Thomas Risse (2011). The Berlin approach is contrasted with the one pursued in this Handbook—and in the Bremen Collaborative Research Center TranState—in Marianne Beisheim et al. (2011).

24    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens

Internationalization and the State Part II of the book is devoted to the relationship between the state and the international environment, and we have been supported by Michael Zürn and Nicole Deitelhoff in editing it. It begins with an overview of international models of the state (Zürn and Deitelhoff, Chapter 10), then probes the various ways in which states are shaped and transformed by the international system (10–18). Individual chapters look at “crucial types” and examine the tensions between formal sovereign equality and the de facto inequality of states (Viola, Snidal, and Zürn, Chapter  11), the competition among states in the international economy (Genschel and Seelkopf, Chapter 12), and the changing division of labor between the state and international organizations as well as non-state actors (Hanrieder and Zangl, Chapter 13). Special attention is paid to the EU (Shakel, Hooghe, and Marks, Chapter 14), which is arguably the most developed instance of “supranationalization” (in European parlance) or “pooled state sovereignty” (in North American parlance), approaching the status of a quasi-federal entity. The more general issue of the evolving relationship between transnational institutions and the state is also explored (Mattli, Chapter 15). Part II concludes with three chapters on crucial contemporary challenges that require states to coordinate their actions with other states:  civil wars and terrorism (Daase, Chapter 16), the world financial crisis (Helleiner, Chapter 17), and environmental risks (Dingwerth and Jörgens, Chapter 18).

Contemporary Transformations of the Established OECD Democracies Part III (19–30) examines the main transformations among the established OECD democracies. Building on a grand overview (Levy et al., Chapter 19), it looks first at the evolution of the state in the three commonly identified crucial subtypes of political economy—statist (Levy, Chapter 20), corporatist (Huo and Stephens, Chapter 21), and liberal (Peter Hall, Chapter 22)—and then considers the transformation of states surrounding the transition from closed ISI to open economies (Schwartz and Etchemendy, Chapter 23). These chapters cover macro-economic management and key forms of state economic intervention, including public ownership, industrial promotion, regulation, trade policy, industrial relations, and social policy. The chapter on the transition away from ISI also serves as a bridge to similar transitions beyond the affluent democracies. The remainder of Part III is devoted to an examination of some crucial issues concerning changes in state responsibilities and capacities in particular areas. Chapters first address the welfare state (Obinger and Starke, Chapter 24), gender relations (O’Connor, Chapter 25), and the transformation from the positive to the regulatory state (Holzinger and Schmidt, Chapter 26). They are followed by chapters on immigration (Bauböck, Chapter 27), plurinational states (Keating, Chapter 28), national security (Busch, Chapter 29), and the democratic state (Nullmeier et al., Chapter 30). All these chapters show that states are evolving in diverse ways in response to common international and domestic changes.

Introduction   25

State Transformations in the Former Communist World Part IV (31–35) analyzes state transformations among the former communist countries, where states long held the greatest power, cumulating economic and political control. With the collapse of the communist ideal, state authorities have sought to build market economies. This has been a wrenching, contested process. In many cases, the transition from plan to market has been accompanied by a transition from authoritarianism to democracy, a transition that has proven no less wrenching and contested. A striking feature of the post-communist transitions is their tremendous diversity. Out of the uniformity of the communist crucible has emerged quite a variety of political and economic outcomes. The first chapter (Grzymała-Busse and Luong, Chapter 31) of Part IV provides an overview of the different post-communist state outcomes and their causes, while the ensuing four chapters (32–35) discuss major types of outcomes in more detail. Eastern European countries (Vachudova, Chapter 32) illustrate the different pathways away from communism and the central role of the EU in that process. Other countries, once a part of the former Soviet Union (Luong, Chapter 33), are analyzed with regards to the significance that vast natural resources have for political and economic transformations. The Russian case (Taylor, Chapter 34) itself is treated as emblematic of the wider trend of resurgent authoritarianism. Finally, China (Tsai, Chapter 35) suggests that it may be possible for a communist regime to become more flexible, responsive, and open to experimentation, thereby allowing for the transition to a dynamic market economy, while retaining an authoritarian, single-party political structure.

State Transformations in the Global South Part V (36–43) explores the evolution of the state among the less developed countries of the Global South. The first chapter (Lange, Chapter 36) presents a general overview of states in Africa, Asia, Latin America, and the Middle East, tracing the basic characteristics of the states in each region and differentiating them from states in the OECD and post-communist countries. In order to explain the distinctive characteristics of states in the Global South, this chapter points to such factors as colonial origins, late development, resource endowments, and social and ethnic cleavages. The structure of Part V parallels that of Part III on the core OECD states in two ways. First, it provides a set of chapters that are devoted to transformations of crucial ideal types of states—in this case, developmental (Evans and Heller, Chapter 37), rentier (Waldner and Smith, Chapter 38), predatory (Reno, Chapter 39), and failed (Chojnacki and Menzel, Chapter 40). Second, Part V probes changes in state responsibilities and capacities in some crucial areas, including ethno-nationalism (Lange and Schlichte, Chapter 41), democratization (Pop-Eleches and Robertson, Chapter 42), and social protection (Huber and Niedzwiecki, Chapter 43). The parallel structures of Parts III and V highlight how different the challenges faced by states in the Global South are from those faced by the core states of the OECD, and they also show how much more limited the capacities of states in the developing world are for

26    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens meeting these challenges. Cross-regional comparisons also cast light on the interaction between the state and the international system. In particular, such comparisons point to the tensions between formal sovereign equality and the de facto subordinate position of the states of the Global South. Relatedly, they draw attention to the disproportionate impact of international actors and organizations on critical outcomes in the developing world, such as regime change, ethnic conflict, human development, and social protection.

5 Conclusion Following Part V, we summarize the main findings of the volume in a conclusion (Huber et al., Chapter 44). It points to the ubiquity of state transformations both historically and in the present era. It argues that states are transforming, gaining new responsibilities and exercising power in new ways, as opposed to simply retreating or defending established domains of influence. Finally, it shows how the character of state transformations varies across the main regions analyzed in the Handbook—the established OECD democracies, the post-communist countries, and the Global South—and that the economic and political gulf separating the Global North and the Global South will most likely not only persist but widen.

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Chapter 2

Ch a ngi ng Perspecti v es on the State Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier

In this chapter, we analyze the evolving debate about the state and its transformations. Simplifying somewhat, we can say there have been three eras or waves of social science thinking about the state since World War II. In the first wave, the leading social science perspectives of the postwar boom period—pluralism, Marxism, modernization theory, and behavioralism—largely neglected the state analytically. This neglect was somewhat more pronounced in North America than in Continental Europe. The second and third waves have been dominated by debates between historical institutionalists and neoliberals. Historical institutionalism and neoliberalism diverge on two main points. The first concerns the role of the state. Historical institutionalists depict the state as central to successful adjustment to political and economic challenges, whereas neoliberals portray the state as impeding adjustment and even as causing many problems in the first place. The second divergence relates to cross-national variation. Historical institutionalists contend that political, historical, and institutional differences generate multiple, functionally equivalent solutions to common challenges. Neoliberals, by contrast, emphasize a single optimal solution to common challenges and see international competition as driving, if not pure convergence, then at least a strongly convergent trajectory. The second wave of debate about the state began with the emergence of historical institutionalism in the 1970s. Historical institutionalism arose in part as an effort to explain developments as being differential responses to problems in the world economy, the breakdown of democracy in many of the advanced Latin American countries, rapid economic growth in East Asia, and developmental failures in Africa. Historical institutionalists portrayed the differential capacities of states as central to the distinct national responses to these political and economic challenges. In the Anglo-American world, the historical-institutionalist perspective was countered by a more critical neoliberal view of the state. This neoliberal approach gained influence with the economic turnarounds of the United States (US) and the United Kingdom (UK) in the 1980s and the economic difficulties experienced by

34    Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier countries and regions—France, Japan, and East Asia—previously held up as models of statist policy-making. In the most recent third wave, international developments—most notably globalization, the multiplication of international institutions and organizations, the breakdown of communist states along with the end of the Cold War, and the rapid creation and diffusion of new technologies—have fueled the sense that states are becoming less powerful and relevant. Neoliberals have advanced this understanding most aggressively, but many international relations scholars (cf. Part II of this Handbook) and even some historical institutionalists share the sense of state decline. Historical-institutionalist responses have gone in two main directions. Some have pointed to the persistence or path dependence of established state policies and institutions, while others have emphasized state transformations, identifying new roles and missions that states are undertaking. The following analysis of changing perspectives on the state is divided into four sections. Section 1 describes the general neglect of the state prior to the 1970s in the first wave of social thinking about the state. Section 2 presents the second wave, that is, the emergence of historical institutionalism in the 1970s and 1980s, which often placed neoliberals on the defensive. Section 3 depicts the third wave, which was something of a reversal of positions beginning in the late 1980s, as neoliberals confidently predicted the decline of the state, whereas historical institutionalists seemed to be on the defensive. Finally, Section 4 offers concluding thoughts about the challenges and limitations of both the neoliberal and historical-institutionalist perspectives as they seek to grapple with contemporary developments, such as the 2008 financial crisis and the ensuing recession, dubbed by some the “New Hard Times” (Gourevitch 2013) or—referring back to the Great Depression—the Great Recession (Kahler and Lake 2013; Bermeo and Bartels 2014).

1  Theoretical Neglect of the State in the Social Sciences—The First Wave Ironically, the leading scholarship in political science, especially in North America, long marginalized the most important institution in politics—the state. In the decades after World War II, political scientists and other social scientists relegated the state to a passive role in explaining outcomes of political processes. The state was either ignored or conceptualized as a kind of cash register, a vector sum of the values and interests of societal actors. While acknowledging state transformations, these approaches left little room for diverse state arrangements or for an active state role in the process of transformation. Both Marxist and pluralist theories saw the state as a mere reflection of societal power relations. For Marxists, the state remained the “executive committee of the bourgeoisie”1

1  The Friederich Engels quotation in The Origins of Family, Private Property and the State runs as follows: “the modern representative state is an instrument of exploitation of wage labour” (Engels 2010 [1884]: 210). The earlier Communist Manifesto states more pointedly: “The executive of the modern state is but a committee for managing the common affairs of the bourgeoisie” (Marx and Engels 2008 [1848]: 5).

Changing Perspectives on the State    35 or a simple tool used by the economically dominant class to exercise its hegemony over the laboring classes. Only in rare circumstances, in a situation of deadlock among warring classes, could the state acquire autonomy and become an actor in its own right (Marx 1981 [1852]). Pluralist theorists, in contrast, saw the state not as a tool for any one class or group, but rather as a neutral arena where contending forces pursued their interests and arrived at some result through bargaining and compromise, with the outcome reflecting their relative strength (Dahl 1961). For both Marxists and pluralists, then, the essence of politics—who gets what, when, and how (Lasswell 1958)—was determined by power relations in society and the economy, not by independent state action. Other highly influential strands of social science theory likewise sidelined the state. Modernization theory emphasized the diffusion of values, norms, and knowledge from the developed to the developing societies as these countries industrialized. Economic and social development, that is, greater societal affluence and the spread of education, were expected to lead to democratization via changing attitudes among elites, middle classes, and masses. Elites would become less fearful of the masses, the educated middle classes would embrace liberal and democratic values, and the lower classes would abandon radicalism, all of which would provide fertile ground for democratic governance (Lipset 1960; Bell 1962). In this process, the state would serve as a neutral bureaucratic instrument to help in the pursuit of economic and social modernization. The related behavioralist perspective explained political and economic outcomes on the basis of citizens’ attitudes. Democracy would work where citizens trusted one another and believed in their own capacity to influence politics (Almond and Verba 1965). Economies would flourish where citizens embraced the values of education, entrepreneurship, and shared prosperity. In this political culture perspective, the state figured mainly as an object of cognition and affect, not as an actor. The postwar literature did offer some insight into the factors that might impel state transformations. For both modernization theory and Marxism, industrialization and the development of a market economy were expected to produce a certain kind of politics. Modernization theory anticipated peaceful, limited controversies within a generally accepted democratic capitalist system and the end of ideologies. Marxism, by contrast, predicted an intensification of class conflict under industrial capitalism, ultimately leading to revolution, with class conflict ending only within a fully realized socialist system. The political culture perspective pointed to another driver of change, in the form of shifts in the political and economic values of citizens and elites. While identifying possible engines of state transformation, the postwar literature put forward a very thin conception of what these transformed states would eventually look like or do. In some cases, states were essentially absent, as in the pluralist perspective, or they were described in highly vague terms, as in the Marxist characterization of the realization of socialism when the state would “wither away.”2 In other cases, states were uniform, undifferentiated across countries at similar stages of historical development, as in the 2  This

famous adage can be traced back to only some of the more recent translations of Friedrich Engels’ Anti-Dühring of 1878 (Part III “Socialism,” Ch. 5 “State Family, Education”), e.g. in Peking’s Foreign Language Press 1976 or Moscow’s Progress Publishers post-1947. In these translations, Engels proclaims: “The state is not ‘abolished,’ it will wither away” or “it withers away.” By contrast, in the initial translations (1892, 1907, 1935), the phrase was: “The state is not ‘abolished,’ it dies out.” (Emphasis in the

36    Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier depictions of both Marxism and liberal modernization theory. And in all cases, including the behavioralist theory of political culture, states were clearly subordinate to more powerful societal and economic forces. There was little sense of states playing a role in their own transformations or of similarly situated states evolving along distinctive lines. Instead, the prevailing understanding was that states were objects, not actors, that they were being transformed by economic, social, and cultural forces beyond their control, that they were uniform technical constructs, and that they were moving toward an endpoint where they would have virtually no autonomy or influence. This notion of the state as a uniform object also held true for the dominant theory of international relations, neorealism, notwithstanding the fact that the states were conceptualized as the only important actors in the international system. Neorealism portrayed states and their governments as little more than billiard balls, whose actions were determined by the imperatives of competition and survival in an amoral international system (Waltz 1959, 1964; Aron 1966). States were rational actors, seeking to maximize their security and power. Whereas pluralism, Marxism, behavioralism, and modernization theory viewed transformations of the state as stemming from (domestic) socio-economic forces, the neo-realist theory of international relations depicted state behavior and transformations as a consequence of the structure of the international system, whether unipolar, bipolar, or multipolar. Scholars of Continental and Northern Europe, especially legal scholars, paid considerably more attention to the state (for an overview cf. Möllers 2008). In the statecentered European tradition of political thought, the state was seen as unified and hierarchically superior to society, it was identified with a bureaucracy pursuing the common good, and it was demarcated clearly from the potentially chaotic sphere of particular private interests (Schmitt 1957/2008 [1928]; Böckenförde 1958; Forsthoff 1964, 1971—for syntheses, see Kersten 2005; Meinel 2007, 2011). The statist tradition initially had an authoritarian bent, particularly in Germany, but in the postwar period, the democratization of the state became generally accepted (Kelsen 1945), and terms like “constitutionalism” and “political system” began to gain prominence in legal and political science scholarship (Möllers 2008; Anter and Bleek 2013). The major conceptual breakthrough consisted in opening the state sphere to the influence of society. Also in the postwar period, the enormous scope of state intervention and “top down” modernization in Europe was recognized and described by, amongst others, social science outsiders in studies of rational planning (Massé 1965; Shonfield 1965). State intervention in markets, industrial and technology policy, and Keynesian demand management were framed positively and became part of a conception of the technocratic state. Hence, elements of a new statist approach in the social sciences and in law were in place in Europe as early as the 1960s, even though they had not yet been pulled together in an overarching theoretical statement.

original.) In the German original Engels used the word, “absterben.” After World War II, the English version of Vladimir Iljitsch Lenin’s 1917 (1918) State and Revolution brought about a Gestalt-switch in the Engels translation. The fourth section of Lenin’s Ch. 1 “Class, Society and the State” is titled “The ‘Withering Away’ of the State, and Violent Revolution,” referencing Engels’ work, and this translation is reiterated throughout Lenin’s text.

Changing Perspectives on the State    37

2  The Statist Revival and Its Critics—The Second Wave In the 1970s and 1980s, social scientists in North America began to turn their attention to the state, while in Europe the new line of inquiry built upon and transformed earlier strands of state theory. Neo-Marxist European theorists now probed the relative autonomy of the state and the state’s relations to the ruling classes (Miliband 1969; Poulantzas 1973; Jessop 1982, 2002, 2006; Offe 1984), and these theorists’ insights infused mainstream social science research. In the administrative sciences, political science, sociology, and law (Scharpf 1973; Mayntz and Scharpf 1975), scholars analyzed the interventionist state, its massive bureaucratic capacities, and the associated legal arrangements. Theories emerged addressing the scope of state capacities, the span and depth of political control, and the social preconditions of successful state intervention. Finally, in the late 1960s and early 1970s, the first works on the historical development of the modern state in Western Europe were initiated by Stein Rokkan and Charles Tilly (Rokkan 1975; Tilly 1975; Flora et al. 1999). In the US, developments took the form of a new line of inquiry exemplified by Bringing the State Back In, an influential volume sponsored by the Social Science Research Council (Evans et al. 1985). The volume reflected a broad trend that had its roots in the realization by many scholars that the established frameworks were not very helpful in explaining a number of political and economic developments. Interest in the state was fueled by studies of military interventions and “revolutions from above,” social revolutions, economic growth models, and differences in the responses of affluent democracies to the economic shocks of the 1970s. Analysts of the new kind of military regimes that were imposed in Brazil (1964), Argentina (1966, 1976), Chile (1973), and Uruguay (1973) depicted the state as a bureaucratic and coercive apparatus that could be a relatively autonomous actor (Stepan 1978; Collier 1979). They theorized about the conditions under which such autonomy was likely to grow and about the limits of state autonomy (O’Donnell 1979 a,b). Social and economic groups retained a crucial role, but in the context of their (generally subordinate) interactions with the state. At roughly the same time, scholars analyzing revolutions drew attention to the centrality of the state in precipitating far-reaching “social revolutions” that went beyond changing political leadership to fundamentally transform society, the economy, and governance (Skocpol 1979). Theda Skocpol associated social revolutions with economic backwardness and the pressures of war, which overwhelmed the capacities of less advanced agrarian states. As old institutional orders crumbled, revolutionaries forged powerful new state apparatuses to drive military and economic modernization. The problems of late developers also led researchers to probe the potential role of the state as defender of national economic interests in relations with multinational enterprises and national capital (Vernon 1971; Evans 1979). Cross-national variation in economic performance likewise pointed to the salience of the state. An initial literature, inspired by the cases of Japan and France, recognized the pivotal role of the state in overcoming economic backwardness, in planning

38    Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier or “picking winners” among industrial sectors, and in “governing the economy” more generally (Gerschenkron 1962; Shonfield 1965; Katzenstein 1978; Johnson 1982; Zysman 1983; Hall 1986). With the onset of “stagflation” following the OPEC oil shocks in 1973 and 1979/80, scholars began to investigate how corporatist concertation among the state, employers, and trade unions in a number of European countries could restrain inflation while maintaining low unemployment (Lehmbruch and Schmitter 1982; Goldthorpe 1984; Katzenstein 1984, 1985; Scharpf 1991). The successful replication of Japan’s statist model by East Asian “tigers,” such as South Korea and Taiwan, provided further support for the statist perspective (Amsden 1989; Wade 1990; Woo-Cumings 1999). So, too, did the weak economic performance of the US and the UK, the affluent democracies most closely associated with the free-market model, which struggled economically during the three decades after World War II, particularly in the 1970s. The emerging statist perspective was, in many ways, a “revival of a Continental European perspective” in the nineteenth-century tradition of Max Weber (1864–1920) and Otto Hintze (1861–1940), as Theda Skocpol noted in her introduction to Bringing the State Back In (1985: 7 f.). Out of diverse studies asking very different questions emerged a new theoretical approach that came to be labeled “historical institutionalism” (Steinmo et al. 1992; Hall and Taylor 1996; Immergut 1998). This theoretical approach was applied to a wide range of institutions, defined loosely as formal or informal norms, rules, and procedures, with particular attention paid to the state and its capacity to direct society and the economy (Katzenstein 1978; Krasner 1978, 1988; Johnson 1982; Evans et al. 1985; Hall 1986). States were said to be “weak” or “strong” depending on their autonomy from societal actors, the quality and professionalism of their bureaucracies, the policy tools and instruments at their disposal, and their capacity to extract resources from society and impose a coherent modernizing strategy. States were also seen as central to interest representation. Pluralism and behavioralism were challenged OECD-wide by studies that emphasized the asymmetries and biases of interest group conflicts and the role that state agencies played in forming the political views of individuals (Lowi 1969). The new institutionalism recognized and problematized the ways in which the state shaped group interactions and political outcomes (building on Lehmbruch 1967 and Lijphart 1969, see Schmitter and Lehmbruch 1979; Berger 1981). State institutions could provide incentives or disincentives for group organization and make collective action of groups more or less difficult. Accordingly, the state could systematically privilege some groups and outcomes over others, and the task was to arrive at a theoretical understanding of the impact of political institutions on power relationships. The statist perspective did not go unchallenged. Some argued that it exaggerated the role of the state, taking state laws and proclamations at face value, when state authorities often lacked the capacity to implement or enforce these initiatives on the ground (Cohen and Bauer 1985; Samuels 1987; D. Friedman 1988; Migdal 1988; Cohen 1989; in retrospect Migdal and Schlichte 2005). The more significant, long-run challenge came from other quarters, however. An increasingly influential neoliberal critique agreed with statists that states were salient, but portrayed the impact of the state in a negative light. Rather than being agents of economic modernization, states were depicted as hostages of special interests, most notably uncompetitive but politically-connected big business and organized labor (Stigler 1975). These “insiders” impeded the efficient allocation of labor and capital

Changing Perspectives on the State    39 via the market, slowing economic growth and job creation (Olson 1982; Lindbeck and Snower 1988). Instead of funding the high-tech industries of the future, clubby financial markets favored the heavy industries of the past; instead of matching workers with jobs, highly regulated labor markets and overly generous welfare states restricted flexibility, while encouraging indolence, dependency, and poverty (Murray 1984). The problem of capture and special interests was claimed to extend to the state itself. “Civil servants” were reinterpreted and relabeled as “rent seekers” (Niskanen 1971), who sought public employment not out of any desire to serve the public, but rather to reap rents and be employed under much more favorable working conditions—with better pay and benefits as well as iron-clad job security—than workers in the private sector (Tullock 1967; Krueger 1974). From a political perspective, neoliberals argued that an interventionist state was antithetical to liberty and democracy (Hayek 1976 [1944]; M. and R. Friedman 1990; M. Friedman 2002 [1962]). When states combine economic and political power, there is no room for civil society to develop. Moreover, dissent is silenced, since opponents lack the resources to voice their opinions and fear retribution by government authorities. Thus, statism was presented as not just an economic problem, but also as a threat to democracy. Prior to the 1970s, supporters of the neoliberal perspective, including Milton Friedman and the Chicago School, along with public choice theorists, were a lonely voice in policy-making circles dominated by the ideals of Keynesian economics and the mixed economy (Shonfield 1965; Hall 1992). Neoliberals made their first important breakthroughs with the election of Margaret Thatcher as Prime Minister of the UK in 1979 and Ronald Reagan as US President in 1980. Both Thatcher and Reagan embraced a neoliberal agenda that was highly controversial at the time, and they began repudiating Keynesianism, rolling back government regulations, and forcefully confronting the labor movement. When the long-ailing British and US economies began to turn around in the 1980s, surpassing the performance of many other affluent democracies, neoliberal ideas gained credibility and emulators in Europe, especially at the EU level. The economic difficulties experienced by countries or regions such as France, Japan, and East Asia, previously held up as models of statist policy-making, lent further credence to the neoliberal notion that the excessive influence of the state constituted the principal obstacle to investment, growth, and job creation. Developments beyond the affluent democracies also bolstered the cause of neoliberalism. The collapse of Soviet and East European Communism was interpreted by many as demonstrating that markets were better than states at protecting freedom and promoting prosperity. In Latin America, Chile’s economic turnaround after 1973 under General Augusto Pinochet, who was closely advised by Chicago School economists, seemed to validate free-market prescriptions (even if the reality of Chilean economic policy was far more ambiguous than the Chicago School narrative suggested). Neoliberal ideas spread to other developing countries not only via emulation of the “Chilean model”, but also through international financial institutions (IFIs), including the World Bank and the International Monetary Fund (IMF), that were heavily influenced by the US government. Debt crises, most notably those affecting Latin America in the 1980s and East Asia in the late 1990s, provided an opportunity for IFIs and Western banks to impose neoliberal reforms as a condition for the receipt of aid. Countries exiting from Communism were likewise drawn to neoliberalism as a way of moving to a market economy as quickly as

40    Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier possible, demolishing the discredited and repressive communist state, and appealing to international lenders and investors whose funding was desperately needed. By the mid1990s, the phrase “Washington consensus” emerged as a shorthand for a standard package of neoliberal policy prescriptions (Williamson 1990), pointing to both the influence of the US in promoting neoliberalism and the emphasis on rolling back the state as the solution to economic difficulties.

3  International Challenges and State Responses—The Third Wave The most recent third wave of thinking about the state has focused on the challenges posed by changes in the international arena (cf. Cameron et al. 2006: Parts I, II; Genschel and Zangl 2014). The end of the Cold War, new technologies, a surge in economic globalization, and the growing influence of international organizations and transnational NGOs are changing the environment in which states conduct their affairs, rendering certain policies or modes of governance impracticable. These developments have fueled the sense, particularly among neoliberal and international relations scholars (inter al. Risse 2011), that states are becoming less powerful and relevant.

International Pressures on States The end of the Cold War marked a breakpoint in thinking about the state and international policy regimes. Communism and socialism, the principal ideological challengers to free-market capitalism, were discredited. While pronouncements of the “end of history” (Fukuyama 1992) proved premature, to say the least, the end of the Cold War did bolster the credibility of neoliberal prescriptions, along with the capacity of the US to promote these prescriptions through both ideological channels and international lending institutions (Evans 1997). The collapse of Communism also deprived the mixed economies of Western Europe and East Asia of their position as the moderate middle between the Cold War polarities. Neoliberals have voiced increasing disdain for West European and East Asian practices, more or less equating them with socialism and “crony capitalism,” respectively. Taking a step back, state intervention in general has come to be viewed with tremendous suspicion, as prone to inefficiency, corruption, and rent seeking. Beyond these ideological exploitations of the changed international situation, globalization—understood as the multiplication and intensification of interactions across national borders—has undermined many state strategies for protecting the security and well-being of citizens (Keohane and Milner 1996; Strange 1996; T. Friedman 1999). Keynesian demand stimulus is of limited effectiveness unless coordinated with other countries—or unless conducted by international institutions covering a broad trading zone like the EU—since much of the demand stimulus leaks, benefiting foreign rather than domestic producers and fueling balance of payments deficits. Keynesianism is further constrained by the threat of capital exit, that is, by the flight of mobile investors, who disapprove of increased

Changing Perspectives on the State    41 government spending and deficits—though the fact that, in March 2013, Cyprus was able to freeze bank assets greater than 100,000 Euros proved that states are not completely powerless to limit capital flight. Finally, as the ongoing crisis of the Eurozone demonstrates, even the wealthiest nations in the world cannot sustain huge budget deficits indefinitely in the face of international bond market reluctance to roll over ever-larger levels of government debt. Globalization has also undermined industrial policy. Trade openness has deprived governments of one of the key tools for nurturing infant industries: the possibility of insulating them from foreign competition. To guarantee a level playing field, most forms of subsidies are prohibited under either the rules of the World Trade Organization (WTO) or European Union (EU) competition policy. There are also concerns about effectiveness. Given that companies are sourcing production the world over, aid to industry, like Keynesian demand stimulus, may leak out of the domestic market and provide manufacturing jobs for workers in China or India, rather than in the country that engages in industrial policy. Closely related to the globalization argument, many scholars see new technologies as eroding the possibilities for state intervention. The information technology revolution has given global traders the capacity to send trillions of dollars around the world daily, far outstripping the currency reserves of individual nations (O’Brien 1992). This flood of footloose capital has undermined the capacity of governments to sustain fixed exchange rates or undertake policies at odds with financial orthodoxy. The ease with which money sloshes across borders has also made it difficult for governments to control tax evasion and money laundering. Although US and European authorities have placed tremendous pressure on tax havens of late, countries (e.g. Ireland, Cyprus, Liechtenstein, and the Cayman Islands) and financial institutions (e.g. Swiss banks) are still able to provide some kinds of questionable financial services to companies and individuals. From an interest group standpoint, globalization and new technologies have raised the power of business relative to the state or organized labor, thereby placing pressure on governments to accommodate business preferences for lower taxes, wage moderation, and regulatory relief. Capital is considerably more mobile than either labor or the state, giving business a tremendous source of leverage. Companies can “regime shop,” locating production and investment in the most tax-friendly, employer-friendly countries. In response, governments have often felt compelled to pare back spending and economic intervention, on pain of losing investment to more business-friendly locations. The result, many believe, is a “race to the bottom,” not only in social protection and wages, but also in state “intrusiveness” in the economy. Business is not the only interest that has gained influence relative to the state. The rise of international institutions above, local authorities below, and NGOs outside the state has undermined the state’s capacity to act unilaterally, forcing state authorities to work with partners whose power, legitimacy, information, and resources they need. Reinforcing this trend, many problems transcend national boundaries:  environmental degradation, for example, has an impact way beyond the borders of the states that allow it to happen. The diffusion of authority has sometimes taken a sinister turn. New technologies of communication and violence have empowered menacing non-state actors, from terrorist networks to drug cartels, who threaten the state’s monopoly of organized force both nationally and internationally.

42    Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier Taken together, then, international developments—the end of the Cold War, globalization, new technologies, and the multiplication of institutions and organizations beyond the state—are claimed to have narrowed the jurisdiction, autonomy, and capacity of the state (Guéhenno 1995; Ohmae 1995). This claim is advanced most forcefully by neoliberal and international relations scholars, but it is shared by many others, including some historical institutionalists. Still, historical institutionalists have generally been sceptical about proclamations of the death of the state. They offer two main responses to the state-decline thesis, one emphasizing state persistence and the other state transformations.

Sources of State Persistence In a first response to the state decline thesis, historical institutionalists present several arguments for why the challenges of globalization are not massive enough to seriously jeopardize state intervention and state capacities. The first argument for persistence is that the world has not actually changed very much. In the context of globalization, for example, it is noted that levels of trade integration today scarcely exceed levels reached in the years prior to World War I (Berger and Dore 1996; Hirst and Thompson 1996; Garrett 1998b; Rieger and Leibfried 2003). Although capital flows have indeed grown exponentially, most of these flows are short-term portfolio moves, with little impact on domestic loan rates. Thus, financial globalization has not fundamentally altered the day-to-day operation of lending and borrowing. Moreover, many of the constraints on state action that are attributed to recent developments actually existed in an earlier period. For example, although capital liberalization has enhanced business’s exit option, it is not as if companies were powerless previously. Government actions have always been restrained by the need to assure business confidence so as to create an environment in which privately held companies would be willing to invest (Lindblom 1977; Block 1987 [1977]). In a similar vein, even if globalization makes it difficult for a country to run sustained budget deficits, it is not as if big deficits were the macroeconomic strategy of choice in the 1960s, even for free-spending Scandinavian countries. On the contrary, needing to defend a fixed exchange rate and fearful of inflation, these countries tended to run budget surpluses (Stephens 1996; Huber and Stephens 2001). The second historical-institutionalist argument for the persistence of state intervention is that the demand for state rollback is weaker than commonly portrayed. Paul Pierson (1994) has demonstrated that popular support for the welfare state held firm even at the two epicenters of the neoliberal revolution—the US under Ronald Reagan and the UK under Margaret Thatcher (for analysis of more recent US developments cf. Hacker and Pierson 2006, 2010). The American and British publics were not nearly as enthusiastic about welfare retrenchment as the electoral successes of Reagan and Thatcher might have indicated, and enduring public support for social protection has made significant welfare retrenchment exceedingly difficult. Nor are electors alone in resisting neoliberal policies. Scholars of Germany note that employers derive many benefits from the country’s highly structured industrial relations system and expansive welfare state, including a skilled labor force, labor management cooperation, and opportunities to pension off redundant workers at government expense (Thelen 1999, 2012, 2014; Hall and Soskice 2001). Despite the presence of a center-right government for much of the 1980s and 1990s, German employers did not

Changing Perspectives on the State    43 push for Thatcher-style deregulation because the system worked well enough, especially for large companies. The broader analytical point is that key economic actors often do not hold the deregulatory preferences that the literature on state decline attributes to them (Mares 2003; Martin and Swank 2012). The third historical-institutionalist argument against state decline acknowledges that the world may indeed have changed and that constraints on the state have grown, but counters that these constraints can be handled with relatively small adjustments (Garrett 1998a). For example, international financial markets may not allow governments to run sustained budget deficits, meaning that Keynesian demand management is much less available as a policy option at the national level—though at least in Europe, the EU as a whole has such an option. However, the prohibition on big national budget deficits is not a prohibition on big government: budgets can be balanced at 20 percent of GDP, as in the US, or at 50 percent of GDP, as in Sweden. Relatedly, it is noted that while business has become harder to tax due to international capital mobility, corporate taxation generally represents a small proportion of government revenues—in the neighborhood of seven to eight percent—making a fiscal crisis of the welfare state exceedingly unlikely (Ganghof 2000; Steinmo and Swank 2002; Steinmo 2003; Genschel and Schwarz 2011). What is more, most countries have been able to retain corporate tax revenues through a combination of simple anti-evasion measures and tax reforms that lowered rates while eliminating exemptions and broadening the base. (For the full range of these government tax strategies, see Ganghof 2008.) The fourth and last historical-institutionalist argument for the persistence of state activism is one of path dependence. Institutions are sticky, and state policies, especially costly social policies, tend to rest on powerful political foundations. There is a reason why the US social security system is commonly referred to as the “third rail” of politics—electrocuting the person who touches it—and welfare state reform in Europe has proven even more politically parlous (Obinger et al. 2010). Contemporary reformers do not make policy in a vacuum. They operate on a political terrain shaped by prior state policies—policies that have reinforced or even fostered powerful interests with an enormous stake in the perpetuation of existing programs (Weir et al. 1988; Pierson 1994, 2000; Skocpol 1995). However persuasive the arguments of neoliberal economists and however significant the pressures of globalization, the capacity of state authorities to roll back existing commitments is highly constrained by the interests and public expectations that have grown up around these commitments and by the buffer functions against external shocks that many of these policies fulfil (Rodrik 1997, 2011). Globalization is countered by domestic politics. Historical-institutionalist arguments on behalf of state persistence offer a valuable corrective to overblown prophecies of state decline. There has been far less change in the world than meets the ear, and much of this change can be accommodated through relatively limited adjustments to existing arrangements. The state-persistence thesis concedes important ground to the state-decline thesis, however. It essentially accepts the former’s presumption that contemporary changes push in a single direction, namely toward the reduction in state intervention, and it differs mainly in its assessment of the strength of these pressures and of the state’s capacity for political and institutional resistance. It also accepts the declinist metric of change as the erosion of traditional state missions and powers, thereby confining politics to a kind of rearguard action. The logic of economic, technological, social, and ideological change is that state intervention should shrink, while

44    Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier national political and institutional forces should resist and delay such shrinkage. Thus, politics is destined to defend an ever smaller, less relevant, and more embattled sphere of state activity across time.

Dynamics of State Transformations A second response to the state-decline thesis emphasizes state transformations, as opposed to state persistence. This transformational approach is advanced primarily by historical institutionalists, but finds support among some economists as well. While conceding that international pressures may challenge specific state activities, the transformational perspective notes that such forces may also be “enabling” (Weiss 2003), creating opportunities for new kinds of state intervention. In other words, state activism can be renewed and replenished, not simply eroded. The transformational perspective on the state advances three main arguments against the state-decline perspective. The first is that the neoliberal project itself rests on the redeployment of the state, as opposed to the retreat of the state. This claim builds on Karl Polanyi’s critical insight that market-making is the product of state intervention, rather than simply the eclipse of the state, and that such intervention tends to engender demands for state intervention to compensate and shelter those subjected to the market (Polanyi 1957 [1944]). According to Polanyi, market-making entails a “double movement” of the state—first establishing the market, then embedding the market in social norms. Picking up on this second movement, the so-called “domestic compensation” literature (Cameron 1978; Ruggie 1982; Katzenstein 1984, 1985; Rodrik 1997; Garrett 1998a, b) has long noted that the countries most open to international trade tend to have the largest welfare states.3 In other words, the expansion of the state’s social vocation has been essential to the expansion of international trade. In a contemporary vein, studies of neoliberal reformers, such as Margaret Thatcher of Britain, have likewise pointed to the increased role of the state in forging a more market-oriented political economy, whether by breaking the power of unions and other producer groups, imposing pro-competitive regulation on sheltered activities, reining in free-spending local government authorities, or bringing the public sector to heel (Gamble 1994; Richardson 1994; Vogel 1996; advocating “re-‘stating’ ”: Gamble and Wright 2004). The linkage between economic liberalization and increased state power has an external as well as an internal dimension (Barton et al. 2006; Steinberg 2006). International free trade agreements often require signatory states to take on new responsibilities, including administering antidumping provisions, enforcing intellectual property rights, and expanding environmental protection and labor rights. The process of negotiating these agreements also tends to boost the power of the central state relative to other domestic actors. In the name of enabling governments to “speak with one voice” and make credible commitments in international negotiations, authority is often shifted vertically, from the 3  Increased international exchange may also lead to competitive upgrading of social protection. In Germany’s founding period of the social insurance state, the 1880s, Bismarck’s strategy amounted to outcompeting England via industrial peace-making, and England felt compelled to improve its own social policy efforts (cf. Hennock 2007).

Changing Perspectives on the State    45 local to the national level, and laterally, from the legislature to the executive. Such shifts of power are highly controversial and have triggered political battles, particularly in countries with strong federalist traditions, such as Germany. The dynamic is further complicated for members of the EU. On the one hand, given that trade policy falls clearly within the EU’s jurisdiction, the same processes of centralization that occur within nation states engaged in trade negotiations take place between nation states and the EU. On the other hand, national authorities often use the EU and its liberalizing agenda to bolster their own power vis-à-vis domestic rivals (Grande 1996; Moravcsik 1998). Governments routinely resist demands for protection against foreign competition by invoking EU competition policy and counter pressures for higher levels of public spending by blaming Maastricht and EMU budgetary rules. Referencing these kinds of power dynamics, scholars of Italy have depicted the EU as having strengthened the Italian state (Ferrera and Gualmini 2004), and such claims have been made about other EU member states as well. It is not just historical institutionalists who link economic liberalization to state transformation and activism. Several leading economists specifically invoke Polanyi to argue that successful economic liberalization requires state support and to criticize the antistatist agenda associated with the Washington consensus (Rodrik 1997, 2007; Stiglitz 2007, 2010; with lawyers arguing along similar lines, cf. Joerges and Falke 2011). Stiglitz, in particular, contends that policy-makers have largely failed to integrate Polanyi’s central insight that the self-regulating market is a myth and that efforts to establish a self-regulating market lead to disaster. The disappointments of “shock therapy” in post-communist transitions, the 1997/98 East Asian debt crisis, and the 2008 financial meltdown all stemmed, according to Stiglitz, from excessive faith in the market and neglect of the role that states must play. He observes, for example, that the architects of communist transitions believed that dismantling the repressive, dysfunctional communist state would yield a flourishing market economy, but the absence of state institutions to uphold property rights, police the market, and adjudicate disputes led to a “Wild West” of corrupt, oligarchic capitalism. The Polanyian reply to the globalization hypothesis, then, is that to the extent that globalization requires countries to rely on the market, successful adaptation entails redeploying the state to support, regulate, police, and legitimate the market—generally, through social spending—not simply dismantling the state. The second argument of historical-institutionalist scholars operating from a transformational perspective is that even in a world of globalization and heightened constraints, there are alternative economic strategies to neoliberalism that afford a more central place to political choice and state direction of the economy. This argument is generally associated with the claim that governments of the left have the capacity to pursue progressive strategies, despite new constraints. Whereas prior typologies tended to focus on differences in macroeconomic policy or industrial policy (Shonfield 1965; Zysman 1983; Hall 1986), the left-leaning transformational perspective concedes that such policies have been rendered much less practicable due to globalization and European integration. States have largely abandoned Keynesian demand stimulus and voluntarist industrial policy. That said, there are other state policies that provide alternatives to neoliberal capitalism. Gøsta Esping-Andersen (1990, 1999) emphasizes the role of welfare policy, which he contends has laid the foundations for three distinct “worlds of welfare capitalism”—liberal, Christian democratic, and social democratic—that differ in their

46    Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier employment patterns, income distributions, modes of competition, and treatment of women and children. Esping-Andersen’s typology is rooted in historic patterns of political competition and welfare formation, dating back at least to World War II. Other left-leaning scholars have adopted a more voluntarist approach. Carles Boix contends that left-leaning governments, even in countries like Spain that have no tradition of social democracy, can compete on the basis of high spending on education and public investment, as opposed to lower taxes and wages (Boix 1998). Scholars have also suggested that Nordic governments have reinvigorated the social democratic model by curbing some excessive social spending and plowing part of the savings into preschools, computer literacy, internet access, higher education, and R&D (Pontusson 2010; Steinmo 2010; Ornston 2012; see also Huo and Stephens, Chapter 21, this volume). This redeployment of state spending has underwritten Nordic success in innovation-based competition and high technology, leading to the creation of large numbers of high-skill, high-wage jobs in private services and industry. Another group of scholars who posit alternatives to neoliberalism is made up of the advocates of various “third ways,” most notably Anthony Giddens (1998, 2001; also Cuperus and Kandel 1998; Hombach 2000). The third way, as the label suggests, takes issue not only with neoliberalism, but also with traditional leftist prescriptions. Instead of nationalizations and ever-higher levels of public spending, third-way advocates call for “active welfare states” that support job creation that act as “trampolines” rather than “safety nets,” public investment instead of public consumption, greater levels of personal responsibility and accountability, the use of market forces and public-private partnerships to achieve state objectives more efficiently, a redistribution of productive assets as opposed to income, and an emphasis on equality of opportunity rather than outcome. One notable feature of the third way is that it is not confined to Britain. Rather, the third way has been presented as a formula that can work for any progressive government. In practice, scholars and left parties in other countries have tended to embrace different conceptions of third-way reforms, but there is a shared belief that by adapting their policy instruments, left governments can still pursue progressive ends, notwithstanding the constraints of globalization. The third argument of the transformational perspective on the state is that states have significant roles to play beyond the economy and that many of the same international developments that are claimed to be narrowing the state’s role in the economy are driving dramatic expansions of state missions and power in other areas. For example, the end of the Cold War may have discredited alternatives to neoliberal economics and bolstered the Washington consensus, but beyond the economic sphere, it has opened the door to US-led military interventions around the world. No longer held in check by the threat of Soviet retaliation, Western countries have deployed military force in places as diverse as Iraq, Libya, and Mali in the name of defending human rights (the so-called “right to protect,” or R2P—see Daase, Chapter 16, this volume), combating terrorism, and even promoting regime change. Whether the end of the Cold War has moved the world toward neoliberal economics and whether such a move entails a shrinking of the state are subjects of furious debate. By contrast, there is no debating that the end of the Cold War has created opportunities for expanded military intervention by Western powers.

Changing Perspectives on the State    47 The easing of restrictions on cross-border flows displays a similar Janus-faced character. The opening of national borders allows goods and capital to move more freely around the world, narrowing the room for certain kinds of economic policies such as Keynesian demand stimulus or credit rationing. The porousness of national borders also makes it easier for individuals to cross them, however, especially within the EU’s Schengen zone, but even among countries that have not liberalized immigration, for example, the US and Mexico.4 This porousness raises a host of concerns that have prompted dramatic expansions of state powers. Concerns about illegal immigration have fueled an array of repressive measures, such as expedited expulsion procedures, increased identification controls, and the construction of border fences (Mau et al. 2012). Concerns about terrorism have prompted not only wars and the use of “enhanced interrogation methods” abroad, but also aggressive expansions of state powers at home, including airport security measures, preemptive detention, data mining, and wiretapping (see Busch, Chapter 29, this volume). Once again, globalization enables states as well as constraining them.

4  Limitations and Challenges The debate between neoliberal and historical-institutionalist scholars has added much to our understanding of state transformations. Neoliberals identify important international constraints on contemporary states, while historical institutionalists point to ways in which states can resist international pressures or redeploy their actions on behalf of new missions and objectives. For all their contributions, the neoliberal and historical-institutionalist approaches confront a number of challenges. The 2008 financial crisis and ensuing responses illustrate some of the main limitations and challenges for each approach. Let us start with the neoliberal approach. A first limitation of the neoliberal understanding of state transformation is prescriptive. Neoliberals emphasize state retreat and decline as the necessary response to international pressures, particularly in the economy. Yet the retreat of the state in the realm of financial

4 

In contrast to the first phase of globalization that ended in August 1914 with World War I, the second phase is not characterized by the free mobility of persons across borders. Today the only global regional exception is the European Union with its four freedoms, the first of which is free mobility. While three freedoms—especially the free movement of goods, but also of services and capital—came “naturally” into the 1957 Treaty, free mobility was an add-on due to Italian bargaining power only, and it was based on Italy’s expectation that the country would continue to send large numbers of workers northwards. The free mobility of persons has never been as widely accepted as the other freedoms. Leaders, such as former French president, Nicolas Sarkozy have often threatened to reimpose border controls in response to the perceived laxity of other countries in limiting drug smuggling or illegal immigration. There has also been a backlash against real or imagined immigration from recent joiners, Bulgaria and Romania after restrictions were lifted on 1 January 2014. Although not a member of the EU, Switzerland crystalized European concerns about migration flows when voters approved a referendum “against mass immigration” on 9 February 2014. The referendum requires the government to set quotas on immigration and prioritize the hiring of Swiss citizens. Such a move would unravel the compromise struck with the EU, which gave Switzerland access to the Common Market in return for accepting free mobility of persons; the complete “four freedoms” package deal would need to be renegotiated between Switzerland and the EU, with consequences for Switzerland and, possibly, also for free mobility within the EU.

48    Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier regulation is widely blamed for having caused the 2008 meltdown. Moreover, the countries that were at the epicenter of this meltdown, the US and Britain, were also the affluent democracies most associated with a light-touch, neoliberal approach to economic affairs in general and financial regulation in particular. Neoliberal prescriptions seem anything but optimal or necessary; on the contrary, they appear to have led to economic catastrophe. The problems for the neoliberal approach are, second, normative as well as analytical. Much of the normative justification for neoliberal measures is based on economic performance. Neoliberals acknowledge that the statist approach may appear more sympathetic at first glance, as statists respond to pressing social problems, such as unemployment and poverty, with new public policies (M. and R. Friedman 1990). However, they contend that such policies generally fail, hence it is state retreat that is actually the more economically efficient and ultimately welfare-enhancing strategy. The problem arises when neoliberal prescriptions fail to deliver economic performance. At this point, there is no independent normative basis of legitimation, leaving the anti-statist perspective in a normatively and politically fragile position. The neoliberal, declinist perspective on the state is challenged, thirdly and finally, by geopolitical developments. Even if the neoliberal view of the economy were to be entirely accepted, it would be difficult to reconcile this minimalist understanding of the state with the multiplication of the state’s military and national security activities in the twenty-first century. One cannot but note the irony of leading proponents of the state-decline thesis routinely submitting to long lines and invasive body searches at airports and having their cell phones and emails monitored by the National Security Agency (NSA). The analytical challenge for the neoliberal, declinist perspective, then, is to arrive at a unitary theory that can account for the state’s expanded geopolitical role alongside its supposedly reduced economic role. The historical-institutionalist perspective also confronts serious challenges. A first challenge concerns the metric of state transformation. Historical institutionalists point to a variety of new powers and responsibilities that states have acquired, even as they have lost old ones, but it is far from clear that the former offer an adequate replacement for the latter. For example, states may have multiplied their new economic policies and interventions. Yet this development is of little solace to citizens if it fails to reverse slow growth, mass unemployment, and rising inequality and poverty. The transformational perspective on the state runs the risk of fetishizing new state programs and policies, while ignoring or, at least, downplaying the loss of critical functions, including assuring economic growth. A second concern about the historical-institutionalist perspective on the state is analytical. The historical-institutionalist approach, as the label indicates, places considerable weight on historical and institutional legacies, which are said to significantly constrain contemporary governments. The discussion by historical institutionalists of neoliberalism and its alternatives, by contrast, seems to have a strong voluntarist streak. Historical institutionalists—along with Polanyian economists such as Stiglitz and other progressive purveyors of third ways—criticize governments for pursuing neoliberal economic policies and present alternatives, which they argue offer superior social and economic outcomes. These writings tend to be thin on political analysis, however, telling governments what to do, without saying much about how they should do it. Such voluntarism, bordering on wishful thinking in some cases, seems to ignore the emphasis of historical institutionalism on historical and institutional constraints.

Changing Perspectives on the State    49 A third, related concern about the historical-institutionalist perspective is typological. The loss of critical economic responsibilities has diminished the differences among the various alternative national models or varieties of capitalism.5 The decline of industrial policy, detailed financial regulation, and Keynesian fine-tuning has eliminated much of what is distinctive about the statist model, while the erosion of centralized wage bargaining has diminished one of the most important features of the corporatist model. As a result, the old typologies do not carry much analytical weight any more in much of the contemporary historical-institutionalist analysis. Countries no longer fall into their predicted categories, and prior typologies are often reduced to dualities, distinguishing between neoliberalism and something else. These three limitations can be seen in the historical-institutionalist treatment of the 2008 crisis. On the one hand, historical institutionalists were arguably right about the economics of the crisis; the retreat of the state from financial regulation advocated by neoliberals was clearly central to the crisis. On the other hand, historical institutionalists have been confounded by the politics of the crisis. National responses did not flow predictably from established typologies. By most accounts, “liberal” Britain and the US responded most aggressively, launching state bailouts, nationalizations, and stimulus plans, whereas supposedly “statist” France offered a fairly anemic response (Bermeo and Pontusson 2012; Massoc and Jabko 2012; Levy 2013; Woll 2014). Moreover, as the crisis has unfolded and sovereign debt has become a concern in Europe, neoliberal policy prescriptions seem to be prevailing, while backdoor ECB monetary activism keeps further crisis or deflation at bay. As before the crisis, historical institutionalists find themselves in the uncomfortable position of criticizing neoliberal policies and proposing alternatives in a way that seems more hortatory than analytical. Finally, if the crisis of neoliberal capitalism has expanded the economic role of the state, states have failed to regain the function or capacity to govern the economy as they did in the past. Increased state activism does not appear to have translated to an increased capacity to promote growth. The debate about the state has come a long way since the relative neglect in the dominant postwar analyses. Neoliberals and historical institutionalists have extended our understanding of the state in multiple ways. We have learned that states are actors, not just arenas or objects, and that their actions can impel societies and economies in very different directions. We have also learned that states are embattled, because the international environment has thrown out a variety of challenges. Finally, we have learned that states possess considerable resources to resist or redeploy in the face of international pressures, rather than simply declining. Still, there is much work to be done. Aside from responding to each other’s critiques, the neoliberal and historical-institutionalist approaches confront the challenge of offering a more universal analytical perspective—neoliberals, by forging a unitary theory, thereby encompassing state transformations in the military and security arenas along with the economic arena; historical-institutionalists, by extending core structuralist and typological principles from past events to state transformations in the contemporary period.

5 

In view of these developments, Kathleen Thelen (2012, 2014) provides an overview on the varieties of capitalism school and its critics, and she proposes a new “varieties of liberalization” approach, in which the relationship between coordinated and egalitarian capitalism is disentangled.

50    Jonah D. Levy, Stephan Leibfried, and Frank Nullmeier

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Pa rt I

T H E E M E RGE NC E OF MODE R N STAT E S

Chapter 3

Va r ieties of State Ex per ience John A. Hall

1  A Definition in Motion One should show caution towards definitions. Platonic essences may exist in some fields, but they do not exist in all of them—and to pretend that they do creates a misplaced concreteness that can mislead rather than enlighten. This warning certainly applies to any definition of the state, above all because states have changed their character—the means by which they are created, their reach, and their functions—as the result of the historical forces with which they have interacted. This is not to say that definition is not important, merely that it should be seen, to use Max Weber’s (1874–1920) expression, as “ideal typical,” that is, as a means to understanding different social realities. To mention the great sociologist of course brings to mind his definition of the state, one that has exerted considerable dominance in the field—remarkably so, given the tendency of social scientists to argue endlessly about their concepts. A “ruling organization” shall be called a “political organization” if and insofar as its existence and the effectiveness of its order within a specifiable geographical area are continuously safeguarded by the application and the threat of physical coercion on the part of the administrative staff. A continuously operating compulsory political organization shall be called a “state” if and insofar as its administrative staff successfully claims the monopoly of legitimate physical coercion in the implementation of its order.1

There are many variations on these themes, two of which offer important additions to Weber. Samuel Finer (1997: 2–3) suggests that the concept of the state really makes sense only within a system of states, in which mutual recognition constitutes the basis of sovereignty. This is correct, in and of itself. But it also points us to a fundamental fact about

1  This very precise translation of Max Weber (1980 [1921]: 29) is by Walter Scheidel (2013), who also provides a compendious list of definitions of “the state.”

62   JOHN A. Hall many states in the historical record, namely their concern for security within a hostile environment. More particularly, every European state before the nineteenth century spent the most revenue—often, however, only a small share of total national product—on war or the preparation for war. In a nutshell, geopolitics matters. Michael Mann (1986a) has added a Durkheimian component, namely that of the creation and maintenance of a set of norms within the territory of the state. This immediately brings us to the flexibility of the definition in question. For we must ask how widely such norms are shared, given a general movement from elite to popular politics. There is certainly no Platonic essence at work here. This chapter revolves around all these concepts, concentrating on their salience at key points within European history—for that is the world that gave us both the concepts and institutional packages of our world. Two additional and related preliminary points must be made about fluidity within the definition of the state before turning to the actual variability of state experience. First, one must stress that Weber’s definition is as much about pretension as reality, at least when considering the historical record. The most obvious point concerns the monopoly of coercion. Weber’s definition reflects his own time, an era in which states were seeking to increase their powers—which the great powers did even more in the years immediately after Weber’s death. Still, even in Weber’s own life states did not have a complete monopoly on the forces of coercion. Many officer corps had a measure of autonomy from their states—with the British military, to take an unusual example, being prepared to consider mutiny in 1914 rather than allow a system of Home Rule for Ireland that would have diminished imperial unity. This lack of sole and legitimate control over coercion is overwhelmingly true for much of the historical record, as endless complaints about “overmighty subjects” so clearly shows. Consider, too, the vexed question of national identity, as we must if we are to take Mann’s definitional consideration to heart. Many authors read back into the past our conception of the nation state, in which the people have some say, putative or real, over the state in which they live. But it is a terrible mistake, nearly all the time, to imagine that a generally shared sense of belonging existed in the past: states did not benefit from such homogeneity, and they lacked sufficient power to create it. In a nutshell, the notion of generalized normative integration is very recent. Note, too, that there are complexities here, to be noted later, such that even “the nation state” should not be seen as the ultimate form of the state, the final arrival at a Platonic essence. Finally, it is just as important not to take as an assumption the more realistic view that all states seek to increase their rates of fiscal extraction. This is useful if taken cautiously, not least as it then highlights the classic Chinese imperial exception—in which low rates of taxation were sought in order that the populace would not then be overburdened, thereby increasing the likelihood that they would remain quiescent.

2 Statelessness Thinking about historical development necessarily brings to mind social evolution. It is very important to be aware of any naïve version of the theory of social evolution that presumes an onwards and upwards process to higher forms, as in imagining simple societies

Varieties of State Experience    63 akin to acorns bound eventually to become oak trees. This is far too “whiggish” in character, failing to realize that most societies seek to adapt to circumstance rather than to take a leap into the unknown. It is crucial to remember this when considering the supposed omnipresence of the state. Anthropologists and historians have demonstrated the falsity of this view, showing that people seek to escape the coercive powers of a state when they can.2 This is not simply a question of hunters and foragers being able to manage their lives without state control, nor of whether continual fission from bands and chiefdoms means that they cannot properly be called states. More revealing is the ability of nomads to escape the state.3 A tax gatherer who arrives in the evening at an encampment of Berbers in the High Atlas is liable to find that they have disappeared by the next morning. This is not to say that stateless societies lack political order: to the contrary, the segmentary principle, or pitting a particular layer of one tribe against a similar level of another, seems to provide stability through a complex balancing mechanism. From these considerations comes a crucial question: if the state is not natural, why was it born? The best answers involve circumscription, or being tied down by irrigated land so as to become the requisite fodder for state building (Carneiro 1970). The key point to be made here is that the construction of states changed everything. The concentration of power involved was such that there could be no retreat away from the state. However pristine state formation took place, there is no doubt about the consequence: secondary state formation took place very fast, so as to allow survival. Differently put, an evolutionary step had been taken—not as the result of any necessary and natural unfolding of a logic inherent in every society, but rather as a key invention of the very few pristine states that changed the conditions of existence for the rest.

3  States in Agraria There is everything to be said for considering human history in trinitarian terms, as a movement from the simple world of hunters and foragers, to the complexities of agrarian society, and then to the advanced technological condition of the industrial world. Bruce Trigger (2003) has systematically examined the basic types of political rule within the pre-modern agrarian world, and has argued that two basic forms—city-states and empires—dominate the historical record. The emergence of city-states seems to occur in power vacuums that allow them a measure of autonomy. This was true of the city-states of the north of Italy during the Renaissance (Burke 1986), and it seems to explain the city-states of West Africa as well. It is very noticeable that city-states had particularly intensive social relations, in part because of the high level of military participation often demanded by these entities (Hansen 2000). This,

2  Having

this consideration in mind makes one realize that rebellions against taxation are more normal than odd, and that high taxation resulted from crisis rather than from any sort of logic of social development. 3  There is one exception to the general rule that tribes are poor material for state construction. If the huge empire of Genghiz Khan underwrites the generalization, the Arab conquests go against it. In the latter case, the nomads involved did not just have military capacity but were also in possession of a world religion (Crone 1986; Khazanov 1994).

64   JOHN A. Hall in turn, was at least sometimes linked to conceptions of democracy—for the few, of course, as in Classical Greece—and republicanism. Walter Scheidel (2013: 31) nicely captures the situation: “while far from all city-states were republics, most republics were city-states.” Finally, city-states often existed within a larger federal world, as was again true of Classical Greece. All of this is to say that a crucial reason for considering city-states is the later impact of their ideological and institutional legacy. The first city-state became an empire, and empires often dissolve in such a way as to allow the re-emergence of city-states, making the pair truly symbiotic (Marcus 1998). Empires deserve definition. The formal definition offered by Alexander Motyl (2001) for all empires in human history is helpful, seeing an empire as a rimless bicycle wheel, in which dominated peripheries cannot communicate with each other but interact only with the center. Owen Lattimore (1962) adds to this by noting zones of integration within the pre-modern world, the smallest being economic, with a larger reach for tax-gathering, and with borders likely to be maintained by military means. But the most useful general model of the “agro-literate polity” remains that of Ernest Gellner (1983). The polities in question seem odd to modern eyes. Elites, so to speak, sat upon a series of rather diverse communities, of varied character in terms of language, religion, and identity. Such communities were laterally insulated from each other. In contrast, the elite had a horizontal identity of its own, shared across space, thereby giving it the power that came from being able to outflank the communities beneath it. These social formations were accordingly not “societies,” at least as we understand that term (Hall 1985). The powers of the state tended to be rather limited, with harsh and arbitrary punishment making up for the inability to provide regularized justice (Crone 2003). States were mere “capstones,” unable to penetrate deeply into their territories, with the daily needs of justice and welfare being provided through self-help organizations. At best, this could ensure peace through varied mixtures of local and central power; at worst, there might be a power stand-off in which societal power was so limited that the state might succumb to a relatively small challenge—as happened on more than one occasion in China, when the empire was conquered by a relatively small number of nomads. The negative quality of this type of rule—its concern with stability at the cost of efficiency—does not mean that this type of formation had little effect on its environment.4 Peter Bang’s superb comparative study (2008) measures the level of trade and specifies the character of markets in the great pre-modern tributary empires, all on the basis of a brute calculation that the maximum surplus available for all purposes in agrarian conditions was never likely to be more than 45 percent of total product. The Roman state—whose powers were relatively great in comparative context—was able to get its hand on perhaps six percent of the total product of the empire, mostly spent on the court and the legions, with a much larger share going to the aristocracy, both in Rome and in the provinces. Somewhere between ten percent and 20  percent of total product was moved around the empire. So markets certainly existed, as they made it

4  There is an element of autocritique here. In earlier work, I underplayed the importance of markets in ancient empires and made too much of the view that capstone states sought to restrict them (Hall 1985).

Varieties of State Experience    65 possible to meet the needs of the state and the demands of the few for luxury goods, but they lacked any autonomy of their own, as they were designed instead to serve the polity. Even if this seems limited, the key point remains that, at best, these were huge social worlds, the bases for civilizations. It is worth stressing that the stability of agro-literate polities depends upon the creation of normative unity within the elite. One striking discovery of the comparative historical analysis of universal empires is that all paid enormous attention to the performative aspects of power (Stollberg-Rilinger 2008, 2011, 2015; Bang and Kolodziejczyk 2012). Symbols and rituals mattered enormously precisely because of the lack of regularized bureaucracies. The displays and competitive emulation of the theater state in nineteenthcentury Bali had manifold application in earlier times (Geertz 1980). The point is that so much attention was paid to performance precisely because it was so very difficult to achieve elite unity. The weakness of agro-literate polities derives from their tendency to move towards something like feudalism, that is, for the localities to increase their powers at the expense of the center. But it should be clearly stated that this did not necessarily lead to cumulative change. Much more common was the cyclical process that dominated state theory for most of human history, in the notion of the Mandate of Heaven or in Ibn Khaldun’s (1332–1406) wonderful account of Islamic politics, in which weakening at the center was followed by chaos that led in time to a reunified centralization drive. Karl Marx’s (1818–83) contemptuous stress on the lack of real change in the Indian past—on “wild, aimless, unbounded forces of destruction” which did little to affect the “undignified, stagnatory, and vegetative life” of the society beneath (Marx 1973 [1853]: 306)—captures the general situation nicely. There is considerable variation in the duration and size of empires (Taagepera 1978a, b). One element that helps explain the increase in size in the agrarian world is surely the creation of world religions and ethics. Gellner (1983) offered four contrasts that help us understand this diversity:  centralized/uncentralized, stallions/gelded, open/closed and fused/non fused. Each contrast had an illustration: the Papacy compared to the ulamas of Islam, feudal warriors contrasted to the eunuchs so prominent in the Roman and Chinese cases, the meritocratic, examined Mandarinate of China compared to the hereditary Brahmins of the classical Hindu world, and the military orders of Europe pushing expansion to the East seen as so very different from the division of function characteristic of the caste system. These are striking contrasts, but the general picture can be amplified in many ways. For one thing, one needs to remember the tensions that came with conquest. Alexander sought to bring the Persian elite into the fold, for instance, but he thereby irritated his Greek companions, who feared the loss of privilege and the possibility of being outnumbered and submerged. A very similar story can be told of the Qing, where Manchus long sought to maintain their own identity. For another, the ideologies of universalism could vary a great deal. What seems to be most typical is hybridity rather than the imposition of the culture of the center: thus Asoka sought to blend Hindus and Muslims through inter-marriage and syncretism. And a final point needs to be mentioned, because it points away from ideal-typical points made about agro-literate polities earlier. It is not the case that all empires were worlds unto themselves. Both the Mughals and the Qing faced genuine rivals, and therefore they played down some of their universal claims in the interests of expediency.

66   JOHN A. Hall

4  The European Exception The world just described is, in the terms of social theory, that of Talcott Parsons (1902–1979), derided in his day and since for conservatism. But there is enormous sense to his position. Evolution properly understood suggests, as noted, that one should adapt to one’s circumstances; most societies seek to remain true to themselves, disliking change as much as do individuals, if one can put it in these terms. Modern historiography has made us aware that the great civilizations discussed earlier were successful, for all the rise and fall of dynasties within them. Until something like 1800, their productivity and inventiveness outdid that of Europeans. Nonetheless, the great alternative seen in most of social theory, perhaps above all in that of Karl Marx, stresses the importance, prevalence, and necessity of social change. We need this viewpoint if we are to understand the distinctiveness of North-Western Europe, that is, the region of the world from which in large part come the institutions of the world in which we live. The binary distinction drawn by Trigger (2003) between city-states and empires in the agrarian world is incomplete, for it does not capture the character of the European condition—in which city-states existed within a world of competing states, themselves empires in that their cores had conquered surrounding areas, but bereft of unipolar status because they always lived in a competitive world. In comparative perspective, Europe lacked a coherent civilizational frame: power was held in different hands, competition abounded, and a generalized restlessness resulted. A part of the explanation for this probably lies in the splitting of ideological and political power, with some of that resulting from Rome providing the numinous rituals of rule to kings rather than to an emperor. To gain power, kings eventually made alliances with merchants, as Adam Smith (1723–90) stressed so clearly, and in the process helped create a new world, at first commercial and eventually industrial. States swam in the larger seas of economic and military competition; no single power could control these interrelated forces, and all had to engage in continual self-transformation in order to survive. In a nutshell, it was the very lack of adaptation to circumstances in Europe that led it to pioneer a new world, a step in social evolution to which others then had to respond. The basic logic of multipolarity stresses the likelihood of imitation in a situation lacking a single cultural model, but which instead possesses plural and competing ideas and institutions. There may be something more or less universal here. The sociology of fashion, well understood by Adam Smith and by Pierre Bourdieu (1930–2002), makes much of the status that comes to those at the cutting edge of novelty. In state affairs, the desire to be at such an edge was certainly as present in the eighteenth century when Voltaire (1694–1778) and Montesquieu (1689–1755) sought to understand Albion’s secrets as it was recently in the United States when researchers sought to understand the institutional characteristics that allowed for Japanese economic success. But copying is most certainly not always a question of choice, but rather a matter of survival. There is an oddity here. Large parts of a major discipline, international relations, now seem to deny the central insight of realism, that necessity is the mother of invention, that lack of security in a multipolar world forces change upon states on pain of extinction. This is the Darwinian world familiar to a mass of theorists, including Thucydides

Varieties of State Experience    67 (c. 460–395 BC), Niccolò Machiavelli (1469–1527), Thomas Hobbes (1588–1679) and JeanJacques Rousseau (1712–78), and represented more recently with powerful empirical support by Charles Tilly (1929–2008) and Michael Mann (1986b, 1993; Tilly 1992). Of course, necessity is not the mother of invention in one crucial way: the functionalism implicit in that phrase hides the obvious fact that many did not adapt, and so were absorbed by greater powers. But it still seems clear that transformations of states have often resulted from the pressures of war. And it is important to stress that much more is involved than the creation of bureaucracy. The “national efficiency” movement that so affected British politics in the first three decades of the twentieth century had its origin in the discovery at the time of the Boer War of the poor health of would-be conscripts—and this point can be generalized, given that the extension of welfare benefits often followed major wars. Further, it is not possible to understand the spread of democracy without reference to participation in war—in all its varied forms, from “G.I. bills,” that is, veterans’ bills, to votes for women. Finally, it is worth stressing that these processes of imitation are not confined or specific to Europe, central though they were to that social world. By the end of the nineteenth century, both Japan and China were sending intellectuals and policy-makers to Europe, desperate to discover what could be copied so that they could survive. Philip Gorski’s work challenges what he refers to as this “bellicist” tradition, and further challenges look set to come from Deborah Boucoyannis at the University of Virginia. There is nothing so important and so enjoyable as sustained skepticism, especially when done with such brilliance; and these authors make excellent points. At a descriptive level, it is indeed true that forces other than war led to state-building in Europe—prominent among them marriage and that creation of clean and disciplined state bureaucracies by Calvinist reformation that Gorski himself so strikingly illuminated (2003). Further, some of the fiscal sociology used to back up the “bellecist” tradition may be flawed, due to a failure to control properly for economic development and for population growth. Crucially, the drive to more unitary states was not so powerful as to rule out “composite” arrangements, that is, the presence of regional “liberties” limiting metropolitan powers, thereby suggesting similarity rather than difference with the great agro-literate polities of the pre-modern world (Elliott 1992). Equally, there were long-lasting alternatives to unitary states, as Janice Thomson (1994) and Hendrik Spruyt (1994) have clearly demonstrated when writing about mercenaries, pirates, and interdependent city-states. And old regimes retained an edge for much longer than is generally realized. They had size and state capacity, as was most clearly demonstrated in Russia’s defeat of Napoleon (Lieven 2009). And at a prescriptive level, one can only hope and work for state construction by means alternative to war. This point can be expressed differently:  that something happened in a particular way does not entail moral endorsement, nor does it follow that the mechanism in question should be universalized—although it would be wonderful if it were possible for African states to be better constructed through marriage strategies! Nonetheless, the skepticism shown should, in my view, be limited rather than total. It may be that state formation depended on factors other than war, but it remains hard to deny that war engaged the attention of the leaders of European states once they existed. Further fiscal sociology, for all its imperfections, has established a fairly certain link

68   JOHN A. Hall between war (and the preparation for war), increasing state expenditure and state expansion (Bonney 1999). Then there is the comparative evidence concerning the incidence of war over the last 500 years, which clearly highlights the bellicosity of Europeans: between 1494 and 1975, European powers were involved in war nearly 75 percent of the time, with perhaps as much as 80 percent of all wars from 1816 to the 1950s being European in origin. In contrast, East Asia saw a 300-year period of peace between the 1590s and 1894, broken only by barbarian invasions and five fairly small two-state wars (Mann 2013). Finally, whatever reservations are justified about the early modern period, the links between war and transformations of the state in the modern world, to which we now turn, simply cannot be denied.

5  From Dynamism to Disaster In order to understand these links it makes sense to draw a distinction between organic and imitative development within Europe. Such core European states as France and Britain interacted over long periods of time with their societies, certainly in part due to pressures of war, and in so doing increased their own capacities in tandem with the development of shared citizenship and nationality. The core territory remained largely the same, but it became occupied by a “people” who slowly began to share normative commitments, especially once the coming of industry revolutionized social life. This unification movement involved language, national sentiment, citizenship, democracy, and eventually welfare. It ended up creating the modern nation state, an infinitely more powerful entity than the composite dynastic system that it came to replace. One major qualification or addition must be added to this picture of organic development. These nation states were at one and the same time empires, with the British in particular possessing huge overseas territories (see Kelly and Mahoney, Chapter 5, and Lange, Chapter 6, both this volume). Here there is something of a sea change, from the export of luxuries in the pre-modern world to the creation of political economies that extracted huge amounts of resources from the masses—directed moreover by a center with very varied powers, from direct to indirect rule (see Lange, Chapter 6, this volume), and then from gun-boat diplomacy to unequal exchange. The European states that did not develop in this organic way realized that a quantum leap in power had taken place, and sought to change their societies in order to survive. It is important to remember that the entry of the people onto the political stage, both as workers and as nations, could take different forms. Workers can and have been integrated into modern societies, as members of the state rather than of a class opposed to its very existence. The same point can be made about nations: Switzerland and India show at a descriptive level that multinational states can and do exist (Stepan et al. 2011); accordingly, definitions of nationalism in terms of each nation having its own state and each state its own nation are misguided (Gellner 1983). But if integration is possible, so is that politicization of class and nation that can lead to revolution and secession. Increases in militancy seem to be best explained by political exclusion: when states do not allow entry through the granting of trade union or

Varieties of State Experience    69 cultural rights, classes and nations are forced to take on the state. Weber realized the importance of the principle in connection with German workers:  anti-socialist laws had created a politically conscious class wholly unnecessarily, given that liberalism had tamed the British working class.5 In a nutshell, conflict intensifies, rather than being diffused in civil society. Analytically, a “liberal machiavellianism” makes most sense for rulers, accepting democracy so as to diffuse radicalism by allowing entry. But European old regimes did not behave in this manner. They loathed socialism, and showed an equal reluctance— shared by Weber—to contemplate any loss of state powers in national terms, either through making the state less unitary or by allowing downsizing. The political consciousness of nations arose again as the result of the way in which states behaved, as was exemplified by the way in which attempts at linguistic rationalization at the end of the nineteenth century turned the Finns towards secession.6 And there was a key linkage at work here: radical right elites feared socialism, so they were tempted to play the national card—to turn their composite monarchies into nation states (Lieven 2000; Kumar 2010). There is some truth to the notion that war in early modern European history brought progress. But by the end of the nineteenth century, as space filled up, this institutional package became increasingly dangerous. The great powers witnessed the Ottoman Empire weakening, and stressed more and more the need to marry nationalism with imperialism—to have a homogeneous population possessed of its own sources of supply and its own secure markets. This played some role in the events of 1914, above all in the stiff note sent by Vienna to Serbia designed to make clear that it would not allow for any downsizing of its territories that would diminish its great power status. It is very important here to be sensitive to the context of the time. Culturally, the great empires were quite simply about prestige, their rulers monarchs whose conceptions of honor derived from a mentality in which dueling was normal. To accept a rebuff was to suffer humiliation. And this view was not irrational. Downsizing a state—say the loss of the Jura to Switzerland—matters not a whit in a world based on well-understood principles of geopolitical order. But the beginning of the twentieth century was not like that at all: loss of territory might mean loss of power, and this might lead to collapse. World War I was so destructive that it changed everything. Key national groupings, notably in Cisleithania (the Austrian half of the Hapsburg Dual Monarchy), were further politicized by vicious and discriminatory wartime behavior, and grabbed the chance for secession that came with the defeat of their imperial overlords (Wimmer and Feinstein 2010). But there was little stability in consequence. The new nation states of Central Europe were mostly feeble and in conflict with each other, and many of them had nationalities problems of their own. They offered a tempting target to the great powers that flanked them.

5  Bismarck had of course sought to gain loyalty through the granting of welfare. But political exclusion radicalizes in a way that the granting of welfare cannot alleviate. 6  There is much to debate here. Benedict Anderson (1983) argues that “official nationalism” was the response of the great states to the invention of the national principle. I tend to think that it was state actions, driven by perceived geopolitical weakness, that politicized nationalism, thereby giving this protean force the power of historical agency.

70   JOHN A. Hall And here there was a fundamental transition. Both Russia and Germany were subject to social revolution. These regimes witnessed the rise of the state as a “moral project,” or the creation of power-systems opposed to liberalism (Perez-Diaz 1993; Mann 2005). The empire to the East had been recreated under new management, and it offered a model of single party rule, blessed with an ideology that seemed to promise late economic development. Its very presence of course changed world politics by sending China down a different historic path. One element that went into the German mix was the experience, by 1918, of food shortages consequent on the British blockade. This certainly made the possession of Lebensraum attractive. But the uniqueness of the Nazis lay in their desire for an expansion within Europe that would not add, as had traditionally been the case, to the multinational character of an empire, but would rather kill and cleanse so that new territories would be inhabited in the end only by Aryans (Mazower 2008). It was this drive—present too in East Asia—that gave World War II its fundamental character as the last inter-imperial war. The consequences are well known and profound: the homogenization of the populations of most of Europe through population transfer, ethnic cleaning, and mass murder; the ending of the European empires overseas and the resulting attempt to establish new states; and the division of the world between two great superpowers, armed to the teeth but forced to forgo war due to the nuclear revolution.

6 Conclusion What points can be taken away for the readers of the rest of this volume, whose emphasis is on the postwar world, from this account of the transformation of states in history? Important considerations come to mind when we return to the considerations with which we began, namely the insistence that any definition of the state needs to be aware of change and variety. In particular, why was caution shown to the view that the nation state is somehow the ultimate destination for states, the very essence of the entity itself? Let us consider in turn and in bold relief the advanced and the developing world. Caution is not the same thing as denial: the nation state has very great importance in several ways. The inclusion of workers and of the (few) remaining national minorities within Europe, in new institutional packages made up of political and cultural rights, varying of course by country, has created a particularly successful political form (Milward 1984). Importantly, such states are now relatively modest, competing economically but now remaining fundamentally pacific. This is not to say for a moment that they have ceased to exist as states (Milward 1992). It remains the case that state calculation can be detected inside the European Union, the most integrated part of the North, as is entirely obvious when analyzing national responses to the crisis surrounding the Euro. Nonetheless, caution is needed, for two reasons. The first reason comes to mind once we ask why Europe has become so peaceful. Without a shadow of doubt, a significant part of the answer lies in the actions of the United States. There is truth to the notion that a hegemon—a very particular type of state, dominating, ordering, defending, and now

Varieties of State Experience    71 preying on capitalist society—solved the security problems of its allies, allowing them to concentrate on economic and social improvements (Gilpin 1981). The future of this type of system is one of the questions of the age. The second reason concerns the very character of the nation state. One point that comes to mind here backs up the claim, already made, that there are limits to the transnational achievements of the European Union. Bluntly, nationalism might yet change its character in the advanced world. Consider the Danes. In September 2000, the last referendum in that country, as to whether to join the Euro, saw the emergence of two broad parties, a united political elite in favor against a largely nativist opposition. Both sides sought the good of the country, but those opposed seemed to resent a more international and interdependent world, requiring significant linguistic ability, in which they feared that they would not prosper. But the point that matters more concerns immigration, and it too can be illustrated with reference to Denmark. A low birthrate mandates immigration. But the very cohesive state of national identity makes it almost impossible for immigrants “to get in,” to be fully accepted, and to intermarry with Danes. There is a good deal of political gunpowder at work here, suggesting that some change in the received notion of the nation state is needed—at least in Europe, given that these strictures do not apply to the United States. When we turn to the rest of the world two considerations jump out at us. The first is simply that nation-building and state-building have not yet been achieved in large parts of the world, notably in those countries whose borders have straight lines indicating their past as overseas possessions of Europe (see the chapters in Part V of this Handbook). Something absolutely fundamental matters here. European history witnessed the dark forces of destruction, from murder to cleansing, as creators of very homogeneous nation states. Can large parts of the modern world create states in which different nations can live together? The “state-nation” model of India is desirable and needed, and one can at least hope that it may spread (Stepan et al. 2011). The second concerns a necessary correction to the views that were popular as the Cold War ended, views which insisted that liberal capitalism was the sole polity that would matter for the future. The truth is opposite. Authoritarian capitalism in Germany and Japan before World War II worked, and so does that of China today. One needs to remember that authoritarian capitalism fell only because of its engagement in war, with assertiveness perhaps in part explained by the feeling that economic success should have as a consequence a greater place in the international order. One of the questions of the age is whether China will remain content with the rules of the modern world order. It does so well with those rules that serious challenge would be irrational in an abstract sense; but it behooves us to remember that “irrationality” of just this type was embraced by Germany, twice in a single century. China also reminds us of something still more fundamental. Most of this volume will be concerned with the “normal” questions of political economy, of the types of state characteristic of our times and the possibilities they have of political and economic progress. But what if the very basis of our times were to change? It takes but a moment to realize that the consequences of China reaching anything like the standard of living of Europe and the United States will be totally dramatic for the environment. What if global warming begins to bite soon? What sort of states then?

72   JOHN A. Hall

References Anderson, Benedict [RO'G], 1983. Imagined Communities: Reflections on the Origin and Spread of Nationalism. London, UK: Verso. Bang, Peter F, 2008. The Roman Bazaar: A Comparative Study of Trade and Markets in a Tributary Empire. Cambridge, UK: Cambridge University Press. ——, and Kolodziejczyk, Darius, ed, 2012. Universal Empire: A Comparative Approach to Imperial Culture and Representations in Eurasian History. Cambridge, UK: Cambridge University Press. Bonney, Richard, ed, 1999. The Rise of the Fiscal State in Europe, C.  1215–1815. Oxford, UK: Oxford University Press. Burke, Peter, 1986. “City-States.” In States in History, ed John A Hall, 137–153. Oxford, UK: Basil Blackwell. Carneiro, Robert L, 1970. “A Theory of the Origin of the State.” Science 169 (3947, 21 August): 733–738. Crone, Patricia, 1986. “The Tribe and the State.” In States in History, ed John A Hall, 48–77. Oxford, UK: Basil Blackwell. ——, 2003. Pre-Industrial Societies: Anatomy of the Pre-Modern World. Oxford, UK: Basil Blackwell. Elliott, John H, 1992. “A Europe of Composite Monarchies.” Past and Present 137 (1, November): 48–71. Finer, Samuel E, 1997. The History of Government from the Earliest Times. Vol. 1: Ancient Monarchies and Empires. Oxford, UK: Oxford University Press. Geertz, Clifford, 1980. Negara: The Theater State in Nineteenth Century Bali. Princeton, NJ: Princeton University Press. Gellner, Ernest, 1983. Nations and Nationalism. Oxford, UK: Basil Blackwell. Gilpin, Robert G, 1981. War and Change in World History. Cambridge, UK:  Cambridge University Press. Gorski, Philip S, 2003. The Disciplinary Revolution:  Calvinism and the Growth of State Power in Early Modern Europe. Chicago, IL: Chicago University Press. Hall, John A, 1985. Powers and Liberties: The Causes and Consequences of the Rise of the West. Oxford, UK: Basil Blackwell. Hansen, Mogens, ed, 2000. A Comparative Study of Thirty City-State Cultures:  An Investigation Conducted by the Copenhagen Polis Center. Copenhagen, Denmark: Kongelige Danske Videnskabernes Selskab. Khazanov, Anatoly, 1994. Nomads and the Outside World. Madison, WI: University of Wisconsin Press. Kumar, Krishan, 2010. “Nation-states as Empires, Empires as Nation-states: Two Principles, One Practice?” Theory and Society 39 (2, March): 119–143. Lattimore, Owen, 1962. Studies in Frontier History. Oxford, UK: Oxford University Press. Lieven, Dominic CB, 2000. Empire: The Russian Empire and Its Rivals. London, UK: John Murray. ——, 2009. Russia Against Napoleon: The Battle for Europe 1807–1914. London, UK: Allen Lane. Mann, Michael, 1986a. “The Autonomous Power of the State: Its Origins, Mechanisms and Results.” In States in History, ed John A Hall, 109–136. Oxford, UK: Basil Blackwell. ——, 1986b. The Sources of Social Power. Vol. 1: A History of Power from the Beginning to 1760 A.D. Cambridge, UK: Cambridge University Press.

Varieties of State Experience    73 ——, 1993. The Sources of Social Power. Vol. 2: The Rise of Classes and Nation-States, 1760–1914. Cambridge, UK: Cambridge University Press. ——, 2005. The Dark Side of Democracy:  Explaining Ethnic Cleansing. Cambridge, UK: Cambridge University Press. ——, 2013. “The Role of Nationalism in the Two World Wars.” In Nationalism and War, ed John A Hall and Siniša Malešević, 172–196. Cambridge, UK: Cambridge University Press. Marcus, Joyce, 1998. “The Peaks and Valleys of Ancient States: An Extension of the Dynamic Model.” In Archaic States, ed Gary M Feinman and Joyce Marcus, 59–84. Santa Fe, NM: School of American Research Press. Marx, Karl, 1973 [1853]. “British Rule in India,” article dated June 10, 1853 and reprinted in: Karl Marx, Political Writings. Vol. 2: Surveys from Exile, ed David Fernbach, 301–307. Harmondsworth, UK: Penguin Books. Mazower, Mark, 2008. Hitler’s Empire: How the Nazis Ruled Europe. New York: Penguin Books. Milward, Alan S, 1984. The Reconstruction of Western Europe, 1945–51. Berkeley, CA: University of California Press. ——, with the assistance of George Brennan and Frederico Romero, 1992. The European Rescue of the Nation-State. Berkeley, CA: University of California Press. Motyl, Alexander J, 2001. Imperial Ends:  The Decay, Collapse and Revival of Empires. New York: Columbia University Press. Pérez-Díaz, Víctor, 1993. The Return of Civil Society: The Emergence of Democratic Spain. Cambridge, MA: Harvard University Press. Scheidel, Walter, 2013. “Studying the State.” In The Oxford Handbook of the State in the Ancient Near East and Mediterranean, ed Peter F Bang and Walter Scheidel, 5–60. Oxford, UK: Oxford University Press. Spruyt, Hendrik, 1994. The Sovereign State and Its Competitors:  An Analysis of Systems Change. Princeton, NJ: Princeton University Press. Stepan, Alfred C; Linz, Juan, and Yadav, Yogandra K, 2011. Crafting State-Nations: India and Other Multinational Democracies. Baltimore, MD: Johns Hopkins University Press. Stollberg-Rilinger, Barbara, 2008. Spektakel der Macht: Rituale im alten Europa 800– 1800. Katalog [Spectacles of Political Rule: Rituals in Old Europe, 800–1800. An Exhibition Catalogue]. Darmstadt: Primus. ——, 2011. “Much Ado About Nothing? Rituals of Politics in Early Modern Europe and Today.” Bulletin of the German Historical Institute Washington 48 (Spring): 9–24. Available at:  http://www.ghi-dc.org/files/publications/bulletin/bu048/bu_48_009.pdf (last consulted 18 February 2014). ——, 2015, The Emperor’s Old Clothes: Constitutional History and Symbolic Codes of the Holy Roman Empire, Oxford, UK/New York: Berghahn (in preparation). Taagepera, Rein, 1978a. “Size and Duration of Empires: Systematics of Size.” Social Science Research 7 (2): 108–127. ——, 1978b. “Size and Duration of Empires Growth-Decline Curves, 3000 to 600 B.C.” Social Science Research 7 (2): 180–196. Thomson, Janice E, 1994. Mercenaries, Pirates and Sovereigns:  State-Building and Extra­ territorial Violence in Early Modern Europe. Princeton, NJ: Princeton University Press. Tilly, Charles, 1992. Coercion, Capital, and European States, AD 990–1992. Oxford, UK: Blackwell.

74   JOHN A. Hall Trigger, Bruce, 2003. Understanding Early Civilizations: A Comparative Study. Cambridge, UK: Cambridge University Press. Weber, Max, 1980 [1921/22]. Wirtschaft und Gesellschaft: Grundriss der verstehenden Sozi­ ologie [Economy and Society: An Outline of Interpretive Sociology]. Tübingen, Germany: Mohr (first published 1921/22; first translated by Günther Roth and Claus Wittich, published Berkeley, CA: University of California Press 1978). Wimmer, Andreas, and Feinstein, Yuval, 2010. “The Rise of the Nation-State Across the World, 1816 to 2001.” American Sociological Review 75 (5, October): 764–790.

Chapter 4

The L ay er ed State Pathways and Patterns of Modern Nation State Building

Philip Manow and Daniel Ziblatt

1 Introduction The modern nation state can be understood as the outcome of several overlapping, but chronologically ordered, historical processes. This sequence included a process of initial nation state formation, a process of democratization, and a process that turned the state into the most important institution for intervening in the economy. While the first of these three processes largely preceded industrialization, the latter two occurred precisely at a time when the market emerged as the dominant principle guiding economic activity, and when predominantly agricultural societies made their well-studied breakthrough into becoming predominantly industrial societies. In the literature the logic of these three processes of political development is often portrayed as one of steady progress from mere territorial consolidation and rule to the developed, affluent, and peaceful (Western) societies of today. But this modernization account—with the mature welfare and intervention state as the endpoint—shares the typical problems of teleological “grand narratives”: retrospective narration, a Western bias, a harmonious concept of how history has unfolded, and an “unmoved-mover” understanding of sweeping trends that somehow came to converge on the modern nation state in its European, North-American, or Japanese variant. These three processes of modern state-building—nation state formation, democratization, and the modern interventionist welfare state—certainly built upon each other and were also undoubtedly deeply intertwined.1 However, in this chapter we emphasize that the institutional 1 

One can argue, e.g., that the process of democratization and the advent of the modern interventionist state were already in some sense “implied” when the emerging territorial states adopted a new formula of political legitimacy: the switch from the Divine Right doctrine to a modern “functional” understanding of political rule as it was—most prominently—formulated in Thomas Hobbes’s political philosophy. For Hobbes the main rationale of the modern territorial state is the effective protection of its citizens as a precondition for their economic well-being (2010 [1651]). The modern state therefore is based upon

76    Philip Manow and Daniel Ziblatt linkages across epochs by no means followed a smooth linear trajectory; rather, the formation of modern nation states produced diverging pathways: The layered state reflects the diverse modes by which elites had resolved conflicts and disputes in earlier periods.2 In this chapter we will elaborate the key points of intersection across these periods by providing, in Section 2, a narrative of the process of nation-building that essentially spans the roughly 100 years from the Congress of Vienna 1815 to the end of World War I. Next, in Section 3, we will describe the uneven process of democratization that started with the American and French Revolutions (Palmer 1959, 1964), but which—as a first wave— took place mainly from 1848 to 1950 (Maier 1992). We describe the multiple dimensions of this process and their interplay: suffrage extension, the introduction of secret voting, the “nationalization of party-systems” (Caramani 2004), the achievement of full parliamentary accountability of government (Przeworski 2010: ch. 3), the disempowerment of old institutions (such as upper chambers and monarchs), and the establishment of new non-majoritarian institutions and practices (Rueschemeyer et al. 1992; Collier 1999; Tilly 2004; Ziblatt 2006; Przeworski 2010). For our purposes of analyzing the layered character of the modern nation state, however, it is most important to show how much the process of nation-building—with its economically, culturally, and particularly religiously diverse patterns—affected the party systems that were to emerge when the modern mass democratic political market was established (Lipset and Rokkan 1967). This will finally allow us to explain, in Section 4, the variation of the welfare and intervention state. Its advent took place in roughly the 100-year period—the age of “the interventionist state”—from 1880 to 1980. How, when, and with what consequences the modern intervention state entered the scene was in large part determined by the outcome of the two previous processes and their interplay, namely the process of nation-building and that of democratization (Lipset and Rokkan 1967; Rokkan 1970). We will also provide a stylized account of this process for the European nations: we highlight how different levels of economic development and the countries’ different religious compositions interacted in the moment when most of the European countries became fully democratic, namely in 1918/1919, to bring about party systems that would become decisive for the fate of democracy and for the way the nation state came to intervene in market processes and tame modern capitalism.

2 Nation-Building The territorially confined nation state is the most successful unit of political domination and political rule that exists today. It has effectively crowded out all alternative models: the city-state, the empire, numerous local fiefdoms, and kingdoms (Spruyt 1994; see John Hall, Chapter 3, this volume). In our age, in which many have pronounced the nation state to be an exchange of “obedience against protection.” But if the state was designed to serve these interests of its citizens, it would logically follow that citizens’ political participation would have to be shaped in a way that allowed citizens to articulate what they wanted and assess whether their wants were met. The proto-democratic character of Hobbes’s political philosophy has been emphasized by Richard Tuck (1998) and others. 2 

The notion of “layered” institutions draws on Karen Orren and Stephan Skowronek (2004).

The Layered State    77 dead, no competitor truly exists. The nation state’s normative appeal, based upon collective self-rule, seems largely unrivaled (Meyer 1999) except perhaps by a European Union (EU) that claims to be a democratic polity most fitting to our supposedly “post-national” times (Habermas 1998). However, the EU’s persistent lack of democratic legitimacy was fully disclosed in the post-2008 crisis: the crisis triggered a fallback into “intergovernmental” modes of problem-solving, which makes the EU’s claim appear dubious. Also, our so-called “post-national age" has been characterized by a steady increase in the number of nations on the globe (Alesina and Spolaore 2005): simply taking membership in the United Nations (UN) as a criterion for being a sovereign state, we count 74 members in 1948, 89 in 1950, and 194 today, with ten more waiting for membership status, including Taiwan, Kosovo, and Palestine. Today, nation states cover more than 90 percent of the continental surface area of the world, whereas around 1900 they covered less than 40 percent (Wimmer 2013). In short, there is every reason to believe that the nation state will remain the primary locus of legitimate political power and political identity cum loyalty in the contemporary world. The first advantages of the territorial state were presumably military in nature:  it had unique administrative, taxing, and, consequently, war-financing power (Brewer 1989). Moreover, military technological progress increasingly put cities and other non-territorial late feudal patterns of authority at a serious disadvantage (Poggi 1978). Modern artillery—the “weapons of mass destruction” of the seventeenth century—critically improved the auspices for siege warfare (Parker 1996). It was significant for the new military balance between attackers and defenders that in 1797 Venice, the most admired and successful example of a city-state, lost its perennial autonomy, and that in 1815 Geneva became a Swiss canton (Osterhammel 2009:  565). The burden of intensified warfare— bigger armies, stronger fortifications, more expensive weaponry—was best shouldered by territorial states because of their unrivaled resource-extracting capacity. Therefore, Charles Tilly’s (1992) “states make wars and wars make states” aptly characterizes the development from the seventeenth to the nineteenth century. Later, when the age of democratic revolutions was already underway, the military advantages of the territorial state were amplified by its unique recruiting capacity (Levi 1997): the levée en masse, or universal conscription. Universal conscription, in turn, was intimately related to the revolutionary change in the fundamental principle of political legitimacy: the switch from monarchy to collective self-rule. This transformation has even been exemplified in the twentieth century by the close nexus between wars, the granting of the vote, and the conferring of social rights. While the breakthrough of the national principle was not automatically linked to democratization (Wimmer 2013: 237), modern wars fought by nation states were an important catalyst for the subsequent extensions of political participatory and, later, social rights. The breakthrough of universal male suffrage in Western Europe and some of the most important welfare state extensions took place only after the carnage and destruction of the two World Wars (Rasler and Thompson 1985; Pedersen 1990, 1993; Skocpol 1992; Kasza 1996; Klausen 1998; Scheve and Stasavage 2010; Sparrow 2011; Obinger 2013). Once the modern nation state had emerged from Europe’s continuous dynastic struggles, it entered a new period of global competition in which it proved its essential competitive advantages on the international plane. This had profound consequences for the spatial organization of political rule (Maier 2012). Thus, when European nations started

78    Philip Manow and Daniel Ziblatt their “scramble for Africa” in the last quarter of the nineteenth century, they turned a scattered landscape of several thousand small fief- and kingdoms into some 40 territorial units, which, in the wave of independence after World War II, turned into autonomous nation states. Similar processes can be observed in the sixteenth, seventeenth, and eighteenth centuries for the Americas and Asia, as demonstrated by the Indonesian islands, which were “unified” under Dutch rule. In 1690, John Locke explained the British monarchy’s advantage over the Indian chiefs of North America with the fact that they were not kings ruling over nations, but “only captains of so many families” (quoted from Landucci 1972: 162). Paradoxically, the economic and military superiority of the European state turned the nineteenth and early twentieth centuries into a period dominated by (new) forms of colonial empires, while at the same time challenging the older colonial powers of Spain and Portugal (Burbank and Cooper 2011). Yet, this European superiority motivated local elites everywhere to emulate Europe’s successful nation state model (cf. Anderson 1983; Wimmer and Feinstein 2010): “Ambitious political elites from around the world embraced the ideology of nationalism, hoping that they would one day preside over states as militarily powerful, politically potent, and culturally glorious as the early nation states” (Wimmer 2013: 80). The result was uneven development:  the descent of old colonial powers like Spain or Portugal, the ascent of the US as a new colonial power in Cuba, Puerto Rico, and the Philippines, and the extension of the British Empire in India. This development in India ran counter to the increasing independence of the “dominions”—Australia, New Zealand, Canada, and South Africa—which was finally fully granted in the Westminster Statute in 1931. All of this was combined with the shift of European imperialism to Asia and Africa, after a first wave of national independence in Latin America broke in the first quarter of the nineteenth century. This wave had itself been the consequence of European nation state warfare, namely the defeat of Spain in the war against Napoleon. Yet, the internal contradictions of nation states that at the same time built vast colonial empires became normatively and empirically apparent with the onset and end of World War I: normatively this was clear with Wilson’s 1918/1919 declaration of the principle of selfdetermination along with Lenin’s earlier 1914 public commitment to the same idea (Manela 2007; Fisch 2010); empirically these contradictions were clear with the unprecedented near simultaneous collapse of the old multinational Russian, Ottoman, and Austrian empires in 1918/1919 (Hechter 2000). For Europe, then, World War I “accomplished the victory of the nation state principle” (Schieder 1991: 67),3 and that happened simultaneously with the democratic mass-market’s becoming a reality and with the full “nationalization of politics” (Caramani 2004). Critically for later developments, as we will see, a large number of these new democracies introduced proportional representation as their electoral system (Carstairs 1980; Caramani 2000; Blais et al. 2004). In Europe the processes of nation state formation and democratization intersected crucially and gave rise to national party systems that were to profoundly affect the direction in which the Western political economies would develop in the second half of the twentieth 3  The

nations that emerged from the ruins of Austria-Hungary were:  Czechoslovakia, Yugoslavia, German-Austria, Hungary (all in October 1918), plus Poland and the West-Ukraine (in late October, early November 1918).

The Layered State    79 century. Finally, with the post-World War II cycle of independence, the nation state model became the dominant template for political rule worldwide—the age of colonial empires had ended (Spruyt 2005). Again, this development was linked to a (second) wave of democratization from 1943 until 1962 (e.g. Italy, Germany, Japan, India, Jamaica), triggered in large part by former colonies since the newly independent nation states at first turned democratic (Huntington 1991; Przeworski et al. 2000; Gleditsch and Ward 2006). When studying nation state formation and focusing on Europe we can follow in the footsteps of Theodor Schieder (1991) and distinguish three “formation models” that are ordered in time and space: (1) early territorial consolidation in the West and partially in the North of Europe, including France, England, the Netherlands, and Sweden; (2) later nation state formation via unification of previously independent political units in Europe’s center, in Switzerland, Italy, and Germany; (3) and, finally, in a “third wave” of nation state formation, the secession from and breakup of empires, particularly in Central Eastern Europe. Greece had already split from the Ottoman Empire early in the nineteenth century; around the turn of the century Norway and Finland seceded from Sweden and Russia, respectively; Serbia, Romania, and Bulgaria emerged as independent nation states in Central Eastern Europe in the last quarter of the nineteenth century; and at the end of World War I they were joined by Poland, Hungary, Czechoslovakia, and Yugoslavia (for similar schemes, see Schulze 1994; Wimmer 2013). Different waves of nation state formation also seem to parallel the different waves of colonialism: both colonialism and nation state formation occurred early in Latin America, with the independence of Bolivia, Chile, Venezuela, Columbia, Uruguay, Mexico, Chile, Argentina, etc., occurring in the beginning of the nineteenth century as a result of the Spanish defeat of Napoleon. National independence set in much later in Asia and Africa, after World War II in the British and French spheres (see also Kelly and Mahoney, Chapter 5 and Lange, Chapter 6, both this volume). The Western colonial empires had created nation states as models of emulation and by imposition and thus contributed to the diffusion of the nation state idea: the right of secession as postulated by the Bolsheviks in 1917 resulted from the Eastern European experience with the Russian, Austrian, or Ottoman Empires, and it subsequently became crucial for the waves of anticolonial nationalism in the 1950s and 1960s. Today, Europe’s early nation states are confronted with the erosive impact of secessionist movements in Catalan and Basque Spain, in Scotland, and in Brittany, because the national principle has come home to roost in those places where it had first manifested itself, that is, in the West of Western Europe (see also Keating, Chapter 28, this volume). Schieder’s three state-formation models gave rise to different kinds of nation states that evolved at different tempos. We see the relatively smooth inner transformation of a given polity in the first group, the consolidation cases, where internal struggles between the aristocracy and the other classes represented the dominant line of political conflict. By contrast, we observe more sudden, abrupt processes of nation state formation in Continental Europe in those countries that were formed by unification or secession, that is, in the second and third groups of the Schieder formation models. Here, the main impulse of political conflict was external, and the nation understood itself as a pre-existing entity that merely sought political form. National identity often was established either against a “foreign” imperial power (Hechter 2000) or against the “internationalist” spirit of the day, which was embodied in the two, then-dominant international doctrines: Marxism

80    Philip Manow and Daniel Ziblatt and Catholicism, or the “red” and the “black international,” respectively. Often a kind of ethno-nationalism (Breuilly 1993) resulted, which made these countries more susceptible to totalitarian breakdown once independence had been achieved (Mann 2004). Finally, as the nation state principle spread, the character of war changed:  whereas World War I was the catalyst that ended the era of empires in Europe, the many unsolved minority questions remaining after their breakup contributed to the next great war and were brutally “solved” by World War II (Snyder 2011), or they were suppressed in the East under Soviet hegemony and resurfaced after the fall of the Iron Curtain in the Balkan wars of the 1990s. After 1945, war has turned from inter-state to intra-state, and it mainly breaks out in ethnically or religiously heterogeneous settings (Wimmer 2013).

3  The Democratization of the State Nation state formation dominated between 1815 and 1914 (see Section 2). Overlapping with it, and at times intersecting with it at the tail-end of this transformation, was a period often called “democracy’s first wave” (Huntington 1991). In this period, a fundamental “type-shift” in the structure of the modern state began in Western Europe, from mostly competitive oligarchies to inclusive democracies. It started with a great burst in the middle of the nineteenth century, followed by a series of major institutional reforms that over the next hundred years, in fits and starts, democratized the modern state. Between roughly 1848 and 1950, major institutional reforms occurred that reconfigured the structure of political rule. Often the period between 1848 and World War I is seen as the “age of capital,” in which “the world was conquered by sober men in sober clothes spreading respectability and a faith in private enterprise” (Hobsbawm 1996 [1975]:  10). However, long-run, albeit often subterranean, changes were simultaneously taking place in the structure of society and in the political institutions of the state, and these changes gradually institutionalized new and more democratic forms of governance. In 1848–49, no Western European state was democratic. By 1950, all of Western Europe was democratic, with the exception of Spain and Portugal. What were the most important democratic institutional reforms of the state? What prompted these changes? And what explains the starkly different national trajectories in the character of the democratization? The precise cluster of institutional reforms that democratized European states, reforms which began in 1848, picked up speed over the course of the century, and came to a head in most countries in 1918–19, included a series of well-known “macro” institutional innovations. Additionally, these changes also included a series of less visible “micro” institutional reforms that historians and political scientists have catalogued: • Expansion of the suffrage for national parliamentary elections, first male (e.g. Switzerland, 1848; Britain, 1832, 1867, 1884, and 1918; France, 1848; Germany, 1871; Sweden, 1909) and later female (e.g. Britain, 1918 and 1928; Germany, 1918; US, 1920; Sweden, 1921; France, 1944); • Increased accountability of national executives, for example, of monarchs, by making the selection of governing cabinets dependent on elections (e.g. Britain, 1832; Denmark, 1901; Sweden, 1917; Germany, 1918);

The Layered State    81 • Institutionalization of civil liberties, such as freedom of association, freedom of the press, and freedom of speech; • Elimination of bans on opposition parties in politics (e.g. Germany, 1890); • Adoption of the secret ballot (e.g. Britain, 1872; Germany 1903; France, 1913); • Regional equalization of the “value of the vote” via regular reapportionment; • Elimination of “plural voting,” where some voters had more than one vote or the votes were weighted differently (e.g. Belgium, 1919; Britain, 1948); • Elimination of electors, that is, of indirect voting (e.g. Prussia, 1918); • Disempowerment of unelected upper chambers (e.g. Britain, 1911).4 All of these institutional reforms can be usefully categorized as widening the scope and impact of participation in and contestation of political power (Dahl 1971). However, it has been argued that these reforms also had the effect of “restricting participation in politics to this . . . comparatively relatively harmless form” (Hirschman 1982: 112–113) and consequently of limiting more active and directly participatory conceptions of citizenship (cf. Guttman and Thompson 2004). Nevertheless, these institutional reforms of the state gave the working class and urban citizens greater political voice vis-à-vis wealthy and rural citizens, and they also shifted the class and sectoral balance of social power in Europe away from landed elites by eroding and eclipsing the “old regime” nexus of power, wealth, and prestige (Mayer 1981). By 1918, these diverse institutional reforms had been adopted nearly everywhere in Western Europe.5 Still, these reforms did not come in one comprehensive package of a single “democratic transition” (see Collier 1999). Nor did they arrive without opposition, struggle, and at times murderous conflict. We can usefully identify two long-run patterns of democratization between 1848 and 1950. In one cluster of countries—for example, Britain, Belgium, Denmark, Sweden, and the Netherlands—democratization in that 100-year period followed a relatively settled path. While social conflict also clearly played a major role in democratization, and opposition to democratization was not insignificant, no major “democratic backsliding” occurred, and military coups were avoided, as were other authoritarian “seizures of power.” In the years between World War I and World War II, democracy, though often faced with internal crises, survived, unless displaced by Nazi conquest from the outside. In these cases, democracy emerged gradually and protractedly, and it almost approximated the teleological elements of some variants of modernization theory in which it is assumed, once one element of democratic rule is granted, it is difficult to retrench, and the scope of democracy broadens irresistibly. In a second cluster of European countries—including Germany, Italy, Spain, Portugal, plus most Central and Eastern European countries, and arguably France—this teleological narrative is confronted with starkly disconfirming evidence.6 Here, democratic institutional development was often stalled for long periods of time (as in Germany before 1918),

4 

The list is based on but expanded from Daniel Ziblatt (2006: 336). There are, of course, major exceptions, e.g. Britain’s House of Lords and restrictions on female suffrage in Italy and Switzerland. 6  Whether France in the 1920s and 1930s is a democratic success case, and whether it really proved to be “immune” to Fascism, as Réne Rémond (1982) had famously claimed, is the subject of a protracted debate (Soucy 1995; Passmore 1997, 2013; Jenkins 2005). 5 

82    Philip Manow and Daniel Ziblatt and once it was initiated, it was often subject to threats of anti-democratic coups (as in Spain and Portugal). In all of these cases, the interwar years were marked by varieties of breakdowns of democracy (e.g. Linz and Stepan 1978; Capoccia 2005; Bosworth 2009). The road to democracy was unsettled and circuitous. While democracy was reestablished in Germany, Italy, and France after 1945, in Portugal and Spain democracy was established only in 1974 and 1975, respectively, and it came to East and Central Europe only in the 1990s, after the collapse of the Soviet Union. Thus, between 1848 and 1950, the modern state poses two analytical challenges: first, explaining the convergent tendencies of democratization that marked the century in Europe; and, second, accounting for the stark unevenness in and divergence of the precise character of democracy’s development. These two realities—a common trend towards ever-greater democratization everywhere, but remarkable diversity in that experience— have understandably generated much social science and historical research. We will start with the first challenge: most efforts to explain the convergence on democratic state forms have rightly highlighted economic change as the trigger behind democratization. This literature has taken several forms. First, clearly inspired by the coincidence in timing between the industrial revolution and democratization in Europe, modernization theory in the post-World War II period aimed to confirm economics as the impetus for democracy, demonstrating the cross-national correlation between national GDP per capita and democracy. Economic development was thought to transform societies, reduce scarcity, alter cultural values, and reduce the incidence of political violence, thereby making democratic transitions more likely and democracies more stable (Lipset 1959; Almond and Coleman 1960; Przeworski et al. 2000: ch. 2). In addition to these older ideas, a “new modernization” political economy literature also explores the nexus between economic development and democratization to explain the convergence on democratic institutions. However, it does so by looking at a different set of powerful causal mechanisms (see Boix 2003; Acemoğlu and Robinson 2006). Rather than focusing merely on rising levels of wealth, these accounts deploy a rationalist micro-logic in which the prospects for democratization in Europe and elsewhere are regarded as the outcome of each country’s levels of socio-economic inequality and of the relative position of the “rich,” the “poor,” and the “middle class” in society. Here, the distribution of income, not the level of income, is decisive. Following the logic of the Kuznets Curve, it is argued that income inequality may be high in early stages of socio-economic development, but that this declines over time. In Carles Boix’s (2003) account, it is when less is at stake in distributional terms for the wealthy, that is, when inequality is lower, that democracy becomes safest (see also Przeworski 2010). By contrast, in the model developed by Daron Acemoğlu and James Robinson (2006), if socio-economic inequality is too low, the demand for democratization from “the poor” is unlikely in the first place, leaving democratization and socio-economic inequality in a curvilinear relationship. In brief, democratization is most likely not at extremely low or high levels of socio-economic inequality but rather at moderate levels of socio-economic inequality. While the nexus between the level of wealth and welfare in a society and the stability of democracy is well established (Przeworski et al. 2000), it is also clear that the Napoleonic Wars and World War I contributed to the general spread of the nation state principle. Both these external shocks “hit” societies at very different levels of economic development and

The Layered State    83 when they had very different economic structures. These levels and structures then were thought to play a decisive role when it came to the question of whether or not a nation later backtracked from the democratic path once it had adopted it. The strand of research that helps us understand the uneven nature of democratization in Europe identifies distinct national trajectories or clusters of national trajectories. In the wake of Barrington Moore’s major work (1966) on the social class-coalitional origins of dictatorship and democracy, national patterns have attracted recent scholarship. For our purposes, the most important insight of Moore’s work, which has shaped a generation of subsequent research, is twofold: first, there is no single path to modernization for Europe’s nation states; and second, social coalitions of different classes and sectors are the engines of democratization, though at the center of his analysis is the claim “no bourgeoisie, no democracy.” In response to, and clearly inspired by Moore’s major work, a series of studies conducted in the 1990s have made further headway in understanding the divergent settled and unsettled patterns of European democratization, challenging some of Moore’s key claims but still inspired by his comparative historical method. Among some of the most ambitious have been those by Gregory Luebbert (1991), Dietrich Rueschemeyer, Evelyne Huber Stephens, and John D. Stephens (1992), Sheri Berman (1998), and Ruth Collier (1999). Of these, Rueschemeyer et al. (1992) first explored 38 countries in an intensive historical fashion, and highlighted, like Moore (1966), that the balance of power between different social classes determined the prospects for democratization in Europe. The work diverged from Moore, however, by arguing that the “outs” of the political system, chiefly the working class, were more important than the often democratically ambivalent bourgeoisie. Where this class emerged as dominant as a result of socio-economic modernization, and where landed elites were weakened, democratization was possible. In this account, the working classes and their political organizations were the engine of democratization.7 Luebbert (1991), Berman (1998), and Collier (1999) all also owe a methodological debt to Moore, but they depart from him even further by placing less emphasis on socio-economic modernization and social classes. Instead, they emphasize political factors, and above all the organization, strategies, and ideology of political parties. Here we begin to see that recent scholarship has converged on seeking to identify the sources of difference among those states that experienced settled paths of democratization and those that struggled with authoritarian detours. This meets our second challenge. Above all, these accounts presume that regime types do not simply reflect socio-economic patterns of development, but that, instead, they are themselves mediated by politics, by the players in the politics of transition, political parties of the left and right, their ideology, their organization, and, above all, the social coalitions which shaped them and which they shaped.8 In Luebbert’s (1991) account, the turn to authoritarianism in Europe’s democracies after World War I was the result of the structure of social coalitions that underpinned partisan linkages: in a case such as Britain, the urban working and middle class formed early 7  Another

recent work that makes this argument in a historically sweeping fashion is Geoff Eley’s (2002) book. 8  Ruth Collier’s (1999) important account primarily concentrates on the “adoption” of democratic reforms and is less focused on explaining cross-national differences in regime stability, and thus we do not discuss it fully here.

84    Philip Manow and Daniel Ziblatt alliances. Subsequently, liberal parties could dominate politics before World War I, and workers’ parties remained organizationally weak and programmatically moderate. In a second cluster of cases, which includes Italy, urban middle classes formed alliances with the landed middle class, that is, the family peasantry, which triggered the turn to fascism in the interwar years. And finally, in a third class of cases, as in Scandinavia, an alliance of small-holders’ parties and social democrats saved democracy in the interwar years and responded to the world economic crisis with non-liberal, Keynesian-type policies. Consequently, according to Luebbert, the ideology of the left was moderated in both the first and third class of cases by the given coalition options, which contributed to democratic stabilization in the face of the major economic crises of the 1920s and 1930s. A crucial unstated variable in his account is the religious factor that hindered a coalition between a Marxist workers’ movement and devout Catholic farmers in mono-denominational countries, where the counter-reformation had led the church into an alliance with the reactionary forces of society. No religious conflict stood in the way of a red-green alliance between workers and farmers in Scandinavia, as we will see below. Where the working class remained excluded, however, as in Luebbert’s second case of an urban-middle class/ farmer coalition ultimately leading to fascism, the left radicalized, because it lacked feasible reform options in the republican order. It was here that the split between socialists and communists, which occurred in all West European countries (McInnes 1975), led to an organizationally and electorally strong communist wing of the labor movement. As we will see, this is one of the enduring legacies of that political constellation that continues into the post-World War II period. This points us to Europe’s emerging party systems, and the nature of the partisan players in these party systems, as being the determinants of democratic stabilization (Ertman 1998; Capoccia and Ziblatt 2010). First, as highlighted above, a moderate left—tamed and in coalition with liberals, whether urban-based as in Britain or rural-based as in Scandinavia—appears to be at least one important precondition for democratic stabilization. This is further borne out when we see the polarizing consequences that occur when such coalitions proved impossible—as they did in Italy or Spain. Where the left could not count on allies, because Catholic farmers—often under the close tutelage of the church— could not bring themselves to ally with the anti-clerical Marxist workers’ movement, there was often a “great schism” between a moderate, reformist left and a radical, revolutionary left, which made democratic stabilization more difficult in these cases (Manow 2013). In those polarized polities, the electoral right’s stance towards the republic was regularly the mirror-image of that of the country’s left wing, and it was also decisive for regime stabilization (for more see Ziblatt 2015). In France and Southern Europe, not only did the left radicalize and split, but the electoral right did so as well. Here, the electoral right, with only the loosest of modern party organizations, was tightly associated with, or nostalgic for, repressive monarchies, and the result was that with the rise of mass politics after 1918, politics became more polarized. In contrast, in Scandinavia and Britain, the electoral right was armed with the organizational resources of mass democratic political parties early on, and so it developed quite moderately. In fact, in a case such as Britain, the right was not unlike its social democratic and labor party rivals in its early mass appeals (e.g. Pugh 1985), and so also eased the process of coping with the rise of democracy. Again, religion comes in as a powerful variable. One important legacy of the process of building the nation state, as Stein Rokkan (1970) has noted, was confessional homogeneity

The Layered State    85 in Europe’s North and South, whether through the Reformation in Lutheran Sweden and Denmark, as well as in mostly Anglican Britain, or through the Counter-Reformation in Catholic Spain, France, and Italy (Ertman 2009). By contrast, early state-building left confessionally split polities in places such as Switzerland, Germany, and the Netherlands. Consequently, in his classic General Theory of Secularization (1978), David Martin identified a “Latin” and a “mixed pattern” of political Catholicism. Parties of religious defense (Christian democracy) were more moderate-centrist in those countries in which Catholicism was a minority religion, that is, in the mixed countries, than they were in the mono-denominational Catholic countries. Consequently, the Christian democratic parties in Germany or the Netherlands were largely pro-republican and potential allies for social democracy in the interwar years, whereas the pro-clerical right was strongly antirepublican in France, Spain, and Italy.9 Where a national Catholic identity had helped in becoming independent from a foreign ruler of different denominational belonging— Catholic Ireland against Anglican Britain, Catholic Belgium against the Protestant Dutch Provinces and secular France, Catholic Poland against Orthodox Russia and Protestant Prussia—no severe state/church conflict emerged, and Christian democratic parties, if they were founded, were moderate too (Martin 1978: esp. 37, 42–45). In sum, the modern state was fundamentally transformed by democratic institutional reform between 1848 and 1950. But this was not a simple case of “irrepressible democratic transformation” in which history’s legacies were simply dissolved by the great leveling forces of industrialization and economic development. Instead, the remarkable variation in democratic experiences in this period was rooted, as the literature has made clear, in different socio-economic structures, different coalitional dynamics, and different proto-party system dynamics, which themselves were anchored in the state’s earlier confrontation with—not exclusively, but predominantly—religious institutions (Lipset and Rokkan 1967). Just as institutional inheritances from a previous period shaped democratization experiences in a later period, we shall now see in Section 4 that democratization and its determinants in Europe also continued to matter in the subsequent period of welfare-state development.

4  The Modern Intervention and Welfare State As we can gather from Figure 4.1, there is no obvious correlation between the timing of the onset of the welfare state—measured here as the date of the first introduction of one of the major social insurance schemes like accident, health, old age, or unemployment

9  It

was, therefore, the Protestant peasants in Germany’s North who overwhelmingly voted for the National Socialists—not the Catholic small farmers in the South (see King et al. 2008). In denominationally mixed Germany, the political representation of rural interests was religiously split. Catholic farmers were represented by the Center Party, but Protestant farmers had no established agrarian party of their own, and they voted in large numbers for the NSDAP in the wake of the economic crisis of 1928 to 1932.

86    Philip Manow and Daniel Ziblatt

1st year of social insurance scheme

1930

US Canada

1920

1910

Netherlands

1900

1890

Australia France Ireland New Finland Zealand

Spain

Italy

UK

Norway

Denmark

Greece Switzerland

Portugal

Japan

Belgium

Sweden

Austria Germany 1880 0

2

4

6

8

10

Level of democracy (polity)

Fig. 4.1  Level of democracy at the moment of the first introduction of one of the major social insurance schemes. Note:  Level of democracy measured according to Polity Index, running from 0 to 10. Source: Own calculations based on Manfred G.  Schmidt (1998:  180, Table  5).

insurance—and the level of democratization of a country at that moment. Figure 4.2 shows that we also cannot establish a nexus with the level of economic development in a country. Rather, we can observe two different trajectories leading to the modern welfare and intervention state: a comparatively late, liberal, or “democratic” trajectory (e.g. the UK, Switzerland, US, and Canada) and an early “pre-democratic” one (e.g. Germany, Austria, Italy, and Japan). The key distinction is normally thought to be whether systems of social protection were introduced under conditions of mass politics or as bureaucratic measures of modernization “from above” and, thus, as a means to instill political loyalty vis-à-vis the pre-democratic nation state (Flora and Alber 1981). What has been described as the conservative welfare state with its many “corporatist” occupational schemes, its parafiscal organization, its emphasis on status differentials, and its focus on “self-administration” by workers and employers, is typically explained in reference to the mainly pre-democratic context of its origin (Esping-Andersen 1990).10 There appears to be a link between late nation state formation and early welfare state building, which can probably be explained by the higher demand of political legitimacy and the need to forge a nation in the latecomer cases. This points to the different role of imperialism: the early Western nations—in particular England and France, as well as the 10  The same can be said for non-liberal origins of the Japanese welfare state. See in particular Gregory Kasza (2006).

The Layered State    87 1930

US Canada

1st year of social insurance scheme

1920 Greece Portugal Japan

1910

1900

Italy Finland

1890

Switzerland

Spain Ireland

Norway

Sweden

France

Netherlands

Australia New Zealand

Belgium

UK

Denmark Austria

Germany 1880 1000

2000

3000

4000

5000

6000

gdp p.c. at first year of social insurance scheme

Fig. 4.2  Level of GDP per capita at the moment of the first introduction of one of the major social insurance schemes. Note: Level of GDP per capita is measured in internationally comparable Geary Kahmis dollars ($). Source:  Own calculations based on Manfred G.  Schmidt (1998:  180, Table  5).

Netherlands, parts of Belgium, Spain, and Portugal—looked back at a “glorious history of national supremacy,” thanks to their colonial experience. By contrast, the aggressive imperialism of Germany and Italy around the turn of the nineteenth to the twentieth century, along with the early pre-democratic welfare-state building in Germany, Austria, and Italy (as well as Japan) is a testimony to the double need to simultaneously forge and prove the nation externally and internally. It remains unclear, however, how exactly decisions taken in the late nineteenth century are thought to have constrained policy choices in the second half of the twentieth century, that is, how the institutional structure of the pre-democratic welfare state could have remained stable under democracy. A fuller picture of the interplay between nation state formation, democratization, and economic development emerges when we combine our insights about the basic societal cleavage structures that were the heritage of the national and industrial revolutions (see Section 3; Rokkan 1970; Flora et al. 1999) with insights about the importance of basic social coalitions of different classes and sectors from Barrington Moore (1966) and Gregory Luebbert (1991). Such a perspective distinguishes foremost between countries according to their level of economic development at the moment of mass democratization toward the end of World War I. At the end of the “Great War,” our two previously described processes—nation state formation and democratization—interact critically: the French Revolution, exported

88    Philip Manow and Daniel Ziblatt through the Napoleonic Wars, had exposed the European states to a common shock, the nineteenth-century consequences of which were nationalist movements fighting for independence, self-determination, and freedom from the forces of the Ancien Régime. In the wake of World War I, the Ottoman, Hapsburg, and Russian Empires finally dissolved, a large number of new nation states emerged, and the principle of collective self-rule became fully established (Manela 2007; Fisch 2010). At the same time, as we saw, full parliamentary accountability and full (male) suffrage became the standard, and the adoption of proportional representation as an electoral system helped to establish a system of programmatically cohesive parties offering political programs in an arena of “nationalized politics” (Caramani 2004). The beginning of the “intervention state” in the last quarter of the nineteenth century was a response to the rapid capitalist transformation of Western societies, and it went hand in hand with the “de-localization” and democratization of politics. The introduction of proportional representation in countries that previously had mainly applied the majorityrunoff system (Blais et al. 2004) strengthened national parties and made them into prime political agents, whereas politics was “nationalized” in the majoritarian systems by strong presidents or prime ministers confronting rather weak parties (Cox 1987, 1997; Shugart 2001). With their impact on the ideological composition of governments (Iversen and Soskice 2006; Cusack et al. 2007) and on the linkages between the state, parties, and interest groups, electoral formulas became a crucial factor in the further economic and social developments of the developed countries. These political processes affected states at very different levels of economic development. In Europe, industrialization basically progressed from West to East:  it was most advanced in Great Britain, followed by Belgium, the Netherlands, and then Germany, while the economies in Central and Eastern Europe around 1918 were still predominantly agrarian. This mattered for the formation of political coalitions. In the westernmost countries of Europe, farmers became less important as an electoral group, yet in the East they were so dominant that their interests ruled supreme. The countries in Europe’s center were “in between,” both geographically and economically: farmers were still such an economically and electorally important group that the political fate of these countries hung on the question of which political coalitions were possible between workers, (small) farmers, and the urban bourgeoisie (Malefakis 1971; Luebbert 1991). Here the second important dimension beyond class, which we already pointed to, comes into play: religion. It is primarily a North-South dimension that divided the countries with Lutheran state churches in Scandinavia from the countries with political Catholicism in continental Europe (Kersbergen and Manow 2009; Manow 2009). Whereas political Catholicism in the mixed countries was rather moderate, centrist, and most often prorepublican, in countries where Catholicism had the religious monopoly—that is, Italy, France, Spain, and Portugal—the church was clearly more rightist, anti-republican, antidemocratic, reactionary, and often in alliance with the dominant forces of the Ancien Régime, that is, the crown, the military, and large landholders (see Martin 1978; Malefakis 1992; Diamandouros et al. 2006; Pollard 2009). The interplay of economic and cultural factors proved decisive. In both Northern and Southern Europe, the agricultural sector still played a critical role in the interwar period. But whereas economic interests led to a coalition of workers and farmers in the countries of the North (Berman 1998; Judt 2010), cultural conflicts—in particular the strong

The Layered State    89 anti-clericalism of the left and the high level of religiosity in the countryside—kept such a coalition from emerging in the South. Instead, the family peasantry turned mostly to the extreme right (Corner 1975; Paxton 1997; Preston 2006; Tumbletey 2009), leading to an often violent polarization of the political sphere, and in many countries resulting in the totalitarian shifts of the 1930s and 1940s. One upshot of this development, which had longterm consequences for the political economies of Southern Europe, was the radicalization of the left; this led to strong communist parties and unions (McInnes 1975; Bartolini 2000; Eley 2002). We need to recognize the creation of powerful communist parties and unions as an important heritage of the political polarization of countries in the “Latin pattern” (Martin 1978). In turn, these parties shaped the party systems after World War II, if the countries were at all democratic, just as strong communist unions shaped industrial relations (Ebbinghaus and Visser 2000). The political violence and the fundamental character of political conflict before 1945 explains the persistence of the polarized electoral milieus of the clerical right and the anti-clerical left after 1945. For a long time, this pattern was basically unaltered by the profound socio-economic change over the postwar period, as well as unimpressed by the slow rapprochement among the political elites of both sides, which culminated in Italy in the compromesso storico, the historic compromise, in the late 1970s (Ginsborg 2003). The polarization was also not affected substantially by secularization, that is, by the decreasing strength of religious sentiments and values. The common fight against fascism had led to the inclusion of the communists in early postwar cabinets and the equivocal position of the Catholic church vis-à-vis fascism had delegitimized the Catholic intransigents after World War II. Yet, the Cold War consensus quickly led to the sustained exclusion of communists from government participation, and political Catholicism once more understood itself mainly as an anti-communist bulwark. The consequences for the postwar political economies are obvious: whereas a coalition of social democratic and agrarian parties built the Scandinavian welfare state11 on universal principles and financed the welfare state with extensive (and regressive) taxation (Korpi and Palme 1998), a coalition of social democrats and moderate Christian democrats stood behind the continental welfare state, which was based on an occupational principle and was financed primarily by social insurance contributions (Kersbergen 1995; Manow and Kersbergen 2009; Palier 2010). The South differs in its political development, however: one of the immediate consequences of the “Southern” party constellation was the dominance of center-right governments in Italy and France. The rift on the left reduced the chances that left parties would be in government, and it increased the probability of Christian democratic or conservative government. For example, in Italy the Democrazia Cristiana became hegemonic, and there was no realistic contender from the left. Complementary to the argument that the fragmentation of the right was an important precondition for the social-democratic dominance in Scandinavia (Castles 1978), we can argue that the fragmentation of the left proved to be an important contextual factor for its poor performance in government and for the

11  See Sven Olson (1986); Gøsta Esping-Andersen (1990); Asbjørn Norgaard (2000); and Evelyne Huber and John Stephens (2001: 131–132 [Norway], 134–135 [Finland], 141–142 [Denmark]).

90    Philip Manow and Daniel Ziblatt prevalence of centrist politics (and social policies) in countries such as Italy and France (Hopkin 2004; Watson 2008). In Spain, the violent struggle between a clerical right and an anti-clerical left led to the complete demise of democracy under Franco’s dictatorship, which lasted until 1975. After Franco’s death, the transition to democracy meant that the Communist party was legal again, but, wary of the fragile transition process, voters and party elites preferred moderate positions. The Socialist Party officially renounced Marxism in 1979, and as soon as the rift between the left parties strengthened, the political right was no longer forced to a moderate position: the Catholic church withdrew its support from the centrist Unión de Centro Democrático, a party with strong Christian democratic leanings, to back the more right-wing Alianza Popular (Hopkin 1999). Consequently, we see that Juan Linz erred in predicting that in Spain, as in Italy, Christian Democrats and Communists would become the two strongest parties as soon as the country became democratic (Linz 1967; Linz and Montero 1999). Nonetheless, the split between socialists and communists continued to affect electoral competition and industrial relations (Watson 2008), as well as social and economic policies. Therefore, in many respects, the Spanish political economy resembles that of Italy or Portugal. Communists who were systematically barred from executive power in the Southern European countries shifted their energies to industrial relations, and with considerable militancy communist unions defended the rights of the core industrial workforce (for strike activity data, see Armingeon et al. 2012). The results were a high level of job security in the core industrial spheres, which in turn has led to dual labor markets with a low level of female employment and very high youth unemployment (OECD 2004; Allard 2005). From this emerged a social landscape consisting of highly segmented job markets, coupled with an occupationally stratified social insurance arrangement that reinforced labor market segmentation. Industrial relations remained highly conflictual, and wage moderation and corporatist interest intermediation did not belong to the repertoire of macro-economic steering, which stood in marked contrast to the continental European countries (Crouch 1986; Siaroff 1999). There were exceptions to this, but only in extraordinary circumstances, such as Spain’s transition to democracy between 1975 and 1978, or the run-up to the common currency, the Euro, in Spain and Italy in the 1990s. High job protection, combined with a strongly fragmented welfare state based on occupational insurance schemes, led to the twin set of marked insider-overprotection and outsider-underprotection, a situation quite typical for Southern Europe (Ferrera 1996, 1997). The basic Rokkan-cum-Moore/Luebbert-framework finally allows us to also understand important peculiarities of the US case (Prasad 2012). The US was distinctive by expanding white male franchise early in the industrialization process, but African-Americans remained politically excluded in the South (see Rueschemeyer et al. 1992: 127–129). As a consequence of early white male suffrage extension, farmers were an important electoral group in the late nineteenth and early twentieth centuries. Since cultural and religious cleavages were not standing in the way of a farmer-worker alliance, and given that the majoritarian electoral rules impeded the representation of farmers’ interests by an agrarian party, we witness an early political coordination between workers and farmers within the Democratic Party, which gained majorities regularly with the support of Midwestern Republicans. While a traditional view is that potential red-green alliances were weakened in the US by immigration and race, in a recent interpretation, the political coalition manifested itself inter alia in early progressive income taxation, in the repeated veto of farmers and workers

The Layered State    91 against the introduction of regressive consumption taxes, in relatively strict anti-trust laws, in tight product regulation, in consumer protection, and in consumer-friendly credit regulation (Prasad 2012).12 In the long run, the US political economy diverged more and more from the political economies of Western Europe, both because the US had a majoritarian electoral law that disadvantaged the left (Iversen and Soskice 2006), and because the resistance against a federal consumption tax seriously impeded the tax extraction capacity of the US central government once the period of high growth and full employment ended in the mid-1970s (Kato 2003).

5 Conclusion The spread of the nation state principle in Europe reached its high point in 1918. Later conflicts and crises were mainly provoked by national minority problems, which continued to burden the post-World War I settlement and were mostly either “solved” violently in the subsequent war or suppressed until 1990 under communist rule. In this other sense, politics became “nationalized” after World War II (cf. Caramani 2004), as we can see from the subordinate role that ethnic or regional parties played in most of the postwar party systems of Western Europe. All of these emerging party systems, of course, reflected the most important conflict of all industrial societies: the conflict between capital and labor, with parties of the workers’ movement being established everywhere. Variance in the party systems came about primarily through the state-church conflict of the late nineteenth and early twentieth centuries: absent in the Protestant (or Anglican) North, moderate in Continental Europe, excessive in Europe’s South. This variance was mainly visible in the party representation of the rural population as the most pious segments of modern societies: agrarian parties represented farmers in Scandinavia, Christian democrats represented this segment in Continental Europe, and fascists attracted peasants in the violent struggles between the forces of the Ancien Régime and the republican side that occurred in the South of Europe. This deeply polarized conflict had wider consequences in this region as well, as it caused the left to radicalize and split. This heritage of polarized politics continues to impact the political economies of Southern Europe today. After World War I, nation state formation and democratization left countries with peculiar mixtures of economic structure and cultural configurations, primarily with regards to religious divisions. With some noted exceptions,13 where Catholicism emerged as the hegemonic confession (e.g. in Italy, Spain, France, and Portugal), party politics took on a different cast in the age of democratization: in the twentieth century, the electoral right identified more closely with, and was nostalgic for, the pre-democratic old regime, and the left fractured between communism and socialism. This generated particular contours in the democratic 12  From this perspective, the US in the late nineteenth and early twentieth centuries does not really look like the (neo)liberal “night watchman state” that dominates our view of the US today. The fact that the outcomes of identical red-green alliances in Scandinavia and the US differed so much from each other is explained by differences in the underlying economic problems. In the US, the economy was one of high growth and high productivity both in agriculture and industry, whereas European countries had to struggle with their competitive disadvantages vis-à-vis the US economy. These disadvantages became more pressing as transportation costs fell due to easier steamship and railway transportation, i.e. since the last quarter of the nineteenth century. (See Findlay and O’Rourke 2007: Ch. 7.) 13  The exceptions were mono-denominational Belgium, Ireland, and Poland, where the Catholic church itself became important for national independence.

92    Philip Manow and Daniel Ziblatt experience before World War II as well as in the structure of “Southern” European welfare states afterwards. By contrast, where the seventeenth-century conflicts resulted in religious heterogeneity that persisted into the nineteenth century (e.g. in Germany, the Netherlands, and Switzerland), the state-church conflicts were overcome, the left did not split, and where the right could overcome its own confessional divisions, the right could moderate.14 By the post-World War II era, this had been achieved everywhere, and the welfare state, as it emerged in Continental Europe, reflected this different partisan configuration. Finally, in the homogenous Protestant countries of Northwestern Europe, for example, in Sweden, Norway, Denmark, and the United Kingdom, the electoral right had an easier time during the democratic age, in part because it developed party organization relatively earlier, and it began representing coalitions of the middle/upper classes in putatively secular coalitions (cf. Iversen and Soskice 2006). In the second half of the twentieth century, politics were less and less dominated by a confessional element, though it had been precisely this element that had given the Western welfare and intervention state its distinctive characteristics.

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Chapter 5

The Em ergence of the N ew Wor ld States Andrew S. Kelly and James Mahoney

By the mid-nineteenth century, most of the modern states of the New World had come into being. The American Revolution brought the 13 original colonies together as the soon-to-expand United States of America (US). The aftermath of the same revolution also helped to prompt the creation of a sovereign Canada. In Spanish America, the Wars of Independence gave way to many new states with borders quite similar to those that demark the contemporary countries of the region. In Portuguese America, a peaceful transition to independence yielded one state, Brazil, and it remains with us today. Only in the British Caribbean and a few other locations had sovereign states not emerged from colonialism by the beginning of the twentieth century. Although independence from colonialism was the immediate impetus for the emergence of states in the New World, the process of state formation had begun much earlier. Even before colonialism, the Americas featured a remarkable panorama of native societies at differing levels of state development, ranging from hunter-gatherer bands to great conquering empires. The largest pre-Columbian empires in the New World were advanced to the point that they bore some interesting similarities to the European empires that conquered them. The arrival of Europeans, however, fundamentally redirected indigenous processes of state formation in the Americas. Through settlement and institutional implantation, European colonialism had the effect of bringing many political formations from the Old World into the New World. With its vast native populations, nevertheless, the New World was hardly a tabula rasa onto which the European formations could be directly engraved. Instead, state-building under colonialism grew out of the interaction between European institutions and indigenous institutions. Just as there was a great variety of precolonial societies in the Americas, so too did the colonizing European states—for example, Spain, England, Portugal—differ in their institutions and orientations. The specific pattern of colonial state-building, as well as the trajectory of postcolonial development, thus depended both on which European state was doing the colonizing and on what kind of precolonial society was being subjected to this intervention.

100    Andrew S. Kelly and James Mahoney Colonialism differentially prepared the new states that emerged after independence to participate in the world economy and achieve economic prosperity, social welfare, and political development. Already by the mid-nineteenth century, vast differences in levels of economic, social, and political development existed among the states of the New World. On many measures, the nascent US and Canada were much wealthier on a per capita basis than other parts of the New World. In South America, the River Plate colonies of Argentina and Uruguay had become the richest (by per capita measures) and most politically and socially developed parts of the continent. By contrast, Bolivia, Paraguay, and Ecuador were dramatically poorer and characterized by weak political institutions and minimal investment in public goods. Still other countries, such as Colombia, Peru, and Venezuela, were somewhere in the middle. For its part, the huge territory of Brazil was extremely poor, though regional differences in levels of wealth between the North and South that persist today were well established at the end of the colonial period. In this chapter, we consider several different sets of explanatory factors that might help account for differences in the economic performance and the administrative and political capacity of the states that emerged in the New World. In looking at these alternative explanations, we engage many leading social science theories aimed at explaining state development, economic prosperity, and human welfare. We begin by exploring geographic variations among the territories that became the New World states. Here attention focuses on differences in the natural landscape, including soil quality, disease propensity, and precious mineral endowment. Next our attention turns to the role of indigenous state development. We explore the extent to which the differences among the New World states that emerged by the nineteenth century can be explained by differences in the nature of precolonial states. Finally, we examine the causal consequences of variations in the levels of European settlement. Here we consider the effects of being colonized by one European power rather than another, as well as the effects of having experienced greater or lesser settlement. It bears emphasizing that these sets of explanatory factors are neither mutually exclusive nor fully independent of one another. Rather, we argue throughout that one must draw on each of them to make sense of variations in the way in which states were formed in the New World. We will show that variations in colonial institutions brought into being different constellations of political and economic actors, and that it was the persistence of these actors, not the colonial institutions themselves, that best explain state-building differences across the Americas.

1  Geographic Factors Many geographic features of the New World preceded not only the arriving Europeans but also the indigenous people who had lived in the New World for centuries before colonialism. The fact that much of the natural landscape was in place before all others factors gives it the potential to function as an unmoved mover in a causal explanation. In this section, we consider how the literature has used variations in three sets of geographic factors to explain state formation: (1) ecological zones, (2) disease environment, and (3) mineral

The Emergence of the New World States    101 wealth. We suggest that, of these factors, the location of minerals likely had the most to do with where European state institutions were first created.

Ecological Zones The New World is composed of two main climatic zones: tropical and temperate. Over roughly the last two centuries, the tropical states of the New World have significantly underperformed relative to temperate states not only in the accumulation of wealth, but also in areas such as education, morbidity and mortality, infrastructure investment, and democracy (Gallup et al. 1999; Acemoğlu et al. 2001, 2002; Sachs 2001; Engerman and Sokoloff 2002, 2005; Gallup et al. 2003; Lange 2004). Even when excluding the US and Canada, both of which are temperate zone states, those New World states that fall within the temperate ecological zone show greater capacity for economic development and superior results across a range of political and administrative indicators, including corruption, bureaucratic efficiency, and rule of law (Gallup et al. 2003). If geography exerts a direct and fully exogenous effect on development, the evidence should reveal relatively stable differences between geographic zones over time. Instead, however, there has been a growing divergence between temperate and tropical states since the nineteenth century (Coatsworth 1993; Sachs 2001; Engerman and Sokoloff 2002, 2005). To explain the steady improvement of temperate zone states and the decline of the tropical states, scholars have pointed to varying abilities to take advantage of the opportunities presented by industrialization. States that had developed centralized bureaucracies, stable rules, and relatively open economic opportunities were more capable of securing continued development in the nineteenth century and beyond. Yet, if we look further back into the history of New World state development, we find evidence not simply of divergence, but of a reversal of developmental fortunes among colonial states (Acemoğlu et al. 2002; Mahoney 2003). The tropical states that are today the least socioeconomically and politically developed in the Americas were among the most productive and wealthy states prior to 1700. Theories that posit an indirect relationship between ecological zones and state development are better able to accommodate such reversals in development fortunes. Arguments that geography affects long-run development only indirectly through its impact on institutional development are supported by statistical analyses that show that geography, when controlling for institutions (e.g. rule of law), has at best a weak direct effect (Easterly and Levine 2003; Rodrik et al. 2004). Qualitative studies have also shown how elements of geography, in particular soil quality and temperature, affected long-run development through their influence on levels of inequality and subsequent institutional development in the colonial and postcolonial eras (Engerman and Sokoloff 2002, 2005). Tropical states, while enjoying great wealth in the early colonial period, also exhibited great inequality. Stanley Engerman and Kenneth Sokoloff’s (2002, 2005) work suggests that these differences in levels of inequality are what actually account for the long-run developmental variations between the temperate and tropical states. In colonial states with higher levels of equality, they argue, investments were made in democratic institutions, whereas in unequal societies, elites erected legal institutions that advantaged only a small group of people. According to this argument, levels of inequality originally developed in response

102    Andrew S. Kelly and James Mahoney to agricultural opportunities. In the tropical states, economic elites engaged in commercial agriculture using coerced labor, and they lavished money on consumption and the establishment of institutions that would protect their positions. By contrast, in temperate states such as Argentina and the US, ecological factors favored small family farms. The resulting mode of production allowed for higher levels of economic and political equality. By 1916 and 1920, respectively, Argentina and Uruguay had ended wealth and literacy requirements, introduced the secret ballot, and provided nine percent (Argentina) and 13.8 percent (Uruguay) of their populations with voting rights (Engerman and Sokoloff 2005). While such proportions do not seem highly inclusive, the superiority of democratic institutions is more clearly demonstrated when compared to tropical states such as Bolivia and Ecuador, which enfranchised less than five percent of their populations as late as the mid-twentieth century (Engerman and Sokoloff 2005). Thus, not only have the temperate states proved to be economically stronger, but they have also produced more democratic institutions, which have helped to direct money towards investments in public goods such as physical and educational infrastructure. In both quantitative and qualitative studies, indirect theories stumble most clearly when confronted with developmental differences within ecological zones. Ecological zone theories would predict similar levels of success for similarly situated states. What we see, however, is that great variations exist within the groupings of both temperate and tropical states. The temperate zone of South America, which includes Argentina, Uruguay, and Chile, has an average GDP per capita (1995$) of $7,496, whereas the temperate zone countries of the Northern Hemisphere, that is, the US and Canada, have an average GDP per capita of $23,971 (Gallup et al. 2003; World Bank 2012). Literacy rates, which have been used to gauge state investment in public goods, also vary quite measurably among temperate zone states (Engerman and Sokoloff 2002: 52, Table 8). The US and Canada had literacy rates at the turn of the twentieth century that approached 90 percent, whereas those of Argentina and Uruguay hovered around 50 percent. If we examine various indicators that capture state-building efficacy for bordering tropical states, we also see significantly different outcomes. For instance, the GDP per capita of Costa Rica, which is $5,716 in constant 2000 US$, is more than four times that of Nicaragua, which is $1,350 (World Bank 2012). Costa Rica also enjoys a substantial lead over neighboring Nicaragua on the Inter-American Development Bank’s (IADB 2014 relying on World Bank 2013) measure of overall government effectiveness for 2009, with scores of 0.43 and –1.05, respectively, where zero is the world average and where positive scores indicate better performance. This indicator aggregates measures of government stability, bureaucratic quality, government wastefulness, and the extent of bureaucratic red tape. If we expand the picture to include education, health, and infrastructure, Costa Rica’s advantage is further solidified.

Disease Environment Tropical geographic factors such as ambient air temperatures, the absence of a winter freezing period, and abundant precipitation are conducive to pests, parasites, and disease. These factors can impede economic development through their negative impacts on agricultural productivity, animal husbandry, and human cognitive development. Yet

The Emergence of the New World States    103 the disease environment can also shape economic and political development indirectly by influencing patterns of colonial settlement and institution-building. Here we consider how scholars have developed this argument for the disease environment of the New World. Indicators of state-building efficacy such as bureaucratic effectiveness, level of corruption, strength of legal system, and level of democracy all share strong associations with the disease environment for Europeans (Acemoğlu et al. 2001, 2002; Lange 2004, 2009). Where Europeans could not safely settle, that is, where the disease environment was particularly virulent for these newcomers, colonial authorities were more apt to rely on the personal power of chiefs and local traditions to establish control (see Lange, Chapter 6, this volume). Where disease environments favored European settlement, direct colonial rule was more likely to occur, bringing with it strong, centralized legal-administrative structures; meritocratic hiring and promotion for bureaucrats; and generally a stronger foundation for long-run economic, political, and social development than that found in the indirect and decentralized states of the tropics. At the heart of such arguments are two key assumptions: first, that Europeans settled primarily in areas with favorable disease environments; and second, that where Europeans settled in large numbers they implanted highly efficacious and non-extractive institutions. Evidence from the Americas calls both of these assumptions into question. The temperate regions of North and South America were generally far less attractive to Europeans than tropical areas for much of the colonial period, which creates problems for theories that stress the role of disease environment. The higher mortality rates for Europeans in these tropical zones cannot be disputed, but evidence points towards the conclusion that the risk of disease and death were far outweighed by the economic opportunities of the tropical areas of the New World. The hundreds of thousands of Spanish colonists who arrived in the New World in the sixteenth and seventeenth centuries were concentrated in Central Mexico and the Andes. These tropical and subtropical zones formed the core of Spanish colonialism, whereas the temperate and more hospitable southern regions of South America were long fringe areas of little importance to Spain. The record of British migration over the period from 1630–1780 also shows high concentrations of Europeans in territories characterized by higher European mortality rates. Roughly 90 percent of British immigrants to the New World went to the West Indies and Southern mainland of North America (Engerman and Sokoloff 2002: 7). The increasing proportion of Europeans drawn to Portuguese, French, and Dutch colonies by the demand on the world market for sugar, tobacco, coffee, and other high value crops provides further evidence that an unfavorable disease environment was only a modest impediment to European settlement (Engerman and Sokoloff 2002: 7–9). The colonial and postcolonial development of these states also shows that high levels of European settlement did not necessarily result in the implantation of efficacious institutions. Heavy settlement was characterized by the construction of highly exploitative labor institutions, a legal system that served to perpetuate the economic and political power of the elite, and a corrupt administrative apparatus.

Precious Minerals The final geographic factor that we consider is mineral resources. As historians have long pointed out, this factor was among the most prominent in shaping colonial institutions

104    Andrew S. Kelly and James Mahoney and state-building processes in Spanish America. In need of gold and silver to finance their expansionist policies, Spanish colonial settlers and authorities passed over the fertile soils of the Southern Cone in favor of the mining opportunities of Mexico, Peru, and Bolivia. Silver mining financed the transport of hundreds of thousands of Europeans into the New World. In fact, the key mining city of Upper Peru (Bolivia), Potosí, was inhabited by over 100,000 people (European and indigenous) in the early seventeenth century—placing it about even with London at the time. Yet, despite such extensive European settlement, Peru and Bolivia saw the erection of some of the most extractive and exploitative institutions in the New World. Exploitative labor institutions, such as the encomienda (labor grants) and mit'a (labor drafts), as well as restrictive trade quotas, guilds, price controls, and land-grant monopolies, established a politico-economic class in the core Spanish colonies that fortified its position through restrictive political participation and patrimonial bureaucracies. In turn, these institutions, and, more precisely, the constellation of political actors they brought into being, affected the development of the states that emerged out of colonialism. The implication is that precious metals had a long-run impact on development by shaping the extent to which economically extractive and politically restrictive institutions were built up during the colonial period. There are, however, limits to the explanatory power of the “precious metals” theory. Crucially, areas rich in mineral deposits but lacking large indigenous populations usually did not receive substantial colonial influence (Mahoney 2010). The lower levels of colonial settlement in Northern Mexico compared to Central Mexico, for example, show that indigenous population centers, rather than mineral resources, were the main driver of colonial settlement. Mexico’s silver was located mostly in the north, whereas its indigenous population was concentrated in the central and southern areas. The Spanish chose to locate their colonial project around the indigenous people, not the minerals. Nevertheless, the presence of minerals in the north certainly contributed to the substantial colonial project that was launched in Central Mexico.

2  Indigenous State Development When the Europeans first arrived in the New World, a remarkable panorama of indigenous polities was present. The size and level of institutional complexity of these societies is strongly correlated with important developmental outcomes among the states that emerged in the Americas. Thus, the key issue to be considered is whether differences among the states of the New World can be explained by variations in the extent of indigenous state formation that preceded the arrival of Europeans.

Types of Precolonial Societies Most famously, the polities of the Americas at the dawn of the sixteenth century included two great conquering empires: the Aztec Empire of Central Mexico and the Inca Empire of the Andean region. Each of these empires incorporated millions of people under a

The Emergence of the New World States    105 militaristic system of governance in which local communities were obligated to pay tribute and provide soldiers and workers to their Aztec and Inca rulers. Other smaller state-like empires also existed in the Americas among the various remaining Maya societies in the Yucatán peninsula and in Guatemala; among the Muisca people around Tunja and Bogotá in Colombia; and among the Pipil people of Cuscatlán and Izalco in El Salvador (Mahoney 2010). The Aztec and Inca empires were not, however, modern states. They lacked stable borders and uninterrupted control within their own boundaries, and central authorities did not maintain a monopoly on the legitimate use of force (Weber 1968 [1921/22]). Instead, rulers depended on partially autonomous local authorities to oversee the extraction of tribute and labor and the enforcement of order. Nevertheless, the empires certainly were premodern states in the sense that they represented readily identifiable polities with large, ethnically diverse, and highly stratified populations that were under the authority of centralized rulers who oversaw multiple layers of patrimonial-bureaucratic governance (Eisenstadt 1963; Flannery 1972; Wright 1977). At the other end of the political spectrum were countless hunter-gatherer societies that roamed in the precolonial Americas. These societies were small, mobile, ethnically homogeneous populations that lacked centralized and bureaucratic authority (Service 1962; Flannery 1972). Hunter-gatherers were most noticeable in areas where larger polities were not present, especially geographic regions located toward the northern and southern extremes of the New World. Thus, much of Canada and parts of the northern US, as well as southern parts of South America such as Uruguay, Southern Argentina, Paraguay, and Chile, featured mainly hunter-gatherers. Finally, perhaps a majority of New World inhabitants lived in chiefdoms of one kind or another. These societies were the dominant political formations of parts of the US, most of Central America, and much of the northern territories of South America that escaped the grasp of an empire. Chiefdoms are defined by the presence of centralized but nonbureaucratic authority structures. They are settled agricultural societies, though they lack the same extent of division of labor and degree of stratification of premodern states. There is a strong inverse relationship between the size and complexity of the precolonial societies that were present in a given territory before colonialism and the human welfare of the inhabitants of the modern states that emerged after independence in these territories. Sovereign states that came from regions in the heartland of the Aztec or Inca Empires—that is, Mexico, Peru, Bolivia, and Ecuador—had populations with high incidences of poverty, illiteracy, morbidity, and abbreviated longevity. In addition, these states rank poorly on measures of administrative capacity and corruption. By contrast, states that emerged in areas where hunter-gatherer societies predominated have tended to perform better on these kinds of human development and political-administrative indicators. This inverse correlation is too strong to write off as simply an artifact of chance. Instead, we see at least three possible ways of explaining or interpreting the relationship between precolonial state development and postcolonial state development:  (1)  as a spurious byproduct of geography; (2) as a direct result of the persistence of indigenous formations over time; and (3) as an indirect relationship that works through the mediating variable of colonialism. We consider each of these explanations in turn.

106    Andrew S. Kelly and James Mahoney

The Geography Hypothesis First, one could develop a geographic interpretation of the correlation between precolonial societies and subsequent development outcomes. This interpretation would suggest that the correlation is simply the spurious byproduct of prior geographic variables. In particular, the state-like empires tended to be located in the least geographically promising areas, allowing one to plausibly hypothesize that it was poor geographic potential— rather than anything having to do with the indigenous polities themselves—that explains their subsequent performance. By the same token, the hunter-gatherers tended to occupy the most promising geographic areas, and these geographic features, rather than the hunter-gatherers, explain why these areas developed more effective and wealthy states. It is, however, possible that geography is correlated with later state outcomes only because of the mediating influence of precolonial societies. That is to say, geography helps explain whether a territory will be marked by a precolonial state, chiefdoms, or hunter-gatherer groups. But it is these groups—not their geographic concomitants— that account for subsequent variations in state-building and performance. This argument again relegates geography to an indirect role in driving state development processes. It is likely that geography affected the distribution of premodern states, chiefdoms, and hunter-gatherer groups in the Americas. State-like formations were not formed in temperate areas where inhabitants would have had to endure cold winters. These temperate areas were left to the wandering groups and mobile chiefdoms that could endure the seasonal change through hunting and gathering or by pursuing temporary and shifting agriculture. Instead, the great states of the New World were created around tropical highland areas— that is, the Central Valley of Mexico and the highlands of Peru. These regions offered a good climate for native crops and a relatively benign disease environment for the indigenous population (Gallup et al. 2003: 14). To evaluate whether geography directly shaped long-run state outcomes or whether its effect ran indirectly through precolonial societies, it is useful to look at subnational variations within cases. For example, within Bolivia, the Altiplano highland region was densely populated by the Aymara people, who were incorporated into the Incan state. By contrast, the hot tropical lowlands around Santa Cruz were sparsely populated by hunter-gatherer groups. Whereas a simple geographic explanation leads one to predict that the altiplano should be wealthier than Santa Cruz, an explanation focused on the size and complexity of the precolonial population predicts just the opposite. In fact, despite its tropical lowland geography, Santa Cruz is richer and more developed at the level of local government than the highland areas to the west. Perhaps the most convincing argument against direct geographic effects involves the fundamental correlation between subnational areas with dense indigenous populations (regardless of geographic conditions) and the absence of state development, economic prosperity, and social opportunities (Yashar 2005). While one could try to argue that these indigenous people are impoverished only because of their geographic circumstances, such an argument overlooks centuries of abuse and discrimination that seem far more plausible as explanations of the poverty that marks indigenous

The Emergence of the New World States    107 people everywhere in the New World. Even in countries that are understood to have the most favorable ecological conditions for development, indigenous people still represent that stratum of society that is the least incorporated into the modern state and is the most impoverished and disadvantaged. The near universality of indigenous community marginalization and poverty suggests that something other than geography is at work.

The Persistence of Precolonial Societies A second possibility is that the political and socioeconomic formations of the precolonial era themselves persisted, to varying degrees, and that the extent to which they were retained can help explain differences among the postcolonial states of the New World. The extent to which a precolonial polity was able to persist was most strongly shaped by its size, though geographic location also mattered. The size of the group was of paramount importance in the face of European diseases and abuses that left astounding death rates. By one estimate, the hemispheric population for the New World declined from 53.9 million in 1492 to only about 5.6 million in 1650 (Denevan 1992: xxix). Thus, regions that had sparser precolonial populations often did become relatively blank slates on which Europeans could inscribe their own institutions. Accordingly, one might argue that what is really special about the US, Canada, and the Southern Cone is the relative absence of indigenous institutions and people not long after colonialism began. This absence spared these areas from the preservation of institutions antithetical to the creation of prosperous and egalitarian states. The corollary of this hypothesis is that the larger and more complex indigenous societies were able to persist despite the trauma of disease and colonialism—with disastrous long-run implications. The logic of the argument is that these societies featured premodern state institutions that were out of sync with the modern world economy and modern state system. The basic problem with this explanation is that it overemphasizes the extent to which indigenous political and economic formations were able to persist in the Americas after the arrival of Europeans. It does so by ignoring the enormously consequential effects of colonialism on indigenous societies and institutions. Even in areas such as Central Mexico, where the Aztec Empire had its firmest grip, the effect of colonialism was to completely upset and overturn precolonial institutions. The prior governance, bureaucracy, and military structures of the Aztec Empire were eventually wiped out and replaced with European alternatives. Ultimately, we do not know what would have happened if the indigenous societies of the New World had been allowed to continue to evolve without colonialism. At the time of colonialism, they were at most premodern states and lacked certain aspects of great civilizations, notably writing. Any endogenous transition to modern states with stable boundaries and relatively continuous authority within those boundaries would not have been soon forthcoming. Nevertheless, we can be certain that European colonialism dramatically shaped the process of state formation that did occur in the New World. Given this, it is hard to lay blame on precolonial institutions: they had been so thoroughly changed by colonialism that they cannot be treated as cases of persistence.

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The Colonialism Hypothesis This brings us to the third explanation, one that places emphasis on colonialism itself when accounting for the relationship between the size and complexity of indigenous societies and the socioeconomic and political performance of contemporary states in the New World. In this explanation, the nature of the indigenous population matters because it affected the mode or level of colonialism. In other words, the effects of indigenous societies on state developmental outcomes are indirect, running through the mechanism of colonialism. At first glance, it may appear that there is little relationship between the nature of the pre-existing indigenous population and the level of colonial settlement that occurred in an area. Heavy colonial settlement took place in regions that were the heartlands of great indigenous states, that is, Central Mexico and the Andes. Yet huge settlement also took place in North America and Canada, regions that featured at most intermediary chiefdoms. Thus, when looking at the Americas as a whole, there is no simple correlation between precolonial population size and level of colonial settlement. Yet, if we entertain the possibility that different European colonizers operated in distinct ways, then a striking pattern becomes visible. Spanish authorities and settlers overwhelmingly chose to concentrate themselves and their institutions in areas with dense indigenous populations. Thus, the Aztec capital at Tenochtitlan/Mexico City became the heart of the colonial project in New Spain, while the Inca capital at Cuzco and the new Spanish capital at Lima were the core areas of the colonial project in South America. These regions were attractive precisely because they contained densely settled societies amenable to exploitation via a tribute-collecting state and an extractive economy built around coercive labor. Indeed, during the first two centuries of colonialism, the Spanish rarely heavily settled an area and implanted extensive institutions unless the area was well populated by indigenous people. Consequently, much of the Southern Cone, with its hunter-gatherer and small chiefdom societies, remained relatively uninhabited until the end of the colonial period, despite its temperate climate. By contrast, the British appear to have been especially attracted to sparsely populated areas (Lange et al. 2006). Unlike the Spanish, their settlers and authorities did not mainly seek to achieve accumulation by reconfiguring existing extraction networks and coercive labor systems. Instead, they sought to settle heavily in areas where the precolonial people could be pushed aside, displaced, or otherwise destroyed. The removal of the indigenous population allowed for the wholesale introduction of British institutions without having to work through indigenous ones. Thus, settlers and authorities focused their colonization efforts in North America on places where they could almost completely eliminate the pre-existing order to make way for the installation of new institutions that replicated or improved upon those in the metropolis. The differing preferences between the Spanish and British about which kinds of indigenous populations to heavily settle and colonize reflected a more basic difference in their political economies. We will to return to the nature and implications of these differences later. For now, the important point is that the correlation between the size of precolonial populations and subsequent state development outcomes may well be linked to the fact that different precolonial populations triggered differing forms and levels of colonialism.

The Emergence of the New World States    109 In turn, these levels of colonialism may hold the key to explaining the vast differences among the New World states that were already present in the nineteenth century.

3  European Settlement The colonial regions of the New World saw significantly different levels of European settlement. Recent literature has sought to explain the causes and developmental consequences of these variations. Prominent scholars contend that the identity—whether national or otherwise—of the colonizing Europeans made no difference at all (Acemoğlu et al. 2001: 1373; Robinson and Sokoloff 2003: 174). All European colonizers, such scholars argue, were attracted to or repulsed by the same kinds of areas. Notably, according to these arguments, they were drawn to settle in areas with favorable disease environments and small indigenous populations. Likewise, the legacies of a given level of settlement are seen to be the same for all colonizers. In particular, where Europeans settled in the greatest numbers, institutions were developed that encouraged investment and fostered higher levels of economic, social, and political development (Hall and Jones 1999; Acemoğlu et al. 2001, 2002; Engerman and Sokoloff 2002, 2005). In this section, we consider these arguments about the causes and consequences of the level of European settlement for the New World states.

Causes of Levels of Settlement One important line of research suggests that the disease environment and mortality risk for Europeans drove levels of colonial settlement (Acemoğlu et al. 2001). Yet, as was discussed above, there is much counter evidence showing that disease environment and mortality rate had little effect on the level of settlement in the early colonial period in the Americas. Mexico, Peru, Bolivia, and the West Indies, all of which had dangerous disease environments for Europeans, drew the bulk of settlers prior to 1700 (Engerman and Sokoloff 2002; Mahoney 2010). By contrast, areas with favorable disease environments, such as the Central Valley in Chile or the coastal River Plate area, saw almost no colonial settlement before the eighteenth century. These outliers were more the norm than the exception, and they seriously call into question the idea that disease environment explains settlement. A second line of argument is that European settlement was driven by the size of the indigenous population (Acemoğlu et al. 2002). When Europeans encountered small indigenous populations, the reasoning goes, they could more readily establish property rights institutions, and thus they settled these areas in large numbers. When Europeans found large indigenous populations, by contrast, they could not easily create property rights institutions, and thus they had an incentive to invest in extractive institutions that exploited the indigenous population by transferring its resources to the colonizing population and state. Extractive institutions were, to be sure, implanted in colonial territories with large indigenous populations, but these institutions were accompanied by heavy—not

110    Andrew S. Kelly and James Mahoney light—European settlement. In the Americas, extractive colonialism and heavy settlement often went hand in hand. Thus, Europeans flocked to areas with dense indigenous populations—above all, Central Mexico and the Andean regions—in order to enrich themselves by exploiting native labor. Conversely, areas with sparse populations did not attract large European settler populations. Sparsely populated regions such as the Southern Cone of South America were passed over by Spanish colonizers because they lacked opportunities for economic accumulation via labor exploitation.

Consequences of Levels of Settlement According to settlement theories of development, where Europeans were located in large numbers, settlers demanded laws and organizations to protect private property, leading the colonial government to respond by creating colonial orders that were at times superior to even the institutions of the home country. Thus, these theories suggest that the settlement colonies naturally saw the creation of functioning legal and policing systems that protected property and placed checks on government expropriation. In making this argument about the positive effects of high levels of European settlement, these theories mark a turn toward a neo-modernization theory of state development (Hall and Jones 1999; Acemoğlu et al. 2001, 2002; Engerman and Sokoloff 2002, 2005). Like other strands of modernization theory, settlement arguments assume that European influence and institutions are conducive to and perhaps even necessary for development. They thoroughly reject alternative arguments linking higher levels of European influence to lower levels of development, as was suggested in much of the dependency theory tradition (e.g. Frank 1967). The neo-modernization settlement argument is derived from and supported by the superior state-building outcomes in the British settler colonies. The outstanding performance of these states—whether measured in terms of political inclusion, health and education, or general levels of economic development—highlights the plausibility of neo-modernization notions of development. Once we move beyond the British settler colonies and examine the varied developmental records of the former Spanish colonies of Central and South America, however, these notions quickly run into trouble. Problems with neo-modernization settlement theories can be seen in the fact that several lightly settled colonial regions of Latin America became relatively developed countries. Indeed, what are typically viewed as Latin America’s most economically and politically developed states—Argentina, Uruguay, Chile, and Costa Rica—were all colonial peripheries. Chile and Uruguay, for example, are regional leaders across a number of indicators that capture policy coordination, enforcement, and the degree to which the policies reflect public interest (Scartascini et al. 2009). Conversely, Latin America’s most settled colonial regions—Mexico, Bolivia, Peru, Ecuador, Guatemala—are notably underdeveloped across developmental measures. Transparency International, for example, ranks Bolivia, Peru, and Ecuador among the most corrupt countries in the Americas (Transparency International 2011). One might go so far as to say that colonial peripheralization was a necessary condition for developmental success in Latin America. The idea that Europeans preferred and demanded the institutions of private property does not hold up very well for the Spanish American colonial regions, at least before the

The Emergence of the New World States    111 late eighteenth century. The settlers who came to the Americas sought to create extractive institutions of varying kinds, including coercive labor institutions and monopolistic trading institutions. These extractive institutions became concentrated in precisely those areas where the Europeans heavily settled. By contrast, in the colonial peripheries, these institutions did not develop. Indeed, the very absence of colonial settlement explains rather well why places like Argentina, Uruguay, and Costa Rica lacked deeply seated extractive institutions of the kind that plagued development in other parts of the Americas. In addition, these low-settlement states erected more coherent administrative, judicial, and policing institutions and infrastructure. These institutions contrasted strongly with those that were populated by the mercantilist elite in the core colonies. In both settler and non-settler colonies, the particular institutional configuration brought into being a certain elite class that then sought to expand the very institutions that brought that class into being. It is for this reason that the peripheral colonies experienced a virtuous cycle in which political and economic institutions that favored long-run state-building continued to grow in the postcolonial period.

Why Colonizer Identity Matters Currently prevalent social science theories of colonialism and development hold that the identity of the colonizer did not matter for long-run development (e.g. Robinson and Sokoloff 2003: 174). Yet the fact that sometimes heavy European settlement fostered postcolonial development (e.g. Canada), whereas other times it had the opposite result (e.g. Peru), suggests that the consequences of colonialism may well vary across colonizers. The territories in the Americas that were heavily settled by Spain in 1750 did not become rich countries. By contrast, the territories in the Americas that were heavily settled by Britain in 1750 did become rich countries. What might explain these patterns? We suggest that colonizer identity matters, but “identity” must be understood in terms of the concrete institutions that compose the political economies of the colonizers, not the colonizers’ national or cultural identity. The New World colonizers—Spain, Portugal, Britain, France, and the Netherlands—were far from institutionally identical in terms of political economy. Most basically, they varied in the extent to which capitalist institutions prevailed. Capitalist institutions took hold earlier and more deeply in Britain and the Netherlands than in Spain and Portugal. Given this, we would not expect to see these colonizers leaving behind similar institutional configurations in the New World. Rather, when heavy settlement occurs, we would expect British and Dutch colonialism to yield more capitalist institutions than Spanish and Portuguese colonialism. It is not hard to pinpoint differences in the institutions of Spain and Britain themselves during the colonial era—at least from the seventeenth to the late eighteenth century—that might have affected the ways in which they colonized territories. Spain’s political economy was quite mercantilist, which meant it erected barriers to political and economic participation and placed heavy restrictions on trade and property ownership. Rather than favoring entrepreneurial groups who would invest in future growth, the institutions of mercantilist Spain empowered monopolistic merchants and wealthy landholders who engaged in rampant consumption. In Britain, by contrast, capitalist institutions were more advanced during the course of the seventeenth century.

112    Andrew S. Kelly and James Mahoney Merchants free from royal control had a stronger presence, and fewer royal restrictions governed trade and production. The open competition in the less mercantilist colonies resulted in stronger incentives to establish coherent administrative and judicial institutions, as well as stronger policing institutions and investment in infrastructure. One can think about the effects of being colonized by Spain versus Britain in the following way:  Spanish colonialism entailed control from a declining mercantilist power soon to be relegated to the semiperiphery of the world system. British colonialism involved domination from a rising capitalist power poised for world hegemony. The differing politico-economic institutions of these two colonizing nations empowered different groups of elite actors, and it is upon the power configurations of these actors that postcolonial political regimes were built. Of course, the institutions of Britain and Spain changed over time. When Britain embarked on its colonial project in the New World during the sixteenth century, it was closer to Spain in its institutional configuration. At this time, British colonialism was centered in the Caribbean and focused on plantation agriculture. The institutions put into place by the British during this early phase of colonialism were not advantageous. Regarding Spain, it gradually became more capitalist, especially after the reforms of Charles III in the 1770s, which led to an explosion of trade between Spain and the New World. As a result, territories in Latin America that received extensive late colonial attention, such as Argentina and Uruguay, were bequeathed a more favorable institutional heritage. Finally, it bears emphasizing that the contrast drawn here between British (more capitalist) colonialism and Spanish (more mercantilist) colonialism applies to settlement colonies in the New World—that is, territories such as Mexico or the US that were heavily and permanently occupied by the colonizer power. It is far less clear that British colonialism left behind a superior legacy when it did not entail settlement. In fact, one might well hypothesize that “low levels” of mercantilist colonialism were preferable—from the perspective of long-run development—to low levels of capitalist colonialism. To support the idea, we need only remember that former British colonies now include some of the poorest countries in the world. These countries were usually precisely those areas where the British did not settle but instead simply extracted.

4 Conclusion Variations in colonial state-building were enormously consequential for the kinds of states that emerged in the aftermath of colonialism. In the Spanish colonies, the colonial state was often a major hindrance to postcolonial development. The colonial institutions that were transplanted to the New World by Spanish settler populations were, not surprisingly, reflective of the mercantilist institutions of the home country. Such institutions restricted trade, minimized political and economic opportunity, empowered corrupt bureaucrats, introduced weak administrative and judicial institutions, produced few incentives for investment in public goods, and encouraged vast consumption by the economic elite. As a result, the core colonies of Spanish America—Bolivia, Peru, and Mexico—were ill-prepared for competition in the liberalizing world economy and further hindered by political

The Emergence of the New World States    113 and bureaucratic incapacity. In the British colonies, by contrast, the institutions erected by settler populations were imbued with the capitalist orientation that was on the rise in the home country. This was also characteristic of states like Argentina and Uruguay, which became the focus of Spanish colonialism after the liberalizing Bourbon reforms. Settlers and colonial government officials erected bureaucracies that were stocked with career officials and established institutions that protected private property, encouraged investment, and bestowed on the settler population comparably greater economic and political opportunities. These nations have persistently been the best performers across a broad array of political and economic indicators. No one approach can adequately explain the state-building variations on view in the modern New World. Rather, one must draw on geographic conditions, indigenous state development, and European settlement to achieve an adequate explanation of postcolonial development. In this chapter we have shown that these explanatory factors are neither mutually exclusive nor independent of one another. Geography, for example, mainly exerted indirect effects that shaped the decisions by Europeans about where to settle. Yet the size and complexity of the indigenous population also affected the extent to which European settlement and state-building took place. Spanish authorities and settlers in the New World were especially attracted to densely populated regions whose inhabitants could be readily exploited. By contrast, British settlers and authorities focused their settlement projects in regions with sparse indigenous populations. In addition, this chapter has reintroduced colonizer identity as an important factor in understanding the kind of institutions that were transplanted or erected in the New World. It was, as we have shown, variations in the colonial institutions that brought into being the different constellations of political and economic actors who were most responsible for state-building differences seen across the post-independence New World.

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114    Andrew S. Kelly and James Mahoney Engerman, Stanley L, and Sokoloff, Kenneth L, 2002. “Factor Endowments, Inequality, and Paths of Development among New World Economies.” National Bureau of Economic Research Working Paper 9259. Boston, MA:  NBER. Available at:  http://www.nber.org/ papers/w9259 (last consulted 26 February 2014). ———— , 2005. “Colonialism, Inequality, and Long-Run Paths of Development.” National Bureau of Economic Research Working Paper 11057. Boston, MA: NBER. Available at: http://www.nber.org/papers/w11057 (last consulted 26 February 2014). Flannery, Kent V, 1972. “The Cultural Evolution of Civilization.” Annual Review of Ecology and Systematics 3: 399–426. Frank, André Gunder, 1967. Capitalism and Underdevelopment in Latin America. New York: Monthly Review Press. Gallup, John L; Gaviria, Alejandro, and Lora, Eduardo, 2003. Is Geography Destiny? Lessons from Latin America. Palo Alto, CA: Stanford University Press. Gallup, John L; Sachs, Jeffrey D, with Mellinger, Andrew, 1999. “Geography and Economic Development.” Center for International Development Working Paper No. 1. Available at: http://www.hks.harvard.edu/var/ezp_site/storage/fckeditor/file/pdfs/ centers-programs/centers/cid/publications/faculty/wp/001.pdf (last consulted 26 February 2014). Hall, Robert E, and Jones, Charles I, 1999. “Why Do Some Countries Produce So Much More Output Per Worker Than Others?” The Quarterly Journal of Economics 114 (1): 83–116. IADB (Inter-American Development Bank), 2014. Dataset:  Governance Indicators Database. Washington, DC: IADB. Available at: http://www.iadb.org/datagob/index.html (last consulted 26 February 2014). Lange, Matthew, 2004. “British Colonial Legacies and Political Development.” World Develop­ment 32 (6): 905–922. ——, 2009. Lineages of Despotism and Development:  British Colonialism and State Power. Chicago, IL: The University of Chicago Press. ——; Mahoney, James, and vom Hau, Matthias, 2006. “Colonialism and Development: A Comparative Analysis of Spanish and British Colonies.” American Journal of Sociology 111 (5): 1412–1462. Mahoney, James, 2003. “Long-Run Development and the Legacy of Colonialism in Spanish America.” American Journal of Sociology 109 (1): 51–106. ——, 2010. Colonialism and Postcolonial Development:  Spanish America in Comparative Perspective. New York: Cambridge University Press. Robinson, James, and Sokoloff, Kenneth L, 2003. “Historical Roots of Inequality in Latin America and the Caribbean.” In Inequality in Latin America and the Caribbean: Breaking from History, ed David D Ferranti, 171–190. Washington, DC: World Bank. Rodrik, Dani; Subramanian, Arvind, and Trebbi, Francesco, 2004. “Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Develop­ ment.” Journal of Economic Growth 9 (2): 131–165. Sachs, Jeffrey D, 2001. “Tropical Underdevelopment.” National Bureau of Economic Research Working Paper 8119. Boston, MA:  NBER. Available at:  http://www.nber.org/ papers/w8119 (last consulted 26 February 2014). Scartascini, Carlos; Stein, Ernesto, and Tommasi, Mariano, 2009. “Political Institutions, Intertemporal Cooperation, and the Quality of Policies.” Working Paper No. 676. Inter-American Development Bank. Washington, DC: IADB. Available at: http:// www.iadb.org/res/publications/pubfiles/pubWP-676.pdf (last consulted 26 February 2014).

The Emergence of the New World States    115 Service, Elman R, 1962. Primitive Social Organization. New York: Random House. Transparency International, 2011. Dataset: Corruption Perceptions Index. Available at: www.transparency.org/policy_research/surveys_indices/cpi (last consulted 26 February 2014). Weber, Max, 1968 [1921/1922]. Economy and Society, ed Guenter Roth and Claus Wittich. New York: Bedminster Press (originally published Tübingen, Germany: Mohr 1921/1922). World Bank, 2012. Dataset: World Development Indicators. Washington, DC: World Bank. Available at:  http://data.worldbank.org/indicator/NY.GDP.PCAP.KD (last consulted 26 February 2014). ——, 2013. Dataset:  Worldwide Governance Indicators. Washington, DC:  World Bank. Available at:  http://data.worldbank.org/data-catalog/worldwide-governance-indicators (last consulted 26 February 2014). Wright, Henry T, 1977. “Recent Research on the Origin of the State.” Annual Review of Anthropology 6: 379–397. Yashar, Deborah J, 2005. Contesting Citizenship in Latin America. New York: Cambridge University Press.

Chapter 6

State For m ation a n d Tr a nsfor m ation i n A fr ica a n d Asi a The Third Phase of State Expansion

Matthew Lange

Although diverse types of political organizations have existed since the advent of settled agriculture some ten millennia ago, over the past half-millennium this diversity—while still great—has declined considerably, and today many suggest a dominant model of the state has proliferated into nearly all corners of the world (Thomas and Meyer 1984; Meyer et al. 1997; Wimmer 2013). This model is commonly called Western European because it first emerged in that region as the dominant form of political organization. This first phase of state formation occurred over a long period of time. Considerable groundwork was laid under the Roman Empire, state-building accelerated after the fifteenth century, and the process reached its peak in the nineteenth century. In the sixteenth and seventeenth centuries, this model also began to spread beyond Europe through European imperialism and settlement, commencing a second phase of state formation. Indeed, as Andrew Kelly and James Mahoney note in Chapter 5, this volume, the rise of powerful European states made possible European expansionism and state formation by transplanting European-style states in the Americas. By the nineteenth century, the dominant state model began to spread elsewhere, and it was during this third phase that variants of the model reached nearly all corners of the world. In this chapter, I review state formation during the third phase of state expansion, which was concentrated in Africa and Asia. I begin by comparing and contrasting the third phase with the previous two phases (Section 1). Next, I offer a historical overview of state formation and transformation among phase-three states (Section 2) and review the legacies of colonial states in Africa and Asia (Section 3), focusing on how colonial states affected postcolonial state transformations, development, and ethnic violence. Finally, the chapter discusses pertinent issues and trends in terms of state formation and transformation among phase-three states (Section 4).

State Formation and Transformation in Africa and Asia    117

1  The Third Phase of State Expansion in Comparative Perspective One commonality shared by all three phases of state expansion is the impact of intense European competition. As described by John Hall in Chapter 3, this volume, it is commonly accepted that inter-state competition contributed greatly to state transformation and the rise of the European model. This competition, in turn, promoted European expansionism outside of the continent, with different European governments attempting to increase their wealth and power—both in absolute and relative terms—by gaining control of overseas markets and peoples during the second and third phases of state expansion. This similarity also raises an important difference, however: the first phase was concentrated in Europe, but the second and third phases occurred outside Europe. The second and the third phases, in turn, differ from one another in important ways. First, although outside Europe, the last two phases of state expansion also differed geographically, with the second phase centered in the Americas and the third phase centered in Africa and Asia. One must recognize that European colonialism began to conquer and rule regions in both Africa and Asia before the third phase of state expansion, with British, Dutch, and Portuguese colonies in coastal Africa, the Indian sub-continent, the Malayan Peninsula, and the Indonesian Archipelago being notable examples. These early African and Asian colonies differed considerably from colonial expansion in the third phase of state building, however. Most notably, they tended to be trade-based and usually did not extend beyond small colonial-controlled enclaves surrounding ports. As such, they did not construct colonial states but laid the foundation for subsequent colonial expansion and state-building during the third phase of state expansion. Along with geography, the third phase also differed markedly from the second in terms of the primary means of colonial conquest and rule. During the second phase, colonial expansion went hand-in-hand with European settlement, and settlers were informal colonial agents who played important roles constructing colonial state institutions. Contrary to popular views, early European settlers oftentimes either did not willingly choose to migrate or were not free once they migrated, as some were incarcerated and forcibly settled in penal colonies and others migrated as indentured laborers. Moreover, millions of Africans were forcibly brought to the New World colonies to work as slaves. Slavery was usually used for plantation agriculture, and the owners of the plantations were powerful actors who commonly held considerable power in the colonial governments, frequently resulting in plantocracies. Importantly, this large transfer of peoples from both Europe and Africa to the Americas was made possible by the deaths of approximately 90 percent of indigenous Americans, annihilation caused by the Old World diseases that the colonial powers introduced into the New World in combination with the harsh conditions the indigenous population faced after European colonization. Contrary to the second phase, settlement was rare in the third phase of state expansion, occurring in very small numbers in most colonies, in moderate numbers only in a few exceptional cases, and resulting in only one new colony that eventually had a population that was majority settler (New Zealand). This was primarily because most of Asia

118   Matthew Lange and Africa had already experienced European diseases—with the tip of southern Africa, the Antipodes, and the Pacific Islands being the main exceptions—thereby preventing the disease-based decimation of indigenous peoples. Moreover, Europeans had little immunity to numerous diseases that were present in tropical Africa and Asia, thereby creating a disease risk that curtailed European settlement. Finally, the migratory streams had already been established between Europe and the settler colonies during the second phase of state expansion, so the great majority of European migrants continued to go to the Americas during the third phase of state expansion. Slave-based population transfers were also much rarer during the third phase of state expansion. Anti-slavery movements pressured several governments to ban the slave trade by the late eighteenth and early nineteenth centuries, with the British spending considerable resources to organize naval blockades of Atlantic Africa in an effort to end the slave trade. By the 1830s, in turn, slavery was abolished in British colonies, and other colonial powers and former colonies followed suit in the subsequent decades. Another important difference between the three phases of state expansion was temporal. The first phase has historical roots and reached its height between the seventeenth and nineteenth centuries. The second phase began during the first, commencing in the sixteenth century in the Caribbean and Latin America and expanding to North America, Australia, and parts of Africa and Asia in the seventeenth and eighteenth centuries. The third phase began after the lull in colonial expansion following the Napoleonic Wars and only grew rapidly in the last two decades of the nineteenth century. Because of the temporal difference, the third phase of state expansion occurred in a very different global context than the first two. Most notably, capitalist development and industrialization were well underway during the third phase. Great Britain, France, Germany, Belgium, Japan, and the Netherlands were rapidly industrializing, with diverse technological advances in terms of energy, transportation, communication, chemicals, and bureaucratic organization driving industrial expansion. These technologies, in turn, facilitated the conquest and control of large territories and populations without settlement and slavery, without the aid of Old World diseases, and with only a relatively small number of troops and administrators. Although colonialism was a direct cause of state expansion during the third phase, it also contributed to state expansion more indirectly in non-colonies. A handful of regions in Africa and Asia avoided formal colonial conquest and rule, including Afghanistan, Nepal, Mongolia, Iran, Turkey, Thailand, Japan, and the majority of China and Ethiopia. These countries did not have European-style states imposed on them, but European expansion caused many political elites to align their political institutions more closely with the European model. Japan offers a notable example, as a central component of state-building efforts following the Meiji Restoration involved sending officials to Germany to study its state and to incorporate useful elements into the emerging Japanese state (Cumings 2005). In turn, the Japanese state helped disseminate its adopted model to Korea, Taiwan, and parts of China by establishing its own colonial empire. Of equal or greater importance, state change was promoted by pressure from neighboring colonial powers, such as British influence in Nepal and Thailand. In the regions of China that avoided formal colonial rule, imperialism still influenced state formation both by contributing to the collapse of the Chinese imperial state and by offering post-revolutionary officials a general template to follow when reconstructing the state.

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2  State Origins and Transformations: Precolonial, Colonial, and Postcolonial The third phase of state expansion was therefore promoted by continued European colonial expansion but differed from the second phase in a number of ways. Limited settlement and slavery and the immunity of most indigenous peoples to European diseases meant that the colonial states ruled over indigenous peoples. The technological advances of the colonial powers made possible colonial domination with a much smaller administration and military, the rise of ever-larger empires during this third phase of state expansion stretched the manpower and resources of the colonial powers, and both combined to promote relatively limited colonial states in most colonies. Limited colonial states in combination with large indigenous populations, in turn, contributed to new forms of rule, meaning that the states that emerged during the third phase were different from those that emerged in previous phases. In particular, many colonies that were conquered during the third phase of state expansion were ultimately ruled through indirect rule, or domination via collaborative relations between a dominant colonial center and several regionally based indigenous institutions. Because indirect rule incorporates indigenous political institutions into the colonial state, it is useful to consider what these institutions were like and how they affected the form of colonial rule. The precolonial political institutions of phase-three states varied greatly in a number of ways. For one, they varied in scale. The Ottoman and Mughal Empires both controlled vast territories with enormous populations. Others, such as Ethiopia, Morocco, Burma, and Korea, were considerably smaller but were as large as most European national states in terms of both territory and population. Outside of these larger political institutions, vast regions in both Africa and Asia were controlled by chiefdom-based political institutions, and some regions—especially in the tropics—had political institutions governing even smaller populations, oftentimes small bands of only a few dozen people. Several present-day countries in both Africa and Asia have populations that—until the third phase of state expansion—were ruled by multiple types of political institutions. For example, precolonial India was ruled simultaneously by the Mughal Empire, nation state sized institutions in Travancore and Assam, and smaller chiefdoms and bands in the mountainous northeast and the Andaman Islands. Geographically, the largest and oldest precolonial political institutions were concentrated in North Africa, the Middle East, South Asia, and East Asia, whereas the smallest and youngest political institutions were located in sub-Saharan Africa, oceanic Southeast Asia, and the Pacific. Data collected by Louis Putterman (2007) on the extent to which the boundaries of present states conform to earlier political institutions over the past 2,000 years, for example, suggest that the states in North Africa and Asia conform relatively closely to previous political institutions and have long historic roots, slightly longer than their Western European counterparts, in fact. Alternatively, the precolonial political institutions in sub-Saharan Africa (especially south of the Sahel), Latin America, and the Caribbean were usually much younger and smaller.

120   Matthew Lange Through indirect rule, these precolonial political institutions influenced the emerging states because they were actually coopted and incorporated into the states. Such incorporation did not occur on an equal basis, however, as power flowed from the colonial state down to the indigenous political institutions, and local power depended on the acceptance of local subordination to the center. The colonial powers ruled through preexisting political institutions for different reasons. Most notably, indirect rule was cheap and required relatively little personnel. For example, colonial Nigeria had only one administrator for every 52,000 inhabitants, and the ratio was approximately one administrator per quarter million colonial subjects in British India. While a necessity given a shortage of personnel and money during the third phase of state expansion, such minimal collaborative rule was also made possible by the military prowess of the colonial powers and their threat of overwhelming violence. Indeed, although Afghanistan and Ethiopia show that European military power was not always overwhelming, European colonial powers almost always proved capable of conquering distant lands with only a small military force, and the threat of military attack was commonly enough to induce submission. Coercion was not the only factor making possible indirect rule in the face of many colonial subjects, as many indigenous leaders subsequently accepted this form of rule because of the considerable benefits they derived from collaborating with the colonial powers. The literature commonly suggests that only the British used indirect rule. There is some truth to this because the British recognized, formalized, celebrated, and used indirect rule more than any other colonial power. Still, the remaining colonial powers also heavily depended on the incorporation of preexisting political institutions into the colonial state because they too commonly lacked the resources, manpower, and will to establish a single, territory-wide system of direct colonial rule. In his analysis of sub-Saharan Africa, for example, Mahmood Mamdani (1996) notes that indirect rule was the norm regardless of colonial power. Indeed, all of French Africa—an area nearly as large as the United States— was ruled by only 500 administrators in 1937, showing the extreme dependence of French colonial administrators on indigenous collaborators and institutions. That said, each colonial power used its own variety of indirect rule, with the British generally granting indigenous institutions the greatest autonomy (Crowder and Ikime 1970). Moreover, the British used indirect rule more frequently than the other colonial powers, something promoted by a general bias in favor of indirect rule among British colonial officials. As a result, the British were more likely to rule places indirectly, whereas the other colonial powers commonly sought to use other forms of colonialism when possible. For example, the French and the Belgians found a way to limit their use of indirect rule in central Africa by ruling through concessionaire companies that purchased the rights to control large territories and their inhabitants. The British, however, chose not to pursue concessionaire rule in West Africa, despite a precedent in India and the Americas, and implemented indirect rule instead. Several factors help explain the near universal use of indirect rule by all colonial powers in sub-Saharan Africa. Dangerous disease environments and limited economic opportunities promoted indirect rule in the region, as the former hindered European settlement and the latter required a cheap form of domination. Moreover, indirect rule was a very appropriate option in the region because there were multiple chiefdoms in most colonies. Although indirect rule generally required larger precolonial political institutions, the colonial powers in Africa—especially the British—successfully incorporated political

State Formation and Transformation in Africa and Asia    121 institutions of different sizes. Colonial Sierra Leone offers one example, as there were over 200 chiefdoms incorporated into the colonial state during the 1920s, working out to approximately 7,000 inhabitants per chiefdom. Notably, the British initially sought to rule through a much smaller number of chiefdoms but broke these up after a violent anti-colonial rebellion in 1896, showing that larger political institutions—while well suited for indirect rule—could also pose a threat to colonial domination. It also shows how the indigenous institutions incorporated into the colonial state commonly did not have precolonial roots. In Sudan, there was only one dominant precolonial political institution, and it was conquered militarily. British rule began as direct military rule (in cooperation with Egypt). Soon, however, the British began to construct an indirect system of rule in Sudan that was more aligned with their neighboring African colonies, something that involved “young administrators searching for lost tribes and vanished chiefs, and trying to resurrect a social system that had vanished forever” (‘Abd al-Rahim 1969: 203; see also Grandin 1982: 241–243). Notably, the British were also forced to create chiefs when they tried to use indirect rule to control regions with very small precolonial political institutions, such as southeast Nigeria. In Asia and North Africa, indirect rule was also employed. The British used different forms and degrees of indirect rule to control parts of India, Malaysia, and Burma:  the Indian colonial state incorporated 300 princely states into the colonial state, the Malayan colonial state incorporated several sultanates into the colonial state, and the Burmese colonial state incorporated several smaller political institutions from the mountainous regions inhabited by non-Burmans. The remaining colonial powers also used indirect forms of colonial rule in North Africa and Asia, including parts of Morocco, Algeria, Indochina, and Indonesia. Relative to sub-Saharan Africa, however, all colonial powers used indirect rule much more sparingly in Asia and North Africa: it was not used in several colonies, and even when it was employed it was usually combined with direct rule to create a hybrid form of governance. This more limited use of indirect rule in Asia and North Africa challenges the claim by John Gerring, Daniel Ziblatt, Johan van Gorp, and Juliàn Arévalo (2011) that large precolonial political institutions promoted indirect rule. Indeed, the precolonial political institutions of Asia and North Africa were generally larger than those in sub-Saharan Africa, but direct rule was more common in Asia and North Africa. Very large precolonial institutions appear to have impeded indirect rule in different ways. Most notably, indirect rule was a decentralized form of rule dependent on multiple regional institutions, and it was devised as a means of ruling several distinct communities. If a colony had one dominant precolonial political institution, indirect rule was quite impractical, because substate organizations would have to be created by the colonial power (as in Sudan) in order to rule the region indirectly. In such environments, colonial powers were therefore more likely to simply take over indigenous institutions and transform them in ways that facilitated direct colonial rule. The findings of Gerring et al. (2011) are likely driven by settler colonies, as small precolonial institutions facilitated settlement and thereby direct rule in the Americas, Australia, New Zealand, and South Africa. Both large and small precolonial institutions therefore promoted direct rule, but—with the exception of New Zealand— large precolonial institutions promoted direct rule among phase-three states. Colonial officials implementing direct rule frequently removed nearly all high-level indigenous officials and radically restructured the state. At other times, the basic structure

122   Matthew Lange of the political institutions was maintained, and many mid- and high-level indigenous officials retained their positions, with the maintenance of zamindars1 as officials in directly ruled regions of colonial India being an example. Large and old precolonial institutions did not guarantee direct rule, however. Where precolonial institutions were decentralized empires ruling over diverse peoples, indirect rule remained a viable strategy of rule, with India and Morocco being notable examples. Colonialism therefore played a major role imposing states on peoples in Africa and Asia, and these states varied considerably according to their degree of direct and indirect rule. In addition to the imposition of states, the independence processes have also had considerable effects on state transformations in Africa and Asia, as the transfer of power from colonial to indigenous hands frequently did not go smoothly, and major political reforms were common during the period. People in several African and Asian colonies took up arms against their colonizers and fought wars of independence. Some experts recognize that independence violence was most common among non-British colonies, especially the Portuguese, French, and Dutch (Smith 1978; Abernethy 2000; Goodwin 2001). They suggest that these smaller colonial powers desired the retention of their colonies after World War II in an effort to maintain greater international status. Notable examples of anti-colonial wars among non-British colonies include Vietnam, Algeria, Angola, Mozambique, and Indonesia. The British, on the other hand, were less concerned about maintaining their international status through colonialism and subsequently began to prepare their colonies for the wholesale dismantling of the empire shortly after World War II. The British did fight anti-colonial insurgencies in Burma, Cyprus, Palestine, and Malaya, although their efforts to combat anti-colonial movements were not focused on retaining the colonies; they merely sought to curtail violence and grant independence on their own terms. How independence unraveled, in turn, had considerable effect on the states. Where wars of independence occurred, violence commonly caused the breakdown and destruction of the colonial state. This could result in revolutionary state-building, as in Vietnam and Algeria, or defensive state-building (i.e. state-building implemented by officials to quell anti-state violence), as in Malaysia. Alternatively, it sometimes degenerated into civil wars between rival indigenous factions after independence was granted, such as in Burma, Palestine, Mozambique, and Angola. These wars had different effects on the states, promoting an ethnicized and militarized state in Burma, state division in Palestine, and the weakening and maintenance of ineffective states in Mozambique and Angola. In addition to the impact of violence on states, colonial powers made different efforts to prepare colonies for independence, and this also affected the states. In the colonies that fought for and gained independence, little preparation occurred. This also happened in the Belgian colonies, where the colonial administration pulled out and granted independence with very little preparatory work. The French colonies in sub-Saharan Africa also received little preparation for independence until the last moment, and much of this preparation was focused on retaining some control over the colonies after independence, such as maintaining Franc monetary zones in sub-Saharan Africa and a large military presence in several former African colonies.

1  Traditionally, zamindars were hereditary aristocrats who held large tracts of lands, controlled the peasants living on the land, and collected taxes.

State Formation and Transformation in Africa and Asia    123 Among former British colonies in Africa and Asia, the preparatory work for independence was usually greater and over a longer period of time, as the British were more concerned about their legacy than about retaining influence. Thus, within the British Empire, the independence process commonly involved a more gradual transfer of power, the expansion of the state, and democratization (Lange 2009). Such reforms almost always built on previous state structures and very rarely radically transformed them. As a result of this and the fact that the independence process was usually relatively peaceful in former British colonies, the basic state structures that were present during colonialism were usually reproduced after independence without radical modifications.

3  Colonial State Legacies Ever since phase-three states began to break away from their respective empires, a number of scholars have noted that postcolonial states commonly bear strong resemblances to their colonial precursors, sparking claims that colonialism left institutional legacies. These works are in the historical-institutionalist tradition, as they describe and compare the structures of states during colonialism and afterwards to explore the extent to which postcolonial states resemble their colonial predecessors. The general conclusion of this body of work is that colonialism had a major impact on both the form and capacity of postcolonial states. Among former indirectly ruled colonies, states commonly share certain characteristics, all of which appear to have been influenced by colonialism and to have promoted postcolonial states with limited organizational capacity. For example, the states in former indirectly ruled colonies are commonly fissiparous and decentralized, with vast regions of the country that are only weakly incorporated into the state. Although local authorities continue to wield considerable power in many places, this power has usually been displaced by formal substate organizations. Still, substate organizations are commonly minuscule, do not perform many state functions, and leave local authorities great institutional powers (such as the control of communal land and customary law). In this way, Mamdani (1996) suggests indirect rule institutionalized “decentralized despotism,” and Jean-François Bayart (1993) depicts the legacy of indirect rule as a “rhizome state.”2 Hand-in-hand with fissiparous states, indirect rule commonly promoted states with limited infrastructural power. By depending on indigenous institutions, indirect rule dramatically limited the size of the state, especially in outlying regions. One consequence has been that formal state institutions remain largely absent throughout large parts of the country. Military and police presence is commonly limited, but the lack of state presence is particularly great in terms of substate administration. Another common trait of states in former indirectly ruled colonies is limited bureaucratization. Indirect rule depended on two different types of authority:  legal-rational authority in the central administration and traditional authority in the indigenous

2  Rhizomes are plants that send out shoots to create a number of interconnected plants. Bayart therefore suggests that the state was decentralized and with multiple centers of power.

124   Matthew Lange institutions. The contradictions caused by formally combining both types of authority weakened rule-based structures in all parts of the state, but especially in the peripheral regions. The result has been more informal, non-bureaucratic, and personalized state structures without clear borders, something William Reno (1995) refers to as shadow states and characterizes as neo-patrimonial. Relative to states in former indirectly ruled colonies, the states of former directly ruled colonies are usually less fissiparous, more infrastructurally powerful, and more bureaucratic. This difference is commonly attributed to the very different state structures institutionalized via direct rule. Most notably, direct rule commonly institutionalized larger states with a greater administrative presence throughout the territory. And, even when the state was decentralized, such as colonial Malaysia, the ties between central and substate institutions were stronger and more formalized. This difference was caused both by the greater size of the state and the dominance of legal-rational authority and bureaucratic organization. The most notable examples of former directly ruled colonies in Africa and Asia include Hong Kong, Singapore, South Korea, and Taiwan, examples also showing that direct rule was common among the most developmentally dynamic cases in the region. Indeed, most analyses go beyond simply describing the state legacies of different forms of colonial rule and suggest that these legacies have had long-term effects on developmental processes.

State Legacies and Development The common assumption of all works analyzing the developmental legacies of colonial states is that states affect diverse types of developmental processes, meaning that the general continuity of states after independence allowed colonialism to have long-term effects on developmental processes. This literature offers competing claims, however. On one side, Marxist and postcolonial scholars describe how colonial states contributed to subordination and underdevelopment (Alavi 1972; Amin 1972; Blackburn 2005). On the other side, different scholars from modernization and neoliberal perspectives attribute considerable benefits to colonial state institutions (D’Souza 2002; Ferguson 2002, 2004). Most recent works, however, take a developmental state perspective and suggest that colonial state legacies affected developmental trajectories in diverse ways. This body of work places great emphasis on the state’s capacity to formulate and implement developmental policy, recognizes that such capacities vary greatly among states, and finds that colonial state legacies commonly account for much of the variation in both state capacity and postcolonial development. The literature on developmental states began to pay attention to colonialism because several early works traced institutional traits that promote state-led development back to the colonial state. Among the most notable examples include different analyses linking the Japanese colonial state in Korea and Taiwan to postcolonial states that effectively promoted economic development (Amsden 1985, 1989; Wade 1990; Woo-Cumings 1991). These works note that Japanese colonialism was very direct and intensive and constructed large and powerful states. In addition, these states—as well as their postcolonial counterparts—have played important and active roles in managing the economy. A common conclusion of this literature is that state effectiveness contributed to successful state economic management

State Formation and Transformation in Africa and Asia    125 and that such effectiveness is a partial legacy of Japanese colonialism. Similarly, direct colonial rule in Singapore is commonly viewed as institutionalizing an effective state that played a very active and influential role in the country’s postcolonial developmental success (Krause 1988; Huff 1999). Although focusing on cases of successful development, the developmental state literature also analyzes factors that impede state-led development. Peter Evans (1995), for example, notes that states can be developmental, predatory, or a mix of the two. And, while colonialism could—and sometimes did—create states that had the capacities to promote development, it very commonly did not. Atul Kohli (2004), for example, finds that Japanese colonialism contributed to a powerful state in Korea, but that British colonial rule contributed to a state with only moderate levels of effectiveness in India. Even more, he offers evidence that British colonialism institutionalized a state with very little effectiveness in Nigeria and that this state greatly constrained postcolonial development. Along these lines, numerous works on colonial state legacies recognize that colonialism quite commonly left institutional legacies that contributed to predatory states. The literature on predatory states commonly describes how colonial states left tiny states with very little territorial presence and limited degrees of institutionalization prior to independence. These states generally lacked bureaucratic coherence, experienced personalized forms of rule (both at the central and substate levels), and lacked clear organizational boundaries delineating state from society. Largely because of these characteristics, the states lacked the capacity to implement developmental policy. Even more, personal rule allowed rulers to use states in pursuit of their individual well-being, which commonly promoted predatory rule. Most of this literature linking colonial states to negative developmental trajectories focuses on Africa and offers evidence that colonialism helps explain the region’s relatively poor developmental trajectory (Migdal 1988; Bayart 1993; Young 1994; Reno 1995; Mamdani 1996; Kohli 2004; Lange 2009). The literature on colonial state legacies therefore offers evidence that colonialism had large and long-term effects on development but suggests that such effects were diverse and depended on the form of colonial rule. Although not explicit in some works, the body of literature links the diverse developmental trajectories to direct and indirect rule. Indeed, the state legacies linked to positive development are concentrated among former directly ruled colonies, whereas the colonial state institutions linked to more negative developmental outcomes are common among former indirectly ruled colonies. Among former British colonies, for example, there is a very strong relationship between the extent of direct and indirect rule and postcolonial development, and differences in state capacity are linked to the form of colonial rule and help to explain the different developmental trajectories among former British colonies (Lange 2009). One work that opposes the general findings on the differential impact of direct and indirect rule is Lakshmi Iyer’s “Direct Versus Indirect Rule in Colonial India” (2010). Using statistical methods, Iyer finds that directly ruled regions of colonial India commonly had higher levels of development than indirectly ruled regions but suggests this difference might not be the result of the form of colonial rule:  the British might have implemented direct rule in places with greater developmental potential. Recognizing that four princely states in colonial India became directly ruled because of a law (not because the regions had greater developmental potential), she explores the subsequent development of these four former princely states relative to a set of princely states that avoided

126   Matthew Lange direct rule. She finds that the four directly ruled states had inferior development and therefore concludes that direct rule did not leave more developmental institutional legacies than indirect rule. Iyer’s findings have considerable implications for the larger literature on colonial state legacies but must be considered cautiously for three reasons. First, her sample is extremely small, thereby limiting one’s ability to generalize about India: the findings are based on only four former princely states, and colonial India had several hundred princely states. Second, the analysis does not explore institutional mechanisms underlying the relationship, and the relationship might very well be spurious. Finally, and most importantly, India was hardly a typical colony, making generalizations based on it very risky. Most notably, direct and indirect rule in India were different from elsewhere. Despite the fact that most of colonial India was formerly under direct rule, colonial India had a minuscule colonial state because of the large size of India. Indeed, it had one colonial administrator per 250,000 Indians, and this ratio was easily the lowest in the entire British Empire, with Nigeria having the second lowest ratio at one administrator per 50,000 Nigerians. As a result, the state was absent in large parts of colonial India, including in the directly ruled regions. Moreover, the British relied on more indirect forms of rule to help fill in for the state’s absence in the directly ruled regions, with rule through landholding zamindars being a notable example. Thus, direct rule in India created states with many of the same characteristics as indirect rule elsewhere.

States, Identity, and Violence Although most works on colonial state legacies in Africa and Asia focus on continual effects caused by state reproduction, others analyze the long-term effects of colonial state policy. The literature on ethnic conflict offers a notable example of the latter, as a growing literature finds that colonial states affected the identities of the indigenous population through past policy. This literature suggests that colonial officials knowingly and unknowingly promoted multiple ethnic identities among the indigenous population and exacerbated intercommunal antagonisms and competition. Both effects, in turn, continued after colonial independence and contributed to violence during the postcolonial period. The literature on how colonial policy affected postcolonial ethnic conflict is focused largely on Africa and Asia and is quite distinct from the literature on conflict among phase-two states in the Americas. Among phase-two states in the Americas, the dominant divisions were racial: European settlers, African slaves, and indigenous peoples. The salience of these three categories, in turn, helped limit intra-communal divisions. In both Africa and Asia, there were undoubtedly stark racial divisions between Europeans and indigenous peoples, but—except for a few cases—these disappeared or became much less important after colonial independence. Divisions among indigenous peoples, however, remained extremely salient. In this way, colonial policy that heightened ethnic divisions commonly contributed to postcolonial conflict among phase-three states in ways that it did not among phase-two states. Donald Horowitz’s Ethnic Groups in Conflict (1985) offers a classic example of how colonialism heightened intercommunal divisions, antipathy, and competition among phase-three states in Africa and Asia. He presents considerable evidence that colonial

State Formation and Transformation in Africa and Asia    127 officials commonly recognized ethnic diversity and discriminated against the colonized based on their ethnicity, with some communities receiving greater opportunities than others. In colonial Burma, for example, ethnic minorities were greatly overrepresented in both the administration and the military, and such discriminatory policy heightened intercommunal divisions, competition, and resentment. Horowitz and others also note that such outcomes even occurred in some places where the colonial powers implemented non-discriminatory policy that simply recognized ethnic difference. In these cases, the recognition of difference helped institutionalize oppositional identities and promoted ethnic politics. For example, John Breuilly (1994) offers evidence that British colonial policy in India strengthened communal identity and intensified communal competition by organizing politics along communal lines: the colonial government created communal electorates for local boards in the 1880s, the provincial Legislative Councils in 1909, and the colony-wide Legislative Council in 1919. Along these same lines, Evan Lieberman and Prerna Singh (2012) focus on colonial censuses and find that they institutionalized ethnic difference to different extents in Southern Africa. Where the colonial states recorded ethnic difference in the census, ethnic-based civil wars were more likely to occur. Where the colonial and postcolonial states did not institutionalize ethnicity via the census, ethnic conflict was rare during the postcolonial period. More than simply exacerbating divisions, colonialism also had the potential to create them. The literature on the Rwandan genocide, for example, offers evidence—albeit conflicting—that the Belgian colonial state actually created the Hutu-Tutsi racial division in colonial Rwanda and thereby made possible the subsequent genocide. According to Mamdani (2001), Belgian officials racialized a former political division by categorizing individuals as either Hutu or Tutsi in a colonial census, restricting chieftaincies to Tutsis, and discriminating against Hutus in various ways. In so doing, the Belgian colonial state created divisions and institutionalized inequalities, which contributed to the Hutu rebellion during the independence process and the genocide three decades later.

4  Issues and Trends The literature on phase-three states in Africa and Asia therefore places great emphasis on the transformative impact of colonialism and its lingering effects, and a general conclusion is that colonialism had long-term effects on both development and violence. Despite this general consensus, the literature on state origins and transformations in Africa and Asia has drawn criticism along two main lines: the literature depicts states as unchanging and overlooks the potential impact of precolonial factors. Both are important critiques that are already shaping the literature, and they will likely continue to do so in the coming years. Given the common focus on continuity, the literature on colonial state legacies pays more attention to stasis and less attention to dynamic change. This focus has opened the literature up to criticism because change is inevitable, causing some to claim that colonial legacies are of limited and diminishing importance. Scholars have reacted to this critique in two main ways. First, considerable work has been done on path dependence

128   Matthew Lange and mechanisms of institutional reproduction. Scholars are therefore looking into why institutions commonly reproduce themselves with limited change and why past policies can have long-term effects. In this way, scholars do not deny social change but explore particular factors that might promote reproduction and persistence over time. Second, some scholars analyze cases in which colonial state legacies transform. Ultimately, the literature on colonial state legacies will likely become more concerned with change because of a growing consensus around colonial state legacies. This consensus logically leads to scholarship exploring why states persist in some places more than others and why certain state policies have greater long-term effects than others. In this way, we will likely see a greater emphasis on the extent of colonial state legacies, their diminution over time, and factors that affect each. The second critique of the literature on colonial state legacies—that it overlooks precolonial factors—has also received considerable attention. The risk of overemphasizing the impact of colonialism is real, and analyses must be careful not only to link the colonial state to postcolonial outcomes but also to check that precolonial factors do not actually shape both the colonial state and postcolonial outcomes. Indeed, it is possible that colonialism had little impact but simply reinforced precolonial conditions, with the latter therefore having the real causal impact. This potential problem is especially relevant for phase-three states because colonialism lasted a shorter period of time in most of Africa and Asia than in the Americas and because the precolonial social institutions of phase-three states were retained to a much greater extent than in phase-two states, as the latter usually involved the annihilation of indigenous peoples and the wholesale importation of colonial institutions. Several works have already begun to address the precolonial critique in different ways. Using statistical methods, some scholars show a mismatch between precolonial and postcolonial outcomes. Several, for example, find a reversal of fortune whereby those regions that were most developed prior to colonialism became the least developed afterwards (Acemoğlu et al. 2002; Lange et al. 2006; Lange 2009; Mahoney 2010). Others use instrumental variables to avoid potential problems with endogeneity and offer evidence that colonialism had independent effects (Acemoğlu et al. 2001; Iyer 2010). Although most emphasis has been placed on quantitative methods, qualitative methods can also offer important insights into this potential problem. The historical-institutional work on colonial state legacies, for example, commonly uses qualitative methods to document precolonial conditions and analyze how colonialism caused a break from the past (see Mamdani 1996; Charrad 2001). Such qualitative insight can be very powerful when it highlights causal processes, sequences, and mechanisms. At present, the literature on colonial state legacies generally takes an either-or approach and claims that it is either precolonial or colonial factors that matter. Both, however, are usually relevant for most cases, and future work needs to pay attention to each and consider their interactions. For example, if large precolonial institutions promote direct rule, the resulting state institutions are affected by both precolonial and colonial factors, and it can be difficult to separate the two—large and historic political institutions can offer a certain legitimacy and national unity that strengthens the state, direct rule might promote states with greater organizational capacities, and both might interact to promote effective states.

State Formation and Transformation in Africa and Asia    129

References ‘Abd Al-Rahim, Muddathir, 1969. Imperialism and Nationalism in the Sudan: A Study in Constitutional and Political Development, 1899–1956. Oxford, UK: Clarendon Press. Abernethy, David B, 2000. The Dynamics of Global Dominance: European Overseas Empires, 1415–1980. New Haven, CT: Yale University Press. Acemoğlu, Daron; Johnson, Simon, and Robinson, James A, 2001. “Colonial Origins of Comparative Development: An Empirical Investigation.” American Economic Review 91 (5): 1369–1401. —— —— ——, 2002. “Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution.” The Quarterly Journal of Economics 117 (4, November): 1231–1294. Alavi, Hamza, 1972. “The State in Post-colonial Societies: Pakistan and Bangladesh.” New Left Review 74 (July–August): 59–82. Amin, Samir, 1972. “Underdevelopment and Dependence in Black Africa—Origins and Contemporary Forms.” The Journal of Modern African Studies 10 (4): 503–524. Amsden, Alice H, 1985. “The State and Taiwan’s Economic Development.” In Bringing the State Back In, ed Peter B Evans, Dietrich Rueschemeyer, and Theda Skocpol, 78–106. New York: Cambridge University Press. ——, 1989. Asia’s Next Giant: South Korea and Late Industrialization. Oxford, UK: Oxford University Press. Bayart, Jean-François, 1993. The State in Africa:  The Politics of the Belly. London, UK: Longman. Blackburn, Robin, 2005. “Imperial Margarine.” New Left Review (35, September–October): 124–136. Available at: http://newleftreview.org/A2584 (last consulted 13 November 2007). Breuilly, John, 1994. Nationalism and the State. Chicago, IL: University of Chicago Press. Charrad, Mounira M, 2001. States and Women’s Rights: The Making of Postcolonial Tunisia, Algeria, and Morocco. Berkeley, CA: University of California Press. Crowder, Michael, and Ikime, Obaro, ed, 1970. West African Chiefs: Their Changing Status Under Colonial Rule and Independence. New York: Africana Publishing Corporation. Cumings, Bruce, 2005. “State Building in Korea:  Continuity and Crisis.” In States and Development: Historical Antecedents of Stagnation and Advance, ed Matthew Lange and Dietrich Rueschemeyer, 211–235. New York: Palgrave Macmillan. D’Souza, Dinesh, 2002. “Two Cheers for Colonialism.” The Chronicle Review: The Chronicle of Higher Education 48 (35): B7–B12. Evans, Peter B, 1995. Embedded Autonomy: States and Industrial Transformation. Princeton, NJ: Princeton University Press. Ferguson, Niall, 2002. Empire: The Rise and Demise of the British World Order and the Lessons for Global Power. New York: Basic Books. ——, 2004. Colossus: The Price of America’s Empire. New York: Penguin Press. Gerring, John; Ziblatt, Daniel; Van Gorp, Johan, and Arévalo, Julián, 2011. “An Institutional Theory of Direct and Indirect Rule.” World Politics 63 (3): 377–433. Goodwin, Jeff, 2001. No Other Way Out: States and Revolutionary Movements, 1945–1991. New York: Cambridge University Press. Grandin, Nicole, 1982. Le Soudan nilotique et l’administration britannique (1898–1956): Éléments d’interprétation socio-historique d’une expérience coloniale. [Nilotic Sudan and

130   Matthew Lange the British Administration (1898–1956): Elements of a Social-History Understanding of the Colonial Experience]. Leiden, The Netherlands: E. J. Brill. Horowitz, Donald L, 1985. Ethnic Groups in Conflict. Berkeley, CA: University of California Press. Huff, W G, 1999. “Turning the Corner in Singapore’s Developmental State?” Asian Survey 39 (2, March): 214–242. Iyer, Lakshmi, 2010. “Direct Versus Indirect Colonial Rule in India:  Long-Term Consequences.” Review of Economics and Statistics 92 (4, June): 693–713. Kohli, Atul, 2004. State-directed Development: Political Power and Industrialization in the Global Periphery. New York: Cambridge University Press. Krause, Lawrence B, 1988. “Hong Kong and Singapore: Twins or Kissing Cousins?” Economic Development and Cultural Change 36 (3, April Supplement): 45–66. Lange, Matthew, 2009. Lineages of Despotism and Development: British Colonialism and State Power. Chicago, IL: The University of Chicago Press. ——, Mahoney, James, and vom Hau, Matthias, 2006. “Colonialism and Development: A Comparative Analysis of Spanish and British Colonies.” American Journal of Sociology 111 (5, March): 1412–1462. Lieberman, Evan S, and Singh, Prerna, 2012. “The Institutional Origins of Ethnic Violence.” Comparative Politics 45 (1): 1–24. Mahoney, James, 2010. Colonialism and Postcolonial Development:  Spanish America in Comparative Perspective. New York: Cambridge University Press. Mamdani, Mahmood, 1996. Citizen and Subject: Contemporary Africa and the Legacy of Late Colonialism. Princeton, NJ: Princeton University Press. ——, 2001. When Victims Become Killers: Colonialism, Nativism, and the Genocide in Rwanda. Princeton, NJ: Princeton University Press. Meyer, John W; Boli, John; Thomas, George, and Ramirez, Francisco O, 1997. “World Society and the Nation‐State.” American Journal of Sociology 103 (1, July): 144–181. Migdal, Joel S, 1988. Strong Societies and Weak States:  State-Society Relations and State Capabilities in the Third World. Princeton, NJ: Princeton University Press. Putterman, Louis G, 2007. Dataset: “State Antiquity Index.” Available at: http://www.econ. brown.edu/fac/louis_putterman/antiquity%20index.htm (last consulted 12 October 2011). Reno, William, 1995. Corruption and State Politics in Sierra Leone. Cambridge, UK: Cambridge University Press. Smith, Tony, 1978. “A Comparative Study of French and British Decolonization.” Compar­ ative Studies in Society and History 20 (1): 70–102. Thomas, George M, and Meyer, John W, 1984. “The Expansion of the State.” Annual Review of Sociology 10 (1): 461–482. Wade, Robert H, 1990. Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. Princeton, NJ: Princeton University Press. Wimmer, Andreas, 2013. Waves of War: Nationalism, State Formation, and Ethnic Exclusion in the Modern World. New York: Cambridge University Press. Woo-Cumings, Meredith, 1991. Race to the Swift:  State and Finance in Korean Industrialization. New York: Columbia University Press. Young, Crawford, 1994. The African Colonial State in Comparative Perspective. New Haven, CT: Yale University Press.

Chapter 7

State Theory Four Analytical Traditions

Matthias vom Hau

1 Introduction States have been undergoing major transformations in the last few decades. No matter what the substantive research focus is and no matter what the findings are, the overall scholarly consensus is that states are experiencing dramatic changes. Yet, there is considerably less agreement on how and why these transformations unfold. Debates around these questions often reflect distinct positions in state theory. In this chapter I contend that analyses of state transformations would benefit from close attention to the conceptualization of states and the dynamics of state formation. Different theoretical answers to what the state is and how it came about lead by definition to different answers about how states change. The chapter identifies four major theoretical traditions— class-analytic, liberal, neo-Weberian, and culturalist—which provide different perspectives on the major puzzles explored by state theory such as the nature of the state, the connections between state, economy, and society, and the processes and causes involved in the rise of states. By extension, these approaches set distinct agendas for the analysis of recent transformations of statehood. The chapter does not contain an exhaustive review of the recent literature on state theory. It also avoids an exhaustive intellectual genealogy of the different schools of thought. Rather, I develop an analytical grid that establishes major overlaps and differences between class-analytic, liberal, neo-Weberian, and culturalist perspectives. Highlighting the root concept employed in each perspective—that is, economic relations, strategic action, formal organization, and cultural practices and models—the chapter presents an overview of how each analytic approach conceptualizes (1) state-society relations, or the boundary between state and non-state actors and processes, (2) state capacity, or the ability to implement policy choices, and (3) consent to state power, or how states obtain compliance from citizens.

132   Matthias vom Hau The chapter also illustrates that, despite notable conceptual differences, the four approaches are unified in their explicit focus on the state as an object of study. This distinguishes them from other research traditions in political science and sociology, which exclusively focus on the “political system” as their main unit of analysis (e.g. Parsons 1951; Easton 1953, 1965; Almond and Verba 1963). The remainder of the chapter is organized as follows. In Section 2 I  introduce the four analytical traditions and discuss their respective conceptualizations of the state. In Section 3 I deal with how these frameworks explain the rise of modern states as distinct political units, and how the four approaches account for state development in one key policy area, welfare policy. In Section 4 I  link the discussion to the broader intellectual agenda of the Handbook and explore the implications of different approaches to the conceptualization and rise of states for recent efforts to explain state transformations. Section 5 concludes.

2  Conceptualizing the State: Four Analytical Traditions Most of the existing literature reviews of state theory rely on implicitly held assumptions about what the state is. While these discussions offer valuable insights into a particular theoretical subfield, they bracket broader conceptual comparisons.1 As illustrated by Table 7.1, I pursue a different and more encompassing strategy. I identify four major approaches by focusing on how each conceptualizes the state, and draws the boundary between the state and non-state fields.2

The Class-Analytic Approach This perspective has many national variations3 and is rooted in the Marxist discussions of state theory during the 1960s and 1970s, but it is not limited to the Marxist tradition.4 The common denominator of the class-analytic approach is the assumption of the state’s

1  For recent discussions of class-analytic approaches, see Stanley Aronowitz and Peter Bratsis (2002) and Colin Hay (2006); for liberal approaches, see Margaret Levi (2002) and Martin Smith (2006); for neo-Weberian approaches, see Richard Lachmann (2010) and Tuong Vu (2010); and for culture-analytic approaches, see George Steinmetz (1999) and Aradhana Sharma and Akhil Gupta (2006). 2  In doing so the chapter builds on and complements an earlier generation of reviews concerned with providing a “full picture” of the field (e.g. Stepan 1978; Krasner 1984; Hall and Ikenberry 1989; Migdal 1997; C. Pierson 2011; but see also Hay et al. 2006 and Anter and Bleek 2013). 3  In this chapter I focus primarily on the Anglo-American debates, but there have been important classanalytical discussions of the state in France (Poulantzas 1968; Shapiro 2002; Wickham 2006; Wissel 2007), Germany (Blanke et al. 1975; Wissel and Wöhl 2008), Italy (Vacca 1970; Hardt and Negri 2000), Japan, and elsewhere, which have only fed back partially—and usually belatedly—into the English language discussion. 4 Many scholars operating within this analytical approach are not necessarily Marxist in their ideological inclinations, nor do they embrace orthodox Marxism to theorize the state.

State Theory   133 Table 7.1  Four analytical traditions in state theory Class-analytic approach

Liberal approach

Neo-Weberian approach

Culturalist approach

Root concept(s)

Class conflict

Social contract

Formal organization

State-society relations

State as institutionalized class relations

State as arena of strategic action

State as Cultural (potentially) constitution autonomous actor of state-society boundary

State capacity

Derived from class Derived from relations solving freerider problem

Derived from disciplinary and identity effects of culture Derived from rituals, everyday practices, and world cultural models

Consent to state power

Derived from bureaucratic competence and territorial reach Derived from false Derived from Derived from consciousness, “quasi-voluntary” output legitimacy hegemony compliance among and state citizens ideological work

Cultural representations and practices

economic embeddedness and that class conflict is the driver of both economic and political change. Understanding how states act the way they do requires paying close attention to how social classes and capitalism form (Moore 1966; Wright 1979; Jessop 1990). This does not mean that states are solely instruments in the hands of the ruling class or functional prerequisites for capitalist reproduction. More recent studies in this tradition seek to move beyond the distinction between instrumentalism and structuralism that had characterized much of the earlier debates (Poulantzas 1968; Miliband 1969; see also Barrow 1993). From there flows a decidedly relational conceptualization. States are institutionally condensed class relations; the organizational structures of states embody class dynamics and the imperatives of economic accumulation (Therborn 1978; Jessop 2001). In this relational approach state capacity is a “two-way street.” States derive their capacity to control borders, enact law and order, enforce contracts, collect taxes, and supply public goods from their relations to distinct social classes and from the legacies of past class struggles (Rueschemeyer et al. 1992).5 At the same time, states constitute uneven playing fields that tend to reinforce existing power relations among classes (Hay 2006). In fact, the ability of states to formulate and implement policy affects the balance of class power, most prominently through “strategic selectivity” or bias in favor of certain class forces (Jessop 1990; Hirsch 2005; Offe 2006 [1972]).6 This conceptual approach should, thus, not be equated with economic determinism. The class-analytic perspective suggests some congruence between 5  Dietrich Rueschemeyer et al. (1992) also emphasize two other power clusters, yet the balance of class power provides the main analytical thrust to their argument. 6  To provide an example: the institutional form of states might systematically privilege the security concerns of certain social forces, while excluding other options from state action.

134   Matthias vom Hau states and the broader economic context, but it also recognizes contradictory practices of state organizations with respect to capitalist reproduction (Offe 1984). One offshoot of the class-analytic approach is power resources theory. Representatives of this analytical framework do not presume bourgeois hegemony but they allow for the possibility that organized labor may achieve meaningful gains under capitalism. Accordingly, power resources theory links state development, and in particular the emergence of the modern welfare state, to the balance of class power and suggests that the political strength of labor is the driving force behind more redistributive welfare policies (Korpi 1983; Esping-Andersen 1985; Huber and Stephens 2001). Bob Jessop’s (1990, 2007) “strategic-relational” approach is equally critical of structuralist Marxism. It seeks to bring structure and agency into a dialectical relationship and treats state institutions as a compromise outcome of a series of political and economic crises and the resulting class struggles. States cannot rule through coercion alone. Accordingly, class-analytic approaches draw on a variety of concepts to understand how consent to state power is generated. One line of work focuses on false consciousness, that is, a distorted understanding and experience of power relations, to explain why subordinate sectors adhere to forms of political rule that propel their oppression (Elster 1985; Cunningham 1987; Jost 1995). Other analysts approach this question by drawing on the concept of hegemony introduced by Antonio Gramsci (2011; see also Moran 2002; Buckel and Fischer-Lescano 2007). While ambiguous and contested, the concept most fundamentally refers to the voluntary support of a system of rule among citizens, and highlights the influence of formal political dynamics on everyday activities (Burawoy 1979; Przeworski 1985). Thus, by putting the analytical spotlight on the beliefs and practices of citizens, both false consciousness and hegemony are linked to a relational conceptualization of the state.

The Liberal Approach A second major approach is liberal state theory. This perspective has many variants and underpins research on the state in areas as diverse as political modernization theory (Huntington 1968), pluralism (Dahl 1971), and public choice theory (Niskanen 1971; Riker 1980). Normatively, works within this theoretical tradition often distrust the state and advocate the containment and dispersion of its power, whether in the name of individual liberties, group diversity, or utility maximization. Analytically, the most important common denominator—which also justifies the label “liberal”—is a contractual conceptualization of the state. States are sites of strategic interaction among (powerful) individuals and groups. Even when operating under severe structural constraints, these actors are assumed to have agency. It is ultimately their decisions that shape the institutional make-up of states. Thus, similar to class-analytic approaches, the liberal tradition does not conceptualize the state as an independent source of political power, but treats it as a reflection of broader societal developments and changes. Treating the state as an arena for strategic action also has major implications for the analysis of state capacity and consent. In a liberal perspective, the ability of states to reach society and implement their projects is closely entwined with the policy choices of rulers. The structure and efficiency of state organizations depend to a large extent on the objectives of

State Theory   135 state authorities and their power vis-à-vis other relevant actors. For example, the relations between rulers and economic elites and rulers and their appointed staff shape the choice of particular taxation systems (e.g. the use of state administration for “tax farming”), and this, in turn, has major implications for the development of administrative competence (Levi 1988; Kiser 1994). State capacity also depends on how state authorities manage to ensure consent. Why do economic elites or appointed staff honor a particular policy choice? Liberal state theorists often frame the issue of compliance as a collective action problem.7 In this perspective, constituents are frequently tempted into freeriding, and state leaders, therefore, need to be able to make credible threats in case of non-compliance.8 To return to the taxation example, state authorities require enforcement mechanisms to counteract potential freeriding among taxpayers as well as tax collectors. Yet, violence or force is not the most effective means by which to achieve compliance. This is where legitimacy comes into play. The liberal approach conceptualizes state legitimacy as based on the constituents’ honoring of state policies even when sanctions for non-compliance are absent. Specifically, the liberal tradition makes two distinct arguments for explaining legitimacy (Hechter 2009). The first one focuses on output legitimacy. States that provide desired public goods and services enjoy significant acceptance in the eyes of constituents simply because they deliver these services. A second perspective emphasizes the procedural determinants of legitimacy (Tyler 2006). Constituents perceive those states as legitimate that maintain a minimum of fairness in decision-making processes. These states may not deliver all the desired goods, but service provision cuts across political cleavages and includes both winners and losers of particular policy choices. Thus, similar to the class-analytic perspective, liberal state theory maintains that naked coercion or material rewards cannot sustain political rule, at least not in the long run. Yet—in contrast to false-consciousness accounts and their focus on distorted interests or the hegemonybased approach and its emphasis on habitual compliance and everyday consent—liberal conceptions of legitimacy put the spotlight on strategic calculation and “quasi-voluntary compliance” (Levi 1988), with citizens’ preferences remaining exogenous to the explanatory framework.

The Neo-Weberian Approach A third major theoretical tradition is the neo-Weberian perspective.9 Prominent examples for this approach to state theory are historical institutionalism (Skocpol 1979), the “state in society” approach (Migdal 1988), and organizational materialism (Mann 1986).10 7 

See Mancur Olson (1965) for a general statement of the collective action problem. Yet states also need to be prevented from single-handedly imposing their interests. See Yoram Barzel (2002) for a game-theoretical approach to this issue. 9  Max Weber’s actual writings on the state are multi-faceted and link up to a variety of state-theoretical traditions (Gorski 2003; Migdal and Schlichte 2005). The label “neo-Weberian” seeks to identify the different literatures that came to prominence from the late 1970s onwards and mainly draw inspiration from Weber’s organization-analytic approach to the state. 10  Yet see also the overviews by Stefan Breuer (1998) and Andreas Anter and Stefan Breuer (2007) on recent neo-Weberian discussions of state theory in Germany. 8 

136   Matthias vom Hau The neo-Weberian approach treats the state as a set of administrative and coercive organizations that claim the monopoly of legitimate force over territories and are involved in making decisions that are collectively binding (Weber 1978; Evans et al. 1985; Tilly 1990; Anter 2014). Conceptualized this way, states are endowed with specific powers and forms of autonomy, and they are treated as political forces sui generis. Thus, in contrast to class-analytic and liberal approaches, the emphasis is on the organizational logic of state action. Treating the state as a formal organization introduces two major theoretical issues. To what extent do states independently formulate their goals and take decisions (Krasner 1984; Evans et al. 1985)? And to what extent are state authorities able to implement their decisions across the territories they claim to govern, even at the expense of the interests of powerful non-state actors (Mann 1993; Geddes 1994)? In answering these questions, the neo-Weberian approach is less concerned with the congruence between the state, class, and capitalism. It is primarily preoccupied with state-society relations and state capacity. States are distinguished by the type of autonomy they enjoy from non-state actors. The paradigmatic example for this is Peter Evans’ (1995) argument of “embedded autonomy,” which suggests that specific configurations of social ties with non-state actors allow state authorities to make autonomous yet well-informed policy choices. The neo-Weberian approach treats state capacity as a multi-dimensional concept that captures both relational and organizational properties of state institutions: states derive their ability to exercise control and put policy choices into practice from (a) the resources at their disposal (e.g. a competent bureaucracy, fiscal revenues, physical infrastructure), and (b) the mobilizing of civil society and partnering with non-state groups.11 In that sense, states, or particular state agencies, may employ their social links, coordination facilities and geographical coverage to deliver inclusive development (e.g. through economic transformation or redistribution), but they may equally use their capacities for repression, exploitation, or even genocide. Much of the current debates in the neo-Weberian camp therefore revolve around, first, the relations between the goals of state authorities and their capacity to implement them, and, second, the interactions and precise causal relationships between the different dimensions of state capacity (Soifer 2008). Similar to liberal state theory, the neo-Weberian approach understands legitimacy as a product of state performance. States that marshal the organizational competence and territorial reach for providing a wide array of services are legitimate in the eyes of their constituents. However, the neo-Weberian perspective complements the focus on state performance and procedural fairness with an attention to the ideological and cultural work of state organizations. States also gain legitimacy through their nationalist claims and nationalizing activities, as well as through their involvement in the socialization of citizens (e.g. Gellner 1983; Wimmer 2002). Thus, echoing the selective affinity between a relational conceptualization of the state and hegemony, the emphasis on state action and legitimacy is in sync with the view of the state as a special type of formal organization.

11 

I am grateful to Jonah Levy (personal communication) for this felicitous formulation of state capacity.

State Theory   137

The Culturalist Approach Influenced by the cultural and linguistic turns during the 1970s and 1980s, some scholars put culture and discourse at the forefront of state theory.12 In one variant, which often draws inspiration from Michel Foucault’s pioneering work on governmentality (for starters: Foucault et al. 1991; Macey 1995), culturalism rejects the distinction between cultural and non-cultural objects and treats “the state” as an ideological construct that projects coherence onto a diffuse set of institutional arrangements and political practices (Corrigan and Sayer 1985; Mitchell 1991; Lemke 2007). Other works in this tradition emphasize culture as the context that provides the scripts, rules, and meanings underpinning strategic action and organizational practices (Elias 1982; Abrams 1988; Meyer et al. 1997). What cuts across these different perspectives is a concern with the constitutive and often causal role of culture in state formation. The culturalist approach rejects the view of culture as purely ephemeral and a product of state formation. At the same time, it moves beyond essentialized conceptualizations of national cultures that characterized earlier explanations of state performance (e.g. Almond and Verba 1963). One subgroup among the culturalist approaches is concerned with the cultural and discursive constitution of states and the implications of these processes for the ability to implement policy. Clifford Geertz’ (1980) notion of the “theatre state” suggests that public rituals—whether school inaugurations, press conferences, or national holidays—establish the connecting tissue that holds state agencies with radically different interests and tasks together. This integrative function of rituals helps to explain why state agencies pursue common goals and why ordinary citizens accept state authority. A related perspective emphasizes the “state effect” (Mitchell 1991) of everyday bureaucratic practices, which generate collectively held images of “the state” and its boundary with society. James Scott (1998), for instance, argues that practices such as mapping, surveying, and census-taking not only make populations “legible,” but are equally involved in shaping how “the state” is perceived in the eyes of ordinary citizens. At the macro level, this focus is mirrored by World Polity theory. This analytical perspective shows how the rise of a rational world culture established pervasive global models of statehood, which engendered “institutional isomorphism” among local state institutions, yet with often contrasting implications for their differing abilities to implement policy (Meyer et al. 1997). A second line of work emphasizes possible cultural causes of state capacity. Some scholars point to the disciplining effects of culture. Cultural projects establish mechanisms of moral control and popular mobilization, which subsequently might be appropriated by states. For example, Calvinism greatly contributed to the expansion of state territorial reach in early modern Prussia and the Netherlands (Gorski 2003). Other works are more concerned with the role of discourse and ideology in shaping the mobilizing capacities of states. Scholars have identified family honor (Adams 2005) during the early modern period, and later nationalism (Gerschenkron 1962; Greenfeld 1992) as crucial in facilitating state-led economic transformations. More recently, similar arguments about the political power of discourse and ideology have been made for the effects of neoliberalism on state capacity (Lemke 2001; Harvey 2005). 12 

This paragraph draws on George Steinmetz (1999).

138   Matthias vom Hau The theoretical emphasis on the cultural constitution of state capacity implies a distinct understanding of consent. Works in this line of thought put the analytical spotlight on citizen practices. Most prominently, distinct public images of what the state is and what it ought to do are likely to engender varying responses towards particular state practices, ranging from compliance to open opposition. As a matter of fact, the state can have very different meanings for citizens, even in the context of similar institutional arrangements (Steinmetz 1999). Ultimately, the capacity of states is crucially shaped by how consent to state power is created and maintained. In that sense, culturalists’ concern with ceremonial rituals, everyday practices, or global cultural models echoes the class-analytic emphasis on hegemony.

3  Explaining State Development The distinct conceptualizations of the state advanced by the four analytical traditions provide different starting points for explaining state formation. The respective view of states as condensed class relations, sites of strategic action, formal organizations, or cultural models and practices delimits the range of possible answers each theoretical perspective offers to account for state development. This section traces how works from these four analytical traditions explain state formation in two distinct research areas: (1) the origins of modern states; and (2) the rise of welfare states in Western Europe. All four theoretical traditions problematize the emergence of states as a recent and distinctively modern phenomenon. Moreover, these approaches pay great attention to social policy as the engine of twentieth century state expansion in advanced industrialized societies.

Early Modern State Formation Class-analytic accounts of state formation emphasize changes in accumulation regimes and class relations. As nodal points in the reproduction of class structures, states are both constitutive of and delimited by the dominant mode of production. The emergence of modern states was thus initially associated with primitive accumulation (e.g. the formation of standing armies and more extensive taxation regimes) and later with capital accumulation (e.g. the implementation of formal property rights and contract laws). For example, Perry Anderson (1974) explains state formation in Western Europe through variations in surplus-value appropriation and resolution of conflicts among the nobility and an emerging capitalist class. According to another perspective within this line of research, the rise of modern states also needs to be analyzed as embedded within the global dynamics of capitalism. With his World-Systems theory, Immanuel Wallerstein (1974) argues that, since the 1640s, the form and functioning of states have been circumscribed by their respective roles within the core, semi-periphery, or periphery of the capitalist world-system—and by the interstate system (Wallerstein 2004). Liberal accounts of modern state formation emphasize broader societal changes and the rise of new social actors not highlighted by class-analytic approaches. In an earlier (yet by now largely discredited) modernization theory approach, state formation was linked to

State Theory   139 the transition from agrarian “traditional” to industrial “modern” societies. States became functionally necessary to provide the legal infrastructure and mass education (Gellner 1983) underpinning an increasingly differentiated division of labor. Other variants of this approach put the contractual bases of state formation in the foreground, ranging from the “social contract” metaphor of Locke and other classical theorists to game-theoretical perspectives today that associate the rise of modern states with the problem of establishing enforceable property rights (North 1990; Barzel 2002; Greif 2006) and durable forms of revenue extraction (Levi 1988). Neo-Weberian theories of state formation have a slightly different take and treat wars as the engines of state–building. The preeminent analytical view in the field is the so-called “bellicist approach” (Centeno 2002), which treats modern states as by-products of international military conflicts (Tilly 1990; Downing 1992; Mann 1993; Ertman 1997). War—or the threat of war—induced economic elites to pay taxes and accept other controls on their behavior. Similarly, war pushed rulers to build an administrative and extractive machinery capable of mobilizing resources for the deployment of armies and the acquisition of military technology. Another causal mechanism emphasizes citizenship and cross-class solidarities. With the imposition of conscription, state leaders became more responsive to the demands of citizen-soldiers for the expansion of political rights and social provision, which in turn contributed to the extension of state infrastructural power (Kestnbaum 2009). Recently, the bellicist approach has come under scrutiny.13 Scholars point to the devastating effects of civil wars on state capacity (Thies 2005; Kalyvas 2006) and document state-building occurring in the relative absence of major international wars (Centeno 2002; Hui 2005), even in the context of early modern Europe (Spruyt 1994; Adams 2005). Yet, even if international wars do not play the central role assigned to them previously, a focus on conflict and the threat of political violence—both international and domestic, and combinations thereof—remains a hallmark of neo-Weberian approaches to state formation. For example, Dan Slater (2010) points to encompassing “protection pacts” among various elite factions as a necessary condition for the emergence of strong states in Southeast Asia, while Fernando López-Alves (2000) emphasizes alliances among urban elites, rural landlords, and subaltern groups when explaining distinct patterns of state formation in Latin America.14 In other words, recent neo-Weberian scholarship has moved beyond Charles Tilly’s (1975: 42) famous quip that “[w]‌a r made the state, and the state made war” to treat conflict and the threat of violence more generally as drivers of state formation. Culturalist approaches are more concerned with ideological and cultural change. One group of scholars highlights the spread of social discipline and argues that the rise of modern states is grounded in the creation of a pacified population that is willing to comply with the demands of state authorities. Inspired by Michel Foucault’s governmentality approach, Timothy Mitchell (1991) suggests that the early modern era was marked by the constitution of a “new regime of power,” in which “diffuse strategies” such as mutual surveillance created a more disciplined citizenry, while Norbert Elias

13 

14 

This paragraph follows Tuong Vu’s (2010) review of the neo-Weberian state formation literature. Similar arguments are made by David Waldner (1999) and Tuong Vu (2007).

140   Matthias vom Hau (1982) identifies the spread of “civility,” first among elites and later among the broader population, as a necessary condition for the rise of modern states. From a slightly different theoretical angle, Mara Loveman (2005) suggests that the administrative and infrastructural expansion of modern states presupposed the “primitive accumulation” of symbolic power, that is, the acknowledgement of state authority in the everyday life of ordinary citizens. Taken together, culturalist works often complement the lines of arguments found in the three other traditions. Specifically, the culturalist tradition emphasizes changes in cultural practices and models setting the stage for state authorities to accommodate class interests, protect property rights, or extract revenues from the broader population.

Welfare State Development The four analytical traditions also provide very different, yet ultimately compatible explanations for the rise and expansion of welfare states in the Western world during the post-World War II period (see also Obinger and Starke, Chapter 24, this volume).15 Initially developed as a critique of structuralist Marxism, power resources theory treats welfare states as a real opportunity for the “decommodification” of markets and the empowerment of workers, possibly opening a democratic road towards socialism (Stephens 1979; Korpi 1983; Myles 1984; Esping-Andersen 1990).16 In this perspective, social rights constitute a crucial resource in conflicts between labor and capital. This means that differences in the extent and redistributive effects of transfer payments and social services reflect the power balance between workers and capitalists. Welfare states are thus institutionalized class relations.17 Other class-analytic approaches provide slightly different accounts and treat the rise of the modern welfare state as an expression of “class compromise” between capital and labor (Przeworski and Wallerstein 1982), the “contradictions” inherent in advanced capitalist societies (Offe 1984), or as being linked to the economic and social reproduction of Fordism (Hollingsworth and Boyer 1997; Jessop 2002). Liberal accounts of welfare state formation are equally focused on societal changes as the drivers of welfare state development. One liberal line of explanation points to the “logic of industrialism.” Modern societies, with their emphasis on employment as the main source of economic subsistence, require insurance against the risks associated with unemployment, old age, or disability (Flora and Alber 1981; Wilensky 2002). A second liberal account portrays the welfare state as the culmination of political modernization, organized around the extension of civil, political, and finally social rights (Marshall 1992 [1950]). A third line of argument puts welfare state formation within the broader context of elite interests (North et al. 2009). In many advanced industrialized societies—or 15  Ann Orloff (2005) and Stephan Leibfried and Steffen Mau (2008) are comprehensive recent overviews of welfare state research. The contrast between the four analytical traditions and their respective views on welfare state development is also exemplified by various chapters of Francis Castles et al.’s (2010) The Oxford Handbook of the Welfare State. 16  But see Claus Offe (1984) for the commodifying effects of welfare states. 17  Power resources theory treats the organizational strength of different classes, which is crucially mediated by labor unions, business associations, and political parties, as the main determinant of the size and form of the welfare state.

State Theory   141 “open access orders”—elites gradually extended rights, including the right to associate and organize, to the broader population. While the initial aim of this move was market expansion for elites, an unintended consequence was an opening for policies that contradicted direct elite interests, including social provision and redistribution. Thus, liberal approaches echo the class-analytic emphasis on social forces but sidestep a discussion of class conflict and social rights. By contrast, the neo-Weberian perspective treats welfare state formation as at least partially autonomous from class structures, elite pressure groups, or the “structural prerequisites” of industrialization.18 Some scholars focus on the preferences of bureaucrats, which are treated as autonomous from social pressures and are often more driven by geopolitical or organizational concerns (Weir et al. 1988; Orloff 1993). A second variant emphasizes the influence of formal political institutions and points to constitutional features, for example, federal or unitary systems (Obinger et al. 2005), or “veto points” (Immergut 1992) as crucial in blocking or facilitating the implementation of welfare policy. A third variant focuses on the intended social “buffering” and legitimation effects of welfare states in open economies (Rieger and Leibfried 2003; Obinger et al. 2010). Neo-Weberian analysts are also concerned with the causal impact of policy feedback and path dependence. A particular social policy might create vested interests that crystallize into constituencies motivated to defend “their” programmes (P. Pierson 1996). What cuts across these different lines of arguments is that state institutions play a crucial, structuring role in systems of social provision, and state officials have their own preferences that are often incongruent with dominant economic interests (Nullmeier and Rüb 1993). Culturalist approaches are primarily concerned with the cultural and discursive foundations of social policy. In this perspective, “needs” and “risks” are treated as historical constructions that require close scrutiny themselves (Fraser and Gordon 1994; Wacquant 2009), while implicitly held assumptions about race, class, and gender often have major implications for the form and extent of social provision. Whether they are capitalists, party leaders, movement activists, or state officials, actors involved in making social policy draw on and perpetuate ideas about who is “in need” and deserves assistance (Gans 1996). Another culturalist line of work explores the ideological transformations underpinning modern welfare state development. Specifically, scholars focus on the invention of “the social” as necessary for modern welfare policy (Ewald 1986; Kaufmann 2012). Social insurance or old-age pensions presuppose the notion of a distinct domain between the state and the economy that can and should be regulated through expert knowledge and intervention (Steinmetz 1993). The main point of culturalist contention with the other three analytical traditions is thus the supposedly “thin” rationalist understanding of actors found in class-analytic, liberal, and neo-Weberian theories of the state. In sum, the conceptualization of the state and explanations of its emergence are closely entwined. Wearing a particular theoretical lens regarding what the state is inevitably influences subsequent explanations of its historical origins. This, in turn, has notable implications for how each perspective problematizes contemporary state transformations.

18  For the neo-Weberian approach, Elmar Rieger’s (1999) reconstruction of Weber’s analysis of social policy development, a perspective Weber himself never really elaborated, is an important text.

142   Matthias vom Hau

4  Explaining State Transformations Since the 1980s the global political economy and the international state system have undergone several profound changes. Complementing more comprehensive chapters in the Handbook, this section presents an overview of how the four traditions conceptualize and explain state transformations based on examples from industrial policy and social provision. Class-analytic theories of the state point to shifts in the balance of class power and accumulation regimes as key drivers of contemporary state transformations. Industrial relations scholars drawing on this theoretical lens see greater capital mobility and economic openness as increasing the strength of economic elites. For example, transnational corporations enjoy greater flexibility in choosing their production sites, and the increasingly blurry boundaries between national and transnational capital make it more difficult for states and economic elites to invest in a shared project of national industrial development (Chibber 2003; Kohli 2004). Class-analytic scholarship on the welfare state employs a similar approach. With the internationalization of finance and greater capital mobility governments lost important leverage to generate employment, putting additional strains on existing welfare policy. Similarly, the internationalization of production reduced the bargaining power of organized labor since the stakes vis-à-vis capital exit are quite high. Some works in the class-analytic tradition therefore suggest that economic globalization has led to welfare state retrenchment (e.g. Korpi and Palme 2003).19 In its analysis of contemporary state transformation the liberal approach emphasizes a variety of factors, including trade liberalization, global and regional integration, privatization, the rise of new social movements, and public-sector reform. The result is the decentralization of state power and the rise of “multi-level governance,” or multiple sites of decision-making, each including different actors and interests (Sørensen 2004). Liberal scholarship on industrial policy argues that current state responses are shifting towards rule-making, delegation, and the establishment of complex networks with non-state actors (Jordana and Levi-Faur 2004). The ultimate goal is to boost economic development by fostering social capital and synergy effects (Putnam et al. 1993; Woolcock 1998). Similarly, liberal analyses of contemporary welfare state change focus on the extent to which new or transformed social policies protect outsiders over insiders and overcome unemployment and welfare dependency (Ferrera et al. 2000; Rueda 2005; Emmenegger et al. 2012). These studies also show that shifts in party constituencies and partisan alignments do not map neatly on class dynamics anymore, yet that these shifts nonetheless shape the strategic interactions among state officials and non-state actors. Research in the neo-Weberian tradition emphasizes that the internationalization of finance and production has pushed states away from the management of the national economy towards a regulatory role that facilitates cooperation across public agencies and private units. Most prominently, state reforms “after neoliberalism” focus on achieving export-oriented industrialization and social inclusion through “reregulation” (Snyder 2001), the creation of strategic public-private partnerships, and decentralization (Glatzer 19 

But see Huber and Stephens (2001) for a class-analytic approach that argues against this claim.

State Theory   143 and Rueschemeyer 2005; Falleti 2010). In that sense, what distinguishes liberal from neoWeberian approaches is the former’s more optimistic take on the fragmentation of state power and the rise of multilevel governance. Neo-Weberians are generally more skeptical about this, especially in light of the future pursuit of sustainable economic development and social provision projects. The culturalist tradition helps to investigate both the constitutive and causal role of culture in transformations of stateness. Some culturalists treat “the state” as a mythical device to project the idea of a single, durable force onto diverse strategies and arrangements. In this view, recent state transformations are first and foremost attempts to secure rule by changing the behavior of individuals. Industrial policy has become deeply immersed in discourses about “efficiency” and “international competitiveness” rather than “national development,” while social programs seek to incentivize “community” and “civil society” into taking on welfare provision (Rose and Miller 1992; Li 2007). Culturalist works also focus on the rise of new discourses and ideologies and their impact on state capacity (Ferguson 1990; Lemke 2007). Most prominently, the rise of “neoliberalism” as an ideological platform strengthened political and economic forces in their struggle to minimize state intervention in markets and civil society, thereby transforming industrial relations and welfare provision into more flexible forms.

5 Conclusion In charting the terrain of state theory this chapter has identified four theoretical approaches to the state: class-analytic, liberal, neo-Weberian, and culturalist. These perspectives and their respective conceptualizations of what the state is inform their subsequent explanations of the rise of modern states and welfare state development. The four theoretical views also provide varying starting points for the study of state transformations. One major implication of this discussion is that these analytical traditions offer distinct but complementary analytical windows in understanding contemporary puzzles of state transformation. Each perspective points to different research questions and offers alternative explanatory factors and processes of relevance.20 In this sense, the four traditions are best treated as a general tool kit for approaching the theoretical challenges posed by recent transformations of statehood. At the same time, these analytical frameworks are not mutually exclusive. Classanalytic, liberal, neo-Weberian, and culturalist approaches often complement each other. As a matter of fact, many recent works emphasize the fruitfulness of explicitly combining these different theoretical traditions. For example, the literature on state formation has moved away from treating states as formal organizations or condensed class relations, and instead focuses on states as institutional configurations in which political conflicts and alliances unfold (Vu 2010). Similarly, a combined focus on organizational and cultural features is a growing trend in the recent sociological literature on state formation (e.g. Loveman 2005). The emphasis is on how particular state structures contribute to the

20 

See Rueschemeyer (2009) for a more thorough discussion of this mode of theorizing.

144   Matthias vom Hau formation of distinct public representations of state power and how those public images in turn circumscribe the goals and capacities of state organizations. Overall, this chapter has illustrated that the field of state theory remains an active one. Engaging a diverse set of literatures, the chapter has taken a snapshot of how debates around the conceptualization and origins of states in different (though sometimes overlapping) quadrants of the field unfold. Together, these arguments point to new avenues for advancing work on state change. For example, until recently, there has been very limited research on how states, especially those in the Global South, promote social welfare provision and redistribution after neoliberalism (see Huber and Niedzwiecki, Chapter 43, this volume).21 Of particular urgency is thus to explore more systematically how the four theoretical traditions can be combined when studying contemporary state transformations.

Acknowledgement The chapter has greatly benefited from the extensive and poignant feedback provided by the handbook editors, and from the suggestions made by the participants of the 2012 handbook workshop at UNC Chapel Hill. I would also like to thank Fulya Apaydin vom Hau and Enrico Pugliese for important bibliographical information on authors I did not know much about.

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State Theory   149 World and European Experiences, ed Herbert Obinger, Francis G Castles, and Stephan Leibfried, 1–48. Cambridge, UK: Cambridge University Press. ——; Starke, Peter; Moser, Julia; Bogedan, Claudia; Gindulis, Edith, and Leibfried, Stephan, 2010: Transformations of the Welfare State: Small States, Big Lessons. Oxford, UK: Oxford University Press. Offe, Claus, 1984. Contradictions of the Welfare State. Cambridge, MA: MIT Press. ——, 2006 [1972]. Strukturprobleme des kapitalistischen Staates:  Aufsätze zur politischen Soziologie [Structural Problems of the Capitalist State: Essays on Political Sociology]. The 2006 edition is revised and updated. Suhrkamp: Frankfurt a.M., Germany. Olson, Mancur, jr, 1965. The Logic of Collective Action: Public Goods and the Theory of Groups. Cambridge, MA: Harvard University Press. Orloff, Ann S, 1993. The Politics of Pensions: A Comparative Analysis of Britain, Canada, and the United States, 1880–1940. Madison, WI: University of Wisconsin Press. ——, 2005. “Social Provision and Regulation: Theories of States, Social Policy, and Modernity.” In Remaking Modernity:  Politics, History, and Sociology, ed Julia Adams, Elisabeth S Clemens, and Ann Shola Orloff, 190–224. Durham, NC: Duke University Press. Parsons, Talcott, 1951. The Social System. New York: Free Press. Pierson, Christopher, 2011 [1996]. The Modern State. Third, revised edition (first edition 1996, second 2004). London, UK: Routledge. Pierson, Paul, 1996. “The New Politics of the Welfare State.” World Politics 48 (2, January): 143–179. Poulantzas, Nicos, 1968. Pouvoir politique et classes sociales de l’État capitaliste. Paris, France: Maspero. (English edition: Political Power and Social Classes, London, UK: Verso 1978; later developed into Nicos Poulantzas and Stuart Hall, State, Power, Socialism, London, UK: Verso 2014). Przeworski, Adam, 1985. Capitalism and Social Democracy. New  York:  Cambridge University Press. ——, and Wallerstein, Michael, 1982. “The Structure of Class Conflict in Democratic Capitalist Societies.” American Political Science Review 76 (2): 215–238. Putnam, Robert D; Leonardi, Robert, and Nonetti, Raffaella Y, 1993. Making Democracy Work: Civic Traditions in Modern Italy. Princeton, NJ: Princeton University Press. Rieger, Elmar, 1999. Zur ‘Theorie’ der Sozialpolitik und des Wohlfahrtsstaates. Der Beitrag Max Webers [On the Theory of Social Policy and the Welfare State. The Contribution of Max Weber]. ZeS-Arbeitspapier # 14/99. Bremen: Universität Bremen, Germany, Zentrum für Sozialpolitik. Available at: http://www.zes.uni-bremen.de/veroeffentlichungen/arbeits papiere/?publ=1273&page=4 (last consulted 15 February 2014). ——, and Leibfried, Stephan, 2003. Limits to Globalization: Welfare States and the World Economy. Cambridge, UK: Polity. Riker, William H, 1980. “Implications from the Disequilibrium of Majority Rule for the Study of Institutions.” The American Political Science Review 74 (2, June): 432–446. Rose, Nikolas, and Miller, Peter, 1992. “Political Power beyond the State: Problematics of Government.” The British Journal of Sociology 43 (2, June): 173–205. Rueda, David, 2005. “Insider–Outsider Politics in Industrialized Democracies:  The Challenge to Social Democratic Parties.” American Political Science Review 99 (1): 61–74. Rueschemeyer, Dietrich, 2009. Useable Theory:  Analytical Tools for Social Research. Princeton, NJ: Princeton University Press. ——, Huber, Evelyne, and Stephens, John D, 1992. Capitalist Development and Democracy. Chicago, IL: University of Chicago Press.

150   Matthias vom Hau Scott, James, 1998. Seeing like a State: How Certain Schemes to Improve the Human Condition Have Failed. New Haven, CT: Yale University Press. Shapiro, Michael J, 2002. “Bourdieu, the State and Method.” Review of International Political Economy 9 (4): 610–618. Sharma, Aradhana, and Gupta, Akhil, ed, 2006. The Anthropology of the State: A Reader. Hoboken, NJ: John Wiley & Sons. Skocpol, Theda, 1979. States and Social Revolutions:  A  Comparative Analysis of France, Russia, and China. Cambridge, UK: Cambridge University Press. Slater, Dan, 2010. Ordering Power: Contentious Politics and Authoritarian Leviathans in Southeast Asia. Cambridge, UK: Cambridge University Press. Smith, Martin, 2006. “Pluralism.” In The State: Theories and Issues, ed Colin Hay, Michael Lister, and David Marsh, 21–38. New York: Palgrave Macmillan. Snyder, Richard, 2001. Politics after Neoliberalism:  Reregulation in Mexico. Cambridge, UK: Cambridge University Press. Soifer, Hillel, 2008. “State Infrastructural Power: Approaches to Conceptualization and Measurement.” Studies in Comparative International Development 43 (3–4, December): 231–251. Sørensen, Georg, 2004. The Transformation of the State:  Beyond the Myth of Retreat. Basingstoke, UK: Palgrave Macmillan. Spruyt, Hendrik, 1994. The Sovereign State and Its Competitors:  An Analysis of Systems Change. Princeton, NJ: Princeton University Press. Steinmetz, George, 1993. Regulating the Social:  The Welfare State and Local Politics in Imperial Germany. Princeton, NJ: Princeton University Press. ——, ed, 1999. State/Culture: State-Formation after the Cultural Turn. Ithaca, NY: Cornell University Press. Stepan, Alfred C, 1978. The State and Society: Peru in Comparative Perspective. Princeton, NJ: Princeton University Press. Stephens, John D, 1979. The Transition from Capitalism to Socialism. London, UK: Macmillan. Therborn, Göran, 1978. What Does the Ruling Class Do When It Rules? State Apparatuses and State Power under Feudalism, Capitalism and Socialism. London, UK: Verso. Thies, Cameron G, 2005. “War, Rivalry, and State Building in Latin America.” American Journal of Political Science 49 (3): 451–465. Tilly, Charles, 1975. “Reflections on the History of European State-Making.” In The Formation of National States in Western Europe, ed Charles Tilly, 3–83. Princeton, NJ: Princeton University Press. ——, 1990. Coercion, Capital, and European States, AD 990–1992. Oxford, UK: Blackwell. Tyler, Tom R, 2006. Why People Obey the Law. Princeton, NJ: Princeton University Press. Vacca, Giuseppe, 1970. Scienza, Stato e Critica di Classe: Galvano Della Volpe e il Marxismo [Science, the State, and Class Critique: Galvano Della Volpe and Marxism]. Bari, Italy: De Donato. Vu, Tuong, 2007. Paths to Development in Asia: South Korea, Vietnam, China, and Indonesia. New York: Cambridge University Press. ——, 2010. “Studying the State through State Formation.” World Politics 62 (1): 148–175. Wacquant, Loïc. 2009. Punishing the Poor: The Neoliberal Government of Social Insecurity. Durham, NC: Duke University Press.

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Chapter 8

Limited Statehood A Critical Perspective

Thomas Risse

I start by showing that modern consolidated statehood is no template for understanding the current international system or its historical development—it is a myth (Section 1). I then conceptualize limited statehood and show its empirical validity as the default situation in the contemporary and historical international system (Section 2). I go on to criticize the prevailing paradigms on statehood and its transformations as biased toward Western and European modernity (Section 3). Then I demonstrate that there are functional equivalents to the “shadow of hierarchy” cast by the state (Section 4): various incentive structures induce non-state actors in particular to contribute to governance, and relationships of trust produce legitimacy, a necessary condition for effective governance in areas of limited statehood. “And Yet It Moves”—the areas of limited statehood discussed here are neither ungoverned nor ungovernable.

1  Modern Consolidated Statehood—A Myth The modern fully sovereign state is the template for organizing our understanding of statehood.1 Fully sovereign states are internationally recognized, free from outside interference with their political authority, and effective in terms of their ability to implement and enforce decisions (Krasner 1999). They enjoy the privileges of international legal 1  I thank the editors, Dieter Wolf, and the participants of the Hansewissenschafts-Kolleg workshop in Delmenhorst for their critical comments. Research for this paper has been conducted in the framework of the Collaborative Research Center “Governance in Areas of Limited Statehood.” Funding by the Deutsche Forschungsgemeinschaft is gratefully acknowledged. The following summarizes arguments which have been developed further in Tanja Börzel and Thomas Risse (2010); Thomas Risse (2011b); and Stephen Krasner and Thomas Risse (2014b).

Limited Statehood   153 sovereignty, such as the right to enter into treaties and join international organizations. They are full Westphalian or Vattelian sovereigns: their domestic authority structures are autonomously determined. They approximate the Weberian ideal, maintaining a monopoly on the means of violence. But consolidated and fully sovereign statehood is largely a myth, and has been so historically and in the contemporary international system. There is wide variation among the more than 190 states in the international system as to how closely they conform to the ideals of full domestic sovereignty defined as “the formal organization of political authority within the state and the ability of public authorities to exercise effective control within the borders of their own polity” (Krasner 1999: 4). Few states in the contemporary international system approximate consolidated statehood. At the other end of the spectrum, completely failed states, which lack any authority over their territories and have completely lost the monopoly on the means of violence, are equally rare in the international system or in historical perspective (see Chojnacki and Menzel, Chapter 40, this volume). Recent examples include Somalia and the Democratic Republic of Congo. The most common version of statehood is characterized by “areas of limited statehood”: these are parts of the territory or policy areas in which the central government lacks the capacity to implement decisions and/or its monopoly over the means of violence is challenged. However, limited statehood is rarely an attribute of a state as a whole; rather, a country’s territory may contain “areas of limited statehood,” where the reach of state authority is severely constrained. Examples include the Amazon region in Brazil, Northeast Kenya, and parts of Southern Italy. Limited statehood can also refer to policy areas in which central state authorities are unable to implement and enforce their own decisions. Examples include environmental legislation in China and anti-corruption laws in Georgia. I argue, therefore, that limited statehood is the rule rather than the exception, both in today’s international system and historically. The modern consolidated state, with its ability to control its borders and to effectively implement and enforce central decisions, has been around only a few centuries. As James C. Scott put it: “The very earliest states in China and Egypt—and later, Chandra-Gupta India, classical Greece, and republican Rome—were, in demographic terms, insignificant. They occupied a minuscule portion of the world’s landscape, and their subjects were no more than a rounding error in the world’s population figures” (2009: 5). One could even argue that Western states—the prime examples of “modern states”—enjoyed consolidated statehood only after decolonization insofar as the colonial powers were never able to fully control their subjects and territories in the colonies (Lehmkuhl 2007; Conrad and Stange 2011). And while some ingredients of modern statehood—particularly international sovereignty in terms of mutual recognition—were globalized with de-colonialization, domestic sovereignty as the ability of central authorities to govern effectively was not. As a result, most states contain vast areas of limited statehood, both with regard to territory, important policy areas, and large parts of their populations. However, areas of limited statehood are not ungoverned spaces or areas lacking “governance,” understood here as various institutionalized modes of social coordination through which binding rules are produced and implemented collectively and/or collective goods provided (Benz 2004; Mayntz 2009; Risse 2011b; and Levi-Faur 2012). Collective goods are often provided under extremely constrained domestic sovereignty—by a variety of state and non-state, local and transnational plus international actors. Governance in

154   Thomas Risse areas of limited statehood is, almost by definition, multilevel governance in that external actors are systematically included in rule-making and service provision (see Schakel et al., Chapter 14, this volume). In areas of limited statehood the provision of collective goods varies across sectors, time, or geographic areas. Take the failed state of Somalia: while the region surrounding the capital of Mogadishu has been a war zone for the past 20 years, the semi-autonomous province of Somaliland in the North enjoys rather decent governance institutions, at least when compared to other parts of sub-Saharan Africa (Menkhaus 2006/07; Debiel et al. 2010). If limited statehood is the rule rather than the exception, this influences how we conceive of statehood and governance. The literature on statehood and its transformations, including the one on failing and failed states (Rotberg 2004, 2003), usually takes Western modern and consolidated statehood as the “normal” point of departure and diagnoses multiple deficits when classifying developing countries in the Global South. As postcolonial studies remind us, this Western- or Euro-centric bias overlooks the reality of governance under conditions of limited statehood (Williams and Chrisman 1994; Young 2001). In this chapter I will first conceptualize limited statehood in Section 2 and show its empirical validity as the real default situation in the contemporary and historical international system. Then, in Section 3, I will criticize the prevailing paradigms on statehood and state transformations as biased toward Western and European modernity. If limited statehood is the norm rather than the exception, the Western experience with consolidated statehood and its transformations cannot be generalized to the Global South. Rather, it stands for only one particular, albeit rather successful, governance configuration out of many possible options. I will use modernization theories and the literature on failing and failed states as problematic examples of an overextension of Western and European experiences. Finally, I will briefly demonstrate in Section 4 that areas of limited statehood are not ungoverned spaces and that effective and legitimate governance is possible in the absence of consolidated statehood. There are functional equivalents to the “shadow of hierarchy” cast by the state, various incentive structures induce non-state actors in particular to contribute to governance, and relationships of trust produce legitimacy, a necessary condition for effective governance in areas of limited statehood.

2  Conceptualizing Limited Statehood The concept of “limited statehood” requires clarification (see Risse 2011b). It resembles but is not equal to Joel Migdal’s (1988) “weak states” or Robert Jackson’s (1990) “quasi-states.” In particular, the notion of limited statehood needs to be strictly distinguished from the use of “fragile,” “failing,” or “failed” statehood in the literature (see Chojnacki and Menzel, Chapter 14, this volume). Most typologies in the literature and the datasets on fragile states, “states at risk,” etc., are oriented normatively toward highly developed and democratic statehood and, thus, toward the Western model (particularly Rotberg 2004, 2003). The benchmark is usually the democratic, capitalist, and interventionist state governed by the rule of law (Leibfried and Zürn 2005; Hurrelmann et al. 2007; see Manow and Ziblatt, Chapter 4, this volume).

Limited Statehood   155 This is problematic on normative and analytical grounds: it is normatively questionable, because it reveals Eurocentrism and a bias toward Western concepts. We might find the political and economic systems of the People’s Republic of China and of Russia morally questionable, but they are certainly states. Confounding statehood with a particular Western understanding is analytically problematic, too, because it tends to confuse definitional issues with research questions. If we define states functionally as political entities that provide all kinds of services and public goods, such as security, the rule of law, welfare, and a clean environment, we can no longer research whether states actually deliver these goods or not. Moreover, many, if not most, “states” in the international system would not qualify as such, since they fail miserably at providing governance. Therefore, I opt for a narrow concept of statehood. I closely follow Max Weber’s conceptualization of statehood as institutionalized rule and an authority structure with the ability to rule authoritatively (Herrschaftsverband) and control the means of violence (Gewaltmonopol, cf. Weber 1980 [1921]; on statehood generally Benz 2001; Schuppert 2009). It should be noted, though, that the Weberian state is an ideal type: empirical states might approximate the ideal type—“consolidated statehood”—but they will never quite reach it. While no state governs hierarchically all the time, consolidated states can at least authoritatively make, implement, and enforce central decisions for a collective. I distinguish strictly between statehood as an institutional structure of authority and the kind of governance it provides. The latter is an empirical, not a definitional, issue. Control over the means of violence is part of the definition. Whether this monopoly of the use of force actually provides security for the citizens as a public good and does so irrespective of race, gender, or kinship, is an empirical question. Both Nazi Germany and the Stalinist Soviet Union were consolidated states with central authorities by and large enjoying the monopoly of the means of violence. But they used their monopoly to terrorize large parts of the population and, thus, produced widespread insecurity. If statehood is defined by the monopoly of the means of violence and/or the ability to make and enforce central political decisions, we can now define more precisely what “limited statehood” means: while areas of limited statehood are still contained in internationally recognized states—even the failed state Somalia still commands international sovereignty—it is their domestic sovereignty which is severely circumscribed. Areas of limited statehood are those parts of a country in which central authorities (governments) lack the ability to implement and enforce rules and decisions and/or in which the legitimate monopoly on the means of violence is lacking, at least temporarily. The ability to enforce rules or to control the means of violence can be restricted along various dimensions: territory; sector, with regard to specific policy areas; social groups, with regard to specific parts of the population; and duration. Then, the opposite of “limited statehood” is not “unlimited” but “consolidated” statehood: those areas of a country in which the state enjoys the monopoly of the means of violence and/or the ability to make and enforce central decisions. Thinking in terms of configurations of limited statehood also implies thinking in degrees of limited statehood rather than in a simple dichotomy. The map in Fig. 8.1 shows the “varieties of statehood” for most of the globe. The degrees of statehood are derived from three indicators: “failure of state authority,” “portion of country affected by fighting” (based on PITF 2012)—measuring the state’s monopoly on the means of violence—and “bureaucratic quality” (based on ICRG 2012; see Lee et al. 2014 for details). This map still suffers from “methodological individualism”: the data are

156   Thomas Risse

Fig.  8.1  Degrees of statehood on the globe, 2008. Source: Collaborative Research Center “Governance in Areas of Limited Statehood,” Berlin, Germany.

aggregated on a national level and not solely with regard to specific parts of the territory or policy areas. Only a small portion of states in today’s international system can be characterized as having consolidated statehood, including fully effective domestic sovereignty (white color). On the other end of the spectrum are fragile, failing or failed states. Failed states are those that have lost the state monopoly of the use of force and/or do not possess effective capacities to enforce decisions (e.g. Somalia, black color). Fragile or failing states, such as the Democratic Republic of Congo, Pakistan, or Yemen, are unable to control large parts of their territory. The vast majority of states in the contemporary international system contain “areas of limited statehood”: in parts of the territory or in some policy areas the central government lacks the capacity to implement decisions and/or its monopoly of the means of violence is challenged (various shades of grey). Territorial examples include the Amazon region in Brazil, Northeast Kenya, and parts of Southern Italy. Policy examples include legislation that, in many developing countries, is never implemented, whether in the areas of the environment, schooling, or social security, or the inability to collect taxes in more developed countries like Greece. Areas of limited statehood are almost as ubiquitous in the contemporary international system as they are in historical comparison (Conrad and Stange 2011). After all, the state monopoly of the means of violence has not existed for much more than 150 years. Most contemporary states contain “areas of limited statehood” in the sense that central authorities do not control the entire territory, do not completely enjoy a monopoly on the means of violence, and/or have limited capacities to enforce and implement decisions, at least in some policy areas or with regard to large parts of the population. This is what Somalia, Brazil, and Indonesia, but also the People’s Republic of China, have in common. And this is what they share with modern protectorates such as Afghanistan, Kosovo, or Bosnia-Herzegovina, which are internationally recognized states that lack Westphalian or Vattelian sovereignty because external actors rule parts of their territory or control some policy areas (Krasner 1999).

Limited Statehood   157

3  Theories of the State and Their Blind Spots Western social science conceptualizations of the modern state have penetrated our thinking thoroughly. Thus, Western- or Euro-centrism is constitutive for state theory, and this Handbook is no exception. The concept of “limited statehood” also derives from modern state theory in the understanding of Max Weber or of international law (see Jellinek 1922 [1900]; Benz 2001; Schuppert 2003, 2014). In a constructivist perspective, we cannot avoid some degree of Euro-centrism epistemologically and ontologically, since we simply cannot ignore our intellectual background (Draude 2008). We need to be aware, though, of the limitations, blind spots, and intellectual baggage we are carrying with us when we theorize about the state. I will address some of these issues, which seem particularly relevant for thinking about areas of limited statehood. First, I  deal with the literature on the modern state and its transformations and argue that its findings cannot be generalized beyond today’s Global North. Second, I focus on modernization theories as still being the most prominent intellectual approaches towards the developing world, which extend the Western development experience to “the rest of the world.” This results in a “deficit theory” of limited statehood.

The Modern State and its Transformations The major contenders in Western thinking on the state have debated the autonomy of the state vis-à-vis society. They all basically agree on what a (modern) state is and what it should look like. Take Marxist and pluralist theories conceptualizing the state as a transmission belt for power relations in society (see Introduction of Huber et al., Chapter 1; vom Hau, Chapter 7; and Levy, Chapter 9, all this volume). Whether the state is the “executive committee” of the ruling classes or state action is the outcome of competing societal interests is irrelevant, since the underlying understanding is the same: states enjoy domestic sovereignty as defined earlier. The controversy is merely about the interests for which central governments use their authority. The same holds true for all those who were “bringing the state back in” (Evans et al. 1985), emphasizing the relative autonomy of the state’s bureaucratic and coercive apparatus. These scholars placed great importance on the ability of the state to govern hierarchically and theorized about its interactive relationship with society (see also Katzenstein 1984, 1978). About 20 years later, “transformations of the state” in the age of globalization have become the focus of much theoretical and empirical research (see this Handbook; also Leibfried and Zürn 2005; Hurrelmann et al. 2007). These transformations are primarily about the state’s mode of governance—reaching from hierarchical steering in the provision of collective goods to the “managerial state” (Genschel and Zangl 2008, 2014). The fundamental insight here was: effective governance in the age of globalization requires a switch from exercising hierarchical authority to becoming the “cooperative state” (Benz

158   Thomas Risse et al. 1992; Mayntz and Scharpf 1995; Voigt 1995). At the same time, in an era of neoliberalism, the de-regulation and privatization of previously public services have also become a matter of political choice. Nevertheless, even the managerial state has not lost its ability to steer hierarchically or to cast a “shadow of hierarchy” (Scharpf 1997; Börzel 2008). The cutting edge scholarship on the transformation of modern statehood under globalization still derives the managerial capacity of the state from its ability to steer hierarchically when needed (for more, see Schuppert 2008; Beisheim et al. 2011b). Numerous empirical studies on state transformation in the OECD world have shown that the “shadow of hierarchy”—the threat to authoritatively legislate and implement—is insuring the effectiveness of governance and the provision of collective goods by non-state actors (Héritier and Lehmkuhl 2008; Börzel 2010a; Héritier and Rhodes 2011). The same is true for the voluntary decision of modern states to relinquish domestic authority in favor of international regimes and global gover­ nance institutions (Zürn 2005, 2008; see also Zürn and Deitelhoff, Chapter 10, this volume). The implementation of global norms and rules relies heavily on the ability of states to effec­ tively enforce decisions, that is, on consolidated statehood (see Ladwig and Rudolf 2011). These literatures take consolidated statehood for granted. As a result, they are ill-suited to deal with reality in most contemporary states, as well as with statehood historically (Lehmkuhl 2007). The insights of these literatures apply to consolidated statehood only, which we see mostly in the Global North (see Figure 8.1), but these insights cannot be generalized. Governments in areas of limited statehood are unable to effectively implement decisions, enforce the law, or cast a “shadow of hierarchy.” For them this is not a matter of choice, as with “neoliberal” states, but a matter of necessity. Governance in areas of limited statehood cannot rely on the domestic sovereignty of the state to be effective.

The Deficit Theory of Limited Statehood: Modernization Theories and Beyond One way to deal with limited statehood theoretically and empirically has been to use the Western consolidated, democratic, and interventionist state and its transformations— TRUDI, that is, territorial, rule of law, democratic, and interventionist state (Leibfried and Zürn 2005)—as the teleological endpoint of the history of modernization. I label this the “deficit theory” of limited statehood (see also Schuppert 2009, 2014). Modernization theory and its variants are just one example. For modernization theory, the cause that initiates economic growth, urbanization, literacy, a growing middle class, and ultimately democracy is technological change. Technological innovation is generated in the global environment and is not targeted at altering domestic authority structures in any particular state (Lipset 1959; Przeworski 1991; Boix 2003; Inglehart and Welzel 2005). The various modernization theories can be grouped by the factor they place in the driver’s seat for the movement toward modern societies and polities: economic development (Rostow 1960), national unity and identity (Rustow 1968), a strong—and even authoritarian—state (Huntington 1971), or a combination of the above. The now vast literature on fragile and failed states follows these theories (e.g. Rotberg 2003, 2004; Dorff 2005; Call 2011; see Chojnacki and Menzel, Chapter 40, this volume). Failed statehood is usually measured by

Limited Statehood   159 the absence of governance in the fields of security, rule, and authority, as well as other collective goods. The result is: failed states do not provide governance—by definition—and state-building becomes the main policy goal to foster effective governance. The core of the argument remains the same: the endpoint of modernization is TRUDI. This paradigm has been criticized from a variety of perspectives: it has been accused as Euro- or Western-centric, as camouflaging Western colonialism and imperialism, etc. I do not want to repeat these indictments; rather, I submit that these types of arguments result in a “deficit theory” of limited statehood. Areas of limited statehood are mainly seen as lacking the ingredients of (Western) modernity, be it a well-functioning state, a developed economy, a constitutional system, or a political culture embodying the rule of law and democratic governance. The ensuing developmental perspective is, at least implicitly, based on a trajectory towards (Western) modernity. State-building, democracy promotion, and economic development assistance then become the “natural” policy choices to move countries with areas of limited statehood onto the path toward modernity (similarly Brozus 2011). These “deficit theories” of developmental statehood ignore the huge variation of governance in areas of limited statehood, to which I will turn now.

4  Governance Without a State: “And Yet It Moves” Fortunately, areas of limited statehood are not devoid of governance.2 The most striking empirical finding with regard to governance here is the huge variation we encounter (Krasner and Risse 2014b). The scatter plot in Figure 8.2 depicts the (non-)provision of collective goods across countries. Three things stand out. First, not surprisingly, we see consolidated states: those units with a statehood score of 0.9 or above provide collective goods in most areas. This is the realm of the literature on modern (Western) statehood and its transformations. While consolidated statehood is strongly correlated with collective goods provision in the Northeastern part of Figure 8.2, I do not make any causal claims, since the scatter plot does not show who actually provides the various services. Second, collective goods provision in failed states, which are those states at or below a score of 0.4 on the statehood index, is rather limited, but not completely impossible. Failed states score particularly poorly on infrastructure, economic subsistence, and health. A more detailed analysis shows, however, that comparatively simple services can be provided under these conditions: examples are child immunization, the distribution of anti-malaria bed nets, and even access to clean water. Somalia, with its “quasi-state” provinces, is a case in point (see Schäferhoff 2014). 2  I will now report findings from research at the Collaborative Research Center “Governance in Areas of Limited Statehood” at the Freie Universität Berlin, carried out in cooperation with the Center for Democracy, Development, and the Rule of Law at Stanford University, the University of Cape Town, and others (see Risse 2011a; Krasner and Risse 2014a).

160   Thomas Risse 1

Service provision

0.8

0.6

0.4

0.2

0 0.2

0.4

0.6

0.8

1

Statehood Security Infrastructure

Economic subsistence Education

Environment Health

Fig. 8.2  Service provision and degrees of statehood, 2010. Note:  The x-axis measures statehood in the same way as the global map earlier (Figure 8.1). The y-axis measures many composite indicators for service provision based on various data sources:  World Development Indicators, United Nations Office on Drugs and Crime, UNESCO, UCDP, etc. See Lee et  al. (2014) for details. Each dot represents a particular type of service provision by country, e.g. the + dot at 0.3/0.1 represents (extremely poor) health provision in a failed state. Source: Collaborative Research Center, “Governance in Areas of Limited Statehood,” Berlin, Germany.

Third, the variation in the degree to which collective goods are provided is extremely high in areas of limited statehood, those with statehood scores between 0.4 and 0.9.3 The variation does not disappear if we control for the two macro variables often used in development studies and comparative politics (Lee et al. 2014): regime type (democracy vs. autocracy) and economic development (GDP per capita). This variation requires explanation, and it cannot easily be accounted for with existing state theory. In particular, it cannot explain the excellent governance performance in some areas of limited statehood given that central governments are unable to exert authority or, by definition, to cast a “shadow of hierarchy.” In fact, in areas of limited statehood, many states are part of the problem and not of the solution (see Reno, Chapter 39, this volume). So, how can we account for effective governance without the state? And who governs in areas of limited statehood? To begin with the latter, we observe the following actor constellations in areas of limited statehood (Börzel and Risse 2010; Beisheim et al. 2011b; Risse 2012):

3  Note that our measurement of statehood is orthogonal to regime type and that the indicators for governance performance used in Figure 8.2 do not include human rights or the rule of law. However, various human rights indicators and measurements of statehood do not correlate either (for details,see Börzel and Risse 2013).

Limited Statehood   161 Governance without the state. In some cases, central state authorities are not even involved in governing areas of limited statehood. External—state and non-state— and domestic non-state actors often provide governance using both hierarchical and non-hierarchical means of steering. Examples of hierarchical non-state authority include colonial rule (Conrad and Stange 2011) and modern protectorates, international (criminal) courts, warlords (Chojnacki and Branovic 2011), and indigenous leaders. Governance by delegation. In other cases, weak states delegate authority to other— state and non-state—“governors.” These governors then enter into contractual obligations to provide rules and public services. A well-known example is RAMSI, the Regional Assistance Mission for the Solomon Islands, whereby 15 Pacific states, including Australia and New Zealand, provide public security and the rule of law (Matanock 2014). In many cases, development assistance agreements also qualify as governance by delegation. While such governance is common throughout the globe, the main difference between consolidated statehood and areas of limited statehood is that, in the latter case, governments cannot enforce the contracts but depend on the voluntary performance of external “governors.” Governance by negotiation. This is the most common governance configuration in areas of limited statehood. It is non-hierarchical by definition and often includes central state authorities (national governments) and a variety of external and internal, state and non-state actors. Sometimes these negotiation systems are highly institutionalized, as in public-private partnerships (Schäferhoff et al. 2009; Liese and Beisheim 2011), but often they consist of ad hoc arrangements. Central governments oftentimes assume the role of governance managers in the same configurations as they do in consolidated states (Genschel and Zangl 2008, 2014)— the main difference being again that they cannot cast a “shadow of hierarchy” to enforce agreements. But what are the conditions under which these actor constellations provide effective governance? Four factors appear to account for the variation in effective governance shown in Figure 8.2: Institutional design of the actor constellation. The literatures in international relations on legalization and the rational design of institutions (Goldstein et al. 2000; Koremenos et al. 2001) point out: if rules cannot be enforced hierarchically, functionally adequate institutional designs matter enormously for governance. This also seems to hold for areas of limited statehood, where flexibility and organizational learning capacities are crucial for governance in local arenas (see Beisheim et al. 2014). Statehood and its functional equivalents. This scope condition is the only one that requires some degree of statehood. If central state authorities are too weak to credibly cast a shadow of hierarchy, other—particularly external—actors might be able to step in:  home states of multinational corporations might force such states to provide governance in areas of limited statehood (Flohr et al. 2010; Börzel and Thauer 2014). International courts might hold “governors” in areas of limited statehood accountable, absent local judicial systems (Sikkink 2011). In some cases, it is the absence of political and social order—the “shadow of anarchy”—that

162   Thomas Risse induces state and non-state actors to provide governance in areas of limited statehood (Börzel 2010b). Legitimacy of the actors’ constellations. Research on global and transnational governance has often shown that input and throughput legitimacy is crucially linked to effectiveness (Wolf 2000; Zürn and Joerges 2005; Dingwerth 2007). The same is true for areas of limited statehood (Schmelzle 2011; Krasner and Risse 2014a). If the governed consider the actors’ constellation legitimate, this induces voluntary compliance with (costly) rules (Hurd 1999). Legitimacy appears to be a necessary condition for effective governance in areas of limited statehood. Social integration and trust. Elinor Ostrom and others have demonstrated empirically that social trust is a crucial condition for overcoming collective action problems such as the “tragedy of the commons” in local communities (Ostrom 1990, 2002; Ostrom et al. 1994; also on social capital Putnam 1993; Hartmann 2011). In areas of limited statehood trust serves two functions: the more communities develop trust and collective identities, the more they can govern themselves absent a functioning state. And, in areas of limited statehood, social trust enhances the action capacity of local communities so they can influence their “governors.” In this sense, trust does—or does not—feed into legitimacy.

5 Conclusion Most theories of the state and its transformations assume pre-existent consolidated statehood as the ability of central authorities to maintain domestic sovereignty: to enforce rules and/or to maintain a monopoly of the means of violence. These theories are ill suited to cope with the reality of limited statehood in most parts of the world, where domestic sovereignty is weak in parts of the territory, and where it is particularly weak in certain policy areas or over parts of the population. Theories of state transformations have a built-in bias towards consolidated statehood by taking domestic sovereignty for granted. As a result, these theories do not travel to areas of limited statehood. Also, modernization theories, including those dealing with “failed states,” suffer from a “deficit” in understanding statehood in the Global South—and some are outright Euro- or Western-centric. Yet, areas of limited statehood are neither ungoverned nor ungovernable spaces where anarchy, chaos, and violence prevail. Rather, social and political order, plus collective goods and services, are often provided in a variety of actor constellations, even under the adverse conditions of fragile and failed statehood. I have discussed various factors contributing to effective and good governance under such conditions of statehood, namely the institutional design of the actor constellation, the presence of functional equivalents to statehood, the legitimacy of the actor constellation, and, last but not least, social integration and trust among local communities. Theories of the state and its transformations cannot explain the varieties of effective and legitimate governance in areas of limited statehood, for the reasons outlined. Statehood is correlated with good governance in the consolidated states of the Global

Limited Statehood   163 North only. But Somalia is very unlikely ever to become Denmark. If we want to promote good governance, democracy, the rule of law, and social welfare under conditions of limited statehood, we need to think outside the box of our state-centered theories (Beisheim et al. 2011a; Brozus 2011).

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Limited Statehood   167 Rostow, Walt, 1960. The Stages of Economic Growth: A Non-communist Manifesto. New York: Cambridge University Press. Rotberg, Robert I, ed 2003. State Failure and State Weakness in a Time of Terror. Washington DC: Brookings Institution Press. ——, ed, 2004. When States Fail:  Causes and Consequences. Princeton, NJ:  Princeton University Press. Rustow, Dankwart A, 1968. “Modernization and Comparative Politics:  Prospects in Research and Theory.” Comparative Politics 1 (1, October): 37–51. Schäferhoff, Marco, 2014. “External Actors and the Provision of Public Health Services in Somalia.” In External Actors, State-Building and Service Provision in Areas of Limited Statehood. Special Issue of Governance, ed Stephen D Krasner and Thomas Risse, 27 (4): 675–695. Available at: http://onlinelibrary.wiley.com/doi/10.1111/gove.12071/abstract (last consulted 18 February 2014). ——; Campe, Sabine, and Kaan, Christopher, 2009. “Transnational Public-Private Partnerships in International Relations: Making Sense of Concepts, Research Frameworks, and Results.” International Studies Review 11 (3): 451–474. Scharpf, Fritz W, 1997. Games Real Actors Play: Actor-Centered Institutionalism in Policy Research. Boulder, CO: Westview Press. Schmelzle, Cord, 2011. “Evaluating Governance: Effectiveness and Legitimacy in Areas of Limited Statehood.” SFB Working Paper Series # 26. Berlin, Germany: Freie Universität, SFB 700. Available at: http://www.sfb-governance.de/publikationen/sfbgov_wp/wp26/ wp26.pdf? 1328175148 (last consulted 18 February 2014). Schuppert, G Folke, 2003. Staatswissenschaft [State Science]. Baden-Baden, Germany: Nomos. ——, 2008. “Was ist und wie misst man Wandel von Staatlichkeit?” [What Is and How Does One Measure Transformations of the State?]. Der Staat 47 (3): 1–32. ——, 2009. Staat als Prozess. Eine staatstheoretische Skizze in sieben Aufzügen [The State as Procedure. On State Theory in Seven Acts]. Frankfurt a.M., Germany: Campus. ——, 2014. Verflochtene Staatlichkeit. Globalisierung als Governance-Geschichte [The Interwoven Nature of States: Globalization as Governance History]. Frankfurt a.M., Germany: Campus. Scott, James C, 2009. The Art of Not Being Governed:  An Anarchist History of Upland Southeast Asia. New Haven, CT: Yale University Press. Sikkink, Kathryn, 2011. The Justice Cascade: Human Rights Prosecutions and World Politics. New York: W. W. Norton. Voigt, Rüdiger, ed, 1995. Der kooperative Staat [The Cooperative State]. Baden-Baden, Germany: Nomos. Weber, Max, 1980 [1921]. Wirtschaft und Gesellschaft [Economy and Society]. Tübingen, Germany: J.C.B. Mohr (first published 1921; first translated by Günther Roth and Claus Wittich as Economy and Society, Berkeley, CA: University of California Press 1978). Williams, Patrick, and Chrisman, Laura, ed, 1994. Colonial Discourse and Postcolonial Theory: A Reader. New York: New York University Press. Wolf, Klaus D, 2000. Die neue Staatsräson—Zwischenstaatliche Kooperation als Demokratieproblem in der Weltgesellschaft [The New raison d’être of the State— Intergovernmental Cooperation as a Problem for Democracy in World Society]. BadenBaden, Germany: Nomos. Young, Robert, 2001. Postcolonialism: A Historical Introduction. Oxford, UK: Blackwell.

168   Thomas Risse Zürn, Michael, 2005. “Global Governance.” In Governance-Forschung. Vergewisserung über Stand und Entwicklungslinien, ed G Folke Schuppert, 121–146. Baden-Baden, Germany: Nomos. ——, 2008. “Governance in einer sich wandelnden Welt—Eine Zwischenbilanz [Governance in a Changing World—An Interim Balance Sheet].” In Governance in einer sich wandelnden Welt. Politische Vierteljahresschrift (PVS), Special Issue 41, ed G Folke Schuppert and Michael Zürn, 553–580. Wiesbaden, Germany: VS Verlag. ——, and Joerges, Christian, ed, 2005. Law and Governance in Postnational Europe. Compliance beyond the Nation-State. Cambridge, UK: Cambridge University Press.

Chapter 9

State Tr a nsfor m ations i n Compa r ati v e Perspecti v e Jonah D. Levy

1 Introduction The contributions to the Oxford Handbook of Transformations of the State enhance our understanding of what is happening to states in the contemporary era in two important ways. First, as the title of the Handbook indicates, the chapters focus on state transformations, as opposed to state eclipse or persistence. Whereas much of the scholarly literature portrays states as either eroding under international pressures, such as globalization, or else persisting largely as before, thanks to political resistance and institutional stickiness (see Levy, Leibfried, and Nullmeier, Chapter 2, this volume, for a fuller discussion), the contributors to the Oxford Handbook probe the ways in which states are transforming— not just ceding old responsibilities, but also acquiring new responsibilities and forging new modes of governance. The second important way in which the chapters in the Oxford Handbook extend our understanding of state transformations is by providing a truly global perspective. Instead of focusing on a few countries or a group of countries, like Latin America or the affluent democracies, the contributors cover all the major regions of the world. The Oxford Handbook is also global in the sense of encompassing a wide range of policies—military, security, migration, etc.—as opposed to just political economy. Finally, the Handbook is global in analyzing state transformations at different historical moments, rather than confining the discussion to the present period. This chapter uses the wide-ranging contributions to the Oxford Handbook to situate contemporary state transformations in comparative perspective. The chapter offers three sets of comparisons. Section 2, a comparison across time, suggests that whereas in the past, state transformations generally entailed the development of new capacities, often in different ways in different countries, much of the current literature equates state transformations with a reduction of state missions and capacities and a narrowing of cross-national

170   Jonah D. Levy differences—an approach that misses critical dimensions of change. Section 3, a comparison across policy, contends that state transformations tend to vary from one type of policy to the next: state retreat is most prevalent in areas of directive economic intervention; it is more muted when states play a central role in implementation; and in some areas, most notably those marked by the emergence of new risks or social norms, we see an expansion of state activity. Section 4, a comparison across place, shows that state transformations are taking very different forms in different parts of the world and that these cross-regional differences can be traced to the factors emphasized in the introductory and concluding chapters of this volume—differences in state positions within the international system, state structures, and features of civil society. Section 5 offers some concluding thoughts about the comparative politics of state transformations. While making use of many fine contributions to the Oxford Handbook, this chapter—in contrast to the Conclusion (Huber et al., Chapter 44, this volume)—does not profess to provide a comprehensive summary. Rather, it selectively chooses among the materials in the book, discussing some chapters at length while ignoring others, in order to advance a particular understanding of state transformations. It goes without saying that neither the authors of individual contributions nor the editors of the volume are responsible for the claims and conclusions put forward in this chapter.

2  Comparison Across Time: From State Development to State Retreat? In the past, scholars discussing the evolution of the state tended to employ the phrase “state development” as opposed to “state transformation.” The reason is that states were mostly forging or gaining new capacities over time. As in the present period, international competition and diffusion played a central role in prompting state transformations, but by and large, adapting to more challenging international environments entailed constructing new state capacities. Charles Tilly provided the classic formulation when he noted that “[w]‌ar made the state, and the state made war” (1975: 42). Early state formation in Europe was driven by military threats, with states constructing not only standing armies, but also bureaucracies and tax-collecting authorities to support them (Gilbert 1975). Max Weber likewise emphasized the forging of coercive capacity, defining the state as the entity that claims “the monopoly of the legitimate use of physical force in the enforcement of its order” (Weber 1965 [1919]). Statehood was also associated with territorial control, which entailed the ability to enforce national laws and political authority throughout the realm. In short, state formation revolved around the construction of military, coercive, and extractive capacities that enabled state authorities to both protect themselves against enemies without and impose their authority against rivals within. States did not necessarily achieve these objectives in the same way. Another hallmark of the literature on state formation was typologizing. Scholars identified different kinds of states emerging from the intersection of geopolitical pressures and domestic politics:  absolutist versus limited/constitutional regimes; patrimonial versus bureaucratic administrations; and systems relying primarily on “despotic” versus “infrastructural”

State Transformations in Comparative Perspective    171 power (Anderson 1974; Gilbert 1975; Mann 1986; Ertman 1998). Chapters 3–6 of the Oxford Handbook, which analyze the emergence of modern states in Europe and beyond, operate in this spirit. In Chapter 3, for example, John Hall shows that the imperatives of war figured prominently in European state-building, but that international military competition drove the formation of very different kinds of regimes and political systems in different European countries. John Hall notes that European powers were involved in war nearly 75 percent of the time between 1494 and 1975 (Chapter 3, this volume). In his chapter, Hall traces a first “organic” trajectory of state development, incarnated by Britain and France, in which states “interacted over long periods of time with their societies, certainly in part due to pressures of war, and in so doing increased their own capacities in tandem with the development of shared citizenship and nationality.” According to Hall, this unification movement “involved language, national sentiment, democracy, and eventually the provision of welfare.” Hall contends that the military threat posed by the organic states then drove a second “imitative” form of state development in other European territories, most notably Germany. Elites in these emerging states deployed nationalism as a means of building power rapidly so as to catch up with the most developed countries and turning the working class away from democracy and socialism. In this context, politics took on an authoritarian and militaristic hue, as against the liberal, democratic template that prevailed in Britain and France. Not all changes went in the direction of increased powers. Over time, absolutist regimes were pressed to submit to constitutional restraints and uphold property rights and the rule of law. Fundamental civil rights were articulated, and eventually, in Western Europe at least, democracy prevailed. These restraints on the state, although submitted to with great reluctance, often at the point of a bayonet, enhanced state capacities in some respects, as exemplified by the British case (Weingast and North 1989; Brewer 1990). Protection of property rights and the rule of law generated prosperity, which multiplied the fiscal capacity of the state, while democratic inclusion and civil rights enhanced the state’s capacity to raise taxes and mobilize the masses for war and other collective projects. The challenge of incorporating the masses led to the development of another important state capacity, that of providing social protection through the welfare state. Once again, the expansion of state capacities took several different forms—the so-called liberal, Christian democratic, and social democratic “worlds of welfare capitalism” in Gøsta Esping-Andersen’s celebrated typology (1990). The heroic phase of welfare state construction occurred during the initial decades after World War II, meaning that states were forging critical new capacities—to tax, spend, redistribute, and reduce risk—a century or even several centuries after the initial period of state formation. International economic challenges likewise drove new kinds of state intervention. Scholars of the industrial revolution argued that late-developing countries could not emulate the free-market ways of the pioneer industrializer, Britain—although the state played a much bigger role in British industrialization than this free-market label would suggest (cf. Polanyi 1944). Free trade would lead to the annihilation of fledgling “infant industries,” so tariff protection was needed until domestic firms were strong enough to compete on their own (List 1856 [1841]). Late developers also required a different kind of financial system in order to mobilize sufficient capital to cover the growing costs of industrialization: in Germany, investment banks pooled savings and coordinated production and prices to assure profitability, while in Russia, an even later developer, only the state could provide

172   Jonah D. Levy the necessary financial resources through a combination of subsidies and lucrative public procurement contracts (Gerschenkron 1962). States continued to forge new instruments of intervention and to steer the economy in the postwar period. Andrew Shonfield provided the classic account, Modern Capitalism, which was penned in the mid-1960s (Shonfield 1965). According to Shonfield, “modern capitalism” of the postwar variety was marked by fast, steady growth and full employment. Shonfield attributed this economic success to state intervention in five areas: 1) vastly increased public management of the economic system; 2) Keynesian fine tuning, a welfare state, and expanded public expenditures; 3) the “taming” of “the violence of the market” in the private sector, through government regulation, planning, and inter-firm cooperation; 4) public policies to increase innovation and worker training; and 5) the pursuit of intellectual coherence through long-term planning. Different countries implemented these features of “modern capitalism” in different ways, according to Shonfield. Britain and the US pursued a relatively arm’s-length approach to business; France relied heavily on state guidance and planning; Germany and Sweden operated through tripartite negotiations among state representatives, employer organizations, and trade unions; even Italy achieved a degree of economic coordination through strong leadership of its public holdings. The variety of postwar economic strategies prompted a number of other typologies, generally distinguishing between a market-oriented liberal system, a statist approach, and a corporatist, negotiated set of arrangements (Zysman 1983; Hall 1986; see also for a discussion of these three models: Levy, Chapter 20, Huo and Stephens, Chapter 21, Peter Hall, Chapter 22—all this volume). The current debate about state transformations displays an amnesiatic quality. It is almost as if the earlier literature on state formation and transformation did not exist. True, international developments continue to figure prominently—in this case, globalization, new technologies (internet, microprocessor, etc.), the end of the Cold War, the growing power of international organizations, and widely diffused neoliberal ideas. However, the linkage made between these international developments and state transformations departs from earlier understandings in two fundamental ways. First, international pressures are portrayed as pointing in a single direction, toward the reduction of state missions and capacities. The heart of the debate is about the strength of these pressures and the possibilities for resisting them. Does globalization mean that states must engage in a “race to the bottom,” cutting taxes, social spending, and environmental protection, or do wealthy countries have enough competitive strengths to offset higher costs or, at least, to adapt to the new environment with limited reforms? Have NGOs and international institutions, like the EU, taken over critical state policies, or have state authorities been able to resist such transfers? By contrast, there is little debate about the direction of international pressures. Even critics of the state-decline thesis tend to accept the notion that international forces are pushing toward the reduction of state intervention, voicing skepticism mainly about the relative power of these forces. The second departure from past literature on state development concerns cross-national variation. Whereas the traditional literature almost invariably identified multiple possible responses to international challenges, today’s state-decline literature equates adaptation with the shedding of state capacities, the adoption of a number of neoliberal policy prescriptions, and the erosion of cross-national differences. In the extreme version of this argument, the so-called “Washington consensus” (Williamson 1990) or the “competition

State Transformations in Comparative Perspective    173 state thesis” analyzed by Philipp Genschel and Laura Seelkopf (Chapter 12, this volume), states are being driven implacably toward a single, stripped-down, market-conforming shadow of their former selves. Even those scholars who stop short of the competition state thesis depict international forces as narrowing the sphere of state intervention and spawning, if not convergence, then a strongly convergent evolution among previously diverse states. To the extent that domestic forces enter into the account, their role is essentially to resist or slow this convergent trend. Contemporary state transformations, then, are a process in which international pressures gradually defeat domestic stickiness or inertia, resulting in states that are leaner, meaner, and more alike. The current debate has failed to incorporate insights of past interaction between international challenges and state transformations. It is not that states have never ceded authority. As noted earlier, the forging of liberal constitutional orders limited the arbitrary powers of rulers. However, if there is one lesson to be learned from history, from comparison across time, it is that states often respond to international challenges, whether military or economic, by forging new missions or modes of governance, as opposed to simply narrowing their activities. It is difficult to see, from a theoretical perspective, why the situation would be radically different today, why the relationship between international challenges and state capacities would have turned wholly negative. In a similar vein, there is no a priori reason to assume that the various structural and political factors that led states to respond in different ways to common challenges in the past would have suddenly lost all salience. Comparison across time points to two things that are missing from the contemporary debate about transformations of the state. The first is a sense of the plurality of possible state responses to international challenges, a recognition that state retreat is not the only possible response and that the expansion or redeployment of state capacities may also figure prominently. The second is a comparative politics of state transformations, that is, an understanding that the character of state transformations is not uniform, but rather varies with the policy in question as well as with the political, social, and institutional context. The rest of this chapter probes variation in contemporary state transformations. The next section scrutinizes variation in state transformations across policy, while the ensuing section analyzes variations in state transformations across place.

3  Comparison Across Policy: State Retreat, Persistence, and Advance The debate about state transformations is framed in sweeping terms, with one side proclaiming that international developments such as globalization are radically narrowing sovereignty, while the other insists that little or nothing has changed. Yet the reality is more nuanced and variable. In some instances, internationalization has eroded state powers, but in other instances, states have been able to preserve or even expand their powers. These patterns of state transformation display a strong policy logic: internationalization has pressed most strongly against state efforts to direct the economy; there has been much less change when states play a central role in implementing policies; and states have forged new powers in response to new risks, social norms, and economic challenges.

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State Retreat Much of the literature positing a decline of the state focuses on economic policy, and with good reason. The clearest instances of state retreat are in the economic arena. States have not lost economic powers across the board, however. Rather, the losses are concentrated in policies associated with heavy-handed, state direction of the economy. Industrial policy offers perhaps the classic example. Where once state planners nurtured “infant industries” behind high tariff walls, now such policies run up against the prohibitions of the WTO and, within Europe, the EU. So, too do subsidies, capital infusions, and other forms of discretionary aid. Cheap loans, long a mainstay of industrial policy (Zysman 1983), were swept away by the global wave of financial liberalization. Beyond specific instruments, internationalization has undermined the very rationale of industrial policy, the presumption that what is good for domestic firms is good for the economy (Reich 1992). As companies have established global production networks, their success no longer translates automatically to investment and job creation in their country of origin. For various reasons, including proximity to markets, lower production costs, and access to specialized suppliers, “national champions” may choose to reinvest their profits abroad. Keynesian fine-tuning has been another casualty of globalization. With the growth of trade as a share of GDP, demand stimulus tends to “leak” out of the domestic economy. Consumers use their extra purchasing power to buy foreign goods along with domestic goods, dampening Keynesian “multipliers,” fueling trade deficits, and undermining the value of the currency. Initially, it appeared that the 2008 financial meltdown might trigger a revival of Keynesianism, as all of the major economic powers stimulated their economies simultaneously, neutralizing the leakage problem. The Keynesian revival proved short-lived, however, even amidst the worst recession since the 1930s. Some countries, most notably Germany, balked at sustained stimulus, placing pressure on their trading partners to rein in spending as well. In addition, the rapid run-up in government deficits and debt led wary international financial markets to demand unsustainably high interest rates to refinance the sovereign debt of shaky borrowers on the European periphery. When these countries turned to international financial institutions (IFIs), such as the IMF, World Bank, and EU, for help, they were required to reverse course and implement painful austerity programs as a condition of aid. Several of the contributors to the Oxford Handbook suggest that in the current context, Keynesian demand stimulus is checked not only by the challenges of international coordination, but also by the pressures of bond markets and the orthodox economic agenda of IFIs (cf. Helleiner, Chapter 17; and Nullmeier, Schneider, and Hepp, Chapter 30, both this volume). Some highly interventionist economic policies have persisted, but at the price of becoming less ambitious. Centralized wage bargaining among the Nordic countries has migrated to the sectoral level and become less redistributive. Tax policy, which is analyzed by Philipp Genschel and Laura Seelkopf (Chapter 12, this volume), has evolved along similar lines. The multiplication of tax havens from Monaco to the Cayman Islands has pressed even the most powerful OECD countries to lower tax rates on mobile factors, such as corporate taxation and the taxation of individual capital income and wealth. States have compensated for the lost revenues by eliminating loopholes and increasing taxes on less mobile factors, generally social security and value-added taxes, but the effect has been to make the tax code less progressive.

State Transformations in Comparative Perspective    175 Market-directing national models, like market-directing policies, have proven highly vulnerable. Of the four national models discussed in the Oxford Handbook (cf. Levy, Chapter 20; Huo and Stephens, Chapter 21; Peter Hall, Chapter 22; Schwartz and Etchemendy, Chapter 23, all this volume), the two most directive ones have been largely dismantled: the statist model, embodied by France and Japan, and the importsubstitution industrialization (ISI) model of Latin America and Southern Europe. French planners and Japan’s MITI no longer seek to outwit the market, and Latin American and Southern European authorities have opened their economies to international competition. By contrast, the two more market-conforming models, the liberal and corporatist systems, while experiencing significant reform, have retained their distinctive institutional configuration and their special policy mix. States are not retreating across the board from the economic arena. Both the statist and ISI countries have expanded systems of social protection to accompany the movement away from state-guided growth, while taking state spending to unprecedented heights. In a similar vein, although states are no longer promoting national champions through sectoral industrial policy, some of the most successful nations, particularly the Nordic and East Asian countries, are seeking to boost economic growth and employment through increased public spending on education, computer literacy, research and development, and infrastructure (cf. Huo and Stephens, Chapter 21; and Evans and Heller, Chapter 37, both this volume). Still, if states are not withdrawing from the economy, they are retreating from the most ambitious and intrusive policies. They have abandoned efforts to dictate specific market outcomes (through industrial policy, redistributive taxation, or Keynesian demand stimulus). To the extent that they intervene at all, it is primarily in support of markets (Levy 2006).

State Persistence Whereas the forces of globalization have weighed heavily on directive economic powers, states have been better able to resist encroachments by international organizations. The decision-making rules of these organizations tend to require unanimous support or, at a minimum, super-majorities, as in the case of qualified-majority voting (QMV) for the EU. Moreover, countries can often opt out of international agreements. Beyond decision-making rules, states tend to be able to protect their sovereignty most effectively when they enjoy broad discretion in implementing international mandates and agreements. The case of environmental policy, analyzed by Klaus Dingwerth and Helge Jörgens (Chapter 18, this volume) shows how difficult it is for international organizations to wrest authority from nation states, even when international arrangements may be better suited to the challenge at hand. As industrialization spreads around the globe, many environmental problems, including climate change, ozone depletion, and the loss of biological diversity, spill over national or even regional borders and require international coordination to resolve them. It would certainly be logical, therefore, for much environmental policy to shift from national to international authorities, and there are signs of such a shift. However, Dingwerth and Jörgens point out that the vast majority of international environmental rules, hamstrung by the need to overcome potential state vetoes, have been

176   Jonah D. Levy based on voluntary agreements or “soft law.” What is more, when international accords have created legal obligations, these have generally been phrased in vague terms—such as “prevent transboundary harm,” “adopt a precautionary approach,” or make “wise use of wetlands”—that give states considerable latitude in interpreting and meeting their obligations. The situation may be starting to change, according to Dingwerth and Jörgens, as a new generation of international agreements is phrased in more precise and constraining language and international judicial rulings narrow state discretion. To this point, though, the combination of super-majoritarian decision-making rules and reliance on national authorities for implementation has limited the internationalization of environmental policy. A similar tale could be told with respect to military intervention on behalf of humanitarian objectives—the so-called “right to protect” or “R2P”—with national authorities using control over implementation to defend their sovereignty against international encroachments. William Reno observes (Chapter 39, this volume) that international actors are playing a growing role in pushing states toward humanitarian interventions. The media and NGOs like Human Rights Watch often publicize cases of massive human rights violations, shaming powerful countries into action. In addition, as noted by Tine Hanrieder and Bernhard Zangl (Chapter 13, this volume), the International Criminal Court (ICC) has the power to unilaterally indict and demand the extradition of alleged war criminals; it does not need a vote by member states. The conduct of humanitarian intervention is also increasingly internationalized. Individual states generally lack the resources to go it alone, and multilateral intervention, particularly with the blessing of an international organization such as the United Nations (UN), helps insulate the invading powers against accusations of neo-imperialism or self-dealing. There are important limits to internationalization, however, particularly where large and powerful states are concerned, as Lora Anne Viola, Duncan Snidal, and Michael Zürn discuss (Chapter 11, this volume). UN missions require a unanimous vote by the Security Council, which is difficult to obtain and gives major powers a veto. Even when the UN or ICC provides an international mandate, these organizations lack any kind of enforcement capacity. Because international institutions like the UN and ICC need the resources of powerful nations in order to implement their decisions, these nations possess considerable leverage or even a de facto veto. For example, the UN authorized military intervention precisely where the US and its allies were willing to commit troops, as opposed to authorizing it in all places where humanitarian intervention was justified (e.g. Libya in 2011, but not Darfur). In addition, the US demanded and received an exemption from indictment by the ICC as a condition for committing troops to UN-authorized missions. The cases of environmental policy and humanitarian intervention show that control over policy implementation provides considerable leverage to states seeking to defend their powers against international organizations. International initiatives may never get off the ground because of a lack of support from critical nation states (e.g. military intervention in Darfur). Alternatively, international initiatives may move forward, but only at the price of substantial concessions to national governments (e.g. the exemption of US forces participating in UN-authorized missions from ICC indictments). Finally, seemingly ambitious international initiatives may be emptied of much of their substance in the implementation phase, especially if state obligations are phrased in vague and general terms (as with many environmental agreements).

State Transformations in Comparative Perspective    177

State Advance While the contemporary debate about state transformations has been dominated by discussions of state retreat and persistence, a third kind of state transformation, state advance, has received relatively scant attention. Yet states are not just abandoning or clinging to old responsibilities; they are also carving out new responsibilities. These new responsibilities are every bit as central to an accurate understanding of state transformations as instances of retreat or persistence. Three main sets of forces have driven the expansion of state activities: the emergence of new risks, changing social norms, and pressures to adjust national economic models. One of the most important risks to have emerged in recent years is the threat of terrorism. Andreas Busch contends (Chapter 29, this volume) that the growing fear of terrorism, crystallized by the 9/11 attacks in the US, has provoked a paradigm shift among state authorities: instead of trying to capture and punish offenders who have committed crimes, the objective has become to prevent crimes from happening in the first place. This preventive approach prioritizes the capacity of the state to identify threats and respond rapidly, while downgrading the protection of civil liberties. Under the preventive approach, states need to gather comprehensive information about all citizens, who are treated, for this purpose, as potential terrorists. States must also be in a position to interdict or even arrest potential terrorists before terrorist acts can be committed. Finally, states must be able to incarcerate, extract information from, and convict accused terrorists without being hampered by the legal protections traditionally afforded the accused. The shift to a preventive approach has prompted a massive expansion of state powers at home and abroad, as Christopher Daase describes (Chapter 16, this volume). At home, states have increased their repressive and information-gathering capacities, as exemplified by the US Patriot Act and the NSA’s sweeping communications surveillance. Abroad, state authorities have loosened the rules of warfare, attempting to suspend minimum standards of humanitarian law in the war on terrorism and to create a separate set of standards for the use of force in protecting against terrorist threats. “Pre-emptive wars” against regimes suspected of supporting terrorists, “enhanced interrogation methods” of suspected terrorists, and “blacklists” of individuals banned from international travel attest to the new state powers forged in conjunction with the war on terror. The development of new state responsibilities has been impelled by a second set of forces—changes in social norms and public opinion. Gender relations offer a striking example. The affluent democracies have been moving (haltingly and unevenly) away from the traditional gendered division of labor, in which men are breadwinners and women caregivers, and toward a more egalitarian, dual-earner model. This shift in attitudes has spawned several new state activities, which are discussed in by Herbert Obinger and Peter Starke (Chapter 24, this volume) and by Julia O’Connor (Chapter 25, this volume). Seeking to boost employment levels and bolster shaky pension systems, states have pushed women to enter the labor force. So-called “labor market activation,” “welfare-towork,” and “workfare” programs often entail increased surveillance and pressure to enter the workforce and reduced benefits for women, even those with young children, who remain at home. State authorities have deployed carrots as well as sticks. O’Connor identifies a variety of “work-family reconciliation” policies that seek to reduce the inequalities in the workplace

178   Jonah D. Levy stemming from women’s status as child bearers and principal care givers by socializing some of the costs and provision of care. Such policies, which are also discussed by Obinger and Starke (Chapter 24, this volume), include subsidized or state-provided childcare and elderly care, anti-poverty programs targeted at families, pension credits for years spent rearing children, the individualization of taxation, paid parental leaves following the birth or adoption of a child, and paid time for tending to sick relatives. A third set of forces that has impelled the development of new state responsibilities has resulted from the challenge of adapting national economic models to globalization and other changes. Although economic policy offers some of the clearest examples of state retreat, it is also an area in which states have forged new activities. Moreover, the processes of state advance and retreat have often been intertwined. As noted earlier, when governments in statist and ISI countries began dismantling essential parts of their respective economic models, they simultaneously initiated or greatly expanded social protection regimes to accompany this move to the market (cf. Levy, Chapter 20; and Schwartz and Etchemendy, Chapter 23, both this volume). States have also forged new activities as a way of preserving or adapting national economic models, as opposed to dismantling these models. Jingjing Huo and John Stephens relate (Chapter 21, this volume) that the Nordic countries have moved beyond the traditional European specialization in high-end manufacturing to position themselves as leaders in knowledge-intensive, high-tech industries. They have done so on the basis of substantial new investments in childcare, education, computer literacy, training, technology, and venture capital. In other words, new state policies have translated to new sources of comparative advantage. All challenges to the state are not created equal. Contrary to the prevailing debate over the changing place of the state, international pressures are not uniformly sidelining states, nor are they being uniformly checked by states. Rather, the linkages between international developments and state sovereignty are variable and policy-specific. As the next section relates, these linkages also vary with the political and institutional context.

4  Comparison Across Place: State Transformations Around the World State transformations may be a universal phenomenon, but they take very different forms in different parts of the world. This section provides a broad-brush comparison of state transformations among four sets of countries: 1) the affluent OECD democracies; 2) Latin America and East Asia; 3) the former communist countries; 4) the Global South. It shows that the patterns of state retreat, persistence, and advance vary considerably from one region to the next (for more in-depth discussions cf. Levy et al., Chapter 19; GrzymałaBusse and Luong, Chapter 31; Lange, Chapter 36; and Huber et al., Chapter 44, all this volume). Instead of convergent evolution, we are witnessing new forms of cross-regional diversity. Moreover, building on the framework of the introductory and concluding chapters of this volume, this chapter suggests that cross-regional differences in state transformations can be traced to differences in state positions within the international system, state structures, and features of civil society.

State Transformations in Comparative Perspective    179

The Affluent OECD Democracies Ironically, although much of the alarmist scholarship about the decline of the state has been penned with the affluent democracies in mind, these countries have been arguably the most successful in preserving, adapting, and redeploying the state, at least when seen from a cross-regional perspective. The combination of a dominant position within the international system, professional and powerful state administrations, and vibrant societal organizations has multiplied the options available to the affluent democracies. As a result, the pattern of state transformations among these countries entails not just state retreat, but also the creation of new programs, new capacities, and new modes of governance. Given that changes in state activities have already been analyzed, the following discussion will focus on changes in governance. States no longer dominate the institutional landscape in the way that they did a half-century ago. They now confront powerful international institutions, such as the WTO and the EU in Europe, along with international NGOs. State authority is also contested domestically by increasingly mobilized societal groups, ethnic movements, and local authorities. The multiplication and growing power of non-state actors can be an asset for the state as well as a constraint, however. Following Michael Mann’s classic distinction between “despotic power” and “infrastructural power” (Mann 1986), institutional proliferation has eroded the capacity of state authorities to act “despotically,” that is, unilaterally in the face of substantial opposition from other actors. At the same time, it has opened the possibility of expanding the state’s “infrastructural” power, its capacity to forge partnerships with powerful groups and institutions, harnessing their capital and resources on behalf of jointly defined projects. Moreover, the growth of international organizations, most notably the European Union, has created an external dimension to this partnering strategy. Whereas partnering with domestic groups can enhance the infrastructural power of the state, partnering with international groups can enhance what we might call the “suprastructural power” of the state. Walter Mattli’s analysis of standard setting (Chapter 15, this volume) illustrates the kind of give and take associated with changing modes of governance. At first glance, states appear to be losing control over standard setting. Although technical standards were traditionally established by national authorities, the rapid expansion of global markets has heightened the need for international standards, since national standards are often incompatible and constitute obstacles to trade. Much standard setting has, therefore, migrated from the domestic arena to the international arena. In addition, because traditional intergovernmental bodies are very slow and often lack the technical expertise to deal with ever more complex and demanding regulatory issues, standard setting has also shifted from the public to the private arena. The upshot is that where nation states once issued command-and-control regulations, the new type of regulation originates in private, international regulatory agencies that are generally sponsored by and closely aligned with business. Upon closer inspection, however, Mattli shows that states continue to have a critical role to play and, in some ways, have expanded their capacity to set effective standards. Because international, private regulation is susceptible to a number of limitations and failures—self-dealing, neglect of the public interest, lack of transparency, absence of democratic legitimacy—state intervention is needed to make this mode of governance operate

180   Jonah D. Levy effectively. Key state initiatives include: bolstering national regulatory organizations, so that they can participate in international standard-setting negotiations; providing subsidies, resources, and expertise to groups representing consumers and citizens; maintaining continuous supervision of the process of implementing standards; and intervening if consumers or the public interest appear to be harmed. Mattli contends that by partnering with international private associations while establishing effective limits on business hege­ mony, state authorities have been able to create a system of standard setting that combines the technical expertise, extensive resources, and market responsiveness of the private sector with the openness, transparency, and legitimacy provided by the state. In Mattli’s mind, far from eclipsing the state, the shift to private, international standard setting is rooted in “a novel type of transnational governance, one that is neither purely private nor purely public, but may best be captured by the term of ‘joint or hybrid governance.’ ” The analysis of multilevel governance by Arjan Schakel, Liesbet Hooghe, and Gary Marks (Chapter 14, this volume) likewise points to the potential gains to states from forging partnerships with other political institutions. One of the main drivers of European integration, according to Schakel, Hooghe, and Marks, is the quest for more efficient provision of public goods. The externalities and scale economies associated with reducing trade barriers, providing clean air, and ensuring compatibility of transportation and energy networks mean that these policies are most effectively managed at the European level. Conversely, policies like research and education, healthcare delivery, and the promotion of small business require diverse solutions adapted to the local context and are best handled at the regional and local levels. In both instances, states have been able to enhance their capacities by partnering with other institutions, whether above or below the state level. Under the system of multilevel governance, states sacrifice some of their despotic power, their capacity to act unilaterally, but they gain in suprastructural power (European integration) and infrastructural power (regionalization). In order to achieve these gains, state authorities must exercise power in new ways, through complex and shifting negotiations with other countries and institutions, rather than through traditional, state-centric, command-and-control methods. The affluent democracies are certainly not immune to international pressures. However, they possess considerable resources for responding to these pressures, including a privileged position within the international system, highly developed states, and well-organized civil societies. Consequently, state adjustment has often taken the form of new state missions or modes of governance, as opposed to a generalized reduction in the state’s footprint.

East Asia and Latin America The most advanced countries of East Asia and Latin America come closest to the core OECD pattern of adjustment, centered on the redeployment of the state and the forging of new connections with civil society. This similarity is not entirely surprising, given that these countries are relatively affluent and have made successful transitions to democracy. Moreover, democratization has often been driven by and reinforced nascent groups in civil society, creating possibilities for state-society partnerships. As a result, both state elites and societal groups have been involved in adapting state institutions and policies

State Transformations in Comparative Perspective    181 to new challenges. Peter Evans and Patrick Heller (Chapter 37, this volume) and Evelyne Huber and Sara Niedzwiecki (Chapter 43, this volume) provide clear illustrations of these dynamics. Evans and Heller describe the transformation of developmental states in response to changes in the economy and society. There is widespread agreement that globalization and new technologies have made it far more difficult for states to pursue traditional developmental strategies centering on the protection and promotion of heavy industry. In addition, newly industrializing countries, such as South Korea and Taiwan, are less insulated from international financial pressures than the established OECD democracies: when the East Asian financial crisis struck, international lending organizations demanded market reforms and a loosening of protectionism in return for new loans. These countries are also less insulated from domestic demands. In many countries, newly mobilized societal groups called for a curtailing of the pro-business bias associated with the developmental state. Evans and Heller argue that these economic and political pressures have spelled not the end of the developmental state, however, but rather the recasting of the developmental state along new lines. Developmental states have maintained their Weberian bureaucratic structures, but have moved away from the exclusive promotion of heavy industry and narrow partnerships with business elites. New developmental states focus on supporting the development of human capabilities throughout society via increased spending on education, health, and infrastructure, an approach long championed by the Nobel prize-winning economist Amartya Sen (1999). The premise of this new developmental strategy is that the best way to promote productivity and economic growth in today’s rapidly changing, information-centric economy is to expand the capabilities of the mass of citizens. New developmental states are also forging a different kind of relationship with civil society, according to Evans and Heller. Whereas in the past, developmental states sought to suppress the demands of labor and were compatible with authoritarian politics, today’s developmental states seek to incorporate a wide array of groups. Connections to a robust civil society provide all manner of benefits, including information and feedback to improve policy design; checks on capture and clientelism; and partners for outreach and implementation, which are especially important in the case of policies like education and healthcare that seek to reach marginalized groups in the hinterlands. In order to reap these benefits, Evans and Heller contend that new developmental states must bolster civil society, just as old developmental states once bolstered industrial elites, in particular by sharing responsibility for the design and implementation of public policies. Evelyne Huber and Sara Niedzwiecki describe another shift in the state’s missions and relations with civil society. Historically, the most advanced states of Latin America and East Asia have developed distinctive social capacities. Latin American countries established early welfare states, prodded by powerful labor movements and left parties, while in East Asia, where developmental dictatorships held sway, formal social protection was largely absent. East Asian elites did not ignore the social question, but instead attempted to resolve it in a different way, through what came to be known as “productivist welfare states.” East Asian authorities sought to avoid the need for a formal welfare state by creating full employment and rising incomes through a combination of land reform, industrial policy, and public investments in health and education.

182   Jonah D. Levy Huber and Niedzwiecki contend that Latin American and East Asian leaders have been reforming their respective systems through a kind of mutual borrowing. Part of the reason for this behavior is that state elites have discovered the limits of their traditional approaches. East Asia’s productivist welfare states were of little use to the millions of people who lost their jobs during the 1997/98 financial crisis. Latin America’s welfare states have tended to leave much of the population unprotected—the so-called labor market “outsiders” composed of rural and informal employees—and have centered on payments to replace or stabilize incomes, as opposed to increasing productivity. Huber and Niedzwiecki suggest that reforms have also been driven by changes in the political context. Transitions to democracy in East Asia have allowed unions and societal organizations to press for the establishment of formal welfare programs, while the election of a number of left-leaning governments in Latin America at a time when a commodities boom has filled state coffers has opened the door to universal health, education, and antipoverty programs that include outsiders and that seek to upgrade human capabilities. The result is not necessarily convergence between the East Asian and Latin American regimes. East Asian welfare states remain far smaller than their Latin American counterparts, and Latin American investments in human capital fall well short of those in East Asia. However, in both regions, the direction of reform is toward an expansion of state responsibilities, driven in no small part by a more mobilized, politically active civil society. Although the advanced countries of East Asia and Latin America approximate the OECD pattern of adjustment, there are still some important differences. Corruption has weakened state capacity and legitimacy in many countries, especially in Latin America, and these nations occupy a more subordinate position within the international financial system. As a result, the so-called “Washington consensus” of neoliberal reform has been imposed in relatively pure ideological form on these countries, especially at times of debt crisis. Neoliberal reform has destabilized the traditional growth models of ISI in Latin America and developmental states in East Asia. It has also stripped state authorities of key instruments of political legitimation, such as patronage and social spending. State transformations, then, have been impelled and constrained by international economic pressures to a greater degree than among the established OECD democracies. That said, the combination of democratic political institutions, strong economic growth, and mobilized civil societies has provided valuable resources for state adaptation and redeployment, as opposed to state rollback. Like their counterparts among the core affluent democracies, the advanced states in East Asia and Latin America have forged new economic and social missions along with new kinds of governance based on more cooperative relationships with societal groups.

The Communist and Post-Communist World The pattern of state transformation across the communist and former communist countries presents a very different picture from that of the affluent democracies or Latin America and East Asia. The totalitarian states and command economies across Eastern Europe and the former Soviet Union have been toppled and replaced, not reformed. That said, the combination of state collapse and civil societies debilitated by decades of

State Transformations in Comparative Perspective    183 repression has limited the possibilities for post-communist reconstruction. Reformers have generally found it easier to reconstruct and deploy despotic capacity than to provide effective governance or partner with civil society to cultivate infrastructural capacity, although there are some important exceptions to this pattern. Anna Grzymała-Busse and Pauline Jones Luong (Chapter 31, this volume) and Milada Vachudova (Chapter 32, this volume) show that two kinds of states have emerged out of the ashes of the communist states: what might be termed power-sharing states that compensate and guarantee the political survival of the opposition and winner-take-all states that concentrate political and economic power in the hands of an often-autocratic leader. Power-sharing states are found almost exclusively in East Central Europe, with Poland being the prototypical case. The chapters by Grzymała-Busse and Jones Luong and by Vachudova relate that power-sharing states are largely the product of mobilized civil societies that helped topple the communist regimes and exerted considerable pressure on elite reformers via strikes, elections, and media campaigns. This influence translated to democratic systems that provide a variety of guarantees to those out of office. Features such as proportional representation, parliamentary governance, decentralized polities, and clear property rights curb the discretion of rulers and lead to frequent elite turnover. They also tend to limit corruption and rent seeking, as do independent regulatory agencies, a smaller bureaucracy, transparent party funding systems, and a free press. Winner-take-all states are far more common in the post-communist world, especially across the former Soviet Union. Grzymała-Busse and Jones Luong as well as Vachudova note that this system emerged from personalistic and autocratic processes of state-building by unconstrained elites, who did not face significant societal mobilization. Unconstrained elites designed institutions and practices that concentrate power in the hands of the executive: majoritarian electoral laws, presidential rule, highly centralized polities, and conditional or unclear property rights. Winner-take-all states impose high costs on the political opposition. Members of the opposition have no local power bases to fall back on, since the national leadership appoints local government authorities; they have little influence over policy; they are excluded from the spoils of office; and their basic civil rights and property can be usurped at any moment. The winner-take-all states are also associated with pervasive corruption. The exemplar of the winner-take-all system is Russia under Vladimir Putin, which is analyzed by Brian Taylor (Chapter 34, this volume). Taylor shows that Putin has strengthened the despotic or repressive capacity of the Russian state by rebuilding the military, police, and domestic security forces; tightening controls over the media, political parties, and civil society; replacing elected governors with appointees; and reining in the oligarchs, expropriating or even jailing those who fail to go along with Putin’s wishes. On the basis of Putin’s reforms, the Russian state has become largely autonomous from societal, regional, oligarchic, and parliamentary interests, that is, more able to formulate and impose initiatives independent of the preferences of societal actors and the political opposition. The state is also better able to extract fiscal resources, having brought the oligarchs to heel and improved tax collection. On other dimensions of stateness, however, Taylor shows that under Putin, the Russian state remains deficient. Putin has not strengthened the state’s capacity to provide collective goods and services in a reasonably professional, cost-effective manner. The Russian

184   Jonah D. Levy state continues to be plagued by bad governance, characterized by corruption, arbitrariness, poor protection of property rights, and a weak rule of law. The state has become less efficient, not more efficient, at providing basic public services, such as healthcare. It also struggles to safeguard citizens against crime and terrorism. Finally, the Russian state continues to lack infrastructural capacity, and Putin has made the problem worse by repressing independent actors and civil society. Despotic states are not entirely unreformable, however. Vachudova analyzes how the EU has used its leverage during accession negotiations to push some aspiring member states, most notably in the Western Balkans (Bulgaria, Romania, Slovakia, Croatia, Serbia, etc.), away from illiberal or authoritarian rule and toward democracy. In her chapter and her book (2005) she describes the EU accession process as “the most successful democracy promotion policy ever implemented by an external actor.” In addition, over time, as EU authorities have learned from initial rounds of enlargement, they have layered on new requirements designed to promote not just democracy, but also well-functioning states. For example, the EU now devotes a chapter in the accession process to fundamental rights, the rule of law, and the performance of the judiciary. Although there are limits to the EU’s ability to reshape accession-country institutions, as Vachudova points out, what is perhaps most interesting from the perspective of state transformations is that international constraints are being deployed to build state capacities, as opposed to constraining or narrowing state capacities. Even states that remain formally despotic can experience significant change, as Kellee Tsai relates (Chapter 35, this volume). China—a one-party, nominally communist regime—has implemented sweeping changes, revitalizing state institutions that were on the verge of irrelevance or decay. The key is what Tsai terms “adaptive informal institutions,” that is, changes in practice that occur within the existing institutional framework, without any revision to the law. If the innovation proves successful and popular, then the law can be changed and the reforms extended further. Conversely, if the innovation proves problematic and unpopular, officials can stamp it out. Thus, adaptive informal institutions open a space within authoritarian systems for experimentation in new kinds of state-society relations that need only be acknowledged if they prove successful. Tsai points to “collective enterprises” as a leading example of adaptive informal institutions. In the 1980s, collective enterprises were allowed to operate as quasi-private companies at a time when private enterprises remained under tight control. The success of these collective enterprises then paved the way for the legalization of private enterprises in 1988. Nor did institutional change end there. The legalization of private enterprises opened the door to further reforms, culminating in the admission of business owners into the Chinese Communist Party (CCP) and the establishment of constitutional protections of private property rights. In the end, collective enterprises served as an informal adaptive institution that permitted the gradual introduction of private property, the unleashing of society’s entrepreneurial energies, and the eventual incorporation of a business class into the CCP without triggering a backlash by the guardians of communist orthodoxy. Across Eastern Europe and the Soviet Union, totalitarian states have been swept away and new states erected in their place. However, totalitarian legacies, most notably debilitated civil societies, have weighed heavily on post-communist politics. As Taylor describes, reformers have generally found it easier to reconstruct despotic capacity than

State Transformations in Comparative Perspective    185 to provide effective governance or partner with civil society to cultivate infrastructural capacity. Still, as Grzymała-Busse and Jones Luong along with Vachudova observe, a few countries where societal groups helped topple the communist regimes have established power-sharing states which, however imperfect, hold the possibility for developing effective governance and state-society partnerships. Moreover, despotic states may be reformable, as the chapters by Vachudova and Tsai relate. The EU has used its leverage to nudge accession countries toward liberal democracy, the rule of law, judicial independence, and state integrity. China’s leaders have maintained a despotic regime, indeed a formally communist regime, but have been able to introduce a degree of institutional flexibility and create a dynamic market economy through adaptive informal institutions.

The Global South The pattern of state transformations among the least developed states of the Global South displays both similarities with and differences to the pattern of the post-communist world. As in Eastern Europe and the former Soviet Union, reform has tended to take place against institutions, rather than through institutions. The goal has generally been to topple dysfunctional and repressive regimes, and many countries in the Global South have experienced sweeping changes. That said, state transformations among these countries have tended to be the product of violent projections of force—of coups, revolutions, civil wars, and foreign invasions—as opposed to the mostly (albeit not always) peaceful processes of change in Eastern Europe and the former Soviet Union. Moreover, state transformations have often proven to be fleeting and unstable, in contrast to the rapid lock-in of new institutions in Eastern Europe and the former Soviet Union described by Grzymała-Busse and Jones Luong as well as Vachudova. Societal, state-institutional, and international factors have all contributed to this pattern of violence and instability across the Global South. From a societal perspective, the most striking features of the Global South are deep poverty and ethnic divisions. Matthew Lange relates (Chapter 36, this volume) that per capita GDP is only one-fifth to one-sixth the level of the affluent democracies of the OECD. States lack the fiscal resources to fund a professional bureaucracy, leading to shirking and corruption among administrators. They also lack the means to support economic development or provide health, education, and welfare to the citizens. As a result, citizens feel little attachment to the state, and their loyalties often lie with clans or tribes that are seen as better able to address their needs. Aggravating matters, as Matthew Lange and Klaus Schlichte describe (Chapter 41, this volume), are ethnic divisions, which are often traceable to colonial divide-and-conquer policies and arbitrary definitions of borders and are far more pervasive in the Global South than in the core OECD. Such divisions frequently undermine the functioning of the state. Instead of providing services to all citizens, communalized states favor a particular group, engaging in open discrimination against out-groups. Lange and Schlichte show that ethnic divisions are also linked to political violence. Communal riots or warfare are often used as a way of keeping subordinate groups in line; discrimination and violence may lead victimized groups to turn against the regime, supporting secessionist or rebellious movements;

186   Jonah D. Levy and state authorities confronting ethnonationalist movements may respond militarily, which can lead to civil wars accompanied by large-scale abuses of human rights. Thus, ethnic divisions in the Global South both undermine the functioning of the state and fuel political contestation and violence. A second factor behind the sweeping, often violent transformations of states in the disadvantaged Global South is the dysfunctional character of many of these states. As noted earlier, states often fail to deliver useful services because they lack adequate fiscal capacity or are structured to favor one ethnic group over the others. The predatory states examined by William Reno (Chapter 39, this volume) go a step further. These states prey upon their own citizens, terrorizing them, despoiling their common patrimony, and deliberately undermining the institutions and policies that might allow citizens to make a better life for themselves. Leaders of predatory states believe that improving the welfare of their citizens could bring about a fundamental shift in political power that would threaten their own survival. For example, ambitious insiders could use the institutions of development-oriented states to build their own power base. From the perspective of fearful rulers, retaining power and promoting economic development or providing public goods to all citizens are mutually exclusive. For this reason, predatory states rank near the bottom of the UN Human Development Index, the Freedom House Index of political liberties, and IMF and World Bank measures of economic growth. Another defect of troubled states in the Global South is their limited sovereignty. In many countries, large swathes of national territory are held by rebel groups or warlords. For Sven Chojnacki and Anne Menzel (Chapter 40, this volume), such contested zones are where “state failure” bleeds into “state collapse.” State failure describes a situation in which state institutions are unable to provide security, legitimacy, or basic public welfare services. State collapse results when states not only fail to perform their basic functions, but effectively dissolve. In a sense, the processes of state failure and state collapse are two sides of the same coin of political instability and violence in the Global South: on the one hand, the inability or unwillingness of many rulers to provide useful services to the population; on the other hand, the incapacity of these authorities to enforce their rule by projecting power and monopolizing violence throughout the realm. The third main factor behind the pattern of violent, unstable state transformation throughout much of the Global South is a set of shifts in the international system. One such shift has been the end of the Cold War. Reno notes that the Cold War buttressed predatory states in several ways. The fear of a direct conflict between the superpowers protected predatory regimes against both foreign invasion and secession. Consequently, these regimes did not need to worry about securing the loyalty of the population, nor did they need to promote economic growth in order to finance an army. In addition, both the US and USSR provided direct aid to their clients. For example, Reno relates that in the early 1980s, Liberia, Somalia, and Congo were Africa’s three largest recipients of US foreign aid, and all three benefited from US pressure on international creditors to provide commercially unviable loans. With the end of the Cold War, Western countries were less willing to support unsavory clients. The US Congress cut off aid to Liberia, Somalia, and Congo, and all three states promptly collapsed. If the end of the Cold War led Western powers to sever ties with some governments in the Global South, it spawned a more intrusive approach in other cases. No longer fearful

State Transformations in Comparative Perspective    187 that military intervention would prompt a war between the superpowers, Western nations affirmed a “right to protect” (R2P), that is, a right to intervene to protect citizens from atrocities tolerated or perpetrated by their governments. Reno points out that R2P was invoked to justify internationally led regime change in Sierra Leone (1998), Liberia (2003), Guinea (2009), and Libya (2011). The end of the Cold War also freed the West to promote secessionist movements, leading to the creation of new countries like East Timor and South Sudan. The 9/11 attacks provided a further motivation for Western interference in the Global South. Conflicts that had been of little concern suddenly raised alarms. As Chojnacki and Menzel observe, “civil wars” became redefined as “failed states” that threatened national security by providing safe havens for terrorists. This kind of reasoning was used to justify military intervention in countries like Somalia and Mali. From the vantage point of many countries in the Global South, the end of the Cold War and the response to 9/11 transformed the international system into a much more threatening, destabilizing order: instead of propping up clients and defending the status quo, as during the Cold War, Western powers became increasingly willing to promote regime change via military means as a way of upholding norms like R2P or democracy and to safeguard national security by disrupting terrorist networks. The pattern of political violence and instability across much of the Global South stems from a combination of illegitimate and predatory states, deeply divided civil societies, and a destabilizing international system. State institutions have tended to be ineffective at best—unable to assure security and the rule of law, to promote economic growth, or to provide basic public services, such as healthcare or education. In many cases, states lack the basic attributes of sovereignty, in that they are essentially absent from large parts of the country. At worst, states in the Global South engage in economic predation, terrorizing and despoiling their citizens. The effects of such predation, along with deep ethnic divisions, have often left civil society fractured and incapable of organizing for the collective good. Finally, the international system, which long buttressed regimes in the Global South, has become a source of instability. The end of the Cold War deprived assorted authoritarian, corrupt, or predatory regimes of the economic and military support of one of the two superpowers, which often led to regime collapse or civil war. Military intervention by Western nations in the name of defending human rights, promoting democracy, and/or combating terrorism has also toppled or at least undermined many regimes.

5  Conclusion: Toward a Comparative Politics of State Transformations This chapter has challenged the prevailing understanding of state transformations, and specifically the views emphasizing state retreat in the face of international pressures, by providing a series of comparisons. Comparison across time demonstrates that states have often responded to international challenges by forging new missions and modes of governance, as opposed to simply retreating—a possibility that seems to be assumed away by the

188   Jonah D. Levy contemporary debate. Comparison across policy shows that international pressures do not affect states in just one way; instead, the linkages are variable and policy-specific. Finally, comparison across place makes it clear that state transformations take very different forms in different parts of the world, reflecting differences in positions within the international system, state structures, and features of civil society. At the most general level, this chapter suggests that contemporary state transformations should be studied through the lens of comparative historical analysis, as opposed to either a teleology of state decline or a counter-narrative of state inertia. Arriving at a comprehensive, comparative politics of state transformation will require addressing several additional challenges, however. The first is typological. Institutional and policy reform has undermined many of the prevailing typologies of states, such as the distinction between statist, liberal, corporatist, and ISI economic models. Meanwhile, countries in Latin America and East Asia have approached or, in some cases, exceeded the level of development of the historic OECD nations. This combination of dislodging of the old and the emergence of the new requires us to rethink the categories that we use to group advanced political economies. In addition, new typologies must be able to integrate not only economic change, but also state transformations in other areas, such as military, security, gender, and immigration policy. The second challenge concerns the understanding of a “modern” or “adapted” state. Historically, adjusting to changes in the international environment meant developing a whole new set of state activities and capacities: constructing a bureaucracy capable of extracting the resources to sustain a standing army or overcoming relative economic backwardness by devising mechanisms to protect and finance infant industries. By contrast, adapting to globalization in the contemporary era seems to revolve around subtler changes. In many instances, adjustment entails pursuing traditional objectives in new ways—for example, supporting economic growth and social protection through a greater reliance on market mechanisms. New modes of governance also figure prominently in contemporary state adjustment. Institutional fragmentation means that state authorities can no longer simply issue fiats, but rather must often forge partnerships and compromises with a multitude of other actors. A central analytical challenge for any comparative politics of state transformation, then, is to arrive at a coherent understanding of what a “successful” state looks like at a time when “successful” adjustment does not necessarily revolve around dramatic changes and the adoption of heroic new missions. The third challenge relates to the construction or reconstruction of state capacity in places where it is lacking. Across much of the former communist world and Global South, states struggle to perform the most rudimentary functions, such as assuring public order or the rule of law. The trajectory of the post-communist world would seem to suggest that countries must first establish despotic capacity before they can move on to improving state effectiveness or cultivating infrastructural capacity. Critics counter that the despotic path is a dead end, rather than a necessary phase of state development. Might it be possible to avoid zero-sum tradeoffs, instead constructing state and civil society, despotic and infrastructural capacity, effectiveness and inclusion in tandem? Some of the post-communist transitions in Eastern Europe, where mobilized civil societies toppled the communist regimes, point toward such a path. Moreover, the growth of international organizations and NGOs, which is so often presented as a constraint on nation states, may offer

State Transformations in Comparative Perspective    189 resources for newly emerging states and civil societies, as the EU has certainly done for East European accession states. In other words, the increasing availability of suprastructural capacity abroad can potentially assist states struggling to rebuild both despotic and infrastructural capacity at home.

Acknowledgment The author wishes to thank Claire Greenstein and Stephan Leibfried for their comments, corrections, and suggestions on earlier versions of this chapter.

References Anderson, Perry, 1974. Lineages of the Absolutist State. London, UK: Verso Books. Brewer, John, 1990. The Sinews of Power:  War, Money, and the English State, 1688–1789. Cambridge, MA: Harvard University Press. Ertman, Thomas, 1998. Birth of the Leviathan: Building States and Regimes in Medieval and Early Modern Europe. Cambridge, UK: Cambridge University Press. Esping-Andersen, Gøsta, 1990. The Three Worlds of Welfare Capitalism. Princeton, NJ: Princeton University Press and Cambridge, UK: Polity. Gerschenkron, Alexander, 1962. Economic Backwardness in Historical Perspective. Cambridge, MA: Harvard University Press. Gilbert, Felix, ed, 1975. The Historical Essays of Otto Hintze. New York: Oxford University Press. Hall, Peter A, 1986. Governing the Economy: The Politics of State Intervention in Britain and France. New York: Oxford University Press. Levy, Jonah D, ed, 2006. The State after Statism: New State Activities in the Age of Liberal­ ization. Cambridge, MA: Harvard University Press. List, Friedrich, 1856 [1841]. The National System of Political Economy. Philadelphia, PA: J. B. Lippincott & Company (originally published in German in 1841). Mann, Michael, 1986. “The Autonomous Power of the State: Its Origins, Mechanisms, and Results.” In States in History, ed John A Hall, 109–136. London, UK: Basil Blackwell. Polanyi, Karl, 1944. The Great Transformation. Boston, MA: Beacon Press. Reich, Robert, 1992. The Work of Nations: Preparing Ourselves for 21st-Century Capitalism. New York: Vintage Books. Sen, Amartya K, 1999. Development as Freedom. New York: Anchor Books. Shonfield, Andrew, 1965. Modern Capitalism: The Changing Balance of Public and Private Power. Oxford, UK: Oxford University Press. Tilly, Charles, 1975. “Reflections on the History of European State-Making.” In:  The Formation of National States in Western Europe, ed Charles Tilly, 3–83. Princeton, NJ: Princeton University Press. Vachudova, Milada A, 2005. Europe Undivided: Democracy, Leverage and Integration after Communism. Oxford, UK: Oxford University Press. Weber, Max, 1965 [1919]. Politics as a Vocation. Philadelphia, PA: Fortress Press (first published in German in 1919).

190   Jonah D. Levy Weingast, Barry R, and North, Douglass C, 1989. “Constitution and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England.” Journal of Economic History 49 (4): 803–832. Williamson, John, 1990. “What Washington Means By Policy Reform.” In Latin American Adjustment: How Much Has Happened, ed John Williamson, 7–40. Washington, DC: Peterson Institute for International Economics. Zysman, John, 1983. Governments, Markets, and Growth: Financial Systems and the Politics of Industrial Change. Ithaca, NY: Cornell University Press.

Pa rt I I I N T E R NAT IONA L I Z AT ION A N D T H E  S TAT E

Chapter 10

I n ter nationa liz ation a n d the State Sovereignty as the External Side of Modern Statehood

Michael Zürn and Nicole Deitelhoff

1 Introduction Already at the end of the nineteenth and the early twentieth century, writers as different as Karl Marx and Friedrich Engels, on one side, and Norman Angell (2007 [1912]), on the other, emphasized the irrelevance of national borders for economic interests. Then, two world wars and the rise of totalitarian states silenced this perspective, which was not revived until the debate about the likely future of the modern state in the late 1960s and early 1970s. With The Economics of Interdependence (Cooper 1968) and Sovereignty at Bay (Vernon 1971), two economists set off the debate, while the most important contributions of political scientists came about more than two decades later (Scharpf 1991; Jessop 1994; Cerny 1995, 1996). All of these contributions focused on the presumed effects of globalization on the state’s ability to govern internally. The rise of transborder flows in goods, capital, and information, as well as the rise of transnational actors such as multinational corporations (MNCs), were seen as challenging the state’s ability to effectively steer the course of its political community. Nevertheless, many prominent studies still emphasized the continuing and basically unchanged capability of the state to autonomously choose its policies (Garrett 1995; Krasner 1999; Rieger and Leibfried 2003). Similarly, it was argued that if the conditions that render state intervention into markets difficult do prevail, it is due only to the state’s decision (Helleiner 1994). Thus, Linda Weiss (1998) talked about The Myth of the Powerless State. More recent studies on the effects of globalization have, however, shown a slight trend toward convergent deregulation, although it is still much less clear than originally expected, and it is contingent upon a number of scope conditions (for an overview, see Zürn 2013; Genschel and Seelkopf, Chapter 12, this volume).

194    Michael Zürn and Nicole Deitelhoff Particularly in the last 15 years, the debate about the future of the state has increasingly changed its focus to analyzing the new role of the state and the “transformations of statehood” (Leibfried and Zürn 2005). The respective contributions focused not only on an increasingly integrated world economy, but also on the emergence of denationalized civilization risks, such as climate change or transnational terrorism. They identified an expansion in the regulatory scope and depth of international institutions and organizations, and focused on the rise of a transnational civil society, in addition to MNCs, as drivers of the change. At the same time, a differentiated view of the state was employed. It was emphasized that states, in spite of all the changes, have been keen to keep firm control over the key resources of governing, such as the monopoly on the means of force and on tax collection (see e.g. Rosenau 1997; Zürn 1998; Held et al. 1999; Grande and Pauly 2005). Based on configurative or multidimensional definitions of statehood and the modern state in the tradition of Georg Jellinek (1900), changes were analyzed along different dimensions (Habermas 1998; Caporaso 2000; Zangl and Zürn 2003; Deitelhoff and Steffek 2009). In this second stage of the debate, scholars of international relations played a much more significant role, since the question of sovereignty and the external side of the modern state came to the fore. In Part II of the Handbook, we address this more recent debate and focus on the external side of statehood. The chapters of this Part focus on discerning the effects of internationalization on the modern state, and, if these effects exist, on how the state is affected by features of internationalization, such as the increase of transnational exchanges, international institutions, and transnational actors. This introductory chapter serves two functions. First, it provides a conceptual scheme and a map for the more specific chapters of Part II of this Handbook, which analyze the effects of internationalization on specific aspects of the state (Viola et al., Chapter 11, Genschel and Seelkopf, Chapter 12, Hanrieder and Zangl, Chapter 13, Schakel et al., Chapter 14, Mattli, Chapter 15, all this volume), or focus on particularly important challenges to the state (Daase, Chapter 16; Helleiner, Chapter 17; Dingwerth and Jörgens, Chapter 18, all this volume). Its second function is to summarize and discuss the findings of these chapters with a view to assessing the external side of the state in today’s world. We proceed in four steps. To analyze the effects of internationalization on the state, we begin by delineating the external side of the modern state. We conceptualize it as sovereignty featuring properties of both single states and the state system (Section 2). Traditional sovereignty basically denotes the idea “that there is a final and absolute political authority in the political community . . . and no final and absolute authority exists elsewhere” (Hinsley 1986: 26). Since this idea depends on external recognition, states and the state system stand in a relationship of mutually constituting each other. For our purposes, we conceptualize traditional sovereignty as a concept that has several components, each of which is a correlate to the internal components of the modern state: it is based on a notion of (1) recognition that refers to capacity (assuming states do have control over their territory); (2) formal equality and segmentary differentiation (not allowing for a relationship of formal dominance between states); (3) final authority (not allowing for the rise of authority beyond the state/s); and (4) social and economic independence (allowing for independent economic and social development in the domestic sphere), yet comprising interdependence among states in the security realm. Against the benchmark of traditional sovereignty, we ask whether sovereignty is still crucial in understanding the external side of the state, and, if so, how the meaning of sovereignty has changed during the last centuries.

Internationalization and the State    195 One objection to such an approach is that, in the real world, none of the components of traditional sovereignty have ever been fully realized. As powerful states have frequently violated the sovereignty of other states, a conceptualization in which traditional sovereignty serves as a benchmark is falling into the trap of the Westphalian myth (e.g. see Krasner 1999). It is not the fully consolidated but the limited statehood that describes normality, as Thomas Risse argues (Risse 2011a, Chapter 8, this volume). Contrary to this critique, we argue that the perspective of compliance with sovereignty norms is only partially useful, since sovereignty is, at its core, not a behavioral norm, but a regulative idea that is entangled in the broader notion of statehood. Regulative ideas such as objectivity or democracy do not formulate concrete behavioral guidelines, but reflect normative and conceptual aspirations in the minds of individuals (Section 3). Of course, sovereignty may not only change its meaning; it may also become so detached from reality that it ceases to exercise the function of a regulative idea. Three possible outcomes of our analysis are, therefore, conceivable: according to the first one, traditional sovereignty still prevails as a constitutive regulative idea; secondly, a new meaning of sovereignty serves as a regulative idea; finally, sovereignty has lost its function as a regulative idea. Against this conceptual background, we reconsider and reconstruct the external side of the state (Section 4). We identify changes in the concept of sovereignty, especially those discussed in the subsequent chapters of Part II (Section 5), and we conclude (Section 6) by examining these changes and re-thinking the conceptualization of the external side of the state. The result of this exercise can be summarized in two findings. First, there is one lesson that receives unequivocal support in all chapters: the effects of internationalization on the state lead to a (partial) internationalization of the state; the state, including its external side—that is, sovereignty—will remain. Second, we argue that significant changes are being observed in the meaning of sovereignty. Traditional sovereignty has been transformed to something that may be labelled as conditional sovereignty.

2  Sovereignty: The External Side of the Modern State The heyday of the modern state materialized in the western part of the world in the second half of the twentieth century. This historically concrete state can be seen as the specific geographical and historical institutionalization of an imagined ideal type, or of a regulative idea, in which four central dimensions of statehood merged (see Zürn 2004; Leibfried and Zürn 2005):1 (1) The monopolization of the means of force and of tax collection within a specific territory has resulted in the modern territorial state. 1 See

Hurrelmann et al. (2007), Genschel and Zangl (2008, 2014), Deitelhoff and Steffek (2009), Deitelhoff and Geis (2010), and Rothgang and Schneider (2015) for further contributions which employ the themes of this concept.

196    Michael Zürn and Nicole Deitelhoff (2) The recognition that the state is internally bound by its laws has made the institutionalization of the rule of law and the constitutional state possible. (3) The formation of a common national identity—the people within the territory of a state considering themselves a community—has led to the claim for political self-determination and made the rise of the democratic nation state possible. (4) The goal of increasing societal wealth and distributing it fairly has led to the development of a social interventionist state. At least in the OECD2 world of the 1960s and 1970s, the central characteristic of the modern state has been that these four institutional dimensions of modern statehood merged and supported each other in one territorially defined political organization. The modern state came to be distinguished by a specific emphasis on territoriality or space as its central organizing principle. The separate elements can be seen as constituting a “national constellation” (cf. Habermas 1998). Because these different dimensions of statehood supported each other (cf. Senghaas 1994), they form a “synergetic constellation.” The merging of these four dimensions of statehood at the level of territorially defined states also implies a sharp spatial dividing line between inside and outside, usually demarcated by the borders of the national territory. In other words, the territorial, rule-of-law-based, democratic, interventionist state—which has been abbreviated as TRUDI (Zürn und Leibfried 2005: 3)—not only takes effect on the inside, but also has, by its constitution, an external side. The best term to capture this external side is sovereignty. The notion of sovereignty is intimately connected with the idea of the modern state. This becomes evident in one of the most influential definitions, according to which sovereignty denotes “the supreme legal authority of the nation to give and enforce the law within a certain territory and, in consequence, independence from the authority of any other nation and equality with it under international law” (Morgenthau 1967: 305; see also Hinsley 1986: 17). Sovereignty is attributed to states by other states (Biersteker and Weber 1996a: 2). It is recognition as an international legal subject that ultimately makes a political organization a state. “Sovereignty, in the end, is status—the vindication of the state’s existence as a member of the international system” (Chayes and Chayes 1995: 27; see also Bull 1977; Ruggie 1986). Although the concept of sovereignty prevailed de facto to a significant degree from the fifteenth century on, it only became recognized de jure through the Westphalian treaties and states’ prevalence over institutional competitors such as city states (Spruyt 1994). It took a further 300 years before the world was completely compartmentalized into different sovereign states, each given responsibility for a certain territory, and other powerful threats to the monopoly of force, for example, pirates and mercenaries, lost significance in transnational spaces like the open sea (Thomson 1994). The concept of sovereignty, in its original meaning, involves four components. First, the ruler of a state exercises sole authority over the territory of that state. This essentially means that a state’s authority is recognized by others “when [it] has achieved the capability to defend its authority against domestic and international challenges” (Thomson 1995: 220).

2 

Organisation for Economic Co-operation and Development.

Internationalization and the State    197 In this sense, external recognition has been bound to internal capacities to prevail as the power-holder over a given territory. Secondly, at the level of the state system, since the notion of a final and absolute authority of the political community rules out external domination, all states are equal in their sovereignty. This means that there is no institutionalized discrimination between small and large states or less and more powerful states when it comes to international law and international institutions. Or, as Kenneth Waltz has famously put it, in structural terms, since there is no functional differentiation between states, formally, each is the equal of all the others (1979: 88). This highlights the notion of segmentary differentiation at the level of the state system. Thirdly, and related to the second point, state parties are not subject to any law other than their own and what they have explicitly agreed to. They represent the absolute and final authority; there can be no further stratificatory differentiation. This component excludes, on the one hand, the possibility for states to control the internal or external affairs of other states. On the other hand, international institutions are considered to be instruments of the state, lacking a political authority of their own (Kahler 2004). International institutions serve as means to coordinate state interactions in terms of realizing common gains and avoiding common losses (Keohane 1984). Fourthly, a state is not only free to pursue its desired internal policies (in the normative sense) but also capable of doing so (in the instrumental sense). States possess sufficient autonomy to pursue different paths of internal development. Even in the post-World War II world of embedded liberalism, structural pressure leaves states enough autonomy for them to decide on their own to what extent they favor redistribution of wealth within their societies and wish to build up welfare states (Katzenstein 1978; Ruggie 1994; Hall and Soskice 2001). These four components of the external side of the modern state correlate nicely with the internal components of TRUDI. A state’s capacity to defend its authority as a basis for external recognition reflects the monopolization of the means of force and of tax collection within a specific territory, which has resulted in the modern territorial state. The sovereign equality principle under international law goes hand in hand with the internal rule of law principle. The rejection of any authority above the modern state is based on the idea of political self-determination, which corresponds internally to democratic rule. The principle of autonomy and the capacity to choose its own domestic course is a prerequisite of the interventionist welfare state.

3  Sovereignty as a Regulative Idea The multidimensional approach to sovereignty shares similarities with Stephen Krasner’s seminal contribution about sovereignty as “organized hypocrisy.” Krasner (1999:  2–3) distinguishes between four types of sovereignty:  legal sovereignty, or recognition and acceptance of the judicial equality of states; Westphalian sovereignty, a form of political organization based on territory and an exclusion of external authority; domestic sovereignty, the ability of public authorities to exercise effective control; and interdependence sovereignty, the ability of public authorities to control the flow of information, ideas, goods,

198    Michael Zürn and Nicole Deitelhoff capital, and people across borders. In contrast to Krasner, we do not speak of four types, but rather of four dimensions of sovereignty. These four dimensions stand in relationship to each other, and changes in one dimension will cause changes in another. In our view, it is a synergetic constellation—just like TRUDI. Krasner’s attack on sovereignty as a myth is mainly directed against one type of sovereignty, Westphalian sovereignty, that is the exclusion of external authority. Krasner (1999) underlines an argument that he made earlier in “Westphalia and All That” (1993), saying that he does not see the Peace of Westphalia as a turning point in history that established the sovereignty of states: Westphalia was but one step in the long-term erosion of the position of the emperor. Every important change in the Holy Roman Empire from the Golden Bull of 1356 to the Recess of the Imperial Deputation involved either a reduction in the emperor’s power or an increase in the power of the princes or both. Westphalia was only the most notable of these developments. (1993: 246)

There is little to add here. We will adopt such a historical perspective and trace the change of meaning in each of the four dimensions of sovereignty over time in Section 4. Yet there is another argument leading to the view of Westphalian sovereignty as a myth (Krasner 1999; Risse 2011b). As opposed to legal sovereignty, which supposedly is in the interest of all rulers, Westphalian sovereignty is, according to Krasner (1999: 27), only in the interest of rulers of the weak states, not the strong ones. For exactly this reason, Westphalian sovereignty is—contrary to legal sovereignty—inherently unstable. When measured in terms of a behavioral legal norm, Westphalian sovereignty has never prevailed completely. The observation that Westphalian sovereignty has, to some extent, always been disregarded could therefore lead some to the conclusion that it was either ineffective or never really enacted (Biersteker and Weber 1996b). Irrespective of whether such a shortcut between compliance and norm existence makes much sense, sovereignty should be considered a regulative idea. Regulative ideas are heuristic principles of the mind that structure the social realm without being present. They consist of two components: rational ideal and normativity. It is an ideal in the sense that it can never exist in a thorough way, such as the mathematical notion of a circle. It is normatively desirable in the sense that it points to an ideal to which we should aspire. For example, perfect objectivity is an ideal that structures social life. Immanuel Kant’s initial example of a regulative idea, God, may be most telling in that respect. Freedom, justice, and democracy are modern institutional examples. Sovereignty as a synergetic constellation should be seen as a similar regulative idea rather than as a behavioral norm.3 There is thus no need to struggle with Krasner’s empirical assessments of sovereignty when the concept is used as a regulative idea instead of a behavioral norm which has been negotiated in the Peace of Westphalia. Similarly, according to Thomas Risse (Risse, Chapter 8, this volume), “areas of limited statehood”—referring to a deficit in the ability to exercise effective control within the border of a polity—in the international system have been a common phenomenon historically and continue to be so in today’s international politics. Accordingly, limitations of effective control can form in parts 3 

In contrast to a regulative idea, behavioral norms can be realized completely. It is possible to comply with the norm of not driving faster than 55 miles on the highway—although this is very hard for Germans to accomplish.

Internationalization and the State    199 of a country’s territorial space temporarily, in specific policy areas, or with regard to groups of the population, and those limitations may be permanent or temporary. Empirically, Risse is correct. At the same time, it becomes obvious that the opposite of limited statehood is not—as he writes—consolidated statehood (which is, according to his definition, limited as well), but full statehood. Yet, full statehood is a regulative idea about the allocation of authority that has enormous effects without being fully in effect. There is a further theoretical implication of understanding sovereignty as a regulative idea entangled in the broader notion of statehood. Since regulative ideas consist of a rational ideal and a built-in normativity, they can also be an expression of fundamental norms and a source of law. With the notion of sovereignty as a regulative idea, one thus enters the realm of an international or even a world society, based on common understandings and some minimal values (Bull 1977: 13). John Meyer, his colleagues and students (1997) have developed the idea of one world polity, which provides cognitive and normative models that help constitute contemporary states. This “script” contains the regulative idea of sovereignty. To the extent that sovereignty is an expression of these fundamentals of an international or world society, it expresses a moral purpose that defines legitimate statehood and what counts as appropriate state conduct (Reus-Smit 1999). This moral purpose can change over time, while the organizational principle of sovereignty remains intact. To put it differently, it is the meaning of the regulative idea of sovereignty that varies, not the concept. A shift in the meaning of sovereignty in each of the four dimensions is thus one layer of change, the decline of the notion of sovereignty another. To sum up, this discussion of regulative ideas, such as sovereignty and the understandings of structure, provides a normative orientation without ever presuming that they become fully realized in their practices. This has two conceptual implications. Firstly, noncompliance is in fact constitutive for the concept and cannot be used to prove its ineffectiveness. Thus, a significant change in content or effectiveness of a regulative idea needs to be empirically shown on a deeper level: we need to demonstrate that the benchmark of evaluating behavior and the justificatory practices change significantly. Secondly, sovereignty, just as any other regulative idea, is not a concept with a fixed meaning. Significant changes in the meaning can take place without a rejection of the concept, as long as it serves as the criterion of defining legitimate membership in the state system. Any account of sovereignty must therefore analyze both whether and how the meaning of sovereignty changes, as well as whether the regulative idea of sovereignty is still effective at all.4 To the extent that we consider traditional sovereignty a benchmark for the following analysis, three outcomes are possible: first, traditional sovereignty persists as a regulative idea; second, sovereignty is still an effective regulative idea but has changed its meaning over time; third, sovereignty has ceased to function as a regulative idea that structures understandings and provides normative orientation in the international society. With this concept of sovereignty as a regulative idea, we can, in the next section, trace the differentiations and qualifications that each of the four components of the concept 4  Christian Reus-Smit (1999: 158) maintains that both neo-realists and neo-liberal institutionalists entertain an understanding of sovereignty as a concept with a fixed meaning. This may or may not be true. In any case, we strongly support the claim that sovereignty is a concept whose meaning may change over time: “it is a variable, social, and practically constituted regime” (Thomson 1994: 13).

200    Michael Zürn and Nicole Deitelhoff has experienced over time. As becomes evident, each of the dimensions has undergone some changes in meaning. As a result, the overall meaning of sovereignty has changed as well. Against this background, we assess whether developments of the most recent decades—mostly societal denationalization, but also the rise of global governance and transnational actors, which are discussed in more detail in the subsequent chapters— have led to a further change in the makeup of the external side of the modern state. To this end, in Section 4 we formulate some hypotheses about ongoing changes in the meaning of sovereignty.

4  Tracing Changes in the Makeup of TRUDI’s External Side The discussion of our four-dimensional understanding of sovereignty as a regulative idea highlights that the components of sovereignty—even if disregarded by powerful states— structure practice to a significant extent. This does not mean that sovereignty is a fixed concept established in 1648. Quite the contrary: it has changed its precise meaning over time, and there are many signs that our current age is particularly significant in this respect. Four questions concerning the trajectory of these conceptual changes will now be explored: (1) From recognition based on capacity to conditional sovereignty? (2) From formal equality to institutionalized inequality? (3) From final authority to international authority? (4) From policy autonomy to liberal convergence?

From Recognition Based on Capacity to Conditional Sovereignty? Fundamental to the development of the external recognition of states based on capacity was the process of the monopolization of force in a given territory. A royal monopoly of force prevailed as a result of fierce competition between different power-holders, first in France and then in England. This monopolization of force was accompanied by a tax-raising monopoly, through which, in turn, the monopoly of force could be defended against aggressors from within and outside the controlled territory (see Elias 1976; Giddens 1985; Tilly 1985). These two developments together established the state as a distinct administrative sector that is both different from society and closely related to the notion of rule enforcement on the one hand, and a locus of resource mobilization on the other. The ensuing capacity to govern a certain territory was the basis for external recognition in the traditional version of sovereignty. It was the foundation for a claim of final authority over a given territory, and it also laid the basis for sovereignty understood “as a social status that enables states as participants within a community of mutual recognition” (Strange 1996:

Internationalization and the State    201 22). The mechanism of mutual recognition helped states prevail over their city-state competitors (Spruyt 1994). While external recognition has remained a necessary component of sovereignty, its character and content have changed. With the rise of nationalism, mainly in the eighteenth and nineteenth centuries, external recognition was supplemented by internal recognition of the territorial state as the legitimate and necessary organizational form of a political community that defines itself as a nation.5 In this process, ordinary people actually began “to allot recognition to the conceptual existence of the state” (Nettl 1968: 566). The territorial state thus became a nation state. Although the territorial state was able to build upon proto-national cultures and communities, it actively contributed to the rise of national identities through harmonization policies and the symbolic representation of “imagined communities” (Anderson 1991). As a result, the notion that national boundaries and territorial state boundaries have to coincide prevailed (Gellner 1983). Internal recognition and legitimacy, defined as a generalized perception that a given form of political rule is appropriate within some socially constructed sphere and carried out in an acceptable way, became increasingly important, and led to a situation in which a broader understanding of the capacity to govern prevailed: “the recognition by internal and external actors that the state has the exclusive authority to intervene coercively in activities within its territory” (Thomson 1995: 219). Modern sovereign statehood thus became linked to a double requirement: the external recognition of the capacity of the state to govern effectively, and the internal recognition that the state and its practices be legitimate. In the twentieth century, the basis of external recognition changed as well. Effective governance by the state as the basis of recognition was progressively replaced by people’s right to self-determination. As late as 1946, the British government refused to give up its colonies on short notice, arguing that these territories lacked an effective state that was able to pursue the goals of governance. The British government was able to bolster its argument by citing the League of Nations, which restricted the right to state-building by establishing criteria for the “capacity for independence.” Not until 14 years later did the United Nations pass a resolution that the right to self-determination did not depend on the existence of the ability to govern. “Inadequacy of political, economic, social or educational preparedness should never serve as a pretext for delaying independence.”6 Subsequently, “quasi-states” emerged, which owed their existence primarily to recognition and assistance by other states and international organizations, but hardly conformed to the notion of modern statehood as conceived by the early state theorists like Jean Bodin and Thomas Hobbes.7 Put differently, sovereignty exists as a legal concept de facto independent of the effectiveness of the national capacity to govern. 5  The

distinction between internal and external “recognition” must not be confused with the one between internal and external “sovereignty” (see e.g. Reinicke 1998; Brühl and Rittberger 2001). Whereas internal/external recognition refers to different “recognizing subjects,” the more traditional distinction between internal/external sovereignty refers to internal authority vs. independence from external resources as already implied in Hans Morgenthau’s definition. 6  Declaration on the Granting of Independence to Colonial Countries and Peoples: Resolution 1514 (XV), 14 December 1960. 7  Robert Jackson (1990) coined the term “quasi-states” for these organizations. See also Georg Sørensen (1997) on this issue.

202    Michael Zürn and Nicole Deitelhoff Thus, while the material capacity to control a territory still plays an important role in the background, the principle of self-determination became the decisive criterion for external recognition of states. A layer deeper, two things remained unchanged up until 1989: states were the subjects who recognized other states, and recognition was an eternal concept; once recognized, states were permanent members of the club and could hardly be excluded. It has been argued that since the end of the Cold War this situation is transforming as well. Substantial international norms and rules are in this view increasingly decisive for the recognition of a state (Franck 1992). To the extent that substantial norms such as human rights provide the basis for the recognition of states, recognition becomes a conditional concept that is not provided on a permanent basis—that is forever—but rather it can be lost when the criteria are violated. Moreover, one can question to what extent only states (bilaterally) or intergovernmental organizations decide on this. To a certain extent, transnational actors and society seem to play a role as well. In this view, international society is on the brink of a world society with a double constituency: states and people (Habermas 2011). These developments lead to the hypothesis that, after 1989, the recognition of states does not result only from state interaction but involves transnational society as well; also, it is declared not eternally, but remains conditional on certain standards (Zürn 1998: 332–333).

From Formal Equality to Institutionalized Inequality? Sovereign equality describes a situation in which all states—recognized on whatever basis—are formally and legally equal under international law (Krasner 1999:  14). According to its Charter, the United Nations is based “on the principle of the sovereign equality of all its members.” The notion of sovereign equality is, according to Kenneth Waltz’s theory of international politics, more than a normative principle. It is also an integral part of an anarchical system. As long as the security dilemma is not resolved, no state can specialize in, for instance, the monitoring of human rights, as long as others focus on security and military matters (Waltz 1979: 104, 115). In this line of thinking, anarchy puts the issue of security and survival on top of everything else, which in turn explains the dominance of the political system over all others. This move privileges territoriality along the lines of segmentary differentiation: the “like units” on which Waltz (1979: 97) builds his theory of anarchic structure. Given that the history of the international system is rife with examples of inequality between states, the almost ontological position that sovereign equality has in the international system appears surprising. Not only the differences in size, population, wealth, and military resources, but also the differences between states’ knowledge and soft power are dramatic. While the principle of sovereign equality refers to formal or functional equality, and therefore does not exclude resource inequality, it is hard to imagine that the difference between the United States and Somalia does not translate into other forms of inequality— especially since the international system does not possess an effective constitution and rule of law for helping poorer subjects to maintain their legal equality, as is the case within constitutionalized states. And indeed, the distinctions between great powers, middle powers, and small powers; between core and periphery; and between states’ positions in selective state clubs like the concert of Europe after 1815, the G8/20, or the “P5”—the five permanent members—of the United Nations Security Council point to forms of inequality that go

Internationalization and the State    203 beyond the inequality of resources. Many international institutions are criticized for policies that reflect the interests of a small group of rich states and hurt poor and less developed states (Higgott et al. 2000; Kapstein 2000). Moreover, the history of international relations is full of formal and informal empires (see also Hurrell 2007: 34). The meaning of sovereign equality thus always involved two elements that point to institutional inequalities. First, informal hierarchies between Great Powers and other states led to a differentiated allocation of rights and obligations on the basis of resource inequalities. Historically, the Vienna Conference of 1815 and its successors in the following years exemplify this type of institutional inequality. Second, colonialism and imperialism always pointed to hierarchy between members of the state system and the outside world. Arguably, the latter, more formal side of institutional inequality declined from World War I on and finally dissolved with the breakup of the Soviet Empire. The former institutional inequality, however, is still in place. One can even go further and ask whether sovereign equality as an element of the regulative idea of sovereignty has been complemented by now with a certain institutionalization of inequality; that is, a formal inscription of inequality onto the functioning of institutions, and thus the undermining of formal or functional equality. To be clear, institutionalized inequality is different from effects of legal regulations that accentuate inequality, as many of the critics of the World Bank and the International Monetary Fund (IMF) claim. The notion of institutionalized inequality goes beyond such effects. For example, a national law that increases value added tax for the purpose of reducing corporate tax may increase economic inequality, at least temporarily, but can nonetheless be the outcome of a proper democratic decision-making process based on formal equality. The undermining of sovereign equality means more than just the differentiated allocation of rights and obligations on the basis of differences in capacity. Modern societies and the international system are familiar with this kind of differentiated allocation of rights and obligations from the outset—not everyone pays the same taxes. The attribution of a leading and formative role to the victorious major powers of Great Britain, Prussia, Russia, and Austria in the aftermath of the Napoleonic Wars was compatible with the prohibition on discrimination in that it was associated with the size of a country’s contribution to the formation of political order. Sovereign equality is undermined only when we observe an inscribed difference of rights and obligations giving rise to discrimination and a systematically unequal application of the law. In order to prove violations of the sovereign equality of states, we should, therefore, not follow as broad an interpretation of this principle as the one adopted by the United Nations in Resolution 2625: “States have equal rights and duties and are equal members of the international community.” But even if the principle of sovereign equality is interpreted only as formal equality and the prohibition of intervention in internal affairs (cf. Krisch 2003; Nolte 2007), tendencies in three areas could question this seemingly unshakeable principle of the Westphalian system (Zürn 2007). If states get a larger vote in the process of rule-setting for the mere fact that they have a large population, this would indicate a change in principle, because then the cosmopolitan principle of individual equality would perforate the principle of state equality. Moreover, if states get special voting rights or other special rights in the rule-setting process that may be based on meritocracy but cannot be changed without the consensus of the privileged state, this could also be seen as undermining the principle of sovereign equality. Finally, systematic selectivity in the application of international law could also undermine equality under international

204    Michael Zürn and Nicole Deitelhoff law. But, the question remains with regard to the validity of the hypothesis: is this systematic process actually occurring and leading to institutionalized inequality and an undermining of sovereign equality?

From Final Authority to International Authority? State parties are not subject to any law other than their own. According to this component of sovereignty, international law is seen as a shallow instrument. It is weak in terms of legal obligation and cannot be enforced; it is limited to the realm of coordinating states’ external activities (coordination law) but does not intervene in domestic affairs; and it is secondary to national law and constitutions. This portrayal of international law, again, is an ideal type. The Westphalian treaties already contained paragraphs about the protection of (religious) minorities, and thus of a prescription incompatible with the notion of unlimited freedom of state action in its own territory. Nevertheless, the regulative idea of the state’s final and absolute authority prevailed, and the reality of the core states of the European state system came close to the ideal until the end of World War II. International organizations were set up only beginning in the second half of the nineteenth century, primarily as means to coordinate different national (foreign) policies. The consensus principle prevailed and states were rarely if ever asked to implement decisions to which they had not specifically consented. The age of embedded liberalism and the evolution of the United Nations system brought some change. International law was regarded more and more as real law with some legal obligations involved. International treaties were ratified in national parliaments more often than before. Moreover, international law now contained significant parts that addressed the relationship between states and their citizens, with the rise of human rights law being a case in point. In general, international institutions began to regulate issues that also affected domestic politics to some extent. International lawyers label this development as the move from coordination law to cooperation law (e.g., Schweisfurth 2006). While the consensus prevailed in principle, many international organizations introduced the possibility of majority decisions, thus creating the possible condition that states were asked to implement decisions to which they had not necessarily consented. Moreover, some of the new constitutions developed in Europe after 1945 indicated a place for international law. For instance, the Italian constitution agrees, in principle, “to limitations of sovereignty” when they serve peace and justice among nations. Nevertheless, the theoretical attempt to conceptualize international institutions as instruments of the territorial state without possessing a political authority of their own still seemed very plausible (Kahler 2004). The big exceptions were already the European Communities and, later, the European Union. Here, over time, strong institutions that increasingly developed a political authority of their own emerged beyond the state (Haas 1964). Although this development does not apply to the whole institutional makeup of the European Union or all policy fields within it, the European Union emerged as a genuine political system that made states give up their veto positions, at least in part. With the Single European Act and the Maastricht Treaty, the European Union was seen as a site of political authority that could not be reduced to the notion of European institutions as tools of the nation states. While European law can

Internationalization and the State    205 gain supremacy over national law, most state constitutional courts in Europe accept the validity of European law only as long as it is not in conflict with their constitutions. The last two to three decades have brought changes that have undermined the notion of final authority even on the international level. Most importantly, it has been suggested that some forms of international authority have arisen—that is, a process in which international institutions develop procedures that contradict the consensus principle and the principle of non-intervention (Zürn 2007; Zürn et al. 2012). Accordingly, some international norms and rules create obligations for national governments to take measures even when they have not agreed to do so (cf. also Hurd 1999; Rittberger and Nettesheim 2008: 3; Kahler and Lake 2009: 246; Lake 2010). International institutions have authority when states recognize, in principle or in practice, their ability to make binding decisions and/or credible epistemic judgments on matters relating to a state’s domestic jurisdiction, even if those decisions are contrary to a state’s own policies and preferences. This understanding of political authority beyond the nation state does not necessarily require autonomous international organizations. Both international institutions that have been delegated autonomous power to make decisions (e.g. the International Criminal Court) and those without such a formal delegation of power (e.g. majority decisions in the United Nations Security Council) can possess authority in the defined sense. In the former case, one can speak of delegated authority;8 the latter is a case of pooled authority (Keohane and Hoffmann 1991; Moravcsik 1998: 67; Hawkins et al. 2006; Deitelhoff 2009). The authority of international institutions thus points to a feature other than the autonomy of international organizations. The hypothesis is that by now the role of international institutions has changed so much that final authority is no longer part of the regulative idea of sovereignty. It has been replaced by the idea that national rule is circumscribed by international authority. This does not necessarily require a doctrinal acceptance of the supremacy of international law. The presence of different sites or spheres of authority has therefore led to the concept of legal pluralism. In this view, international legal orders can coexist with national legal orders without necessarily undermining normative concepts such as the rule of law and democracy (Krisch 2010). In the rare cases that different orders collide, one can think of quasi-constitutional principles that can help to resolve these conflicts (Kumm 2009). In any case, in order to reassess sovereignty, it is important to understand to what extent and at what level of sustainability international authority has arisen in the last few decades.

From Policy Autonomy to Liberal Convergence? There is little doubt that, for a very long time, states possessed the normative and factual autonomy to pursue their own path of modernization and their own way of organizing 8 

The term “delegated authority” triggers different understandings. For most scholars in the tradition of rationalist institutionalism, the term implies that states are still principals who can take back delegation whenever they want. In another use of the term, delegation also involves an element of transfer of authority that cannot be taken back easily. We use the term in the latter sense, being aware that even Thomas Hobbes’ Leviathan is a conditional institution that, in theory, can be neglected when it fails to deliver.

206    Michael Zürn and Nicole Deitelhoff markets. More liberal pathways, such as the ones in the Netherlands, England, and the United States, coexisted with heavily interventionist or statist models, as in France, Prussia, and Russia (see Moore 1966; Senghaas 1982). A certain change took place after World War II when international institutions developed to manage economic interdependence. The international trade regime (the General Agreement on Tariffs and Trade (GATT)) and the regime for the regulation of currency and financial affairs were crucial to the management of economic interdependence. These institutions were supposed to prevent a repetition of the disastrous spiral of protectionism and subsidy-giving that began after Black Friday in 1929, causing the world economic crisis (Keohane 1984; Kindleberger 1986). The Bretton Woods institutions, established under American leadership, were extremely successful for a long time. For almost 30 years, they supported stable growth in the Western industrial states. They promoted the integration of the global economy and, as a result, strengthened the role of export-oriented branches of industry in national political systems. They contributed in particular to the prevention of a spiral of protectionism and devaluation during economic recessions. Moreover, these institutions facilitated the development of democratic welfare states, some of which had up to 50 percent of gross national product at their disposal. There was still sufficient autonomy to react to external challenges in very different ways (Gourevitch 1978; Katzenstein 1985).9 The principle on which these international institutions were based was expressed using the term “embedded liberalism.” Embedded liberalism is understood as a basic focus on free trade and open borders, which, however, are concretely embedded in national political systems that can cushion the shocks and inequalities triggered by the global market (see Ruggie 1983). International cooperation, affluence, and democracy were mutually reinforcing in this arrangement and resulted in an extremely stable peace between the democratic welfare states (Russett and Oneal 2001). However, in some ways the Bretton Woods institutions undermined the foundations of their own success. Embedded liberalism triggered a continuous dynamic of deepening liberalization and accelerated technological development, the interaction of which prompted the latest push for globalization, or denationalization (Beisheim et al. 1999; Held et al. 1999). Many argue that this has led to another, even more fundamental change: the undermining of the national autonomy pillar of the embedded liberalism arrangement. As a result of societal denationalization, national policies were increasingly considered unable to achieve their desired outcomes. The effectiveness of state policies was challenged in those policy fields in which the spatial scope of national regulation no longer corresponded to the real boundaries of societal transactions. The options available for effective national market intervention and social protection programs were considerably restricted by the rapid increase in direct investment and by highly sensitive financial markets in particular. At the same time, the Fordist regime of production was transformed in the course of accelerated technological development. Against this background, the term competition state was coined to describe a state that has lost the autonomy to deviate from neoliberal demands (cf. Aglietta 1979; Hirsch and Roth 1986; Jessop 2001). 9 

This quasi-experimental setup—i.e. same problems, but different responses—was adopted more or less silently by the entire literature on the “varieties of capitalism”(on this point cf. in particular Kitschelt et al. 1999; Hall and Soskice 2001; and Yamamura and Streeck 2003).

Internationalization and the State    207

5 Findings In this section, we tie together the findings of the subsequent chapters about the most recent changes in the four components of sovereignty. Whereas the conceptual chapters will be assigned more or less exclusively to a specific component, the issue-oriented chapters (Daase, Chapter 16, Helleiner, Chapter 17, Dingwerth and Jörgens, Chapter 18, all this volume) will be addressed in a crosscutting way.

Responsible Sovereignty Without doubt, the standards for recognizing a state as a state have changed. What is considered legitimate statehood and rightful state conduct (Reus-Smit 1999) has shifted significantly. As argued earlier, the twentieth century already saw a significant change, as the capacity to govern lost its status as the primary criterion for the recognition of statehood in the process of decolonization. It was replaced by the elusive concept of self-determination. The best indication of this process is the mere term “failed states,” which would have been a contradiction in terms according to previous standards (see Risse, Chapter 8, this volume). The quest for self-determination did not stop at the level of political elites. Today, legitimate statehood seems to involve a will of self-determination in connection with the ability to protect the people of a given territory from massive violations of human rights such as genocide, ethnic cleansing, war crimes, and crimes against humanity. It does not suffice anymore for leaders of liberation movements to claim the right of self-determination for their people. To some extent, a political system also has to demonstrate that it is in principle able and willing to serve the interests of the people. Although this criterion of recognition has been formally established, its enforcement remains precarious (see Daase, Chapter 16, this volume). As the debate about the norm of responsibility to protect (R2P) demonstrates, beyond the formal endorsement of the R2P, there remains a range of contested issues regarding the concept’s implications. These concern the application of the norm more generally (Deitelhoff 2013), but also some specific issues, such as the use of force in interventions and the question of how to differentiate interventions designed to protect civilians from those that aim at regime change (Reinold 2010; Bellamy 2011). This can also be viewed on the behavioral level. Since 1989, the international community has increasingly begun to respond to cases of gross violation of human rights with military force and economic sanctions. After 1989, in some cases such as Kosovo or East Timor, the United Nations even set up transitional administrations with far-reaching executive, legislative, and judicial powers. Yet the selectivity of these interventions demonstrates that the normative change involved should still be seen as an open enterprise whose future is far from certain (Daase, Chapter 16, this volume), and its implementation depends, to a large extent, on the willingness of some powerful states to provide the resources (Zangl and Zürn 2003: Ch. 9; Binder 2010). The developments in Libya and in Syria in 2011 and 2012 highlight these problems. On the one hand, the brutal use of military force against oppositional protests by dictators with a proven record of decades-long human rights violations cannot be ignored. It poses a

208    Michael Zürn and Nicole Deitelhoff challenge to the international society that requires action or a justification for non-action. Transnational actors, such as non-governmental organizations (NGOs), or, more generally, significant parts of the transnational civil society, consider such events a gross violation of global norms that cannot be accepted. On the other hand, not only the unresolved disputes about the norm’s implementation but also the blatant resistance of powerful states emphasizing the norm of non-intervention, such as China and Russia, lead to political bargains with open outcomes. This has two implications. First, the time horizon of state recognition has changed. For a long time, external recognition as a sovereign state, once attained, was, in principle, valid for eternity. States disappeared only due to internal developments or brute force that circumvented the principle of sovereignty. Nowadays, the recognition of a state seems to depend more upon its respect for human rights. Massive violations of human rights and the systematic use of force against parts of the population lead to the rise of the responsibility to protect. In extreme cases, the violation of human rights can even be regarded as a justification for intervention. Similarly, the growing use of international observers at national elections indicates a trend towards turning critical elections into global events (Rosenau 1997: 259; Kelley 2012), and the concept of “good governance” is now also used for evaluations of national policies by international institutions like the World Bank. In light of these developments, the recognition of a state tends to be less of a one-shot constitutive act and more the result of permanent monitoring of its legitimacy. Secondly, the subject performing this monitoring function has shifted. It is no longer solely the international society of states, but has been developing into an emerging transnational society as well as supranational bodies that act with some autonomy from national governments. Supranational bodies judge whether deviant state behavior is defensible and thus provide the necessary information. Then, in outrageous or repetitive cases, transnational society may question the legitimacy of a nation state. Along these lines, the United Nations Secretary General Kofi Annan (1999) also adopted the perspective that states must serve peoples. “If they fail do so and permit serious human rights abuses,” he said, “they open themselves to justified intervention by the international community in form of the UN itself.” Taking this notion further, the authority that assigns sovereignty, which is the exclusive right to set or adopt the rules for a given territory, seems to change: states are no longer the only actors essential in recognizing nation states as legitimate—transnational groups and supranational actors are also involved. What seems to be in the process of changing in world politics is thus not only the criterion of recognition, which has shifted from capacity to self-determination to responsibility to protect, but also the time horizon for recognition, as well as the subject that has the authority to recognize a state.

Stratified Sovereignty As Viola et al. (Chapter 11, this volume) write, sovereign equality “aspires to equalize states despite the inequalities in capabilities dividing them.” In this sense, Krasner’s (1999) critique of Westphalian sovereignty as hypocrisy is descriptively convincing, but it misses the normative component of the concept. “As long as international decision-making is based on executive multilateralism and the consent principle, international institutions do certainly reflect power inequalities in terms of the content of the rules and informal rules of

Internationalization and the State    209 decision-making. The formal political equality expressed in the consent principle can be seen as an equalizing force when measured against the power distribution benchmark” (Viola et al., Chapter 11, this volume). When international institutions exercise authority, the consensus principle is undermined, and an element of vertical stratification is introduced into a system otherwise characterized by functional equivalence. In an international system with international authority, segmentary differentiation is thus accompanied by stratificatory differentiation and functional differentiation (see Albert et al. 2013). Indeed, the international system includes more elements of informal and formal stratification than one may expect in an anarchical society (Hurrell 2007: Ch. 7). This is not necessarily a recent phenomenon, however. Stratificatory differentiation or institutionalized inequality has been part of the international system from the very beginning (Viola 2009). Moreover, the clearest cases of institutionalized inequality were established immediately after 1945, with the special rights of the P5 in the United Nations Security Council and weighted voting in the World Bank and the IMF. Therefore, the institutionalization of inequality may not necessarily be a trend, but it seems safe to say that the more authority international institutions possess, the more they display institutionalized inequality (Viola et al., Chapter 11, this volume). Thus, sovereignty today is no longer married with sovereign equality.

Plural Authorities It is hard to overlook the empirical evidence in favor of authority beyond the nation state in today’s world. Schakel et al. (Chapter 14, this volume) demonstrate this most convincingly with respect to the European Union. Charting policy competence of the European Union across policy areas and time shows significant variations (Börzel 2005). As Schakel et al. (Chapter 14, this volume) write: “A startling fact . . . is that there is not one case where a policy has been shifted from the European to the national level, nor is there a case where a policy that was supranational has become intergovernmental.” With respect to international institutions, Hanrieder and Zangl (Chapter 13, this volume) see a growing tendency, on the one hand, “to intervene into what used to be states’ domestic affairs, while on the other hand being less and less controlled by their member states.” The rise of international authority—defined as the competence of international institutions to make decisions even if they run counter to the expressed preferences of (some) governments—can be shown at all stages of the policy cycle (Zürn et al. 2012): in rule-setting via majority decision-making, in monitoring via delegation to non-state actors, in adjudication via the rise of judicial bodies, in enforcement via increased activity by the United Nations Security Council, and in knowledge assessment and policy evaluation via the rise of international knowledge bodies such as the Intergovernmental Panel for Climate Change (IPCC) or private accounting bodies such as the International Accounting Standards Board (IASB) (Mattli, Chapter 15, this volume; Zimmermann and Werner 2013). Tine Hanrieder and Bernhard Zangl (Chapter 13, this volume) suggest the term “embedded state” to grasp the new situation. Similarly, Arjan Schakel, Liesbet Hooghe, and Gary Marks (Chapter 14, this volume) employ the concept of multi-level governance. Both of these concepts are very useful for specific purposes, but possibly go too far when it comes to the global level, for two main reasons. First, the notion of embeddedness of the state in

210    Michael Zürn and Nicole Deitelhoff a framework of international institutions, as well as the notion of multi-level governance, insinuates a certain level of orderliness. The degree of fragmentation or lack of formal coordination between different sites of authority is enormous, however. Second, as Eric Helleiner (Chapter 17, this volume) points out in his analysis of the political consequences of the world economic crisis, embeddedness does not automatically translate into authority. Policy outcomes may often result from national and unilateral decision-making rather than from international institutions. Moreover, both concepts seem to give the international level a certain premium and thus imply a sense of international supremacy. Legal theorists, therefore, employ the concept of legal pluralism in order to point to the parallel, interacting, but uncoordinated presence of different sites of authority. Along this line, it may be more appropriate to understand sovereignty in this dimension as a constellation that always involves several competing authorities.

Limited Autonomy Full domestic policy autonomy of states never existed. Even the treaties of Westphalia contained provisions for (religious) minority rights. Beside normative limitations, the international system is also full of structural limitations of autonomy. As Dieter Senghaas (1982) emphasized, from the moment that England modernized and industrialized, pressure was put on all other states to respond and to catch up in their development. In the 1970s, the term interdependence was used to point out that the effect of any domestic policy depends on the policies of other nations (Keohane and Nye 1977). Robert O. Keohane (1993: 93) is correct in stating that the “problem that international interdependence poses in the first instance for governments is not that it directly threatens their formal sovereignty or even their autonomy, but that it calls into questions their effectiveness.”10 If, however, the effectiveness question reduces the space of possible policy options to essentially one—as an extreme reading of the “competition state” hypothesis suggests—then the notion of policy autonomy is so far detached from reality that it lacks any analytical use value. Walter Mattli (Chapter 15, this volume) highlights how globalization “has magnified the opportunity costs of incompatible national rules.” Still, as Philipp Genschel and Laura Seelkopf (Chapter 12, this volume) convincingly show, states retain some autonomy; for instance, they possess many choices in the area of tax policy. While there may be issue areas that show a strong policy convergence across states, this is in no way a general phenomenon. Eric Helleiner (Chapter 17, this volume) points out that the response to the financial crisis in 2007 and 2008 did not lead to the expected swing away from neoliberal policies as in earlier crises or as expected. As Helleiner says, the best explanation for this may indeed be “the persistence of an integrated global economy,” the entrenchment of neoliberal regulation in international institutions and its diffusion, and their deep ingrainedness in all sectors of national societies.11 In this sense, normative and structural limitations 10  This phenomenon is what Stephen Krasner (1999: 12) refers to as interdependence sovereignty, i.e. the ability of a state to control transborder flows. 11  Neo-liberal imprints can be found in the administrative sector in the form of new public management or in education sectors that increasingly follow neo-liberal standards.

Internationalization and the State    211 of national policy autonomy certainly do exist, and they should not be underestimated. There is another possible reason for policy convergence that does not point to reduced policy autonomy. As Klaus Dingwerth and Helge Jörgens (Chapter 18, this volume) argue with regard to environmental policies, policy convergence “has resulted from . . . voluntary imitation and learning rather than economic pressures or political imposition.” Thus, states learn from each other about both desirable principles and goals of policies, as well as the techniques and instruments to achieve those.12

6  Conclusion: Conditional Sovereignty Sovereignty is not lost. As the analyses in the chapters of this Part highlight, it still functions as a powerful regulative idea in that it structures social life and remains a normative aspiration for political organizations. Its meaning today is, however, different from that of sovereignty yesterday. In all of its components, we can trace significant changes over time. States come into existence by being recognized by others as states. This is the core of the external side of sovereignty. However, the basis for the recognition of a state has changed significantly. The material capacity of a state is no longer decisive; instead, the willingness and ability to protect one’s people is the determining factor. At the same time, the rights and duties of recognized states have changed, as well. The right of non-intervention has weakened, as has the right to be formally equal and the right to have the autonomy to set policies. These rights have been replaced by the right to participate in the exercise of international authority, to ask for a greater share of decision-making power if more responsibilities are taken over, and to learn from each other, especially in an international organization, to improve national policies. These changes stand in a synergetic relationship with each other. Together, they point to an increased importance of individuals and societal groups, as well as a reduction of the value of the state, or to its decentering, as Daase (Chapter 16, this volume) puts it. “Conditional sovereignty” sees the state more and more as an instrument to accomplish other values. Conditional sovereignty is significantly different from traditional sovereignty, but it is still sovereignty in that it defines legitimate membership in the state system. This introductory chapter has remained largely descriptive and evaluative. We did not systematically look for the drivers of change. Schakel et al. (Chapter 14, this volume) offer an elegant account of the major determinants of the rise of European authority. In this view, it is functional necessity that drives the process, while the demand for redistributive policies and the resilience of political communities hinder a rapid shift. On the basis of our analysis, one may add that, as a result of internationalization, we can also see an internationalization of the state in all of its dimensions. While communitarian bonds develop more slowly than functional needs and thus brake the speed in the rise of international authority, the new demands for legitimate statehood and rightful state conduct indicate communitarian bonds beyond the nation state. The international and the world society

12  For the parallel situation in welfare state development, see the synopsis of Herbert Obinger et al. (2013).

212    Michael Zürn and Nicole Deitelhoff seem not to accept inhumane treatment of the people by a sovereign state. In this sense, one may speak of a rising global community.

Acknowledgment We want to thank all the participants at the authors’ workshop in Delmenhorst for their helpful comments, as well as Georg Simmerl and Barçın Uluışık for their support in putting together the manuscript.

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CRUCI A L T Y PE S

Chapter 11

Sov er eign (I n)equa lit y i n the Evolu tion of the I n ter nationa l System Lora Anne Viola, Duncan Snidal, and Michael Zürn

1 Introduction Sovereign equality—the idea that all sovereign states are formally equal—is a fundamental tenet of international law and much international relations theorizing. The notion of sovereign equality traces its roots through the writings of Hugo Grotius (2012 [1625]); Samuel Pufendorf (2005 [1672]); Emer de Vattel (2008 [1758]), and other early modern publicists to the beginning of the state system and has attained an axiomatic position in the modern international legal system. Sovereign equality is asserted in Article 2 paragraph 1 of the United Nations (UN) Charter, which states that the “Organization is based on the principle of the sovereign equality of all its members.” And this principle is repeated in the founding documents of most major international institutions, regardless of the inequality in the material capability or power of member states. The dominant theories of international relations accept the premise canonically articulated by Kenneth Waltz that “in the absence of agents with system-wide authority, formal relations of super- and subordination fail to develop.”1 Because states are undifferentiated, “[f]‌ormally, each is the equal of all the others” (Waltz 1979: 88). Sovereign equality is significant because it aspires to equalize states, despite the inequalities in material capabilities dividing them. Small and weak states have a right to exist on

1  Important

exceptions include studies from critical theory, such as Immanuel Wallerstein’s (2004) world systems theory, English School approaches emphasizing the societal dimensions of international relations (e.g. Bull and Watson 1984; Buzan and Little 2000; Keene 2002), and, more recently, studies examining the role of hierarchy in international relations (e.g. Hurrell 2003; Donnelly 2006; Lake 2009; Zürn et al. 2012; Viola 2013).

222    Lora Anne Viola, Duncan Snidal, and Michael Zürn equal footing with great powers, even though some states have the capacity to impose unequal arrangements on others.2 Yet, the principle of sovereign equality belies unresolved tensions that are coming into sharper focus as a result of the transformation of the international system. Sovereign equality is a limited and imperfect guarantee of equality. The history of the international system is rife with instances of the institutionalization of inequality, such as the veto power granted to the permanent members of the UN Security Council or the weighted voting structures of the International Monetary Fund (IMF). Moreover, it is unclear to what extent an equality norm—even when formally institutionalized—can mitigate the inequalities resulting from asymmetrical power relations. These observations open up an important set of questions. What is the relationship between the great variation in state capacity on the one hand, and the aspiration to sovereign equality on the other? How are functional, legal, and political equality related? How and to what extent do international institutions mitigate or promote the inequality of states? In the spirit of these questions, this chapter analyzes the origins of the sovereign equality concept and its contested nature, the claim that institutions can equalize relations among otherwise disparate states, and whether and how the erosion of state sovereignty is affecting the claim of equality among states. We argue that sovereign equality is not a static category, a principle that is either upheld or violated. Rather, sovereign equality is a dynamic concept composed of three constitutive components—functional, legal, and political—that stand in changing tension to one another. Functional equality is the core of the concept of sovereign equality, accompanied by legal equality and political equality. The degree of equality achieved on any one dimension largely depends on the nature of international institutions and how they distribute rights and privileges. We identify three ways in which the evolution of the international system has affected the relationship between these constitutive components of sovereign equality. First, the institution of sovereignty provides a guarantee of domestic autonomy and non-intervention that implies a functional equivalence between states. When sovereign states do not accept any law besides their own, international norms and rules require the consent of all parties to an agreement, enhancing the prospects for political and legal equality. In these consensus-based interactions, the contribution of institutions and international law towards leveling the playing field has been limited but important. But increasing interdependence and the growing need to coordinate actions among states tend to make institutional arrangements for cooperative decision-making more numerous, more important, and often more formalized. In this context, our second observation is that the importance of political and legal equality increases. At the same time, powerful actors have opportunities to use their resources to shape both procedural and substantive rules in their favor, which increases the tension between the different forms of equality. Third, this relationship takes on yet another facet when international institutions themselves become more autonomous and exert authority in their own right. As institutions

2  Historically, this applied first to the limited membership of the European great power system (Krasner 1999), but it was more broadly extended in the twentieth century.

Sovereign (In)equality in the INTERNATIONAL SYSTEM     223 gain authority at the expense of individual member states, new relationships of super- and subordination between states and institutions develop. International institutions exercising authority in their own right challenge the functional equality of states. Institutions exercising their own authority are no longer legitimated through the “one state, one vote” principle, but develop elements of vertical differentiation or formalized hierarchy, leading to increased political inequality between states. In addition, when international institutions make decisions against the explicitly stated interests of states, implementation of rules and rights is likely to be selective, potentially resulting in legal inequality. The chapter is divided into three further sections: Section 2 presents our conceptualization of sovereign equality; Section 3 discusses the historical origins of the sovereign equality principle and its implications; Section 4 analyzes how international institutions act as state equalizers and unequalizers, taking into account the tensions between material inequality and the prospects for legal and political equality. We conclude by reflecting on the future of sovereign equality and its implications for a changing international system.

2  The Meaning of Sovereign Equality We argue that there are four distinct, albeit interrelated, ways of thinking about equality in the state system: resource equality, functional equality, legal equality, and political equality. Resource equality refers to the distribution of material and non-material capabilities among states, including standard capability measures of power. Traditional theorizing on international relations takes state relations to be characterized by resource inequality on the one hand, and sovereign equality on the other hand. Sovereign equality, in contradistinction to resource inequality, is most commonly used to refer to one or a combination of functional, legal, and political equality. Traditional theorizing on international relations focuses on the unequal distribution of resources among states.3 States vary greatly in material resources, such as territorial size, population, economic output, and military prowess. They also vary greatly in soft resources, such as expertise, bureaucratic and technological development, and moral persuasiveness. These differences in resources are significant because they contribute to a state’s ability to exert power and influence in the international system. Indeed, the study of international relations has been primarily concerned with how unequal capabilities determine the distribution of power, which in turn determines inter-state relations and systemic stability. Despite great variation in resource endowment, “sovereign equality” is nevertheless a core principle of international relations. The notion of sovereign equality is first and foremost anchored in the idea of functional equivalence. Kenneth Waltz (1979), for example, understands sovereign equality to result not from material equality but from the fact that all states are similar, rather than differentiated, in structure and function. In the international system, each state is self-sufficient and autonomous, so no state is entitled to 3 

Some authors have addressed the contested and changing nature of the sovereignty norm (for various perspectives, see Barkin and Cronin 1994; Bartelson 1995; Krasner 1999; Buzan and Little 2000; Clark 2005; Osiander 2001; Philpott 2001; and Weber 1995; cf. also Zürn and Deitelhoff, Chapter 10, this volume).

224    Lora Anne Viola, Duncan Snidal, and Michael Zürn command and none is subordinate to another. In the language of differentiation theory, states thus stand in a relationship of segmentary, but not functional, differentiation with each other.4 States are thus understood to enjoy functional equality. This kind of equality is one of category—all states are states by virtue of their statehood—and is generally understood to carry with it the normative imperative of non-intervention.5 International law goes further in claiming that functional equivalence (i.e. statehood) carries with it a broader normative imperative that states ought to be treated alike. International law formally guarantees states “equality before the law” or legal equality.6 Equality before the law means that like actors are treated alike—that is, consistently—in front of judicial organs and are equally able to assert their rights (Suganami 1992:  222; Simpson 2004: 43). There must be no deviations in treatment between similar cases on the basis of whim, fear, or favor unless provided for in the rule itself. By the same token, states are equally bound to obey international law. Legal equality does not, however, imply or guarantee other kinds of equality, such as the equal distribution of rights or resources. In fact, it leaves open the possibility that even equally applied laws might discriminate in their effects, for example, laws that might further the interests of some, but not all, states. The norm of sovereign equality is often embodied in international institutions, which has brought the principle in close association with the idea of political equality. Almost all international organizations explicitly include in their founding documents a commitment to the equality of their members, evoking the expectation that members will have equal representation, equal voting power, and equal rights and duties (Efraim 2000). In some instances, such as at the United Nations General Assembly, political equality does indeed get translated into “one state, one vote.” But in many instances, political equality is limited—meaning simply that sovereign states get a seat at the table. Thus, when we consider the IMF or the World Bank, all member states have a voice, but the relative weight of their voting power varies greatly in accordance with their material power. Institutional arrangements, therefore, do not consistently translate functional or legal equality into political equality. Together, functional, legal, and political equality form the building blocks of sovereign equality. As a principle of the international system, sovereign equality emphasizes the equality of states in spite of obvious resource inequalities. Functional, legal, and political equality, while not eliminating resource inequality, may mitigate the effects of power. Functional equality, as noted, implies the norm of non-intervention and is the basis on which state independence is respected, despite the fact that some powerful states have the ability to dominate others. Legal equality adds the notion of equality before the law and so constrains the range of legitimate action for powerful states. Political equality gives even small and weak states a voice in the management of the system so that, for example, resource inequalities are neutralized in majority decision-making. Political equality can further mitigate inequality in resources by giving small and weak states an opportunity to use their voice to redistribute goods in their favor. 4  Sociological differentiation theory has rarely been employed in analyses of international relations. However, it speaks directly to the issue of functional equality and its implications. See the contributions in Mathias Albert et al. (2013). 5 See Stephen Krasner (1999) for a discussion of the relationship between sovereignty and nonintervention. 6  Legal equality in the sense used here is related to, but only an element of, the broader concept of rule of law, e.g. conditions of due process and prosecutorial and judicial. All of these elements are central to the rule of law, but are, at best, barely emergent at the international level.

Sovereign (In)equality in the INTERNATIONAL SYSTEM     225

3  Sovereign Equality in the Evolution of the States System The principle of sovereign equality can be traced back to the earliest theorists of the international system. Although scholars disagree over who first articulated the idea of sovereign equality, Hugo Grotius (2012) is traditionally attributed this distinction for his 1625 treatise De Jure Belli ac Pacis [On the Laws of War and Peace].7 Emer de Vattel is then widely considered to have worked out its theoretical underpinnings, largely under the influence of natural law (Ninčić 1970: 37). These jurists, writing in the seventeenth and eighteenth centuries, sought to provide a legal-normative basis for the recognition of autonomy of the small and newly independent political entities that resulted from the collapse of the Holy Roman Empire. The state was then still a highly fragile construction whose independence they sought to naturalize by arguing that the domestically consolidated state is the only type of actor fit for sovereign equality (Williams 2005: 47) and by explicitly excluding other types of actors—specifically sub-state actors such as guilds or merchants, super-state actors such as the Holy Roman Empire, and networks of cities like the Hanseatic League (Spruyt 1994). The challenge, however, was to eliminate the contradiction between the reality of material inequality and the nascent legal claim to equality. Inspired by Thomas Hobbes’ description of the state as an “artificial man” in Leviathan (1991 [1651]), the classical jurists reasoned that if states are like people, then states are— like people—equal by nature. They argued that a fundamental principle of international law is that sovereign states have equal standing in the international system by virtue of having the qualities of sovereignty or statehood, despite their differing capacities. Early writers such as Jean Bodin (1992 [1576]) and Hobbes argued that domestic control over territory must be considered the main marker of sovereignty. An actor that possesses control over a territory and autonomy from other actors possesses the qualities of a sovereign state and, by definition, is like any other sovereign state. Thus, the jurists attempted to eliminate the contradiction between the reality of material inequality and the legal claim to equality with a formalistic solution. They grounded the claim to equality in the shared formal attributes of statehood, anchoring it in an argument of functional equivalence. The rooting of sovereign equality in functional equivalence has had significant implications for the international system. The principle of sovereign equality was successful in justifying a certain standing or status for small states that were otherwise weak actors. The articulation of this legal doctrine helped buttress claims to territorial autonomy and supported norms of non-intervention (Strang 1991; Bartelson 1995). At the same time, however, it achieved this by explicitly excluding actors without the defining features of states. Even today, non-state actors are excluded from the principle of sovereign equality and its basic protections. In spite of transnational actors’ increasing access to international organizations (Tallberg et al. 2013) and the active role that the EU plays in some international negotiations (Burca and Scott 2001), such actors do not have the standing of being equal

7 See Athena Efraim’s (2000:  66–69) discussion about disputes concerning the first treatment of sovereign equality.

226    Lora Anne Viola, Duncan Snidal, and Michael Zürn members of the system and so have no, or few, legal rights in international law. This is a significant constraint on the participation of non-governmental and supranational actors who, over the past several decades, have been gaining in de facto importance. A further implication of the articulation of sovereign equality in terms of functional equivalence has been the relative neglect of the substantive content of states’ rights and duties. By emphasizing that all sovereign states have equal standing by virtue of their shared attributes, early scholars supported and facilitated a formalistic rather than substantive interpretation of equality. Indeed, as long as there were no or only few venues for formal inter-state cooperation, the question of how to distribute substantive rights and duties was not salient. Some attempts at early formalized cooperation, such as the Hague Conventions, respected a strong principle of sovereign equality by proposing unanimity or one-state, one-vote decision rules, or by making decisions on the basis of consensus (Simpson 2004: 132–164). Yet as institutional arrangements became more important as tools of international governance, the great powers attempted to institutionalize a leadership role for themselves (Simpson 2004). Modern international institutions thus faced the dilemma of respecting the principle of sovereign equality while giving expression to power differences. The principle of sovereign equality, derived as it was from the attribute of state autonomy, left the door open for resolving this tension by reducing sovereign equality to functional equality with few formal, if any, legal and political rights. On the one hand, formal institutions acknowledge the principle of sovereign equality by giving all sovereign states a seat at the table. On the other hand, International Organizations (IOs) also institutionalize the unequal distribution of rights and duties among states. Thus, while functional equivalence remains the cornerstone of sovereign equality, the legal and political dimensions of sovereign equality prove less stable and become dependent on how they gain institutional expression. The crucial question then becomes, how and to what extent do institutions contribute to equality or inequality among states?

4  International Institutions as State Equalizers and Unequalizers International institutions, to the extent that they give all sovereign states a seat at the table, have the potential to amplify equality among states. Being recognized as an equal member of an institution puts states on the same formal footing despite vast differences, which has the potential to translate into redistributive results. At the same time, however, any given rule or law reflects power relationships and therefore might work in favor of more powerful states. We disentangle these contrary effects by distinguishing first between traditional postwar institutions, characterized by executive multilateralism, and those institutional arrangements that, over time, begin to assert their own authority. Second, within both of these types we distinguish between rule setting (i.e. the creation and reform of institutions), which mainly affects issues of political equality, and rule implementation (i.e. the ongoing operation of rules and institutions), which mainly has implications for legal equality.

Sovereign (In)equality in the INTERNATIONAL SYSTEM     227 Our finding is that institutions promote a minimum guarantee of sovereign equality on one dimension while often undermining it on another. Moreover, as institutions grow in importance and deepen over time, they have the potential to amplify these effects.

Executive Multilateralism and Implications for (In)Equality Consider the creation of an international institution among a group of states that are functional equals but vary in their resource capacities. The occasion for creating the institution is that prevailing national policies are not properly aligned on some issue such that joint gains are available through cooperation. Cooperation requires that states change their respective behaviors in some way and is problematic both because cooperation requires individual sacrifices by various states (e.g. changing their policies) and because states may have normative and distributive differences over the exact content and form of cooperation. For this reason, cooperation may need to be institutionalized in order to decide upon, coordinate and manage these changes, as well as monitor states’ respective behavior. Since states differ in resources, the participation of some will be more vital than participation by others; certain states also may be more dependent on achieving cooperation than others. These differences in resource capacity and needs translate into different bargaining power regarding the terms of cooperation. Even without specifying the situation in more detail, more powerful states—defined in terms of having more resources and less need for cooperation—will be strongly advantaged in defining the terms of institutionalized cooperation, regardless of the formal recognition of their equal standing. Sovereign equality cannot fully mitigate the inherent advantages of the powerful in the international system. However, a pure bargaining story misses the commitment problem that is central to the institutionalized cooperation story. Because institutionalized cooperation entails an ongoing enterprise, it requires a deeper commitment than is entailed in a one-off bargain. Powerful states need to assuage concerns that they will take advantage of weaker states and reassure cooperation partners that they will live up to their commitments. This leads powerful states to make institutionalized commitments to respect the rights of the weak (North and Weingast 1989; Cowhey 1993; Ikenberry 2001). These commitments can be made even stronger by various forms of legalization that reduce the uncertainty and arbitrariness that weaker actors face in the international system (Abbott and Snidal 2000). In return for assuaging the concerns of the weak, however, the powerful capture the lion’s share of the substantive gains of cooperation and, more importantly, structure the institution’s procedural rules in their favor. Thus international institutions enshrine both a commitment to legal and political equality and de facto inequality in their operations. This equality-inequality relationship is especially apparent when institutionalized cooperation emerges in the aftermath of war. Here victors have a (possibly temporary) opportunity to impose terms on the vanquished and take everything for themselves. But they may instead pursue the alternative option of constructing a postwar order that is less punitive and even beneficial for the vanquished by organizing them into an institutional arrangement that serves and maintains the victor’s advantage over time (Ikenberry 2001). The resulting institutional arrangement lessens inequality among states at the current time by giving the defeated and now extremely weak state some (rather than no) political rights—but its very purpose is to harness the stability of institutions to sustain political

228    Lora Anne Viola, Duncan Snidal, and Michael Zürn inequality over time. The best-known example is undoubtedly the United Nations Security Council, which grants a veto right to only the five permanent members. Moreover, rule-deepening over time can reinforce the unequal effects of rules. Thus, the distributional consequences of the World Trade Organization (WTO) are widely thought to be skewed towards the advanced economies because of its emphasis on manufactured goods and provisions for intellectual property rights. There was a tacit understanding that this would be rectified in subsequent discussions in the Doha trade round—but the successful operation of WTO rules has reinforced a stalemate on the prevailing, biased institutional status quo. While such considerations might be ascribed to unanticipated path dependence, the case of the powerful victor reminds us that states anticipate these effects as they create institutional rules. The legislative procedures in the international system, that is, the secondary rules in the sense of H.L.A. Hart (1961), are still blunt and foster opportunistic behavior. Indeed, the increasing strength of international law and increasing authority on the part of IOs may work in favor of the most powerful states when international institutions grow in number and influence (Benvenisti and Downs 2007). This congealing of power in formal rules corresponds with (in)equalities in informal institutional practices. In creating an institution, it is impossible to write a complete “institutional contract,” since the world is too complex and unanticipated events occur. Thus, any institutional arrangement depends also on informal practices that emerge around the formal procedures and are essential to its operations. Indeed, many formal rules, such as voting rules, are rarely invoked in international organizations where decisions are instead reached through informal understandings and unspoken consensus. The shift to informal rules may also change the relative ability of actors to influence an issue. Some informal resources (such as the ability to be persuasive) may be neutrally distributed in ways that promote equality, although even here it appears that certain states (e.g. developed ones such as Norway and Canada) are relatively advantaged in this respect. Other informal resources would appear to favor the powerful states quite strongly. These states are typically more centrally located in international networks, and this positional advantage empowers them to build supporting coalitions for any action from setting agendas to building a consensus. In addition, they have greater resources with which to bargain, more possibilities for offering linkage to other issues, and more personnel to send to meetings and conferences. Informal inequalities can coexist easily with formal political equality as expressed by the “one state, one vote” rule. In many international institutions, formal political equality is maintained in the rule-setting stage in that any decision about the content of rules requires the consent of all states. This formal political equality helps smaller states to increase their bargaining power and thus can be seen as an equalizing force. But Randall Stone (2011) has recently documented how the informal influence of resource inequality can offset the apparent move towards formal political equality within a number of international institutions. Sometimes this happens by moving decisions to informal forums, such as the G-groups, where powerful states hold sway (Vabulas and Snidal 2013), but often it happens through informal processes within formal organizations. The green room negotiations of the WTO, for example, privilege a small set of powerful actors in the process of rule-setting. Another striking recent example is the “single undertaking” of the Uruguay Round, whereby developed states presented the basic WTO framework to less developed states as a take it or leave it offer. This compelled the weakest states to join the new trade arrangement even though it

Sovereign (In)equality in the INTERNATIONAL SYSTEM     229 did not satisfy their demands for including agricultural products and imposed unwanted requirements, including laws on intellectual property rights, upon them. Turning from rule creation to rule application and implementation, we find a similar mix of equality and inequality. Sovereign equality provides for a minimal equalizing effect to the extent that it is translated into equality before the law, that is, legal equality in our terms. Because powerful states need to maintain the support of weaker states, they have strong reasons to respect equality before the law and, more generally, existing institutional rules. Thus, powerful states often act as if bound by international law and agreements. For example, the United States (US)—more so than the EU—has abided by WTO commitments and Dispute Settlement rulings, regardless of how strongly it opposed them. Even when powerful states want to break or circumvent international law, as the US was arguably doing with respect to the Iraq War, they generally justify their actions in terms of international law and seek the agreement and support of weaker states (Thompson 2009). A particularly striking example is that even at the height of the Cold War, both the 1956 Soviet invasion of Hungary and the 1961 US Bay of Pigs operation were changed in military disadvantageous ways in order to strengthen the perception that international law was being followed (Westra 2008). Powerful states are influenced by international rules even when they are breaking them. The non-prejudicial implementation of rules over time often strengthens them and, therefore, their equalizing effect. This may happen as states become more deeply socialized to rules through recurring practice, which also may deepen these rules’ legitimacy. It also may happen as existing rules shape states’ decisions and investments in ways that increase their reliance on the rules over time. All of these effects may reinforce the normative power of rules. This has surely happened with the rules proscribing the use of force except in certain justified situations. Insofar as existing legal rules empower the weak, equal application will allow them to advance their interests (Krisch 2001: 152). As noted earlier, however, law can also instantiate the interests of the powerful and thus its overall equalizing tendencies cannot be assumed in all cases.

Increasing Institutional Authority and Implications for (In)equality Thus far we have considered institutions as intergovernmental bodies based on executive multilateralism and the consent principle. In these institutions, both procedural and substantive rules are likely to reflect power inequalities. Nevertheless, the formal political and legal equality expressed in the consent principle acts as a significant equalizing force. The performance of certain governance tasks, however, may require the delegation of authority to an international organization, thus challenging the consent principle. As international institutions cover more issues and become increasingly responsible for regulating transnational and behind the border issues, they may gain public authority (Zürn et al. 2012). This may be because there is a need for some way of “filling in” the incomplete contract, for centralization of activities, or for an agent who is independent of member states (Abbott and Snidal 1998). Whatever the reason, the agent must have some autonomy to be effective (Hawkins et al. 2006) and is sometimes in a position to expand this autonomy beyond

230    Lora Anne Viola, Duncan Snidal, and Michael Zürn the initial grant of authority. The secretariat of the International Atomic Energy Agency, for instance, monitors nuclear regulations and their domestic implementation. Similarly, the World Bank and IMF can impose policies autonomously. Another significant development in this respect is the rise of international dispute settlement bodies to whose decisions states bind themselves.8 But even without a formal delegation of power, international institutions can undermine the consent principle, as when decisions are made on the basis of non-unanimous voting. Majoritarian decision-making increases the ability of international institutions to act by cancelling the vetoes of individual states or even non-majoritarian coalitions. Today, roughly two-thirds of all international organizations with the participation of at least one great power include some majority rule provisions (see Blake and Payton 2008). Insofar as international institutions exercise authority, the consent principle is undermined, and an element of vertical stratification is introduced into a system otherwise characterized by functional equivalence. International institutions have political authority over states when states recognize, in principle or in practice, their ability to make binding decisions or judgments on matters relating to a state’s jurisdiction, even if those decisions or judgments are contrary to a state’s own policies and preferences (Cooper et al. 2008: 505). This can happen through the delegation of policy functions to international organizations or through the pooling of decision-making (Moravcsik 1998: 67; Hawkins et al. 2006). While such authorized international organizations may pursue their own organizational or “pathological” goals (Barnett and Finnemore 2004), they often pursue the collective goal for which they were created with more vigor than the states that created them. This may protect weaker states against the vagaries of powerful states in some circumstances, but it also opens opportunity—and perhaps necessity—for the institutionalization of formal political inequality. The institutionalization of political inequality is likely for three reasons (Zürn 2007). First, powerful states accept the authority of international institutions only if they can be sure that the institutions will enable them to maintain their privileged status. For this reason they demand special political rights, such as weighted voting rights and vetoes. Thus, international institutions capable of exercising authority over members, such as the UN Security Council, are likely to be characterized by powerful states with special privileges regarding the deployment of institutional authority, which ultimately undermines the political equality of states. Institutional rules may become so deeply entrenched over time that political (in)equality is very hard to change even if the underlying resource distribution has changed. On the UN Security Council, for example, France retains its position even though it has been surpassed as a great power by other states. While the Security Council would never be constituted the same way today, the difficulty of agreeing on a new membership, the interests of existing permanent members in not opening up the membership question, and the possibility that trying to change things might disrupt the existing arrangement have been sufficient to preserve the prevailing arrangement. This tendency will be reinforced insofar as states have invested in the prevailing institutional arrangements. Given that any attempt

8  See Project on International Courts and Tribunals, “Material and Publications” http://www.pict-pcti. org/matrix/matrixintro.html, see also Karen Alter (2009).

Sovereign (In)equality in the INTERNATIONAL SYSTEM     231 to abolish the special position of the veto powers can be thwarted by this very same veto, we have institutionalized inequality.9 Weighted voting rights in the World Bank and IMF provide additional examples of the institutionalization of political inequality. The Bretton Woods institutions that still guide much of the international political economy were shaped mainly by the US and United Kingdom (UK), and these institutions have enabled the US and the UK to maintain both their financial and ideological power in the ensuing period. Indeed, as changes in the distribution of financial resources have diminished relative US voting power, the veto threshold has been adjusted to compensate. To a certain extent, the vote quotas can be seen as functional and meritocratic. The problem of political inequality arises, however, to the extent that these institutions are then empowered to impose far-reaching internal restructuring measures, for example in reference to currency imbalances, on some countries but not on others. That the content of international rules reflects power distribution can be seen in other issue areas as well. Thus, the US was granted special rights temporarily during the definition of the International Criminal Court, in the form of Resolutions 1422 and 1487 (Deitelhoff 2009). American soldiers who commit crimes when deployed on UN missions could not be indicted. Corresponding exceptions were also offered in the design of the Ottawa Landmine Convention and the Kyoto Protocol, where the US negotiated such favorable conditions that questions concerning equal treatment can justifiably be raised. If the US, which is among the top ten producers of per capita CO2 emissions and is also among the richest countries in the world, is allocated significantly lower emission reduction obligations than many other countries, this would appear to be an expression of differential rights sanctioned by law. In short, as international institutions gain authority, political equality between states is undermined. A second reason why an increase in institutional authority may increase political inequality concerns the changing ways in which institutions legitimate their authority. As long as the intergovernmental level was restricted to merely developing a modus vivendi of interaction, requiring the consent of each member state, a two-staged process of legitimation was sufficient (Moravcsik 2004; Scharpf 2010). The decisions taken on the level beyond the constituent members were legitimated through the legitimacy of their representatives. With the rise of authority of international institutions undermining the consent principle, this has changed. There is an increasing need to create a direct link between the international institutions that exercise authority and the societal targets of regulations (Zürn 2004). Insofar as societal actors do not have direct access to international institutions, however, sovereign inequality may be necessary for their legitimacy. Given the dramatic differences in the size of states—ranging from a few thousand inhabitants in countries such as Liechtenstein to over 1.3 billion in the case of China—the functional equality of states does not provide a normatively compelling principle for the representation of societal interests when international institutions exercise authority (Luban 2004). The exercise of independent institutional authority, where the institution acts on behalf of global-societal rather than state interests, strengthens the claim that states with large populations should 9  Consider in this context, however, the interesting Report of the Princeton Project on National Security (Ikenberry and Slaughter 2006) which demands, for the first time ever, a self-imposed restriction on the use of the veto by the US. This changes little with regard to the argument, however: the right of veto can only be abolished if all five veto powers vote in favor of the measure.

232    Lora Anne Viola, Duncan Snidal, and Michael Zürn have more influence than those with smaller populations. In this sense, the delegation of authority to institutions might amplify the political inequality of states. Moreover, if international institutions gain authority to set rules without the consent of all states but do not also gain the capacity to enforce those rules, selective implementation of the law becomes institutionalized. In this way, legal equality is further undermined. Since 1989, for example, human rights abuses have increasingly gained acceptance within the international community as legitimate grounds for intervention, so states can no longer be described as fully sovereign in the sense of being free to rule inside their own territories as they see fit. The dramatic contravention of human rights is now interpreted as a violation of universal obligations, which can be sanctioned by the international community. Such changes may be desirable, but they present a challenge to any notion of functional equality. Third, the material resources—financial and military—for the enforcement of emerging norms remain primarily in the possession of powerful states. This means that the implementation of institutional decisions will tend to be selective, and therefore unequal, in at least two ways: it will be based on the willingness of powerful states to act, and it will exhibit a bias against enforcing laws on powerful states and their allies. The UN, for example, continues to depend on the willingness of individual states—such as the US and its allies—to implement peace enforcement operations decided on by the Security Council. Because powerful states are only interested in intervening in conflicts in exceptional cases, the UN itself can only selectively enforce its laws (Zangl and Zürn 2003). The UN was not in a position to intervene, for example, in the civil war situations in Myanmar, Sudan, Angola, or Liberia, as no powerful state was willing to send its armed forces on a military mission authorized by the UN (see Binder 2009 for an account of factors driving the selectivity of interventions). Thus, the most powerful states, and above all the US, effectively decide when fundamental norm violations are sanctioned and when they are not, and the UN’s peace enforcement remains necessarily selective. Equality before the law is thus undermined. Thus, the impact of international institutions on sovereign equality depends on the type of international institution. When international institutions are based on the consent principle and follow the logic of executive multilateralism, formal guarantees of equality can be effective, especially when there is a high level of legalization. Inequality of power resources can nevertheless find expression in informal political inequality and in the content of rules. To the extent, moreover, that the consent principle is replaced with partial international authority—the authority to make decisions, but no authority to enforce them—political inequality gets institutionalized, and the implementation of norms may become selective and violate legal equality.

5  Conclusion: The Future of Sovereign Equality We have argued that sovereign equality must be understood in terms of its component parts:  functional, legal, and political equality. Moreover, these parts are not always positively correlated with one another. Indeed, we have discussed how these different types of equality exist in tension with one another. An important question raised by

Sovereign (In)equality in the INTERNATIONAL SYSTEM     233 the international relations literature is to what extent institutions can amplify sovereign equality and potentially mitigate the tensions between its component parts. We have argued that the strength of sovereign equality and the relationship among functional, legal, and political equality is very much influenced by the institutional structures in which they are embedded. It is impossible, however, to say that institutions always strengthen or always weaken sovereign equality. In simple, consensus-based institutions with little authority over distributional conflicts, institutions can level the playing field among differently endowed states by reflecting their functional equality. But as institutions become more formalized and increase in their authority, powerful states have incentives to use their resources to shape institutions to their favor, leading to increased political inequality. Institutional reproduction, in turn, deepens these asymmetries. As institutions themselves become more authoritative at the expense of all member states, moreover, functional equality can be further undermined, and forms of legal hierarchy can begin to develop. What, then, is the future and the future impact of sovereign equality? To the extent that states remain the key actors of international politics, sovereign equality is likely to remain a key constitutive—and contested—element of their relations. To the extent that non-state actors—whether supranational institutions acting from above, or non-governmental organizations (NGOs) and firms acting from below—play a central role in global governance, sovereign equality is likely to become less important, and potentially undermined, as an organizing principle. In particular, as continued globalization further increases the prominence of non-state actors, it will be more difficult to make sovereign equality meaningful. It is likely, then, that an alternative or some hybrid organizing principle will emerge that better reflects the shifting distribution of authority—both among states and between states and non-states—in the international system. One possibility is that a weakening of sovereign equality’s component parts will lead to a more hierarchical order in which certain actors have authority over others. Ironically, this is exactly the sort of circumstance under which the principle of sovereign equality first originated in the early modern European states system. The success, failure, or modification of sovereign equality has major implications for the relations among states and other actors. Even if sovereign equality does not remain a key constitutive principle of international politics, understanding and analyzing it will provide an important key to emerging institutional changes.

Acknowledgment We thank Philipp Genschel, Frank Nullmeier, and participants at the “Transformations of the State” workshop held in Delmenhorst, 3–5 November 2011 for comments on earlier drafts.

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Chapter 12

The Competition State The Modern State in a Global Economy

Philipp Genschel and Laura Seelkopf

1  The Competition State Thesis Is there a general trend in the developmental trajectories of advanced capitalist states? The competition state thesis argues that there is and that the essence of this trend is a change of state form, from welfare to “competition state” (Cerny 1997; Hirsch 1998; Jessop 2002). In contrast to earlier state transformations, which were punctuated by wars, revolutions, and violent institutional ruptures, this transition is incremental, undramatic, and peaceful. The basic institutions of the welfare state remain in place but are gradually trimmed, rearranged, and “refunctionalize[d]‌” (Jessop 2002: 258) to serve a new purpose: to make society fit for competition. While the mission of the welfare state had been to protect national society from excessive competition by controlling cross-border economic transactions, by granting social rights and protection, and by nationalizing key public services, the competition state pursues “increased marketization” (Cerny 1997: 259). It liberalizes crossborder movements, re-commodifies labor, and privatizes public services. The welfare state domesticated capitalism, whereas the competition state vies for capital. The competition state thesis is attractive for intellectual and normative reasons. It offers a simple and general theory of state transformation that makes sense of a large and diverse set of changes in advanced capitalist states since roughly the 1970s. The explanatory leverage is potentially very large. At the same time, it resonates with widespread feelings of political disenchantment and decay. Explaining how the state loses power and autonomy in some respects while remaining a central and increasingly repressive governance actor in others, it rationalizes general misgivings about the “neoliberal” age. Many people suspect that more market simply means more big business (Crouch 2011). Large firms call on the state to protect them from competitive risks by shifting them onto small business and labor. The recent financial crisis is emblematic of this fear. Governments swiftly unburdened banks of bad debt, protecting management and shareholders from loss, and pushing the costs onto citizens via spending cuts and structural reforms—more welfare for capital, more competition for all the rest.

238    Philipp Genschel and Laura Seelkopf Yet, precisely because of its simplicity and generality, the competition state thesis is also problematic. Its propositions are precarious and not supported by rigorous empirical analysis. Three propositions are central. First, structural determinism:  the structure of the global economy forces states to compete for mobile capital. Second, convergence: there is only one best policy response to inter-state competition, namely the implementation of a neoliberal agenda of supply-side policies, fiscal restraint, and the marketization of social relations. Third, the decline of the welfare state: since the welfare state is seen as a competitive disadvantage in global markets, it will wither away as market competition intensifies. Neither of these propositions is uncontested among students of comparative political economy. For instance, globalization-skeptic scholars regard international competitive constraints as weak at best, even in an era of global markets. They see no strong structural determinism of national policies and institutions (Garrett 1998; Hay 2008). The Varieties of Capitalism School conceives of international competition as a source of cross-national divergence rather than of convergence (Hall and Soskice 2001). And, according to the socalled “compensation thesis,” the welfare state is the institutional foundation rather than the victim of international competition. Without the welfare state, there would be no substantial cross-border economic integration, and hence no competitiveness problem (e.g. Rieger and Leibfried 2003; Rodrik 2011). In sum, the mainstream literature in comparative political economy is not very impressed by the competition state thesis and largely ignores it. Unfortunately, the proponents of the competition state thesis hardly engage the mainstream views and make no sustained effort to find empirical support for their own propositions in macro-quantitative, internationally comparative time-series data. They rely almost exclusively on qualitative evidence—rich and insightful, but also often quite anecdotal (but see Horsfall 2010). This is unfortunate: a more intense debate with other perspectives engaging macro-quantitative evidence could considerably strengthen the competition state thesis, both by demonstrating its validity and exposing its limits. It could also help correct the strange neglect of global market forces in the mainstream literature on comparative political economy. While the competition state thesis tends to overplay these forces, the mainstream clearly underplays them (see Streeck 2010). Section 2 will now clarify the concept of the competition state by referring to some of its prominent proponents, such as Philip Cerny, Bob Jessop, and Joachim Hirsch. Section 3 reviews the causal mechanisms allegedly driving its rise. Section 4 takes up three critical questions addressed to the competition state thesis: how stringent are competitive constraints? How convergent are state reactions to competitive constraints? How detrimental are these constraints to the welfare state? The questions are discussed in light of contrasting arguments from other strands in the comparative political economy literature and descriptive evidence of tax policy trends in Organisation for Economic Co-Operation and Development (OECD) countries. Taxation provides an excellent starting point for analyzing the transformative effect of international economic integration: it is an essential feature of both the welfare and the competition state, and it has figured prominently in the globalization debate, as it sparks contending views on whether international tax competition erodes the fiscal foundations of the welfare state. Many authors have used it as a crucial test case for the impact of global economic change on domestic policies and institutions (Garrett 1998; Swank 2002; Steinmo 2003; Campbell 2004). Section 5 concludes.

The Competition State    239

2  Defining the Competition State What is a competition state? According to the proponents of the competition state thesis, it is a newly emerging state form that, from the 1970s onwards, has obtained dominance in advanced Western societies and worldwide. The key features of the competition state are defined mostly in terms of features of the old state form it replaces: the “Keynesian Welfare National State,” or KWNS (Jessop 2002). The KWNS dominated the “golden years” of welfare expansion after World War II. The competition state is its historical successor and conceptual antonym. First, the competition state is not a Keynesian state, because it has decidedly nonKeynesian policy priorities (e.g. Cerny 1997: 259 f.; Jessop 2002: 256; Horsfall 2010: 65): it is less concerned with managing the macro-economy than with ensuring micro-economic efficiency; it has a supply-side rather than a demand-side focus; it prefers rule-bound over discretionary policies; it prioritizes inflation control over full employment, fiscal restraint over fiscal expansion, and neutral taxation over progressive taxation; it promotes innovation and growth in general rather than picking winners through an activist industrial policy. The competition state relies on market mechanisms and avoids market interventions. Second, the competition state is not a welfare state, because it aims to increase rather than decrease the market dependence of citizens and industry: it serves as a “collective commodifying agent,” not as a “decommodifying hierarchy” (Cerny 1997: 267; also Jessop 2002: 251 f.; Bobbitt 2002: 241 f.; Horsfall 2010: 62–64). The competition state trims welfare entitlements to increase work incentives and to mitigate dependency traps; it cuts wage-replacing unemployment benefits and expands subsidized employment and training programs (active labor market policy); it emphasizes means-tested social assistance and de-emphasizes status-preserving social insurance; it privatizes the provision of public services, such as telecommunications, railways, hospitals, education, prisons, and cuts subsidies for private industry; it expands markets but refuses to guarantee market outcomes. Third, the competition state is not a national state because its territory and people lack economic coherence and common identity (Jessop 2002:  173–181; Cerny 2010:  6; Lunt 2010:  28). While the welfare state had created a fairly self-contained national economy insulated from international markets by capital controls and trade restrictions, the competition state opens up to international trade and capital flows and exposes the domestic economy to global markets that no longer operate along national lines. While the welfare state had fostered a sense of national identity, solidarity and belonging through discriminatory policies of cultural and ethnic homogenization—including strict immigration laws, public schooling, and forced assimilation of minority groups—the competition state champions non-discrimination. It is basically indifferent to race, religion, income, or gender, and it welcomes social, cultural, and ethnic diversity as a productive resource. Interest, not identity, keeps national society together. The competition state is “a mere pragmatic association for common ends” (Cerny 1997: 255). Finally, the competition state is not a state in the emphatic sense of untrammeled national sovereignty (Cerny 1997: 258; Hirsch 1998: 33 f.; Bobbitt 2002: 234; Jessop 2002: 252 f.). The sovereignty of the competition state is doubly constrained: first, by the rules of international

240    Philipp Genschel and Laura Seelkopf economic regimes (European Union (EU), North American Free Trade Agreement (NAFTA), World Trade Organization (WTO), International Monetary Fund (IMF), etc.), and, second, by the ever-present exit threat of mobile capital—real (physical), financial, and human—that forces governments to compete for capital through market-friendly policies. Both constraints restrict the policy space for protectionism, decommodification, and redistribution, leaving governments with no alternative to “neoliberal” policies. Formally, the competition state remains a democratic institution. In fact, however, democratically elected governments have no alternative to moving “policy in a market-conforming direction” (Swank 2006: 853). Without choice, the democratic machinery runs idle. The state transforms from an instrument of national self-government into an “enforcer” of the interests of global capital vis-à-vis domestic society (Cerny 1997: 258). In short, the competition state is the institutional reflection of the global spread of pro-business, “neoliberal” reforms—low inflation, fiscal austerity, welfare retrenchment, marketization, deregulation, and privatization. It represents not just one variety of capitalism among others, but the general form of the state associated with the distinct period of capitalist development unfolding since the economic crises of the 1970s.

3  Explaining the Competition State Most proponents of the competition state thesis see the rise of the competition state as an adaptive response to fundamental macro-social change including globalization, government overload, the crisis of Fordism, and the cultural hegemony of neoliberal policy ideas. Globalization undermines the welfare state by exposing it to international competition (Cerny 1997; Hirsch 1998: 32 f.; Bobbitt 2002: 220 f.; Fougner 2006: 173–175). As the barriers to cross-border transactions erode, governments can no longer impose costly taxes and regulations on mobile assets and activities, but have to vie for them through deregulation and tax reduction. The external competitive constraint weakens the welfare state’s capacity to shape and mitigate competition internally. To stay competitive, governments have to cut costs and slack, curtail redistributive policies, sell off public services, and focus public expenditure on economic rather than social needs, that is, on infrastructure, education, and research. Competitiveness supersedes national security and domestic welfare as the top political priority. While competitiveness had always been a concern for states (Reinert 1995), globalization significantly changes its salience and meaning. Until the 1970s, competitiveness mainly concerned the ability of national industry to sell goods in foreign markets. With the onset of deep economic integration in the 1970s and 1980s, however, it increasingly concerns the ability to attract and retain mobile assets and activities, especially human, corporate, and financial capital, for the domestic economy. Governments transform from sales representatives of national industry to landlords trying to lure in rich foreign tenants. And, importantly, the proponents of the competition state thesis highlight the central role of states in creating and maintaining economic globalization. States do so through unilateral liberalization and through multilateral cooperation in international economic regimes, such as that of the WTO, EU, NAFTA, and IMF. One motive is to better cope with internally generated problems of government overload.

The Competition State    241 Government overload undermines the welfare state from within (Cerny 1997: 262; Jessop 2002: 87 f.; Cerny and Evans 2004: 52; Lunt 2010: 26). It refers to the self-reinforcing escalation of welfare state commitments. The dynamic is fueled by disincentive effects of welfare state policies which aggravate the problems these policies notionally address (e.g. Offe 1984): the welfare state’s commitment to Keynesian demand management triggers adaptive responses by economic agents, such as excessive wage deals between trade unions and employers, which cause stagflation; the commitment to provide for social needs spurs the invention of new needs and ratchets up political demands; the expansion of welfare programs creates constituencies with vested interests in further expansion, for example, welfare bureaucrats and professionals, publicsector trade unions, and welfare clients (Rieger and Leibfried 2003); and subsidies to industry trigger investments in effective lobbying rather than efficient production. As the decommodified and subsidized parts of society absorb ever greater shares of economic output and political power, they slowly throttle the productive elements. Private investment is crowded out by public consumption. Public deficits grow and cause a chronic fiscal crisis of the state. Turning to the competition state is the means to break this vicious cycle. By exposing domestic society to international competition, it helps governments in “getting incentives right,” and it forces citizens and industry to rely primarily on their own efforts rather than on public assistance. The crisis of Fordism is, according to some authors, the deep cause of both globalization and government overload. Fordism was the “accumulation regime” of Western welfare states during the “golden” 1950s and 1960s (Hirsch 1998; Jessop 2002: 56–58). The regime was based on a virtuous, self-reinforcing cycle of mass production and consumption: mass production increased productivity through economies of scale; increased productivity led to rising wages; rising wages spurred mass consumption; mass consumption increased the utilization of capacity and, thus, profits; increased profits, in turn, allowed for more investment in productivity-enhancing technologies of mass production. When the saturation of demand for mass-produced goods and a shift in consumption patterns towards services ended this virtuous cycle, the crisis of the welfare state began: mass unemployment, lower profit levels, and growth rates cut into public revenues; increased demand for fiscal stimulus and income maintenance pushed up public spending. The result was the overloaded state of the 1970s. In this reading, governments moved towards the competition state to scale back the overload and to rescue capitalism from stagnation. By opening up the domestic economy to global markets and by commodifying essential state functions, governments created new profit opportunities for capital. It is not by accident that some of the biggest fortunes of the late twentieth century were made in newly privatized service markets such as telecommunications and television. Just think of Carlos Slim, Rupert Murdoch, and Silvio Berlusconi. The spread of neoliberalism facilitated the transition to the competition state by focusing public attention on competitiveness and by discrediting policy alternatives to market-accommodating policies. For Paul Krugman, the “rhetoric of competitiveness” (1994: 40) is a publicity stunt by governments and opinion leaders to sell structural reform to reluctant mass publics. However, for most theorists of the competition state it is more than that: it reflects an entrenched cultural hegemony of neoliberal policy ideas that “naturalizes” international competition to the point where it is broadly accepted as a taken-for-granted constraint on domestic policy (Fougner 2006: 165 f.; Lunt 2010; Taylor

242    Philipp Genschel and Laura Seelkopf 2010). In this perspective, the exigency of international competition is more narrated than real: it is a political construct that has been promoted, since the 1980s, by powerful actors such as the Reagan government in the United States, the Thatcher government in Britain, and international organizations with a stake in market integration, such as the World Bank, the OECD, and the EU. Yet narrated competition is nevertheless a real constraint. Even social democratic or center-left parties are forced to adapt, as the aggressive marketization and retrenchment agendas of the Blair government in Britain and of the Schröder government in Germany show (Cerny and Evans 2004: 60). And even fundamental shocks like the recent financial crisis fail to break neoliberal hegemony (Crouch 2011). The four explanations of the rise of the competition state are not mutually exclusive. Most proponents of the competition state thesis refer to all four of them but emphasize globalization as the most conspicuous and, supposedly, most consequential driver of transition.

4  Questions about the Competition State According to one prominent commentator, the competition state thesis provides a “supremely well observed, yet nonetheless general, elegant and parsimonious” account of key changes in the political economy of contemporary states (Hay 2004: 39). But is it true? The thesis’ validity is problematic for two reasons. It relies on a set of rather heroic propositions about state-economy relations, all of which are contested in comparative political economy: structural determinism, convergence, and the decline of the welfare state. Additionally, its proponents make little systematic effort to test these propositions empirically. While their predictions concern general patterns and trends in all countries, the competition state literature relies mostly on small-N qualitative studies focusing on particular developments in particular countries. Now we will discuss the three propositions in light of conflicting arguments from other strands of the comparative political economy literature and use empirical evidence from taxation in OECD countries to demonstrate the potential of more quantitative approaches for elucidating the scope and limits of the competition state thesis. Obviously, we cannot fully test the competition state thesis here. This would require a systematic empirical analysis of more policy areas (including public spending, labor market policy, education, social protection, market regulation, etc.) over an extended period of time and an extended sample of countries (including non-OECD countries). We simply use a crucial case, a case “that must closely fit a theory if one is to have confidence in the theory’s validity” (Eckstein 1975: 118) to highlight some of the promises and pitfalls of the competition state thesis deserving more systematic study elsewhere.

Do States Compete? Take the proposition of structural determinism: it holds that the changing structure of the macro-social environment—globalization, government overload, post-Fordism,

The Competition State    243 neoliberal hegemony—forces governments to compete for real (physical), financial, and human capital. According to Bob Jessop, the competition state is the “naturally necessary form of the capitalist type of state in a globalizing knowledge-based economy” (2002: 268). Other authors are less explicit but also see the transition to the competition state as an inevitable institutional adaptation to largely exogenous economic pressures (Cerny 1997; Hirsch 1998; Bobbitt 2002). Dodging competition is not an option. Unfortunately, these authors do not address how the external pressure for increased competitiveness is internalized by states. Implicitly, they allude to two alternative mechanisms. One, suggested primarily by the spread of the neoliberalism explanation, is agency: powerful actors—government elites, business leaders, and the media—analyze the competitive constraints weighing on the domestic economy, develop reform programs for meeting them, and cajole domestic society into accepting the necessary changes (Cerny and Evans 2004; Lunt 2010; Taylor 2010). The problem with this account is that it undermines the supposed inevitability of the competition state. Agency introduces contingency because different agents may perceive similar structural constraints differently, conceive different policy responses, and differ in their ability to sell these responses politically. The rise of the competition state no longer looks like the necessary outcome of non-negotiable, externally imposed structural imperatives, but like the contingent and potentially reversible outcome of a political process of “neo-liberalisation” (Hay 2004: 44). The competition state thesis loses much of its generality and persuasive power. The other mechanism is natural selection: uncompetitive institutions and policies are weeded out by sheer competitive pressure. This is the mechanism the early proponents of the competition state thesis clearly had in mind. The problem with this account is finding evidence for it. According to a large body of globalization-skeptic literature, international competitive constraints are weak at best and leave considerable room for domestic choice. Authors note that the contemporary level of economic integration is not unprecedented, that the major share of economic activity is still geared to domestic markets, and that mobile capital still flows into non-liberal, high-tax, high-regulation economies such as Denmark (e.g. Campbell 2004; Hay 2008)—there “remains a leftist alternative to free market capitalism in the era of global markets based on classic ‘big government’ and corporatist principles” (Garrett 1998: 4). In light of these claims, the competition state thesis loses much of its empirical plausibility. How stringent are competitive constraints on national governments? Consider some evidence from taxation. To the extent that taxes fall on capital or other mobile assets, the competition state thesis predicts tax competition: governments can no longer impose taxes on capital, but have to vie for it by undercutting foreign capital tax rates. Indeed, corporate tax rates conform to this prediction. As Table 12.1 shows, they have fallen across all core OECD-countries. The average is down from 46 percent in the late 1980s to 29 percent in the late 2000s. Various indicators point to competitive constraints as the major cause of the race to the bottom in corporate tax rates. First, there is extensive evidence of corporate tax arbitrage. Foreign direct investment and, even more importantly, corporate paper profits are highly sensitive to international tax rate differentials. Multinational companies routinely design their internal but cross-border transactions so as to increase paper profits of affiliates in low-tax countries and reduce them in high-tax countries (Genschel and Schwarz 2011: 350).

244    Philipp Genschel and Laura Seelkopf Second, there is evidence of governments reacting to corporate tax arbitrage by strategic rate setting. Corporate tax rate choices vary systematically with rate levels in neighboring countries and in regional integration clubs like the EU (Genschel and Schwarz 2011: 358). Finally, and most importantly, corporate tax rates vary with country size. As the bottom row of Table 12.1 shows, OECD corporate tax rates were essentially unrelated to country size in the 1980s (coefficient of correlation 0.1) but were positively and significantly related to country size in the 2000s (coefficient of correlation 0.6). This indicates increasing competitive pressure because, according to the standard model of tax competition (Wilson 1999), small countries have more to fear and less to lose from tax competition than large countries and will therefore undercut large countries’ tax rates in the competitive equilibrium. Small countries, on the other hand, have more to fear, as—given their lack of market power—they suffer relatively larger capital outflows when keeping tax rates up; they have less to lose because, for the same reason, a rate cut results in a relatively larger capital inflow from abroad. Intuitively, preying on a foreign tax base instead of farming domestic tax resources is profitable when foreign economies offer lots of prey and the domestic economy offers little to farm. If size differences are large enough, small countries may actually be better off under tax competition than in its absence. Note, however, that the correlation between corporate tax rates and country size is far from perfect. Competition is not the only factor that matters in tax rate choice. Note also that the tax wedge (i.e. the sum of personal income tax, employee social security contributions, and payroll taxes as a percentage of labor costs) of the average production worker (i.e. single earner, married, and two children) has also fallen from 17 percent (OECD-average) in the late 1980s to 14 percent in the late 2000s. This is harder to square with the competition state story. The drop fits the marketization part of the competition state story: governments cut non-wage labor costs in order to increase labor-market participation rates and raise the international competitiveness of domestic gross wages (Jessop 2002: 83). But, the drop is at variance with the idea of tax competition. The standard model of tax competition predicts a shift of the tax burden from mobile capital to less mobile tax bases. The available evidence suggests that labor is rather immobile. To the extent that workers move between countries at all, the movement is driven by income differences, not tax differences (Genschel and Schwarz 2011: 348). Hence, tax wedges should increase, not decrease, as competitive pressure on capital taxation mounts. The lack of any significant association with country size also corroborates the absence of competitive constraints on tax wedges (bottom row of Table 12.1). Overall, a cursory look at the evidence from taxation provides partial support for structural determinism:  competitive pressures are a significant constraint on corporate tax rates, and states are forced to compete for mobile capital. But small states are subject to stronger constraints than large states, and labor taxation is not directly affected.

Does Inter-State Competition Lead to Convergence? The competition state thesis predicts a process of competition-induced convergence of domestic institutions and practices around a neoliberal script of the competition state. It

Table 12.1  The competition state: evidence from taxation Regime/ Country

Population (Million) 05–09

Corporate Tax Rate

Tax Wedge°

85–89

05–09

85–89

05–09

Total Tax Revenue (% GDP) 85–89

05–09

Corporate Tax Revenue (% GDP) 85–89

05–09

Deficit 85–89

05–09

n.a.

1.4

Continental  Luxembourg

0.5

n.a.

30

n.a.

-3

 Austria

8.3

50

25

8

 Belgium

10.6

44

34

 Netherlands

16.4

41

 France

61.9

45

 Germany

82.2

37.1

36.4

6.3

5.3

8

40.3

42.4

1.4

2.2

-3.1

-1.9

21

16

43.6

44.0

2.3

3.2

-4.3

-2.0

28

27

24

43.9

38.8

3.2

3.4

n.a.

-1.0

35

7

15

42.4

43.3

2.1

2.5

-2.6

-3.8

60

35

22

18

36.1

36.0

2.0

1.8

n.a.

-1.6

30.0

48

31

17

13

40.6

40.1

2.9

3.1

-3.3

-1.5

4.2

40

32

16

21

34.1

34.5

2.8

4.9

-2.6

1.9

 Ireland

4.3

48

13

20

-4

35.2

29.9

1.2

3.1

-7.5

-3.4

 Switzerland

7.6

31

21

11

8

26.2

29.4

1.9

3.1

0.8

0.8

 Australia

21.3

44

30

n.a.

13

28.0

28.9

2.9

6.2

1.2

0.1

 Canada

32.9

46

33

10

14

33.7

32.6

2.8

3.3

-6.0

0.0

 United  Kingdom

61.0

36

29

19

10

36.5

35.7

4.2

3.4 -1.2

-4.8

 

Average

Anglo-Saxon  

New Zealand

 

United States

 

Average

Nordic

301.8

44

39

21

10

26.1

26.6

2.2

2.7

n.a.

-5.5

61.9

41

28

16

10

31.4

31.1

2.6

3.8

-2.5

-1.6

 Norway

4.7

51

17

19

43.0

4.2

11.4

 Finland

5.3

54

26

21

22

41.1

43.4

1.4

3.2

3.1

2.7

 Denmark

5.5

50

26

35

29

48.2

49.2

2.3

3.6

n.a.

3.1

 Sweden

9.2

57

28

25

22

50.5

47.4

2.2

3.4

1.2

1.8

Average

6.2

53

27

25

23

45.6

45.7

2.5

5.4

3.1

5.9

 Portugal

10.6

48

27

13

 Greece

11.1

48

27

 Spain

44.5

35

33

 Italy

59.2

46

31.3

45

 

28

42.5

4.9

16.0

Southern

 

Average

 Japan   Average Correlation with logged population

127.7 40.5 n.a.

46 -0.1

4

25.5

34.6

1.2

3.2

-6.5

-5.4

17

25.6

31.6

1.0

2.2

-10.3

-8.7

11

11

30.2

34.7

2.0

3.5

-4.2

-2.1

31

15

15

35.4

42.7

3.5

3.4

-11.0

-3.4

n.a.

29

13

12

29.2

35.9

1.9

3.1

-8.0

-5.0

40

9

14

28.7

28.0

6.5

4.0

-0.2

-4.7

29

17

14

35.9

37.0

2.7

3.8

-2.8

-0.9

-0.3***

-0.3*** -0.02

-0.12

-0.41***

0.6***

-0.24

0.16

-0.32***

Notes: n.a. = not available °  Single earner, married, two children, and average production worker. Data for 1985 and 2005 only. ***  The correlation with the logged population is significant at the 0.01 level. Sources • Population—OECD General Statistics (OECD General Statistics: http://stats.oecd.org/); • Corporate Tax Rate, Tax Wedge, Total Tax Revenue, and Corporate Tax Revenue—OECD Tax Statistics (OECD Tax Statistics: http://www.oecd-ilibrary.org/taxation/ data/oecd-tax-statistics_tax-data-en;jsessionid=af73600d4pmdf.x-oecd-live-02); and • Deficit—IMF (IMF World Economic Outlook, September 2011: http://www.imf.org/external/ns/cs.aspx?id=28).

The Competition State    247 allows for different states to adapt to competitive constraints differently reflecting different domestic institutions and political configurations (Jessop 2002: 67). There is “diversity within convergence” (Cerny 1997: 263). The competition state comes in different shapes—neoliberal, neo-corporatist or neo-statist (Jessop 2002); Anglo-Saxon, Nordic, or Conservative (Horsfall 2010)—but only if, and insofar as, these different shapes ensure comparable levels of competitiveness in world markets (Cerny et al. 2006: 21 f.). There are various problems with the convergence argument. First, the proponents of the competition state thesis emphasize that the transition to the competition state is still in progress (e.g. Jessop 2002: 248). It is unclear how much convergence to expect to date. Perhaps the bulk is yet to come? This makes testing the proposition almost impossible. Second, the variety of competition state forms makes it difficult to measure convergence. What is the unifying criterion that allows determining whether Norway, France, South Korea and the United States represent variant forms of the competition state or just different forms of state? Do “flexicurity” reforms in Denmark and Margaret Thatcher’s labor market flexibility policies in the UK indicate institutional convergence (because both involve liberalization) or divergence (because the first accommodates labor interests while the latter does not)? A coherent framework explaining when distinct competition state forms emerge and how they can be distinguished from other state forms, that is, from non-competition states, is lacking. This is all the more problematic as the proponents of the competition state thesis relentlessly extend the scope of their theory to nonOECD countries for which it was not designed, for instance to China, Chile, Malaysia, Mexico, Singapore, South Africa, and Jordan (Jessop 2002; van der Westhuizen 2002; Al-Jaghoub and Westrup 2003; Cerny 2010; Soederberg 2010; Taylor 2010). Most of these countries never had a welfare state in the first place. Their governments may be overloaded, but for different reasons than in OECD countries. Their economies often rely heavily on Fordist mass production. And the reigning ideology is sometimes explicitly opposed to neoliberalism. Finally, the causal mechanism of the convergence hypothesis is unclear. Why should international competition homogenize state structures and not diversify them, as, for instance, the Varieties of Capitalism School argues? Proponents of this school hold that economic integration encourages divergence by forcing producers to specialize and forcing producers’ home countries to support specialization through specific policies and institutions. Rather than converge on liberal market economies, non-liberal, “co-ordinated” varieties of capitalism move further away to defend their comparative institutional advantages (Hall and Soskice 2001). What does the evidence from taxation say? Following common practice (e.g. Cerny 1997; Esping-Andersen 1999; Stephens et  al. 1999; Bobbitt 2002; Jessop 2002; Campbell 2004; Pontusson 2005), Table 12.1 groups the 21 OECD countries of our sample into four distinct regime clusters—Continental, Anglo-Saxon, Nordic, and Southern. If we look at corporate tax rates, there is clear evidence of convergence across clusters. The spread between the four regime averages shrinks from 12 percentage points in the late 1980s (Nordic 53 percent—Anglo-Saxon 41 percent) to only four percentage points in the late 2000s (Continental 31 percent—Nordic 27 percent). Corporate tax rates also converge within three of the four clusters. The extent of convergence depends on the cluster’s heterogeneity in country size. The Nordic cluster is very homogenous in country size and, consequently, has the lowest spread in corporate tax rates: only a two percentage point difference

248    Philipp Genschel and Laura Seelkopf between the highest and lowest Nordic rate in the late 2000s. The Anglo-Saxon cluster, by contrast, is the most diverse in country size and consequently has the largest spread in corporate tax rates: 26 percentage points in the 2000s. Obviously, rate convergence is conditioned by country size, as predicted by the standard model of tax competition. This is corroborated by the fact that the regime with the lowest average country size, the Nordic regime, exhibited the lowest corporate tax rates, on average, in the 2000s, even though it had the highest rates in the 1980s. If we look at tax wedges, we see divergence. While tax wedges in all four regimes follow a downward trend, the spread of the regime averages increases slightly from 12 percentage points in the 1980s (Nordic 25 percent—Southern 13 percent) to 13 percentage points in the 2000s (Nordic 23—Anglo-Saxon 10). With the exception of the Nordic cluster, the spread also increases in each of the clusters, most prominently in the Continental and the Anglo-Saxon clusters. In contrast to the corporate tax rate, which is driven by common external competitive pressure, the tax wedge reflects domestic differences in regime-type and political configuration. Finally, with total tax revenues we see essentially no change. With the exception of the Southern cluster, which has increased its average tax take from 29 percent in the 1980s to close to 36 percent in the 2000s, the average tax takes of the other clusters remain basically unchanged. Also, within regimes there is little movement: The intra-regime spreads hardly change between the 1980s and the 2000s. Conclusion: we see convergence on the policy variable directly exposed to international competition, the corporate tax rate. We see divergence on the policy variable sheltered from international competition, the tax wedge. And we see essentially no change at the aggregate level of total tax revenues. The overall pattern resembles “convergence within diversity” more than “diversity within convergence” (Cerny et al. 2006: 21). Confronted with the homogenizing pressures of international tax competition on capital taxation, states preserve the distinctness of the national tax system by increasing the diversity of labor taxation. Diversity is not erased but consolidated in those parts of the tax system that are sheltered from international competition.

Does Inter-State Competition Undermine the Welfare State? The competition state thesis predicts welfare state decline. The reasoning is simple: international competition for mobile capital requires tax cuts; tax cuts require spending cuts; spending cuts require welfare retrenchment; hence the welfare state is hollowed out. Key policies and institutions remain in place, but deprived of revenue they are little more than an “organizational Maginot line” (Cerny 2010: 13) against global markets (Hirsch 1998: 32; Bobbitt 2002: 220; Jessop 2002: 84). There are three prominent counterarguments against this thesis, also often called the “efficiency thesis.” According to the globalization-skeptic perspective there is no evidence of international competition pulling the fiscal rug out from under the welfare state (e.g. Garrett and Mitchell 2001), but there is substantial evidence of the resilience of welfare state institutions and policies (e.g. Pierson 2001). According to the Varieties of Capitalism School, international economic integration results in welfare retrenchment in liberal market economies, which compete mainly on costs, but not in non-liberal coordinated

The Competition State    249 economies, which compete mainly on quality (Hall and Soskice 2001: 57–58). Finally, the “compensation thesis” holds that economic globalization buttresses rather than erodes welfare spending, as citizens call on governments to protect them from the economic risks associated with international competition. Hence, more open economies have larger welfare states (e.g. Busemeyer 2009). Table 12.1 provides little support for the compensation argument. To be sure, total tax revenues are negatively and significantly associated with country size, indicating that small countries, which usually have more open economies, have larger public sectors. But the negative association already existed in the late 1980s, predating the integration push of the past 20 years. More importantly, this push did not result in any substantial tax increase. With the exception of the Southern cluster, the growth in total revenues was flat over the past 20 years. Support for the Varieties of Capitalism prediction is also scant. There is no evidence of increasing divergence between the liberal Anglo-Saxon cluster and the rest. While Anglo-Saxon countries tend to have lower total tax revenues than countries from other clusters, the difference is not substantially more pronounced than in the 1980s. By contrast, Table 12.1 broadly conforms to globalization-skeptic predictions. It provides no evidence of a general decline of the welfare state. Total tax revenues have been broadly stable since the 1980s. Corporate tax revenues increased, rather than decreased (from 2.7 percent of GDP on average in the 1980s to 3.8 percent in the 2000s), and budget deficits declined by almost two percentage points (from −2.8 percent of GDP on average in the 1980s to −0.9 percent in the 2000s), indicating a better ability of governments to meet spending requirements by available resources. Does it follow that economic integration is irrelevant for the welfare state? Again, consider the effects of country size. As Table 12.1 shows, neither corporate tax revenues nor deficits were substantially related to country size in the late 1980s. In the late 2000s, by contrast, both variables were negatively and significantly associated with size. This suggests an ambiguous effect of tax competition on the welfare state: positive in small countries, negative in large countries. Tax competition buttresses the welfare state in small countries in two ways. First, it leads to a net influx of mobile capital and thus drives up capital tax revenues: as Table 12.1 demonstrates, small countries had significantly higher corporate tax revenues than large countries in the late 2000s even though their corporate rates were significantly lower. Second, the influx of capital fuels labor demand and wages, which in turn increase revenues from labor taxation and reduce demand for unemployment benefits and income support. Both effects combined help small countries to fund welfare programs without deficits and to keep unemployment and poverty in check (Genschel 2004: 631). This explains why left parties in small countries like Ireland often support aggressive tax competition strategies. Large countries suffer from the reverse effects: they lose capital and, hence, capital tax revenues, and see their employment and wage levels depressed. In conclusion, international competitive constraints affect the welfare state in more ambiguous ways than the competition state thesis suggests. They tend to challenge the welfare state in large countries but bolster it in small countries. Note, however, that the standard model of tax competition suggests that large countries lose more than small countries gain, so the overall competitive impact on the welfare state may indeed be negative, as the competition state thesis suggests. Note also that while small countries may profit from tax-induced capital inflows in good times, they may be particularly hard hit by sudden capital-outflows in bad times. Ireland, the former poster child of successful tax

250    Philipp Genschel and Laura Seelkopf competition, is also one of the main victims of today’s European debt crisis. Note, however, that Ireland’s coping strategy again relies on tax competition. Tellingly, the corporate tax is the only tax the Irish government refused to raise following the crisis.

5 Conclusion The competition state thesis offers a general and simple theory of state transformation in advanced capitalist societies. It is general in arguing that state change is caused by the same macro-social trends in all OECD countries and perhaps even in countries worldwide— that is, by economic globalization, government overload, post-Fordism, and the cultural hegemony of neoliberal thought. It is simple in predicting that these trends evoke the same type of change everywhere: welfare cutbacks, a broad marketization of social relations, and the transformation of the state into a “competitive entity” (Fougner 2006: 165). As our cursory look at tax policy in advanced Western countries suggests, these propositions are overly general and too simple: not even in the OECD are all states subject to the same competitive constraints in taxation, but small countries are more affected than large ones. Some reactions to tax competition are convergent, as the thesis supposes, for instance with respect to the corporate tax rate. Others are divergent, for instance with respect to the tax wedge. And while competitive effects on the welfare state are negative in some (usually large) countries, they are positive in others (usually small). The relationship between the welfare and the competition state is less clearly zero-sum than the thesis suggests. Yet, equally importantly, the evidence confirms the basic thrust of the thesis: global economic change is a powerful driver of state change. Tax competition exists and constrains national tax policy choices in important ways. States are affected by their economic environment. Trite as it may sound, this is a point worth making given the strange pride that more mainstream positions in comparative political economy—for example, globalization skepticism, Varieties of Capitalism, and the compensation thesis—take in being agnostic about external economic constraints on the welfare state. Where the competition state thesis is in danger of overplaying the impact of global economic change, the mainstream is underplaying it. Therefore the thesis should not be given up but developed. One of the potential strengths of the competition state literature is its attention to political economies outside the OECD area. Mapping out and explaining variation in the social policies of these economies is clearly an important future research frontier (Carnes and Mares 2007: 882). However, it also exposes the main weaknesses of the competition state thesis that need to be addressed. On the theoretical side, scholars need to think more carefully about the mechanisms linking external constraints and governments’ policy choices. The competition state argument was modeled on empirical developments observed in North America and Western Europe. It is not self-evident that the argument travels easily to other countries in other structural positions in the world economy and with different domestic institutions and practices. Is globalization really a threat for less developed countries, such as Malaysia, or is it an opportunity? One of Bangladesh’s economic mainstays is Fordist mass production of textiles. Will it converge on a similar form of competition state as post-Fordist Singapore? Do we expect autocratic China to develop a similar social and economic policy profile as democratic Mexico? Deriving better predictions of the forms, timing, and levels

The Competition State    251 that different countries should show on their way towards—or away from—the competition state would make the theory more convincing, as well as more amenable to rigorous empirical tests. This requires more systematic attempts to model the causal link between competitive constraints and policy choices and a more sustained effort to complement the rich qualitative work on the competition state with systematic quantitative analyses.

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Chapter 13

The Embedded State

The New Division of Labor in the Provision of Governance Functions

Tine Hanrieder and Bernhard Zangl

In the twenty-first century, state sovereignty is no longer absolute. Even the authority of powerful states is embedded in manifold international institutions whose governance activities have become increasingly intrusive. The United Nations Security Council (UNSC) may nowadays order the freezing of the bank accounts of terror suspects and war criminals. The World Trade Organization (WTO) in Geneva can decide whether the Europeans may ban hormone-treated beef and genetically modified food from their markets. And an International Criminal Court (ICC) has been established in The Hague that can command the extradition of the president of a sovereign country such as Sudan. As these examples demonstrate, even the core of political sovereignty is no longer exclusively controlled by the nation state, but has instead been penetrated by international authorities. International institutions not only circumscribe the autonomy of states in their international affairs but also intervene into their domestic realm. The metaphor of the “embedded state” addresses this entanglement of state and international institutions. Nation states exert their authority within an internationalized authority structure made up of international institutions and organizations. These international structures have both constraining and enabling effects. They impose rules on nation states that limit states’ authority, but at the same time these structures provide for a rule-based context of managed interdependencies and joint governance that allows states to exert political authority. Therefore, any change of these international institutional structures may have important implications for states’ political authority and, thus, their sovereignty. In order to gain a fine-tuned understanding of the ways states are internationally embedded, this chapter maps the reconfiguration of authority structures in historical perspective. We trace a trend from the “sovereign state” toward the “embedded state,” which is the result of a shift from strictly intergovernmental to more and more supranational authority structures. The chapter will start by situating the concept of the “embedded state” within the scholarly debate about the shifting authority relations between nation

254    Tine Hanrieder and Bernhard Zangl states and international institutions (Section 1), followed by a historically structured account of the shift from the sovereign to the embedded state. We show that, to manage international interdependence, state authority was initially embedded in largely statecontrolled international institutions that mainly shielded states’ domestic authority from infringements stemming from other states (Section 2). We then go on to argue that the authority of international institutions has changed dramatically in the last two or three decades. While less and less controlled by states, international institutions are no longer merely shielding, but rather intervening into states’ domestic realms (Section 3). Finally, drawing on recent scholarly contributions, we discuss whether the ensuing authority configuration may trigger a self-reinforcing and/or self-undermining institutional dynamics. We will also pinpoint avenues for future research on the international embedding and disembedding of nation states’ political authority (Section 4).

1  Debating the Internationalization of Political Authority The rise of international political authorities and their effects on the political authority of the nation state has become a matter of scholarly debate in which—roughly speaking— statist and internationalist positions can be distinguished. The statist view. From a statist view, international institutions and organizations remain what they have always been, namely, fundamentally controlled by their member states. In this view, international organizations (IOs) are state instruments without any impact on sovereignty. This position is most prominently held by those adhering to the realist tradition of international relations (IR) scholarship (Waltz 1979). According to the realist perspective, international institutions merely reflect the underlying interests of and the power constellation among their members and are largely without effect; they are not even seen as being able to stabilize international cooperation (Mearsheimer 1994). While neoliberal institutionalists have challenged the realist pessimism regarding the ability of international institutions to further inter-state cooperation, they remain committed to the view that international institutions largely reflect the distribution of power and constellation of interests among their member states. In this view, international institutions are created by states as instruments to facilitate cooperation that reflects their—or the enacting coalition’s—common interests (Keohane 1984, 1989; Hasenclever et al. 1997; Gruber 2000). International institutions and organizations may at times be recalcitrant state instruments, but they hardly have any impact on state sovereignty (Moravcsik 1999; Krasner 2001). This understanding is even shared by neoliberal institutionalists, who use so-called principal-agent theories to study state control over IOs. They conceive of states as “principals” that delegate circumscribed authority to international organizations, that is, their “agents,” such that these IOs fulfill the tasks the states themselves have difficulties fulfilling effectively or efficiently. While mainly concerned with the organizational tools available to states for reining in their agents, principal-agent approaches acknowledge sources of IO “slack” (Hawkins et al. 2006). They stress, for instance, unanimous decision rules in international organizations as an important obstacle to the principals’ agent control. Where states cannot reach decisions that

The Embedded State    255 redefine the mandate and authority of IOs, bureaucratic autonomy is expected to be higher than where states may make decisions based on (simple or qualified) majority (Nielson and Tierney 2003). Though this research agenda has spurred interest in how bureaucrats exploit the discretion granted to them by states, and thus opened the possibility that IOs may have independent effects as actors, it still draws on the assumption that IOs are largely controlled by states and thus leave state sovereignty largely unaffected (e.g. Haftel and Thompson 2006; Betts 2009; Biermann and Siebenhüner 2009; Copelovitch 2010). The internationalist view. The statist view of international institutions is challenged by internationalist IR scholarship that emphasizes the agency and autonomy of international organizations. To begin with, in the field of European politics, neofunctionalists argue that transnational social relations drive the demand for institutions beyond the state, thus shifting political authority from the state to supranational institutions of the European Communities, the EC, or its successor the European Union, the EU (Haas 1977). Moreover, integration steps in one domain spill over into other domains due to the necessity of maintaining consistent rules, so the dynamic toward supranational authority becomes self-reinforcing (Stone Sweet and Sandholtz 1998). More recently, such internationalist arguments are also taking hold in the IR literature. Constructivist IO scholars in particular contend that international politics is becoming increasingly “bureaucratized” by supranational secretariats. Supranational rule is sustained by the modern principle of rational-legal authority that endows the bureaucracies of IOs with considerable autonomy. Through their authority to define and classify the legitimate objects and subjects of international governance, IOs deeply affect international and domestic politics (Barnett and Finnemore 2004). Their legitimate authority has even been conceived of as a source of IO “sovereignty” beyond the state (Hurd 2008). The debate about whether IOs are mere agents or autonomous actors—mostly cast in terms of the rationalism versus constructivism debate (Nielson et al. 2006)—is ongoing and has yielded important insights into the conditions of IO influence. Yet, from a more recent reconfigurationist point of view, this nation state versus international institutions framing has also contributed to reproducing a zero-sum view of political authority that obscures rather than illuminates important transformations of contemporary authority structures. State authority is not supplanted by international authorities, yet neither is it unaffected by the institutionalization of political authority beyond the state. Research on the “disaggregated state” does, for instance, claim that state component actors such as the bureaucracy, the judiciary, or the legislature increasingly interact through transgovernmental ties, which tends to disaggregate the state into its component parts (Slaughter 2004). And research on the “unbundling of the state” underlines that today’s modern states increasingly share political authority with non-state actors, be they international institutions, private businesses, or civil society actors (Genschel and Zangl 2008, 2014; Hurrelmann et al. 2008; on private authority beyond the state see Mattli, Chapter 15, this volume). Similarly, research on multilevel governance investigates how political authority is shared across institutional levels—regional, national, and supranational (Hooghe and Marks 2001). Originating from European integration studies, multilevel governance research investigates how levels of decision-making are interlinked in complex federal systems such as the European Union (see Schakel et al., Chapter 14, this volume). Our usage of the term “embedded state” is both narrower and broader than the notions of multilevel governance and of the “unbundling of the state.” It is narrower in that we

256    Tine Hanrieder and Bernhard Zangl zoom in on the relationship between public authorities, namely states and international organizations (see Mattli, Chapter 15, this volume).1 Moreover, and in contrast to the multilevel perspective, we do not conceptualize the nation state as one among several—national, subnational, and supranational—levels of decision-making within a complex political system, but instead focus on how state sovereignty and the authority of international institutions have mutually constituted and reconstituted each other. Given that international institutions are both limiting and constitutive of state sovereignty, an investigation of states’ international embeddedness allows us to retrace changes on the “external side” of modern statehood (see Zürn and Deitelhoff, Chapter 10, this volume). What we aim to show is that the state-international reconfiguration is not a zero-sum relationship but a more complex constellation where different dimensions of authority are recombined in novel ways. To grasp this reconfiguration, our take on the embedded state is also broader than the multilevel governance perspective in that we do not exclusively focus on decisionmaking authority. Rather, we examine a triad of state powers: (1) the authority to make binding decisions, (2) the operative capacity to implement these decisions, and (3) a publicly recognized ability to legitimate public policies (see also Genschel and Zangl 2008, 2014). Since these authorities are not isolated but stand in a relationship of mutual dependence on each other, their combined analysis allows for more fine-grained insights into the state-IO relationship than does a zero-sum view of political authority. Hence, the central question of this chapter is: to what extent are these functions exerted by the national state and international institutions, respectively, and how may this change our notions of sovereign authority? Using a (stylized) historical approach to this problem, the chapter shows how sovereign authority has been gradually displaced by interlocking authority structures. Our account will be illustrated with examples from different issueareas and focus on commonalities rather than differences. The focus lies on the growing embeddedness of developed states in international institutions, bearing in mind that weak and dependent states have hardly ever enjoyed the sovereign autonomy of OECD countries (see Viola et al., Chapter 11, this volume, on the unequal state).

2  Shielding Sovereignty in an Interdependent International System The early period of IO-state relations was marked by a constellation where state sovereignty was actually preserved with the help of international institutions. This period of the sovereign state can be broadly dated from the mid-nineteenth century to approximately the 1970s and 1980s, depending on the issue-area at hand. It was marked by the gradual takeover of international governance functions by IOs. However, the rise of IOs in the nineteenth and twentieth centuries did not undermine state sovereignty. Rather, on the contrary, the policies of international organizations were based on the growing competence 1 

The notion of the “embedded state” resonates with, but also differs from, the concept of “embedded autonomy” developed in comparative politics, which describes levels of state-society interdependence in economic governance (Evans 1995).

The Embedded State    257 to shield state sovereignty in an interdependent international system, while these organizations’ policy-making was largely controlled by states. To be sure, after the first IOs such as the Rhine River Commission or the Universal Postal Union emerged in the mid-nineteenth century, IOs became more and more important. Their number rose from 25 in the late nineteenth century to about 100 in the mid-twentieth century and reached a peak of 350 in the late twentieth century. Also, the average number of member states per international organization grew. While each IO had, on average, about 15 members at the end of the nineteenth century, this number increased to about 20 in the mid-twentieth century and reached 35 at the end of the twentieth century. The number of IO memberships per state also increased. On average, each state had about ten memberships in international organizations in the late nineteenth century. In the mid-twentieth century, this average of IO memberships per state already stood at almost 30, and it reached 60 in the late twentieth century. Finally, the number of issues covered by IOs grew, too. The first IOs in the nineteenth century dealt with very limited technical issues, such as the coordination of standards for international mailing, international shipping, or international railway transportation. In the twentieth century, by contrast, international organizations such as the United Nations (UN), the World Trade Organization (WTO), the International Monetary Fund (IMF), and the International Labour Organization (ILO) cover a great variety of political issues, from preserving international peace to stabilizing the global economy and improving social welfare (Pevehouse et al. 2004). Yet, until the late twentieth century, these institutions did not have competences that would undermine state sovereignty. In the face of increasing complex interdependencies, they primarily gained competences to shield states’ political authority from being undermined by other states’ policies. International organizations were given the task of managing the increasingly complex interdependencies between states so as to curb undesired policy externalities. They guarded intergovernmental rules of conduct and were thus mainly concerned with regulating inter-state conduct through at-the-border governance. In the domain of security, the United Nations, founded in 1945, superseded the ban on the use of force in inter-state conflict, and a system of collective security was set up to protect states from external aggression. At the same time, each state’s right to self-defense was confirmed, and the UN was explicitly banned from intervening in states’ domestic affairs. The regulation of international trade was also confined to inter-state conduct. Under the General Agreement on Tariffs and Trade of 1947 (GATT), at-the-border trade barriers such as tariffs were subjected to a regime of reciprocal concessions with the goal of trade liberalization. Still, in line with the principles of embedded liberalism, trade barriers were not completely abandoned, so as to allow some space for Keynesian macro-economic management and the buildup of national welfare state systems. The international combat of infectious disease provides another example of an area in which borders still mattered. Despite the appealing slogan that “disease knows no borders,” the nineteenth century sanitary regulations that the World Health Organization (WHO) inherited in 1948 focused on atthe-border measures such as quarantines. The regulations were designed to reconcile protective measures with the economic interest in open trade and were applicable to a limited number of contagious diseases such as cholera, yellow fever, and smallpox. Apart from being limited to shielding states’ authority against policy externalities from other states, international organizations were also largely controlled by states. Decision-making authority remained a sovereign prerogative, as decisions in

258    Tine Hanrieder and Bernhard Zangl international institutions and organizations most of the time required universal consensus, and the application and interpretation of international rules was mostly left to states. This is most evident in the case of the GATT. Decisions about new norms could only be made in intergovernmental negotiations and thus by consensus. Sanctions for non-compliance with these rules required a consensual decision as well and could thus be blocked by the potential targets of such sanctions. The same applies to the security field. New norms—concerning arms control, for instance—could become binding only when intergovernmental negotiations led to a consensus among relevant states. During the Cold War, the consensus requirement factually also applied to the UNSC, despite its formal majority voting system. Even in cases of a violation of the ban on the use of force, offending states hardly ran the risk of a UNSC resolution criticizing them. In addition to their decision-making prerogatives, states retained operative control over the implementation and enforcement of international norms. In the absence of enforcement capacities, the GATT could only authorize states to retaliate against rule violations. Likewise, the United Nations relied on case-by-case contributions of member states to conduct peacekeeping and/or peace enforcement operations, since the UN military forces foreseen in the UN Charter never came into being. In the health domain, to give another example, the WHO could provide detailed technical standards for the prevention and handling of contagious diseases through the International Sanitary Regulations (since 1969, International Health Regulations), but these standards had to be enacted by national health authorities. Moreover, the WHO remained dependent on state reporting of disease outbreaks, so that in many, if not most, cases, the WHO’s hands were tied even in the face of apparent violations of these reporting obligations (Zacher and Keefe 2008: 39–40). Finally, the legitimacy of IOs was closely tied to state authorization. The sovereigntybased legitimacy discourse of the time was that IOs were controlled by states which thereby gave legitimacy to their governance activities. IO governance rested on an international legalism where only public, that is, state-based, political authority was recognized as legitimate and clearly delineated from non-state actors. Hence, post-World War II multilateralism was a system of international coordination among governments, with little to no societal involvement beyond the state (Zürn et al. 2007: 133). Thus, to sum up, the twentieth century witnessed a growing reliance of sovereign states on international institutions and organizations covering a wide variety of issue-areas. Within this increasingly institutionalized environment, member states had to forego certain policy options—such as radical protectionism or military aggression—in exchange for a more rule-based and dependable intergovernmental environment. Yet IOs hardly interfered in the domestic authority of states and largely remained under state control.

3  The Rise of Supranational Authority and Interlocking Governance Functions Since the end of the twentieth and the beginning of the twenty-first century, many IOs have acquired more autonomous governance authorities. On the one hand, they are increasingly gaining competences to intervene into what used to be states’ domestic affairs,

The Embedded State    259 while on the other hand they are becoming less and less controlled by their member states. Nevertheless, as IOs remain fundamentally dependent on states’ authority contributions, the embedded state is far from being in decay. In terms of their competences, many IOs are no longer restricted to merely shielding states’ authority. Rather, they are gaining the competences for global governance and thus the competence to intervene into states’ domestic affairs. They are not only managing the interface between states through at-the-border norms, but also targeting non-state actors as objects of governance with behind-the-border norms and in some cases even with beyond-the-border norms (Lawrence et al. 1996). Intra-state violence by organized nonstate actors is no longer regarded as a purely domestic security problem, but as a challenge to be addressed multilaterally. Today, the UNSC is not only concerned with the inter-state use of force, but also targets private groups and individuals. It can mandate, for example, the freezing of bank accounts of political leaders and military commanders that it deems responsible for the use of excessive military force against civilians (Cortright 2000). In the fight against terrorism, the Security Council has also begun to target suspected terrorists and their supporters (Kreuder-Sonnen 2012). By the same token, the GATT is no longer confined to at-the-border trade barriers. Its successor, the WTO, focuses on domestic technical standards or food safety standards that are now treated as behind-the-border barriers to trade that are subject to international regulation. In addition, the WTO now deals with issues such as intellectual property rights. States are required to protect the copyrights of foreign companies against infringement in their domestic markets. In global health politics, the WHO Framework Convention on Tobacco Control addresses the business practices of tobacco companies. It seeks to reduce demand for tobacco by, for example, regulating the content, packaging, and labeling of tobacco products and tobacco advertising (WHO 2003). Not only have IOs gained competences in behind- and beyond-the-border governance, but these competences are no longer fully state-controlled. A shift from the intergovernmental to the supranational level has taken place in many organizations, particularly at the level of decision-making authority (Zangl and Zürn 2003; Lake 2010). Supranational decision-making is in some cases based on new majoritarian decision rules. This applies not only to the European Union, but also to the UNSC, which nowadays makes majority decisions that are no longer merely concerned with applying UN norms. It also sets new norms, as in the case of resolution 1540 of 2004, which requires that states prosecute the proliferation of nuclear-weapons-relevant material to non-state actors under domestic criminal law (Rosand 2004; Heupel 2008). Furthermore, a growing number of IOs are given the authority to make autonomous decisions. Although this hardly extends to norm-setting decisions, the application of norms to specific cases is increasingly delegated to supranational bodies. Judicial decision-making by the WTO’s Appellate Body or by the International Criminal Court are prominent examples (Zangl 2008; Deitelhoff 2009). Yet also seemingly technical agencies, such as the WHO, have gained decision-making authority. Under the revised International Health Regulations (IHR) of 2005, the WHO secretariat is entitled to declare international health emergencies and to recommend specific public health measures. To guarantee health security under globalized conditions, the WHO no longer depends on official state reporting of disease outbreaks, but may instead draw on nonstate sources (WHO 2008). The repercussions of these new authorities were intensely felt in the WHO’s pandemic alert against “swine flu” in 2009. This first invocation of the new

260    Tine Hanrieder and Bernhard Zangl IHR 2005 pressured governments to purchase and stockpile vaccines far in excess of what turned out to be needed. Yet, despite the fact that IOs are no longer fully controlled by states, they still remain fundamentally dependent on states’ authority contributions. There are three limitations that keep IOs dependent on states: (1) The gain in international decision-making powers is not matched by growing operative capacities (Genschel and Zangl 2008, 2014). So far, IOs have managed to organize some operative presence only in the Global South, the developing world. In the Global North, the world of developed countries, however, their operative presence is almost non-existent. Although IOs increasingly target non-state actors, citizens of developed countries barely ever make direct contact with international authorities— they receive no letters, no telephone calls, no fines, no e-mails, etc. This lack of operative capacity makes IOs particularly dependent on states when it comes to enforcing decisions against unwilling targets. To be sure, enforcement is not always required to ensure compliance with international decisions (Chayes and Chayes 1993; Zürn and Joerges 2005). In fact, international decisions are generally respected, despite the fact that they cannot be enforced. Yet, if enforcement is required, IOs have no choice but to rely on state support, because the relevant operational capacities remain state prerogatives. It is thus states that enforce the freezing of bank accounts of terror suspects that are listed by the UN. It is states that prosecute copyright infringements the WTO is acting against. And it is states, and not the WHO, that have to build up surveillance and response capacities to back up global pandemic preparedness. (2) The specification of IO decisions still depends greatly on states. As opposed to decisions on at-the-border norms, IO decisions on behind-the-border and beyondthe-border norms cannot help but be quite general given the diversity of states’ domestic legal, political, societal, and cultural contexts. Applying the WTO ban on import quotas in Sweden and Lesotho, for instance, may be possible; applying the same copyright regulations in both countries appears, by contrast, impossible. Therefore, context-sensitive specifications of international decisions are critical to making IO decisions applicable on the ground. In this respect, IOs are still dependent on states. It is thus left to states to define how terrorist activities are criminalized, in accordance with UNSC decisions. And it is states—not the WTO—that specify how victims may protect their copyrights. States also have to define how the provisions of the WHO’s Framework Convention on Tobacco Control can be translated into domestic policy and legislation. It is also telling that even the EU largely relies on “directives” that require further specification through state decisions rather than “regulations” that are directly applicable. (3) IO authority continues to depend on legitimization by states. As their governance activities become more intrusive, IOs have increasingly come under political fire (Zürn et al. 2007; Rixen and Zangl 2013). The public protests during the IMF, WTO, and G7 meetings of the 1990s and 2000s demonstrate that the traditional sovereigntybased legitimization discourse no longer sticks. To cope with their politicization, IOs have tried to tap into sources of legitimacy that are independent from states. They try to give themselves a more “democratic flavor” by opening their organizations to civil society participation (Steffek 2003; Jönsson and Tallberg 2010). Even the WTO

The Embedded State    261 and the UNSC, which were traditionally rather reluctant in this regard, have opened up to civil society actors (Binder 2013). This may satisfy principles of democratic deliberation (Nanz and Steffek 2004), but the way in which civil society participation is organized does not remotely match principles of democratic representation. Only the EU allows for “proper” democratic representation, through the European Parliament, which has gained considerable competences in the last three decades (Rittberger 2007). Yet, even in the EU the social preconditions for democracy—such as transnational collective identities, a transnational civil society, and a transnational public sphere—are barely developed to a degree that would allow democratic representation to function properly (Zürn 2000). Thus, even the democratic legitimacy of the EU still predominantly derives from the representation of national citizens by their governments in the European Council (Moravcsik 2002). In sum, contemporary governance is marked by a close coupling of national and international authority. Both levels are interlocked and complement rather than replace each other. Internationalists are right that IOs have become increasingly autonomous and intrusive authorities whose governance activities states cannot simply ignore, while at the same time statists seem to have it right that, despite their growing intrusiveness and autonomy, IO authority still depends very much on states’ governance support. The increased authority of IOs has not necessarily decreased state authority. Rather, it has both constraining and enabling consequences for states. For them, IOs, such as the EU in particular, are viable governance instruments that help them do things they could not do alone, while at the same time being effective governance constraints. And, as the example of the EU may indicate, the more constraining they are, the more enabling they might be. Table 13.1 summarizes the contrast between the sovereign state (Section 2) and the embedded state (Section 3) that we have outlined so far.

Table 13.1  The sovereign state versus the embedded state The Sovereign State

The Embedded State

IO Function

Shielding states’ domestic affairs: IOs rely on at-the-border norms with states as targets.

Directing global affairs: IOs use behind-the-border norms with private actors as ultimate targets.

IO Decision-making

Intergovernmental bodies and unanimous decision-making: each state has veto power.

Supranational bodies and increasingly majority voting: states have no veto, but are needed for specification.

IO Operative Capacities

States implement and enforce IO decisions voluntarily.

States implement and enforce IO decisions voluntarily.

IO Legitimacy

Legitimacy derives predominantly from state consent plus depoliticized expertise.

State consent remains crucial, but IOs are also legitimized politically through stakeholder participation.

262    Tine Hanrieder and Bernhard Zangl

4  Institutional Trends: Between Reinforcing and Undermining Internationalization In a nutshell, the classic “sovereign” state has evolved into a state that is “embedded” in an increasingly dense and complex web of IOs. Considerable decision-making authority has moved to the international level, though IOs remain dependent on the national link for rule specification, implementation, and legitimization. This configuration is not static but inherently dynamic and generates—positive and negative—feedback. It has inspired novel research that addresses the implications and potential consequences of this complex institutional interplay. The following three strands of research seem to be of particular relevance. IOs’ Strategies vis-à-vis Non-State Actors. One strand of research is mainly concerned with how IOs circumvent their reliance on state contributions by enlisting non-state actors to support their governance tasks. Among other things, this research claims that IOs increasingly rely on governance tools other than traditional regulation, be it intergovernmental or supranational regulation (Abbott and Snidal 2010). It underlines, on the one hand, that IOs have begun to bypass states by promoting private actors’ voluntary self-regulation. As IOs can rarely use hard, binding law to affect transnational targets, that is, engage in beyond-the border governance, they often rely on soft—non-binding— instruments. The UN Global Compact is a prominent example here. The UN asks private businesses to voluntarily accept the social standards laid down in the UN Global Compact. By listing the participating companies on its website, the UN promotes corporate social responsibility without being able to enforce it. On the other hand, this research underlines that IOs often bypass states when they delegate governance tasks to non-state actors. Here IOs engage only indirectly with their targets, because non-state agents, that are accountable to the IO, are brought in to fulfill governance tasks the IO is unable or unwilling to perform. The UN, for example, contracts NGOs for the construction of refugee camps (Cooley and Ron 2002), and the World Bank supports development and educational projects of NGOs in developing countries. Technical cooperation projects of the International Labour Organization (ILO) are also increasingly implemented by local NGOs (Schapper 2014). Still another way of how IOs address their non-state targets without having to rely on states is what we in our research call orchestration (Abbott et al. 2014). Orchestration is indirect, as is delegation, yet it is also soft, as is persuasion. Orchestration is indirect because third parties are brought in as intermediaries, and it is soft because intermediaries are not controlled but rather supported by the IO. The intermediaries are important because they have key qualities—such as viable information, operational capacities, decision-making authority, or legitimizing powers—that the respective IO may lack. According to this research, IOs use orchestration techniques to set up so-called public-private or private-private partnerships. They may support such partnerships that work as governance schemes largely independently of states (Bull and McNeill 2007). For example, the WHO has jump-started a range of public-private partnerships such as the Global Fund to Fight AIDS, Tuberculosis and Malaria, or Roll Back Malaria that bring in critical operative capacities for health development

The Embedded State    263 projects and are legitimated through stakeholder representation on their governing boards (Lee 2010). Institutional dynamics. Another strand of research investigates the ambiguous implications of institutional proliferation beyond the state. It points to the ongoing spread of “regime complexes,” which are networks of partially overlapping institutions in different issue areas such as trade, the environment, and human rights (Raustiala and Victor 2004; Alter and Meunier 2009). In international trade, for example, WTO rules overlap significantly with regional arrangements such as the EU or NAFTA. In addition, many issues previously treated in separate regimes—such as environment and trade politics (Copeland 2000) or security and refugee politics (Betts 2009)—have become institutionally linked. The ambivalence of this trend lies in the fact that it sometimes increases and sometimes undermines the authority of IO decisions vis-à-vis states. Institutional proliferation entrenches international authority where IOs become mutually reinforcing. Inter-institutional linkages can increase incentives for compliance, as non-compliance in one context can have negative repercussions in related institutions (Davis 2009). In cases where one institution is politically blocked, others may step in and provide international governance (Kelley 2009). Furthermore, the concerted operation of several institutions can close loopholes otherwise available to states. Their combined effect has, for example, reinforced the impact of international election monitoring organizations. The Ukraine elections of 2004 are a pertinent case where the mutually reinforcing criticisms of several IOs pressured the state to rerun elections and thus triggered a change of government (Kelley 2009: 61). In a similar vein, inter-linkages between international environmental institutions have been shown to create synergies more often than conflicts between rules (Oberthür and Gehring 2006; Chambers 2008). In the domain of supranational jurisdiction, a pertinent example is provided by the inter-linkages constructed between the European Court of Justice (ECJ) and the European Court of Human Rights, which have helped to overcome interstate deadlock in the field of European human rights politics (Scheeck 2005). Yet, it has also been maintained that institutional overlap creates not only synergies but also conflict among both institutions and organizations. Such conflict may even be provoked by states that strategically create rival institutions in order to relax existing compliance pressure and create uncertainty about the competent organization (Helfer 2004; Raustiala and Victor 2004; Oberthür and Gehring 2006). For example, it remains disputed whether genetically modified organisms in food fall under the WTO’s purview or under the 2001 Cartagena Protocol on Biosafety. While the EU favors the Protocol, which embraces the precautionary principle, the US insists on WTO jurisdiction. The availability of several international institutions has locked them in a stalemate that prevents regulatory harmonization (Drezner 2007: 149–175). Likewise, the parallel legalization of the WTO, NAFTA, and Mercosur has led to situations where judicial rulings in one regime contradict rulings issued in the other (Davis 2009: 28; Faude 2011). In situations of institutional complexity, state discretion over rule specification and implementation again becomes critical. Conflicts among rules are often decided “on the ground” through the way states enact these rules. States may even avoid and block attempts to clarify international rules to retain such discretion (Alter and Meunier 2009: 16). Civil societal reactions and the politics of legitimacy. Yet another strand of research is concerned with the societal feedback to the emerging authority configuration between

264    Tine Hanrieder and Bernhard Zangl states and IOs. First, a range of studies has argued that social actors can reinforce the supranationalization of political authority through their positive feedback. This is most obvious in the economic realm, where domestic economic interests have been identified as driving forces behind IOs such as the WTO that promote international trade liberalization or the international enforcement of intellectual property rights (Sell 2003). In the EU, private interest group pressure has significantly contributed to enhancing the European Commission’s authority in enforcing EU competition law (Büthe and Swank 2007). International courts have also been strengthened by societal actors. By repeatedly turning to the ECJ and invoking community law vis-à-vis domestic courts, individuals, private businesses, and civil society organizations have greatly enhanced the ECJ’s autonomy. The Court now enjoys considerable autonomy from national governments (Burley and Mattli 1993; Alter 1998). Another set of studies that highlights positive feedback claims that IOs give rise to “their” own transnational societies whose demands directly address IOs, not states, and thus reinforce the IOs’ authority. The People’s Health Movement (PHM), founded in 2000 to lobby international health organizations, is a pertinent example of a transnational network created specifically to target societal demands at authorities beyond the state. The Global Health Watch, which is published by the PHM together with like-minded organizations, regularly reviews international health governance and thus provides a venue for societal debate and criticism (People’s Health Movement et al. 2008). Second, and contrastingly, another range of studies argues that the growing authority and intrusiveness of international institutions has the potential to generate negative feedback: it may provoke protest that threatens to delegitimize supranational authority (Zürn et al. 2007; Hooghe and Marks 2009). In this view, it is the very fact that IOs are no longer fully controlled by states, while at the same time they are increasingly targeting non-state actors with their governance activities, which explains why they have become the object of politicization (Rixen and Zangl 2013). Relatedly, the emergence of a new political cleavage—between cosmopolitan orientations on the one hand and nationalist preferences on the other—has been attributed to the internationalization of political authority (Kriesi et al. 2012). The impact that politicization and contestation have on the authority of international institutions thus becomes a critical issue (Zürn et al. 2007). The openness of international institutions toward critical and oppositional views may be crucial to prevent an all-out exit and dissidence by societal actors (Daase and Deitelhoff 2011). Overall, the three strands of the literature on IO strategies vis-à-vis non-state actors, on IO institutional dynamics, and on IO politicization have already improved our understanding of how growing IO authority may unleash the self-reinforcing and/or selfundermining dynamics of IO authority. They can thus also tell us a great deal about the dynamics to which the embedded state is exposed. Yet, all three strands of this research identify both self-reinforcing and/or self-undermining dynamics at the same time and thus do not specify whether the state will continue to look more and more like an embedded state or whether its sovereignty will be reasserted. Thus, to get a better grip on the destiny of the state, all three strands of the literature should begin to specify more thoroughly the conditions under which the increasing IO authority will lead to self-reinforcing or self-undermining dynamics. This would also allow us to better estimate whether the trend towards an ever deeper embeddedness of the modern state will continue or the sovereign state is ripe for a comeback.

The Embedded State    265

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Chapter 14

M u ltilev el G ov er na nce a n d the State Arjan H. Schakel, Liesbet Hooghe, and Gary Marks

The authority of subnational governments and international institutions has grown considerably over the past 65 years. Cross-sectional variation has not diminished, but where change has taken place it has been largely in the direction of multilevel governance. Europe has been the epicenter of this development, and hence this chapter focuses primarily on Europe and the OECD world, but developments elsewhere will be briefly discussed as well. Europe’s experiment with its political structure is rooted in the disaster of World War II. Not one of the six founding states of the European Economic Community had escaped military defeat and foreign occupation. Institutions that were considered utopian before the war now seemed worth trying. The outcome, half a century later, is an unstable and contested reallocation of authority to the European level. The process has been two sided. Authority—the competence to make binding decisions that are regarded as legitimate—has been diffused to subnational governments even in countries that do not harbor national minorities (Goldsmith and Page 2010; Hooghe et al. 2010). The simultaneous centralization of authority in a continental polity and decentralization to subnational regions reveals that the standard toolkit of political science cannot fully grasp what is going on. The European Union (EU) appears to break the mould of the state, but is not a state itself. Rather, in Stephan Leibfried’s metaphor, it is akin to a ship with a single hull but masted with national flags. Hull up, it appears to be supranational, but viewed from the opposite direction, from the masts down, it is an intergovernmental confederation of states (Leibfried et al. 2009). The EU is “less than a state, but more than an international organization” (Sbragia 1992), a “composite” polity (Tarrow 2001), a “condominio” or “consortio” (Schmitter 1996), a “regulatory state” (Majone 1996), a “post-modern state” (Caporaso 1996), or a “compound polity” (Fabbrini 2007). Decentralization in countries such as France, Italy, Spain, or the United Kingdom (UK) is a clear departure from a unitary national state, but is less than federal. The outcome is described as quasi-unitary, quasi-federal, or federalizing, all of which are terms that take one into the grey area between unitary and divided sovereignty.

270    Arjan H. Schakel, Liesbet Hooghe, and Gary Marks The literatures on Europeanization and decentralization meet around the idea that authority has become multi-layered, but beyond this lies disagreement. What is the logic of decision-making in this new (dis)order? Who is driving the process? And what are the effects for state sovereignty? In Section 1 we draw on theories of European integration to position ourselves on these questions before examining, in Section 2, how authority has shifted in Europe. In Sections 3 and 4 we engage the principal explanations and survey subnational decentralization beyond Europe. Section 5 concludes by exploring the implications for the state and for national sovereignty.

1  Theories of European Integration The fundamental reason for international governance is that interaction among national communities creates problems that demand collective decision-making. The diversity of such problems reflects the depth and scope of interaction. According to this functional line of thinking, international governance in general, and European integration in particular, reduces the costs of providing international public goods. However, governance is also an expression of community. Citizens care—passionately—about who exercises authority over them. The functional need for coordination rarely coincides with the territorial scope of community. Communities demand self rule, and a preference for self rule is inconsistent with the functional demand for supranationalism. This tension has shaped European integration and the fate of the national state. The founders of the EU were pragmatic. This reflected facts on the ground. While several influential political leaders, including Jean Monnet and Walter Hallstein, had supranational ambitions, they realized that they were in the minority and could not appeal to an emergent European identity. Their strategy, and the strategy of integrationists who followed them, was to mobilize support for concrete projects such as the customs union, common agricultural policy, and the social fund. Their efforts were phenomenally successful, but what can account for the speed and breadth of regional integration in Europe in the 1950s and 1960s? How could rapid jurisdictional reform take place among embedded national states? Functionalism conceives a mismatch between the international scale of human problems and the national scale of states as a force for supranational integration, but says little about how this mismatch is resolved. Neofunctionalists argue that transnational interest groups demand international governance to reap (mainly economic) benefits. Once set in motion, the process is self-reinforcing. As integration deepens and supranational institutions gain power, more transnational interests are created. Supranational actors themselves demand more authority. Progress in one policy area spills over and gives rise to pressures for integration in other areas. After the debacle of Charles de Gaulle’s opposition to supranationalism and the empty chair crisis of 1965–66, neofunctionalist predictions appeared too rosy. The most influential alternative approach—intergovernmentalism—describes a family of theories that conceive regional integration as an outcome of bargaining among national states. The puzzle was not the speed or breadth of regional integration, but the decision of national states

Multilevel Governance and the State    271 to create an international regime in the first place. Given their power and resources, why should states pool authority? Stanley Hoffmann argued that states would not swim far in supranational waters. They might be prepared to integrate on matters of low politics if the gains were evident, but on many issues, including those that engage national sovereignty, “[a]‌mbiguity may arouse and stiffen national consciousness into nationalism” (1966: 882; also Rosamond 2000: 78). The main intergovernmental line was to bring regional integration back into the realm of “normal” international relations theory. The authority exercised by European institutions is pooled or delegated by the member states to make commitments. Intergovernmentalists link national preference formation to strategic bargaining between states in a two-level game. National interests are framed in domestic political conflict and, once formulated, are bargained in intergovernmental fora. The debate between neofunctionalism and liberal intergovernmentalism was interlaced with a discussion about the nature of the beast and, by implication, about the appropriate categories of analysis. Is European integration best conceived as a means for coping with international interdependence, or is more to be gained from analyzing the EU as a federal polity? Should one use the language of international relations or the language of comparative politics? In the late 1990s, the debate on Europe’s jurisdictional architecture converged on the view that European integration had transformed a network of sovereign national states into a system of multilevel governance (Hooghe and Marks 2001; Kohler-Koch and Eising 1999; Jachtenfuchs 2001). Literature on multilevel governance extends the notion of reallocation of authority to decision-making within, as well as among, national states (Bache and Flinders 2004; Enderlein et al. 2010; Piattoni 2010). There are (almost) as many definitions of multilevel governance as there are users of the term, but common to all is the idea that authority on a broad swathe of issues has come to be shared across global institutions, regional organizations such as the EU, national governments, and subnational governments.

2  Multilevel Authority Figure 14.1 reveals how formal rules concerning national/EU decision-making across 18 policy areas have evolved from the 1955 Rome Treaty to the 2005 Constitutional Treaty, as charted by Tanja Börzel (2005). Breadth of integration refers to the range of policies or tasks for which the EU plays a role; depth of integration refers to the supranational or intergovernmental character of the decision rules. There is wide variation across policy areas, as suggested in the size of the box plots representing the 5 to 95 percent range for breadth and depth. As one would expect, policies that redistribute income among individuals are handled almost exclusively within national states, whereas policies having to do with trade and market integration are handled almost exclusively at the European level. A startling fact about the pattern in Figure 14.1 is that there is not one case where a policy has been shifted from the European to the national level, nor is there a case where a policy that was supranational has become intergovernmental. At least up to this point in time, the development of European governance has been unidirectional.

272    Arjan H. Schakel, Liesbet Hooghe, and Gary Marks Monetary

Intergovernmental-------------------Supranational

5

4

Agriculture

3

Political External

2

Scope Depth

Tax

* Culture

1

0 Rome

SEA

Maastricht Amsterdam

Nice

Constitutional Treaty

Fig.  14.1  Evolution of EU authority:  policy scope and depth, 1957–2005. Note: Scope (1–5) estimates the extent to which the EU plays a role in a policy; Depth (1–5) estimates the supranational or intergovernmental character of the decision rules. The boxes encompass the interquartile range for 18 policies, the horizontal line is the median, and the whiskers indicate the fifth and ninety-fifth percentiles. Circles (stars) are cases with values that deviate from the interquartile range by 1.5 (3.0) times the interquartile range. The acronym SEA stands for the Single European Act of 1986. Source: Börzel (2005: 221–223).

Figure 14.2 charts the evolution of regional authority in older and newer EU members from 1950 to 2007. Of 27 EU countries in 2007, 21 had become more regionalized. Twenty additional levels of regional government had been established, and not one disestablished. The number of elected regional assemblies had increased from eight to 20. While regional authority in the EU-East is considerably lower than in the EU-West, decentralization has increased sharply since the collapse of Communism. Variation across regions shows no signs of declining over time. Some countries have no regional level. Others have authoritative regional governments that play a decisive role not only in their respective regions but also in the country as a whole. Of the 27 EU member states, six had no regional tier,1 ten had a single tier, ten had two regional tiers, and one, Germany, had three in 2007. There has been no convergence in regional government but, rather, continuing and wide divergence. 1 

Defined as a general-purpose tier with an average population ≥ 150,000.

Multilevel Governance and the State    273 16

EU-WEST

EU-EAST

OECD-OTHER LATIN-AMERICA

14

SOUTH-EAST ASIA 12 10 8 6 4 2 0 1950

1960

1970

1980

1990

2000

Fig.  14.2  Regional authority over a long half-century, 1950−2007. Note:  EU-West  =  14 countries; EU-East  =  10 countries; OECD-other  =  9 countries; Latin-America  =  21 countries; Southeast Asia  =  4 countries. This figure estimates regional authority for intermediate governments with an average population of at least 150,000. Regional authority is estimated along eight dimensions in two domains:  self rule (the authority exercised by a regional government over those who live in the region) and shared rule (the authority exercised by a regional government or its representatives in the country as a whole). Self rule consists of

• Institutional depth = extent to which a regional government is autonomous rather than deconcentrated;



• Policy scope = range of policies for which a regional government is responsible;



• Fiscal autonomy = extent to which a regional government can independently tax its population;



• Representation = extent to which a region is endowed with an independent legislature and executive. Shared rule consists of



• Law-making = extent to which regional representatives co-determine national legislation;



• Executive control = extent to which a regional government co-determines national policy in intergovernmental



• Fiscal control = extent to which regional representatives co-determine the distribution of national tax revenues;



• Constitutional reform = extent to which regional representatives co-determine constitutional change.

meetings;

Sources: Hooghe et al. (2010); Shair-Rosenfield et al. (2014); and Hooghe et al. (2015).

274    Arjan H. Schakel, Liesbet Hooghe, and Gary Marks Yet this has been an era of subnational empowerment. The scale of change becomes apparent only when one escapes “methodological nationalism” (Jeffery and Wincott 2010), which boils regional government down to the categories of the unitary state, confederalism, and federalism. Few countries jumped from one category to another, but many have engineered basic reform. So regionalization is similar to Europeanization in that it is a coherent process of change—not a series of independent bargains. Figures 14.1 and 14.2 give credence to the claim that the jurisdictional architecture of Europe has become multilevel. But what are its causes, and what does this mean for the state in Europe? Over the past two decades research on Europe has engaged each of these questions.

3  Explaining Multilevel Governance Two literatures help us to understand the transformation of authoritative decision-making over the past half century. First, public goods theory conceives government as a means to provide public goods that would not be produced by the market or by rational citizens acting independently. The structure of government will then reflect the efficient production of public goods given their economies of scale and externalities. Pressure for reform arises from the tension between actual and efficient government structure. Second, government is an expression of community and the demand for self-rule on the part of normatively distinct, territorially based groups. The structure of government will then reflect the pattern of community; pressure for reform will arise when they diverge.2

Public Goods The first approach builds on the theory of public good provision in which efficient governance a) internalizes inter-jurisdictional externalities, b) exploits scale economies, and c) tailors policy to the heterogeneous preferences of those living in different communities (Hooghe and Marks 2009a). Where the externalities and scale economies that arise from a problem such as providing clean air, minimizing monetary transaction costs, or reducing trade barriers are transnational in scope, the most efficient level of decision-making is also transnational. Where the externalities and scale economies are local or regional, as for garbage collection or land-use planning, the most efficient level is subnational. Multilevel governance should be very common since the externalities and scale effects of most policies provided by government—for example, health, education, economic development, spatial planning, environment and welfare services—are diverse. So one would expect some policies to be decentralized and others to be centrally provided. During and immediately after World War II, authority was packaged in highly centralized states by the overriding need to mobilize resources for war and to survive scarcity. In the post-World War II era, functional pressure for regionalization resulted from a double shift in policy portfolios, which moved away from national war-making and towards new policies related to economic growth, trade, and welfare; these are policies with widely 2 

A comprehensive analysis would include the effects of regime type and distributional politics.

Multilevel Governance and the State    275 varying externalities and economies of scale, which are best conducted at diverse territorial levels. The change was not immediately evident because, in the years following the war, central states were called upon to distribute scarcity and to mobilize resources, human and financial, to rebuild battered economies. Moreover, jurisdictional arrangements are sticky—one must expect a serious lag between change in the environment and change in the structure of government. Most policy areas that have been shifted to the European level follow a functional logic rooted in the territorial scope of their externalities and scale economies (see Table 14.1). This applies to policies concerned with trade, transport, energy, and competition, in which the initial steps toward integration were taken in 1957. In the early decades of the European Economic Community (EEC), integration in social and industrial policy were spillovers arising from economic integration. In addition, the European Commission played a significant role in international trade negotiations, where the benefits of scale are transparent. This is a field in which the EU can be considered a great power. Subsequent European integration in environment, research, and immigration also has a functional logic. However, a functional explanation gets one only so far. Some policy shifts involve political side-payments. These include regional and cohesion policy and agricultural subsidies. The European Commission defends regional policy on efficiency grounds, but a survey of Commission officials finds that a majority favor re-nationalization of the EU’s agricultural policy and regional policy is low on the wish list for further centralization (Kassim et al. 2013). Moreover, Europeanization does not encompass all policy areas for which there are collective functional benefits, such as defense procurement. Most of the exceptions can be explained by the distributional consequences of Europeanization and the capacity of potential losers, be they national governments or domestic interests, to block reform. While neofunctionalist accounts emphasize spillovers, intergovernmentalists highlight the distributional impediments to international cooperation. But neither predicts the constraining impact of mass publics—a development which has exerted a serious drag on integration. Multilevel governance conceives of European integration as part of a broader process of authority dispersion, which stretches beneath as well as above the central state. The existence of an overarching European market eliminates the fear that regional autonomy would result in small, inefficient economic units that might be denied access to former markets (Jolly 2007; Piattoni 2010). This has emboldened demands for independence on the part of minority nations. Why not gain the benefit of flexibility and responsiveness in a small jurisdiction without losing access to a continental-sized market?3 Moreover, the EU domesticates international relations in a rule-bound polity, and it gives small states greater leverage than they would have in a classic Westphalian system. The effects are indirect because the EU has no authority over subnational relations in its member states. Strong regional governments, such as the German Länder and Spanish communidades autónomas, are well placed to gain influence in European decision-making, but they also have the most to lose when authority is reallocated to Europe. The European Commission has kick-started regional government in some formerly centralized states 3 

A recent report on Welsh independence claims that per capita income would be as much as 39 percent higher in Wales had the country achieved independence in 1990. The argument is that small EU countries have grown more than larger ones in the last two decades because they reap the advantages of flexibility within “the EU’s flotilla-like structure” (Price and Levinger 2011).

Table 14.1  Evolution of EU versus national competence in policy fields 1950

1957

1968

1992

2000

2010

Economic Policy  Goods/services  Agriculture   Capital flows  Persons/workers  Transportation  Energy  Communications  Environment   Regional policy  Competition  Industry  Money/credit   Foreign exchange  Revenue/taxes  Macroeconomic

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

2 1 1 1 2 2 1 2 1 2 2 1 1 1 1

3 4 1 2 2 1 1 2 1 3 2 2 2 2 2

4 4 4 3 2 2 2 3 3 3 2 2 2 2 2

4 4 4 4 3 2 3 3 3 3 3 5 4 2 3

4 4 4 4 3 3 3 4 3 3 3 5 5 3 4

Social/Industrial Policy   Work conditions  Health   Social welfare   Education and research   Labor relations

1 1 1 1 1

1 1 2 1 1

2 1 2 2 1

2 2 2 2 1

3 2 2 2 2

3 2 2 3 2

Legal-Constitutional Policy  Justice  Citizenship

1 1

1 1

1 1

3 2

3 3

3 3

 Participation   Police and order

1 1

1 1

1 1

2 1

2 2

2 2

International Relations/Security   Trade negotiations   Economic-military aid  Diplomacy   Defense and war

1 1 1 1

1 1 1 1

3 1 1 1

5 2 2 2

5 2 3 2

5 3 3 2

Key: 1 = all policy decisions at national level; 2 = only some policy decisions at EU level; 3 = policy decisions at both national and EU level; 4 = mostly policy decisions at EU level; 5 = all policy decisions at EU level. Sources: Estimates for 1950, 1957, and 1968 are from Lindberg and Scheingold (1970; 67-71) complemented by Schmitter (1996); estimates for 1992 are from Schmitter (1996: 125-26), informed by five experts’ judgements in March 1992; estimates for 2000 are based on Schmitter’s (1996: 125-26) projections and post-hoc evaluations by Hooghe and Marks (2001: 187-88); estimates for 2010 are made by Hooghe and Marks for this Handbook and based on existing treaty obligations and obligations undertaken subsequently. For greater detail on the Lindberg and Scheingold vs. Schmitter assessment see Hooghe and Marks (2001).

Multilevel Governance and the State    277 through its cohesion policy, which funds economic development in poor EU regions. Greece, Hungary, Ireland, Poland, and Slovakia have regionalized in part to gain access to EU funding. However, subnational actors merely implement EU policy in centralized countries. In federations and countries with a strong regional tier, EU integration has generally led to more cooperation, rather than competition, between regions and central government (Tatham 2011). The Committee of the Regions, a consultative assembly of subnational leaders across the EU, has issued a Charter for Multilevel Governance that sets out principles and methods for involving regions in national and European decision-making. The goal is “Europe with the regions,” not “Europe of the regions.” Multivariate analysis suggests that the effect of European integration on subnational authority is muted (Schakel 2009a). Regionalization appears to be more powerfully influenced by the logic of policy-making in advanced capitalist society. Regional authority was almost frozen in the years immediately following World War II, but from the 1970s on, there was a torrent of reform strengthening regional government (Figure 14.2). This process of regionalization parallels the growth of government responsibility for welfare, microeconomic, environmental, education, health, and transport policy. These policies extend the reach of the central state, but, unlike war, they do not compress policy-making to the national level. On the contrary, each of these policies has diverse externalities and economies of scale and, as a result, these public goods are most efficiently delivered at the local and regional levels, as well as by central government (Ter-Minassian 1997; Schakel 2010).

Community Government is palpably shaped by demands on the part of communities to rule themselves. Communities—bounded groups of densely interacting humans sharing distinctive cultural norms—may wish to exercise self-rule so that laws are not imposed from the outside. Friction between national law and minority norms can generate potent demands for jurisdictional reform. Seymour Martin Lipset and Stein Rokkan (1967) summarize this as a center–periphery cleavage, a durable and sometimes violent clash between peripheral communities and state-builders. Functionalists and neofunctionalists stressed the constraining effects of national identity on integration. “We are favored by the need and the habit of material cooperation; we are hampered by the general clinging to political segregation. How to reconcile these two trends, both of them natural and both of them active, is the main problem for political invention at this juncture of history” (Mitrany 1948: 151). But they believed that national identity would ultimately give way to a more encompassing loyalty. In an early analysis of public opinion on European integration, Ronald Inglehart (1967) predicted that a shift of loyalties was a matter of generational replacement. Younger cohorts, he argued, were being socialized in societies where nationalism was discredited and where supranational institutions were providing an expanding range of collective goods. Recent research arrives at a different verdict: identity remains a supremely powerful constraint on preferences concerning the level of European integration (Carey 2002; McLaren 2002; Risse 2009). This is true both for political parties and for the general public. The presence of ethnic or territorial minorities and their effect on jurisdictional design within the state is widely acknowledged in the literature. Many minority communities

278    Arjan H. Schakel, Liesbet Hooghe, and Gary Marks have been assimilated into nations, yet most nations coexist with minority communities that retain distinct norms rooted in language, religion, or ethnicity (Keating 1998; Brancati 2008). Demands for self-rule have intensified with the decline in the share of the vote going to major parties and the growth of regional parties. The average regional-level vote share for regionalist parties in national elections in 11 countries surveyed by Massetti and Schakel (2013) has increased from 4.9 percent in the 1970s to 8.9 percent in the 2000s (see also De Winter et al. 2006; Brancati 2008).

4  Multilevel Governance Beyond Europe Europe has been the prime laboratory for multilevel governance, but the dispersion of authority has occurred beyond. Figure 14.2 illustrates that non-OECD countries have become more decentralized, as well. The largest changes have taken place in non-federal countries. Of 21 Latin American countries, 14 have decentralized, while only two, Cuba and Ecuador, centralized over the 1950–2006 period. In Southeast Asia, our measure tracks regional authority in Indonesia, Malaysia, the Philippines, and Thailand, and it finds significant increases in all but Malaysia. Decentralization has been recommended by international institutions, including the OECD, the World Bank, the International Monetary Fund (IMF), the Inter-American Development Bank, and the Asian Development Bank, as a means to increase government efficiency and effectiveness. However, this does not explain variation in the timing and extent of decentralization across the globe. Democratization and the presence of minority communities provide a better grip on when and how countries decentralize. As in Central and Eastern Europe, regionalization in Latin America and Southeast Asia closely tracks democracy. The dip in the 1970s and 1980s in Latin America corresponds to the authoritarian turn in all but a handful of countries; of 21 countries, only Costa Rica has not experienced authoritarian rule in the past 60 years. The onset of democratization came later in Southeast Asia, and this is reflected in the fact that regionalization began in earnest only in the early 1990s. Here ethnic diversity has intensified pressure for regionalization (Shair-Rosenfield et al. 2014). All four countries have introduced or strengthened special autonomy statutes for ethnic or religious minorities. Territorially concentrated ethnic minorities are much less common in Latin America, though in recent years several governments (Bolivia, Colombia, Ecuador, Nicaragua, Panama, Venezuela) have conceded limited self-rule to indigenous communities. Multilevel governance has also deepened above the state. Problems generated by reciprocal interdependence are deliberated in global forums, but implementation usually requires coordination among international, national, and subnational governments. Climate change policy is a case in point. Global agreements set parameters, but the work is done by cities, regions, and localities (Biermann and Pattberg 2012). International institutions are the topmost levels in an interconnected system in which no level or organization operates unilaterally. As Michael Zürn observes in the introduction to Part II (Chapter 10, this volume), the international system has been transformed into a system of multilevel governance in which tasks are differentiated by sector rather than segmented across tiers.

Multilevel Governance and the State    279 International governance has become more supranational as well as multilevel (Cooper et al. 2008; Kahler and Lake 2009). Forty-one of the 72 most authoritative international organizations (IOs), including the World Trade Organization (WTO), the IMF, the World Health Organization (WHO), and the United Nations Educational, Scientific and Cultural Organization, make important policy decisions by super-majority (Hooghe and Marks 2014). General secretariats have gained authority in several leading trade organizations, including the South African Development Community and the EU, and international courts have seen increasing rates of litigation (Alter 2012). The upshot is a “dense network of international and transnational institutions of unprecedented quality and quantity . . . that are far more intrusive than conventional international institutions. They can circumvent the resistance of most governments via majoritarian decision making, or by dispute settlement procedures through the interaction of monitoring agencies with transnational society, and by dominating the process of knowledge interpretation” (Zürn 2012: 734). Whereas governance within the state is chiefly general-purpose, designed around particular communities, international governance is biased towards task-specific government, designed around particular problems (Hooghe and Marks 2009b). General-purpose government above the state is limited to regional subsets of states and populations that have some normative commonality, shared values, and minimal levels of trust, and it has been growing in number over the past few decades. Just 16 of the 72 most authoritative international organizations are general-purpose organizations,4 and all cater to regionally specific groups of countries. The United Nations is the one global organization that comes closest to general-purpose government, but it is authoritatively weak outside its core area of international security. Kathy Powers and Gary Goertz identify 35 “regional economic institutions” in existence in 2011, 14 of which have been established since 1985. Newcomers include the East African Community, Mercosur, and the Community of Independent States. While trade is usually at the core of these organizations, they “are often the go-to place when new problems arise” (2011: 2396). However, they are markedly less supranational than task-specific organizations. The default decision rule in a regional IO is consensus. In this respect, the EU is an outlier (Hooghe and Marks 2014). The weakness of authoritative general-purpose governance beyond the state—pace the EU—has stark consequences. Task-specific government is oriented toward Pareto optimality; it works best where distributional conflict is not especially intense. General-purpose government, by contrast, is appropriate for decisions that redistribute resources and where trade-offs across policies can facilitate agreement. Since general-purpose government is weak at the global level, public goods with distributional consequences are underprovided. 4 

Defined as an organization having competencies in 15 or more of 25 possible policy fields. An IO is coded as having competence in a policy area if it meets two or more of the following criteria: a) the policy is mentioned in the constitution/founding documents; b) the IO has a distinct organizational component for the policy (agency, department, office, unit); c) the IO collects or spends money on policy (budget category, taxes, fees, fines, penalties); d) there is a consistent policy pattern (laws, decisions, regulations, conventions, protocols, rulings); e) the policy is in the mission self-description on the IGO (international governmental organization) website. Policy scope was assessed by two independent coders for each of 72 IGOs from a list of 25 policies. Krippendorff’s alpha is 0.70, which indicates reasonably high intercoder reliability.

280    Arjan H. Schakel, Liesbet Hooghe, and Gary Marks Whereas general-purpose governance is tuned to the linkages across policies, task-specific governance is tuned to linkages across levels. The challenge for general-purpose governance is coordination across levels. The challenge for task-specific governance is coordination across policies. A  consequence is that coordination among task-specific organizations in the international arena is generally poor, and so negative externalities—for example, those created by the WTO for public health, the environment, or labor rights—may not be sufficiently taken into account. There is a paradox here. National states facilitate IOs because these institutions aggregate preferences and make authoritative decisions for millions of individuals, yet IOs constrain international government on grounds of national sovereignty and the demand to be able to veto decisions. The result is an ongoing tension between efforts to reap the benefits of scale while adapting to the demand for self rule of national, regional, and local communities.

5  Good-Bye to National Sovereignty? The evidence presented in this chapter reveals that the jurisdictional architecture of the EU-polity has become multilevel and that the structure of government reflects a tension between functional pressures and identity (Hooghe and Marks 2009a; Schakel 2009b). But one could equally assert that national states remain the ultimate arbiters of authority and therefore retain sovereignty. States that retain a final say on the allocation of decision rights can deepen multilevel governance, so the claim that we live in a world of sovereign states does not tell us much about who exerts authority over most decisions. Multilevel governance does not negate national sovereignty, but it does reduce its descriptive power. A sovereign state is, first of all, the ultimate authority within its borders. This has never applied to federal states where the constituent units can veto constitutional change. Watts (2008: 169) observes that the fundamental principle of federalism would be undermined “if a regional government acting alone had the unilateral right to leave the federation, or the federation had the unilateral right to expel a regional unit.” Today there are barely more federal regimes than there were in 1950. However, the federal-unitary state dichotomy does not capture the significant decentralization of authority to regional governments that has actually taken place (Hooghe and Marks 2013). In the UK, the Government of Wales Act (1999) and the Scotland Act (1999) assert that no recommendation shall be made to Parliament to revoke or vary the act “unless such a draft has also been laid before, and approved by a resolution of, the Assembly” (or Parliament in Scotland). The Åland Islands have a similar guarantee within Finland, the Faroe Islands within Denmark, and Sarawak and Sabah within Malaysia. Ultimate authority can be complicated in ways that escape the unitary/federal dichotomy. Moreover, a constitutional analysis, no matter how detailed, does not provide a balanced account of the reallocation of authority over the past half century. The constitutional powers of regional governments have not changed in the Czech Republic, Denmark, Finland, France, Greece, Ireland, Italy, Poland, Romania, or Slovakia, but in each country the authority of regional governments to shape policy has significantly increased. External sovereignty, or the notion that the state is the commander of last resort in relations with external actors, has also been resistant to change. This is the view of realists, who

Multilevel Governance and the State    281 regard IOs as contracts among national states, and legal scholars, who regard sovereignty as indivisible. The argument that the national state has not lost external sovereignty focuses on the political limit situation. Sovereignty, in this view, is not the sum of authoritative competences, but “the quality of a power that has no superior.” In the last analysis, a member state of the EU is a member at its own discretion. If it wished, it could exit. In this view, European law bites because the member states voluntarily wish it to do so. Michael Troper, a French constitutional scholar, writes that “[t]‌he binding force of European law is not explained as an expression of the will of European authorities. It comes from the French constitution alone and is, therefore, an expression of the will of the French people” (2010: 150). Several national constitutions appear to open the door to fragmented sovereignty. The 1946 Preamble of the French constitution, which remains in force today, maintains that “Subject to reciprocity, France shall consent to the limitations upon its sovereignty necessary to the organization and preservation of peace.” The Italian constitution agrees in principle to “limitations of sovereignty where they are necessary to allow for a legal system of peace and justice among nations.” These statements can be regarded as self-limitations amendable by (national) constitutional processes. This is the line taken by the German Constitutional Court in its 30 June 2009 Lissabon ruling that European law cannot have primacy over the German Basic Law if there is a conflict (Decisions of the Bundesverfassungsgericht, vol. 123: 267 ff.). In a 2006 ruling, the French Constitutional Council ruled that “the transposition of a directive may not run counter to a rule or principle inherent in the constitutional identity of France, except when the constituting power consents thereto” (quoted in Troper 2010: 146). But as Neil MacCormick (2010) notes, exit from the EU requires negotiation. Who is the “commander of last resort” in the dark and untrodden zone of disentangling a state from the Union?5 Which body is the ultimate arbiter of disputes that might arise in allocating the collective costs of exit? We seem to be confronted with overlapping legal-constitutional orders. According to national law, states are bound by EU law because they confer this right by their own constitutional rules. According to the European Court of Justice, the “Community constitutes a new legal order . . . for the benefit of which the States have limited their sovereign rights, albeit within limited fields” (Van Gend & Loos vs. Administratie der Belastingen Case 26/62—5 February 1963). The EU avoids clashes with its member states by seeking consensus even under majoritarian rules, by allowing derogations to treaty commitments, by legislating by directives that bind in goals but not means, and by using soft law; in short, the EU operates by a “flexible combination of cooperation, competition and control” (Benz 2010: 220). National states remain the most important arenas for the exercise of authority, and they show no signs of disappearing. However, they have shed authority to governments within and without. A member state always has the option of leaving the EU, but the immense cost of this reduces its weight in decision-making, including decision-making about whether to regard EU law as supreme. There is, in other words, an observational tension between national sovereignty, which can be said to be unaltered, and central state authority, which has changed a lot.

5  Greenland, a special autonomous region of Denmark, exited the EU in 1985, but this has little to say about member state exit.

282    Arjan H. Schakel, Liesbet Hooghe, and Gary Marks This tension is prefigured in the contract theory of the state and the notion that while the state is authoritative, it is the result of the free choice of its members. Hobbes argued that even though individuals are subject to rules laid down in a compact, they remain in ultimate control of their fate:  “[A]‌ll actions which men do in Commonwealths, for fear of the law, are actions which the doers had liberty to omit” (Hobbes 1960 [1651]: Chapter 21). Thomas Hobbes claims that an individual is un-free only if he is physically forced. “[W]hen a man throweth his goods into the sea for fear the ship should sink, he doth it nevertheless very willingly, and may refuse to do it if he will; it is therefore the action of one that was free: so a man sometimes pays his debt, only for fear of imprisonment, which, because no body hindered him from detaining, was the action of a man at liberty.” The implication is that if a state is not coercively forced to remain part of a union, it is sovereign. The point is an important one, though sovereignty in this conception is a poor guide to the choices that states—or individuals—actually make. The building of modern states in Europe took several centuries. Many regions in federal countries, such as Germany and Austria, and heavily regionalized countries, such as Italy and Spain, were once independent, sovereign units. By contrast, the period from the foundation of the European Coal and Steel Community to the present is around 60 years, a fact that throws into sharp relief both the extraordinary pace of change in recent decades and the necessarily tentative nature of our attempts to draw definitive conclusions about the process.

Acknowledgment We would like to thank John Hall, Michael Zürn, Stephan Leibfried, and John Stephens for comments. Research reported here is funded by an ERC grant, “Causes and Consequences of Multilevel Governance” # 249543.

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284    Arjan H. Schakel, Liesbet Hooghe, and Gary Marks Kahler, Miles, and Lake, David A, 2009. “Economic Integration and Global Gover­ nance: Why so Little Supranationalism?” In The Politics of Global Regulation, ed Walter Mattli and Ngaire Woods, 242–275. Princeton, NJ: Princeton University Press. Kassim, Hussein; Peterson, John; Hooghe, Liesbet; Bauer, Michael W; Connolly, Sara; Dehousse, Renaud; and Thompson, Andrew, 2013. The European Commission of the 21st Century. Oxford, UK: Oxford University Press. Keating, Michael, 1998. The New Regionalism in Western Europe: Territorial Restructuring and Political Change. Cheltenham, UK: Edward Elgar. Kohler-Koch, Beate, and Eising, Rainer, ed, 1999. The Transformation of Governance in the European Union. London, UK: Routledge. Leibfried, Stephan; Gaines, Susan M, and Frisina, Lorraine, 2009. “Through the Funhouse Looking Glass: Europe’s Ship of States.” German Law Journal 10 (4): 311–334. Lindberg, Leon N, and Scheingold, Stuart A, 1970. Europe’s Would-Be Polity. Patterns of Change in the European Community. Englewood Cliffs, NJ: Prentice Hall. Lipset, Seymour M, and Rokkan, Stein, 1967. “Cleavage Structure, Party Systems, and Voter Alignments: An Introduction.” In Party Systems and Voter Alignments, ed Seymour Martin Lipset and Stein Rokkan, 1–67. New York: The Free Press. MacCormick, Neil, 2010. “Sovereignty and After.” In Sovereignty in Fragments, ed Hent Kalmo and Quentin Skinner, 151–168. Cambridge, UK: Cambridge University Press. McLaren, Lauren M, 2002. “Public Support for the European Union: Cost/Benefit Analysis or Perceived Cultural Threat?” Journal of Politics 64 (2): 551–566. Majone, Giandomenico, 1996. Regulating Europe. London, UK: Routledge. Massetti, Emanuele, and Schakel, Arjan H, 2013. “Ideology Matters:  Why Decentralisation Has a Differentiated Effect on Regionalist Parties’ Fortunes in Western Democracies.” European Journal of Political Research 52 (6): 797–821. Mitrany, David, 1948. “The Functional Approach to World Organization.” International Affairs (Royal Institute of International Affairs) 24 (3, July): 350–363. Piattoni, Simona, 2010. The Theory of Multi-Level Governance: Conceptual, Empirical, and Normative Challenges. Oxford, UK: Oxford University Press. Powers, Kathy, and Goertz, Gary, 2011. “The Economic-Institutional Construction of Regions: Conceptualisation and Operationalisation.” Review of International Studies 37 (5): 2387–2415. Price, Adam, and Levinger, Ben, 2011. “The Flotilla Effect:  Europe’s Small Economies Through the Eye of the Storm.” Accessed 12 August 2011: http://www.english.plaidcymru. org/uploads/downloads/Flotilla_Effect_-_Adam_Price_and_Ben_Levinger.pdf. Risse, Thomas, 2009. A Community of Europeans? Transnational Identities and Public Spheres. Ithaca, NY: Cornell University Press. Rosamond, Ben, 2000. Theories of European Integration. London, UK: Palgrave Macmillan. Sbragia, Alberta M, ed, 1992. Europolitics:  Institutions and Policymaking in the “New” European Community. Washington, DC: The Brookings Institution Press. Schakel, Arjan H, 2009a. “A Postfunctionalist Theory of Regional Government. An Inquiry into Regional Authority and Regional Policy Provision.” Ph.D. Dissertation, Free University Amsterdam, The Netherlands. ——, 2009b. “Explaining Policy Allocation over Governmental Tiers by Identity and Functionality.” Acta Politica 44 (4): 385–409. ——, 2010. “Explaining Regional and Local Government:  An Empirical Test of the Decentralization Theorem.” Governance 23 (2): 331–355.

Multilevel Governance and the State    285 Schmitter, Philippe C, 1996. “Examining the Present Euro-Polity with the Help of Past Theories.” In Governance in the European Union, ed Gary Marks, Fritz W Scharpf, Philippe C Schmitter, and Wolfgang Streeck, 121–150. London, UK, and Thousand Oaks, CA: Sage. Shair-Rosenfield, Sarah; Marks, Gary, and Hooghe, Liesbet, 2014. “A Comparative Measure of Decentralization for Southeast Asia.” Journal of East Asian Studies 14 (1): 85–107. Tarrow, Sidney G, 2001. “Contentious Politics in a Composite Polity.” In Contentious Europeans: Protest and Politics in an Emerging Polity, ed Douglas R Imig and Sidney G Tarrow, 233–252. New York: Rowman & Littlefield. Tatham, Michaël, 2011. “Devolution and EU Policy-Shaping: Bridging the Gap Between Multi-Level Governance and Liberal Intergovernmentalism.” European Political Science Review 3 (1): 53–81. Ter-Minassian, Teresa, 1997. “Intergovernmental Fiscal Relations in a Macroeconomic Perspective:  An Overview.” In Fiscal Federalism in Theory and Practice, ed Teresa Ter-Minassian, 3–24. Washington, DC: International Monetary Fund. Troper, Michel, 2010. “The Survival of Sovereignty.” In Sovereignty in Fragments, ed Hent Kalmo and Quentin Skinner, 132–150. Cambridge, UK: Cambridge University Press. Watts, Ronald L, 2008. Comparing Federal Systems. Third edition. Montreal, Canada: McGill-Queen’s University Press. Zürn, Michael, 2012. “Global Governance as Multi-level Governance.” In The Oxford Handbook of Governance, ed David Levi-Faur, 731–744. Oxford, UK: Oxford University Press.

Chapter 15

Beyon d the State?

Are Transnational Regulatory Institutions Replacing the State?

Walter Mattli

This chapter examines the role of the state in international regulation and charts major changes in recent times. The focus is on regulatory trends in product markets across a wide range of sectors, including agriculture, food, construction, chemicals, electronics, plastics, medical instruments, pharmaceuticals, information, and telecommunication industries. Financial market regulation will also be considered. In the pre-global era, government-mandated rules existed in areas of significant national security interest or high public policy salience. In other areas, rule-making used to be an internal matter for firms or the domain of designated technical organizations, many of them private. Each country produced its own rules without much regard to what others were doing. International rules were few and far between; they originated, for the most part, in a handful of intergovernmental organizations. Globalization has altered this picture. First, it has changed the technical needs and preferences of an ever-growing number of international producers and traders and has magnified the opportunity cost of incompatible national rules. This has triggered a rapid growth in the number of international and regional rules/standards.1 Second, globalization has laid bare some of the procedural inadequacies and organizational limits of traditional intergovernmental regulatory bodies, most notably the excruciatingly slow pace of rules/standards production and, increasingly, their lack of technical expertise and financial resources to deal with ever more complex and demanding regulatory issues. This has led to a much greater involvement of private-sector actors in transnational rule-making. This trend has diminished the presence of the state in important areas of

1  Many of the standards referred to in this chapter are binding—if not by law, then by practical necessity or market pressure. The terms global regulation, rules, and standards thus are used interchangeably and are defined as rules established by expert bodies prescribing, de jure or de facto, the quality or performance of a given practice, procedure, or product (see Büthe and Mattli 2011).

Beyond the State?    287 global regulation, but it has not led to state capitulation to private-sector regulators. The state has been redefining its role in some of these areas of rule-making. Private regulation may fail to consider non-industry interests or revert to anti-competitive practices. Thus, in some cases, governments have reasserted their authority by imposing upon transnational private rule-makers important organizational changes to comply with public interest safeguards. In other cases, governments have decided to work in tandem with transnational private groups, with each party contributing according to its comparative institutional advantage. What is emerging in some areas is a novel type of transnational governance, one that is neither purely private nor public but may best be captured by the term of “joint or hybrid governance.” It describes an arrangement that seeks to combine technical expertise, extensive resources, and market responsiveness with genuine openness, transparency, and legitimacy. In sum, in major areas of the global economy, we observe a three-stage evolution of rule-making governance. This evolution is driven by externalities triggered by mismatches between 1)  national rules and international markets, 2)  limited public capabilities and expansive private-sector needs, and 3) private rule-making and public policy goals. The first mismatch drives the site of governance upwards to the transnational level; the second causes a horizontal move from public (transnational) to private (transnational) governance; and the third drives the transfer from private governance to hybrid governance. None of these transfers of site of governance is automatic or inevitable, however. General efficiency gains alone do not explain governance change. Any change in regulatory governance generates winners and losers, and potential losers may seek to stop or slow change. I will review how institutional and actor-specific characteristics may shape governance choice and regulatory outcomes. The chapter is organized as follows: first, I offer a brief literature review of what is called the regulatory state or regulatory capitalism. Second, I present a typology of global regulation and discuss the role of the state in the various types of regulation. Third, I review the causes of a particularly significant shift in global regulation, namely the rapid rise in “privatization” of transnational regulation. And, finally, I assess the risks and pitfalls of such “privatization” and illustrate how states have sought to reassert their authority to minimize the perceived risk of negative externalities of global private-sector regulatory governance.

1  A Brief Literature Review The literature on the regulatory state or regulatory capitalism distinguishes two main functions of governance:  “steering” (leading, directing, guiding) and “rowing” (service provision). It argues that the state retains the responsibility for steering while business increasingly is taking over the function of service provision. “This new division of labor goes hand in hand with the restructuring of the state (through delegation and the creation of regulatory agencies) and the restructuring of business (and other societal organizations) through the creation of internal controls and mechanisms of self-regulation in the shadow of the state” (Levi-Faur 2005: 15). Two themes recur in this literature. First, the “deregulation revolution” of the 1980s and 1990s was short-lived because it was quickly followed by a wave of new regulation (S. Vogel 1998). And, second, the new regulation tended to no longer be of the old-fashioned

288   Walter Mattli command and control type directly issued by the state, but of a new type originating in independent regulatory agencies and expert business groups (Ayres and Braithwaite 1992; Majone 1997; Gunningham and Grabosky 1998; Hood et al. 1999; Braithwaite 2000; Mattli 2001; Parker 2002; Gilardi 2008). This new model of the regulatory state is said to be diffusing across the world through mimicry, emulation, and market pressure (Jordana et al. 2011). The result, as summarized by David Levi-Faur, is that “[d]‌emocratic governance is no longer about the delegation of authority to elected representatives but a form of second-level indirect representative democracy—citizens elect representatives who control and supervise ‘experts’ who formulate and administer policies in an autonomous fashion from their regulatory bastions” (2005: 13). This literature is mainly concerned with tracing governance changes at the domestic level. With few exceptions (Braithwaite and Drahos 2000; Dilling et al. 2011), it pays little attention to the transformation of global governance and regulation and the challenges posed by this transformation for democracy and the public interest. This international dimension is surveyed in the following sections.

2  Transnational Regulation and the Role of the State The role of the state in transnational regulation traditionally has varied according to the type of regulation. Four types can be distinguished based on 1) whether international rules or standards are developed in public or private settings, and 2) whether multiple regulators compete or whether there is a single dominant body that is the focal point for developing international rules in a given issue area (Büthe and Mattli 2011). The former distinction is referred to as the locus or institutional setting of regulation (the horizontal axis in Figure 15.1), and the latter as the selection process or method. Market-based selection describes the case where multiple regulators (public or private) compete with each other for the ability to set rules likely to achieve market dominance. Non-market-based selection occurs when a focal—that is, single and uncontested—global regulator (public or private) sets the standard. Distinguishing these two dimensions yields four types, depicted in Figure 15.1. I next describe each of the four types, counter-clockwise from the top left.

Type 1:  Public (Governmental) Non-Market Rule-Making Writing rules that organize and control economic behavior has traditionally been a key domestic policy function of states. Such public regulation has been considered particularly important and desirable when economic activities have national security implications or affect salient and hence politically sensitive areas of public policy, such as health, the environment, or consumer protection. In these areas, government control of rule-making has often been deemed necessary, for example, because standards for health and safety resemble “public goods,” which markets will undersupply.

Beyond the State?    289 Institutional setting for rule-making

Nonmarket-based

Public

Private

Rule-making in a focal international agreement; international organization; transgovernmental regulatory collaboration

Transnational focal rule-making organization

(Type 1)

(Type 4)

Competing standards developed by/in national or regional regulatory bodies

Competing standards by individual firms; consortia; competing transnational rule-making bodies

(Type 2)

(Type 3)

Selection mechanism

Market-based

Fig. 15.1  Modes of global regulation: a typology. Governments also have a long tradition of collaborating internationally to regulate public and private behavior. Such international collaboration has traditionally focused on the consequences of international interdependence. International trade, for instance, increases the risk of disease in port cities when traded goods or foreign merchants hail from countries with poor sanitary conditions. Such mutual dependence on other countries’ policies spurred international collaboration among government agencies responsible for human and animal health, starting in the nineteenth century. In the last three decades, rapid market integration, fuelled by revolutionary advances in telecommunication and information technologies, has intensified the need for coordination of rules, regulations, and policies. Such coordination can take place through (1) ad hoc agreements among states, (2)  transgovernmental collaboration among specialized regulatory agencies, or (3) new or existing international governmental organizations (IGOs). Ad hoc agreements are international treaties or similar documents that codify an understanding between the governments of two or more countries. Transgovernmental collaboration may be conducted through networks of public officials meeting directly with each other without going through the traditional channels and political hierarchies of international diplomacy (Keohane and Nye 1989; Slaughter 2004; Eberlein and Grande 2005). These networks often have set international rules. For example, central banks and banking regulators from 13 countries in 1974 institutionalized their informal meetings by forming the Basel Committee on Banking Supervision. In direct collaboration with each other, they developed a series of “capital adequacy” standards, which specify a level of financial

290   Walter Mattli reserves that should be kept by each bank to safeguard against the collapse of a financial institution. The participating regulators then required the banks in their respective countries to implement these standards. They also recommended their standards to banking regulators in the rest of the world. Numerous public regulators who had no voice in setting these capital adequacy standards ended up adopting them (Singer 2007). Notwithstanding the importance of some transgovernmental networks, IGOs have long been the most prominent kind of public international (non-market) standard-setting body. Standard-setting IGOs vary considerably in their age, breadth of activities, and membership. For example, the Universal Postal Union was founded in 1874 and now comprises 172 member states. It sets standards for international mail processing and delivery, as well as standards for technologies to detect and prevent mail fraud and crime. The International Labor Organization (ILO), founded in 1919, proposes labor standards for its 182 member states. And the International Monetary Fund (IMF), established in 1944, sets standards for national governments and statistical offices, specifically for data dissemination, current account reporting, and fiscal and monetary policy transparency.

Type 2:  Public Rule-Making Bodies in Market Competition States shape international regulations not only collectively—that is, through multilateral collaborative schemes (Type 1)—but also unilaterally (or mini-laterally) through market-competition. That is, some global rules originate in domestic (or regional) rule-making bodies and attain global reach not through international collaboration but through market-based selection. Such market-based public international rule-making involves competition among regulatory agencies of individual states or regional groups. The rules of such agencies can come into competition with each other—sometimes after coexisting independently for many years—when changes such as a lowering of tariffs or the lifting of restrictions on cross-border financial transactions increase interdependence and thus create functional or political-economic incentives for a single common rule. There are many examples of market-like international competition between rules developed by public regulatory organizations. For consumer goods, for example, government agencies have established standards for products ranging from pesticides, drugs, and cosmetics to chlorofluorocarbons in spray cans and vehicle emissions. From the 1960s to the 1980s, American regulators such as the United States (US) Environmental Protection Agency established these standards with domestic consumer and environmental protection as their predominant concern, leaving the US with substantially more stringent standards than the EU and many other countries. But as more and more of these products became internationally traded, US standards increasingly competed with European ones (and occasionally other standards), often resulting in a “race to the top,” where the more stringent standard became the de facto global standard (D. Vogel 1995, 2012). By contrast, competition in “flagging standards,” which ship-owners must meet to register their ships in the countries whose flag they are flying, resulted for a long time in a race to the bottom (Murphy 2004), though some scholars note a more recent convergence at intermediate levels of stringency (DeSombre 2006) or even a broad race to the top with a permanent divergence by a small group of countries with weak domestic political and legal institutions and little concern for their international reputation (Barrows 2009).

Beyond the State?    291

Type 3:  Market-Based Private International Rule-Making Market-based private standard-setting is a type of regulation extensively covered in the literature (Bartley 2003, 2007; Haufler 2003; Blind 2004; Cashore et al. 2004; D. Vogel 2005, 2008; Abbott and Snidal 2009). States are rarely involved in this type; instead, it entails rule-making by firms or other non-governmental bodies, who compete individually or in small groups to establish their preferred technical solutions as the de facto standard. One firm’s proprietary technology may become the global de facto technical standard if that firm attains a dominant position in the market or if most of its competitors decide to adopt its technology as the standard, often under license. Market competition between competing private standards, however, can persist for a long time. Market-based private standard-setting has been prominent in the Information and Communications Technology (ICT) sector. Microsoft, for instance, succeeded in establishing its Windows operating system as a de facto global standard thanks to its market dominance and strong “network effects,” that is, substantially increased benefits from adopting a technology also adopted by many others (Liebowitz and Margolis 1999). Other prominent examples include JVC’s VHS format winning out over Sony’s Betamax as the standard for videocassettes, and most recently the Blu-ray standard for optical disc formatting winning out over the HD-DVD format. Firms often form consortia— ad hoc strategic alliances of two or more firms—to develop a new standard and fend off competitors. Market-based private regulation is not limited to the ICT sector, and the rule-makers for this type of regulation vary from individual firms and consortia to civil society organizations. Corporate social responsibility (CSR) standards, “fair trade” standards, and environmental sustainability standards also fall into this category of rule-making. In all of these issue areas, standards developed by civil society-based non-governmental organizations (NGOs) compete for consumers’ or purchasing managers’ allegiance with alternative standards, often developed defensively by firms. Market-based private international standard-setting can be an effective way of setting global standards, but it may also suffer from inefficiencies (Mattli 2003:  202–205). For example, de facto standardization is often praised for its speed, yielding a single leading standard after as little as two years of intense market contest among competing standards. However, when a standard is chosen too early in the development of a new technology, it may unintentionally lock the industry into an inferior standard. Or, uncoordinated standard-setting—typical of market-driven standardization—can give rise to wasteful duplication in the development and promotion of standards. Valuable resources could be saved if producers pooled their resources and worked collectively in non-market private regulatory forums at the global level, as discussed next.

Type 4:  Non-Market Private International Rule-Making Market-based competition among firms and NGOs has resulted in hundreds of international de facto standards spanning many industries. Non-market private bodies, however, are responsible for the bulk of global private-sector rules; they have developed literally thousands of standards. In contrast to market-based private regulation, Type 4 entails

292   Walter Mattli regulatory organizations seen as the obvious forums, that is, as the focal rule-making bodies in their respective fields, by public and private actors alike. As in market-based private regulation, states have traditionally not been players in Type 4 regulation (Mattli and Büthe 2003; Büthe and Mattli 2011). However, as will be explained in Section 4, pressure has been mounting for state involvement in non-market private rule-making because of a perceived risk of significant social cost associated with this form of regulatory governance. Two prominent bodies of this type are the International Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC). These organizations, in which states and governments cannot be members, are best described as centrally coordinated global networks comprising hundreds of technical committees from all over the world and involving tens of thousands of experts largely hailing from industry. ISO and IEC are not operationally self-sufficient, and their officials do not work in isolation. They rely heavily on private-sector standards bodies at the national level for logistical and technical support. The domestic bodies thus are part and parcel of the global institutional structure of standardization; in a sense, they form the institutional backbone of the global regulators. ISO and IEC have produced, on average, 1,700 standards in most recent years, and they account for about 85  percent of all international product standards. Product standards are technical specifications of design and performance characteristics of manufactured goods.2 ISO standards include the standards for freight containers, paints and varnishes, screw threads, corrosion protection, thermal performance, and air quality measurement, as well as the “ISO 9000”-series management standards. IEC standards specify, for instance, radiation dosages for X-ray machines, the standard dimensions and other characteristics of audio CDs and battery sizes, as well as methods to measure electromagnetic interference and thresholds to safeguard against it, so that the operation of one piece of electric equipment, such as a vacuum cleaner or microwave, does not interfere with the operation of other crucial equipment, such as pacemakers or computerized security systems. The stakes in ISO and IEC standardization are high: their product standards often determine market access, due to demands from purchasers or due to government regulations. Countries adopting ISO/IEC standards as domestic standards include not only advanced industrialized countries, but also developing countries such as India and Brazil. Governments around the world increasingly incorporate these standards into laws and regulations by reference, thus making compliance with the current version of a standard the regulatory requirement. Another salient global private regulator is the International Accounting Standards Board (IASB). Based in London, it is the clear focal point for setting international financial reporting standards—standards that specify how to calculate profits and liabilities and thus have a substantial effect on the financial results that a company can report at the end of the quarter or year (Mattli and Büthe 2005a; Zimmermann and Werner 2013).

2  More

specifically, product standards cover properties such as interoperability, interconnectability, levels of safety, conformity, materials, systems of classification, methods of testing, the operation of systems, and quality assurance.

Beyond the State?    293

3  Enlisting International Private-Sector Regulators States and IGOs continue to play significant roles in global regulation alongside an array of new actors from business and NGOs (Abbott and Snidal 2009), and all four types of global regulation are growing. But some are growing faster than others. Perhaps the most remarkable change over the last two decades has been the explosive growth of non-market private rules (Type 4). These rules aim to control both network externalities, which typically have a “coordination” structure, and Pigovian externalities, which tend to have a Prisoners’ Dilemma structure (Abbott and Snidal 2001). Key to this rapid growth is a new link established between the actors in Type 1 and Type 2 regulations. Specifically, IGOs and states have encouraged—even empowered—international privatesector regulators by means of explicit or implicit endorsement and delegation of regulatory authority. Necessity rather than affinity explains this backing. With the onset of economic globalization, state-led global rule-making has come under considerable pressure, particularly in product and financial markets. Globalization has laid bare serious procedural inadequacies and organizational limits of public international governance, notably the excruciatingly slow pace of standards production and, in some cases, lack of technical expertise and financial resources to deal with ever more complex and demanding standards issues. These limitations have led states to enlist the services of private-sector actors, reinforcing the rapid “privatization” of international regulation. Let us consider two examples. By the late 1970s, cross-national differences in product standards had become prominent non-tariff barriers (NTB) to international trade, stifling economic recovery and growth. These standards addressed national compatibility issues and served as the technical basis of laws that sought to tackle purely domestic health, consumer safety, or environmental concerns. In addition, many countries had adopted such standards to protect domestic producers, usually in declining or uncompetitive industries. One seemingly simple way of tackling the NTB problem was to replace domestic standards with international standards. But who would produce international standards? The World Trade Organization (WTO) did not have the in-house expertise to produce detailed technical rules for all major sectors of the global economy. The ISO and IEC, by contrast, possessed the requisite resources. The WTO thus decided to enlist these two private-sector rule-makers. Little known until the mid-1980s, ISO and IEC became prominent, in large part, due to the WTO endorsement, which took the form of the Agreement on Technical Barriers to Trade (negotiated during the Uruguay Round of trade negotiations from 1986 to 1994). This Agreement obliges all member states of the WTO to use international standards as the technical basis of domestic laws and regulations unless international standards are ineffective or inappropriate for achieving the specified public policy objectives. Regulations that use international standards are rebuttably presumed to be consistent with the country’s WTO obligations, whereas the use of a standard that differs from the pertinent international standard may be challenged through the WTO dispute mechanism as an unnecessary non-tariff barrier to trade and thus a violation of international trade law. Unsurprisingly, WTO endorsement has spurred the growth of ISO and IEC standards; domestically produced standards, by contrast, have steadily declined. The combined annual

294   Walter Mattli production of ISO and IEC standards increased from about 500 in the early 1980s to 1,700 in recent years. In the same period, the annual standards production of the German National Standards Institute (DIN), for instance, declined from 1,300 to about 200. The second example relates to an important area of global financial regulation. As noted earlier, financial reporting rules specify how to calculate assets, liabilities, profits, and losses in a firm’s financial statements, as well as which particular type of transactions and events to disclose, so as to create accurate and easily comparable measures of its financial position. Cross-national differences in these rules are said to have exacerbated the Asian financial crisis of 1997/98. The belief that harmonization would bring substantial benefits prompted firms and governments to call on the IASB to produce a single set of international financial reporting standards. Such standards would increase the cross-national comparability of corporate information, improve the transparency of financial statements for shareholders, investors, and creditors, and achieve greater efficiency and stability in global capital markets (Büthe and Mattli 2011). Similarly, in 2009, as the global financial crisis was quickly deepening, the leaders of the G-20 group of industrialized and developing nations met in London and urged the IASB to improve standards on valuation and provisioning and achieve a single set of high-quality global accounting standards to bring greater stability to global financial markets and thus lay the foundation for the resumption of economic growth around the world. State leaders turned to the IASB because it had the resources to produce these standards and had established itself as the focal organization in global accounting. Early public-sector competitors to IASB, including the United Nations Group of Experts on International Standards of Accounting and Reporting (GEISAR) and its successor, the Intergovernmental Working Group on International Standards of Accounting and Reporting (IWGEISAR), quickly lost the race to become the global focal regulator on financial reporting, largely due to insufficient technical expertise and political wrangling (Jupille et al. 2013). State endorsement has served the organizational interests of the IASB well, boosting its prestige and increasing demand for its rules. A rapidly growing number of countries have set out timetables to adopt or converge on IASB standards. By 2010, about 100 countries required compliance with the International Financial Reporting Standards (IFRS), up from fewer than 20 countries ten years earlier.

4  The Risks of Private-Sector Regulation and the Reassertion of State Authority Global private regulation entails considerable distributional implications within the private sector (Mattli and Büthe 2005b; Büthe and Mattli 2011). That is, some industry actors will be more successful than others in pushing their preferred technical standards for adoption as international standards; winners incur no or only minimal switching costs, whereas losers may find the shift to international standards exorbitantly expensive. However, the privatization of regulation can have other distributional consequences. It may promote industry interests at the expense of public interests. As Braithwaite and Drahos note: “Industry can utterly dominate [rule-making in standards-developing organizations] because no one else

Beyond the State?    295 has the energy to do so” (Braithwaite and Drahos 2000: 624), and private rule-making and public policy goals do not always go hand in hand. The problem is not new. When the EU introduced the so-called New Approach some 25 years ago—an attempt to speed up EU rule-making by delegating regulatory authority to private-sector European standard-setters—many observers questioned the legitimacy and even legality of the New Approach. They argued that private standards bodies, dominated by business interests, would be blind to broader social issues, and that the delegation of powers to these private actors would render legislative control over their decisions impossible. The following quote by Anne-Lore Köhne, the leader of a major European consumer group,3 is typical of the kind of concerns expressed by non-industry groups: It must be recalled that in placing . . . reliance on the use of standardization, the European and national public authorities have delegated enormous responsibility. Whereas governments and elected parliaments would have had the final say on consumer safety issues, considerable power has been delegated to what are effectively powerful national and European [standards] monopolies to interpret the broad requirements for safety contained in the European legislative framework. Consumer participation in this process then is no luxury but a necessity to counterbalance the enormous influence of industry . . . [and] ensure that the results of the European standardization process help meet legitimate public policy objectives (Köhne 1999 cited in Büthe and Mattli 2011: 220).

In response to such concerns, the EU member states sought to improve the accountability and transparency of private-sector standard-setters and increase participation by nonindustry groups in European standardization (Mattli 2003). For example, in April 1992, they issued a declaration emphasizing that the involvement of “social partners . . . at every stage of the standardization process and at every level of [European] Standardization Bod[ies] . . .—from Working Group to General Assembly—is a political precondition for the acceptability and further development of European standardization.”4 At the end of the same year, yielding to considerable political pressure, the main European standard-setting organization, CEN,5 introduced a new category of membership, so-called “Associate Members,” to integrate “social partners,” such as the European Association of Consumer Representation in Standardization (ANEC)6 and the European Trade Union Technical Bureau for Health and Safety (TUTB), into the CEN structure.7 Further, the EU member states changed the structure of their financial support to European standardizers, gradually cutting back on general lump sum subsidies and switching to project-based financing. They also increased the practice of employing independent experts to monitor regional standardization.

3 

Köhne spoke as the President of BEUC, the Bureau Européen des Unions des Consommateurs. OJ C 96 of 15 April 1992, 23. See also Council Resolution of 28 October 1999 on the Role of Standardization in Europe, OJ C 141, 19 May 2000. Since January 1968 the Official Journal (OJ) of the now European Union has been published in two separate series, L (Legislation) and C (Information and Notices). 5  CEN stands for Comité Européen de Normalisation, the European Committee for Standardization. 6  ANEC stands for Association de Normalisation Européenne pour les Consommateurs, the European Standardization Association for Consumers. 7  TUTB was established in 1989 by the European Trade Union Confederation (ETUC) to monitor the drafting, transposition, and application of European legislation regulating the working environment. 4 

296   Walter Mattli Last but not least, the member states adopted a series of EU directives that provide for continuous supervision of the process of implementing standards. The Directive on General Product Safety (Directive 92/59/EEC, 1992 OJ L 228/24), for example, gives national governments or regulatory agencies considerable discretion to impose restrictions on the circulation of products that they find to be harmful to consumers, notwithstanding conformity with European standards. Similarly, the Product Liability Directive (Directive 85/374/EEC, 1985 OJ L 210/29) offers national courts leeway to determine whether a product meets “legitimate consumer expectations” (and whether standards reflect the latest scientific and technical knowledge). In sum, European standardization changed from operating in a legal vacuum to being embedded in legal frameworks and controlled by networks of non-governmental and governmental actors. This interplay between private and public governance elements conferred a high degree of legitimacy upon European standardization, which it lacked in the 1980s. Private- and public- sector actors are now involved in CEN and CENELEC, and participation of weaker societal groups, most notably consumer groups, is facilitated by financial assistance. In the last few years, a growing chorus of scholars and observers has been raising concerns about global regulation that are similar to those expressed 20 years ago about trends in European regulation. Eyal Benvenisti and George Downs, for instance, lament that the move towards new global regulation, in which private-sector actors play an increasingly central role, lacks democratic accountability and legitimacy: it “circumvent[s]‌domestic democratic and supervisory processes that had developed over the years through the efforts of civil society, legislatures and courts. By doing so it threatens to effectively disenfranchise both voters and legislators in a host of areas” (Benvenisti and Downs 2009: 367; see also Zürn 2004; Black 2008; Graz and Nölke 2008; Quack 2010). In short, the problem with privatization of regulation is twofold. First, the private forums of rule-making tend to be secretive and devoid of proper due process, and, second, the number of groups involved in private regulation is small and disproportionately—if not exclusively—from industry. The risk, then, is that this combination of skewed institutional setting and narrow participation may lead to regulatory capture, as demonstrated in Figure 15.2 (see also Mattli and Woods 2009).8 A case in point is consumer participation in international product standardization.9 Such participation is strikingly weak. Indeed, a 2004 survey undertaken by the EU Commission on consumer participation in standardization found that the “participation of consumer organisations in international standardisation . . . seems to be out of reach for them at present” (European Commission 2006: 4). There are at least three reasons for the weak role played by consumer groups in global product regulation: first, direct access to ISO/IEC technical committees is difficult. The only group allowed to represent consumer interests within such committees—independently of member organizations—is Consumers International (CI), an umbrella organization representing over 200 independent consumer organizations from almost 100 countries. CI must apply for liaison status for each ISO/IEC technical 8 

Regulatory capture is defined as the control of the regulatory process by those whom it is supposed to regulate or by a narrow subset of those affected by regulation, with the consequence that regulatory outcomes favor the narrow “few” at the expense of society more broadly. 9 Other non-industry or non-commercial groups, such as trade unions, are similarly limited or effectively excluded from participation in international standardization.

Beyond the State?    297 Private rule-making institutions

Industry only

Exclusive (closed and secretive forums; minimal transparency)

Inclusive (proper due process; multiple access points; robust oversight)

Risk of pure capture regulation

Risk of de facto capture regulation

Capture regulation with concessions and compromises

Possible common interest regulation [hybrid governance]

Actor participation Broad range of private and public actors

Fig. 15.2  Privatization of regulation: range of outcomes. committee in which it wants to participate. Such status is not given as a right but only at the discretion of the chairperson of the committee, and it merely offers the possibility to participate as a non-voting member (Dawar 2006; Farquhar 2006: 26). Second, measures by international standards bodies to provide financial support to consumer representatives are few and far between, hampering CI’s ability to send observers to all important committees. In the words of a European Commission survey participant: “The lack of resources . . . forces consumer associations to make a strict selection of what they consider to be the most important [standards issues] for consumers” (European Commission 2006: 10). The absence of significant financial assistance offered at the international level reflects, in part, the practice of some key ISO/IEC members. American private-sector standard-setting bodies have always staunchly opposed any government interference and contend that willingness to pay is the best measure of interest in standardization. Unsurprisingly, those who see no need for financial assistance domestically oppose the idea internationally. And third, consumer representatives are frequently viewed as “outsiders” in private-sector rule-making bodies. Heavily outnumbered by industry representatives, they often are no more than tolerated. Or, as put by CI (2005: 10): Many consumers [believe] . . . when they are invited to join [a technical committee] that their views are being sought and will be valued. The reality can be different; the invitation may have come simply because the meeting host was required to demonstrate that all major stakeholders were involved in the process. Once the goal of having a consumer representative attend the meeting ha[s]‌been achieved there [i]s no further need of the consumer representative and substantive input from [consumers] would not be encouraged.

The ISO and IEC are not the only major global private rule-making bodies singled out for lacking proper representation of non-commercial stakeholders. The IASB, similarly, has been a target of criticism. In 2008, the European Parliament issued a report highly critical

298   Walter Mattli of the IASB governance structure, observing: “[The] IASB lack[s]‌transparency, legitimacy, [and] accountability” (European Parliament 2008: 4). The report went on to make a series of proposals to remedy perceived institutional deficiencies. The proposals include: strengthening the due process of IASB to enable previously rarely represented groups, such as investors, to play a prominent role in rule-making; the creation of a public oversight body involving domestic legislators and financial market supervisors; transparent appointment procedures of board members and trustees drawn from all main groups with an interest in international financial reporting; and a new funding structure that avoids conflicts of interests. These proposals heed calls by politicians and scholars alike to apply lessons from domestic administrative law to debates on how to improve global public and private governance. Laura Dickinson, for example, writes: “[P]‌rivatization is now as significant a phenomenon internationally as it is domestically . . . I [thus] suggest [that] the domestic US administrative law literature may provide a useful set of responses to privatization that has been overlooked by international law scholars, policy-makers, and activists” (2006: 383). Administrative law offers a system of institutionalized procedural and substantive norms intended to assure that all those affected by regulation will be heard during the rule-making process, that decisions will be taken in a transparent manner on the basis of disclosed reasons and in compliance with norms of proportionality and means-end rationality, and that regulations are subject to review by a judicial or other independent bodies upon request. There is growing evidence that state pressure is transforming private regulatory governance into a form of hybrid governance—a new form of governance that comes with public oversight and robust due process and disclosure. The IASB is a case in point. In 2010, it created a new body, the Monitoring Board, to provide a formal link between the private-sector trustees and public authorities. The Monitoring Board consists of one representative, each, of the US Securities and Exchange Commission (SEC), the EU, and the Japan Financial Services Agency, two representatives of IOSCO—and the chair of the Basel Committee as an observer. It has the power to request meetings with the Trustees and “participate” in their appointment, but it has no authority directly vis-à-vis the IASB. In a recent wide-ranging study on trends in global institutional reform, Benedict Kingsbury, Nico Krisch, and Richard Stewart (2005) identify many cases similar to the IASB. The authors thus are sanguine about the potential for the growth of administrative law principles and mechanisms in global governance, and they conclude that a global administrative law is not only possible, but that it is in the process of being created. Greater transparency, more provisions for participation, and related reforms may indeed be necessary first steps to ensure that global regulation will come to reflect a wide range of interests. But, as I have argued elsewhere, such steps are far from sufficient—especially in global private governance. Lack of broad-based participation in highly technical domains may be caused not just by exclusion or non-transparent procedures, but also by technical ignorance, information deficits, erroneous beliefs, or collective action dilemmas. The creation of more robust notice-and-comment procedures, for example, will achieve little when the problem is ignorance or lack of technical expertise by the subjects of a particular governance arrangement. Greater procedural transparency and formal rules guaranteeing procedural inclusion of all affected parties may be in vain if those parties’ participation is in fact prevented by a lack of financial resources or a collective action problem (Mattli and Büthe 2005b; Mattli and Woods 2009). The most likely outcome in such a case may not be common interest regulation but rather de facto capture regulation (see Figure 15.2).

Beyond the State?    299 In short, the debate on how to render global private governance more accountable and legitimate has only just begun. Early reform suggestions are helpful, and administrative law undoubtedly has many more lessons to offer. However, real change and improvement will necessitate considerably more far-reaching and radical measures than the present discourse suggests. Reforming private regulatory governance in Europe under the New Approach took some 20 years of struggles between industry and non-industry groups. Direct state pressure and interference were of the essence in bringing about change. Reforms at the global level are bound to be considerably more contentious and protracted.

References Abbott, Kenneth W, and Snidal, Duncan, 2001. “International ‘Standards’ and Inter­ national Governance.” Journal of European Public Policy 8 (3): 345–370. ————, 2009. “The Governance Triangle: Regulatory Standards Institutions and the Shadow of the State.” In The Politics of Global Regulation, ed Walter Mattli and Ngaire Woods, 44–88. Princeton, NJ: Princeton University Press. Ayres, Ian, and Braithwaite, John, 1992. Responsive Regulation:  Transcending the Deregulation Debate. New York: Oxford University Press. Barrows, Sam, 2009. “Racing to the Top . . . at Last: The Regulation of Safety in Shipping.” In The Politics of Global Regulation, ed Walter Mattli and Ngaire Woods, 189–210. Princeton, NJ: Princeton University Press. Bartley, Tim, 2003. “Certifying Forests and Factories: States, Social Movements, and the Rise of Private Regulation in the Apparel and Forest Products Fields.” Politics & Society 31 (3, September): 433–464. ——, 2007. “Institutional Emergence in an Era of Globalization: The Rise of Transnational Private Regulation of Labor and Environmental Conditions.” American Journal of Sociology 113 (2, September): 297–351. Benvenisti, Eyal, and Downs, George W, 2009. “Toward Global Checks and Balances.” Constitutional Political Economy 20 (3–4, September): 366–387. Black, Julia, 2008. “Constructing and Contesting Legitimacy and Accountability in Polycentric Regulatory Regimes.” Regulation & Governance 2 (2): 137–164. Blind, Knut, 2004. The Economics of Standards:  Theory, Evidence, Policy. Cheltenham, UK: Edward Elgar. Braithwaite, John, 2000. “The New Regulatory State and the Transformation of Crimi­ nology.” British Journal of Criminology 40 (2, March): 222–238. ——, and Drahos, Peter, 2000. Global Business Regulation. Cambridge, UK: Cambridge University Press. Büthe, Tim, and Mattli, Walter, 2011. The New Global Rulers:  The Privatization of Regulation in the World Economy. Princeton, NJ: Princeton University Press. Cashore, Benjamin; Auld, Graeme, and Newsom, Deanna, 2004. Governing through Markets: Forest Certification and the Emergence of Non-State Authority. New Haven, CT: Yale University Press. CI (Consumers International), 2005. First Steps in Standards Representation. London, UK: CI, September. Available at http://www.consumersinternational.org (last consulted 22 January 2014).

300   Walter Mattli Dawar, Kamala, 2006. “Global Governance and Its Implications for Consumers.” Consumer Policy Review 16 (1): 2–4. DeSombre, Elizabeth R, 2006. Flagging Standards: Globalization and Environmental, Safety, and Labor Regulations at Sea. Cambridge, MA: MIT Press. Dickinson, Laura A, 2006. “Public Law Values in a Privatized World.” Yale Journal of International Law 31 (2): 383–426. Dilling, Olaf; Herberg, Martin, and Winter, Gerd, ed, 2011. Transnational Admin­ istrative Rule-Making. Performance, Legal Effects and Legitimacy. Oxford, UK: Hart Publishing. Eberlein, Burkard, and Grande, Edgar, 2005. “Beyond Delegation:  Transnational Regulatory Regimes and the EU Regulatory State.” Journal of European Public Policy 12 (1): 89–112. European Commission, [2005 event file dated to] 2006. European Commission, Health and Consumer Protection Directorate-General, Evaluation Report: Questionnaire on Consumer Representation in Standardisation Activities at National, European and International Level. Available at: http://ec.europa.eu/consumers/cons_org/eval_report_en.pdf (last consulted 22 January 2014). European Parliament, 2008. European Parliament, Committee on Economic and Monetary Affairs (Rapporteur: Alexander Radwan), Report on the International Financial Reporting Standards (IFRS) and the Governance of the International Accounting Standards Board (IASB). Strasbourg: European Parliament, 5 February ([A 6-0032/2008, 2006/2248 (INI)). Available at: http://www.iasplus.com/en/binary/europe/0801econreport.pdf (last consulted 22 January 2014). Farquhar, Bruce, 2006. “Consumer Representation in International Standards.” Consumer Policy Review 16 (1): 26–30. Gilardi, Fabrizio, 2008. Delegation in the Regulatory State: Independent Regulatory Agencies in Western Europe. Cheltenham, UK: Edward Elgar. Graz, Jean-Christophe, and Nölke, Andreas, ed, 2008. Transnational Private Governance and its Limits. London, UK: Routledge. Gunningham, Neil, and Grabosky, Peter N, 1998. Smart Regulation: Designing Environmental Policy. Oxford, UK: Oxford University Press. Haufler, Virginia, 2003. “Globalization and Industry Self-Regulation.” In Governance in a Global Economy: Political Authority in Transition, ed Miles Kahler and David A Lake, 226–252. Princeton, NJ: Princeton University Press. Hood, Christopher; James, Oliver; Jones, George; Scott, Colin, and Travers, Tony, 1999. Regulation Inside Government: Waste Watchers, Quality Police, and Sleaze-busters. Oxford, UK: Oxford University Press. Jordana, Jacint; Levi-Faur, David, and Fernández-i-Marín, Xavier, 2011. “The Global Diffusion of Regulatory Agencies: Channels of Transfer and Stages of Diffusion.” Comparative Political Studies 44 (10, October): 1343–1369. Jupille, Joseph; Mattli, Walter, and Snidal, Duncan, 2013. Institutional Choice and Global Commerce. Cambridge, UK: Cambridge University Press. Keohane, Robert O, and Nye, Joseph S, 1989. Power and Interdependence. Second edition. New York: Harper Collins Publishers. Kingsbury, Benedict; Krisch, Nico, and Stewart, Richard B, 2005. “The Emergence of Global Administrative Law.” Law and Contemporary Problems 68 (3–4): 15–61.

Beyond the State?    301 Köhne, Anne-Lore, 1999. Address at International Conference “Standardization for the 21st Century.” In Conference Reports. Brussels, Belgium: Commission-DG Enterprise (cited in Büthe and Mattli 2011: 220). Levi-Faur, David, 2005. “The Global Diffusion of Regulatory Capitalism.” The Annals of the American Academy of Political and Social Science 598 (1, March): 12–32. Liebowitz, Stanley J, and Margolis, Stephen, 1999. Winners, Losers & Microsoft: Competition and Antitrust in High Technology. Oakland, CA: Independent Institute. Majone, Giandomenico, 1997. “From the Positive to the Regulatory State.” Public Policy 17 (2): 139–167. Mattli, Walter, 2001. “The Politics and Economic of International Institutionalized Standards Setting.” Journal of European Public Policy 8 (3): 328–345. ——, 2003. “Public and Private Governance in Setting International Standards.” In Governance in a Global Economy: Political Authority in Transition, ed Miles Kahler and David A Lake, 197–229. Princeton, NJ: Princeton University Press. ——, and Büthe, Tim, 2003. “Setting International Standards: Technological Rationality or Primacy of Power?” World Politics 56 (1): 1–42. —— ——, 2005a. “Accountability in Accounting? The Politics of Private Rule-Making in the Public Interest.” Governance 18 (3): 399–429. —— ——, 2005b. “Global Private Governance: Lessons From a National Model of Setting Standards in Accounting.” Law and Contemporary Problems 68 (3–4): 225–262. ——, and Woods, Ngaire, ed, 2009. The Politics of Global Regulation. Princeton, NJ: Princeton University Press. Murphy, Dale D, 2004. The Structure of Regulatory Competition: Corporations and Public Policies in a Global Economy. Oxford, UK: Oxford University Press. Parker, Christine, 2002. The Open Corporation: Effective Self-Regulation and Democracy. New York: Cambridge University Press. Quack, Sigrid, 2010. “Law, Expertise and Legitimacy in Transnational Economic Gover­ nance: An Introduction.” Socio-Economic Review 8 (1, January): 3–16. Singer, David Andrew, 2007. Regulating Capital: Setting Standards for the International Financial System. Ithaca, NY: Cornell University Press. Slaughter, Anne-Marie, 2004. A New World Order. Princeton, NJ: Princeton University Press. Vogel, David, 1995. Trading up:  Consumer and Environmental Regulation in a Global Economy. Cambridge, MA: Harvard University Press. ——, 2005. The Market for Virtue: The Potential and Limits of Corporate Social Responsibility. Washington, DC: Brookings Institution Press. ——, 2008. “Private Global Business Regulation.” Annual Review of Political Science 11 (1): 261–282. ——, 2012. The Politics of Precaution. Princeton, NJ: Princeton University Press. Vogel, Steven K, 1998. Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries. Ithaca, NY: Cornell University Press. Zimmermann, Jochen, and Werner, Jörg K, 2013. Regulating Capitalism? The Evolution of Transnational Accounting Governance. Basingstoke, UK: Palgrave Macmillan. Zürn, Michael, 2004. “Global Governance and Legitimacy Problems.” Government and Opposition 39 (2): 260–287.

CRUCI A L IS SU E S

Chapter 16

Secu r it y, I n terv en tion, a n d the R esponsibilit y to Protect Transforming the State by Reinterpreting Sovereignty

Christopher Daase

1 Introduction The Responsibility to Protect (R2P) is the most recent and most explicit attempt to redefine sovereignty. As adopted by the General Assembly in the Outcome Document of the World Summit 2005,1 it grants responsibility for the protection of human rights to the international community in cases in which national governments are unwilling or unable to provide human security for their people. If a state does not fulfil its most basic function, so the argument goes, it forfeits its sovereignty, which subsequently shifts to the United Nations (UN). On this basis, the Security Council is entitled, in extreme cases, to apply or mandate military force to prevent further human rights violations. Although the normative status of R2P remains contested and its application is inconsistent, its emergence points to a de facto fundamental transformation of the international normative order. However, it is not only the result of norm-entrepreneurs, be they expert commissions, such as the International Commission on Intervention and State Sovereignty (ICISS 2001) or the High-Level Panel on Threats, Challenges and Change (High-Level Panel 2004), or states, such as Canada and Japan, supporting the human security agenda as “Friends of Human Security.” It is also the product of more fundamental processes, which have de-centered the state in international relations and redefined three fundamental concepts: security, intervention, and responsibility. The chapter reconstructs 1 

http://www.un.org/summit2005/documents.html

306   Christopher Daase the political debates about R2P, the driving forces behind them, and their normative and political effects. It backs the claim of Michael Zürn and Nicole Deitelhoff (Chapter 10, this volume) in the Introduction to Part II that sovereignty continues to function as a “regulative idea” of international politics, but that the concept has fundamentally changed its meaning, transforming the very idea of statehood. In their traditional meaning, the concepts of “security,” “intervention,” and “responsibility” are closely linked to state sovereignty and constitute the core of the national interest as conceived by many realist and rationalist theories of international relations (Morgenthau 1952; Krasner 1978; Waltz 1979; Glaser 2010). In recent years, the global academic and political discourse has, however, challenged these assumptions. The concept of security was broadened, the norm of non-intervention relaxed, and political responsibility redefined. All this, I argue along constructivist lines (Finnemore 1996; Weldes 1996), has resulted in a normative change of the international system that affects both state structures and national interests. Indeed, the “second image reversed” comes true not only in its original version insofar as material conditions, such as anarchy and the distribution of power, affect domestic politics (Gourevitch 1978), but also insofar as new ideas on the international level and the emergence of global norms transform the idea of the state and change the domestic structure and politics themselves.

2  Sovereignty and Security Security has been the traditional core value of the nation state. However, the meaning of security has broadened in the second half of the twentieth century in four dimensions: the referent object, the issue area, the geographical scope, and the kind of danger that is to be considered. In this process, “national security” is gradually superseded by “human security” as the central normative concept of international relations. While “national security” regards state sovereignty as the highest end, “human security” de-centers the state and subordinates it to the needs of individual human beings. This section reconstructs the conceptual shift, identifies the driving forces behind it, and demonstrates how a changed notion of security redirects the focus of international security concerns from state to human challenges. The analysis starts from a narrow notion of security as established in strategic debates and public discourse after World War II. However, the concept of security has a much longer history in European thought and can be related to the diverging spheres of internal public safety and external state security in European nation-building. Nevertheless, the 1950s are a good starting point, since they represent a time in which the meaning of security narrowed to the greatest degree possible, focusing on the national survival of states and communities in the face of existential threats like world wars and nuclear annihilation. The separation of safety and security has gradually disappeared, and meanings of internal and external, national and human, military and economic, territorial and global security have merged into an extended concept of security over the last 50 years.

Security, Intervention, and the Responsibility to Protect    307

Reference The first dimension of a conceptual extension is the reference dimension that determines whose security should be safeguarded. Historically, the concept of security is linked to the consolidation of the nation state as the only legitimate actor in international politics. In early modern times, the state established itself as a guarantor of the safety of its citizens, as Thomas Hobbes has famously described. Security, however, remained precarious in an inter-state system without a strong central power. Thus, security in international relations meant first and foremost the safeguarding of the nation’s territory and the defense of its borders against other states. This is the understanding of national security advocated by “political realists” such as John Herz or Hans Morgenthau after World War II and throughout the Cold War (Herz 1950; Morgenthau 1954)—as long as no international monopoly of power exists, all states live in a self-help system, and their finest duty is to assure national survival. As Kenneth Waltz famously wrote: “In anarchy, security is the highest end” (1979: 126). This idea did not go unchallenged. Historically, liberal philosophers such as John Locke and Immanuel Kant had stressed that the state is only an instrument to provide safety for the public. In the 1970s, scholars of international relations took up this idea and challenged state-centric realist thinking by arguing that society should play a greater role in security analyses (Keohane and Nye 1977; Doyle 1983). As a consequence, societal security was understood as a situation in which a collective of citizens lives in safety and freedom so that it can develop its productivity and wealth (Weaver 1993). This line of argument was taken even further when the concept of human security became prominent after the end of the Cold War. It is not the state nor even social collectives that are the referent object of security, but rather the individual human being. The human security approach challenges not only the traditional state-centric view but also the focus on social groups. Championed by the UN and a number of expert commissions, the concept is closely linked to a cosmopolitan understanding of international politics and the conviction that human beings, not states, have an intrinsic value and should be protected (Beitz 1979; Pogge 2001). Wherever state rights and human rights come into conflict, human rights should be given priority. Thus, human security refers not only to the protection of individuals and communities from war and other forms of violence, but also to the protection of “the vital core of all human lives in ways that advance human freedoms and human fulfillment” (Thakur and Newman 2004: 37).

Issue The conceptual extension of the referent objects has implications for the issue area of security. Traditional security threats were mainly perceived in military terms, as the greatest security concerns for states are armed attacks and the danger of being conquered. Thus, traditional national security interests are military in nature. Military security, in turn, was expected to be threatened for the most part by hostile states. Throughout the Cold War in particular, the focus on nuclear weapons underlined the realist perspective on state-tostate threats and deterrents (Kissinger 1957; Brodie 1959).

308   Christopher Daase The traditional focus on military threats changed in the early 1970s when economic security became prominent. The 1973 and 1979 oil crises made people aware that their wellbeing was not only challenged by military threats, but also put at risk by economic vulnerability (Wolf 1977). Thus, the concept of security was broadened to include the access to so-called “vital resources” (Maull 1984). States and societies were seen as vulnerable to being embargoed by intentional use of a resource as a weapon or by being cut off unintentionally from resources by natural catastrophes, civil wars, or pure shortages. Thus, the following conclusion was drawn: to safeguard energy security, economic, political, and military instruments had to be integrated into a single framework of comprehensive security (Nye 1982). A further step towards extending the meaning of security was taken when the notion of environmental security was introduced. The Brundtland Report (1987: 5) stated that “environmental threats to security are now beginning to emerge on a global scale.” Since then, environmental degradation and climate change have been discussed as national and international security issues (Myers 1989; Renner 1989). The key argument is that the increasing destruction of our natural habitat can lead directly to conflict (Tuchman Mathews 1989: 166). However, the empirical link between environmental degradation and the risk of violent conflict has remained controversial (Deudney and Matthew 1999; Homer-Dixon 1999). Advocates of environmental security have nevertheless defended the securitization of the environment by pointing to the potential consequences of ignoring this issue and the urgency of rallying public support for more resolute environmental policies. Thus, Richard Ullman (1983: 133) redefined security by specifying the newly perceived threats: “A threat to national security is an action or sequence of events that (1) threatens drastically and over a relatively brief span of time to degrade the quality of life for the inhabitants of a state, or (2) threatens significantly to narrow the range of policy choices available to the government of a state or to private, nongovernmental entities (persons, groups, corporations) within the state.” Also in the view of many of his colleagues at the time, environmental degradation and climate change had exactly these effects and were legitimate security issues. A more recent development is the extension of security into the humanitarian field. With this move the last great issue area of international politics—human rights—is integrated into the security discourse. Humanitarian security refers not only to the human rights situation of groups and individuals, however, but also to the security of development aid volunteers and disaster relief workers in crisis areas. In addition, the protection of so-called safe havens and humanitarian zones is often seen as a purpose of humanitarian security.

Space A third dimension of extended security is geographical scope: how far do security concerns extend geographically? Traditional security policy applied only to the national level. Realists thought it foolish to design security policies beyond the nation state. Even if global security problems exist, the international system allows only national solutions: “Worldshaking problems cry for global solutions, but there is no global agency to provide them”

Security, Intervention, and the Responsibility to Protect    309 (Waltz 1979: 109). National security therefore strictly refers to the security of the territorial state and derives its ends and means from “national interests.” This limitation becomes problematic as states develop joint strategies to defend their common interests regionally. When the North Atlantic Treaty Organization (NATO) was founded in 1949, it led gradually to the emergence of a “security community” (Deutsch 1954). Security communities develop if states integrate politically by renouncing violence as a means of settling conflicts among each other and by forging common ideas on how to establish and maintain regional stability. Security communities emerged in many regions of the world, overcoming the narrow notion of national security (Adler and Barnett 1998). The term international security refers more broadly to inter-state cooperation in security issues. It departs from realist assumptions by arguing that cooperation among security-seeking states is possible even in the absence of an overarching framework that could coerce states to keep their promises (Axelrod and Keohane 1986). International security thus redirects attention from purely national or regional concerns towards the stability of the international system as a common good. The question then is no longer how to maximize national security, but how to create international conditions so that all states enjoy a reasonable degree of security. International institutions have been regarded as the principal tools for the multilateral preservation of international security (Martin 1992; Haftendorn et al. 1999). Finally, the concept of global security goes even beyond international security. While international security still refers primarily to states, global security refers to human beings all over the world. The Independent Commission on Disarmament and Security Issues— the Palme Commission—argued as early as 1982 for a notion of “common security” that would transform the existing inter-state society into a world society. The concept of global security gave rise to strategies to enhance living conditions of the world society, which is for all human beings. Thus, global security often goes hand in hand with human security and integrates measures to protect the environment and the climate, to secure access to food and clean water, and to end civil strife and violent conflict.

Danger Arguably the most important fourth dimension of conceptual change concerns danger. Traditionally, political challenges to the state had been conceptualized as threats, which were measured on the basis of what was known about the enemy, its hostile intentions, and military capabilities (Knorr 1976; Cohen 1979). This was paradigmatically the case in the Cold War when East and West stood eyeball to eyeball, heavily armed. Defusing threats either by counter-threats and deterrence or by threat-reduction and détente became the crucial challenge in the Cold War (Gaddis 1987). The concept of insecurity as symmetrical threat became problematic, however, when more diffuse dangers to the well-being of societies began to be perceived. In times of great social and economic interdependence, dangers do not necessarily come from hostile actors and military capabilities, as the oil crises demonstrated. Thus, insecurity needed to be measured differently, for example by the degree of vulnerability to externalities, whatever

310   Christopher Daase their sources might be (Keohane and Nye 1977). Thus the focus was redirected from enemy strength to one’s own weaknesses. From the concept of vulnerability it is only a small step to the paradigm shift in security policy after the Cold War. Today, risks, not threats, command the discourse about international politics. The “clear and present danger” of the Cold War has been replaced by opaque and future “risks and challenges.” The proliferation of weapons of mass destruction, transnational terrorism, organized crime, environmental degradation, and many other issues are framed in terms of uncertainty and risk. What makes these issues similar is their relative indeterminability. With the concept of risk, dangers are perceived that do not yet exist but could potentially develop. The incorporation of uncertainties is the ultimate extension of the perception of insecurity, and it fundamentally changes the demands for security (Daase and Kessler 2007). When security policy is to deal with uncertainties and risk, it can no longer be reactive, as in the Cold War, but must become proactive. A policy is proactive if it reduces potential dangers by anticipating future problems, developments, and needs. In general, proactive security policy addresses the causes or effects of a risk, and so it can be preventive or precautionary. All proactive strategies to reduce international risks are much more active and offensive than traditional security policies, which aimed at averting threats or mitigating vulnerabilities. The state has to prevent a danger before it emerges, and so it intrudes internally into the civil rights of citizens and externally into the sovereign rights of states. Thus, the conceptualization of security as the absence of risks contributes to interventionist policies.

3  Sovereignty and Intervention The traditional understanding of sovereignty is closely linked to the norm of non-intervention. This section analyses the concept of (non-)intervention and how the debate over humanitarian intervention has changed the idea of sovereignty. It starts from the assumption that there is a tension, if not a gap, between the legality and legitimacy of humanitarian intervention. On the one hand, the UN Charter clearly prohibits the use of force by states, except for individual or collective self-defense, according to Article 51 of the UN Charter or the Security Council mandated peace-enforcement under Chapter 7 (Gray 2000: 24–50). On the other hand, it is widely recognized that states witnessing major human rights abuses might feel morally compelled to use military force even in the absence of a UN mandate to stop atrocities and restore public order (Wheeler 2000; Holzgrefe and Keohane 2003). In this regard, the NATO action in Kosovo in 1999 was prototypicalin the now famous words of Justice Richard J. Goldstone, it was “illegal but legitimate” (Independent International Commission on Kosovo 2000: 4). Since then, the formula “not legal but legitimate” has become a standard justification for breaking the law in the name of legal reform. In 2003, Anne-Marie Slaughter argued that the Kosovo verdict could be extrapolated such as to call the imminent invasion of Iraq “illegal but legitimate.” “But depending on what we find in Iraq,” she continued, “the rules have to evolve, so that what is legitimate is also legal.” As we now know, nothing of interest was found, and the case for a proleptic legitimation of preventive war therefore

Security, Intervention, and the Responsibility to Protect    311 collapsed. However, when no “weapons of mass destruction”—the casus belli—were found, Washington and London re-declared the war a humanitarian intervention. Overthrowing Saddam Hussein, they argued, retroactively justified the war, implicitly claiming not only a right to humanitarian intervention, but also to pro-democratic regime change. Whatever the merit of such post hoc efforts at legalization, they demonstrate that the argument has to be taken more seriously now that, by softening the principles of non-intervention and nonuse of force, the international community may get itself onto a “slippery slope” towards accepting forcible intervention (Semb 2000; Falk 2003). But what exactly is the reason for the progressive deterioration of the prohibition of the use of force, and, correspondingly, of the norm of non-intervention? These norms, after all, had been seen as the foundations of international order for decades. Is it the growing gap between legality and legitimacy of humanitarian intervention that allows states to exploit legal uncertainty and to exercise power politics unchecked? By closing the gap, some argue, clear legal criteria for legitimate military intervention will emerge and the room for abuse will be minimized. This idea was clearly taken up in UN Secretary General Kofi Annan’s challenge to the international community to detail clear guidelines for humanitarian intervention. In their absence humanitarian interventions would set “dangerous precedents for future interventions without clear criteria to decide who might invoke those precedents and in what circumstances” (Annan 1999). The Independent International Commission on Kosovo, established by Kofi Annan and headed by Richard J. Goldstone, took up the task. It proposed a plan for legal reform to make the law of humanitarian intervention more congruent with what was seen as “an international moral consensus” (2000: 4). This plan added to a growing body of literature advocating the codification of humanitarian intervention or the development of new standards through forced change in customary international law. The aim of both approaches to legal reform is to bridge the gap between legality and legitimacy or, in the words of one of Kofi Annan’s predecessors, Javier Pérez de Cuéllar, to develop a “new concept [of intervention], one which marries law and morality” (cited in Lyons and Mastanduno 1995: 2). Legally speaking, the norm of non-intervention and the prohibition of the use of force are unequivocally stated in Article 2(4) of the UN Charter. Two exceptions are clearly delineated in Chapter 7 and Article 51, respectively. These provisions, together with constraints imposed by the Cold War, kept the norm of non-intervention relatively intact and limited the uncertainty of its interpretation. This does not mean that the norm was not violated, quite the contrary. But it was relatively easy and uncontroversial to distinguish a breach of law from lawful self-defense or peace-enforcement. This changed with the end of the Cold War. During the East-West conflict, only a few cases emerged that could be retrospectively categorized as humanitarian intervention: Indian action in East Pakistan, now Bangladesh (1971); the Vietnamese intervention in Cambodia to end Khmer Rouge rule (1978); and Tanzania’s intervention in Uganda to oust Idi Amin (1979). However, none of these actions were undertaken in the name of humanitarian intervention or with primarily humanitarian intent, nor were they accepted by third states or international organizations as legitimate violations of the non-intervention principle. Thus, these actions did not challenge the normative framework of Articles 2(4), 51, and Chapter 7 of the UN Charter, and consequently upheld the divide between the legal and illegal use of force.

312   Christopher Daase This changed with UN Resolution 688 and the subsequent forcible intervention by the United States (US), the United Kingdom (UK), and France in 1991 to protect the Kurds and Shiites in Iraq (Gallant 1992). While the resolution called on Iraq to end the repression of its civilian population and to let humanitarian organizations do their work, it was not passed under Chapter 7. Rather, it explicitly recalled Article 2(7) by reaffirming the prohibition of UN intervention into matters of domestic jurisdiction. Nevertheless, the Allies used force without explicit UN authorization to provide safe havens and to compel Iraqi troops to leave these areas. When challenged by Iraq in the Security Council, the Allies replied that they had acted to prevent repression and to support Resolution 688. This attempt to bring unlawful action under the “implied authorization by Security Council Resolution in the absence of any express authorization provided a pattern that was to be followed in the future” (Gray 2000: 29). In the 1990s, the Security Council approved the use of force in a number of cases to stop human rights abuses and to restore public order in failing states. As a consequence an opinio juris evolved that “UN-sanctioned humanitarian interventions are lawful exceptions to the Charter’s general prohibition of forcible self-help in international relations” (Holzgrefe and Keohane 2003: 43). At the same time, however, force was used in a number of cases in which Security Council approval could not be secured in advance: ECOWAS 2 in Liberia (1990–95); the UK, France, and the US in Iraq (1991–); ECOWAS in Sierra Leone (1998–); and NATO in Kosovo (1998–). These were the hard cases of humanitarian intervention that fell into the grey zone between the legal norm of prohibition of force and the moral norm of human rights protection. The more that cases of unauthorized intervention occurred, the broader the gap between legality und legitimacy of humanitarian intervention grew, and the stronger the pressure became for legal reform to “harmonize” legal provisions and social notions of justice. Two alternative paths of legal reform have been discussed, since there are theoretically two ways in which norms change (Ullman-Margalit 1990). First, norms change by design, that is, by explicit agreement between actors to set new standards for acceptable behavior. In international law, this takes place through signing and ratifying bilateral or multilateral treaties. Second, norms change through evolution, via the spontaneous shift of social practice through tacit agreement among actors about acceptable behavior. This happens in international law if a new practice is widely shared by all or most states and an opinio iuris exists, the belief, on the part of governments, that this practice is required by law. Strictly speaking, one might object, this variant of normative change is not legal reform, as it involves no purposive action to change the law. But sometimes states break international norms to set precedents and to initiate a change of customary international law. The aim of legal reform by illegal means is to move state practice—and by implication customary international law—closer to the alleged legitimacy of an imagined norm. First reform path—legislated change. The Independent Commission on Kosovo suggested the strategy of codification. It proposed a three-step process of formulating a doctrine of humanitarian intervention: as a first step, it suggested a “framework of principles” for humanitarian intervention, including threshold principles that must be satisfied and

2 

ECOWAS stands for: Economic Community of West African States.

Security, Intervention, and the Responsibility to Protect    313 contextual principles that determine the degree of legitimacy of an intervention. As a second step it proposed the formal adoption of the framework by the UN General Assembly as a Humanitarian Intervention Declaration. The third and last step would be an Amendment of the UN Charter to give humanitarian intervention a firm legal foundation (2000: 187–198). However, the codification of principles for humanitarian intervention turned out to be extremely tricky. Scholars, and even more so states, disagreed on whether triggering events for humanitarian interventions should be restricted to genocide and gross violations of human rights or should also include lesser human rights abuses and restrictions of democratic rights. Many feared the codification of humanitarian intervention would lead to an asymmetrical treaty: the distribution of real power and veto rights in the Security Council would leave the five permanent members immune in practice to humanitarian intervention. Although selectivity does not speak against the legitimacy of a moral norm, it could have severely restricted the legitimacy of a legal norm. A codified right to humanitarian intervention would, in any case, add to the existing inequality in international law and further diminish its overall legitimacy. Closing the gap between legality and legitimacy by codifying principles for humanitarian intervention could have detrimental effects. Thus, the vast majority of states, especially in the Group of 77, made it clear they would not support a codification of humanitarian intervention. Western states were equally unwilling to commit themselves in a binding way. Second reform path—evolutionary change. The idea of legal reform by evolution operates more indirectly. Allen Buchanan (2003) argues that illegal acts aiming at the reform of international law could narrow the gap between legality and legitimacy of humanitarian intervention by inspiring a new international customary law. Western states, and especially the US, should not be afraid of violating international law, since they do so to change it anyway. They could claim, if not anticipated legality, then at least morality for their unlawful actions. However, the very notion of “creating a new customary law” is a contradiction in terms: customary norms are not created, but evolve. Surely, an action can be undertaken with the intent to set a precedent that, over time, leads to a new practice, thus constituting a new customary norm. This development does not depend on the original agent, however, but rather on the other agents who do or do not follow the precedent (Kier and Mercer 1996). Considering the inconsistent practice of humanitarian intervention and its contestation, it is unlikely that a majority of states would approve of such precedents. For Buchanan this does not matter. State consensus is dispensable as soon as a meaningful agreement among individuals exists and an international community develops that transgresses international society. “The normative force of state consent in the present system is morally questionable at best” (2003: 152). This argument not only challenges the legitimacy of non-democratic states, but also questions the legitimacy of international organizations, including the UN. By such reasoning, international customary law is no longer validated by international consent, but by the consent of a small group of liberal (Western) states. The proposal implies the change of the customary norm of humanitarian intervention, and also of the “secondary rules,” which determine how customary norms develop. This conforms to a general trend in international relations to redefine the sovereign equality of states as a foundation of international law and to claim “formal recognition for the greater influence of the actions and opinions of powerful states in the formation

314   Christopher Daase of customary international law” (Byers and Chesterman 2003: 193). Although this might pro forma narrow the gap between legality and legitimacy of humanitarian intervention, it could fundamentally endanger the legitimacy of international law itself. So some scholars have argued for a less forceful, incremental approach to legal reform: in their view of the current situation, the illegality of humanitarian intervention safeguards against the abuse of humanitarian arguments by powerful states as a pretext for war, especially by hegemons in various world regions. Keeping humanitarian intervention illegal upholds a high threshold of justification and dissuades states from easily making use of the humanitarian argument (Stromseth 2003: 253). But, if they are convinced that their moral considerations override legal considerations, they are free to shoulder the responsibility for breaking the law (Franck 1999).

4  Sovereignty and Responsibility This leads to the third conceptual change and the evolution of the R2P as an international norm. Many international actors and analysts refer to it as an “emerging norm,” avoiding the assertion that new international law already exists (ICISS 2001: para. 1.11; High-Level Panel 2004: para. 201 f.; Evans 2006; Matthews 2008; Weiss and Thakur 2009). Indeed, contrasting norm and implementation reveals that a normative consensus among states does not exist, as recent debates over NATO intervention in Libya and the human rights situation in Syria demonstrated. Nevertheless, by labeling R2P as an emerging norm, quasi-legal justifications can be used for actions that are, strictly speaking, illegal. And, by pretending to bridge the gap between legitimacy and legality, the notion of an emerging norm tends to erase the difference between two distinct kinds of political normativity— moral and legal—with the effect of undermining the authority of both. The argument that R2P is an “emerging norm” is closely linked to a liberal understanding of international politics, which perceives international relations as increasingly regulated, formalized, and legalized (Abbott et al. 2000; Goldstein et al. 2001; Zangl and Zürn 2004) to assure individual human and civil rights to an ever higher degree (Tesón 1998; Buchanan 2004). The R2P, liberals hold, is part of this progress. On the initiative of Canada, the International Commission on Intervention and State Sovereignty (ICISS) was established in 2000. It consisted of eminent persons from around the world and came up with R2P as the idea that sovereign states have a responsibility to protect their own citizens from avoidable catastrophe—from mass murder and rape, from starvation—but that when they are unwilling or unable to do so that responsibility must be borne by the broader community of states. (ICISS 2001: Ch. 8)

In 2004 UN Secretary-General Kofi Annan introduced another commission, the High-Level Panel on Threats, Challenges and Change, which took up the concept, arguing that there is a growing acceptance of humanitarian intervention and a new sense of collective responsibility “when it comes to people suffering from avoidable catastrophe” (High-Level Panel 2004: para. 201 f.). In March 2005, Annan reiterated the commission’s findings in his report In Larger Freedom: Towards Development, Security and Human Rights for All and underlined

Security, Intervention, and the Responsibility to Protect    315 the significance for collective responsibility of supporting the notion of an emerging norm. The R2P finally made its way into the final communiqué of the Millennium Summit in 2005 and was adopted unanimously by the UN General Assembly. If the story is told in this way R2P is indeed a success, an “idea whose time has come” (Evans 2008), and one that follows from global legalization. However, the liberal narrative has three problems, directly relating to the criteria of legalization given by Abbott et al. (2000), namely precision, obligation, and delegation. These problems cast doubts on R2P as an emerging legal norm. First, the competing interpretations of R2P, the remaining uncertainties and, consequently, the lack of precision is downplayed; second, the political resistance of major powers and of some smaller international actors against R2P—or the liberal interpretation of it—is disregarded and, as a consequence, the unclear normative obligation ignored; and third, the question, “Who has final authority over the use of force for humanitarian purposes?” is still unanswered and thus the problem of delegation unsolved. First, precision. According to Abbott et al. (2000), international legalization takes place if norms are defined in increasingly precise terms specifying the rights and duties involved. For R2P, it can be shown that although international actors were quick to adopt the concept, they failed to agree on a precise meaning. “A closer study of the relevant reports and documents reveals considerable divergences in opinion. Different bodies have employed the same notion to describe partly different paradigms” (Stahn 2007: 101). While the ICISS Report (2001) does not address the legitimacy of military intervention without a UN mandate, the High-Level Panel Report (2004) reserves the right to react to the Security Council. The Secretary General’s report (Annan 2000) interprets collective responsibility embedded in a wider vision of human security and development, while the Millennium Summit Document stresses the sovereign rights of states and their responsibility towards their citizens along with the collective responsibility of the international community, but it does not explicitly exclude unilateral intervention (Bannon 2006). As regards precision, it would be difficult to interpret the development of R2P as legalization. Quite to the contrary, it is its vagueness that seems to have led to wider acceptance of R2P as a moral norm (Luck 2011). Second, obligation. International legalization occurs if more and more states perceive the duty to act according to a specific norm (Abbott et al. 2000: 401). Although many states were willing to interpret the R2P as a permissive right to intervene militarily on a caseby-case basis if gross human rights violations occurred, they have been equally eager to deny a general obligation to take such action. During the negotiations of the Millennium Summit Document, US Ambassador John Bolton (2005) made it clear that the US would never accept “that either the United Nations as a whole, or the Security Council, or individual states, have an obligation to intervene under international law.” The final document thus reveals clear verbal gradations in responsibility regarding the three pillars of R2P: while the responsibility to prevent, that is, the duty to encourage states to uphold human rights, is supported unreservedly, the responsibility to react by diplomatic or military intervention is put under a double reservation, as such a duty is accepted only after a caseby-case review and on a voluntary basis (Stahn 2007: 109). States were even more reluctant to accept a general responsibility to rebuild, which was conceded only “as necessary and appropriate.” All this shows that the degree of obligation has not increased in recent years, raising doubts that R2P is an emerging legal norm.

316   Christopher Daase Third, delegation. International legalization takes place when states give up national prerogatives and grant authority to an international entity to make decisions affecting them (Abbott et al. 2000: 403). Even regarding the criterion of delegation, however, it is hard to qualify the R2P as an emerging norm. To be sure, the UN Security Council can authorize military measures to uphold human rights, according to Chapter 7 of the UN Charter. But neither the ICISS Report nor the Millennium Summit Document explicitly precludes unilateral action. Even the UN Secretary-General was smart enough not to claim general authority, which might have turned out to be unenforceable. In the end, states have reserved for themselves the right to act if the UN does not authorize action, or to remain inactive if the UN demands action. This is hardly progress in legalization. In sum, the description of the R2P as an emerging norm does not describe its normative status correctly. Rather, it is a political statement that encapsulates the demand to solve the normative conflict between sovereignty and humanitarian intervention by legalizing the latter. The factual statement that R2P is an emerging norm suggests that such normative evolution is predetermined. This allows for two things: first, it justifies today’s action by reference to imagined future legal norms; and second, it ignores resistance to norm development altogether or depicts it as a futile battle against normative progress. To assess the normative status of the R2P in a more balanced way, critical voices have to be integrated into the analysis. Alex Bellamy (2009) has pointed to resistance against the R2P. On the one hand, states such as Cuba, Pakistan, Algeria, Iran, Zimbabwe, and Venezuela have argued against any new ways of intervening in their internal affairs of state and have favored a strict interpretation of sovereignty and non-intervention. Because of their problematic human rights records, it is easy to assume egotistic motives and their fear of being targeted by humanitarian intervention. On the other hand, states such as Russia and China are critical of the danger that the R2P could be used as a pretext for unilateral intervention by Western states. Their position is to concentrate decision-making strictly in the Security Council, where they enjoy a veto, or in UN regional organizations. In addition, there are more modest attempts to address the concerns that mainly global middle powers have raised about R2P (Hanns Seidel Foundation et al. 2012). So Brazil (2011) has proposed the concept of a Responsibility while Protecting, suggesting limits on the use of force and new ways of strengthening monitoring and accountability in peaceenforcement operations. But this proposal met strong criticism from Western states for narrowing the freedom of action of international organizations or individual states engaging in humanitarian missions. The argument of this section was that the normative development of R2P is neither finished nor predetermined. This is not to say that a norm of R2P does not exist, quite to the contrary. But it is a moral norm, rather than a legal norm or an emerging legal norm. It draws its legitimacy from converging views of international actors on the duties states have vis-à-vis their citizens and from the responsibility of the international community to react, if necessary, with military means, when states are unwilling or unable to meet basic human security needs. While the application of the norm might be contested, its core values are so widely shared that it is possible to speak of a new global normative order. This order details the political responsibility of both states and the international community regarding human rights and basic security needs.

Security, Intervention, and the Responsibility to Protect    317

5 Conclusion This chapter has argued that international normative change has contributed to the transformation of the state. The old fundamental norm of sovereignty that has served as a protective shield against external interference in internal affairs of states has been redefined. The reinterpretation of three core concepts of international relations—security, intervention, and responsibility—in public discourse has contributed to the readjustment of the rights and obligations of states. National security is no longer the unquestioned primary value in the international political realm. Over the last 50 years or so, the concept of security has gradually been extended. Today, “human security” demands that state action be oriented towards the well-being of all citizens. Human security is closely linked to a cosmopolitan understanding of international politics, which includes the conviction that human beings, not states, have an intrinsic value and should be protected. Wherever state rights and human rights are in conflict, human rights have priority. The success of the human security concept has also helped to relax the strict interpretation of the non-intervention norm. By claiming the legitimacy of humanitarian intervention, opportunities have been created to justify military measures on moral grounds, even if the UN Security Council did not mandate them. While the legal codification of humanitarian intervention failed, the global reinterpretation of sovereignty through R2P was successful. Although the process of norm evolution is neither finished nor predetermined, R2P functions as a normative framework that sets new standards for good governance and responsible political action. Normative change occurs on different levels, moral and legal. While legal developments often lag behind moral developments, they do not exclusively determine state action. Moral considerations affect the perception and behavior of states and international organizations. Thus, although the redefinition of security, intervention, and responsibility has not yet materialized in new positive international law, it has changed sovereignty as practised by the international community.

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Security, Intervention, and the Responsibility to Protect    319 Falk, Richard A, 2003. “What Future for the UN Charter System of War Prevention?” The American Journal of International Law 97 (3, July): 590. Finnemore, Martha, 1996. National Interests in International Society. Ithaca, NY: Cornell University Press. Franck, Thomas M, 1999. “Break It, Don’t Fake It.” Foreign Affairs 78 (4, July/August): 116. Gaddis, John, 1987. The Long Peace: Inquiries into the History of the Cold War. New York: Oxford University Press. Gallant, Judy A, 1992. “Humanitarian Intervention and Security Council Resolution 688: A Reappraisal in Light of a Changing World Order.” American University Journal of International Law and Policy 7 (2): 881–920. Glaser, Charles, 2010. Rational Theory of International Politics: The Logic of Competition and Cooperation. Princeton, NJ: Princeton University Press. Goldstein, Judith L; Kahler, Miles; Keohane, Robert O, and Slaughter, AnneMarie, ed, 2001. Legalization and World Politics. Cambridge, MA: MIT Press. Gourevitch, Peter A, 1978. “The Second Image Reversed:  The International Sources of Domestic Politics.” International Organization 32 (4): 881–912. Gray, Christine D, 2000. International Law and the Use of Force. Oxford, UK: Oxford University Press. Haftendorn, Helga; Keohane, Robert O, and Wallander, Celeste A, ed, 1999. Imperfect Unions: Security Institutions over Time and Space. Oxford, UK: Clarendon Press of Oxford University Press. Hanns Seidel Foundation; Institute for Security Studies, South Africa; Konrad-AdenauerStiftung, and South African Institute of International Affairs, 2012. The Responsibility to Protect—From Evasive to Reluctant Action? The Role of Global Middle Powers. Johannesburg and Tshwane, South Africa: HSF, ISS, KAS & SAIIA. Available at: http://www.hss.de/fileadmin/suedafrika/downloads/E-book-R2P-From_Evasive_to_Reluctant_Action.pdf. (last consulted 21 January 2014). Herz, John H, 1950. “Idealist Internationalism and the Security Dilemma.” World Politics 2 (2): 157–180. High-Level Panel, 2004. High-Level Panel on Threats, Challenges and Change. A More Secure World: Our Shared Responsibility. New York: United Nations. Available at: http://www. unrol.org/doc.aspx?n=gaA.59.565_En.pdf (last consulted 21 January 2014). Holzgrefe, Jeff L, and Keohane, Robert O, ed, 2003. Humanitarian Intervention: Ethical, Legal and Political Dilemmas. Cambridge, UK: Cambridge University Press. Homer-Dixon, Thomas, 1999. Environment, Scarcity, and Violence. Princeton, NJ: Princeton University Press. ICISS, 2001. Report of the International Commission on Intervention and State Sovereignty. Ottawa, Canada: International Development Research Center. Available at: http://responsibilitytoprotect.org/ICISS%20Report.pdf (last consulted 21 January 2014). Independent Commission on Disarmament and Security Issues, 1982. Common Security: A Blueprint for Survival. New York: Simon and Schuster. Independent International Commission on Kosovo, 2000. The Kosovo Report: Conflict, International Response, Lessons Learned. Oxford, UK: Oxford University Press. Keohane, Robert O, and Nye, Joseph S, 1977. Power and Interdependence: World Politics in Transition. Boston, MA: Little-Brown. Kier, Elizabeth, and Mercer, Jonathan, 1996. “Setting Precedents in Anarchy: Military Intervention and Weapons of Mass Destruction.” International Security 20 (4, April): 77–106.

320   Christopher Daase Kissinger, Henry A, 1957. Nuclear Weapons and Foreign Policy. New York: Harper for the Council of Foreign Relations. Knorr, Klaus E, 1976. “Threat Perception.” In Historical Dimensions of National Security Problems, ed Klaus E Knorr, 78–119. Lawrence, KS: University Press of Kansas. Krasner, Stephen D, 1978. Defending the National Interest: Raw Materials Investments and U.S. Foreign Policy. Princeton, NJ: Princeton University Press. Luck, Edward C, 2011. “The Responsibility to Protect: The First Decade.” Global Responsibility to Protect 3 (4, December): 387–399. Lyons, Gene, and Mastanduno, Michael, ed, 1995. Beyond Westphalia? State Sovereignty and International Intervention. Baltimore, MD: Johns Hopkins University Press. Martin, Lisa L, 1992. “Interests, Power, and Multilateralism.” International Organization 46 (4): 765–792. Matthews, Max W, 2008. “Tracking the Emergence of a New International Norm:  The Responsibility to Protect and the Crisis in Darfur.” Boston College International and Comparative Law Review 31 (1): 137–152. Maull, Hanns W, 1984. Raw Materials, Energy, and Western Security. London, UK: Macmillan. Morgenthau, Hans J, 1952. In Defense of the National Interest: A Critical Examination of American Foreign Policy. New York: Knopf. ——, 1954. Politics among Nations: The Struggle for Power and Peace. New York: Knopf. Myers, Norman, 1989. “Environment and Security.” Foreign Policy (74, Spring): 23–41. Nye, Joseph S, 1982. “Energy Security Strategy.” In The Strategic Imperative. New Policies for American Security, ed Samuel P. Huntington, 301–329. Cambridge, MA: Ballinger. Pogge, Thomas W, ed, 2001. Global Justice. Oxford, UK: Blackwell. Renner, Michael, 1989. “National Security, the Economic and Environmental Dimensions.” Worldwatch Paper (no. 89). Washington, DC: Worldwatch Institute. Semb, Anne Julie, 2000. “The New Practice of UN-Authorized Interventions: A Slippery Slope of Forcible Interference?” Journal of Peace Research 37 (4, July): 469–488. Slaughter, Anne-Marie, 2003. “Good Reasons for Going Around the U.N.” The New York Times, 18 March, sec. Opinion. Available at: http://www.nytimes.com/2003/03/18/opinion/ good-reasons-for-going-around-the-un.html (last consulted 21 January 2014). Stahn, Carsten, 2007. “Responsibility to Protect:  Political Rhetoric or Emerging Legal Norm.” American Journal of International Law 101 (1): 99–120. Stromseth, Jane E, 2003. “Incremental Change Versus Codification.” In Humanitarian Intervention: Ethical, Legal, and Political Dilemmas, ed Jeff L Holzgrefe and Robert O Keohane, 232–272. Cambridge, UK: Cambridge University Press. Tesón, Fernando R, 1998. A Philosophy of International Law. Boulder, CO: Westview Press. Thakur, Ramesh, and Newman, Edward, 2004. Broadening Asia’s Security and Discourse Agenda. Tokyo, Japan: United Nations University Press. Tuchman Mathews, Jessica, 1989. “Redefining Security.” Foreign Affairs 68 (2, Spring): 161–177. Ullman, Richard H, 1983. “Redefining Security.” International Security 8 (1): 129–153. Ullman-Margalit, Edna, 1990. “Revision of Norms.” Ethics 100 (4): 756–767. Waltz, Kenneth N, 1979. Theory of International Politics. Boston, MA: MacGraw-Hill. Weaver, Ole, 1993. “Societal Security: The Concept.” In Identity, Migration and the New Security Agenda in Europe, ed Ole Weaver, Barry Buzan, Morten Kelstrup, and Pierre Lemaitre, 17–40. London, UK: Pinter.

Security, Intervention, and the Responsibility to Protect    321 Weiss, Thomas G, and Thakur, Ramesh, 2009. “R2P: From Idea to Norm—and Action?” Global Responsibility to Protect 1 (1, February): 22–53. Weldes, Jutta, 1996. “Constructing National Interests.” European Journal of International Relations 2 (3, September): 275–318. Wheeler, Nicholas J, 2000. Saving Strangers: Humanitarian Intervention in International Society. Oxford, UK: Oxford University Press. Wolf, Joseph J, 1977. The Growing Dimensions of Security. Washington, DC: The Atlantic Council’s Working Group on Security. Zangl, Bernhard, and Zürn, Michael, 2004. “Make Law, Not War. Internationale und transnationale Verrechtlichung als Baustein für Global Governance” [Make Law, Not War. Legalization beyond the State: A Building Block for Global Governance]. In Verrechtlichung jenseits des Staates. Ein Baustein für Global Governance? ed Bernhard Zangl and Michael Zürn, 12–45. Bonn, Germany: Dietz.

Chapter 17

A mbiguous Tr a nsfor m ations

The 2007/08 International Financial Crisis and Changing Economic Roles of the State

Eric Helleiner

Over the past century, international financial crises have often helped transform the role of the state within domestic economies as well as the nature of economic relations between states. The precise nature of these legacies, however, has been far from consistent. The financial crisis of the early 1930s famously ushered in both a larger domestic economic role for the state in countries across the world as well as the erosion of liberal patterns of inter-state economic cooperation. By contrast, the international debt crisis of the early 1980s and the East Asian crisis of 1997/98 encouraged domestic economic liberalization in many regions and a strengthening of liberal multilateral practices in the world of economic diplomacy. In what ways are the economic roles of states likely to be transformed by the international financial crisis of 2007/08? Like previous crises, this crisis has already begun to transform domestic economic regimes and international economic cooperation. But the direction of these transformations remains hotly debated. In this chapter, I provide an overview and assessment of these debates, arguing that this crisis has so far left a much more ambiguous legacy. At the domestic level, the crisis initially appeared to challenge “neoliberal” economic regimes, leading many analysts to draw a parallel to the 1930s experience. But this interpretation has looked increasingly less convincing over time. At the international level, policymakers and analysts initially argued that the crisis has generated a dramatic strengthening of multilateral economic cooperation among leading states, but both the significance of this cooperation and states’ enduring commitment to it are easily overstated. Compounding the ambiguity is the complicated relationship between domestic and international trends. In the current moment these trends are often working at cross-purposes, in contrast to the patterns of earlier financial crises. For these reasons, I conclude that we remain in a kind of “interregnum” in which the longer term significance of the 2007/08 crisis for the transformation of the economic role of the state is not yet clear.

Ambiguous Transformations   323

1  Past Crises and State Transformation Whenever an international financial crisis breaks out, analysts draw parallels to the past (e.g. Kahler and Lake 2013). Recent experience has been no exception. As soon as the 2007/08 crisis began, comparisons were made to the era of the Great Depression. For those interested in financial crises, the crisis of the early 1930s has long been a key reference point because it was the most severe and geographically far-reaching financial crisis of the past century. Beginning with Wall Street’s stock market crash in October 1929, the crisis quickly intensified and spread worldwide through various banking crises, sovereign debt crises, and currency crises. The crisis of the early 1930s also had dramatic political impacts. Across the world, it encouraged an expansion of the role of state in the domestic economy as policy-makers—on both the left and right—lost trust in the self-regulatory capacity of markets and the liberal domestic economic practices of the pre-crisis era. The crisis also helped to undermine patterns of international economic cooperation that had evolved during the pre-1914 period and the 1920s. Countries across the world abandoned liberal trade commitments and the international gold standard. Many also defaulted unilaterally on their international debts and introduced restrictions on cross-border movements of money, ranging from capital controls to fully fledged exchange controls. To be sure, supporters of the old liberal international economic order worked hard to try to keep it alive. Central bankers and private international financiers created a new institution in 1930, the Bank for International Settlements (BIS) in Basel, to foster international financial cooperation. But the new body was unable to contain the centripetal political and economic forces contributing to financial instability at the time. A World Economic Conference convened in 1933 to address trade protectionism, international debt, and currency instability also ended in failure. Domestic shifts away from economic liberalism played a key role in undermining the prospects for international cooperation. National policy-makers favoring more interventionist economic policies sought to insulate their country from international entanglements and global economic instability. Indeed, many critics of liberal economic orthodoxy at the national level associated economic internationalism with the old regime; for example, US President Franklin D. Roosevelt critiqued the 1933 World Economic Conference’s effort to stabilize exchange rates as reflecting “the old fetishes of so-called international bankers” (quoted in Kindleberger 1970: 207). It was not until the Bretton Woods negotiations that new conceptions of economic internationalism were forged that were more compatible with new domestic interventionist practices (Ruggie 1982; Helleiner 2006). In a self-reinforcing cycle, the unraveling of international economic cooperation during the early 1930s also had the effect of encouraging the expansion of the state’s domestic economic role. Before the crisis, liberal domestic economic policies were often supported by elites with strong ties to both liberal internationalists abroad and the global economy. The breakdown of international cooperation weakened these groups politically at home as they lost ties to influential external allies and international commerce collapsed.1 By contributing to global economic instability, the breakdown also strengthened domestic policy-makers who advocated nationalist policies designed to insulate the country from 1 

For a fascinating analysis of this in the case of Japan, see Mark Metzler (2006).

324   Eric Helleiner the global economy. The collapse of international financial markets and the international gold standard also removed a key source of external market discipline on unorthodox domestic policies. As Polanyi famously put it rather melodramatically, “the snapping of the golden thread was the signal for a world revolution” (Polanyi 1957 [1944]: 27). Although the early 1930s crisis has been a touchstone for analysts of the current crisis, an exclusive focus on the Great Depression creates a blinkered view of the impact of international financial crises on the role of the state in economic life. For a wider perspective, it is worth examining the two most severe international financial crises of the post-1945 era, that is, before the current crisis: the international debt crisis of the early 1980s and the East Asian crisis of 1997/98. These crises had very different—indeed, polar opposite—effects on the economic role of the state than the crisis of the early 1930s.2 The impact of the international debt crisis of the early 1980s at the domestic level was particularly striking. Rather than undermining liberal economic regimes, the crisis encouraged an extensive restructuring of the economic role of the state in a more liberal direction across much of Africa, Latin America, and Asia. The crisis created a political opportunity for “neoliberal” critics of the various interventionist economic policies that had existed in many developing countries to press for a scaling back—in an often quite dramatic manner—of the state’s role in the economy. The 1997/98 East Asian crisis had a similar effect in many countries that experienced the financial distress. These two crises also encouraged a strengthening of international economic cooperation. Rather than default, almost all debtor country governments continued to pay their debts, accepting new loans from international creditors in exchange for promises to implement austerity programs and liberal economic reforms. The International Monetary Fund (IMF), whose importance in the world economy had diminished in the 1970s, was suddenly thrust into the spotlight as the lead crisis-manager and endowed with enormous influence. Central bankers working cooperatively within the BIS also played an important crisis-management role in both crises. In addition, these crises acted as a catalyst for the development of new forms of international financial regulatory cooperation (see Helleiner et  al. 2010). In the wake of the debt crisis of the early 1980s, leading central bankers working with the BIS negotiated the world’s first set of international capital adequacy standards for banks: the 1988 Basel Accord. The East Asian crisis then acted as the prompt for an even more ambitious international initiative, led by the G73 countries, to develop and promote worldwide international standards for supervision and regulation of not just banks but also securities markets, insurance, accounting, auditing, payments system, and corporate governance. These standards were developed by a number of international standard-setting bodies that emerged after the mid-1970s, and a new institution—the Financial Stability Forum—was set up by the G7 in 1999 to coordinate work in this area. The IMF and World Bank also began extensive programs to monitor compliance with the new standards in countries across the world. The East Asian crisis also saw the creation of another new institution— the G20—that brought together financial officials of leading powers in the developed and developing world to work alongside its G7 counterpart, which had been created in the mid-1970s. 2  3 

Harold James (2009) develops a similar argument vis-à-vis globalization trends more generally. This acronym stands for the “Group of 7” (government leaders).

Ambiguous Transformations   325 In the 1930s, the collapse of domestic liberal economic regimes and international economic cooperation reinforced each other. The opposite dynamic unfolded in the crises of the early 1980s and late 1990s. Domestic neoliberal reformers drew political strength from international alliances (particularly those with the IMF and other creditors, both official and private) and domestic societal groups with a stake in the global economy, as well as from the discipline of global market pressures emanating from enduring—indeed, intensifying—international economic integration. The political success at home of those same domestic reformers, in turn, helped the cause of international economic cooperation, as the former backed initiatives that would support the latter. What explains the contrasting experience of the early 1930s crises with those in the early 1980s and late 1990s? Since severe financial crises discredit existing economic regimes, the contrast can be explained partly by the character of those regimes in place at the time of the respective crises. During the 1930s, influential policy-makers rejected prevailing liberal economic policies, while their counterparts in the 1980s and 1990s reacted against postwar interventionist practices. These reactions were also shaped by the distinctive geography of the various crises. The early 1930s crisis had its origin in the “core” of the world economy, and it prompted powerful states to react against liberal practices domestically and internationally, which then had system-wide consequences. In the cases of the early 1980s and late 1990s crises, the financial upheavals originated in the “periphery,” prompting powerful states to try to contain their effects by urging neoliberal reforms abroad and strengthening liberal forms of international cooperation. Differences at the international level also help to explain the divergent experiences. The collapse of the liberal international economic order during the 1930s is often attributed to a transition of economic power from the UK, which no longer had the capacity to lead, to the US, which was not yet willing to assume a leadership role (see, e.g., Kindleberger 1973). By contrast, during the early 1980s and late 1990s, the US played a decisive leadership role in supporting the role of the IMF and the BIS, offering new loans to debt countries, pressuring for neoliberal reforms abroad, and more generally backing the strengthening of international financial cooperation and globalization. Cooperative action among states during the two more recent crises was also facilitated by a much denser landscape of international financial institutions than the one that existed during the early 1930s, as the landscape of the 1980s and 1990s included the IMF, BIS, the G-groupings, and various international standard-setting bodies. From a liberal institutional perspective, these institutions help states-as-rational-actors overcome collective action problems.4 Others working from a more transnational perspective highlight the similar technical knowledge and worldviews that have been cultivated by transgovernmental networks of national and international financial officials working through these bodies, forming networks that are said to be increasingly “disaggregating” national states.5 More radical analyses see the growing strength of these networks as part of a deeper “internationalization” of the state driven by a new transnational managerial class of a public and private elite that seeks to construct a transnational neoliberal hegemonic order.6 4 

Work in this tradition builds on Robert Keohane’s study (1984). the concept of “disaggregating” states, see Anne-Marie Slaughter (2004); see also Tony Porter (2005) and Andrew Baker (2006). 6  Work in this tradition often builds on Robert Cox’s (1987) analysis. 5  For

326   Eric Helleiner

2  The 2007/08 Crisis: A Challenge to Domestic Neoliberal Economic Regimes? How does the experience of the 2007/08 crisis compare to these past experiences? Initial analyses emphasized comparisons to the 1930s, particularly at the domestic level, where the crisis was expected to bring an end to the “neoliberal” era of free market domestic economic policies in the core states of the world economy where the crisis originated. Typical were the comments of the economist Joseph Stiglitz who argued that “September 15, 2008, the date that Lehman Brothers collapsed, may be to market fundamentalism . . . what the fall of the Berlin Wall was to communism” (2010: 219). Within the field of international political economy, Benjamin Cohen argued: “Like the collapse of the Soviet Union, the crash of the global financial structure has all the earmarks of a genuine systemic transformation—the end of an age of vast, untrammeled market expansion and neoliberal deregulation” (2009: 437). From the world of finance itself, George Soros argued that while crises of the early 1980s and late 1990s had reinforced “market fundamentalism,” this latest crisis would bring an end to the influence of this ideology (2008). These predictions were understandable. In a dramatic departure from free market policies, governments in the United States (US) and Europe nationalized major financial institutions at the height of the crisis. Even top international bankers acknowledged their loss of faith in free markets; as Deutsche Bank’s Joseph Ackermann declared at the height of the crisis, “I no longer believe in the market’s self-healing power” (quoted in Wolf 2008). The reactions against free market policies helped to generate important new regulatory initiatives in the financial sector in both Europe and the US soon after the crisis began. In addition to tightening existing prudential rules (e.g. the Basel rules for banks), policy-makers extended the official regulatory umbrella to cover markets (e.g. over-the-counter derivatives) and activities (e.g. bank compensation schemes) that had previously been left largely unregulated. These regulatory initiatives were driven by a new “macroprudential” philosophy that highlighted how unregulated financial markets could generate systemic risks that had not been well anticipated by pre-crisis laissez faire thinking. Although private financial elites resisted many of the regulatory initiatives, the crisis left them in a more weakened and chastened political position within Europe and the US (Helleiner et al. 2010). The global financial meltdown delegitimized neoliberal ideas not just in the US and Europe, where the crisis was centered, but also elsewhere. Before the crisis, many policy-makers in emerging powers and developing countries saw the neoliberal policies and market practices of the leading North Atlantic financial centers as models to follow. The crisis undermined their faith; as one Chinese official put it, “we used to see the US as our teacher but now we realise that our teacher keeps making mistakes and we’ve decided to quit the class” (unnamed official quoted in Beattie and Dyer 2009). The legitimacy of neoliberal policies in developing countries was further undermined by the fact that the US and European governments employed some rather unorthodox policies to manage the crisis, policies that the IMF had often discouraged developing countries from pursuing during their own debt crises since the early 1980s (Helleiner 2010). The crisis also appeared to validate the wisdom of those developing countries that had intervened in markets in ways that insulated themselves to some extent from global

Ambiguous Transformations   327 markets during the years leading up to the crisis. It was widely noticed that countries with capital controls in place and/or large foreign exchange reserves were less affected by the global financial turmoil. More generally, the resilience and growing influence of a number of emerging powers with more statist economic policies, particularly China, led to renewed interest in their economic policy models (e.g. Ocampo 2009; Wade 2010a). Indeed, as the North Atlantic policymakers appeared to lose faith in the neoliberal policy narrative, officials in emerging powers began to offer policy advice to them based on their own experience. Some analysts argued that neoliberal policy models faced an even more serious challenge at a deeper, structural level. From this perspective, the financial crisis signaled the final exhaustion of a phase of finance-centered, debt-led world economic growth that had begun in the 1970s and had been sustained by, and had reinforced, neoliberal ideology. That pattern of growth had emerged in response to declining profit opportunities in the productive realm of the economy with the exhaustion of the postwar Fordist growth model. This kind of long-wave analysis predicted that the crisis would force major economic and political restructuring in a quest for a new growth regime, one in which neoliberal ideology was likely to be much less prominent (see, e.g., Balakrishnan 2009; Palat 2010; Wallerstein 2010). These various arguments anticipating the decline of domestic neoliberal policy models were particularly popular at the height of the financial crisis, but they have been increasingly challenged since then. One reason has been the manner in which governments have begun to address the large public fiscal deficits that were caused by the bailouts and the broader recession that followed the crisis. Given the financial sector’s role in generating the crisis, many have called for these deficits to be addressed through the imposition of new levies and taxes on the financial sector. While some such levies and taxes have been introduced, policy-makers in Europe and the US have turned largely to austerity measures instead as the solution to their fiscal woes. These measures have often involved quite dramatic publicsector cutbacks that have reinforced the neoliberal policy frameworks domestically. The same financial interests whose bailouts contributed to the expansion of public debt in Europe and the US have often been among the strongest proponents of these government cutbacks. In this context, it is not surprising that analysts have begun to see the crisis experience as providing evidence of the enduring ability of financial elites to manipulate the state to serve their interests while socializing the costs of their excessive risk-taking onto the rest of society. Seen from this standpoint, the crisis has not signaled a change in economic policy regime, but rather continuity (see, e.g., Panitch and Konings 2009). Reinforcing this perspective has been the fact that the reregulation of financial markets in the US and Europe has turned out to be less dramatic than many analysts initially anticipated. As the memories of the crisis have faded, the political momentum for significant regulatory reform has slowed. At the same time, the resistance of the private financial sector has intensified and has led to a considerable watering down of many of the more significant regulatory initiatives (Helleiner 2012, 2014). If the departure from neoliberal economic policy regimes—at least in the US and Europe—looks increasingly less dramatic than initially anticipated, what explains this outcome? One common answer has just been noted: the enduring dominance of financial interests within major states in the current era. While the political clout of private financial elites in leading countries was seriously challenged in the Great Depression, this phenomenon

328   Eric Helleiner has been much less present in the wake of the 2007/08 crisis. As Robert Wade puts it, the large financial firms have become not just “too big to fail,” but also “too big to challenge,” because of their political power (2010b: 159; see also Johnson and Kwak 2010). Wade and others have also argued that no clear alternative ideological consensus has emerged to challenge neoliberal thought, either within the economics profession or the broader political world. To be sure, the new macroprudential regulatory philosophy has challenged free market ideas in the financial realm. But its content remains somewhat ambiguous, and it is narrowly focused on financial regulatory issues rather than on representing a wider ideological worldview that challenges the overall neoliberal economic canon in the way that Keynesian and other ideas did during the 1930s (see, e.g., Wade 2009: 559; Helleiner 2014: ch. 4). One final explanation for the contrast between the 1930s experience and the current era is the persistence of an integrated global economy. As was the case during the 1980s and 1990s, supporters of neoliberal domestic economic regimes have gained political strength from the enduring discipline of global markets. The fear of capital flight has inhibited more radical experimentation in domestic economic policy and encouraged governments to adopt the kinds of austerity measures noted earlier. Competitive pressures emanating from global financial markets have also constrained more radical national financial regulatory reform, as officials worry that unilateral regulatory tightening may simply encourage business to relocate elsewhere. More generally, domestic societal groups whose livelihood remains tied to the still-integrated global trade and production structures have remained a powerful—and interconnected—force for the status quo in the leading states.

3  Strengthened International Economic Cooperation? The survival of an integrated global economy in the face of the financial meltdown has been widely attributed to heightened international economic cooperation during the crisis. The most dramatic way in which cooperation has been bolstered was through the creation of the new G20 leaders’ grouping in November 2008 and its subsequent regular summits. Although the G20 had existed at the financial officials’ level since 1999, it had not carved out much of an influence in global economic governance, or even very distinctive positions from those of the G7. The G20 leaders’ forum has had a very different profile. The G20 leaders’ forum quickly established itself as the “premier forum for international economic cooperation,” displacing the G7 from that role (quotation from G20 Leaders 2009: 3). It also took a lead role in coordinating cooperative responses to the crisis. At their first summit in Washington, the G20 leaders endorsed national fiscal stimulus measures, a move that some believe helped to encourage the coordinated introduction of such policies at the height of the crisis. They also boosted market confidence by announcing that they would “take whatever further actions are necessary to stabilize the financial system,” a statement that appeared to indicate an open-ended commitment to provide liquidity to markets and firms in distress (quote from G20 Leaders 2008: 2). In addition, the G20 leaders promised not to introduce new trade protectionist measures. Although these promises were

Ambiguous Transformations   329 not fully upheld, they helped to signal that G20 leaders were conscious of the need to avoid the kinds of beggar-thy-neighbor policies that had been unleashed during the Great Depression. More dramatic was the G20’s decision at the April 2009 summit in London to increase enormously the lending capacity of the IMF and other official international financial institutions. During the years immediately leading up to the 2008 financial meltdown, the IMF had been slipping into obscurity, with many developing countries reluctant to borrow from the institution because of its record during the East Asian crisis and with the Bush administration showing little enthusiasm for its overall role in the world economy. Beginning at the 2009 London G20 summit, the IMF was suddenly placed back on center stage by the G20 leaders, and it lent emergency funds to countries across the globe, even including—for the first time in many years—some European countries. The central banks of leading G20 countries—particularly the US Federal Reserve—also played a key role from late 2007 onwards in offering balance of payments and liquidity support through swap arrangements among themselves (Bayne 2008; Helleiner 2014). In addition to their crisis management policies, the G20 leaders restored market confidence by signaling their collective desire to prevent future crises through strengthened international financial regulatory cooperation. As with the new support for the IMF, this initiative marked a shift in public priorities. During the half decade before the crisis, the political momentum that the 1997/98 crisis generated for strengthening international financial standards had waned considerably. In 2008, it was suddenly revived, as the G20 leaders threw their political support behind initiatives to bolster existing, and create new, international financial standards. At their 2009 London summit, the G20 leaders also transformed the Financial Stability Forum (FSF), that dated to 1999 and had convened the major national financial authorities managed by a secretariat at the BIS, into the “Financial Stability Board” (FSB). The FSB has a wider membership, more staff and a full-time Secretary General, a strengthened mandate (e.g. to support international supervisory colleges and early warning systems), as well as a formal Charter, which sets out obligations for members (e.g. to implement international standards, as well as undergo peer review and IMF and World Bank assessments). In the words of US Treasury Secretary Tim Geithner, the new body was to act as a new “fourth pillar” of the international economic architecture, alongside the WTO, IMF, and World Bank. At the same time, the G20 leaders also asked the major international standard setters to update their governance structure to give emerging economies more of a say in their decision-making, a request that was quickly granted (Helleiner and Pagliari 2011). As in the early 1980s and late 1990s, international economic cooperation thus appeared to be bolstered, rather than weakened, by the financial crisis. The contrast with the experience of the Depression was striking; indeed, when backing these various initiatives, leading policy-makers often made explicit reference to their desire to avoid the experience of the early 1930s. The patterns of cooperation displayed during the crisis were particularly striking because they took place in the context of what many analysts perceived to be an era of declining hegemonic power. Before the crisis, developments such as the stalling of the Doha Round and the marginalization of the IMF had been attributed by many analysts to America’s eroding leadership capabilities (see, e.g., Dieter 2009). Perceptions of US decline were then only reinforced by the fact that the 2007/08 crisis initially was centered in US financial markets, as well as by US dependence on emerging powers such as China for support during the

330   Eric Helleiner crisis. As the crisis started, some prominent analysts drew parallels to the 1930s, anticipating that declining hegemonic leadership might inhibit cooperative responses to the crisis and contribute to a breakdown of the world economy (see, e.g., James 2009). Some have suggested that cooperation “after hegemony” has been facilitated by the presence of key international institutions that have helped states overcome collective action problems by reducing transaction costs, building mutual confidence, and enabling reciprocity. In the current period, these institutions included not just long-established institutions, such as the IMF and the BIS, but also more recently created ones such as the G20, the FSF, and the international standard setting bodies, each of which had existed—albeit often in a more limited form—for a decade or more before the crisis broke out. Seen from this perspective, these institutions not only facilitated cooperation during the crisis, but also emerged from the crisis in strengthened form. The G20 is seen to have been a particularly important forum to help bridge the gap during the crisis between established powers, such as the US and Europe, and emerging powers, such as China, India, and Brazil (Cooper 2010). Other scholars have explained cooperation during the crisis with reference to a deeper “disaggregation” of states in the face of increasingly dense transgovernmental networks of national and international financial officials working through these various institutions. Seen from this viewpoint, state policy is increasingly driven by these officials, whose views often transcend distinctive national interests because of their common technical knowledge and their shared commitments to an open world economy (Porter 2009). More radical analysts build on that line of argument to suggest that cooperation during the crisis provided further evidence of their view that states are being increasingly “internationalized” to serve a transnational neoliberal hegemony or, more bluntly, the global “logic of capital” (Cammack 2010: 273).

4  The Limits of International Cooperation While these perspectives offer useful insights, it is important not to overstate how significant international cooperation actually has been in accounting for why a 1930s-style collapse of the world economy has not taken place. There is no question that macroeconomic stimulus programs and liquidity provision by national governments played a key role in preventing a repetition of the Great Depression. But it is questionable how important the G20 summits were in generating these policies. Many of them were driven by domestic political and economic imperatives and would have been undertaken even if the G20 had never been created—indeed, many of these policies preceded the G20’s creation. Policy initiatives that marked key turning points in restoring market confidence, such as the British government’s October 2008 decision to recapitalize its country’s banks, were also launched unilaterally rather than cooperatively (Brown 2010: ch. 1; Helleiner 2014: ch. 2). Even the much-hyped increase in the IMF’s resources was less significant to outcomes in 2008–09 than many have argued. Although it may have boosted market confidence in a general way, the IMF’s actual total lending never surpassed the resources that it already had in hand before the G20 leaders boosted its funds (Helleiner 2014: ch. 2). Equally important is the fact that international cooperation played very little role in preventing a dollar crisis at the height of the financial meltdown. At the time that the crisis

Ambiguous Transformations   331 unfolded, the US had become highly dependent on foreign capital to fund large current account and fiscal deficits. As the American financial system imploded in 2008 and the US government responded with monetary easing and larger fiscal deficits, many analysts and policy-makers worried that foreigners would sell their US investments, triggering a collapse of the dollar (Paulson 2010; Soros 2008). That outcome would have triggered higher interest rates in the US and elsewhere, as well as exchange rate instability, both of which would have greatly exacerbated financial and economic instability in the world economy— just as the 1931 sterling crisis did during the Great Depression. That scenario did not unfold because foreigners continued to invest in the US and in dollars throughout the crisis. Some of this support came from private investors who saw US Treasury bills—despite all the US problems at the time—as a relatively attractive and liquid “safe haven” in the volatile markets. But key support also came from foreign governments who retained, and even increased, their reserve holdings of US assets, particularly Treasury bills. These governments included Japan, some other emerging Asian powers, the Gulf States and other oil exporting countries (including Russia), and especially China, with its enormous $2 trillion-plus foreign exchange reserves, most of which were held in dollars. This ongoing foreign support for the US was one of the most important international dimensions of the official management of the financial crisis. It emerged, however, not from cooperation, but rather from unilateral choices of the creditor states taken within the context of a US-dominated world economy. Those states supported the US partly for the same reason that private investors did: the US Treasury bill remained the most secure and liquid asset for governments with large reserve holdings. As one Chinese official explained in early 2009, “except for US Treasuries, what can you hold? . . . US Treasuries are the safe haven. For everyone, including China, it is the only option” (quoted in Sender 2009). The only plausible alternative international reserve currency was the Euro, but the Eurozone lacked an equivalent to the US Treasury bill market because of the absence of a single European fiscal authority. Confidence in the Euro was also undermined by the uneven cooperation and bickering among European national governments in response to the crisis, a phenomenon that raised questions about the Eurozone’s political durability. Foreign support for the dollar also reflected the dependence of many foreign countries on the US as an export market; these countries’ export-oriented development strategies depended heavily on America’s economic health and their country’s undervalued exchange rate vis-à-vis the US dollar (an exchange rate policy that often necessitated dollar reserve accumulation). In addition, foreign holdings of large dollar reserves were a product of “self-insurance” goals of minimizing countries’ vulnerability to speculative financial flows and other external influences by accumulating a large war chest of the world’s most widely used currency. Finally, for countries that had already accumulated very large dollar reserves, such as China, a collapse of the dollar would have undermined the value of their existing investments. Their ongoing support of the US thus reflected a kind of “entrapment,” in which their economic interests were increasingly tied to the fortunes of the US because of the dollar’s role as the dominant reserve currency (Helleiner 2011). The survival of an integrated world economy was thus not entirely due to international cooperation. It also reflected distinct national choices within a global economy characterized by what Susan Strange referred to as enduring US “structural power” linked to the centrality of its markets and the dollar (1987; see also Schwartz 2009). For this reason, it

332   Eric Helleiner is important to be somewhat skeptical of self-congratulatory arguments of policy-makers that “unprecedented cooperation allowed us to avert another Great Depression” (Strauss-Kahn 2010). A Great Depression was averted not just because of cooperation, but also because of a particular alignment of national priorities within a US-centered global economic order. This more “statist” interpretation also calls into question whether the international response to the crisis really does reinforce the theoretical arguments noted earlier about how states are increasingly embedded in global institutional contexts, “disaggregated,” or “internationalized.” There are also growing doubts about states’ commitment to the new patterns of international economic cooperation that they displayed at the height of the crisis. After the headline-grabbing achievements of the first three G20 summits of 2008–09, subsequent G20 summits have been much less impressive. Consensus formation has become more difficult, and sharper disagreements between leading powers have emerged. Key issues that the G20 members committed to at the first summits, such as the reform of IMF governance, remained inadequately addressed. Political leaders also appear less invested in the G20 process than they were before, and they have been unwilling to strengthen its institutional foundations; this “premier forum for international economic cooperation” still lacks a staff, secretariat, and legal standing. Leading powers are also devoting growing attention to regional and bilateral economic initiatives (for the latter, see Chin 2010). These trends are caused in part by some legacies of the crisis, including the shifting power and strategic priorities of key states in response to the 2007/08 crisis. In the wake of the crisis experience, some emerging powers are now seeking to reduce their dependence on the US-centered global economic order. This policy shift includes steps to diversify export markets, pursue regional and bilateral economic cooperation, cultivate more internally driven growth models, foster local financial markets, and promote greater internationalization of their currencies. At the same time, those states are also becoming more assertive in their demands for reform of the existing international economic order, with the goal of refashioning it to better reflect their values and goals. These trends are particularly apparent in China, which has emerged from the crisis with more power and with a more nationalist tone in its foreign economic policy (see, e.g., Shambaugh 2011). At the same time, some prominent analysts within the US itself are also questioning their country’s central leadership role in the world economy. The crisis experience has prompted a reevaluation of the costs of the country’s growing dependence on foreign capital inflows and on rising trade deficits, as well as its role as consumer-of-last-resort for the world economy (see, e.g., Bergsten 2009). In the absence of reforms abroad to change pre-crisis growth regimes, domestic political pressures are building on US policy-makers to act unilaterally to force changes in foreign countries, just as Nixon did in 1971. This development, when combined with new priorities within emerging powers and Europe’s preoccupation with its post-2008 internal difficulties within the Eurozone, suggest a less cooperative future and potentially a significantly less stable global economy. In the event of renewed global financial instability, would the recent G20-led initiatives to strengthen international financial regulation at least kick in to protect the stability of global financial markets? Not necessarily. The limitations of international cooperation in the financial regulatory realm have become increasingly evident. Despite all the attention given to the creation of the FSB, it still has a relatively tiny secretariat, and it remains a largely toothless organization, due to member states’ unwillingness to delegate it real

Ambiguous Transformations   333 power. Policy-makers in leading states are also finding it increasingly difficult to agree on the content of harmonized standards in many key areas, and they have yet to construct an effective cross-border resolution regime to wind down failing international financial firms. Implementation of agreements already reached in the G20, the FSB and international standard settings bodies has also been uneven (Helleiner 2012, 2014: ch. 5). These limitations of international regulatory cooperation also reflect some legacies of the crisis. While the crisis initially acted as a catalyst to strengthen international regulatory cooperation, it also generated two political developments that are now undermining the prospects for that cooperation (Helleiner and Pagliari 2011). First, by politicizing financial regulatory issues to an unprecedented extent within the US and Europe, the crisis has placed new constraints on the ability of regulators and other technocrats to negotiate new international rules through transgovernmental networks or to delegate sovereignty to international institutions. Second, the task of reaching consensus on international regulatory issues has been complicated both by the way the crisis undermined the legitimacy of Anglo-American regulatory models—which had acted as a focal point for coordination in the pre-crisis years—and by the new post-crisis prominence within international regulatory bodies of developing countries, which often bring quite distinct perspectives to the table. These various trends call into question the notion that the crisis has generated a world of strengthening international economic cooperation. It seems just as plausible to argue that the legacy of the crisis may be the opposite: a world of weaker cooperation. Weakening cooperation, in turn, may generate feedback at the domestic level that undermines domestic liberal economic regimes. This feedback may be particularly strong if waning cooperation leads to greater instability and vulnerabilities for the integrated global economy, as the specific national priorities that aligned to prevent a dollar crisis in 2008 begin to shift. In that scenario, calls for greater domestic policy experimentation and policy autonomy may grow, elites with ties to integrated global economy may face new challenges, and the discipline of global markets may be weakened.

5 Conclusion As Charles Kindleberger once famously noted, financial crises are a “hardy perennial” (1978: 3). But the influence of international financial crises on the domestic economic role of the state and inter-state economic relations has been far from consistent over the past century. While the crisis of the early 1930s helped undermine domestic liberal economic regimes and international economic cooperation, those of the early 1980s and late 1990s had the opposite effect. So far, the legacy of the 2007/08 crisis appears to fit neither of these experiences. Many analysts initially saw the crisis as posing a severe challenge to neoliberal domestic economic policy regimes, as financial institutions were nationalized, initiatives were launched to regulate financial markets more tightly, and free market policies more generally were delegitimized. But this view has looked increasingly less convincing in the face of developments such as the introduction of dramatic austerity programs to address public deficits, the watering down of financial regulatory reform, and the weakening of demands for economic regime change. A number of explanations have been offered to account for

334   Eric Helleiner the latter trends: the enduring power of financial interests, the lack of a clear ideological alternative to neoliberalism, and the persistence of an integrated global economy. At the international level, the crisis triggered an immediate strengthening of international economic cooperation, which some analysts interpreted as a confirmation of deeper structural trends, such as the growing significance of international institutions, transgovernmental networks, or transnational hegemonic structures. But the importance of cooperation in managing the crisis should not be overstated. The survival of an integrated global economy was also a product of a particular alignment of national priorities within a global economic order characterized by US structural power. The crisis has also unleashed some political developments—particularly the shifting power and the shifting strategic and domestic priorities of key states—that may increasingly weaken states’ commitment to new patterns of economic cooperation. At both the domestic and international levels, the direction of state transformation is thus less clear than it initially appeared to be. This ambiguity is compounded by the relationship between transformations at both levels. During the early 1930s, the weakening of domestic liberal economic regimes reinforced, and was reinforced by, the collapse of liberal international economic cooperation. The crises of the 1980s and 1990s saw the opposite dynamic: strengthened liberal economic cooperation supported, and was supported by, the turn towards neoliberal economic regimes domestically. In the current period, state transformations at the domestic and international levels have often been working in different directions, making future trends even more difficult to anticipate. Strengthened international economic cooperation initially constrained the new political challenges to liberal economic regimes domestically. But just as those domestic challenges have weakened, international economic cooperation is eroding in ways that may make liberal economic regimes more vulnerable at the domestic level. Given the various uncertainties, it is obviously too early to predict with any certainty the legacy of the 2007/08 crisis for the economic role of the state. It is also important to recognize the diversity of current experiences of different states: generalizations about the direction of change at the domestic level across the world must be treated with great caution. For now, at least, the world is left in a kind of interregnum, in which the direction of change remains unclear and may remain so for some time.

Acknowledgements For their helpful comments, I am very grateful to John Hall, Stephan Leibfried, Walter Mattli, Tony Porter, Arjan H. Schakel, Peter Starke, John D. Stephens, and Lora A. Viola. The chapter was completed in July 2013.

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Chapter 18

En v ironm en ta l R isks a n d the Ch a ngi ng I n ter face of Dom estic a n d I n ter nationa l G ov er na nce Klaus Dingwerth and Helge Jörgens

1 Introduction The number and nature of environmental risks states face have changed dramatically since the 1960s. As industrial production has further expanded and become globalized, so have the environmental risks associated with industrial production. As scientific understanding of many environmental risks has advanced, so has public awareness of these risks. And as high-profile events such as nuclear accidents, oil spills, or extreme weather events linked to global warming are discussed in globalized mass media, public perceptions of environmental risks have changed. Most notably, the modernist notion of environmental risks as “natural hazards” that man needs to control through further advancements in science and technology has given way to an understanding of risks as essentially resulting from societies’ own attempts to gain control over nature through science and technology (Beck 1994). Additionally, environmental risks and public debates about how best to mitigate them have moved significantly beyond the confines of the nation state. While this does not, in principle, distinguish the environment from other areas of state activity—economic and financial policies, social policies, and education policies are also subject to interdependence—at least two features of the environmental field set it apart from other fields. The first is the structure of environmental problems, where, since the early 1970s, domestic and international environmental policy-making has been mostly “market-making” in nature (on the terminology see Streeck 1995; Scharpf 1997). It has focused on harmonizing environmental standards for products and production processes, first domestically and then cross-nationally, while reducing redistributive or

Environmental Risks and the Changing Interface     339 market-correcting measures to a minimum. In contrast to other policy areas, we can therefore expect lower pressures for domestic de-regulation combined with higher chances of (re-)regulation at the international level. Second, many of the environment-related activities that states engage in were initiated in the last five decades, when many of the state transformations discussed in this Handbook began occurring. In contrast to other fields, historical path dependencies that obstruct, divert, or channel transformative forces are, therefore, weaker in the environmental realm. As a result, we might expect the underlying dynamics of state transformation to make themselves felt particularly strongly here. Our study suggests a mixed picture: the state remains central even in an age of growing ecological interdependence, but its role in addressing environmental risks has changed in response to the internationalization and privatization of environmental governance.

2  Environmental Risks as a Threat to the State? The challenges that states face resulting from new or expanded environmental risks are twofold (Biermann and Dingwerth 2004). First, once environmental risks are recognized, these risks create a demand for mitigation and adaptation that puts further stress on the capacity of the modern interventionist state to protect and promote the welfare of its citizens; and second, transboundary risks add an additional layer of ecological interdependence to the already high and growing levels of economic interdependence. That added layer creates further challenges to a core dimension of traditional state sovereignty: social and economic independence (see Zürn and Deitelhoff, Chapter 10, this volume, on all the dimensions of state sovereignty). In the first category, which is that of stress upon the state, climate change is by far the biggest threat. While other environmental risks may pose severe challenges, their impact is likely to remain either temporary or geographically limited. Climate change differs from these other risks inasmuch as it places comparably strong demands on virtually all states, including many states whose capacities are already under stress, thus making it more difficult for states to satisfy the needs and demands of their citizens and adapt to a host of other economic, social, and political developments. Yet there are stark differences between the challenges faced by the states in the world of the Organisation of Economic Co-operation and Development (OECD) and those beyond it. In the OECD world, the main challenges are linked to the competitiveness of states. For example, public money that is invested to adapt to climate change is then unavailable for other purposes, and mitigation measures that are internationally agreed upon benefit countries with more advanced green industries and punish technological laggards. States outside the OECD face more severe challenges. Some small island states like Tuvalu or the Maldives are barely above sea level and are most directly threatened; when the sea level rises, the territories of these states will become uninhabitable or be swallowed by the ocean, meaning that these states will cease to exist. For virtually all other developing countries and economies in transition, the indirect consequences of climate change are significant. First and foremost, climate change is expected to “accentuate

340    Klaus Dingwerth and Helge Jörgens pre-existing conflict patterns” (Paul 2011: 74), most notably those concerning water distribution, access to agricultural land, the acceptance of migrants and refugees, “accelerated and probably chaotic urbanization” (White 2011: 194), and the distribution of economic opportunities. Densely populated river deltas and low-lying areas in Bangladesh, Egypt, and Nigeria are likely to become partially or temporarily uninhabitable, and in a warmer world “water stress” is predicted to affect an additional several hundred million citizens, either as a result of changing precipitation patterns or of melting glaciers (Biermann and Boas 2008). To cope with the consequences of climate change, states would be required to expand their capacities for scientific forecasting, decision-making authority—most notably concerning costly adaptive measures like resettlement schemes and the restructuring of economic sectors—as well as disaster response and conflict resolution. In general, states with broader and better institutionalized capacities and with strong civil societies will be more resilient, while states with narrower and less institutionalized capacities and weak civil societies will be more vulnerable to the disruptions caused or increased by climate change (Moran 2011b). Viewed broadly, even moderate climate change is likely to weaken some of the relatively well-functioning states and intensify the fragility of some of the less well-functioning states, while possibly moving states in which “the risk of state failure is never remote” a step closer to failure (Galvan and Guy 2011; generally Moran 2011a). Finally, for oil-exporting states, the primary threat is slightly different, as they fear mainly that mitigating action will lead to a reduced demand for fossil fuels that could, in turn, “lead to a drop in revenue and reduce the regime’s ability to address traditional risk sources,” thus undermining the authority of the regimes (Russell 2011: 171–172). In sum, environmental and climate change poses a threat to the existence of a few states and limits the prospects for further economic growth for many other states. Most importantly, however, climate change is likely to exacerbate existing inequalities and social conflicts. It generates a whole set of additional demands on state capacity that some states are better equipped to meet than others. In that sense, the effects of internationalization on states differ. For the United States, the sovereignty costs of climate change are low; for the Marshall Islands, they are immense; and for most other states they are somewhere in between these extremes and include challenges to states’ resources, to their problem-solving capacities, and to their legitimacy.

3  The Internationalization of Environmental Politics Faced with an increasing number of environmental challenges, states have developed a growing body of domestic and international environmental laws. Domestically, we observe that national environmental policies are being harmonized even where this is not required by international law, and we see a growing activity of national environmental agencies in international networks. At the international level, the most important developments that result—at least in part—from domestic changes are the expansion of

Environmental Risks and the Changing Interface     341 international environmental law and the spread of administrative law. Taken together, these developments alter, but do not necessarily reduce, the role of the state in environmental policy-making. Diffusion and harmonization at the domestic level. Long-term comparisons of environmental politics in industrialized as well as in industrializing and developing countries show that domestic capacities for environmental policy-making and environmental regulations have expanded continuously over time (Jänicke and Weidner 1997; Weidner and Jänicke 2002). Empirical research thus largely refutes notions that there is a regulatory trade-off between the international and domestic level and that domestic capacities are weakening. On the one hand, international agreements need to be transposed into national law and enforced domestically. Instead of becoming obsolete, domestic political institutions that are capable of adopting and implementing such regulation have become a prerequisite for effectively participating in international environmental agreements. On the other hand, the strengthening of domestic environmental regulation is not restricted to areas that are covered by international regulation. This becomes clear when we look at regulations promoting the use of renewable energy sources (Busch and Jörgens 2012a), at the constitutionalization of environmental protection, or at the creation of national environmental ministries and environmental protection agencies—all of which are not subject to international harmonization (Jörgens 1996). In what is probably the most comprehensive empirical study of environmental policy convergence in Europe so far, Katharina Holzinger, Christoph Knill, and Bas Arts (2008a) analyzed the evolution of 40 environmental policy items in 24 countries over 30 years. They observe a strong convergence of environmental policies across the entire sample. Contrary to previous theoretical expectations, they did not find evidence for an oftenassumed race to the bottom, but rather a continuous strengthening of environmental policies and institutions across all 24 countries (Holzinger et al. 2008a,b). The cross-national upward convergence of domestic environmental policies is attributed to two factors: international harmonization and transnational communication. The second factor is particularly interesting, as it suggests that cross-national information exchange, discussion, and policy learning are “[just as] important in driving cross-national policy convergence as the adoption of legally binding policy arrangements at the level of the EU or international regimes” (Holzinger et al. 2008a: 229). Internationalization, then, has strengthened rather than weakened national capacities to address environmental risks. International engagement of national actors. Transnational communication points to a new and little explored perspective on the role of the state in global environmental governance. Rather than getting involved in multilateral negotiations or trying to exert direct pressure on other states, national governments may affect global governance outcomes by unilateral policy adoption in issue areas that are characterized by a high degree of international interdependence. They do so by—intentionally or unintentionally— exploiting the dynamics of cross-national policy diffusion, that is, the fact that often “government policy decisions in a given country are systematically conditioned by prior policy choices made in other countries” (Simmons et al. 2008: 7). Unilateral policy adoption by individual states may, on balance, “alter the probability of adoption for remaining non-adopters” (Strang 1991: 325)—either by prompting processes of imitation or learning (Jörgens 2004) or by altering the expected utility for adopting the policy in question (Braun and Gilardi 2006).

342    Klaus Dingwerth and Helge Jörgens Based on a dataset covering the international spread of 23 environmental policy innovations across 43 countries over a period of 60 years, Per-Olof Busch and Helge Jörgens (2011) show that the development of cross-national policy clusters in the environmental area occurs not only via multilateral cooperation or hegemonic coercion, but also, to a considerable degree, through diffusion. For eight of these policy items—including capacityrelated items such as the creation of national environmental ministries or the adoption of comprehensive strategies for sustainable development—Busch and Jörgens have substantiated these findings on a global scale. “Governance by diffusion,” then, constitutes a distinct mode of global environmental governance that reflects a new role of the state as a potentially influential actor in decentralized but interdependent international policy networks (Busch and Jörgens 2012b). In institutionally dense environments such as the European Union (EU) or the OECD countries, the chances are particularly high that unilateral action by individual states will trigger policy cascades. Rather than being paralyzed by globalization, states in environmental policy seem to have actually broadened their range of actions, with unilateral policy innovation being more than just a theoretical option. It is important to note that the relevance of international harmonization and diffusion goes beyond policies and regulation. In their systematic comparison of national capacities for environmental policy-making across 30 countries, Jänicke and Weidner found internationalization to be one of the main drivers behind the development and strengthening of the state’s political, institutional, and cognitive capacity to address environmental problems (Jänicke and Weidner 1997; Weidner and Jänicke 2002). The creation of ministries of the environment, regulatory agencies, and scientific advisory bodies, as well as the constitutionalization of environmental protection, was triggered to a large extent by processes of transnational communication and learning rather than by independent domestic responses to environmental problems. This capacity-enhancing rather than capacity-reducing effect of internationalization distinguishes the environmental area from other areas of public policy-making.1 While internationalization has shifted some responsibilities from the national to the international level, it has also strengthened state sovereignty, particularly the state’s capacity to react independently to environmental threats and to choose autonomously from different policy alternatives. The fact that the convergence of domestic environmental policies that we can empirically observe is due to multilateral negotiation, voluntary imitation, and learning, and not to economic pressures or political imposition, shows that agency in global environmental politics has shifted only marginally from the state to international authorities (Jörgens et al. 2014). The growing body of international environmental law. This general impression is confirmed if we look more closely at the state’s role in international environmental governance. Sticking to the conventional distinctions between an early period of environmental governance, defined as the years before the United Nations Conference on the Human Environment (UNCHE) in 1972; a “modern era” between 1972 and the 1992 UN 1 

It is interesting that we find similar processes of policy diffusion and learning in a policy field that is much older (1880s ff.), less internationalized (but since 1957 for the EU), less transnationalized, thus more domestic, and more expensive for the state than environmental policy: in welfare state building, in social policy since the nineteenth century. Herbert Obinger, Carina Schmitt, and Peter Starke have explored this in a synopsis of the literature (2013).

Environmental Risks and the Changing Interface     343 Conference on Environment and Development (UNCED); and a “post-modern” period after 1992 (Sand 2007), we can highlight a number of quantitative and qualitative trends in environmental law at the international level. At the most general level, we observe that the density of international environmental law has increased, but the delegation of state authority to the international level remains moderate at best. Quantitatively, the number of multilateral environmental agreements has grown significantly over time. By the most systematic count available, it has risen from one agreement every two years before World War II to seven agreements per year between 1946 and 1972, 16 agreements per year between 1973 and 1992, and 19 agreements per year in the post-Rio decade (Mitchell 2003: 438). More importantly, the quality of international environmental rule-making has changed in major ways. First, the scale of environmental policies has increased from addressing regional problems—for instance acid rain or regional seas—to global problems, such as ozone depletion, climate change, and the loss of biological diversity. The subsequent increased number and magnified heterogeneity of players have made it more difficult to reach agreements on regulatory details. Second, whereas early international agreements were mostly static, recent agreements are often elements of larger treaty systems. These systems start with relatively broad framework conventions to which more specific protocols are then added. They frequently include treaty bodies made up of conferences of the parties to the treaty, subsidiary bodies on scientific or technical aspects, and treaty secretariats (Mitchell 2003; Gehring 2007). This shift from singular agreements to larger treaty systems has led to more flexible and dynamic rule-systems in which basic principles can be determined even when consensus on details has not (yet) been reached, and in which regulatory progress is achieved a step at a time rather than all at once. Third, the growth of international environmental law has led to the evolution of a number of “regime complexes” (Raustiala and Victor 2004) in which provisions that originate from different treaty systems overlap substantially. Regime complexes—for instance those on climate change, the regulation of chemical substances, or plant genetic resources—may include hard law and soft law, cover regional and global rules, and take in intergovernmental as well as transnational rule systems. In general, these complexes enhance regulatory density, competition and, to some extent, uncertainty. However, they can also engender positive synergies, for example, when similar provisions are included in several legal or political instruments, or when steps are taken to work with different instruments under one umbrella. Fourth, the compliance systems of multilateral environmental agreements have become more fine-grained. In contrast to the first generation of international environmental treaties that “rarely provided for any degree of monitoring or oversight of national implementation,” modern agreements commonly include rather specific provisions on monitoring, reporting, and verification, as well as on institutionalized compliance review committees that may resort to sanctions against non-compliant member states (Redgwell 2007: 941– 943; see also Wettestad 2007: 978–987). While ecological interdependence has led to an ever-larger corpus of international environmental law, interestingly enough, obligation, precision, and delegation levels have not increased to the same extent. While states may be obliged to follow more international environmental rules now than they were in the past, legally binding rules are still

344    Klaus Dingwerth and Helge Jörgens accompanied by a large—and growing—body of international soft law. Moreover, while the precision of state obligations may have increased in some of the more advanced treaty systems, many foundational principles, such as the responsibility to prevent transboundary harm or the requirement to adopt a precautionary approach, remain open to very different interpretations, even as they guide much of international and domestic environmental rule-making (Wiener 2007). Finally, delegation to international authority is of little relevance, as neither majority voting nor independent legal dispute settlement plays an important role in international environmental governance (Romano 2007; Ulfstein 2007: 882).2 In sum, states remain bound almost exclusively to rules to which they have consented, and they largely retain final authority on environmental issues. This impression is further reinforced by the observation that many international environmental agreements suffer from compliance deficits and that major states have refrained from becoming parties to the most important international environmental agreements. Most notably, the United States participates in neither the Kyoto Protocol to the United Nations Framework Convention on Climate Change nor the Convention on Biological Diversity and its protocols. In relation to the conceptual map developed in the Introduction to Part II (Zürn and Deitelhoff, Chapter 10, this volume), we conclude that traditional state sovereignty shows some signs of erosion in relation to the dimensions of independence (where new environmental problems have led to an increase in ecological interdependence) and state capacity (where many states can no longer cope independently with some of the environmental problems they are facing). In contrast, processes of transnational communication and of policy diffusion have strengthened states’ domestic capacities to address environmental problems. Thus, the final authority of states is largely intact, and—at least in formal, legal terms—the internationalization of the state is low. Global administrative law. This broad conclusion, however, needs to be qualified somewhat when we consider the development of that part of international environmental law that remains below the threshold of hard law. Some observers have commented that, in most regimes, “the treaty text itself represents just the tip of the normative iceberg” (Bodansky et al. 2007: 21). Three phenomena justify this statement: the increasing relevance of decisions adopted at conferences conducted by the actors who are party to particular treaties, the formal and informal services provided by treaty secretariats, and the effects that regulatory networks now have at the international level. While formal international treaties normally preclude making legally binding decisions by majority vote, conferences of the parties in environmental treaties frequently allow for the possibility of adopting political—that is, legally non-binding—decisions. These political decisions exert effects on member states that are similar to those caused by legally binding decisions, but they do not require the consent or ratification of every party to the treaty. Treaty bodies can then elaborate “vague treaty norms such as the ‘wise use’ requirement for wetlands, set forth in the Convention on Wetlands” (Bodansky et al. 2007: 21), and these decisions become political facts when applied or 2  Environmental policy-making in the European Union is a special case in this regard and in several other respects (see Kramer 2007 for an overview, and Schakel et al., Chapter 14, this volume).

Environmental Risks and the Changing Interface     345 referred to in other treaty bodies like compliance review committees. In some regimes, including the climate change regime, “the bulk of the regulatory work has been accomplished by simple decisions of the plenary body” (Bodansky et al. 2007: 22). As Thomas Gehring observed, the development of institutional apparatuses with decision-making powers—a phenomenon he calls constitutionalization (2007: 474)—is not only a novelty in international environmental rule-making, but has also gradually eroded the need for state consent: If provisions for the assessment of production and consumption figures under the Montreal Protocol, criteria for the classification of endangered species under CITES, or the rules of the clean development mechanism under the Kyoto Protocol are formulated in a particular way that has been agreed upon within the relevant COP [Conference of the Parties] or MOP [Meeting of the Parties], the treaty system will simply operate accordingly. Alternative options are excluded by the decisions so that, unless a member state is willing to leave the system, it is forced to accept the operation of the system as it is (Gehring 2007: 493).

The services provided by treaty secretariats can provide additional strength to the dynamics of internationalization. Examples of this include when a secretariat staff prepares standardized reporting forms, thus stabilizing a particular reading of the treaty text, when a secretariat staff drafts texts for decisions to be taken by the conference of the parties, and when members of the secretariat synthesize and communicate national reports in a particular way (Biermann and Siebenhüner 2009). Moreover, international environmental bureaucracies such as the UN Environment Programme (UNEP) can also engage in activities that “manage” or “bypass” member states and their preferences, either through direct collaboration with target actors—which in the environmental realm are often corporations—or through the enlisting of intermediaries to achieve their goals (Abbott et al. 2014). UNEP has been particularly active in this regard, as when it helped to set up voluntary regulatory initiatives such as the Global Reporting Initiative (GRI). Finally, regulatory networks play an important role in several areas of environmental decision-making. Probably the most advanced and formalized network is the OECD-wide legally binding system of mutual state acceptance of test data on the toxicity of chemicals, which is combined with the Guidelines for Good Laboratory Practice, or the—abbreviated—GLP Principles (Kingsbury 2007: 79–80). Key features of this test data system include the regular update of controlling rules in a process that normally “[does] not involve national legislatures,” and the “cross-incorporation of standards” developed in other institutions (Kingsbury 2007; see also Herberg 2011). Other inter-agency networks include the Inter-Organization Program for the Sound Management of Chemicals (IOCM)3 and the collaboration of different intergovernmental organizations, including UNEP, to serve as the implementing agencies of the Global Environmental Facility (GEF). In sum, the growth of international environmental law has inspired “the development of a sprawling international and quasi-international bureaucracy” whose members have created a number of influential bureaucratic networks which coordinate a growing share 3 

IOCM was initiated at the UN level in 1995 to coordinate the activities of several intergovernmental organizations in relation to environmental and health risks resulting from the production, use, release, and disposal of chemicals.

346    Klaus Dingwerth and Helge Jörgens of international rule-making on environmental risks (cf. Raustiala 2003: 43–49). Here we can observe a stronger internationalization of the state. This internationalization mainly occurs through bureaucratic networks, with international authority residing in them and in the epistemic communities of which they are often a part. In many cases, though, the scope of such international authority is delimited through the language of international legal agreements in which the activities of such networks are embedded.

4  The Privatization of Environmental Politics Another trend that has sometimes been associated with the demise of state sovereignty is the rise of private governance at the domestic and international level (see also Mattli, Chapter 15, this volume for a discussion). Like internationalization, however, privatization of environmental governance changes rather than diminishes the ways in which states contribute to governing environmental risks. Domestic-level effects of privatization. At the domestic level, state-centered commandand-control regulation increasingly came under attack in the late 1980s and early 1990s. A growing enforcement deficit suggested that the state’s capacity to monitor and control potential polluters was limited and that the state ran the risk of not keeping up with an increasingly complex body of environmental law (Mayntz et al. 1978; Downing and Hanf 1983). Also, the “governance turn” in environmental policy-making and the related notion “that the state should not seek to interfere in every facet of social and economic life” (Jordan et al. 2003: 12) provided a new and convincing framing for “new” environmental policy instruments based on concepts such as voluntary cooperation, self-regulation, and shared responsibility. Finally, growing pressure to reduce the economic and bureaucratic burdens imposed on industry by environmental regulation refocused the attention of policymakers from traditional regulation to voluntary and market-based approaches (Bruijn and Norberg-Bohm 2005). Together, these developments led governments in many industrialized countries to partially shift regulatory authority to private actors. In the environmental area, the most visible outcome of this process was a greater reliance on self-commitment and negotiated agreement, as well as on environmental management systems (Croci 2005). Particularly during the 1990s, voluntary programs were conducted both nationally in many industrialized countries and supranationally at the EU level. Underlying this widespread partial privatization of environmental policy was the assumption that voluntary programs had a number of advantages over direct regulation. These programs were expected to draw on industry’s insider knowledge about the sources of pollution and about the technological options for effective and efficient pollution abatement (Meadowcroft 1998; Bruijn and Norberg-Bohm 2005). Moreover, voluntary programs seemed capable of accelerating rule-making by evading “the lengthy, unwieldy, and cumbersome process of legislative decision-making” (Héritier 2002: 187). In addition, they were thought to improve implementation by involving polluters in the design of environmental protection measures, thereby reducing the polluters’ resistance to these policies (Clercq and Suck 2002: 17–18). And finally, shifting regulatory authority to firms was expected to help

Environmental Risks and the Changing Interface     347 them develop and apply more innovative and effective environmental protection technologies and position themselves more prominently in new emerging markets (Bruijn and Norberg-Bohm 2005). Whereas the 1990s saw a remarkable proliferation of attempts to strengthen private authority in national environmental governance, the pendulum has swung back towards governmental involvement in recent years. We have seen a return of state-centered command-and-control regulation and increased awareness that the growing reliance on market-based instruments, such as taxes and emissions-trading systems, requires a strong role for the state in setting mandatory targets and tax levels, creating and regulating new markets, and monitoring results (EEA 2005). One reason for the return of the nation state in domestic environmental regulation can certainly be found in the poor performance of the vast majority of voluntary programs. In an evaluation of voluntary programs in Canada, Denmark, Japan, and the United States, the OECD (2003) found that the environmental effects of these programs hardly ever went beyond business as usual and that their economic efficiency was generally low. Another study that systematically compared voluntary programs in Europe and the United States found that [w]‌hile the programs have contributed to technological innovation, it was more often incremental than radical. And while there is evidence of private sector leadership, there is concern that it is most often one-off rather than ongoing, and focused on near-term opportunities rather than longer term and more difficult targets. When measured against the tall order of inducing changes in production and consumption systems . . . there is rather limited evidence that voluntary, collaborative and information-based programs can contribute substantially to this (Norberg-Bohm and Bruijn 2005: 362).

In sum, the state has not retreated. Rather, it can be argued that the comparatively poor performance of many of the private regulatory schemes that were tested during the 1990s has brought the state back in as the principal actor in domestic environmental governance (see also Jänicke 2005). While private actors play an important role at the domestic level—for example in public-private partnerships (Glasbergen et al. 2007) or as environmental auditors (Whitelaw 2004)—it is the state that sets the rules, fixes the goals, and participates actively as manager or “orchestrator” of these activities. Thus, rather than eroding the ecological state’s sovereignty to determine and implement environmental policies independently—as would have been the trend under the scenario of a greater reliance on voluntary self-regulation— private actors are now regularly embedded in state-led governance schemes. International-level effects of privatization. The emergence of non-state governance is paralleled at the international level, as transnational regime-building has gained relevance in the past two decades (Cutler et al. 1999). In the environmental arena, non-state actors have established regulatory systems dealing with chemical safety, the sustainable management of a range of natural resources, and corporate environmental management and disclosure. Many of these transnational “non-state market-driven governance” systems (Cashore 2002) have emerged in areas where states had failed to carve out international hard law, but where coalitions of some states, some civil society organizations, and some business organizations shared an interest in establishing international regulation, even though often for different reasons (Pattberg 2007). Examples of transboundary regimes stemming from non-governmental sources include the ISO 14000 standards series, standards for sustainable forest management developed by the Forest Stewardship

348    Klaus Dingwerth and Helge Jörgens Council (FSC), guidelines for good practice for large dam projects developed by the World Commission on Dams (WCD), and standards and indicators for corporate carbon accounting and disclosure under the Greenhouse Gas Protocol and the Carbon Disclosure Project (CDP).4 Most transnational regulatory schemes emerged in the 1990s and 2000s (Abbott and Snidal 2009b:  49–57), and some observers have interpreted their rise as a fundamental transformation from state regulation to non-state governance. However, transnational regimes remain closely linked to the state and to international institutions. Consequently, the rules contained in transnational regimes frequently draw on existing international regulations. For example, Criterion 6.6 of the FSC Principles and Criteria for Sustainable Forest Management stipulates that “World Health Organization Type 1A and 1B and chlorinated hydrocarbon pesticides . . . as well as any pesticides banned by international agreement, shall be prohibited.” Because of such explicit links, Kenneth Abbott and Duncan Snidal (2009a: 551) see transnational regimes as “force multipliers for international regulation,” as they “apply mechanisms such as private certification and labeling in support of international norms,” enhancing the impact of state-centric policy instruments. One implication, however, is that transnational governance schemes may make some intergovernmental norms mandatory, at least in a de facto sense, for owners or producers in states that have not formally accepted them (Clapp 1998). In these cases, traditional sovereignty—as outlined in the Introduction to Part II (Zürn and Deitelhoff, Chapter 10, this volume)—is affected, and inequalities among states become informally institutionalized. This happens, for instance, when a state’s claim of the sovereign use of all its natural resources is challenged by notions of their “sustainable use.” This problem is particularly acute when consumer societies seek to impose sustainability norms on producer societies, even when these are norms that the consumer societies themselves are often reluctant to obey (Smouts 2002). Beyond referring to and amplifying international law, there is a second mechanism by which transnational regimes are linked to international institutions: they are directly supported by these institutions. The WTO, for example, explicitly acknowledges ISO standards as conforming to world trade rules; governments meeting at the World Summit on Sustainable Development (WSSD) officially recommend the GRI as a promising way to promote corporate environmental accountability; the UNEP Finance Initiative, with assistance from the UN Global Compact and the UN Secretary General, helps to bring about the Principles for Responsible Investment; the IUCN and the World Bank jointly organized the World Commission on Dams (WCD), with UNEP later initiating a Dams and Development Project whose task it was to facilitate dialogues to implement WCD guidelines at the national level; the World Bank indirectly supports the FSC when it emphasizes “credible” certification schemes in its Forest Alliance with the WWF; and the International Finance Corporation (IFC) sponsors the development of the Equator Principles, under which private banks voluntarily commit to upholding environmental and social safeguard policies. A particularly interesting case is the relationship between the Marine Stewardship Council (MSC) and the Food and Agriculture Organization of the United Nations (FAO): 4 

Besides these regulatory schemes, a broader notion of transnational environmental governance would also include the transnationalization of corporate standards that results from multinational corporations’ application of home state rules to foreign-based factories; see e.g. Herberg (2008).

Environmental Risks and the Changing Interface     349 The FAO initially sought to establish an intergovernmental competitor to the privately governed MSC, but its own members could muster no more than a consensus for procedural guidelines on eco-labeling schemes, which the MSC subsequently adapted to its own organizational structure and procedures (Gulbrandsen 2010: 127–129). Moreover, when linking their requirements to those of individual states, private certification schemes usually tie certification to compliance with relevant national law (Bartley 2011: 526), and national or regional standards that detail the more general norms of transnational standard systems will often also defer to or reflect national or regional public regulation. Thus, the various North American FSC standards reflect the variation in the stringency of regional environmental standards (McDermott et al. 2009: 232). Moreover, where private standards demand more than domestic regulation, states can facilitate the adoption of private standards via government procurement policies or by incorporating private standards into national legislation. As an illustration, the EU’s Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan, which aims to curb the import of illegally harvested wood into EU member states, “[envisages] recognition of private certification schemes in their export licensing system, provided that these incorporate the agreed legality definitions” (Overdevest and Zeitlin 2014). Finally, both the nature of the state and of its laws affect the extent to which private standards are likely to be adopted in a country, which is shown by the difficulties the FSC had in gaining a strong foothold in states in which land tenure—governed by domestic law—is ambiguous or contentious (Bartley 2010). In sum, the rise of transnational environmental governance occasionally puts pressure on exporters in developing countries to conform to the prevailing norms of consumer states, but rarely undermines state sovereignty in more fundamental ways. As for OECD states, Abbott and Snidal (2009a: 521) summarize the situation in this way: they remain significant players, “but as an orchestrator rather than a top-down commander.” At the same time—and largely in parallel to what happens at the domestic level—private transnational governance contributes only marginally to the problem-solving capacity of states. With market shares in the range of five to ten percent (UNCTAD 2011), most certification schemes are good at harvesting the “low hanging fruit,” but their capacity to stimulate more fundamental transformation is limited (ITC 2011a,b). Their products address mainly European and Northern American niche markets, and the rise of India, and particularly of China, opens alternative export markets to states that own natural resources, thereby mitigating the sovereignty costs that private governance schemes may impose on developing countries.

5 Conclusion The capacity of states to formally govern their territories remains intact, as authority has been delegated to the international level to only a moderate extent. At the same time, the effectiveness of national governance is undermined by enhanced ecological interdependence resulting from climate change and other environmental challenges. Major impacts of global warming and related challenges will materialize only in the coming decades, but they will affect states in very different ways, with some facing severe pressures in relation to state income, problem-solving capacity, and state legitimacy. As major greenhouse gas

350    Klaus Dingwerth and Helge Jörgens emitters like the United States and China are unwilling to accept ambitious emission targets set at the international level, a significant strengthening of international authority in the environmental area is rather unlikely in the near future. It remains to be seen how another trend, which might best be described as “environmentalization of the state,” can help states to maintain or regain sovereignty in the face of ecological crises. Recognizing the many and serious environmental challenges and their close interaction with economic and social processes, many states have started “mainstreaming” environmental protection, whether by including environment-related state functions in their constitutions, enacting environmental framework laws, or establishing environmental state agencies (Busch and Jörgens 2011). In terms of state transformation, these developments are noteworthy, as they transform environmental concerns from a mere state activity to an explicit state function. This development, clearly, has a strong symbolic dimension that becomes evident every so often, as when the Maldives announced a plan to become the world’s first CO2 neutral state (Clark 2009)—a move that may change the purpose of the Maldivian state, but which will hardly protect the Maldives from rising sea levels. Beyond the symbolic dimension, however, the “green state” (Eckersley 2004; see also Meadowcroft 2005) has the potential to become a more internationalized state, not least because the insight that the natural environment transcends state boundaries is more difficult to ignore for states that take the environment seriously enough to turn environmental protection into a proper state function.

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Environmental Risks and the Changing Interface     353 Kingsbury, Benedict, 2007. “Global Environmental Governance as Administration: Implications for International Law.” In The Oxford Handbook of International Envi­ ronmental Law, ed Daniel Bodansky, Jutta Brunnée, and Ellen Hey, 63–84. Oxford, UK: Oxford University Press. Kramer, Ludwig, 2007. “Regional Economic Integration Organizations: The European Union as an Example.” In The Oxford Handbook of International Environmental Law, ed Daniel Bodansky, Jutta Brunnée, and Ellen Hey, 853–876. Oxford, UK: Oxford University Press. Mayntz, Renate; Derlien, Hans-Ulrich; Bohne, Eberhard; Hesse, Beate; Hucke, Jochen, and Müller, Axel, 1978. Vollzugsprobleme der Umweltpolitik. Empirische Untersuchung der Implementation von Gesetzen im Bereich der Luftreinhaltung und des Gewässerschutzes [Enforcement Problems in Environmental Policymaking: An Empirical Investigation of Policy Implementation in the Areas of Air Pollution Control and Water Protection]. Stuttgart, Germany: Kohlhammer. McDermott, Constance L; Cashore, Benjamin, and Kanowski, Peter, 2009. “Setting the Bar: An International Comparison of Public and Private Forest Policy Specifications and Implications for Explaining Policy Trends.” Journal of Integrative Environmental Sciences 6 (3): 217–237. Meadowcroft, James, 1998. “Co-operative Management Regimes: A Way Forward?” In Co-operative Environmental Governance: Public-Private Agreements as a Policy Strategy, ed Pieter Glasbergen, 21–42. Dordrecht, The Netherlands: Kluwer Academic Publishers. ——, 2005. “From Welfare State to Ecostate.” In The State and the Global Ecological Crisis, ed John Barry and Robyn Eckersley, 3–23. Cambridge, MA: MIT Press. Mitchell, Ronald B, 2003. “International Agreements:  A  Survey of Their Features, Formation, and Effects.” Annual Review of Environment and Resources 28 (1): 429–461. Moran, Daniel, ed, 2011a. Climate Change and National Security: A Country-Level Analysis. Washington, DC: Georgetown University Press. ——, 2011b. “Conclusion: The Politics of Uncertainty.” In Climate Change and National Security: A Country-Level Analysis, ed Daniel Moran, 269–273. Washington, DC: Georgetown University Press. Norberg-Bohm, Vicki, and Bruijn, Theo de, 2005. “Conclusions:  Lessons for the Design and Use of Voluntary, Collaborative, and Information-Based Approaches to Environmental Policy.” In Industrial Transformation: Environmental Policy Innovation in the United States and Europe, ed Theo de Bruijn and Vicki Norberg-Bohm, 361–387. Cambridge, MA: MIT Press. Obinger, Herbert; Schmitt, Carina, and Starke, Peter, 2013. “Policy Diffusion and Policy Transfer in Comparative Welfare State Research.” Social Policy & Administration 47 (1): 111–129. OECD, 2003. Voluntary Approaches for Environmental Policy: Effectiveness, Efficiency and Usage in Policy Mixes. Paris, France: OECD. Overdevest, Christine, and Zeitlin, Jonathan, 2014. “Assembling an Experimentalist Regime:  Transnational Governance Interactions in the Forest Sector.” Regulation & Governance 8 (1): 22-48. Pattberg, Philipp H, 2007. Private Institutions and Global Governance: The New Politics of Environmental Sustainability. Cheltenham, UK: Edward Elgar. Paul, Thazha V, 2011. “India.” In Climate Change and National Security: A Country-Level Analysis, ed Daniel Moran, 73–84. Washington, DC: Georgetown University Press. Raustiala, Kal, 2003. “The Architecture of International Cooperation: Transgov­ ernmental Networks and the Future of International Law.” Virginia Journal of International Law 43 (2): 1.

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Pa rt I I I

C ON T E M P OR A RY T R A NSFOR M AT IONS OF T H E C OR E OE C D WOR L D OF STAT E S

Chapter 19

State Tr a nsfor m ations a mong the A fflu en t Democr acies Jonah D. Levy, John D. Stephens, and Stephan Leibfried

Part III of this volume analyzes state transformations among the affluent democracies of the Organisation for Economic Co-operation and Development (OECD), the 21 countries included in Tables 19.1 to 19.4. The citizens of the affluent democracies live in a world that is vastly different from that inhabited by the citizens of the former communist countries, a topic explored in Part IV, or in the Global South, which is the subject of Part V. The use of the word “world” is not accidental, for the division between the OECD, post-communist, and Global Southern regions corresponds roughly to the traditional, if no longer politically correct, distinction between the First World (OECD), the Second World (communist), and the Third World (Global South). This distinction has blurred somewhat in recent years, as following the end of the Cold War, some countries from the former communist region (Czech Republic 1995, Hungary 1996, Poland 1996, Slovakia 2000, Estonia 2010, and Slovenia 2010) and the Global South (Mexico 1994, South Korea 1996, and Chile 2010) have joined the OECD. Still, prior to the 1990s, the lines of division had remained largely unchanged for decades. For purposes of analytic clarity, this chapter focuses on the longtime OECD countries of Western Europe, North America, the Antipodes (Australia, New Zealand), and Japan, as opposed to the recent joiners.1 Although there is considerable diversity among the new members, taken as a group, these countries do not display the features associated with the affluent democratic ideal-type as consistently as the established members. Indeed, nations like Mexico and Chile arguably have more in common with large Latin American 1  One

founding member of the OECD that is not included is Turkey. Turkey differs from the other OECD countries in several ways. It is less developed economically and technologically and has experienced significant military incursions into politics, including the removal of four elected governments since 1960. Moreover, Turkey cannot be considered to be fully West European: it straddles Europe and Asia geographically, and the country is not a member of the most important European institution, the EU.

358    Jonah D. Levy, John D. Stephens, and Stephan Leibfried countries that do not belong to the OECD, such as Argentina and Brazil, than with established OECD members like Germany or the United Kingdom (UK). To provide some syntactic variation, this chapter uses the phrases “established OECD countries,” “advanced capitalist democracies,” and “affluent democracies” interchangeably, while acknowledging that no label is perfect.2 The established OECD countries incarnate many of the ideals to which the countries of the post-communist and developing worlds aspire. Advanced capitalist democracies are generally affluent, peaceful, and well governed. Yet this group of countries is not a monolith: some member states have a long history of prosperity and democracy, whereas others have reached this point only recently. Moreover, there is significant cross-national variation in both the strategies and success with which member states pursue prosperity, security, and social integration. Nor is affluent democracy an endpoint: many of the cozy, comfortable arrangements of the postwar period have come under pressure, and the advanced capitalist democracies have been experiencing profound crisis and transformation. This chapter serves as an introduction to Part III and, therefore, offers an overview of states and state transformations among the affluent democracies. Section 1 begins by contrasting the features of established OECD countries to those in other parts of the world and describing the main functions performed by the advanced capitalist states. Next, Section 2 analyzes internal variation among the affluent democracies, focusing on national economic and social models. Section 3 then discusses neoliberal reforms that have reshaped the political economies of many advanced capitalist democracies. The final concluding Section 4 explores the character of state reform among the affluent democracies, as conveyed by each of the chapters in Part III.

1  The OECD Ideal The established OECD countries combine a number of enviable features. Obviously, the following list of features is a simplification of a more complex reality; few observations 2  The label, “OECD” refers to a group of countries belonging to a particular organization; it is not analytically descriptive. The designations, “advanced capitalist democracies” and “affluent democracies” run up against the problem that several of the 21 countries—the Southern European nations of Spain, Portugal, and Greece—have experienced periods of economic backwardness and/or undemocratic rule. In addition, there are a number of countries in East Asia, Eastern Europe, and Latin America that could be described, at least in the present period, as “advanced capitalist democracies” or “affluent democracies” and, as noted earlier, several have become members of the OECD, yet these countries are excluded from the 21. Note that we use the word “advanced” to indicate “technologically advanced”; no normative or teleological meaning is intended. Finally, some labels display a time-bound character: “capitalist” was useful in distinguishing technologically advanced countries in the West from those in the East during the Cold War, but offers less analytical leverage in the present period, when few countries are organized along communist lines. Likewise, the designation, “advanced industrial democracies” has fallen out of favor, as most of the 21 countries have moved toward a post-industrial, service-based economy. At the same time, substituting the label, “post-industrial democracies” would be problematic since a non-negligible subset of the 21 continue to possess sizable industrial sectors.

State Transformations among the Affluent Democracies    359 hold true across all countries and many decades. (For a more skeptical view of the capacity of states in affluent democracies in general, see Thomas Risse in Chapter 8, this volume, on “state transformations and institutional change.”) Still, the majority of advanced capitalist countries cluster along several dimensions, and there is a clear gap between them on the one hand, and the post-communist and especially Global Southern regions (see Chapter 36 by Matthew Lange, this volume, on “state transformations in the Global South”) on the other hand. The first enviable feature of the established OECD countries is economic affluence. Per capita GDP in 2009 was $33,760, several times the level of non-OECD countries. Central to this prosperity have been states that protect property rights, enforce the rule of law, educate the populace, and invest in infrastructure. In addition, as detailed in Chapter 24 of this volume on “worlds of welfare and worlds of state transformation” by Herbert Obinger and Peter Starke, many affluent democracies, relying on a sophisticated extractive state capacity, have developed extensive welfare states. These universalist welfare states, built since the late 1940s, cushion citizens against a host of social risks associated with modern life, including: workplace injury, unemployment, ill health, disability, and old age. They have also relieved the earlier pressures for protectionist state measures, arguably paving the way for a second era of globalization since the 1970s (Rodrik 1997; Rieger and Leibfried 2003). The combination of market development, public investment, and social protection means that citizens of the advanced capitalist countries are, for the most part, both affluent and economically secure. A second attractive feature of advanced capitalist countries is democratic governance, which rests on such critical state capacities as civilian control of the military, a competent civil service, and a reliable legal machinery. The affluent democracies have been free of military rule or hereditary regimes—most since World War II; Greece, Portugal, and Spain, since the mid-1970s. Governments are selected by citizens through free and competitive elections, with changes of power occurring regularly and peacefully. Authorities govern according to constitutional provisions; the rule of law is respected; and citizens are free from arbitrary arrest or harm by the state. Freedom House scores and other indicators of civil rights and democratic rule are much higher than in other parts of the world. A third important feature of the established OECD countries is territorial and ethnic cohesion. In contrast to many post-colonial nations, delineated by artificial borders and containing multiple, rival ethnic groups, the affluent democracies tend to be ethnically homogeneous, with ethnicity and territory aligned. Of course, one should not romanticize the process by which the advanced capitalist countries arrived at this alignment, especially considering developments in the first half of the twentieth century. War, forced population movements, ethnic cleansing, and genocide all figured prominently in the forging of territorial and ethnic cohesion (as indicated by John Hall in Chapter 3, this volume, on “varieties of state experience,” and by Philip Manow and Daniel Ziblatt in Chapter 4, this volume, on “the composite nature of the concept of modern statehood”). Moreover, massive postwar immigration has made many advanced capitalist countries much less homogeneous, and populist politicians have not hesitated to play on ethnic and racial divisions. In addition, several affluent democracies, such as Canada, the UK, Switzerland, Belgium, and Spain are “plurinational states” (see Keating, Chapter 28, this

360    Jonah D. Levy, John D. Stephens, and Stephan Leibfried volume) and have experienced centrifugal or even secessionist tensions. Still, independence movements and ethnically rooted territorial disputes have not exploded into armed conflict in the manner of the former Yugoslavia or some successor states of the former Soviet Union. Rather, in almost all cases, the demands of ethnic and linguistic minorities have been dealt with peacefully and democratically, and the prospect of civil war remains unthinkable today. A final appealing feature of the established OECD countries is national sovereignty. These countries have enjoyed sovereignty, not just in the minimal sense of legal recognition, but also in terms of the capacity of the state to impose its authority throughout its territory. There has been little challenge from religious, ethnic, or social groups within the country or from meddling neighbors outside, although the Soviet Union did attempt to steer many communist parties and labor movements during the Cold War. The principal challenge to national sovereignty, the construction of the European Union (EU), has been one to which the 28 member states have acceded voluntarily. European integration has been conceived of as a way to pool sovereignty, thereby increasing the combined leverage of member states on a now common market and international politics. This process was actually meant to collectively regain a share of sovereignty under the conditions of globalization. The troubled European Monetary Union (EMU), composed of 18 countries that share a common currency and central bank, was conceived in a similar spirit. Alongside the European integration project, the affluent democracies have been able to project power beyond their borders by participating in other international institutions, such as the North Atlantic Treaty Organization (NATO) and the General Agreement on Trade and Tariffs (GATT) of 1948, transformed into the World Trade Organization (WTO) in 1995. They have been actors and architects of the international order (even if unequally weighted and subjected to United States (US) leadership during the Cold War), as opposed to objects of the international order, which has been the status of most developing countries. Linking these four attractive features of the established OECD countries is a well-functioning state, which rests on a capable civil service, a competent and coherent administration, and an entrenched legal system, often the product of centuries of state building. Once again, one should not neglect the blood-soaked paths that the advanced capitalist countries took to arrive at this point (see the chapters in Parts I and II). Since World War II, however, the established OECD states have generally provided peaceful, democratic governance, incorporated subordinate groups, projected uniform authority throughout the realm, and created a climate conducive to economic growth and social cohesion. Michael Zürn and Stephan Leibfried have coined the acronym TRUDI (Zürn and Leibfried 2005; Hurrelmann et al. 2007; most recently Rothgang and Schneider 2015— which is derived from a combination of Territorial state, RUle of law, Democratic state, and Intervention state—to describe the ideal-type state of the affluent democracies. In its ideal TRUDI form, the modern state controls national territory, ensures the rule of law, reflects the will of the people, and intervenes to support economic growth and social equality.3

3 

What happens to TRUDI and its dimensions after the 1990s is explored in the 25-plus-volume series “Transformations of the State” published since 2007 by Palgrave Macmillan.

State Transformations among the Affluent Democracies    361

2  Variation among the Affluent Democracies The preceding discussion has emphasized the commonalities among affluent democracies. Yet this group of countries is scarcely monolithic. If the TRUDI template describes the general character of established OECD states, there has always been considerable variation within TRUDI. Differences among the democratic regimes of advanced capitalist countries have long provided fertile ground for political scientists. For example, political scientists divide the political regimes of these countries into presidential regimes (i.e., US), semi-presidential regimes (i.e., France), and parliamentary regimes (i.e., UK, Germany, Sweden, Italy, Japan), depending on the institutional locus of power. They also distinguish between unitary or highly centralized states (i.e., France, UK) and federal states (i.e., US, Canada, Australia, Germany, Switzerland) or between states with a strong constitutional court (i.e., US, Germany) and states with limited judicial review (i.e., UK, France, Australia). Another frequently used distinction is according to the number of “veto points,” or opportunities for opponents to check a proposed government initiative (Immergut 1992; Tsebelis 1995). Countries with many veto points (i.e., US, Switzerland), present formidable obstacles to ambitious reforms and tend to be marked by inertial or incremental policy-making, while countries with few veto points (i.e., UK, Sweden, New Zealand) empower political leaders to undertake sweeping reforms and tend to display large pendulum swings in policy with changes in governments. Other distinctions regarding the state refer to the size and probity of the civil service or to the nature of the legal system, that is, European continental codified law versus Anglo-American case law (and the different roles of the state and the courts within these alternative legal systems). Although there are many ways of comparing the polities of affluent democracies, perhaps the most developed literature on the state has focused on the character of state involvement in the economy. This comparative political economy literature has spawned three main typologies. Each typology points to different dimensions of state-society relations; each emphasizes a different role for the state; and each places the leading OECD states in somewhat different analytical categories. These typologies are mainly preoccupied with what established states do and how they function, as opposed to how they came into being in the first place, which is the topic of Part I and of foundational literature on the history of state-making (Anderson 1974; Gilbert 1975; Skowronek 1982; Poggi 1990; Reinhard 1996, 1999, 2007; Ertman 1998; Orren and Skowronek 2004). The typologies also reflect skepticism of the notion that there is a single form of the “modern” or “capitalist” state, emphasizing instead the diversity of possible state arrangements. The first typology distinguishes among alternative approaches to steering and planning the economy. It is exemplified by the magisterial tome of Andrew Shonfield published in the 1960s and reflects the optimistic faith in planning and Keynesian demand management of that era (Shonfield 1965; see also Katzenstein 1978; Zysman 1983; Hall 1986). In Shonfield’s view, different countries approach the challenge of industrial modernization and demand management in fundamentally different ways. The statist approach, described by Jonah D. Levy in Chapter 20 of this volume, and most closely approximated

362    Jonah D. Levy, John D. Stephens, and Stephan Leibfried by France and Japan, then later by South Korea and Taiwan, entrusts powerful state elites with responsibility for directing the economy. State planners enjoy tremendous discretion to intervene in the economy and do so aggressively, deploying a variety of policy levers, including selective protection from foreign competition, control over prices, low-interest loans, and access to cutting-edge technology. In the statist model, state-led development revolves around close collaboration between state technocrats and business elites, while labor is largely excluded from the policy-making process, and wages and welfare benefits are kept low. The second ideal type identified by Shonfield, the corporatist model, which is analyzed by Jingjing Huo and John Stephens in Chapter 21 of this volume, and prevalent in the Nordic countries and Northern Europe, affords a more central place to labor. Instead of being sidelined, powerful labor organizations negotiate with the state along with similarly well-organized business associations over critical issues of public policy. Initially, bargaining over wages received the most attention, but corporatism has been associated with consensual, negotiated approaches to industrial modernization, reforms of labor markets and the welfare state, and innovation in high technologies. It has also included non-state interests beyond the social partners, most notably investment banks that provide long-term, “patient” capital to industry and professional associations that structure and regulate markets. High wages and generous, encompassing welfare states attest to the powerful position of labor and left parties within the corporatist system. As Table 19.14 relates, the corporatist ideal-type encompasses a high degree of internal diversity. The Nordic countries display the most active and powerful labor movements, backed by hegemonic left governments, whereas unionization rates are much lower and the left weaker in Germany and other Continental European countries. This internal diversity has translated into different kinds of welfare states (discussed later) and, in the current period, divergent trajectories of economic development. The third ideal type captured by Shonfield, the liberal model described by Peter Hall in this volume’s Chapter 22 and epitomized by the US and UK (and some of the other English settler states), restricts the directive role of the state, relying on private actors and market forces to steer the economy. State intervention is ostensibly limited to Keynesian demand management, pursued intermittently and half-heartedly, and a small, residual welfare state, although often, as in the US, complemented by significant private social expenditures subsidized by the state through the tax code. Despite the laissez-faire image of the liberal model, freeing up and sustaining functioning markets has always entailed a significant role for the state, and this role arguably expanded with the neoliberal turn inaugurated in the early 1980s by Ronald Reagan in the US and Margaret Thatcher in the UK. Governments in the US and UK deployed considerable power to break the trade unions, roll back labor market protections, challenge welfare benefits, and introduce competition into sheltered sectors like telecommunications and transportation and later public social services, such as education and healthcare. 4 

In Tables 19.1 and 19.4, the countries are grouped by political economy regime. In the political economy typologies, Italy and Greece are ambiguous cases, so they are excluded from the tables. In Tables 19.2 and 19.3, the countries are grouped by welfare state regime, and Italy and Greece are included. The definitions of the variables and the data sources for Tables 19.1 to 19.4 can be found in Table 19.5 placed directly after Table 19.4 in this Section.

Table 19.1  Labor market indicators Female Employment in % of employed females aged 15–64

Union Density net in % of all gainfully employed

Union Coverage

Wage Coordination

work places 1 (firm level)—5 covered in % of (economy wide) all employed

Wage Dispersion 90:10 ratio of the full-time employed

1970– 2000– 1970– 2000– 1970– 2000– 1970– 2000– 1970– 1985 2007 1985 2007 1985 2007 1985 2007 1985

Active Labor Market Policy Spending

Employment Protection Legislation

in % of GDP

0 (least restrictive)— 6 (most restrictive)

2000– 1980– 2000– 1985 2004 1985 2007

2000– 2008

Strikes working days lost per 1,000 workers

1970– 2000–2008 1985

Corporatist Coordinated Market Economies Denmark

62

72

72

72

71

81

4.6

3.3

2.2

2.6

N/A

1.7

2.4

1.5

563

289

Finland

65

67

65

73

77

89

4.0

3.8

2.5

2.4

0.8

0.9

2.3

2.0

1018

152

Norway

57

73

56

55

68

72

4.2

4.0

2.0

2.1

0.6

0.7

2.9

2.6

79

113

Sweden

68

71

76

77

70

92

4.8

3.0

2.0

2.3

2.1

1.4

3.5

2.2

448

86

Austria

48

62

57

34

95

99

4.8

4.0

3.4

3.3

0.3

0.6

2.2

2.0

17

146

Belgium

40

53

51

52

92

96

4.1

4.3

2.4

2.2

1.2

1.1

3.1

2.2

717

260

Netherlands

33

66

35

22

78

84

4.1

4.0

2.5

2.9

0.7

1.4

2.7

2.1

129

Mean

53

66

59

55

79

87

4.4

3.8

2.4

2.5

0.9

1.1

2.7

2.1

424

159

60

34

22

77

63

4.0

4.0

2.9

3.2

0.5

1.1

3.2

2.2

1163

159

65

Other Coordinated Market Economies Germany

49

Switzerland

55

75

30

20

50

45

4.0

3.0

N/A

3.0

0.2

0.6

1.1

1.1

4

14

Mean

52

67

32

21

64

54

4.0

3.5

2.9

3.1

0.3

0.8

2.2

1.7

584

86 (Continued )

Table 19.1 (Continued) Female Employment

Union Density

Union Coverage

Wage Coordination

Wage Dispersion

Active Labor Market Policy Spending

Employment Protection Legislation

2.8

Strikes

Statist Political Economies France

48

57

19

8

80

95

2.4

2.0

Japan

53

62

32

20

Mean

51

59

26

14

3.4

3.0

0.6

1.0

29

17

5.0

55

56

3.7

3.0

3.0

3.0

N/A

0.3

2.5

3.2

3.0

0.6

0.6

3.0

2642

433

1.8

1.4

2978

17

2.3

2.2

2810

225

Liberal Market Economies Canada

48

67

34

30

37

32

1.8

1.0

3.9

3.7

0.6

0.3

0.8

0.8

6769

2148

Ireland

33

57

62

38

N/A

N/A

2.5

5.0

N/A

3.7

1.1

0.7

0.9

1.1

482

37

UK

53

65

48

29

69

35

2.6

1.0

3.2

3.5

0.6

0.3

0.6

0.7

11770

725

USA

52

67

22

12

26

14

1.5

1.0

3.8

4.8

0.3

0.1

0.2

0.2

24228

3842

Mean

47

64

42

27

44

27

2.1

2.0

3.6

3.9

0.7

0.4

0.6

0.7

10812

1688

Import-Substitution-Industrialization (ISI) Political Economies Australia

47

64

48

22

85

60

3.1

2.0

2.8

3.2

0.3

0.3

0.9

1.2

2850

283

New Zealand

42

67

63

22

70

30

3.0

1.4

2.2

2.7

0.7

0.4

0.9

1.5

353

24

Portugal

48

65

56

19

72

67

3.2

2.5

3.6

4.4

N/A

0.6

4.2

3.5

427

49

Spain

29

48

N/A

N/A

N/A

N/A

N/A

N/A

N/A

3.5

0.3

0.7

3.8

3.0

6261

2259

Mean

41

61

56

21

76

52

3.1

2.0

2.9

3.4

0.4

0.5

2.5

2.3

2473

654

Notes/Sources: See Table 19.5 right after Table 19.4 for a detailed description of the measures in the tables and of the data sources.

State Transformations among the Affluent Democracies    365 Unlike the first three ideal types, the fourth ideal type, the import substitution industrialization model (ISI) probed by Herman Schwartz and Sebastián Etchemendy in Chapter 23 of this volume was not part of Shonfield’s original typology. Still, it is included in Part III because the ISI model held sway in a number of OECD countries, and the state played a prominent role. The central logic of the ISI model is to use the rents from substantial exports of commodities to finance industrialization behind high tariff walls. The ISI model is associated with countries in South America (Brazil, Argentina) and Southern Europe (Spain, Portugal) or even the early phases of East Asian development (Taiwan, South Korea), typically under some form of authoritarian rule. However, Schwartz has shown that economic policy in the democratic politics of the Antipodes (Australia, New Zealand) long operated along similar lines (Schwartz 2000, 2005). Like the statist model, the ISI approach gives a directive role to the state, but it is more inward looking, orienting production toward captive domestic markets. It also includes substantial pay-offs to organized labor in the manufacturing sector. If the analytical approach of Shonfield and his followers emphasizes different forms of public steering of the economy, a more recent, second typology focuses on the firm and privileges the role of employers as the key coordinating agents. Peter Hall and David Soskice contend that there are two main “varieties of capitalism”: a “liberal market economy” (LME), embodied by the US and the UK, and a “coordinated market economy” (CME), best represented by Germany, but extending to all of Northern Europe and the Nordic countries (Soskice 1999; Hall and Soskice 2001). Employer organization and the relationship between companies and financial institutions are the defining characteristics of each country’s production regime. The capacity for collective action on the part of employers shapes stable patterns of economic governance encompassing a country’s financial system, its vocational training, and its system of industrial relations. Employer organization is also the primary determinant of international comparative advantage. Hall and Soskice’s liberal market economy (LME) category closely resembles the liberal model in Shonfield’s typology. Relations between the state and business are at “arm’s length.” State authorities do not attempt to partner with business to steer the economy, but rather encourage market competition and free labor markets. Comparative advantage results from the fact that businesses are able to respond rapidly to fluctuations in demand, hiring and firing workers, or opening and closing plants as necessary. Another strength of LMEs is the ability of companies to innovate rapidly and move into emerging sectors, unconstrained by resistance from organized labor or the state. Hall and Soskice’s coordinated market economies (CMEs) map onto Shonfield’s corporatist category. Societal groups are the critical economic actor, although the emphasis is more on employers in the case of Hall and Soskice. CMEs like Germany do not enjoy the kind of flexibility of LMEs: restrictions on lay-offs, plant closings, working hours, and the like, backed by powerful unions and state regulations, preclude rapid redeployment of labor and other resources. Employer coordination provides countervailing sources of comparative advantage, however. Employers are able to organize collectively to train their labor force, generate and share technology, organize exports, set product standards, and bargain with employees. The resulting gains in human capital, technology, and collective goods tend to underpin a competitive strategy of continuous incremental upgrading and high-end manufacturing, which permits the payment of high wages and social benefits.

366    Jonah D. Levy, John D. Stephens, and Stephan Leibfried If there is a limitation to Hall and Soskice’s framework, it concerns the treatment of the countries falling into Shonfield’s statist category. There is no third “variety of capitalism” for Hall and Soskice, yet countries like Japan and France fit uneasily with the CME/LME distinction. Hall and Soskice indicate that Japan, along with South Korea, achieves employer coordination through industrial conglomerates (e.g. keiretsu in Japan and chaebol in South Korea), as opposed to sectoral industry associations. They suggest that France may belong to a possible third “Mediterranean” subtype, along with less developed countries like Spain and Portugal, characterized by a large agrarian sector and a recent history of extensive state intervention. These interpretations are not fully elaborated in the manner of the CME and LME categories, however, and they seem to slight the prominent, directive role of the state in countries like Japan or South Korea. The ultimate analytical challenge may be to bring “varieties of capitalism” and “varieties of states” together in a more synthetic approach. Whereas the typologies associated with Shonfield or Hall and Soskice focus on strategies for steering and coordinating the economy, a third typology operates primarily in the realm of labor market and social policy. Pioneered by Walter Korpi, John Stephens, and Evelyne Huber, this approach centers on the role of left parties and labor movements in driving distinctive forms of social protection (Stephens 1979; Korpi 1983; Huber et al. 1993; Huber and Stephens 2001; Korpi and Palme 2003; Palme 2006). In the most widely evoked typology, Gøsta Esping-Andersen distinguishes among three different variants or “worlds” of “welfare capitalism”: liberal, Christian democratic, and social democratic (Esping-Andersen 1990). The use of the word, “welfare capitalism,” as opposed to “welfare state,” is designed to signal that social policies do not merely redistribute the fruits of capitalist growth, but rather fundamentally structure the character of national varieties of capitalism. Crossnational variation in “welfare capitalism” is depicted as a product of the “power resources of labor,” typically the strength of left parties and trade unions, along with the number of constitutional veto points, which shape the capacity of left parties to convert electoral success into ambitious new social programs. The Christian democratic world is additionally shaped by the political influence of strong Christian democratic parties in Continental Europe. The data in Tables 19.1–19.4 allow us to identify the constellations of similar political economies as well as the distinctive features of individual countries. The liberal world of welfare capitalism is very much like the liberal model in typologies of Shonfield and Hall and Soskice. It encompasses the same countries, most notably the US and the UK (to a lesser extent), and operates to bolster the free market. Liberal welfare states are characterized by low levels of public spending, patchy and uneven coverage, significant reliance on private benefits, stigmatizing means-testing designed to force all but the “truly needy” or “deserving poor” to avoid welfare, and high levels of poverty and inequality (see Table 19.2). They are found in countries where the labor movement has few power resources, that is, where trade unions are weak and left parties are rarely in government. Additional factors contributing to the liberal welfare state are strong secular right parties, left parties with limited ideological and policy ambitions, and, in some instances, constitutional systems with many veto points that curtail the capacity of left parties to translate their occasional electoral victories into far-reaching social reforms. The two remaining welfare worlds, the Christian democratic and the social democratic, overlap with Hall and Soskice’s CME category along with the corporatist model of the Shonfield-inspired typology. Following the logic of power resources theory, social democratic welfare regimes have arisen primarily in the Nordic countries, where labor’s power resources are greatest—and where, in the course of time, for a combination of social and

State Transformations among the Affluent Democracies    367 Table 19.2  Inequality and poverty by welfare state regime Population 25–59 Post tax and post transfer Gini Countries

Early

% of group in poverty

Redistribution resulting from taxes and transfers

Recent

Early

Recent

Children of Single Mothers

All Early

Recent

Early

Recent

Social democratic regimes Denmark

22

21

28

39

10

6

7

8

Finland

19

23

35

36

5

7

7

13

Norway

20

24

27

34

5

7

16

15

Sweden

18

22

36

39

5

6

10

10

Mean

20

23

32

37

6

6

10

12

Christian democratic regimes Austria

28

26

N/A

27

7

7

30

18

Belgium

22

26

32

23

5

8

20

28

France

29

27

19

28

8

9

25

33

Germany

26

33

9

13

5

8

7

38

Netherlands

25

26

33

27

4

6

9

23

Switzerland

29

26

6

14

8

8

24

18

Mean

27

27

20

22

6

8

19

26

18

11

12

20

30

Southern Regimes Italy

30

33

12

Spain

31

34

13

27

12

14

20

30

Mean

31

34

13

23

11

13

20

30

Australia

27

30

22

27

11

12

51

35

Canada

30

33

16

31

12

12

50

44

Ireland

32

31

31

31

11

13

35

39

UK

26

34

17

22

9

11

26

29

USA

30

36

16

20

16

18

57

50

Mean

29

33

20

26

12

13

44

39

Liberal Regimes

Notes: Early = late 1970s to mid-1980s; recent = mid- to late 2000s; N/A = not available. See Table 19.5 right after Table 19.4 for a description of the measures in all tables. Sources: See Table 19.5 right after Table 19.4 for the data sources.

electoral reasons, even the non-social democratic parties have come to accept these welfare systems. Across the Nordic countries, unionization rates are the highest in the world, while left-leaning social democratic parties have been hegemonic for much of the postwar period. Unconstrained by significant veto points, social democrats have enacted highly generous, egalitarian welfare states designed to protect citizens against all social risks,

Table 19.3  Welfare state indicators by regime Social Security Spending

Total Taxes

Government Employment

Welfare Generosity

Daycare Spending

Educational Spending

Parental Leave

in % of GDP

in % of GDP

as % of pop. 15–64

Index of Social Rights

in % of GDP

in % of GDP

weeks of full pay

1980–85 2000–07 1970–85 2000–07 1970–85 2000–07 1971–85 2000–02 1980–85 2000–07 1970–85 2000–07 1970–85 2000–07 Social democratic regimes Denmark

24.4

27.0

46.8

55.9

Finland

20.1

Norway

17.6

Sweden Mean

17.5

25.3

42.9

52.9

10.1

23.6

48.4

57.3

14.2

28.0

29.4

54.2

56.7

20.3

22.5

26.3

48.1

55.7

21.9

34.7

35.2

1.5

1.7

7.1

8.4

24.0

38.0

14.4

27.7

30.5

0.8

0.9

5.3

6.3

7.0

70.0

23.3

34.9

41.7

0.4

0.8

6.0

7.2

7.0

100.0

20.6

40.3

35.8

1.7

1.6

7.8

7.4

32.0

65.0

15.5

20.1

34.4

35.8

1.1

1.2

6.6

7.3

17.5

68.3

10.1

11.4

26.1

28.7

0.3

0.4

5.5

5.7

N/A

N/A

Christian democratic regimes Austria

24.3

28.1

45.2

49.5

Belgium

25.4

26.2

43.7

49.3

8.2

10.7

29.3

32.3

0.1

0.8

5.9

6.3

16.0

36.0

France

22.7

28.8

42.8

49.8

11.3

14.4

28.3

27.4

0.2

1.2

5.3

5.8

13.0

50.0

Germany

24.1

27.9

43.5

44.3

7.9

7.1

28.9

27.1

0.2

0.4

4.9

4.6

27.0

43.0

Netherlands

26.4

21.1

49.0

45.0

6.0

6.5

34.4

35.2

0.5

1.0

7.0

5.1

23.0

31.0

Switzerland

16.4

26.4

31.6

34.5

7.0

8.1

27.3

19.0

N/A

0.3

4.8

5.5

0.0

22.0

Mean

23.2

26.4

42.6

45.4

8.4

9.7

29.0

28.3

0.3

0.7

5.6

5.5

15.8

36.4

Southern regimes Greece

13.9

20.4

N/A

39.8

1.8

N/A

N/A

N/A

N/A

0.1

1.6

3.7

12.0

16.0

Italy

20.8

25.9

33.9

44.9

7.1

8.4

19.0

26.9

0.1

0.6

4.5

4.8

26.0

51.0

Portugal

10.4

21.8

N/A

41.8

4.3

8.7

N/A

N/A

0.0

0.4

2.9

5.2

16.0

33.0

Spain

16.9

20.9

27.5

39.0

2.9

7.8

N/A

N/A

0.0

0.5

2.0

4.3

17.0

31.0

Mean

15.5

22.3

30.7

41.4

4.0

8.3

19.0

26.9

0.0

0.4

2.8

4.5

17.8

32.8

Australia

11.2

17.3

28.8

35.2

9.4

9.3

18.9

18.9

0.0

0.4

5.1

4.8

0.0

0.0

Canada

15.7

17.0

37.9

41.5

12.7

14.5

22.6

24.8

N/A

0.2

7.0

5.3

0.0

53.0

Ireland

17.8

15.3

37.9

35.2

7.0

7.5

19.9

28.3

0.1

0.2

5.6

4.3

9.0

28.0

New Zealand

17.5

18.4

22.0

42.0

11.2

7.4

25.3

24.3

0.0

0.6

4.9

6.8

0.0

27.0

UK

18.7

20.7

42.6

40.3

13.4

9.4

17.3

21.7

N/A

0.8

5.4

5.0

12.0

11.0

USA

13.9

16.0

31.4

33.2

8.8

10.3

17.7

18.4

N/A

0.3

6.5

5.7

0.0

0.0

Mean

15.8

17.5

34.4

38.5

10.6

9.8

20.6

23.5

0.0

0.4

5.9

5.4

4.2

23.8

Liberal regimes

Notes/Sources: See Table 19.5 right after Table 19.4 for a description of the measures in the tables and of the data sources.

Table 19.4  Indicators of the macro-economy Government Deficit

Trade Openness

Deficit or surplus in % GDP

Central Bank Independence

Product Market Regulation

Public Ownership

Exports & imports Low value, more 0 (least)—6 (most 0 (least)—6 (most in % GDP independence regulation) regulation)

Capital Controls

Outward DFI

R&D Expenditure

0 (no)—100 (maximum controls)

in % of GDP

in % of GDP

1965–72 1973–85 2000–07 1965–85 2000–09 1965–85 1998 1975–85 2000–07 1975–85 2000–07 1965–85 2000–04 1965–85 2000–07 1973–85 2000–07 Corporatist Coordinated Market Economies Denmark

3.3

-0.6

Finland

3.8

4.9

4.0

Norway

5.1

7.6

13.5

Sweden

3.2

-3.4

1.8

41.7

Austria

2.5

39.8

92.4

2.0

2.0

5.6

35.5

77.8

56.6

73.2 89.0

1.6

5.6

3.0

32.4

0.0

3.0

2.5

3.0

3.0

3.0

1.5

0.3

5.4

2.4

4.9

3.6

40.9

0.0

3.1

5.4

2.2

5.1

3.7

48.4

0.0

0.6

4.8

2.0

5.0

3.7

27.7

10.5

0.8

4.8

1.1

2.5

4.7

1.4

3.4

3.8

1.3

1.6

6.9

2.4

3.7

2.5

-0.7

-1.6

46.5

99.3

1.5

1.0

5.1

2.3

5.1

3.8

26.9

9.4

0.1

3.3

1.2

2.3

Belgium

-1.3

-5.5

-0.4

81.3

153.3

3.0

1.5

5.4

2.3

5.1

3.1

31.4

0.0

0.4

25.8

1.5

1.9

Netherlands

-0.5

-3.0

-0.6

58.3

36.8

1.5

1.5

5.4

2.0

5.5

3.2

11.9

0.0

3.1

10.5

1.9

1.8

2.3

-0.1

2.7

51.4

88.8

2.4

1.9

5.3

2.1

5.2

3.4

31.4

2.8

1.2

8.6

1.5

2.5

Mean

Other Coordinated Market Economies Germany

1.5

1.8

-2.2

30.8

44.1

1.0

1.0

5.4

1.6

4.7

2.0

1.2

0.0

0.6

1.6

2.3

2.5

Switzerland

4.3

3.5

-0.4

42.7

89.0

1.0

1.0

4.2

2.9

4.5

4.0

3.4

N/A

2.1

10.4

N/A

0.2

Mean

2.9

2.7

-1.3

36.8

66.5

1.0

1.0

4.8

2.3

4.6

3.0

2.3

0.0

1.3

6.0

2.3

1.4

Statist Economies France

1.2

-0.3

-2.7

23.5

52.5

3.0

1.5

6.0

3.0

6.0

4.5

26.8

3.1

0.4

6.3

2.0

2.2

Japan

3.1

-3.1

-5.9

12.9

26.1

2.5

1.5

5.1

2.4

3.5

1.7

39.4

6.3

0.3

1.0

2.5

3.2

Mean

2.1

-1.7

-4.3

18.2

39.3

2.8

1.5

5.5

2.7

4.8

3.1

33.1

4.7

0.4

3.6

2.3

2.7

Liberal Market Economies Canada

-0.6

-4.3

1.1

38.1

70.8

2.0

1.5

4.4

2.1

3.1

2.1

8.9

0.0

0.8

3.9

1.3

2.0

Ireland

-2.3

-5.1

1.5

45.4

153.0

2.5

2.5

5.7

3.2

5.8

4.6

37.4

N/A

N/A

6.7

0.7

1.2

UK

-0.9

-3.6

-1.9

27.7

54.9

3.0

1.5

4.6

1.0

5.2

0.8

31.9

0.0

1.9

6.2

2.2

1.8

USA

-1.8

-2.8

-2.5

10.7

18.2

1.5

1.5

3.1

1.9

1.7

1.4

2.4

0.0

0.5

1.6

2.6

2.6

Mean

-1.4

-4.0

-0.5

30.5

74.2

2.3

1.8

4.4

2.0

4.0

2.2

20.1

0.0

1.1

4.6

1.7

1.9

Import-Substitution-Industrialization (ISI) Political Economies Australia

0.5

-3.5

0.9

21.1

41.0

1.5

2.5

4.1

1.7

4.2

2.9

44.7

18.8

0.3

2.6

1.0

1.7

New Zealand

N/A

N/A

3.6

30.3

55.4

3.0

1.5

5.0

2.0

4.3

2.3

48.4

0.0

0.5

0.7

0.9

1.2

Portugal

N/A

N/A

-3.6

31.0

65.4

N/A

N/A

5.9

2.6

6.0

3.9

65.3

6.3

N/A

3.6

0.3

0.8

Spain

3.6

0.9

0.3

16.6

55.5

2.5

1.5

5.0

2.1

3.7

2.2

49.4

0.0

0.1

6.3

0.1

0.2

Mean

2.0

-1.3

0.3

24.7

54.3

2.3

1.8

5.0

2.1

4.5

2.8

51.9

6.3

0.3

3.3

0.6

1.0

Notes/Sources: See Table 19.5 right after Table 19.4 for a description of the measures in the tables and for the data sources.

Table 19.5  Definitions of variables in Tables 19.1–19.4 and data sources All of the data in Tables 19.1–19.4 are from Brady et al. (2013). The original source is indicated after the variable definition below. The variables are listed in the order they appear in the Tables. The details of publications and websites used as sources for the data—especially for the elaborate OECD data—can be found in Brady et al. (2013). Table 19.1

Female Employment: Female civilian employment as a percentage of the female population aged 15–64 (OECD) Union Density: Net union membership as a percentage of employed wage and salary earners (Visser 2013) Union Coverage: Percentage of employees in workplaces or establishments covered by unions or works councils as a proportion of all wage and salary earners in employment (Visser 2013) Wage Coordination: Kenworthy measure of wage setting coordination, varies from 1 (firm level bargaining) to 5 (economy wide bargaining) (Visser 2013) Wage Dispersion: 90/10 ratio of wages of full time wage and salary workers (OECD) Active Labor Market Policy Spending: active labor market policy spending as a percentage of GDP (OECD) Employment Protection Legislation: OECD employment protection legislation index— varies from 0 (least restrictive) to 6 (most restrictive) (OECD) Strikes: Working days lost per thousand workers (ILO 2013)

Table 19.2 All data derived from Luxembourg Income Study database. Gini and redistribution calculated by Brady et al. (2013); poverty figures from LIS Key Figures (http://www. lisdatacenter.org/data-access/key-figures/). Pre tax and transfer gini — Post tax and transfer gini Redistribution= _________________________________________ × 100 Pre tax and transfer gini Poverty is the percentage of households below 50% of median household income. Table 19.3 Social Security Spending: Social security spending as percentage of GDP (OECD) Total Taxes: Total taxes as percentage of GDP (OECD) Government Employment: Government service employment as percentage of the population aged 15–64 (Cusack 1991, updated by Brady et al. 2013) Welfare Generosity: Index of social rights in unemployment insurance, sickpay, and pensions (Scruggs 2006) Daycare Spending: Daycare spending as percentage of GDP (OECD) Education Spending: Public education spending as percentage of GDP (OECD) Parental Leave: Weeks of full pay (Gauthier 2011) Table 19.4

Government Deficit: Government deficit or surplus as a percentage of GDP, negative figures indicate a deficit (OECD) Trade Openness: Exports plus imports as percentage of GDP (OECD) Central Bank Independence: Index of central bank independence with lower values indicating more independence (Freitag 1999) (Continued )

State Transformations among the Affluent Democracies    373

Product Market Regulation: OECD measure summarizing regulatory provisions in seven non-manufacturing sectors: telecoms, electricity, gas, post, rail, air passenger transport, and road freight, varies from 0 (least regulation) to 6 (most regulation). (OECD) Public Ownership: OECD measure of public ownership in seven non-manufacturing sectors: telecoms, electricity, gas, post, rail, air passenger transport, and road freight, varies from 0 (least regulation) to 6 (most regulation). (OECD) Capital Controls: Quinn and Toyoda (2008) measure of capital controls. Note that we have inverted Quinn and Toyoda’s measure so that 0 indicates no capital controls and 100 indicates maximum controls. Outward Direct Foreign Investment: Outward direct foreign investment as a percentage of GDP (OECD). R&D Expenditure: Total (government and private) research and development expenditure as a percentage of GDP (OECD) Note: All but the OECD sources will be found in the references. For the OECD sources see the codebook by David Brady et al. (2013).

most notably, that of job loss—through so-called “decommodifying” policies that reduce worker reliance on paid employment. As Table 19.3 reveals, the social democratic regime has also moved to address new social risks, such as work–family balance, aggressively expanding public childcare (and, more recently, elderly care), to permit care-givers (overwhelmingly women) to be able to take jobs without neglecting dependent family members. (For an overview of new social risks, see Taylor-Gooby 2004.) Christian democratic welfare regimes have arisen in Continental European countries where labor’s power resources were somewhat lower than in the Nordic countries and Christian democratic parties were stronger, notably in the Netherlands, Germany, and Switzerland (see Table 19.1). Labor unions mobilize fewer members, and social democratic parties are in office only occasionally and often in coalition with more conservative parties. The welfare states in these countries have been built not so much by social democrats as by Christian democrats, fearful of social democratic challengers and acting preemptively to steal the left’s thunder. Although the resulting welfare states spend roughly as much as the social democratic welfare states, they spend in very different ways and for different purposes (see Table 19.3). Their main goals are to preserve the status of employees who are unable to work, not to spread equality, and to bolster traditional social and family structures. Christian democratic welfare states allocate benefits unevenly, on the basis of prior earnings and length of contributions, thereby reproducing the inequalities of the labor market. Christian democratic welfare states also tend to be less responsive to new social risks, such as gender-based inequalities, and to offer less in the way of social services, as opposed to transfer payments. Moreover, they display higher rates of inequality and poverty, especially among single mothers (see Table 19.2). Some scholars have argued for the existence of a fourth welfare world, the Southern European world, encompassing Greece, Italy, Spain, and Portugal (Leibfried 1993; Ferrera 1996, 1997, 2005; Rhodes 1997). The Southern European welfare system emerged more recently than the others because of longer-lasting authoritarian government, late economic development under largely unsuccessful ISI projects, and weak unions. Southern European welfare states offer, in some ways, a more extreme version of Christian democratic welfare

374    Jonah D. Levy, John D. Stephens, and Stephan Leibfried states, with highly polarized benefits, extending extremely generous benefits to a core group of civil servants and stable blue-collar workers, while providing little or nothing to other groups. New social risks are similarly neglected, making it exceedingly difficult to combine paid employment and caring responsibilities. Finally, Southern European welfare states are plagued by problems of corruption, leading to “gaps between inputs and outputs,” as scholars delicately put it, in services like healthcare. It is perhaps no coincidence that these countries are at the epicenter of the ongoing sovereign debt crisis in the Euro zone. Latin American welfare states, which have developed under many of the same conditions as Southern European countries (authoritarian rule, late development, failed ISI projects, weak unions and left parties) have produced welfare states that bear more than a passing resemblance to the Southern European model. (See Chapter 43 by Evelyne Huber and Sara Niedzwiecki on “emerging welfare states in Latin America and East Asia,” this volume, and Huber and Bogliaccini 2010.) By contrast, the ISI countries in the Antipodes, Australia, and New Zealand, followed a path vaguely related to that of Britain, with limited but highly egalitarian tax-and-transfer systems (Castles and Mitchell 1993; Castles 2010), before converging more strongly in the wake of the neoliberal turn of the 1980s. The dominant typologies of comparative political economy privilege different actors and classify advanced capitalist countries somewhat differently. One of the interesting analytical questions is whether the Nordic countries and Continental Europe belong together in a single category, as suggested by the corporatist and varieties of capitalism literatures, or in separate categories, as argued by welfare state scholars. Huo and Stephens (Chapter 21, this volume) offer some important insights. Whereas in the past, Nordic and Continental European countries differed primarily in the character of their welfare states (social democratic versus Christian democratic), with associated impacts on inequality, labor markets, and gender relations, Huo and Stephens point to an emerging divide concerning the basic orientation of the social democratic and Christian democratic political economies, with social democratic countries developing strengths in innovation-based, high-tech industry, while Christian democratic countries continue to focus on high-end manufacturing in established industries. Tables 19.1–19.4 take the year 1985 as a breakpoint because around this time, many advanced economies began to enact far-reaching economic and social reforms in response to generalized economic slowdown, the increased pressures of globalization, de-industrialization, and demographic change. The U-turn of the French leftist government of François Mitterrand in 1983, related by Jonah D. Levy (Chapter 20, this volume), was the most dramatic marker of this reorientation. In the subsequent period, as Table 19.4 indicates, the broad thrust of reform has been in a liberalizing direction: abandonment of Keynesian demand management and industrial policy, financial market deregulation, privatization, labor market flexibility, austerity budgets, independent monetary policy, etc. But social democratic and Christian democratic regimes have reorganized their respective welfare capitalisms in fundamentally different ways, leading to distinctive economic trajectories. Nordic countries, while cutting transfer payments and income maintenance modestly, have made heavy public investments in education, technology, computer literacy, and childcare, which have been widely diffused across all segments of society. These social investments have created a business environment that supports rapid innovation in high technology and the creation of high-wage jobs in private-sector services and information technologies (see Table 19.4). By contrast, Christian democratic countries, with welfare states that are transfer-heavy and service-light and display a far more limited commitment

State Transformations among the Affluent Democracies    375 to equality, have been unable to make this kind of shift—nor has the liberal model held much appeal. That said, the Christian democratic regime has shown itself to be capable of reform (Palier 2010), contrary to the view among most welfare state scholars at the turn of the century (Esping-Andersen 1996; Scharpf 2000; Huber and Stephens 2001; Pierson 2001). Through sustained austerity strategies, epitomized by the Agenda 2010 and the Hartz IV labor reforms in Germany, several Christian democratic countries have restored and intensified their traditional strength in high-end manufacturing. Thus, what was once a divergence in social policy between social democratic and Christian democratic welfare states appears to be driving a divergence in the basic structures of the political economy. The discussion of alternative typologies of advanced capitalism not only foregrounds some of the empirical materials in the coming chapters, but also points to a distinctive feature of debates about state reform in the advanced capitalist democracies, as compared to the post-communist or Global Southern regions. All of the typologies of advanced capitalism present a fairly sanguine view of the possibilities for state intervention in the economy. The statist ideal-type is associated with rapid industrialization in Japan, France, and later East Asia; the corporatist model relies on the state to empower the social partners and help them negotiate compromises that promote economic growth, while attending to the needs of labor; and the various “worlds of welfare capitalism” are distinguished by different state strategies for reconciling economic growth and social protection. It is perhaps no coincidence that the liberal ideal-type is present in more or less the same form across the three typologies, for all three typologies convey the message that there are alternatives to the dog-eat-dog world of neoliberal capitalism and that these alternatives are rooted in enlightened state intervention. Phrased more generally, the agenda in the advanced capitalist world is not to destroy and replace states that are “totalitarian,” “communist,” “predatory,” or “failed,” as it is in the other regions of the world. Rather, if the political economy typologies are an indicator, the past is viewed in largely positive terms, as a “golden age,” and while changes may be needed, the goal is to reform the well-regarded TRUDI state, not to dismantle or replace the state. That said, successful reform is by no means guaranteed. Signs of state decay are easy to find. The Italian state has long been plagued by corruption, illegitimacy, and ambiguous relations with powerful organized crime syndicates, and the Euro crisis has focused attention on the defects of state machinery in Greece, Spain, and other countries. In the meantime, Belgium teeters on the edge of schism. Certainly, the problems of the Global North pale in comparison to those of the Global South. Still, even in prosperous countries with supposedly well-functioning states, there is a profound sense of crisis and dissatisfaction. A new and improved TRUDI state may be highly desirable, but the contours and the path to that new model remain elusive.

3  The Neoliberal Turn among the Advanced Capitalist Democracies The chapters in Part II identify a number of challenges to states in the advanced capitalist world and beyond, starting with economic developments. Globalization is making it easier for employers and financial actors to “exit” from economic regimes that do not suit

376    Jonah D. Levy, John D. Stephens, and Stephan Leibfried their preferences, giving these actors a greater “voice” in state policy-making. At the same time, de-industrialization and mass unemployment in many countries have weakened the countervailing power of labor and state regulators. States have often contributed to the pressures associated with globalization by signing onto initiatives that free up product and financial markets. International institutional developments have further challenged the governments of established OECD countries. States have ceded parcels of sovereignty to international institutions, from NATO, to GATT/WTO, to international tribunals, and, as outlined earlier, most extensively to the EU. Although states often retain a blocking capacity or an important role in enforcement and implementation, they are less able to act unilaterally. In addition, states are not always able to block the actions of international institutions. States have generally been forced to comply with juridical decisions, such as WTO rulings striking down environmental regulations as trade barriers. Moreover, the practice of some kind of qualified majority voting, as opposed to unanimity, has become increasingly prevalent within international institutions, especially the EU, thereby lifting the state’s veto capacity. The national states of affluent democracies are confronted by rivals below as well as above. Devolution and decentralization reforms have compelled states to share many key areas of policy-making with subnational authorities (Hooghe et al. 2008; see also Chapter 14, on “multilevel governance and the state” by Arjan Schakel, Liesbet Hooghe, and Gary Marks; and Chapter 28 on “plurinational states” by Michael Keating, both this volume). Within Europe, EU regional policies and support from the Commission have further bolstered the authority and resources of local authorities. The combination of European integration above and decentralization below has led many theorists to describe policy-making in Europe as “multilevel governance,” that is governance arrangements that span different territorial and functional jurisdictions, defying existing state-centric institutional hierarchies, and operating through shifting coalitions among a variety of institutional players (Hooghe and Marks 2001; see also Schakel et al., Chapter 14, this volume). Related to the notion of multilevel governance, state authorities of affluent democracies are sharing powers not only with rival institutional authorities, but also with groups in civil society. Some of these groups, such as environmental movements, have arisen out of suspicion about state actions and seek to influence or monitor the state. In other instances, overloaded states have devolved complex regulatory issues to non-profit or business organizations that possess the resources and technical capacity to handle them (see also Mattli, Chapter 15, this volume). Transnational NGOs have emerged to intervene in policies that spill across national borders or involve international institutions. Whatever the origins, the net effect of the growing influence of civil society, at home and abroad, is that state authorities are less able to act unilaterally. The chapters in Part III describe how governments in advanced capitalist democracies are responding to these many internal and external challenges. Chapters 20 to 23 cover the transformations of the state in four political economy ideal-types: the statist, liberal, corporatist, and import substitution (ISI) systems. In all of these cases, the end of the “golden age” of rapid growth in the mid-1970s called into question the postwar institutional arrangements. The years since the early 1980s have witnessed far-reaching transformation in economic policy, much of it in a neoliberal direction.

State Transformations among the Affluent Democracies    377 During the golden age, state authorities deployed a variety of instruments to intervene in the economy.5 Some countries possessed large nationalized sectors (Austria, Finland, France, Italy, and Norway), and the state often subsidized investment and employment in these enterprises. Most governments maintained capital controls (see Table 19.4) and heavily regulated internal capital markets. These arrangements allowed state authorities to set interest rates below international rates and offer lower interest rates domestically to business investors (Zysman 1983). Some nations (Australia, New Zealand, Finland, France, Italy, and Sweden, as well as—among the LMEs—Britain) resorted to politically determined devaluations in order to restore competitiveness. Almost all countries, including the LMEs, pursued Keynesian counter-cyclical demand policies, and a number of polities incurred large fiscal deficits in the fight against economic stagnation in the 1970s (Table 19.4). Some administrations (Austria, France, Germany, and Norway) used state-owned banks to subsidize investment in both private and public industries, while in others, the state budget was used for the same purpose. In all of the CMEs and most of the LMEs, public interest services such as telecommunications, mass transportation, energy supply, and public utilities were provided primarily by state monopolies insulated from both domestic and international competition (Héritier and Schmidt 2000). Finally, many governments used non-tariff barriers, such as product regulations, to protect domestic producers. As Scharpf (2000) points out, these statist policies were greatly reduced or abandoned by the turn of the century. This is supported by recent studies relying on a new dataset on public entrepreneurship (Obinger et al. 2010; Schuster et al. 2013; Schmitt 2013). Many state-owned enterprises were privatized, even by social democratic governments. Those that were not privatized were directed to operate according to market, profit-seeking principles. They no longer received state subsidies, but in return, were freed from social obligations, such as supporting employment and investing in economically backwards or troubled parts of the country. The policy changes went well beyond the nationalized enterprises. Capital controls were eliminated and domestic capital deregulated. Devaluation was abandoned as a policy tool. For EU countries, the deepening of European integration after 1990 further limited monetary and fiscal policy latitude and prohibited non-tariff trade barriers and subsidies to support investment and employment. Finally, with the possible exception of Switzerland, almost all countries reluctantly retrenched welfare state entitlements, though the cutbacks were moderate in all but a few cases.6 The fact that there are parallel trends toward globalization and reduction of state direction of the market does not, of course, establish that they are causally linked. For example, in the case of increased exposure to trade, outside of Australia and New Zealand, the effects have been limited because, other than those two countries, the advanced industrial economies were already very open to trade at the beginning of the globalization era (Table 19.4). The one area where increased trade openness may have had a significant impact is the trend toward privatization and “marketization” of state enterprises, that is, making state enterprises operate by the same principles as private enterprises. Even here, the process has been complex and influenced by many factors beyond globalization. With intensifying 5 

The following passage draws on Huber and Stephens (2005: 612–616) There were cutbacks in the 1990s in Switzerland, but these paled in comparison to the expansion over the whole of the last two decades (Armingeon 2001). 6 

378    Jonah D. Levy, John D. Stephens, and Stephan Leibfried competition, the cost of using state enterprises to support employment, a common response to the crisis of the 1970s, forced government after government to abandon the practice in the course of the 1980s and attempt to put state enterprises on a profit-making basis. Once this shift was accomplished, the logic of even having the enterprises in the state sector disappeared. EU competition policy further undermined the case for public ownership by challenging government aid and capital grants to nationalized companies as illegal subsidies. On the other side of the ledger, the large budget deficits faced by many governments made privatization fiscally attractive. Another motive for privatization was the expansion of public enterprises beyond national borders, where government ownership was viewed with suspicion and posed obstacles to market entry, alliances, and acquisitions. Finally, the spread of neoliberal ideology, primarily among parties of the secular right, but also of other political tendencies, most notably New Zealand Labor, added to the push for privatization. Perhaps the most dramatic instances of privatization have been in public service monopolies, particularly telecommunications. In many instances, rapid technological change made what were once natural monopolies into enterprises exposed to international competition. Neoliberal ideological commitments abetted and extended this transformation. Governments engaged in privatization and marketization of public enterprises even in sectors that remained natural monopolies or that were widely perceived by the public to be social services that should not be governed by market principles, such as education and healthcare. In cases like these, the results of privatization and marketization were often less satisfactory, as in the privatization of British Rail (Héritier and Schmidt 2000) and the marketization of healthcare in New Zealand (Kelsey 1995). At the moment there are no time series available on the size of state ownership in the economy as a whole, though relief is in sight (see Schuster et al. 2013; REST 2014). However, the OECD measure of product market regulation in seven non-manufacturing sectors (telecoms, electricity, gas, post, rail, air passenger transport, and road freight) in Table 19.4 does give us an indication of the magnitude of change in state regulation and ownership in those sectors.7 The overall measure of regulation in the seven sectors and the public ownership measure are included in the table. The declines in state regulation and ownership are large in every country and every regime type. Another dimension of globalization, the opening of capital markets and the very large increases in capital flows shown in Table 19.4, has had a significant constraining effect on macro-economic policy. Because of the elimination of controls on capital flows across borders, governments cannot control both the interest rate and exchange rate. If a government decides to pursue a stable exchange rate, it must accept the interest rate that is determined by international financial markets. The absence of capital controls makes the option of setting low interest rates while accepting a depreciating currency unattractive, since this policy choice results in inflation, greatly complicating wage bargaining (see below). Domestic financial deregulation, which was in many cases stimulated by international financial deregulation, has further limited the state’s ability to privilege business investors 7  The

indicators focus on regulations that affect competitive pressures in areas where competition is economically viable and on potential costs that these regulations entail. Indicators may include information regarding barriers to entry, public ownership, market structure, vertical integration, and price controls (varying by sector). Each indicator is measured on a scale from 0 to 6, with 0 indicating the least regulation and 6 the most regulation.

State Transformations among the Affluent Democracies    379 over other borrowers. With governments no longer able to freely set domestic interest rates, the combination of competition from non-OECD countries for investment funds (Rowthorn 1995; Chang and Rowthorn 1995) and the worldwide debt buildup in the wake of the two oil shocks led to a four-fold increase in real interest rates, from 1.4 in the 1960s to 5.6 percent in the early 1990s (OECD 1995: 108). Finally, because of the interest rate penalty that international currency markets made countries with a history of devaluation pay, governments effectively dropped competitive devaluation as a policy tool, and the 12 (in 2014, 18) EMU member states went so far as to completely eliminate the possibility of currency adjustment through the adoption of the Euro. These developments pushed huge responsibilities for maintaining macro-economic balance and external competitiveness onto national wage bargaining systems. With EMU membership or fixed exchange rates, wage gains above the European norm translate directly into higher productions costs, leading to losses in export markets and employment. In this environment, inflation has become the number one enemy of the wage bargaining system because high nominal wage increases can no longer be offset by currency devaluation or depreciation. To help keep inflation low, countries with central banks dependent on government authority moved to increase the independence of their central banks (Table 19.4). Beyond a better capacity to control inflation, this move was designed to increase the credibility of government policy in the eyes of international money markets and thus reduce interest rate premiums. The monetary policy and institutional arrangements favored by the German Bundesbank and conservative economists became the norm and were enshrined in the EMU. Thus, state officials find themselves lacking the fiscal, monetary, and exchange rate tools once available to combat unemployment, shifting much of the responsibility onto the wage bargaining process. While changes in the international political economy have had a decisive impact on state macro-economic policy, domestic economic and demographic shifts have prompted reforms in other areas of state policy. The slowing of economic growth, the transition from an industrial to a post-industrial knowledge-based economy, population aging, declining fertility, and changing family structures have generated policy responses which have then fed back into those structural changes. The chapters in Part III provide detailed descriptions and causal explanations of these processes, so suffice it to mention here a few of the most important changes as illustrations. The transition to the service economy has been associated with the weakening of unions in most countries and the rise of women’s labor force participation in all countries (Table 19.1). After 1973, economic growth slowed to half the annual rate in the golden age, and unemployment rose (though not in all countries in all periods), which generated budget shortfalls and thus pressure on the welfare state. After the mid-1980s, social policy cutbacks were pervasive though moderate in all but two cases, the UK under Thatcher and Major and New Zealand under the National governments of 1990–96. The combination of declining wage and employment growth, sluggish economic performance, increased longevity, and reduced fertility upset the parameters on which the golden age, defined-benefit, pay-as-you-go (PAYGO) pension systems were founded. Countries with mature, defined-benefit PAYGO systems faced huge future pension costs and were forced to undertake reform (Myles and Pierson 2001). The decline in the male breadwinner wage and the sharp increase in divorce rates created “new social risks” for vulnerable groups, such as working families, especially single-parent families. The Nordic

380    Jonah D. Levy, John D. Stephens, and Stephan Leibfried countries addressed these problems with work and family reconciliation policies, such as daycare and parental leave, and more recently, some continental European countries have followed suit (Table 19.3). Tables 19.1–19.4 show that although change is ubiquitous, it is highly uneven. Globalization, above all capital market deregulation and the transnationalization of production, and the spread of neoliberal ideology have led to dramatic changes in most of the macro-economic indicators in Table 19.4. By contrast, Table 19.3 shows that the welfare state has been highly resistant to change. One can detect the move toward “labor market activation”—that is, reducing dependence on social transfers like unemployment or welfare benefits and increasing reliance on earnings from employment—in the figures for active labor market policy spending and employment protection in Table 19.1 and the figures for parental leave and daycare spending in Table 19.3. The cuts in defined-benefit PAYGO pensions do not really show up in the welfare generosity measure because the pension component of that index measures the pension of newly retired workers, and most of the cuts introduced in the past 20 years affect future pensioners. Huber and Stephens’ (2012) comparison of Scruggs’ data on pension replacement rates in 1995 with an OECD estimate of pension replacement rates of workers entering the workforce in 2008 does show the expected decline in replacement rates for defined-benefit PAYGO pensions, but also indicates that in most cases, increases in mandatory funded pensions have made up for this decline. The countries with significant net declines in pension replacement rates were the US, Ireland, and Sweden, with declines of about ten percent, and Germany and Belgium, with declines in excess of 20 percent. Thus, it is more proper to label welfare state change as a transformation to a new type—or types—of welfare state, rather than straightforward neoliberal retrenchment. On balance, the labor market indicators in Table 19.1 have moved in a liberalizing, market direction (weaker unions, less wage coordination and bargaining centralization, less employment protection, greater wage dispersion, fewer strikes) but, with the exception of the decline in strikes, the changes are not nearly as dramatic as the macro-economic changes.

4  Preview of Part III: Changing Forms of State Intervention The previous section has shown that economic liberalization has figured prominently in the response of advanced capitalist countries to globalization and other challenges. That said, economic liberalization has not entailed the eclipse of the state among affluent democracies. For one thing, it is widely acknowledged that the liberalization project itself requires the mobilization of substantial state capacity to break the power of institutions like trade unions that impede the free market, to introduce competition over the objections of those who have benefited from sheltered arrangements, and to write, enforce, and adapt the rules governing newly established markets (Gamble 1994; Richardson 1994; Vogel 1996). In addition, the relatively positive valence of golden age state arrangements across the affluent democracies has limited support for neoliberal ideology. Few if any OECD leaders have launched frontal assaults on their respective states. Rather, liberalizing

State Transformations among the Affluent Democracies    381 reform has often been initiated reluctantly and under duress. Finally, and perhaps of greatest importance, if states have abandoned some functions, in many instances, state reform has entailed a redeployment or transformation of state intervention, as opposed to a straightforward retreat (Levy 2006). This process has often resulted in the creation of new state powers and responsibilities, as the following summary of the individual chapters in Part III relates. In this volume’s Chapter 20, Jonah D. Levy analyzes the transformation of the statist political economies, incarnated by France and Japan. Levy shows that France and Japan have both abandoned most of the key elements of the developmental state model, from activist industrial policy, to state-administered credit rationing, to price rigging. Alongside this retreat of the state, however, French and Japanese authorities have greatly expanded social spending. In the process, France has gone from “welfare laggard” to, by many measures, the most expensive welfare state in the world. Japan has largely foresworn a formal welfare state, but social concerns have driven heavy spending on “employment maintenance” via public works projects and support for loss-making enterprises to prevent lay-offs. As a result, public debt has risen to some 200 percent of GDP, far and away the highest level in the OECD. In neither France nor Japan, then, can the end of voluntarist industrial policy be equated with the eclipse of the state. In Chapter 21 of this volume, Jingjing Huo and John Stephens examine the transformation of the state in the corporatist countries of Northern Europe. Huo and Stephens contend that the Nordic countries have positioned themselves as leaders in knowledge-intensive, high-tech industry. According to Huo and Stephens, the successful adaptation of the corporatist model has been largely a result of state action. State authorities have prodded the social partners to negotiate deals that restrain wages, expand labor market flexibility, and reduce welfare benefits by threatening to act unilaterally and more severely if negotiations fail. In addition to encouraging bargaining under the shadow of hierarchy (Scharpf 1994), state authorities have intervened directly, particularly in the Nordic countries, by boosting spending on childcare, education, computer literacy, training, and technology (see Tables 19.3 and 19.4). These social investments have helped underwrite the innovation-based strategies of many Nordic companies. The social investment strategy has been much less pronounced in Continental European countries like Austria and Belgium, which have struggled to move beyond their traditional specialization in heavy industry. This volume’s Chapter 22 by Peter Hall covers the transformation of the liberal state. Prior to the 1980s, the liberal state was often characterized by what it could not do:  its arm’s-length approach to economic management made it ill suited to steer economic modernization or operate Keynesian demand management during the golden age, and it was even less successful at forging stable corporatist pacts to restrain wages during the 1970s. With the neoliberal turn of the early 1980s inaugurated by Margaret Thatcher in the UK and Ronald Reagan in the US, however, the liberal state intervened aggressively to create a more flexible, market-responsive economy—and thus functioned as a “strong state” in destroying non-liberal state policies and introducing a new regulatory framework (Gamble 1994; Offe 1994). Hall shows that political leaders like Thatcher and Reagan spearheaded policies that tamed inflation, broke the power of trade unions, and reduced wages and welfare entitlements. The US and especially the UK also became pioneers in so-called “new public management” techniques that sought to expand competition in

382    Jonah D. Levy, John D. Stephens, and Stephan Leibfried public services, like healthcare or education, to hold providers to account through rebidding and quantitative evaluations, and to empower “consumers” of public services by giving them more choice, information, and aggressive means of legal recourse (Nivola 1997). Finally, in both countries, state authorities deployed increasingly aggressive methods to induce claimants of welfare benefits to enter the labor market. Chapter 23 of this volume by Herman Schwartz and Sebastián Etchemendy analyzes the dismantling of the ISI model in Latin America, Southern Europe, and the Antipodes. Much like in the statist countries of Chapter 20 (Levy, this volume), authorities in the ISI countries eliminated fundamental pillars of the model, most notably trade protection and the transfer of resources from export-oriented agriculture to sheltered manufacturing. They also generally reduced the power of the trade unions, which were closely tied to the ISI model. Along with these neoliberal reforms, however, Schwartz and Etchemendy observe that state authorities enacted and expanded formal welfare systems to replace the informal income transfers of the old ISI model. The Antipodean countries also emulated the new public management reforms pioneered by the UK, bringing their political economies more closely in line with the liberal ideal type. In Chapter 24 of this volume, Herbert Obinger and Peter Starke review changes in welfare states across the affluent democracies. They note that for all the talk of neoliberal austerity, state spending on social policy has been essentially stable since the end of the golden age, even increasing slightly since 1980. Welfare states have changed in their purposes and policies more than their levels of spending. Social policies are increasingly designed to be “active,” that is, favorable to employment, through such programs as job training and low-cost childcare. Relatedly, they are also more gender-neutral and supportive of work–family reconciliation. Finally, welfare states have become somewhat more service-oriented, with reductions in transfer payments counter-balanced by growth in spending on healthcare, childcare, elderly care, and worker training. Taken together, these trends indicate that if there has been any kind of convergence, it has not been on a lean-and-mean neoliberal model, but rather on what Obinger and Starke call a “market-conforming, enabling welfare state” (see also Hemerijck 2013) and a greater sensitivity to new social risks. This volume’s Chapter 25 by Julia O’Connor analyzes another area of state expansion, gender relations. Gender offers a useful lens for analyzing the state apparatus itself, but it is also a defining characteristic of an ever-expanding policy universe. O’Connor contends that the pursuit of gender equality has spawned two new sets of policies. A first set of policies seeks to redefine the division of responsibility between the family, the market, and the state for the provision of household labor, such as childcare. The aim is to reduce the inequalities in the workplace stemming from women’s status as child bearers and the principal care-givers by socializing some of the costs and provision of care. Such policies, which often go under the rubric of “work–family reconciliation,” include paid parental leave following the birth or adoption of a child, paid time for tending to sick relatives, and subsidized or state-provided childcare and elderly care. A second set of policies, known as “gender mainstreaming,” seeks to understand and address the structural bases of gender inequality. Instead of striving for formal equality of opportunity, gender mainstreaming is concerned with substantive equality of outcome and is more open to measures like quantitative benchmarking and quotas for electoral lists, political representation, and the composition of corporate boards.

State Transformations among the Affluent Democracies    383 In Chapter 26 of this volume, Katherina Holzinger and Susanne Schmidt take up the shift from a positive to a regulatory state, that is, from the classical notion of a state that provides goods and services directly to a state that sets the framework of regulation for these goods to be provided by private actors. Holzinger and Schmidt note that while private provision offers the potential for enhanced efficiency, there are also many risks. State authorities can lose control of policy, private actors may exploit monopolistic situations to engage in rent seeking, and lines of accountability can become obscured to the point of vanishing. To avoid these kinds of pathologies, or in response to the emergence of such problems, state authorities have launched new kinds of regulation—either directly or via newly established independent regulatory agencies. Areas of regulation include: conditions of market entry and exit, cost accounting, content of services, professional and technical standards, performance expectations, pricing, and employment conditions. Holzinger and Schmidt demonstrate that a successful shift from the “positive state” to the “regulatory state” is not simply a matter of rolling back or hollowing out the state. Rather, it requires the development of new state capacities to regulate private actors—autonomy to prevent capture, technical expertise to devise appropriate regulations, and flexibility to adapt to changing markets and new needs. Beginning with Chapter 27 (Bauböck, this volume), Part III is less centered on “crucial types” of political economy and moves on to “crucial issues,” but the pattern of state transformation and reinvention, as opposed to across-the-board retreat, persists. In his chapter on migration, Rainer Bauböck shows that European states are simultaneously liberalizing and restricting their migration policies. On the one hand, European integration is pushing nation states to reduce the salience of national borders. The European Court of Justice has issued a series of rulings in this sense. More important, the Schengen Agreement of 1985, which was incorporated into EU law through the 1997 Amsterdam Treaty, formally abolished internal barriers to migration. By and large, people may now cross from one EU country to another without any kind of control at the border. If developments with respect to migration within Europe point to an important reduction of state sovereignty, quite the opposite holds true with respect to immigration from outside Europe. Most governments, often under pressure from populist, xenophobic parties, have clamped down on the sources of non-European immigration, such as asylum and family unification. Many have also erected obstacles to the acquisition of citizenship by non-Europeans, including longer residency requirements, higher application fees, and challenging language and citizenship tests. This volume’s Chapter 28 by Michael Keating addresses changes within plurinational (or multinational) states like the UK, Spain, Canada, and Belgium. Keating notes that for most of the postwar period, the nation state was seen as the wave of the future, the product of liberalism and democracy, while minority nationalists were assumed to be backward, exclusive, and declining. Yet contrary to expectations, plurinational states have been increasingly contested by internal nationalist groups. Although popular accounts focus on the prospect of secession or national break-up, exemplified by the case of Belgium, the tale told by Keating is more nuanced. In most cases, nationalist groups are seeking greater powers, particularly powers of the purse, as opposed to full-blown independence. They have been largely accommodated through reforms such as consociational power sharing or devolution, the granting of cultural rights to practice indigenous

384    Jonah D. Levy, John D. Stephens, and Stephan Leibfried languages and traditions, and the decentralization of key services like education. Keating sees the nationalities question as an ongoing process, constructing and reconstructing nations over time, but the main direction of reform seems to be an internal adaptation of the nation state, rather than the break-up of the nation state. In Chapter 29 of this volume, Andreas Busch examines national security policy. In contrast to many other chapters in Part III, Busch’s chapter covers a domestic area of indisputable and significant expansion of state powers that reaches far beyond traditional external military security policy (see Part II) or traditional internal policing. Following the 9/11 attacks, the US spearheaded a wide array of reforms designed to enhance state capacity to prevent terrorism. State surveillance, police, and penal powers were increased massively; data collection and usage, especially of foreign travelers, became widespread; supervision of police, secret service, and military tasks was increasingly coordinated, or even fused, under a single agency; and power shifted from the local to the national level and from the legislature and judiciary to the executive. Although the details and extent of these shifts varied from one country to another, the cross-national trend was clear. In addition, Busch remarks that national security policy shows that states can gain or regain some kinds of society-penetrating capacity very quickly. Within two months of the 9/11 attacks, the US had passed the Patriot Act, and several European countries soon enacted similar, if less draconian, reforms. Finally, in this volume’s Chapter 30, Frank Nullmeier, Steffen Schneider, and Andreas Hepp introduce an important cautionary note about transformations of states in the advanced capitalist world. They voice concerns about the changing character of governance and economic policy, which may be undermining the quality of democracy. On the political front, the authors point to the declining significance of the core institutions of the golden age: elections, party government, and big interest organizations. The multiplication of new actors, forms of participation, and media has resulted in a fragmentation of representation, making governance seem increasingly complex and disconnected from the will of the people. On the economic front, Nullmeier, Schneider, and Hepp lament the declining capacity of state authorities to dampen class conflict through redistribution and the growing sense that the state is less and less able to manage its critical responsibilities. The 2008 financial crisis and its impact on policy, according to them, crystallizes both the political and economic concerns, as state authorities were forced first to commit huge sums to unworthy financial actors, then to implement neoliberal austerity policies that were not of their choosing. In a further sign of eroding governance capacity, Nullmeier, Schneider, and Hepp contend that the acceptance of neoliberalism today is no longer based on its appeal or success, but rather on coercion by international financial markets and lending institutions. Taken together, the chapters in Part III show that debates about “more” or “less” state, however measured, miss the mark. States in the established OECD world are both shedding old missions and taking on new ones, and some are fraying. The perceived effectiveness of these states during the postwar golden age has bequeathed a strong reservoir of support for transforming, as opposed to rolling back, state institutions. However, as Nullmeier, Schneider, and Hepp show in the final chapter of Part III, it is not enough to preserve the institutional forms of the state. The central challenge is to find new ways to achieve the kinds of substantive results that legitimated and built popular support for OECD states, for TRUDI, in the first place. Adding to the difficulty and complexity

State Transformations among the Affluent Democracies    385 of this challenge, it needs to be met at the national and the transnational levels in a more fragmented institutional environment.

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State Transformations among the Affluent Democracies    389 Tsebelis, George, 1995. “Decision Making in Political Systems:  Veto Players in Presi­ dentialism, Parliamentarism, Multicameralism, and Multipartyism.” British Journal of Political Science 25 (3): 289–325. Visser, Jelle, 2013. Database: Data Base on Institutional Characteristics of Trade Unions, Wage Setting, State Intervention and Social Pacts, 1960–2011 (ICTWSS). Version 4—April 2013. Available at: http://www.uva-aias.net/207 (last consulted 23 January 2014). Vogel, Steven K, 1996. Freer Markets, More Rules: The Paradoxical Politics of Regulatory Reform in the Advanced Industrial Countries. Ithaca, NY: Cornell University Press. Zürn, Michael, and Leibfried, Stephan, 2005. “A New Perspective on the State: Reconfiguring the National Constellation.” In Transformations of the State?, ed Stephan Leibfried and Michael Zürn, 1–36. Cambridge, UK:  Cambridge University Press. [= European Review 13 (Sup. 1): 1–36]. Zysman, John, 1983. Governments, Markets, and Growth: Financial Systems and the Politics of Industrial Change. Ithaca, NY: Cornell University Press.

CRUCI A L T Y PE S

Chapter 20

The Tr a nsfor m ations of  the Statist Model Jonah D. Levy

The statist model, along with the corporatist and liberal ideal-types, figures prominently in discussions of the different forms that capitalist economies can take (Shonfield 1965; Johnson 1982; Zysman 1983; Hall 1986). During the Cold War, scholars portrayed state-led development as a kind of “third way” between liberal or free-market capitalism and Soviet planning, holding it up as a model for developing countries or even the United States to emulate (Shonfield 1965; Johnson 1982). More recently, though, many of the countries embodying the statist ideal-type—first France in the 1980s, then Japan in the early 1990s, and finally East Asian countries, notably South Korea, in the late 1990s—have experienced profound economic crisis and dismantled key elements of the model (Levy et al. 2006; Pempel 2010). The difficulties of these countries have raised fundamental questions about the vulnerabilities of state-led development, the adjustments that are needed, and the continuing viability of statism in today’s globalized economy. This chapter analyzes the history and debates surrounding the statist model. It focuses on the affluent democracies, notably France and Japan—the transformation of developmental states among the emerging economies is the subject of Peter Evans and Patrick Heller’s chapter (Chapter 37, this volume). France and Japan have long been viewed as exemplars of the statist model. A leading scholar of Japanese industrial policy popularized the term “developmental state” (Johnson 1982), while French expressions pepper descriptions of the statist approach: étatisme from the French word for “state”; dirigisme from the French verb “to direct”; and colbertisme in reference to the interventionist economic advisor to Louis XIV, Jean-Baptiste Colbert. France and Japan offer perhaps the purest incarnations of the statist model, making them ideal for understanding its strengths, limits, functioning, and transformations. This chapter is divided into six sections. Section 1 traces the origins of the statist model, while Section 2 discusses its foundations and operation. Section 3 presents the debate over the impact of state-led development on economic growth and industrialization. Section 4 analyzes the crisis of the statist approach, and Section 5 describes French and Japanese efforts to reform the system. Finally, Section 6 ponders the future of the statist model and the implications for developing countries.

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1  Origins of the Statist Model The statist model is but one of several ways of organizing a capitalist economy. Why have some countries adopted this approach as opposed to alternative economic arrangements? Scholars emphasize two main factors—economic backwardness and the geopolitical environment. The countries that have gravitated toward the statist model, such as France and Japan in the immediate postwar period and South Korea, Taiwan, and Singapore more recently, have invariably been economically backwards. Leaders of these countries have believed, whether rightly or wrongly, that their nations would be unable to achieve economic development through a purely free-market approach. In this view, first articulated by Friedrich List, free trade would strangle fledgling “infant industries” in the cradle (List 1916 [1842]; Gerschenkron 1962). The role of the state was to provide temporary protection, thereby enabling the infant industries to grow into strong adults before facing international competition. State support has also been regarded as essential for financing industrialization (Gerschenkron 1962; Kemp 1985). The premise is that the costs of competing in the most advanced industries have risen over time, as the leading sectors have grown in sophistication. Pioneer industrialists in the age of textiles at the dawn of the nineteenth century could finance development through family resources and retained earnings. By contrast, later industrialization around such products as steel or automobiles was far more expensive, necessitating the establishment of special institutions to generate the requisite capital. According to Alexander Gerschenkron (1962), the somewhat late developers of the mid-nineteenth century, such as Germany, could finance industrialization through universal banks that pooled private savings, but in later-developing countries, such as Russia, only the state could provide sufficient funds. The state spearheaded industrialization by squeezing resources for industry out of peasants and workers, providing large sums of capital to fledgling firms, and guaranteeing profitability through a combination of tariffs and lucrative public procurement arrangements. The understanding of the imperatives of late development advanced by List and Gerschenkron is not beyond criticism. Enterprises in backwards countries may well be able to compete in established industries by borrowing existing technologies and taking advantage of lower labor costs and taxes. Moreover, it is not clear that the costs of industrializing are rising over time. Competing in the leading sectors today, such as web design for the Internet, does not necessarily require mammoth capital outlays. Thus, backwards countries may not be compelled to jump into the most expensive, capital-intensive industries right away, which would then obviate the need for the state to marshal large amounts of capital. Whatever the merits of List and Gerschenkron’s analysis, the leaders of statist political economies clearly believed that state direction was essential for overcoming economic backwardness. Although the statist model is a set of economic arrangements, the origins of this model are grounded in political or even geo-political preoccupations. France’s leaders regarded economic backwardness as a central cause of the humiliating military defeat at the hands of Germany in 1940 (Hoffmann 1963, 1978). France could not meet its national security

The Transformations of the Statist Model    395 needs with a sleepy, agrarian economy. French authorities were especially concerned about the so-called “American challenge” (Servan-Schreiber 1968), the risk of dependence and subordination to American hegemony. The solution, they believed, was to establish a dirigiste state to spearhead industrialization and restore the nation’s great-power status. Japan’s statist model emerged in an earlier era, but with much the same motivation. The Meiji restoration was triggered by Commodore Matthew Perry’s opening up of the country to the West and the realization that Japan was far behind militarily (E. Vogel 1987). The regime’s slogan, “Enrich the country, strengthen the military,” attested to the geopolitical logic behind the state’s efforts to modernize the economy. In the postwar period, Japan was prevented by the US and by its own constitution from reconstituting a powerful military, but “technonationalism,” the aspiration to ensure national security and exercise power internationally by controlling key military technologies, was central to economic policy (Samuels 1994). Geopolitics helped provide the means as well as the motive for establishing statist systems. All of the statist countries were allies of the United States, and, in many cases, they played a critical strategic role (Woo-Cumings 1999; Pempel 2005). South Korea and Taiwan were on the frontlines of the Cold War, while France and Japan provided significant logistical and manpower support to US forces operating abroad. In return for support in the Cold War, the US tendered massive economic and military aid as well as technology. In addition, the US nuclear umbrella and security guarantee reduced the need for allies to spend on defense, leaving additional resources for promoting economic growth. Finally, the US opened its market to its allies while allowing those countries to restrict US access to their markets. Thus, many of the characteristic policies of the statist model—heavy investment in industry, manipulation of markets, technological upgrading, and export-led growth—were bolstered by the alliance with the US. France benefited further from its position within the European Union (EU). The EU’s Common Agricultural Policy (CAP) covered a significant share of the costs of agricultural modernization, allowing French authorities to focus scarce resources on industrial promotion (Keeler 1987; Milward 1992).

2  Foundations and Operation of the Statist Model The postwar statist model of France and Japan rested on a combination of institutional and political foundations. Institutionally, state authorities manipulated an array of mechanisms and resources to steer the economy. Politically, conservative party dominance allowed planners to slight the needs of labor, favoring investment over consumption. Although France and Japan pursued distinct policy mixes, their institutional arrangements shared a number of core features: 1) meritocratic elite schools that recruited and trained the nation’s brightest and most ambitious youths for high-level positions in the state administration; 2) multi-year planning processes that established the priorities and parameters of the nation’s economic development; 3) a variety of policy instruments that permitted state authorities to influence and provide resources to key sectors or even individual firms.

396   Jonah D. Levy The first component of the statist model was the system of elite recruitment and training. The educational systems in France and Japan were designed to channel elites into the high-level civil service. Following selection through rigorous, meritocratic exams, the best and brightest in both countries were trained in select public institutions—the École Polytechnique (Polytechnic School) and École Nationale d’Administration (National School of Administration, or ENA) in France and Tokyo University’s Faculty of Law in Japan— then launched into careers in public service (Suleiman 1974; Birnbaum 1977, 1978; Kim et al. 1995). These schools provided a steady stream of high flyers to state institutions responsible for guiding the economy. What is more, although the graduates of these schools began their careers as civil servants, many moved to the helm of leading multinationals, financial institutions, and parastatals over time. Thus, in both countries, state-industry coordination was facilitated by the existence of a tight network of like-minded elites, spanning the public and private sectors, who shared the belief that state direction could improve upon the play of market forces, accelerate economic modernization, and create comparative advantage in leading industries (Shonfield 1965). The second component of the statist model was an institutional framework for coordinating intervention in the economy. Industrial policy in Japan operated primarily through the Ministry of Trade and Industry (MITI), as well as the Ministry of Finance (MOF). The former worked closely with and nurtured industry through a series of sectoral plans (Johnson 1982), while the latter exercised monetary and budget controls that made it possible to allocate cheap capital to selected industries. These plans identified the priority industries for development and set targets for growth, investment, and exports. The priority sectors would then receive a combination of protection and subsidies to foster their development. French planning worked in much the same way during the initial postwar period (S. Cohen 1977; Hall 1986). A  series of five-year plans, negotiated primarily between the General Planning Commissariat (CGP) and big business, provided guidance and resources to priority heavy industrial sectors, such as coal, steel, and electricity. In the 1960s and 1970s, industrial policy in France was extended through the so-called “grand projects”— a combination of subsidies, captive markets, and the transfer of technologies developed in public research labs that sought to catapult France to positions of global leadership in advanced technologies (E. Cohen and Bauer 1985; E. Cohen 1992). The third component of the statist model was a set of policy instruments that gave teeth to the aspirations of the planners (Shonfield 1965; Zysman 1978; Hall 1986). French authorities used tariff and trade policies to shelter priority industries until the creation of the European Common Market in the 1960s. Japanese protectionism lasted longer, since there was no equivalent of the EU in Asia. Beyond protecting infant industries, Japanese trade policy sought to obtain technology for domestic firms (Samuels 1994), generally by requiring foreign companies to transfer technology as a condition of entry into the Japanese market. French and Japanese authorities wielded a number of instruments to ensure the profitability of strategic industries beyond direct subsidies. Public procurement policies excluded foreign companies, while providing generous profit margins to domestic champions. French authorities also worked diplomatic channels to promote government-to-government sales of such big-ticket items as armaments, communications systems, aeronautics, nuclear power plants, and public transportation equipment and

The Transformations of the Statist Model    397 infrastructure (S. Cohen 1977; S. Cohen et al. 1982). In Japan, officials encouraged cartels as a way of locking in high prices and profits (Tilton 1996). Indeed, Japanese companies often sold at a loss in foreign markets in order to capture market share, while charging high prices—and reaping high profits—in protected markets at home (Prestowitz 1988). French authorities controlled prices directly, a power that they would keep until 1986 (Dumez and Jeunemaître 1989). Price setting made the state the de facto determinant of the profitability of most businesses, allowing the authorities to discriminate in favor of strategic industries. The capacity of companies to borrow was likewise subjected to state discretion (Zysman 1983). Planners in both countries encouraged favored enterprises to take on high levels of debt, so that these firms could invest and modernize more aggressively. Thanks to state manipulation of the banking system, privileged companies could borrow on extremely favorable terms. French and Japanese authorities set interest rates at very low or even negative real rates, thereby creating a shortage of credit relative to demand. Specialized state-sponsored lending agencies then determined which companies would receive the highly desirable cheap loans. Of course, there were differences between French and Japanese industrial policy (Hall 1995; Levy 1999). France had a large nationalized sector, meaning that often the planners were negotiating with another branch of the state. In Japan, by contrast, there were few publicly owned companies (Samuels 1987). French authorities tended to focus on one or two companies per industry, so-called “national champions,” that were usually created with state support. Japan offered an altogether different industrial landscape: under the “one-set principle,” each financial-industrial group, or keiretsu, had one company in virtually every industry (Gerlach 1989, 1992), meaning that Japanese planners typically negotiated with five or more private enterprises, but could selectively reward or punish specific groups depending on their adherence to or deviation from industrial policy goals. Finally, French authorities generally sought to make bold technological leaps, moving from laggard to world leaders in one initiative, with much of their critical technology generated in public research labs (E. Cohen 1992). Japanese authorities, by contrast, emphasized incremental upgrading through a combination of borrowing from abroad and inter-firm cooperation at home (Anchordoguy 1989; Levy and Samuels 1991). Taking a step back, one can say that the French system gave more power to the state, while the Japanese system provided more leverage to business. Still, both were based on a high degree of cooperation between big business and the state. Alongside the various mechanisms for steering business decisions, the statist model arbitrated between business and labor (Pempel and Tsunekawa 1979; Levy 2000). Specifically, the statist model squeezed wages and consumption in order to increase the resources available to industry. The squeezing of wages was facilitated by a massive migration from the countryside, which provided a steady supply of cheap labor, but public policy also played a part. Both France and Japan kept social spending to a minimum during the heyday of industrial policy, even if French policy shifted subsequently. As noted earlier, the Japanese economy was protected and cartelized, enabling producers to make large profits at the expense of Japanese consumers. Collective bargaining was underdeveloped in both countries, owing to weak and divided unions, although wage inequality was considerably more pronounced in France than Japan. Part of the reason for this difference is that as migration from the countryside slowed, French authorities aggressively recruited workers from Southern Europe and former French colonies in order

398   Jonah D. Levy to hold down wages. France’s public finances were also structured to the disadvantage of labor: most revenues were generated by sales taxes and social security charges paid disproportionately by employees, while more progressive income, inheritance, and corporate taxes were set at low levels and collected unevenly. Notwithstanding differences in specific policy instruments, France and Japan shared a common pro-business orientation, squeezing wages and consumption in order to maximize the resources available for business investment. The privileging of business over labor under the statist model was made possible by the political hegemony of the right. In Japan, the conservative Liberal Democratic Party (LDP) ruled more or less continuously from 1955 to 2009, with a weak and divided left unable to mount a serious challenge. In France, the left captured a sizable share of the vote, but for most of the postwar period, the socialists and communists could not overcome their differences to rule together. As a result, the right was largely hegemonic until well into the 1970s, most notably from 1958 to 1969 during the presidency of Charles de Gaulle, the dominant figure in postwar French politics.

3  An Economic Model? The statist model has been a subject of furious debate. Supporters of this model have argued that state-led development constitutes a distinctive and superior form of capitalism (Johnson 1982; Dore 1986, 2000). State planners have successfully outwitted the market, accelerating the pace of industrialization. By “getting prices wrong,” they have encouraged companies to enter advanced industries ahead of market signals (Amsden 1989). By providing a “moving band of protectionism,” they have given infant industries enough protection to develop, while withdrawing that protection when it was no longer needed, making it difficult for trading partners to lodge accusations of discrimination (Tyson and Zysman 1989). And by “picking winners,” they have channeled economic resources to their most effective use, favoring business over labor, investment over consumption, and emerging industries over declining sectors. Proponents of the statist model have pointed to the success of statist political economies, most notably Japan, as validating their view (Johnson 1982). Other scholars have taken issue with this interpretation, however. They have portrayed state action as having contributed little or nothing to Japan’s economic development (Patrick and Rosovsky 1976; Trezise 1984). Their critique centers around two main claims—that state policy has been ineffective and that conventional economic factors account for Japan’s growth. The first critique points to the limitations of state initiatives. State policies have often been ignored by industrialists. MITI famously tried to prevent Sony from making transistor radios and Honda from entering the car business (Henderson 2011). In other cases, Japanese industrialists accepted government subsidies, but then did what they wanted, rather than what they had promised MITI (Friedman 1987; Samuels 1987). This kind of behavior was especially common when MITI tried to encourage companies to reduce production in declining industries (Tilton 1996). Another limit to the contribution of the Japanese state is that MITI has picked losers as well as winners. MITI failed to develop a Japanese software industry, for example, despite

The Transformations of the Statist Model    399 repeated initiatives. MITI also picked losers in the sense of spending a lot of money on declining sectors, such as steel, aluminum, and textiles, rather than emerging sectors (Beason and Weinstein 1996). Of course, money is not the sole measure of state policy. Scholars of Japan have long noted that many of the most important instruments for nurturing priority industries have required little or no direct government spending (trade protection, support for cartels, etc.). The second set of arguments portrays MITI not as flawed but as largely irrelevant. Japan’s economic growth has had little to do with MITI. Rather, it has stemmed from the conventional factors that economists emphasize (Patrick and Rosovsky 1976; Trezise 1984; see Krugman 1994 for an analogous argument about East Asia). Much of Japan’s postwar growth has occurred through “extensive development,” or the addition of factors of production, most notably with the movement of labor and resources from agriculture to industry. Japan has also benefited from economic backwardness, borrowing advanced technologies cheaply from the US. Low taxes and high savings rates have provided a further boon to the Japanese economy. Finally, in contrast to the inward-looking import-substitution model of industrialization that was so popular in Latin America, Japan has relied on export-led growth, forcing its firms to match or exceed the best practices of international competitors. Alongside sweeping claims of state success or failure, an alternative understanding takes a more differentiated view of the statist model. This perspective contends that there are different kinds of statism. In particular, statism can be either imposed from above or “embedded” in society, that is, shaped by ties to social groups, most notably business (Evans 1994). It is not enough for a state to be autonomous, to have a Weberian bureaucracy and multiplicity of tools for economic intervention. The state must also be embedded. The embedded autonomy argument can cast some light on the differential performance of French and Japanese industrial policy (Levy 1999). French policy has operated in a more state-centric, top-down manner than Japanese policy, with state authorities paying much less heed to the concerns and objections of French social groups. If this autonomy has enabled French planners to take bold and decisive action, it has deprived them of feedback loops to curb dirigiste excesses and make the initiatives more market-conforming. Dirigiste overreach has led French authorities to create a number of white elephants, such as the Concorde supersonic airplane, marvelous feats of engineering that were completely unviable in the marketplace. A lack of feedback has also led French authorities to pursue Fordist mass production strategies and to marginalize small- and medium-sized enterprises (SMEs) far more intensively and for a longer time than their Japanese counterparts. Without claiming that MITI has always hit the mark, the Japanese approach has suffered less from dirigiste excesses than France because Japanese business has been better organized and more able to push MITI toward market-conforming initiatives. Competition among multiple keiretsu in key sectors has bolstered the market logic in Japan. A further benefit of the embedded Japanese system is that it has extended the reach of the state. By sharing policy responsibility with employer organizations, MITI has been better able than French planners to implement policies that depend on the cooperation or participation of business. Employer organizations have provided an invaluable relay for programs targeted at SMEs. So, too, have the lead firms in the keiretsu, which have mobilized small subcontractors in their supply chains.

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4  The Crisis of the Statist Model For some 30  years, statist arrangements served France and Japan well. Both countries modernized and prospered, ascending to the ranks of the world’s leading economies. Their apparent success was celebrated and, in some countries, notably those of East Asia, emulated. More recently, however, all of the exemplars of state-led economic development have experienced profound crisis. In the early 1980s, France’s vaunted dirigiste model was repudiated by a leftist government that had been elected on a pledge to take dirigisme to new heights. Japan’s statist system, once the object of envy and fear among Japan’s trading partners, is now blamed for the country’s long period of economic stagnation and sky-high indebtedness. And in the wake of the 1998 East Asian crisis, the Korean offshoot of the Japanese model has been relabeled as “crony capitalism” and radically reformed. The crisis of the statist model has stemmed from three main developments. The first is economic. The statist approach is well adapted to efforts at industrial catch-up—to channeling resources to clearly identifiable strategic industries, copying and transferring existing technologies from the US, and supporting domestic champions. As France and Japan approached US levels of development and technology, however, identifying “winners” became much more challenging (Hall 1986; Katz 1998). Moreover, technologies had to be developed, not simply copied and adapted. Finally, the champions of the next phase of industrialization were not necessarily well-established multinationals; they could be renegades or start-ups largely unknown to the planners. A second development that has undermined the statist model has been growing pressure from the international environment. The European Common Market, constructed in the 1960s, greatly weakened the capacity of French planners to selectively protect markets. In the 1980s, Japan likewise came under pressure from an increasingly assertive United States to open markets and reduce its bilateral surplus. The US began to limit Japanese access in such key sectors as automobiles and semiconductors. Aggravating matters, the Plaza Accord of 1985 led to a 40 percent rise in the value of the Japanese yen, diminishing export competitiveness and encouraging many Japanese firms to shift production abroad. In the case of France, the pressures of European integration undermined the dirigiste model in a second, more fundamental way. The 1983 U-turn and repudiation of dirigisme were triggered by a currency crisis. The French franc was overvalued because France’s rate of inflation was much higher than that of its trading partners, making it difficult for French businesses to compete. In order to remain in the European Monetary System (EMS), France would need to tame inflation. French President François Mitterrand’s advisors were divided on how to respond (Bauchard 1986; Hall 1986; Cameron 1996). One side advocated a fortress France strategy, encompassing withdrawal from the EMS, a sharp devaluation of the franc, tightened exchange and trade controls, and the continuation of dirigiste industrial policy. The other side favored European solidarity, backed by a severe austerity program to eradicate inflation once and for all and stabilize the franc’s position within the EMS. After much agonizing, Mitterrand opted for the latter camp, and the process of dirigiste rollback began. The third and perhaps most important challenge to the statist model has been political. The statist model rested on a political foundation of conservative party hegemony that

The Transformations of the Statist Model    401 enabled governments to channel resources from consumers to investors, from labor to business. This labor-exclusionary strategy was feasible only as long as the conservative hold on power remained secure. Yet in both countries, rapid industrialization and urbanization ate away at the core conservative electorate of rural residents, farmers, and shopkeepers. These developments also swelled the ranks and mobilizational capacity of labor and the left. In France, a first shock to conservative hegemony occurred with the near revolution of May 1968. President Charles de Gaulle, who had dominated French politics for a decade, was no longer the unquestioned leader. Indeed, one year later, de Gaulle resigned from office when a referendum designed to re-legitimate his rule failed to secure a majority. Conservative hegemony was further eroded in 1971, when France’s communist and socialist parties forged a powerful “Union of the Left.” The right was able to cling to power by the smallest of margins during the 1970s, before being ousted by the left in the 1981 elections. Conservative hegemony under the LDP was also eroding in Japan. A first sign of LDP weakness occurred in the 1970s, when Japanese progressives supported by the Japan Communist Party (JCP) and Japan Socialist Party (JSP) took over the governorships of Tokyo, Osaka, Kyoto, and numerous other lower visibility regions. The results filtered up to the national level as well, with the LDP’s margin over other parties consistently declining. Although the LDP was able to fend off this challenge, the party found it increasingly difficult to balance demands for “pork and productivity,” in the words of T. J.  Pempel (2010), that is, for politically motivated construction projects and the protection of agriculture and small business, on the one hand, and economically motivated support for export industry and technological upgrading, on the other hand. In both France and Japan, the eclipse of conservative hegemony undermined the functioning of the statist model (Calder 1988; Levy 1999). Social spending increased, leaving less money for business investment. In Japan, government funds went predominantly to public works projects, which were designed to help construction firms and preserve employment, but did little to advance economic development. In France, despite a discourse of economic modernization, spending was concentrated on declining or uncompetitive enterprises (Berger 1981; E. Cohen 1989). Worse still, government aid tended to be used not to undertake much-needed restructuring and positioning in viable market niches, but rather to delay lay-offs and adjustment. The decision of French President François Mitterrand to choose European solidarity over the dirigiste model was motivated in no small part by the sentiment that dirigiste industrial policy had become counterproductive. By 1983, a number of firms were so heavily subsidized that it would have been far cheaper for the government to pay workers not to produce. In shipbuilding, for example, it was estimated that each job paying $10,000 in annual wages cost the government $15,000 to $45,000 in subsidies (E. Cohen 1989: 230–231). Although both the Japanese and French statist approaches experienced growing difficulties, French authorities made a more radical break with the statist model than their Japanese counterparts. Part of the reason for this difference is that France’s economic problems were more severe. In addition, international and European pressures were more constraining in the French case, with the EMS acting as a catalyst for the decision to move away from dirigiste industrial policy. Finally, domestic political and institutional factors pushed France toward a more sweeping set of changes. The French Fifth Republic provides far greater capacity for decisive action than Japan’s weak parliamentary system, with its revolving-door prime ministers and intra-LDP party factionalism.

402   Jonah D. Levy

5  Reforming the Statist System France and Japan have responded to the crisis of the statist model in very different ways. France broke sharply with statist industrial policy while deploying massive social and labor market measures to pacify and demobilize the victims of market-based restructuring. Japan has proceeded much more cautiously and incrementally, seeking to reform, not repudiate, the Japanese model. Instead of formal social policy, Japanese authorities have sought to preserve employment through a variety of costly measures, from public works programs to financial support for uncompetitive companies and banks. France’s course of reform rested on a double movement (Levy 2005, 2008; Levy et al. 2006). On the one hand, successive governments dismantled all of the characteristic institutions and policies associated with dirigiste economic policy-making. Industrial policy budgets were slashed, nationalized enterprises were privatized, inflation was tamed, state control of the credit system was lifted, and price and capital controls were eliminated. Looking across the wealthy democracies, one would be hard-pressed to find any country that shifted as far away from its postwar economic strategy as France. On the other hand, in order to make this move to the market politically acceptable, French authorities greatly expanded spending on social and labor market programs. Hundreds of thousands of workers were allowed to retire each year at age 55 or even 50 on a full pension, a guaranteed minimum income (RMI) was established to cover those who did not qualify or no longer qualified for unemployment benefits, and the government both directly employed and heavily subsidized the hiring of millions of unemployed workers. These programs reflect what I have called a “social anesthesia” logic (Levy 2005, 2008; Levy et al. 2006). Their goal is not just to alleviate human suffering, but also to compensate and demobilize the potential victims and opponents of market-led industrial adjustment. If the social anesthesia state helped France move away from its statist model, it has generated problems of its own. For starters, social anesthesia programs are extremely expensive. French state spending has risen since the 1983 U-turn, despite the winding down of industrial policy, and now exceeds 55 percent of GDP (Eurostat 2011). According to OECD statistics, France has the biggest welfare state in the world, devoting a larger share of GDP to social programs than even Sweden (OECD 2011b). Heavy social outlays have fueled budget deficits and tax increases. They have also crowded out public investment, a historic strength of the dirigiste model. For example, government spending on R&D declined from 1.26 percent of GDP in 1992 to 1.03 percent in 2002, at a time when the US, Scandinavia, and China were intensifying their investments in the knowledge economy (Ministry of Industry 2004). High cost is not the only problem of the social anesthesia state. The French approach is passive, paying people not to work. It provides few benefits beyond preventing people from resisting market-led adjustment. In addition, since most social spending is financed through payroll taxes, the social anesthesia state discourages hiring, contributing to France’s very high rate of unemployment. Japan’s course of reform has not contained the kind of highly visible shift seen in France in 1983. The initial response to the bursting of the Japanese bubble in 1990 was to prop up the system and await the return of better times (Levy et al. 2006; S. Vogel 2006, 2013;

The Transformations of the Statist Model    403 Pempel 2010). In particular, state authorities encouraged banks to keep non-performing loans to ailing enterprises on the books rather than foreclosing. This tack allowed effectively bankrupt “zombie companies” to continue operating and held down unemployment figures, but it delayed necessary restructuring and required vast subsidies from the state. Faced with continuing economic stagnation, Japanese authorities also launched a series of expensive public construction programs. These projects soaked up some excess labor, but were insufficient to relaunch growth, and many were located in remote, sparsely populated areas, providing little economic benefit. In the late 1990s, with the economy still ailing, Japanese leadership began shifting from trying to buy time to introducing elements of structural reform (S. Vogel 2006, 2013). Financial liberalization, tax incentives, and changes to bankruptcy law and regulatory policy encouraged banks to restructure or liquidate insolvent companies. By 2005, Japanese financial institutions were no longer carrying large portfolios of non-performing loans and could steer resources toward developing sectors. Labor markets were also reformed, making it easier for companies to lay off workers or to hire part-time and temporary employees. Finally, Japanese reformers moved to clip the wings of the bureaucracy, particularly MITI (renamed METI in 2000) and the Ministry of Finance, which were seen as having mismanaged the economy (Pempel 2010; S. Vogel 2010). A series of reforms stripped METI and MOF of many of their prerogatives, centralized power in the prime minister and cabinet, and increased political control of the bureaucracy. In response to these reforms as well as economic pressures, Japanese companies undertook substantial restructuring. Part of this adjustment took the form of outsourcing to cheaper production sites abroad, but Japanese companies also reformed at home. Their strategy was to become leaner and more cost-sensitive while preserving the traditional strengths of the Japanese model, such as skilled, dedicated employees, relational contracting, and close ties to a main bank (S. Vogel 2006). For example, lifetime employment was retained, but it covered fewer employees, and in many cases, the guarantee no longer meant employment in a specific job with a specific firm, but rather some kind of job in some kind of firm within a conglomerate’s array of enterprises. Japanese companies engaged in similar renegotiations with their main banks and suppliers, adjusting relationships rather than severing them. Japan’s course of reform, like that of France, displays both strengths and limitations. On the plus side, Japan has conducted far-reaching economic restructuring without the kind of wrenching repudiation of its postwar model and social dislocation witnessed in France. Unemployment has remained low by Western standards, rarely reaching five percent, and valued elements of the Japanese model have been retained. In addition, Japan has been able to avoid the permanent, costly expansion of social programs that has been so damaging to French public finances. Finally, for all its very real problems, Japanese manufacturing remains among the world leaders, whereas France’s industrial base has been severely hollowed out and now represents roughly the same share of value-added as that of Britain (Gaffard 2010; Didier and Koléda 2011). On the downside, Japan has experienced 25 years of economic stagnation, during which its competitive position has slipped relative to both the US and challengers in East Asia (S. Vogel 2013). In 2011, the country ran its first trade deficit in decades. Although unemployment appears to be a relatively bright spot, Japan, like other affluent democracies, has seen a growing gap between insiders and outsiders, with women and young people being

404   Jonah D. Levy increasingly consigned to low-paid, part-time and temporary jobs. Moreover, the underdevelopment of the Japanese welfare state means that the experience of unemployment imposes far greater hardship than in countries like France. Perhaps the biggest liability of the Japanese strategy concerns public finances. The effects of prolonged slow growth along with the costs of multiple stimulus packages and bank bailouts have sent Japanese debt soaring to over 200 percent of GDP, the highest figure in the OECD (OECD 2011a). Taxes are lower in Japan than in most OECD countries, so there is room to raise revenues in order to tackle debt and deficits, but paying these bills will deprive Japanese authorities of the resources needed to improve business prospects or address gaps in social protection.

6  Contemporary Issues and Debates The ongoing difficulties of France and Japan raise fundamental questions about the reform of the statist model. The first concerns the alternatives to the traditional approach. France and Japan have moved away from voluntarist industrial policy, but in neither country can one find substantial support for the neoliberal model, with its slimmed-down, hands-off state. The question is whether there is an alternative reform trajectory for a country exiting the statist industrial policy model. Might statism be recast rather than dismantled? One intriguing possibility is the Nordic social democratic or social investment model (which is also discussed in Chapters 21 (Huo and Stephens) and 37 (Evans and Heller), of this volume). The Nordic countries are big spenders like France, but they devote less to passive, social anesthesia measures like early retirement and minimum income guarantees. Instead, these countries have made heavy investments in basic education, childcare, elderly care, computer literacy, Internet access, public research, and infrastructure (Esping-Andersen 1999; Huber and Stephens 2001; Pontusson 2010). The social investment state provides numerous economic benefits that France’s social anesthesia state does not: a well-trained, computer-literate workforce; high rates of employment, especially among women and older workers; and support for innovation-based competition and high-end services. The performance of the Nordic countries has been very strong, from international educational comparisons to macro-economic outcomes. This strong performance suggests that, at a minimum, the social investment state is not imposing significant harm and, more likely, offers a way of combining high levels of state spending with economic growth and competitiveness. The fact that the Nordic countries may have forged a viable statist model does not necessarily mean that this model is available to countries like France and Japan. Ideally, from the social democratic perspective, it would have been better if France had moved from the dirigiste state to the social investment state, rather than to the social anesthesia state. Perhaps this option is still available to Japan today. It is by no means clear, however, that a social investment strategy is politically viable at a time when millions of workers are losing their jobs. In contrast to social investment, social anesthesia provides immediate relief, which is why this tack was so attractive to French reformers in the 1980s.

The Transformations of the Statist Model    405 Another possibility is that the social investment state may be the next phase for France after a long period of the social anesthesia state. Again, though, it is very difficult to curtail passive measures in hard economic times, when recipients lack employment alternatives. It is also uncertain that countries such as France and Japan possess the institutional capacity to run the social investment model. It is even more questionable that leaders could ever have a political mandate for such a transformation. The crisis of the statist model has cast suspicion on all kinds of state spending, so a move toward the social democratic model would have to contend with neoliberal arguments for simply slimming down a bloated, dysfunctional state. The experiences of France and Japan hold important implications not only for the operation and reform of existing statist systems, but also for the question of whether developing countries should adopt the statist model in the first place. It is not enough to argue that French and Japanese planners outwitted the market during the golden age of the statist model. France began dismantling that model almost 30 years ago, while the bursting of the Japanese bubble and ensuing crisis began over 20 years ago. The subsequent struggles to dismantle, reinvent, or recast the postwar statist model must also be part of any balance sheet. At some point, whether because of economic changes, globalization, or domestic politics, the statist model seems to reach its limits. Neither France nor Japan has forged a particularly attractive next phase. France dismantled its statist apparatus, but only by building an even more expensive social anesthesia state, which has generated significant problems of its own. Perhaps for this reason, France’s move away from statist industrial policy has failed to revive growth, investment, or employment. Japan has proceeded incrementally, seeking to prevent bankruptcies and preserve employment, but this strategy has proven extremely expensive, pushing state debt to over 200 percent of GDP. It has also failed to revive growth or employment creation. Of course, the evolution of the French and Japanese systems remains a work in progress, and satisfactory solutions may yet be found. Still, in weighing the advantages and disadvantages of the statist model, it is important to understand that statist systems must not only be established, but also—most likely, at some point—be fundamentally reformed. In the end, much of the judgment of the success or failure of the statist model rests on the not entirely resolved question of how to exit or reform the statist model once the initial catch-up phase of industrialization has passed.

Acknowledgment The author wishes to thank Peter Hall, T. J. Pempel, and Steven Vogel for comments on earlier drafts of this chapter.

References Amsden, Alice H, 1989. Asia’s Next Giant: South Korea and Late Industrialization. Oxford, UK: Oxford University Press.

406   Jonah D. Levy Anchordoguy, Marie, 1989. Computers Inc.:  Japan’s Challenge to IBM. Cambridge, MA: Harvard University Press. Bauchard, Philippe, 1986. La guerre des deux roses: du rêve à la réalité, 1981–1985 [The War of the Two Roses: From Dream to Reality, 1981–1985]. Paris, France: Bernard Grasset. Beason, Richard, and Weinstein, David E, 1996. “Growth, Economies of Scale, and Targeting in Japan (1955–1990).” The Review of Economics and Statistics 78 (2, May): 286–295. Berger, Suzanne, 1981. “Lame Ducks and National Champions:  Industrial Policy in the Fifth Republic.” In The Fifth Republic at Twenty, ed William G Andrews, and Stanley Hoffmann, 160–178. Albany, NY: SUNY Press. Birnbaum, Pierre, 1977. Les sommets de l’État: essai sur l’élite du pouvoir en France [The Summits of Power: Essay on the Power Elite in France]. Paris, France: Seuil. ——, 1978. La classe dirigeante française: dissociation, interpénétration, intégration [The French Ruling Class: Dissociation, Interpenetration, and Integration]. Paris, France: PUF. Calder, Kent E, 1988. Crisis and Compensation: Public Policy and Political Stability in Japan, 1949–1986. Princeton, NJ: Princeton University Press. Cameron, David R, 1996. “Exchange Rate Politics in France, 1981–1983: The Regime-Defining Choices of the Mitterrand Presidency.” In The Mitterrand Era:  Policy Alternatives and Political Mobilization in France, ed R Anthony Daley, 56–82. New York: NYU Press. Cohen, Élie, 1989. L’État brancardier: politiques du declin industriel (1974–1984) [The StretcherBearer State: Policies of Industrial Decline (1974–1984)]. Paris, France: Calmann-Lévy. ——, 1992. Le colbertisme “high tech”: économie des Telecom et du grand projet [High-Tech Colbertism: The Economics of Telecoms and the Grand Project]. Paris, France: Hachette. ——, and Bauer, Michel, 1985. Les grandes manoeuvres industrielles [The Big Industrial Maneuvers]. Paris, France: Belfond. Cohen, Stephen S, 1977. Modern Capitalist Planning:  The French Model. Berkeley, CA: University of California Press. ——; Galbraith, James, and Zysman, John, 1982. “Rehabbing the Labyrinth: The Financial System and Industrial Policy in France.” In France in the Troubled World Economy, ed Stephen S Cohen and Peter A Gourevitch, 49–75. London, UK: Butterworth. Didier, Michel, and Koléda, Gilles, 2011. Compétitivité France-Allemagne: le grand écart [French and German Competitiveness: The Big Gap]. Paris, France: Économica. Dore, Ronald P, 1986. Flexible Rigidities: Industrial Policy and Structural Adjustment in the Japanese Economy, 1970–80. Stanford, CA: Stanford University Press. ——, 2000. Stock Market Capitalism: Welfare Capitalism. Japan and Germany versus the Anglo-Saxons. Oxford, UK: Oxford University Press. Dumez, Hervé, and Jeunemaître, Alain, 1989. Diriger l’économie: l’État et les prix en France, 1936-1986 [Directing the Economy: The State and Prices in France, 1936–1986]. Paris, France: L’Harmattan. Esping-Andersen, Gøsta, 1999. Social Foundations of Postindustrial Economies. Oxford, UK: Oxford University Press. Eurostat, 2011. “Total General Government Expenditure in % GDP.” Available at: http://epp. eurostat.ec.europa.eu/tgm/table.do?tab=table&init=1&language=en&pcode=tec00023& plugin=1 (last consulted 24 January 2014). Evans, Peter B, 1994. Embedded Autonomy: States and Industrial Transformation. Princeton, NJ: Princeton University Press. Friedman, David, 1987. The Misunderstood Miracle: Industrial Development and Political Change in Japan. Ithaca, NY: Cornell University Press.

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408   Jonah D. Levy ——, Miura, Mari, and Park, Gene, 2006. “Exiting Etatisme? New Directions in State Policy in France and Japan.” In The State after Statism: New State Activities in the Age of Globalization and Liberalization, ed Jonah D Levy, 92–146. Cambridge, MA:  Harvard University Press. ——, and Samuels, Richard J, 1991. “Institutions and Innovation: Research Collaboration as Technology Strategy in Japan.” In Strategic Partnerships: States, Firms, and International Competition, ed Lynn K Mytelka, 120–135. London, UK: Pinter. List, Friedrich, 1916 [1842]. The National System of Political Economy. London, UK: Longmans, Green and Company (first published in German 1842). Milward, Alan S, 1992. The European Rescue of the Nation State. Berkeley, CA: University of California Press. Ministry of Industry, 2004. L’effort français de recherché et développement (R&D) [The French Effort in Research and Development (R&D)]. http://www.industrie.gouv.fr/observat/bilans/bord/cpci2004/cpci2004_f21b.pdf (last consulted 24 January 2014). OECD, 2011a. OECD Economic Surveys: Japan. Paris, France: OECD. ——, 2011b. “Social Expenditure—Aggregated Data.” Available at:  http://stats.oecd.org/ Index.aspx?datasetcode=SOCX_AGG (last consulted 24 January 2014). Patrick, Hugh, and Rosovsky, Henry, 1976. “Japan’s Economic Performance:  An Overview.” In Asia’s New Giant: How the Japanese Economy Works, ed Hugh Patrick and Henry Rosovsky, 1–61. Washington, DC: Brookings Institution Press. Pempel, TJ, 2005. “Revisiting the Japanese Economic Model.” In Japan and China in the World Political Economy, ed Saadia M Pekkanen and Kellee S Tsai, 29–44. London, UK: Routledge. ——, 2010. “Between Pork and Productivity: The Collapse of the Liberal Democratic Party.” Journal of Japanese Studies 36 (2): 227–254. ——, and Tsunekawa, Keiichi, 1979. “Corporatism Without Labor? The Japanese Anomaly.” In Trends Toward Corporatist Intermediation, ed Philippe C. Schmitter and Gerhard Lehmbruch, 231–270. Beverly Hills, CA: Sage. Pontusson, Jonas, 2010. “Once Again a Model: Nordic Social Democracy in a Globalized World.” In What’s Left of the Left? Democrats and Social Democrats in Challenging Times, ed James Cronin, George Ross, and James Shoch, 89–115. Durham, NC: Duke University Press. Prestowitz, Clyde V, 1988. “Japanese vs. Western Economics: Why Each Side is a Mystery to the Other.” Technology Review 91 (4): 27–36. Samuels, Richard J, 1987. The Business of the Japanese State: Energy Markets in Comparative Perspective. Ithaca, NY: Cornell University Press. ——, 1994. “Rich Nation, Strong Army”: National Security and the Technological Transformation of Japan. Ithaca, NY: Cornell University Press. Servan-Schreiber, Jean-Jacques, 1968. Le défi américain [The American Challenge]. Paris, France: Editions Denoël. Shonfield, Andrew, 1965. Modern Capitalism: The Changing Balance of Public and Private Power. Oxford, UK: Oxford University Press. Suleiman, Ezra N, 1974. Politics, Power and Bureaucracy in France: The Administrative Elite. Princeton, NJ: Princeton University Press. Tilton, Mark, 1996. Restrained Trade: Cartels in Japan’s Basic Materials Industries. Ithaca, NY: Cornell University Press. Trezise, Philip H, 1984. “Japanese Miracles Revisited.” Society 22 (1, November): 36–40.

The Transformations of the Statist Model    409 Tyson, Laura D’Andrea, and Zysman, John, 1989. “Development Strategy and Production Innovation in Japan.” In Politics and Productivity:  The Real Story of Why Japan Works, ed Chalmers A Johnson, Laura D’Andrea Tyson, and John Zysman, 59–140. Cambridge, MA: Ballinger. Vogel, Ezra F, 1987. “Japan: Adaptive Communitarism.” In Ideology and National Compet­ itiveness: An Analysis of Nine Countries, ed George C Lodge and Ezra F Vogel, 141–171. Boston, MA: Harvard Business School Press. Vogel, Steven K, 2006. Japan Remodeled: How Government and Industry are Reforming Japanese Capitalism. Ithaca, NY: Cornell University Press. ——, 2010. “Japan’s Long Road to Competitive Politics.” Current History 109 (728, Sept­ember): 233–236. ——, 2013. “Japan’s Information Technology Challenge. The Third Globalization.” In The Third Globalization: Can Wealthy Nations Stay Rich in the Twenty-First Century? ed Dan Brenitz and John Zysman, 350–372. Oxford, UK: Oxford University Press. Woo-Cumings, Meredith, ed, 1999. The Developmental State. Ithaca, NY: Cornell University Press. Zysman, John, 1978. “The French State in the International Economy.” In Between Power and Plenty: Foreign Economic Policies in Advanced Industrial States, ed Peter J Katzenstein, 255–293. Madison, WI: University of Wisconsin Press. ——, 1983. Governments, Markets, and Growth: Financial Systems and the Politics of Industrial Change. Ithaca, NY: Cornell University Press.

Chapter 21

From I n dustr i a l Cor por atism to the Soci a l I n v estm en t State Jingjing Huo and John D. Stephens

1  The Concept of Corporatism The 1980s literature on corporatism presented two interrelated but different definitions of corporatism, one that emphasized the strength and centralization of employer organizations and union confederations, and one that focused on tripartite bargaining and policy formation by these centralized interest associations and the state (Schmitter 1982; Lehmbruch 1984). Our working definition of corporatism begins with the latter but incorporates the former: in corporatist political economies, peak associations of capital and labor meet with the state to strike bargains over broad social and economic policy, including state expenditure, taxation, wage policy, and so on. In practice, only highly centralized interest groups can enforce such a bargain. A key element, perhaps the key element, of the bargain is that the union confederations agree to restrain wage growth in return for expansion of the “social wage,” that is, welfare state benefits, both transfers and services, that benefit their members. There is some disagreement about which countries should be classified as corporatist. Gerhard Lehmbruch (1984), Peter Katzenstein (1985), and John Stephens (1979) agree that Austria, Belgium, the Netherlands, Denmark, Norway, and Sweden are corporatist political economies. Stephens includes Finland, excluded by Katzenstein because he contends that it had no ideology of social partnership, which is one of his criteria for classifying a country as corporatist. However, Finland does fit both parts of our definition, so we include it in our group of corporatist countries in this chapter. As one can see from Table 19.1 of the Introduction to Part III (Levy et al., Chapter 19, Section 2, this volume), Finland is similar to the other corporatist countries in its labor market institutions, such as union strength and contract coverage, wage coordination, and wage bargaining centralization, as well as in outcomes such as wage dispersion and strike rates.

From Industrial Corporatism to the Social Investment State    411 Katzenstein includes Switzerland while Lehmbruch considers it a marginal case. Kriesi’s (1980, 1982) network and decision-making analysis shows that the unions and political left are not very integrated into the Swiss decision-making system. This is reflected in the very low level of redistribution effected by the Swiss tax and transfer system (Chapter 19, Section 2, Table 19.2). Thus, while it is clear that the Swiss industrial relations system delivers effective wage restraint (Fluder and Hotz-Hart 1998) and very low levels of industrial conflict (Chapter 19, Section 2, Table 19.1), workers are not compensated for their wage restraint with increases in the social wage to the same degree that they are in the corporatist countries. The same can be said for Germany, which Lehmbruch (1984: 66) classifies as a case of “medium corporatism.” While it does deviate somewhat from the corporatist countries in terms of indicators of labor market institutions and their outcomes (Table 19.1), the German welfare state is not any more redistributive than the liberal welfare states, though inequality is lower because of the low levels of wage inequality delivered by the wage bargaining systems.1 From Table 19.4 (Chapter 19, Section 2), one can see that Switzerland and Germany differ from the corporatist political economies in two ways, central bank independence and external capital controls. The measure of central bank independence is from Freitag (1999). It varies from 1 to 3, with 1 indicating high levels of independence from government and 3 indicating low levels. The measure of capital controls is based on Quinn and Toyoda’s (2008) measures. We take the average of the degree of capital account openness and the degree of current account openness and invert the scores so that a low score indicates few capital controls. The index varies from 0 to 100. One can see that Switzerland and Germany are distinct in that they have independent central banks and almost no capital controls. We will argue later that capital controls and dependent central banks were key elements of the economic models of the corporatist political economies in the Golden Age of postwar capitalism. Our corporatist political economies and the two marginal cases of corporatism make up the universe of Peter Hall and David Soskice’s (2001) industry-coordinated market economies (CMEs). In making the distinction between coordinated market economies and liberal market economies, David Soskice (1999) emphasizes employer organization and relationships between companies and financial institutions as defining characteristics of production regimes. Employer organization takes three distinctive forms:  coordination at the industry or subindustry level in most continental and Nordic economies (industry-coordinated market economies, CMEs); coordination among groups of companies across industries in Japan and Korea (group-coordinated market economies); or absence of coordination in the deregulated systems of the Anglo-American countries (uncoordinated or liberal market economies, LMEs). In coordinated economies, employers are able to organize collectively in training their labor force, sharing technology, providing export marketing services and advice for research and development (R&D) and for product innovation, setting product standards, and bargaining with employees. The capacity for collective action on the part of employers shapes stable patterns of economic governance encompassing a country’s financial system, its vocational training, and its system of industrial relations. 1  A caveat here is that the figures in the table are for the working age population. Germany, like most other Christian democratic welfare states, has a comprehensive pension system with a high replacement rate. Thus, if one examines the whole population, the German tax and transfer system is much more redistributive than those of the liberal welfare states.

412    Jingjing Huo and John D. Stephens

2  Postwar Corporatism Both Katzenstein (1985) and David Cameron (1978, 1984) note the strong association of corporatism with economic openness. These are all small countries with small domestic markets. Due to economies of scale, they are forced to export and thus to maintain international competitiveness. For Katzenstein, trade openness is a precondition for corporatist compromise; it provides the incentive for compromise on the part of capital and labor and political parties of the left and right. As one can see from Table 19.4 (Chapter 19, Section 2), the corporatist countries are distinctive in term of their degree of trade openness. As noted, the core of the corporatist compromise is social wage expansion in return for wage restraint. With strong unions and high union contract coverage, it is essential that wage bargaining be centralized and coordinated, and this is enabled by centralized union and employer confederations. The state’s role in these economies goes far beyond simply providing a social wage, or, in Katzenstein’s (1985: 78) terminology, domestic compensation to facilitate adaptation to international economic change in an open economy. Katzenstein (1985: 27, 78) describes the role of the state as pursuing an industrial policy of “flexible industrial adjustment.” By this, he means that these countries are too small to embark on a policy of developing “national champions” to break into entirely new product markets and thus policy concentrates on helping enterprises make incremental adjustments to remain competitive. In recent work on changing patterns of corporatism in the Nordic countries, Darius Ornston (2012, 2013) has termed the traditional corporatism of the countries discussed here “conservative corporatism,” which sounds pejorative but does accurately capture the idea that upgrading change in the product markets, though constant (i.e., constantly changing), is incremental. This, of course, is consistent with Hall and Soskice’s (2001) observation that CMEs are good at “incremental innovation” while “radical innovation” is the strong suit of LMEs. According to Katzenstein (1985), the actual policy instruments by which the state in corporatist systems implemented flexible industrial adjustment varied during the postwar to 1980s period. For example, in Austria and Norway—and we would add Finland—state ownership was very important while in Denmark and Sweden the state sector in industrial production was small. There are, however, several generalizations we can make with the help of Table 19.4. First, as previously noted, in the Golden Age, all of our corporatist countries except the Netherlands were characterized by high degrees of capital controls and low levels of central bank independence. This combination facilitated a policy of low real interest rates, since, with capital controls, the countries could have lower interest rates than other countries without currency depreciation, and government control of central banks allowed governments to set interest rates. This means that these countries were stimulating the economy on the monetary side. In order to avoid inflationary pressures, these countries (with the exception of Belgium) had conservative fiscal policies, running surpluses across economic cycles. Table 19.4 also includes the Organisation for Economic Co-operation and Development (OECD) measure of product market regulation in seven non-manufacturing sectors: telecoms, electricity, gas, post, rail, air passenger transport, and road freight. The overall measure and public ownership measure are included in the table. The corporatist countries

From Industrial Corporatism to the Social Investment State    413 rank high on both of these measures in this period, but they are rather similar to the other countries in the table except for the United Kingdom, the United States, and Canada. Next, we describe the experience with postwar corporatism for each of the countries covered in this chapter. Due to the power of a small number of very large, internationalized, oligopolistic firms Sweden did not move to a statist model like Norway and Finland.2 The Swedish version of the Nordic supply-side model focused on labor supply, influencing investment only indirectly. The contours of this policy emerged in the famous Rehn-Meidner model named for the two LO (the Swedish Confederation of Trade Unions) economists—Gøsta Rehn and Rudolf Meidner—who developed it (Meidner and Öhman 1972; Pontusson 1992: 57–96). The model called for LO to demand equal pay for equal work across the economy, the solidaristic wage policy. This wage policy would force labor-intensive, low productivity enterprises to rationalize or go out of business. The displaced labor would then be moved to high productivity sectors through the active labor market policy. The active labor market policy, by reducing structural unemployment, would further facilitate wage restraint and thus reduce the tradeoff between unemployment and inflation, moving the Phillips curve down and to the left. The hegemonic, and economic, weakness of Norwegian capital is important in accounting for the statist trajectory of economic policy as compared to Sweden’s. In large part, this reflected the objective reality that it would be difficult for Norwegian business to mobilize the capital necessary for an ambitious program of industrialization and structural transformation and, also in part, their weaker ability to oppose such a program had they wanted to. The Norwegian model was characterized by direct intervention of the state through active industrial policy, low interest rates and channeling of credit to industry facilitated by extensive state ownership of industry and of banks, and tripartite wage bargaining in which the state—unlike in Sweden—played an active and not just facilitative role. The credit policies of the government were sufficiently important for the growth and employment policies that Mjøset and Andersson (1986: 121) has characterized the Norwegian model as “credit socialism.” Active labor market policy was less central to the Norwegian model. Finnish economic and political development up to the mid-1980s can be divided into two distinct phases with the watershed being the mid-1960s (Alestalo and Uusitalo 1986; Andersson et al. 1993). The first phase was a period of state-led industrialization based on export of wood and wood products. Finnish labor was largely excluded from the planning process in this period. The mid-1960s witnessed a shift in the political arena with an increase in left strength and increasing cooperation between the social democrats and the communists, and in the labor arena with trade union movement unification and a doubling of union membership. As a result, the Finnish regime moved from statist concertation to tripartite corporatism. In this same period, economic policy shifted to an emphasis on diversification of large industrial firms, both state and private, to manufacturing exports, and to increasing exports to Sweden and the Soviet Union (Andersson et al. 1993: 10).

2  For a more extended discussion of the Golden Age models of the seven countries, see JingJing Huo and John Stephens (2012: 6–15).

414    Jingjing Huo and John D. Stephens Denmark’s only natural resource is fertile soil, thus agricultural products, above all processed foods from the dairy and animal husbandry branches, dominated exports until the 1960s. In sharp contrast to, above all, Sweden, industry was traditionally small scale and craft oriented. As a consequence of the above, agrarian interests were stronger and the left weaker in Denmark than in Sweden or Norway. Given the social democrats’ weakness and need for bourgeois coalition partners, it is not surprising that the social democrats’ postwar statist planning initiative went nowhere (Esping-Andersen 1985: 206). Danish financial markets were strongly integrated with international credit markets in the Golden Age and thus interest rates were higher than in the other Nordic countries (Mjøset and Andersson 1986). With no long-term supply-side policies, government efforts to combat unemployment were predominantly short-term counter cyclical demand management measures. Postwar Austrian corporatism is notable for two characteristics: a large public sector and enormous organizational strength: unionization, for example, was close to 80 percent in the public sector (Hemerijck et al. 2000; Obinger et al. 2010; Afonso and Mach 2011). Social partners in Austria explicitly prioritized full employment over wage increases. To sustain job creation, the state combined demand stimulation with a hard currency to ride out shocks in the 1970s. The success of this approach required containment of inflationary pressure, and public-sector unions took the lead in exercising wage restraint, which allowed the state to engage in demand pumping more effectively. Before the onset of the mid-1980s, the unemployment rate did not exceed four percent. The three components of this success—demand stimulation, hard currency, and wage restraint—came to be known as Austro-Keynesianism (Hemerijck et al. 2000; Obinger et al. 2010). In contrast to Austro-Keynesianism, the Belgian state did not engage in systematic demand pumping and was unable to achieve wage restraint. The wage failure can be traced directly to the organizational weakness of Belgian social partners, again in contrast to Austria. Furthermore, the Belgian state also had less leverage on social partners through the publicsector route because, unlike Austria, there was less extensive nationalization of core industries (Jones 2008; Hemerijck et al. 2000; Houwing and Vandaele 2011). Instead of organizational sinew in the economy, the Belgian state relied on legislative intervention to combat wage inflation via decree. From 1982 to 1986, for example, it suspended wage negotiations altogether. In the absence of either wage peace or fiscal stimulation, the state’s macro-economic adjustment consisted primarily of a combination of hard currency and an aggressive push (together with the Netherlands) toward regional integration to find new markets (Jones 2008). In the Netherlands, like Belgium, there was no extensive nationalization, because this option was unsuitable for the country’s international and service-oriented core industries (Hemerijck et al. 2000). To facilitate the growth of exporting-manufacturing industries, the state initially focused on broadening access to the more prosperous Belgian consumer market, and later on more extensive regional trade integration in Western Europe. As in Belgium, the Dutch state relied heavily on legislative intervention to contain wage inflation, because social partners became notably fragmented in organization, especially on the labor side. Direct state intervention persisted until the Wassenaar Agreement of 1982. This agreement revitalized wage concertation, now with greater focus on labor market flexibility. This paved the way for the “Dutch miracle” in (part-time) employment after the 1990s (Visser and Hemerijck 1997). Instead of Austrian demand-pumping, both Dutch and Belgian policies focused on marketconfirming measures to ease trade integration (Jones 2008).

From Industrial Corporatism to the Social Investment State    415

3  Postwar Corporatism Transformed: Toward Social Investment Since the mid-1980s, traditional policies of corporatist countries have been increasingly undermined by demographic and socio-economic trends from within and globalization from without. Currency union and capital deregulation led to the loss of monetary, interest rate, and fiscal expenditure policies as flexible tools of economic stimulation. While these losses hit all OECD countries, as outlined in the Introduction to Part III (Levy et al., Chapter 19, this volume), they further eroded some key elements of the postwar corporatist model.3 For example, the role of the state declined, especially through the privatization of state-owned enterprises. Capital market deregulation and increased central bank independence undermined the cheap credit model which fueled business investment and economic growth (see Chapter 19, Section 2, Table 19.4). All corporatist countries retrenched welfare benefits—the core social insurance mechanism that underpins these countries’ deep training systems—to some limited extent. However, while some components of postwar corporatism withered away, others continued to function relatively well. For example, systems of corporatist bargaining remain stable, despite some limited decline in union density (Chapter 19, Section 2, Table 19.1). State ownership may have receded, but state intervention remains active, for example in labor market training and education. Even more crucially, the corporatist model is in continuous innovation, inventing new policy instruments to replenish the losses inflicted on its postwar formula. These new instruments center on investment in high quality human capital and technological capabilities, which move corporatism toward a social investment state and knowledge-intensive service economy. Such innovation of corporatism into the twenty-first century is the focus of this section. After the end of the Golden Age, corporatist countries faced new economic challenges in both production and job creation, which turned out to be opportunities for the state to assert itself in the economic landscape. In some countries, the state assumed an important role on the supply side of the economy: the creation and preservation of high-quality human capital. The corporatist state implemented this new task of social investment through two channels. First, the state used public funding to support policy instruments that increase the stocks of high-quality human capital, such as early childhood education and care (daycare), active labor market training, sick pay, and formal education at all levels (Chapter 19, Section 2, Tables 19.1 and 19.3). Second, the state used additional intervention to reshape traditionally self-governing coordination institutions so that they increase the economic returns of human capital stocks, in particular in capturing large market shares in knowledge-intensive industries through successful radical technological innovation.4 3 

An earlier version of this chapter contains detailed analyses of these change processes in the seven corporatist cases (Huo and Stephens 2012: 14–18). 4  Torben Iversen and John Stephens (2008) and Jonas Pontusson (2011) also argue that the development of knowledge-intensive industries, such as ICT, in the Nordic countries was linked to their high public investments in human capital.

416    Jingjing Huo and John D. Stephens On the production front, as the varieties of capitalism (VoC) literature points out, the corporatist economies had for many years consolidated an institutional foundation for comparative advantages in skill-intensive incremental innovation in relatively mature and traditional manufacturing industries (Hall and Soskice 2001). However, the core manufacturing sectors went into decline and were eclipsed by the growing importance of radical innovation in knowledge-intensive sectors, such as telecommunications and biotechnology. From a pure varieties of capitalism perspective, according to which corporatist advantages stem largely from non-state self-governing coordination mechanisms, these countries appear ill prepared for this sectoral transition. Indeed, the focal mechanisms of self-governing coordination, such as patient capital and the internal labor market, all seem to impede rather than facilitate radical innovation. However, as it turns out, at least in the Nordic subset of corporatist countries, the state played a crucial role in recasting the functions of these indigenous coordination networks, so that their synergies are put to use in the competition for leading-edge radical innovation sectors. These countries, in the end, succeeded in outcompeting even the Anglo-Saxon economies normally understood to be advantaged in radical knowledge-intensive innovation. These are precisely the corporatist countries where political and popular support for the role of the state has been historically strong and enduring, that is, the Nordic countries. By contrast, corporatist countries with less state penetration (such as Belgium and the Netherlands) or with large public sectors but without Nordic levels of political or popular support (such as Austria) failed to make a similar breakthrough as their mature industries declined. It is no accident that the differing trajectories of the Nordic countries and the continental countries are related to their differing welfare state models as outlined in Chapter 19 (Levy et al.) and in Chapter 24 (Obinger and Starke), both this volume. The expansion of early childhood education and care in the Nordic countries was motivated in the first instance by the goal of reconciling work and family and thereby increasing women’s labor force participation. The universalization of general secondary school education and the expansion of tertiary education were motivated by the goal of increasing educational opportunity for the children of the less well to do. In the course of the 1990s these quintessential social democratic policies, along with active labor market policies, were reconceptualized as social investments (Jenson 2011). Per Hull Kristensen and Kari Lilja (2011) provide a detailed account of how the Nordic countries transformed themselves from exporters of processed primary products—agricultural goods for Denmark, wood and wood products for the other three countries—and Fordist manufactured products, especially in the case of Sweden, to producers of hightech goods and services, particularly in information and communications technology (ICT). The ICT breakthrough was especially phenomenal in Finland and Sweden, resulting in annual per capita growth rates of over three percent in those two countries in the period 2000–07, well above the average of 2.3 percent of all advanced economies. This success, as it turns out, was not pumped up by direct and large increases in state spending on R&D. While Table 19.4 shows a large increase in aggregate R&D expenditure in Sweden, Finland, and Denmark, the state portion of such increase was five to ten times smaller, that is, 0.1 percent, 0.4 percent, and 0.2 percent of GDP respectively (Stephens 2012). Norway, furthermore, did not experience more than marginal R&D growth in either the state or private sector, which according to Kristensen and Lilja (2011) is because

From Industrial Corporatism to the Social Investment State    417 continuing windfalls from oil exploration are delaying the moment when economic adjustment becomes imperative. Without increasing public-sector R&D funding, what did the state do to promote radical innovation? As alluded to earlier, while the Nordic corporatist state increased stocks of human capital through funding (more on this strategy later), when it comes to innovation as an instrument of increasing the economic returns of human capital, the state has relied instead on policy intervention in traditional corporatist institutions. Ornston (2012, 2013) characterizes this state-directed transformation of non-state, firm-level coordination institutions as “creative corporatism,” in contrast to two other possible developments for corporatist countries, respectively “conservative corporatism” (which preserves pre-existing coordination institutions tuned toward incremental innovation in mature industries) and “competitive corporatism” (which uses these institutions to contain costs and close the gap with more market-oriented liberal market economies, as in Ireland). How did Danish, Swedish, and Finnish firms and unions transform their corporatist institutions from “conservative” corporatism to “creative” corporatism, as opposed to the across-the-board cost cutting of “competitive” corporatism? Although not implemented in reality, the threatening prospect of state confrontation as the ultimate consequence of reform inertia increased social partners’ willingness to promptly embrace institutional adaptation. As Ornston (2012, 2013) explains, this firm-level transformation was not possible without state-level, political, intervention by policy-makers. Although the exact process of reform differed by country, in all three cases the state prodded economic actors to adapt their existing institutions to creative corporatism, by making a credible threat of otherwise unilaterally imposing cost-cutting reforms. Although the state encouraged both firms and unions to change, its intervention was particularly active with regard to organized labor. Just as the state used its own weakness in the international economy (e.g., the growing constraint of the European Union) as a credible commitment to reform, the growing weakness of unions (e.g., Finnish unemployment was 17 percent in the early 1990s) prevented them from credibly committing to resist reform. Instead, organized labor’s rational best response was to accept investment-oriented new practices in exchange for some control over the content of these new practices. Ornston (2012, 2013) argues that in moving to creative corporatism, rather than abandoning coordination, the Nordic state took advantage of pre-existing stocks of cooperative apparatus to implement changes in three areas: finance, the labor market, and industrial policy. In finance, industry- and labor-managed pension funds were invested in venture capital markets to create institutional cooperation in early-stage finance of high-tech enterprises. In the labor market, skill formation took priority over job protection. More specifically, organized labor shifted from job security for the core workers to collaboration in skill investment for non-core workers. In industrial policy, the state took a conscious backseat, encouraging instead private-sector peak-level inter-firm cooperation in R&D. These three turns toward high-tech competition would have been much more difficult without the existing institutional resources of coordination. For example, firms are willing to share private and sensitive information in radical R&D collaboration precisely because they have already had a long history of informational exchange in incremental R&D of mature sectors. Similarly, the state created research consortia out of existing banking blocks and price-taking cartels typical of traditional conservative corporatism (Ornston 2012, 2013).

418    Jingjing Huo and John D. Stephens One obvious question is why other corporatist countries failed to replicate the Nordic success. In essence, the set of conditions jointly necessary for creative corporatism is hard to find: 1) the state, being economically vulnerable, can credibly commit to reform (a condition absent in oil-rich Norway); 2) labor, being politically vulnerable to unilateral state intervention, cannot credibly commit to resist (absent in Tarifautonomie Germany or Kollektivvertrag Austria); and 3) there is pre-existing strength in cooperation (absent in more conflict-ridden Belgium and the Netherlands); and 4) these countries are already leaders in social investment due to their social democratic welfare states. Closely related to the transformation of production in corporatist countries is a transformation of the nature of employment. After all, Kristensen and Lilja (2011) attribute the Nordic success in innovation to fundamental changes in work organization, toward non-hierarchical, horizontally integrated, autonomous, flexible, and communicative practices. In other words, the pattern of work on the production floor becomes increasingly characterized by “discretionary learning” (Lorenz and Lundvall 2011; see also Table 21.1).5 This kind of employment involves high levels of problem-solving and learning on the job and high levels of freedom for the worker to organize his or her work activity (European Survey on Working Conditions, cited in Lorenz and Lundvall 2011). What did the state in corporatist countries do to increase the stocks of human capital that are suitable for high-quality, knowledge-intensive employment? As previewed at the beginning of this section, the state increased public funding of a range of policies that upgrade human capital and in turn raise employment in the knowledge economy. In other words, along with intervention to change patterns of innovation, funding to change the quality of human capital is another key element of the social investment state. Moira Nelson and John Stephens (2011) examine the effect of public funding across 17 OECD countries, directly on the quality of human capital (measured alternatively through years of education and performance scores in the International Adult Literacy Survey, IALS), and indirectly through human capital on high-quality employment (measured alternatively as knowledge-intensive employment and discretionary-learning employment). The authors found that generous short-term unemployment replacement rates, high public spending on compulsory education, active labor market policy, daycare, and sick pay all serve to boost employment and, with the exception of sick pay, increase high-quality employment in particular. The causal mechanism that connects each of these policies to knowledge-intensive employment growth is the accumulation and preservation of skills valuable for highquality employment. Daycare, as a key instrument in early childhood education and care (ECEC), not only helps mothers avoid skill atrophy by helping them to remain in the labor market after childbirth but also helps children to improve cognitive skills that are now established in the literature as important for future employment in the knowledge-intensive economy (Broberg et al. 1997; Campbell et al. 2001; Waldfogel 2002; Brooks-Gunn 2003; Magnuson et al. 2007). Beyond ECEC, the content of compulsory education increasingly moves beyond basic writing and numeracy to areas crucial for the knowledge-intensive service economy, such as creative development, life-long learning, 5  The

missing data in Table 21.1 are due to the fact that not all OECD countries participated in the International Adult Literacy Survey and that only EU countries were included in the European Survey of Working Conditions.

Table 21.1  Literacy scores and discretionary learning employment Score on OECD Literacy Test 5th Percentile

Mean

95th Percentile

Discretionary learning employment 2005

Denmark

213

289

353

55

Finland

195

288

363

45

Norway

207

294

363

n.a.

Sweden

216

304

386

68

Mean

207.9

293.8

366.4

55.9

Austria

n.a.

n.a.

n.a.

47

Belgium

163

277

359

43

Netherlands

202

286

355

52

Mean

182.7

281.6

356.8

47.4

Germany

208

285

359

44

Switzerland

150

271

349

n.a.

France

n.a.

n.a.

n.a.

48

Mean

179.3

278.0

354.3

46.0

114

237

325

37

96

Nordic Countries

Other Corporatist Countries

Other Continental Europe

Southern Europe Italy Portugal

229

334

25

105.0

232.7

329.1

30.9

Australia

146

275

359

n.a.

Canada

145

280

372

n.a.

Ireland

151

263

353

39

New Zealand

158

272

361

n.a.

UK

145

267

360

32

USA Mean

133 146

272 271

371 363

n.a. 35

Mean Liberal Political Economies

Notes: n.a. = data not available Sources: for the first three columns, OECD/HRDC (2000); and for the fourth column, Antoine Valeyre et al. (2009).

420    Jingjing Huo and John D. Stephens technological and scientific knowledge, and employability (Benavot and Braslavsky 2007). While daycare and education spending accumulates skills primarily for the young, the remaining policies protect and deepen skills for working adults. Through retraining, active labor market policies not only prevent skill atrophy but also facilitate further skill acquisition for the unemployed. High but short-term unemployment benefits prevent the unemployed from being forced, by financial pressure, to prematurely end their search on the labor market before being matched to a job with a skill set sufficient enough to be skill-preserving or deepening. Similarly, sick pay prevents workers from being forced to return to the labor market before complete recovery, which avoids the consequence of suboptimal utilization—and hence deterioration—of human capital while on the job (Huo et al. 2008). Public expenditure on these social investment policies has important implications for the long-term job creation prospects of corporatist countries. As the literature has long pointed out, since the decline of the Golden Age and transition to the service economy, non-corporatist liberal market economies have surged ahead of their European counterparts in employment levels. The impressive Anglo-Saxon job growth is primarily a massive increase in low-skill, low-wage elementary service-sector employment driven by high wage inequality. By contrast, the more compressed wages in corporatist countries have the potential to weigh these countries down as they attempt to scale the barrier of job decline in manufacturing (Iversen and Wren 1998). However, some corporatist countries outgrew these dim expectations. Where the political and public support for state funding is consolidated (again, the Nordic countries), the state used the above-mentioned social investment policies to increase service employment, not at the low end but in the knowledge-intensive top-end sectors characterized by discretionary learning. Table 21.1 documents the Nordic breakthrough in human capital and in discretionary-learning employment. The Nordic countries lead in the percentage of workers in discretionary-learning jobs, followed by continental European countries, with LMEs trailing behind. This is all the more striking given that Anglo-Saxon countries actually do well when the quality of employment is disregarded, as in overall employment. Data on human capital stocks illuminate the reasons behind the Nordic success in knowledge-intensive employment. Although LMEs and Nordic countries are similar in average years of education of the adult population, the latter have much higher average literacy scores in IALS, and this difference is sharper in the bottom half of the skill distribution, especially at the fifth percentile (Table 21.1). The correlations between IALS scores at the bottom and the mean and discretionary learning employment are impressive, in both cases, .86. In other words, the Nordic countries have succeeded in creating high-quality employment from sectors that are associated in Anglo-Saxon economies with low skills and wages instead. Finally, data on public funding help us trace such differences in human capital quality back to the role of the state. As seen in Tables 19.3 and 19.4 and additionally in Nelson and Stephens (2011), the Nordic countries lead others in the size of all the previously identified, publically funded, social investment policies: ECEC, active labor market policies, public education, sick pay, and unemployment replacement rates. For example, the Nordic states invest on average 9.7 percent of GDP in education, daycare, and active labor market policies altogether, while their continental corporatist counterparts spend 7.5 percent, and the remaining countries only 6.3 percent.

From Industrial Corporatism to the Social Investment State    421

4 Conclusion As we explained at the beginning of this chapter, the corporatist political economies developed a distinctive supply side version of Keynesianism in their models of economic growth and employment creation. On a moment’s reflection, this is not very surprising: a demand stimulation strategy is not likely to be very effective in small, very open economies as so much of the demand created would leak outside the borders of the countries in increased consumption of imported goods. The corporatist countries used different tools: most used capital controls and dependent central banks to deliver low interest rates, some had large state sectors, and all depended on wage restraint delivered by the unions. The unions and left parties were “compensated,” in Katzenstein’s apt terminology (1985), with redistributive social policy. The political mechanism that delivered these sets of policies was tripartite “concertation” between the state and centralized peak organizations of employers and unions. Globalization, above all through the dismantling of capital controls and resulting exponential growth of capital flows but also with the transnationalization of production, destroyed the bases for almost all aspects of the macro-political economy of the Golden Age supply side model, save the labor relations system which, after some bumps in the 1980s and 1990s, continued to deliver effective wage restraint in the first decade of the twenty-first century. In place of the Golden Age model, a new supply side model developed, though only completely in the Nordic countries, which was based on investment in human capital, private R&D, and employment and production in knowledge-intensive goods and services. The state can increase the rate of returns from the supply side in two ways, either by reducing the cost of input (e.g., by placing restraint on wages or restricting money supply) or by increasing output (e.g., through higher productivity and innovation). However, as long as input to production is characterized by positive returns—even if marginal returns are decreasing—output and input are correlated. As a result, supply-side manipulation on one margin is offset by the changes it triggers on the other margin. For example, attempts to increase the rate of returns by lowering cost can be undermined by the corresponding fall in productivity and skills. Similarly, attempts to increase productivity often result in more, rather than less, costly investment. The rational response of the state to this potentially self-defeating nature of reform is to pick the margin that has the less offsetting effect. This theoretical perspective allows us to separate the supply-side history of the corporatist state into two phases. In the Golden Age, these economies were still in the last phases of decline in agriculture, and skill-intensive manufacturing industries were still expanding in terms of both output and employment. Thus, the need to adapt the economic model to emerging serviceoriented knowledge-intensive industries was in its initial stage. During this period, the seven corporatist economies continued to enjoy some comparative advantage in asset-specific high-quality manufacturing or natural resources processing. This traditional stock of strength in high-quality output, stemming precisely from a long history of corporatist coordination, loosened the otherwise tight tradeoff between input and output, allowing the state to lower cost from the input side without immediately hitting the constraint of lower productivity. As a result, from the 1960s through the mid-1980s, state intervention in

422    Jingjing Huo and John D. Stephens all seven cases was characterized by a flurry of attempts to rein in wages through incomes policy and to rein in money supply through exchange rate or interest rate policies, as detailed in the case narratives. Gradually, however, this traditional stock of manufacturing advantage was depleted, as mature industries went into decline and competition for market share moved to knowledge-intensive, often service-oriented, sectors. On the one hand, the corporatist economies are traditionally behind in producing radical innovation. On the other hand, unlike incremental innovation, radical innovation relies less on cost-efficient processes than on newer products (Evangelista 1999). As a result, the tradeoff now loosened on the input side, allowing the state to invest public expenditure aggressively without immediately hitting the constraint of excessive R&D cost. This is reflected in a dramatic turn to the social investment strategy by the state in the Nordic countries documented in the previous section, followed by a correspondingly visible success in knowledge-intensive human capital formation and eventually a breakthrough in radical innovation and discretionary-learning employment. Although the state in some corporatist economies has thus significantly altered the nature of its supply-side strategies across the two phases, the drastic policy shift does not necessarily imply miscalculation or mistake in either time period. Within each phase, the policy chosen was a rational, and optimal, response to the economic circumstance of the time. By contrast, in continental states where the lack of political and public support for supply-side pumping and welfare state policy legacies prevented policies from shifting, the seeds of long-term mistakes have possibly been sown.

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424    Jingjing Huo and John D. Stephens ——, 1985. Small States in World Markets: Industrial Policy in Europe. Ithaca, NY: Cornell University Press. Kriesi, Hanspeter, 1980. Entscheidungsstrukturen und -prozesse in der schweizer Politik [The Structures and Processes of Decision-Making in Swiss Politics]. Frankfurt a.M., Germany: Campus. ——, 1982. “The Structure of the Swiss Political Systems.” In Patterns of Corporatist PolicyMaking, ed Gerhard Lehmbruch and Phillipe Schmitter, 133–162. London, UK: Sage. Kristensen, Per Hull, and Lilja, Kari, 2011. Nordic Capitalism and Globalization: New Forms of Economic Organization and Welfare Institutions. New York: Oxford University Press. Lehmbruch, Gerhard, 1984. “Concertation and the Structure of Corporatist Networks.” In Order and Conflict in Contemporary Capitalism: Studies in the Political Economy of Western European Nations, ed John H Goldthorpe, 60–80. Oxford, UK: Oxford University Press. ——, and Schmitter, Philippe C, ed, 1982. Patterns of Corporatist Policy-Making. London, UK: Sage. Lorenz, Edward, and Lundvall, Bengt Åke, 2011. “Social Investment in the Globalising Learning Economy: A European Perspective.” In Towards a Social Investment Welfare State? Ideas, Policies, and Challenges, ed Nathalie Morel, Bruno Palier, and Joakim Palme, 235–260. Bristol, UK: Policy Press. Magnuson, Katherine A; Ruhm, Christopher, and Waldfogel, Jane, 2007. “Does Prekindergarten Improve School Preparation and Performance?” Economics of Education Review 26 (1, February): 33–51. Meidner, Rudolf, and Öhman, Berndt, 1972. Fifteen Years of Wage-Policy. Stockholm, Sweden: Swedish Trade Union Confederation. Mjøset, Lars, and Andersson, Jan Otto, 1986. Norden Dagen Derpå: De nordiske økonomisk-politiske modellene og deres problemer på 70- og 80-tallet [The Nordic Countries the Morning After: The Nordic Political Economy Models and their Problems in the 70s and 80s]. Oslo, Norway: Universitetsforlag. Nelson, Moira, and Stephens, John D, 2011. “Do Social Investment Policies Produce More and Better Jobs?” In Towards a Social Investment Welfare State? Ideas, Policies, and Challenges, ed Nathalie Morel, Bruno Palier, and Joakim Palme, 205–234. Bristol, UK: Policy Press. Obinger, Herbert; Starke, Peter; Moser, Julia; Bogedan, Claudia; Gindulis, Edith, and Leibfried, Stephan, 2010. Transformations of the Welfare State: Small States, Big Lessons. New York: Oxford University Press. OECD/HRDC, 2000. Literacy in the Information Age: Final Report of the International Adult Literacy Survey. Paris, France: Organization for Economic Co-operation and Development and Ottawa, Canada: Human Resources Development Canada. Available at: http://www. oecd.org/edu/innovation-education/39437980.pdf (last consulted 26 January 2014). Ornston, Darius, 2012. When Small States Make Big Leaps: Institutional Innovation and High-Tech Competition in Western Europe. Ithaca, NY: Cornell University Press. ——, 2013. “Creative Corporatism: The Politics of High-Technology Competition in Nordic Europe.” Comparative Political Studies 46 (6, June): 702–729. Pontusson, Jonas, 1992. The Limits of Social Democracy:  Investment Politics in Sweden. Ithaca, NY: Cornell University Press. ——, 2011. “Once Again a Model: Nordic Social Democracy in a Globalized World.” In What’s Left of the Left, ed James Cronin, George Ross, and James Shoch, 89–115. Durham, NC: Duke University Press.

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Chapter 22

The Ch a ngi ng Rol e of  the State i n Liber a l M a r k et Economies Peter A. Hall

This chapter is about the role of the state in the economy and how it has changed over the past seven decades in the liberal market economies of the developed world, which are marked by high levels of market competition. In the terminology of this Handbook, these are the “liberal states” of Britain (UK), Canada, the United States (US) and Ireland—the cases considered here. The analysis begins by considering (in Section 1) how these states have been portrayed in the literature. Although the timing of shifts in the role of the state varies across countries, the focus of this analysis is on changes and continuities across two broad periods: a Keynesian era (Section 2), running from World War II to the end of the 1970s, often described as a golden age of high rates of economic growth; and a subsequent neoliberal era (Section 3), marked by slower rates of growth and efforts to increase the role of markets vis-à-vis states in the allocation of resources. Alongside commonalities, Section 4 considers diversity in national responses, and Section 5 considers the future trajectories of the liberal state.

1  Images of the Liberal State Images of the liberal state have been deeply influenced by three waves of literature in comparative political economy. Each emphasizes a distinctive set of differences that reflects the economic preoccupations of its time. Inspired by Andrew Shonfield’s (1969) magisterial overview, the literature of the first wave focused on cross-national variation in the character of state intervention into the economy, emphasizing the extent to which public officials could exert direct control over the allocation of resources among economic endeavors. Thus, Shonfield contrasted the interventionist character of economic planning in France, active labor market policy in Sweden, and Germany’s ordo-liberal economic order. John Zysman (1983) stressed the influence of states over flows of funds in the financial system,

The Changing Role of the State in Liberal Market Economies    427 while Chalmers Johnson (1982) highlighted the formal and informal relationships between business and developmental states (cf. Evans 1995). In this context, the efforts of successive British governments to promote national economic planning seemed anemic (cf. McArthur and Scott 1966; Leruez 1975; Hall 1986). This literature was preoccupied with the attempts of governments to modernize their industrial base to compete more effectively in the world economy—an optic appropriate for the 1950s and 1960s when the shadow of high inter-war unemployment hung over the world and declining barriers to trade brought stiff competition from American multinationals. On this plane, the striking feature of policy in liberal states was its emphasis on “arm’s length” economic management of the sort advocated by John Maynard Keynes, whose doctrines suggested that governments could ensure full employment, without extensive intervention, by manipulating interest rates and the budget balance to moderate fluctuations in economic activity (Hansen 1968; Hall 1989). Many policy-makers in liberal states were skeptical about the value of economic planning or active industrial policy; and analysts judged their modest efforts in that direction ineffective, partly because these states lacked tools offering control over flows of funds in the financial system that might have given them more influence over the investment decisions of firms (Leruez 1975; Blank 1978; Zysman 1983). By the middle of the 1970s, popular anxiety in the developed democracies shifted away from economic modernization toward rates of inflation and unemployment rising in tandem after the collapse of the Bretton Woods monetary system and commodity price shocks. Analysts began to focus on the problem of how governments could reduce inflation without increasing unemployment, and the result was a literature on neocorporatism reviewed in this book in Chapter 21 by Jingjing Huo and John Stephens (see also Hibbs 1977; Goldthorpe 1984). The literature on neocorporatism focused on the organization of trade unions and employers on the premise that, where wage bargaining could be coordinated by associations encompassing enough to promote the economy-wide interests of firms and workers and influential enough to enforce wage agreements, the rate of inflation could be lowered without extravagant increases in unemployment. In such settings, the role of the state was to promote encompassing producer groups, guarantee that concessions made by workers would flow into investment rather than dividends, and provide a macro-economic stimulus or social benefits in return for wage concessions (Pizzorno 1978; Przeworski and Wallerstein 1982). Many scholars thought neocorporatist states had distinctive styles of policy-making based on a search for consensus among social partners and the devolution of authority over policy onto producer groups (Schmitter and Lehmbruch 1979; Katzenstein 1985). From this perspective, liberal states were again the foil, although notable differences among them became salient. In the modal cases, best represented by the US, UK, and Canada, governments displayed little interest in economy-wide wage coordination or bolstering the capacities of trade unions and employers to coordinate skill formation (Thelen 2004). Although they occasionally implemented incomes policies designed to reduce rates of inflation, such as the 1974 Social Contract in Britain and the incomes policy of the Nixon administration in the US, those agreements were typically forced on reluctant employers or unions and short-lived (Regini 1984; Howell 2002). Australia and Ireland were the limiting cases. Australia mounted a durable incomes policy during the 1970s and 1980s, while Ireland secured economy-wide wage coordination for 20 years after 1987. Even in these

428   PETER A. HALL countries, however, governments negotiated only a limited range of policies with business and labor and did little to coordinate vocational training (Hardiman 1988). Their agreements often resembled “social pacts” rather than the deeper cooperation of neocorporatist countries (Avgadic et al. 2011). Once inflation had been brought under control during the 1980s, the attention of political economists turned toward the challenges of globalization, which inspired a wave of literature commonly associated with “varieties of capitalism” (Kitschelt et al. 1999; Hall and Soskice 2001; Amable 2003). These analyses distinguish between “coordinated market economies” that include many neocorporatist cases and “liberal market economies” that encompass the countries examined here. In contrast to the first wave, however, the distinctions now drawn between political economies turn, not on the character of state intervention in the economy, but on the ways in which firms coordinate their endeavors. In liberal market economies, firms rely primarily on competitive markets to secure access to finance, skills, labor, and technology, while firms in coordinated market economies rely more heavily on collaborative arrangements, often coordinated by business associations or trade unions. The implications about the role of the state in the economy are correspondingly nuanced. Broadly speaking, this literature assumes that governments will be responsive not only to electoral pressure but also to pressure from business interests and labor organizations that seek to preserve the competitive advantages of their sectors. Since companies operating in liberal market economies draw many advantages from their capacities to redeploy resources readily, they often press governments to make markets for inputs more flexible, and liberal states have been responsive to such pressures. Thus, this perspective does not rule out episodes of forceful state intervention, especially to make labor markets more competitive, as the anti-union efforts of the Thatcher and Reagan governments did, or to cope with a financial crisis, as in the bailout programs of the US and UK in 2008 and 2009 (Gamble 1994; cf. Levy 2006). As Polanyi (1944) noted years ago, making markets more competitive often requires forceful initiatives from the state.

2  Liberal States in the Keynesian Era The actions taken by governments in the liberal market economies during the Keynesian era correspond well to these portraits of the liberal state. Britain and the United States will be treated here as paradigmatic cases and Ireland and Canada discussed more briefly. Facing the demobilization of millions of soldiers after World War II, the British and American governments feared mass unemployment, a process that the British associated with the intense class conflict of the 1920s and 1930s. Thus, effective governance seemed to require finding the basis for a compromise between the owners of capital or middle class managers and members of a working class whose grim living conditions were still sources of real grievance. In the US, where an ideology of equal opportunity undercut class-based political appeals, the analogous challenge was how to sustain stability in a country marked by prominent racial divisions and two separate social orders, built on segregation in the South and uneasy integration in the North. In Canada, economic issues were crosscut by subnational tensions in a federal system (Jenson 1989).

The Changing Role of the State in Liberal Market Economies    429 In 1945, the British elected a Labour government whose response to these problems was highly interventionist. Important firms were nationalized, including the Bank of England and much of the coal, steel, and transport industries, bringing more than 20 percent of industry under government control. The government experimented with binding wage and price guidelines during the 1940s and rationed many goods until the late 1950s. Physicians were forced into a National Health Service and universal pension and unemployment schemes expanded (Beer 1969). Like the steps taken to build welfare states in Canada, these moves indicated that even liberal states can sometimes be interventionist. Parallel moves in the US were more muted but consequential. The GI Bill of Rights made university education affordable for a generation of veterans, and the 1956 initiative to build an interstate highway system was a $425 billion investment in jobs and infrastructure. The decision to fight a Cold War sparked decades of investment in military technology with civilian spin-offs, which was tantamount to a massive industrial policy oriented to research and development. The space program of the 1950s was its natural concomitant. In such respects, liberal states are far from night-watchmen states. In both Britain and the US, the two decades after World War II were marked by considerable public enthusiasm for a modernizing state, as well as major expansions in public expenditure and the scope of public policy that left lasting marks on liberal regimes. However, this interventionist impulse always faced opposition from the political right and did not survive the 1970s. By the end of the 1950s, President Dwight Eisenhower was warning of the dangers of a “military-industrial” complex, and politicians on both sides of the British political spectrum had accepted a Keynesian compromise, dictating that unemployment was to be addressed, not by further nationalizations, but with activist macro-economic policies that used the budget balance and quantitative controls on credit to moderate the fluctuations of the business cycle. Competition was strengthened via the abolition of resale price maintenance, and the efforts of a Conservative government to construct a national economic plan foundered on the government’s unwillingness to force it upon a fragmented business community (Leruez 1975; Blank 1978). In Britain, the high-water mark for state intervention came with the 1964 electoral victory of a Labour Party under Harold Wilson that promised “to reforge Britain in the white, hot heat of the scientific revolution.” Its initiatives lent a more interventionist cast to the Keynesianism of the period, with the creation of a Department of Economic Affairs and an Industrial Reconstruction Corporation aimed at modernizing industries (Pemberton 2004). However, a 1967 effort to rationalize wage bargaining failed, and the orientation of macro-economic policy-making soon shifted away from growth toward a succession of efforts to stave off recurrent balance of payments crises, culminating in International Monetary Fund (IMF) intervention in 1976. In the United States, the Kennedy administration made Keynesian doctrine an official part of policy but did not attempt a national industrial policy beyond the sphere of defense. As tariff barriers fell, both economies became more open. However, the volume of American trade remained a relatively small proportion of GDP, while Britain became a small, open economy whose leaders continued to act as if they led a large, closed economy—making repeated attempts to defend the sterling exchange rate at the cost of turning macro-economic policy into an ineffective “stop-go” instrument (Brittan 1970). British policy was influenced by the prominent role that financial services, centered in the City of London, played in the economy, both as an important source of international income and as an influential source

430   PETER A. HALL of support for the Conservative Party. The financial sector associated with Wall Street played similar roles in the United States, reinforced by the growing importance of the dollar vis-àvis sterling as a global reserve currency. Neither country developed the kind of export-led growth strategies being devised in Germany and Japan during these years, which exploited German and Japanese capacities for wage coordination to hold down unit labor costs while depressing the exchange rate in order to promote exports (Kreile 1978; Martin 1979; Johnson 1982). Instead, the British and American approach was to promote growth led by domestic demand, based on efforts to liberalize domestic credit markets to support consumption and counter-cyclical macro-economic policy designed to sustain the predictable growth in demand that underpins investment in mass manufacturing (Surrey 1982; Trumbull 2014). In many respects, the Irish and Canadian cases paralleled those of their larger neighbors, even though both were smaller, more open economies. From the 1960s, Irish policy was largely directed at attracting foreign direct investment via low corporate tax rates and an industrial development agency charged with bringing in foreign investment. As in Canada, the government relied on macro-economic management rather than wage coordination or active industrial intervention to sustain economic growth (Nolan et al. 2000). Although a Liberal administration under Pierre Trudeau tried a more assertive industrial policy in the form of a national energy program from 1980 to 1984, for the most part, the Canadian state has been no more interventionist than its American counterpart (Clement and Williams 1989; Howlett et al. 1999). However, Canada developed a more extensive welfare state during the 1960s and 1970s, pushed by social democratic political parties with close ties to organized labor often in coalition with farmers, and then adopted by other governing parties. By the 1970s, the result was a welfare state based on “social liberalism” whose universalism bore comparison to its Nordic counterparts (Myles 1998). The enthusiasm of the American Democratic Party for similar measures was undercut by the tendency of many within its electoral coalition, especially from the South, to associate redistribution with aid for African-Americans (Alesina and Glaeser 2004; Steensland 2006).

3  Liberal States in the Neoliberal Era The 1980s saw the beginning of a neoliberal era during which the role of the state shifted (Heclo 1986). In large measure, these changes were precipitated by rising rates of inflation and declining rates of economic growth in the 1970s (cf. Ferguson et al. 2010). Lower rates of growth limited the scope for further expansion of the welfare state, and persistent stagflation gave rise to disillusionment with the Keynesian policies that had failed to restore prosperity in the 1970s, setting in motion a search for alternative routes to growth. The reaction was especially strong in Britain and the US, where governments had resorted to mandatory incomes policies to hold down inflation in the face of intense protests. Thus, an economic crisis became a legitimacy crisis, calling into question the authority of the state (Crozier et al. 1975; Sandbrook 2010). As more people became skeptical about the capacity of states to manage the economy, they began to look more favorably on the view that growth was likely to be restored only if the role of the state in the economy was reduced (Blyth 2002; Prasad 2006).

The Changing Role of the State in Liberal Market Economies    431 The political reflection of this discontent was the electoral victory of the British Conservative Party under Margaret Thatcher in 1979 and of the Republican Ronald Reagan in 1980. As Krieger (1986) notes, amidst the economic turmoil of the 1970s, both leaders exploited a sense that once-great imperial powers could recover their glory only if markets were unfettered once again. At the same time, the development of monetarist economic doctrine and then rational-expectations economics offered a basis for skepticism about the effectiveness of government, lending credence to political platforms whose ulterior motivation was to bring about an irreversible shift in power from organized labor to capital (Crystal 1979; Cuthbertson 1979; Hall 1993). Thatcher and Reagan accomplished that task and provided templates for market-oriented policies across the world, not least in the European Union (EU), where the Single European Act of 1986 prescribed market competition as an antidote to Eurosclerosis, turning the European Commission into an agent for market liberalization (Glyn 2006; Jabko 2006; Hall and Lamont 2013). The initial watchwords of this neoliberal program—labeled “neoconservative” by Americans—were privatization and deregulation. In the early 1980s, national enterprises were gradually sold off in Britain. The rationale was that private owners could operate them more efficiently, but these programs were also attractive because they offered windfall revenues to governments and the prospect of dramatically weakening the public-sector trade unions. If over seven percent of the British workforce worked in state-owned enterprises in 1980, less than two percent did by 1995, as more than £50 billion of state assets were sold off. Britain led on privatization, but the United States led on deregulation, with early initiatives in air transport and telecommunications. As Vogel (1998) observes, deregulation was really “reregulation,” but of a sort that intensifies competition in markets. In many cases, the privatized industries were utilities providing water, energy, and communications that had once been seen as “public services.” The result was sometimes better service at lower prices, if mainly for customers located in large markets, but these results were by no means universal, and the broader effect was to undercut the older view of the state as responsible for the provision of public services. This neoliberal program had a major impact on the operation of states. On the premise that private providers are more efficient, governments began to contract out many of the services public employees had once supplied, including trash collection, municipal transport, and even the operation of prisons. Of course, these steps also reduced the power of public-sector unions and the number of secure jobs available to the manual working class. Less visible were the steps taken by liberal states to introduce market discipline into the process of public policy-making itself, usually under the heading of the “new public management.” These reforms went farthest in Britain, where the Thatcher government was again the pioneer with an initiative labeled “Next Steps,” soon copied to some extent in New Zealand, Australia, and Canada (Rhodes 1994). Behind these reforms is a profound change in the conception of what good governance entails (Miller and Rose 1990; Moran 2003). This neoliberal vision sees citizens as consumers, owed the kind of consideration an attentive firm devotes to its customers, and government as an institution whose prime objective should be efficiency. From this perspective, civil servants were not the guardians of a public interest, but employees whose units should compete with one another to ensure maximum efficiency while their responsiveness to the “customers” is closely monitored. This is government run on market principles.

432   PETER A. HALL These reforms often separated the formulation of policy from its implementation, entrusting the latter to quasi-independent agencies monitored with new performance technologies. Resources were often allocated across departments on the basis of business plans constructed much as they might be by firms seeking funds from venture capitalists. Within Britain’s National Health Service, for example, regional health authorities competed with each other over the effective delivery of health services, and hospitals and trusts of general practitioners were asked to compete with one another for public resources allocated on the basis of cost effectiveness. Efforts were made to compute the value in equivalent income value of the use citizens made of libraries, sports clubs, and art museums (Davies 2010). It is difficult to assess the overall effects of these reforms. In some cases, they reduced the cost of providing government services, although often with some corresponding loss in quality. The effects on popular conceptions of governance are less tangible but in the long run likely even more consequential. This neoliberal vision of governance marks a departure from traditional images that saw public service as a vocation, rather than as just another occupation, and the higher civil service as a body motivated by a distinctive culture based on collective ideals rather than on market principles (Dyson 1980). In much the same way, the contention that some services are so basic to collective well-being that they should be distributed by “public utilities” gave way to the neoliberal view that all services are the same and best delivered by units dedicated to market-oriented principles of efficiency. Of course, these traditional views were idealized images that often masked underlying deficiencies, but this shift in gestalt has long-term implications for the authority of the state. As visions shift toward ones that see the state simply as another of many actors vying to provide citizens with services efficiently, the claims of the state on the resources of the public become more tenuous, and electorates may become less willing to fund it (cf. Beer 1974). As trust in the state declines in both Britain and the US, this shift in perspective appears to be the greatest victory for neoliberalism, albeit one that may limit the capacity of contemporary states to make the investments in education, research, and industry on which the long-term prosperity of these countries depends. By the 1990s, however, this type of discourse was hegemonic. Market-oriented policies were adopted by governments of all political hues, not only as faits accomplis, but also as desirable reforms (Iversen 2006). The “Third Way,” espoused by the British Labour Party under Tony Blair to distinguish it from the preceding Thatcher government, contained only vague calls for a “market economy” without a “market society.” In practice, Labour strengthened the social safety net under the most vulnerable segments of the populace, such as single mothers and those on low incomes, without much altering the role of the state in the economy. In the realm of social policy, the most striking development in both Britain and the US was a move to make the receipt of social benefits contingent on participation in the workforce. Bill Clinton turned “welfare” into “workfare” and expanded tax credits on earned income, and the Blair government followed with its “Fair Deal” (Pierson 2001; Hacker 2004). The aspiration was to avoid the formation of a permanent underclass with no connections to the labor market, but the policies relied more heavily on sticks than carrots, and their insistence that work is the only route to respectability was reminiscent of Britain’s 1834 Poor Law, enacted in a previous period when market principles were elevated

The Changing Role of the State in Liberal Market Economies    433 to the status of public ideals. Indeed, some analysts have argued that, in combination with rising rates of incarceration in the US, these policies reflect new efforts on the part of such states to discipline the lower classes (Wacquant 2009; cf. Campbell 2010a). As Huo and Stephens (Chapter 21, this volume) indicate, the governments of many corporatist political economies also began to make social benefits contingent on labor force participation, but they also provided training schemes and subsidized positions for the unemployed. By contrast, the active labor market policies of the liberal states remained minimal (see Table  19.1). To foster employment, they tended to rely on large, low-wage service sectors and meager unemployment benefits that forced people into such jobs (Esping-Andersen 1990). As the skills of their workforce began to lag behind those of their competitors and manufacturing jobs flowed overseas, however, liberal governments began to worry about improving the quality of education, focusing on the general skills dominant in these kinds of political economies (Iversen and Stephens 2008). The instruments applied to this problem reflected the dominant principles of neoliberal governance, emphasizing new metrics for judging the performance of schools and students, penalties for schools that did badly on standardized tests, and the establishment of more competitive markets in education via the establishment of charter schools in the US and educational trusts in Britain. However, neoliberal initiatives focused on privatization and deregulation are only half the picture here. The economic performance of Britain and the United States since 1980 owes just as much to the ways in which their governments have managed the demand side of the economy. In contrast to the export-led models of many corporatist political economies, both countries have long operated growth models in which domestic demand plays a central role, and this did not change in the neoliberal era. In Britain, the “end of the Keynesian era” had barely been proclaimed when the monetarist economics that succeeded it proved unworkable because the money supply is a slippery target (Skidelsky 1978). Despite the misgivings of Prime Minister Thatcher, the Treasury then targeted policy on the exchange rate (Riddell 1991). For the most part, policy-makers ignored the purist contentions that monetary policy had no lasting real effects and fiscal policy little influence over the fluctuations of the business cycle. The global enthusiasm for independent central banks, which inspired a 1997 decision to let the Bank of England set interest rates and established a more independent Monetary Policy Committee, did not prevent the Bank from operating an active monetary policy sensitive to the level of economic activity as well as inflation. At the same time, the American Federal Reserve Bank continued to target unemployment as well as inflation (Woolley 1986). In short, most liberal states continued to operate policies built on a pragmatic Keynesianism that soon found reflection in “new Keynesian” economic doctrines, although inflation was given higher priority and monetary instruments were seen as more effective than fiscal ones (Carlin and Soskice 2005). However, new elements were added to the demand-led growth models of these countries in the 1980s. During the 1950s and 1960s, domestic demand was fueled largely by the productivity gains available from industrial production, translated into consumption via the wage gains made possible by regularized collective bargaining (Boyer 1990, 2002). Structural shifts in the economy during this period also inspired a vast expansion in white collar jobs, tied to the growth of the welfare state, public employment, and tertiary education (Goldthorpe 1987). These developments brought steady gains in income for most of the

434   PETER A. HALL population, including the wide swath around the median that can be described as middle class. One indicator for demand-led growth was a savings rate significantly lower than that in many corporatist political economies. By the 1980s, however, the basis for continued growth in domestic demand had changed. Employment in manufacturing declined steadily from the early 1950s, and, although service-sector employment rose, in these economies much of it was concentrated in low-paid services that offered few productivity gains from which to fund higher wages (Esping-Andersen 1999). How then was domestic demand sustained enough, after 1980, to support a demand-led growth strategy? Several developments were important. A revolution in information technology that created entirely new sectors and improved productivity in many others drove some growth in employment, as did an inexorable increase in demand for healthcare, as new technologies became available. This was particularly noticeable in the US whose privatized system of healthcare made cost control difficult. Most notable, however, were a series of measures taken to expand the financial sector and the credit available to households (Campbell 2010b; Rajan 2010). Spurred initially by distortions in the credit markets brought about by high rates of inflation in the 1970s followed by high rates of interest in the 1980s, successive British and American governments deregulated the financial markets (Krippner 2011). The result was a vast expansion in the role that finance played in the economy. By 2007, more than a third of the profits in the American economy were being generated in the financial sector, and many industrial firms were drawing an increasing share of their profits from financing operations or portfolio investments rather than manufacturing. Partly as a result, income inequality increased dramatically: more than half the fruits of growth in the American economy after 1980 flowed to people in the top one percent of the income distribution, while real incomes at and below the median stagnated (Hacker and Pierson 2009). In principle, this stagnation in middle incomes should have damaged domestic demand, but freer flows of credit were used to prop it up. Some of the most important steps centered on the housing market (Schwartz and Seabrook 2009). The Thatcher government sold off about two million units of public housing to create many new homeowners and potential Conservative voters. Successive American governments offered tax deductions for mortgage interest, increased federal mortgage guarantees, promoted mortgage-backed securities that increased the availability of credit, and encouraged banks to offer sub-prime housing loans (Campbell 2010b). By 2007, 68 percent of American families owned a home, and the value of those homes seemed to be increasing annually. As a result, families whose incomes were stagnating often increased their spending, under the illusion that their wealth was increasing (Schwartz 2009). The savings rate of American households, which had fluctuated between eight and ten percent in the previous three decades, fell steadily in the years after 1980 to less than two percent by 2008. These years also saw a vast expansion in consumer borrowing in the US, notably via credit card debt and automobile loans, facilitated by the easy money policies of the Federal Reserve during the 1990s. As median wages stagnated, many Americans had increasing difficulty making ends meet; by the early 2000s, families on average income were spending a higher proportion of their income to purchase necessities than they had done in the early 1970s. And, in the absence of a stronger social safety net, many used their credit cards to cope with adverse life events or the vicissitudes of a fluctuating economy (Tyagi and Warren 2003). In short, in liberal market economies, consumer credit often functions as

The Changing Role of the State in Liberal Market Economies    435 a substitute for more generous welfare states and, although median incomes grew more slowly in the US and Britain after 1980, more relaxed financial regulations and liberal monetary policies maintained domestic demand. In the long run, of course, this formula was unsustainable. As the housing market cooled and holders of sub-prime mortgages defaulted, the bottom fell out of the securitized mortgage market, precipitating a global financial crisis and recession in 2008–09. The US, Britain, and Ireland then faced an extended period of deleveraging destined to depress their rates of economic growth for some years (Reinhart and Rogoff 2009).

4  National Diversity If the US and Britain are paradigmatic cases, whose deregulatory experiments were widely influential, the trajectory of liberal market economies in this era was far from uniform. In some respects, the Irish case is the most distinctive. Its government took advantage of an impending sense of crisis in 1987 to engage trade unions and employers in a succession of social pacts to moderate the growth of wages, generally offering tax concessions in exchange for wage restraint, as one component of a more general move toward economic planning (Culpepper 2008; Regan 2012). The 1986 initiative to create a new single European market also lent new impetus to Irish attempts to attract foreign investment and, by 2000, four fifths of Irish manufacturing was in the hands of multinationals, while employment rose rapidly in the small firms dominating the indigenous economy. As labor moved off the land, the country experienced rapid rates of growth. However, rapid economic growth, the cheap credit made available when Ireland entered the European monetary union, and pro-cyclical fiscal policies soon led to an asset boom (Hardiman 2010, 2012). At the same time, lax financial regulation, with roots in cozy relations between bankers, the construction sector, and a dominant Fianna Fáíl government, encouraged a large expansion in financial services. When the property boom faltered in 2008, several large banks became insolvent. Under pressure from the European Central Bank, the government was induced to guarantee not only bank deposits, but also the bonds of the banks, thereby taking on unsustainable levels of debt that forced it into an austerity program in return for European loans, and the draconian conditions associated with those loans led the trade unions to withdraw from social partnership arrangements in 2009. With something of a time-lag, Canadian governments also turned toward neoliberal policies in this era, initially marked by free trade agreements in 1988 and 1994 that opened Canada's markets to more intense North American competition. Influenced by Québec’s traditions of social solidarity, Liberal governments at the national level resisted pressures to deregulate for some years, but the election of two successive Conservative governments after 1984 saw Canada embrace deregulation and neoliberal reforms to some social policies that were extended by subsequent Liberal governments (Iacobucci et al. 2006). These social policy reforms were marked by movement from universal to targeted benefits and by cutbacks in unemployment benefits and federal transfers for health and social spending (Mahon 2008). As a result, inequalities in income and health began to rise dramatically during the 1990s, even though the country’s social safety net remains more robust than its American counterpart. The notable exception to these trends is in Québec, where activist

436   PETER A. HALL governments have been the norm since the Quiet Revolution of the 1960s, and an extensive “social economy” survived the neoliberal era to deliver significantly lower levels of social inequality (Bouchard 2013). Canada also experienced an expansion in mortgage and consumer lending in this period that sustained consumer spending. A Conservative government under Brian Mulroney liberalized financial regulation. However, the concentrated Canadian banking sector was easier to supervise than the diffuse American markets, and Canadian authorities retained stricter capital requirements and tightened supervision of the banking system in response to bank and trust company failures in the 1990s. As a result, Canada escaped the mortgage lending crisis that submerged the American economy in 2008. By March 2009, the American government had spent the equivalent of 6.9 percent of GDP on bank bailouts, and the British 19.8 percent of GDP, while the Canadian government spent nothing (Konzelmann et al. 2012).

5  The Trajectories of the Liberal State The relationship between state and economy is different in liberal and coordinated market economies. To some extent, these differences may derive from the fact that many liberal states elect governments via majoritarian electoral rules and operate within Westminster political systems. As Iversen and Soskice (2006, 2009) observe, these rules give political parties strong incentives to cultivate median voters rather than make appeals specifically directed at business or labor, as many parties elected by proportional representation do. As a result, the governments of liberal states often have weaker relationships with organized labor or capital and, with the notable exception of Ireland, less inclination to engage in sustained negotiations with them (Martin and Swank 2012). The multiple veto points of the fissiparous American political system also encourage lobbying on behalf of specific interests rather than peak-level bargains with labor or capital. Partly because the voice of organized labor is weaker there and firms tend to prize their capacities to move resources around, liberal states also offer lower levels of social protection than neocorporatist states (Esping-Andersen 1990; Estévez-Abe et al. 2001). Have developments during the neoliberal era significantly altered the role of the state in the economy or eroded the differences between liberal and neocorporatist states? In general, the continuities seem more striking than the changes over time, partly because liberal principles have long been built into the practices of liberal states. There has been some erosion in the differences between liberal and neocorporatist states, but this is largely because the latter have adopted the practices of the former. Cross-national moves to strengthen the work requirements and means-testing associated with social programs build, for instance, on longstanding features of liberal welfare states, as do recent efforts to reduce levels of employment protection. But there are still significant differences between these types of states, because liberalizing reforms have generally gone much farther in liberal market economies than in coordinated market economies (Hall and Gingerich 2009). However, some of the developments of the neoliberal era have certainly been consequential for liberal states. For instance, organized labor is now much weaker than it used to be in the liberal economies (Baccaro and Howell 2011). As a result, the wage bargaining

The Changing Role of the State in Liberal Market Economies    437 systems of these countries are less likely to translate productivity gains into wage gains, which renders domestic demand more sluggish, making it more difficult for these states to operate demand-led growth strategies. And, as the power of trade unions declines and market incomes become more unequal, more of the burden for redistribution shifts onto the state. At the same time, the levels of resources that liberal states devote to improving the skills of the workforce have fallen behind those of many of their neocorporatist counterparts. As a percentage of GDP, the neocorporatist states of Europe spend two to three times as much as liberal states on manpower policy, and, while levels of public spending on education have risen across much of Europe, they have fallen in the liberal market economies (see Table 19.3 in Section 2 of Chapter 19). Liberal states now ask students to pay a large share of the costs of tertiary education, and, as a result, the value of outstanding student loans in the US now exceeds $1 trillion (Ansell and Gingrich 2012). These trends raise legitimate concerns about whether liberal states are well equipped to cope with the economic challenges they are likely to face in the coming decades. Four problems loom large on the horizon of the developed democracies. First, these states will have to cope with aging populations: fewer workers will be supporting the pensions and rapidly rising healthcare costs of larger numbers of elderly people. Second, after two decades of funding public programs by borrowing, which has now reached unsustainable levels, governments seeking a return to fiscal balance are going to have to make hard choices about which programs to fund, and they must do this in a context where these choices have become more difficult because the expansion of entitlement programs is squeezing the scope for discretionary spending, while slower rates of growth constrain total spending levels (Schäfer and Streeck 2013). Third, in a more open global economy, where emerging economies that can deploy low-cost labor and the latest technology pose serious competitive pressure, the liberal market economies will have to export enough to pay for their imports or watch their standards of living decline. Fourth, their best chance of doing so lies in promoting high value-added production, but because that is now knowledgeintensive, it demands a workforce equipped with high levels of flexible skills, firms with serious capacities for innovation, and an economy that devotes high levels of resources to research and development and is capable of moving resources into sectors utilizing emerging technologies. Liberal states face these challenges with a singular mix of advantages and handicaps. Partly because they offer many low-wage, low-skill jobs as well as higher-wage employment based on the general skills that can be acquired through formal education, the liberal market economies can accommodate immigrants. Thus, they have a reasonable chance of expanding their working populations enough to support the elderly. However, coping with an aging population also entails managing healthcare costs, and the institutional capacities of liberal states to do so diverge widely: Britain is at one end of the cost-control spectrum and the US at the other. In some respects, liberal states are relatively well positioned to cope with the politics of austerity: their low levels of social spending are easier to sustain than the more generous welfare states of other regimes. But the obverse of lower levels of spending has been lower levels of taxation, and one might well ask whether these countries are politically capable of funding the kind of government programs supporting the knowledge-intensive economies on which their international competitive position is likely to depend. Effective up-skilling of the workforce may depend on reducing the social inequalities

438   PETER A. HALL that are now prominent features of such economies, via programs of early childhood development, since family conditions are as important to educational achievement as the quality of schools. But the weaker traditions of social solidarity characteristic of such states leave them vulnerable to a sauve-qui-peut politics that resists taxation or further redistribution. To the international struggle for economic success, each of the liberal states brings different assets. Like Australia, Canada has reserves of natural resources that will sustain its exports on rising demand from emerging markets, although the exchange-rate effects are likely to have adverse effects on domestic manufacturing. Ireland’s continued success in attracting foreign firms will depend on the pace of growth in a European economy that is deeply challenged by the Euro crisis and on resolving the unsustainable debt it has inherited from the banking sector. However, a significant expansion in tertiary education there offers the prospect that it can cultivate the skills of its workforce enough to become a site for high value-added production rather than assembly. Like the US, Britain has a large financial services sector with international reach that will continue to make major contributions to its balance of payments, even though it faces downsizing in the short term. The question is whether Britain and the US can also secure market shares in other sectors. The United States enjoys historic advantages in biotechnology, aerospace, and information technology, linked to its capacities for radical innovation, but, in other sectors, such as sustainable energy, it has been vulnerable to Asian competition. Moreover, in both countries, the fate of knowledge-intensive industry is in doubt because their systems of secondary education have been unable to confer the high levels of skill in mathematics and science that are now attained by some of their competitors. These economies have well-established capacities to expand employment in sheltered services and are important providers of internationally traded services in education, tourism, and finance. However, as well-paid jobs in manufacturing moved overseas, the middle of their occupational structures has been hollowed out (Antràs et al. 2006; Autor and Dorn 2009). With state and local governments reducing spending to recover from the recent debt crisis, well-paid middle-class jobs in many other sectors, such as education, healthcare, and public employment, are also disappearing. Ironically, the United States and Britain seem to be losing their middle classes just as China acquires one. What might liberal states do if they want to recover prosperous middle-class positions as well as their exporting capacities? One route would be to revive high value-added manufacturing. Even though technological advances limit the number of new jobs each plant adds to the economy, that kind of manufacturing also stimulates innovation of the sort that can yield more jobs. However, advanced manufacturing requires a highly skilled workforce. Liberal market economies lack the institutional capacities to cultivate these skills via apprenticeship schemes that are built on close cooperation between business and labor. But they may be able to develop them through programs of formal education that promote high achievement in secondary education and further training in community colleges and vocational schools. This strategy would require serious investments in secondary and tertiary education. At the same time, advances in high value-added manufacturing, of the sort found, for example, in aerospace, also depend on high levels of spending on research and development, some of which will have to come from the public sector. Until recently, the liberal market economies were relatively successful at job creation, not only in low-wage services, but also in a wide range of endeavors based on technological

The Changing Role of the State in Liberal Market Economies    439 revolutions in IT, biotechnology, and finance. Can they generate and sustain a new set of technological revolutions capable of creating jobs and exports in the future, and, if so, how? One response to this problem suggests that liberal states should put their faith in the powers of creative destruction inherent in free markets, in the hope that this will give rise to new technological revolutions. That is a popular position in the United States, whose flexible markets have long been propitious sites for radical innovation. However, the preconditions for such innovation in the 1950s and 1960s were exceptionally high levels of public spending on research and development, generally in the name of national defense, and an unprecedented expansion of higher education that has now run its course (Goldin and Katz 2008). Thus, an alternative position suggests that, if liberal market economies are to continue to prosper, they need to make major new public investments in research and development, in skill formation, infrastructure, and emerging technologies. In the era of Sputnik and the interstate highway system, the governments of liberal states were willing to do so, but such programs were subsequently written out of their ideological blueprints for economic success. Ironically, therefore, the future prosperity of many liberal market economies may depend on whether their states can transcend the dictates of neoliberal ideology and summon up the political will to invest more in their economies than they have in recent decades. In short, while liberal states have been different from neocorporatist ones for at least the seven decades since World War II and perhaps for far longer than that, their posture vis-à-vis the economy has also fluctuated a good deal over that time. Although various factors may keep liberal states and liberal economies moving along parallel tracks (Iversen and Soskice 2009), the relationship between them has never been entirely stable over time; and, given the dilemmas facing liberal market economies today, the transformation of the liberal state is probably far from over.

Acknowledgment For comments on a previous draft, I am grateful to the editors and Niamh Hardiman.

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Chapter 23

ISI States R ev erse Cou rse From Import Substitution to Open Economy

Herman Schwartz and Sebastián Etchemendy

How have the countries that used import substitution industrialization (ISI) from the 1930s through the 1970s as an economy and state building strategy changed in the following four decades? This chapter will consider the former British Dominions (Australia, Canada, and New Zealand), Iberia (Spain and Portugal), and the three largest Latin American countries (Argentina, Brazil, and Mexico). However, the analysis could also legitimately encompass South Africa, Chile, Colombia, Peru, Turkey, Iran, and India, as well. By import substitution we mean a package of policies and institutions that shifted rents from raw materials exports towards a nascent manufacturing sector to enable the expansion of consumer non-durables production and, in time, a leap into consumer durable and capital goods production with high levels of local content and tariff protection. This package created not just physical capital but also new social groups: organized capital and labor. These private interest groups were given public status and incorporated into the state through corporatist and quasi-corporatist associations (Offe 1981). In turn this created the capacity for direct state management of the economy, and so reflected and contributed to state building. As in the other advanced economies, the core change is a redefinition of the modes through which the state exercises control over the economy, rather than a simple issue of how much more or less state there is (Schwartz 1994; Hibou 2004). The ISI model can be seen as a variation on the more general model of organized capitalism prevailing from the Depression into the Bretton Woods era. Like the other advanced industrial economies, the ISI states eventually shifted away from forms that involved direct public control and execution of economic tasks toward forms of indirect control. Bureaucratic control and administrative procedures gave way to the use of rules, guidelines, and competitive pressures that shape individual and firm behaviors. This meant, as Steven Vogel (1996) nicely titled his book discussing financial market deregulation, Freer Markets, More Rules. It also

446    Herman Schwartz and Sebastián Etchemendy meant abandoning relatively closed economies, control over finance, a relatively egalitarian income distribution, and publicly privileged interest groups. Finally, financial firms, some non-financial firms, and finance ministries weakened the public status of organized interests in order to enhance both their own market power and state autonomy. Although this chapter will necessarily emphasize the similarities among the ISI states, it will also call out a few crucial differences within and across our Dominion, Iberian, and Latin American cases. Different initial state capacities to monitor markets, different constellations of market actors, different geopolitical positions, and, obviously, the immediately preceding civil war in Spain, created trans- and intra-group differences. Equally important, geography, in the form of real distance from and transportation costs to major world centers of demand, strongly shaped the economic choices available to the ISI states. Canada and Spain were able to shift away from the ISI model more easily and earlier than the other ISI countries because the global car companies used their automobile industries as test platforms for world cars built in a globalized production system. Mexico benefited later from the same process. These early shifts in policy towards the global integration of automobile production point us towards a final difference between the ISI states and the other advanced economies. Regardless of the relative speed of change, their transformations began earlier than is usually assumed. As noted, Canada and Spain began substantial world market (re-)integration well before the 1980s. Australia also had an abortive experiment with international openness and state control via markets in the early 1970s. Mexico initiated the Border Industrialization Program, that is, the Maquiladora Program, in 1965. Brazil pursued a variety of export promotion strategies in the 1960s and 1970s, and Argentina famously liberalized its trade regime in the 1970s. In contrast, New Zealand and Portugal remained frozen in the old model until the early 1980s. Reintegration into global markets reduced the power of local organized interests, particularly labor, and dovetailed with state efforts to individualize access to and benefits from social welfare systems. The chapter thus has four sections. Section 1 sets the baseline by comparing ISI states to other post-World War II Fordist or domestic market oriented states, providing some stylized discussions of how individual ISI states instantiated this model. This section focuses on the basic building blocks and strategies employed to generate ISI. Section 2 discusses pressures for change that emerged from the inherent contradictions of the general ISI model and its specific instantiations, as well as from political democratization. Section 3 discusses the new state forms that emerged out of political conflicts in the 1980s and 1990s. A conclusion follows in section 4.

1  How was the ISI State Like and Unlike Other Postwar States? ISI was both a nation-building and an economy-building project. All eight states considered here were semi-sovereign in important ways during the first half of the twentieth century. The three British Dominions obviously were constitutionally semi-sovereign until the Statute of Westminster in 1931, and de facto for some time afterward. None completely

ISI States Reverse Course    447 controlled its own military, foreign affairs, or judicial system. Economically each was already highly penetrated by British and American financial and manufacturing capital. Trade flows centered on those two countries. Portugal was part of Britain’s informal empire, tied from the time of the Methuen treaty to the British market, and, despite its empire, was bankrupt in both military and financial terms. Mexico and Brazil experienced both positive and negative intervention by the United States (US). Spain was in many ways the most formally sovereign state among the group, although its state also had limited military and financial capacities as well as substantial interregional tensions. However, when looking at the ISI states considered in this chapter, the diversity of Spain’s economic base and export markets was second only to Canada. This semi-sovereign status limited each state’s capacity to control its economy, thereby permitting or abetting foreign penetration of key sectors. ISI changed that by simultaneously expanding a domestic industrial class and thus social support for state policy supporting that class and its associated workforce. In all of the ISI economies, the key policy linking state building, economy building, and national integration was the use of exchange and capital controls to shift rents from commodity exporters—including Spain’s tourism sector (Harrison 1985)—to protected manufacturing sectors. This simultaneously modernized the economy, albeit without guaranteeing world market levels of productivity; urbanized the economy; funded the rollout of national welfare programs, even where these were provincially administered as in Canada, or selective as in Iberia and Latin America; and brought about a steady increase in cultural confidence that supported steps towards full sovereignty, or, in Spain’s and Portugal’s case, accession to the EU as normal nations. As in the rest of the industrial world, significant if not always comprehensive regulation of finance combined with considerable financial market segmentation to give the state discretionary power to allocate capital towards agriculture, housing, and the public sector. Partial state ownership of at least one dominant bank in Australia, New Zealand, and Quebec, or full control as with Mexico’s “Nacional Financiera” (Nafinsa) or Brazil’s National Bank for Economic and Social Development (BNDES), gave those states even more discretion to allocate capital. Canada’s financial system, with its old and cozy cartel of five private mega-banks, bore a closer resemblance to Spain’s than Australia’s system. The Great Depression of the 1930s sparked ISI everywhere, but Argentina, Brazil, Australia, and Canada already had significant local production of consumer non-durables. The initial ISI spurt in Latin America and in Iberia was labor intensive and based on small and relatively spare plants in light industries such as food and textiles (Hirschman 1968). Thus, “late late” industrializers in Ibero-America lacked the institutional instruments of capital accumulation and the state participation that had characterized late industrialization in much of the advanced world. Variants of state corporatism provided the political underpinning of early ISI in the major Ibero-American states (Schmitter 1973). State corporatist politics, that is, the hierarchical organization of labor and sometimes business interests by the state, prevailed under both authoritarian and populist regimes. The authoritarian regimes of Getúlio Vargas (Brazil), Antonio de Oliveira Salazar (Portugal), and Francisco Franco (Spain) developed and strongly controlled labor and sometimes business organizations. Governments generally got the support of the nascent industrial bourgeoisie for their industrialization projects. In the populist experiences of Mexico, especially under Lázaro Cárdenas, and Argentina under Juan Perón, hegemony was more contested. Big business opposed the government, which in turn courted small and

448    Herman Schwartz and Sebastián Etchemendy medium industries and protected unions—and in Mexico also rural unions—as a counterweight (Collier and Collier 1991). Under populism, particularly in Argentina, a relatively more autonomous union movement wielded more political and economic power vis-à-vis business and the state. Wages evolved in a politically coordinated way in all of the ISI states. In the authoritarian cases, the state initially controlled wages with only formal participation from the official corporatist unions. In the late 1950s in Spain and mid-1960s in Portugal, however, more genuine forms of collective bargaining with factory commissions spread as business sought a level of labor participation conducive to higher productivity and upgraded ISI production. In populist Argentina and Mexico, peak-level national or sectoral wage negotiations with unions occurred, though in both cases bargaining was interrupted by the authoritarian turn of the Partido Revolucionario Institucional (PRI) and the advent of military regimes in Argentina. Bargaining in Australia and New Zealand did not take the classic corporatist form, but it had the same effects. Wage bargaining occurred through a legal process in which specialized labor courts set wages and conditions in response to submissions by organized labor and organized employers, as well as to amicus briefs from the state (individuals had no standing). De facto these tended to produce the same kind of productivity linked wage gains found in classic European corporatist systems. In Canada, whose economy exhibited even more regional differentiation and concentration than Australia’s, bargaining structures varied by province. The Ontario government created a set of American style quasi-corporatist arrangements in the automobile and steel industries. Wage settlements generally followed the corresponding settlements in the US. Quebec, by contrast, had French style centralized bargaining centered in its large and technically complex natural resources sectors. In addition, post-Quiet Revolution (1960–66) Quebec also had a clear state-led project of partial ISI that resembled France’s efforts to move out to the technology frontier for complex technologies in construction, power generation, rail and air transport equipment, pharmaceuticals, and dairy. This generic control over finance and coordinated wage bargaining was common to the entire postwar industrial world. How did the ISI state differ from other postwar states? The primary difference was the use of raw materials exports to fund industrialization and in particular the automobile, machinery, and metals sectors in the largest countries. ISI had started around World War I on the basis of domestic demand. This “natural” or automatic ISI had created consumer non-durables production on the basis of demand from sectors linked to the export economy. In turn, growth of these new industries created new social groups that allied in greater or lesser degrees with state actors who themselves were seeking to build a stronger national identity. Explicit ISI policies emerged from the intersection of these desires. These policies employed varying mixtures of tariffs, import quotas, and state contracting plus state-owned enterprises to promote local industry. State bureaucracies thus expanded with and through the economy. The relative success of these policies meant that by the 1930s these social blocs had become coherent enough to shape negotiations with external creditors. The collapse in commodity prices from 1923 to 1932 gave bureaucrats and (nascent) industrialists a political opening in which to promote industrialization, although civil war delayed this in Spain, and Argentina’s industrialization was delayed by the 1930 Roca-Runciman Pact it signed with Britain. State actors and would-be industrialists forged pacts with the devil—external

ISI States Reverse Course    449 financiers whose primary concern was to assure continued interest payments (Plumptre 1947; Cochrane 1980; Drake 1989). These pacts gave states in the British Dominions the tools they needed to aggressively substitute domestic production for industrial imports. In Australia and New Zealand the Harvey and Niemeyer missions—which were akin to Kemmerer’s money doctor missions in Latin America—helped set up central banks with the legal and administrative capacity to sequester foreign exchange and redirect it into industrial investment (Plumptre 1947). From the creditor’s point of view, the resulting trade surpluses would permit continued interest payments. So the British empire helped create more state capacity in the Anglo ISI states. The US state via the Kemmerer and other financial missions helped train the bureaucrats in what became Mexico’s Nafinsa and Brazil’s BNDES. All the ISI states thus came out of depression and war with central and/or state bank control over foreign exchange that allowed them to fund private and state firms controlling critical nodes in the economy (Tortella 2000). These firms all received trade protection through import quotas and tariffs. Only Canada abstained from these direct measures, principally because proximity to the US gave it an assured market—if the exchange rate was low enough—while simultaneously making comprehensive control impossible. The precise modality for protection differed from country to country, as did the precise mode for financial control. In Australia and New Zealand, tariffs hand-tailored to the needs of specific firms encouraged expansion (Capling and Galligan 1992). Canadian tariff levels were set much lower than in the other ISI economies, and lower than under its older “National Policy” of 1871–1940, while still being high enough to induce border-hopping investment by US multinational firms (Eden and Molot 1993). In the three Latin American countries, domestic content regulations covered the automobile and related industries (Jenkins 1987). In Spain, after Franco’s 1959 rapprochement with the West, major transnational corporations (TNCs) invested in basic and transportation industries not already dominated by the state. Despite differences in the precise mode for generating industry with access to cheap capital and then nurturing its growth behind a protectionist trade regime, only Canada ended up with something close to world market competitive manufacturing. The near impossibility of excluding all imports from the US and the possession of the largest national market of these five countries pushed and pulled Canadian industry towards this outcome. Economies of scale in automobile assembly begin at 50,000 units and are exhausted at 250,000 for an individual production line. Engine assembly economies of scale are exhausted at 400,000 units. Yet the entire Australian vehicle market has never exceeded 250,000 units, fragmented over five producers. Consequently, Australian-built cars cost more than twice an equivalent import in the 1960s or 1970s. Similarly, Spanish vehicle output was around 38,000 units in 1959, and despite being the most rapidly growing sector of the Spanish economy, Spain produced only 455,000 units, fragmented over four main producers, by 1970 (Pallares-Barbera 1998; Tortella 2000). The three Latin American markets consistently absorbed fewer than 250,000 units in the 1950s and early 1960s, mostly in Brazil (Jenkins 1987). By contrast, Canada already produced 400,000 units in 1960 (Anastakis 2005). ISI was also a state-building project. In the Anglo Dominions, this took two forms. First, it resulted in the construction of a distinct national identity—unitary in Australia, and bi-cultural in Canada and New Zealand. Canada, which faced the strongest external cultural threat, also had the starkest nation and culture building policies (Goff 2007).

450    Herman Schwartz and Sebastián Etchemendy Canadian protectionist policy covered not only manufacturing but also television content, movies, radio, and print media. As with the nineteenth century Canadian Pacific Railway, the idea was to build a nation and national identity on an east-west axis rather than the more fragmented identity that might emerge from several north-south axes. The rollout of a federally subsidized health insurance system also united disparate provincial systems and remains an enduring, if odd, point of common identity. Second, the provision of ever-expanding social services and the mediation of disputes between capital and labor helped each state expand its infrastructural power (Mann 1986). More and more people became enmeshed in state routines. Here democracy made the Dominions the odd cases, with Australia and New Zealand the oddest. During the high summer of the ISI period, Australia and New Zealand turned common European patterns of social and employment policy upside down (Schwartz 2000). With ISI assuring something akin to full employment, judicial regulation of wages and the labor market could substitute for social policy via the delivery of a socially defined male breadwinner wage. By contrast, Canada’s inability to fully shelter its domestic economy meant that it had to develop a more typically European style welfare state, which, unsurprisingly, was more elaborate in Quebec, which followed France’s lead closely. Unlike Australia and New Zealand, Canada had generous unemployment and social assistance programs for the workers continually displaced from its resource extraction sectors. At the same time, the usual corporatist deals in the metals and automobile sector smoothed wage income and employment. Canada could not use a protected manufacturing sector to soak up excess labor, so federal fiscal transfers homogenized living standards across Canada. In Ibero-America, by contrast, authoritarian regimes produced strongly segmented, Bismarckian welfare states that privileged narrow sets of workers, with Brazil being the most extreme case. There, public-sector workers enjoyed generous old age pensions, and higher education was lavishly funded, while the majority of workers were in the informal sector, and illiteracy continued to be a problem well into the 2000s. Mexico’s ruling party, by contrast, extended welfare, access to subsidized credit, and other support to various groups and regions based on demonstrated electoral support for the PRI. In the absence of a large peasant reserve army of labor, Bismarckian ISI welfare states had more coverage, and were less segmented, in Spain, Portugal, and Argentina than in Brazil and Mexico. As ISI unfolded in the Iberian and Ibero-American worlds, countries diverged in two main ways. First, they differed in the main agent promoting industrial deepening into basic and capital goods, and secondly, they differed in terms of political regime. In Spain and Brazil, the state emerged as the dominant ISI producer and financier, and it undertook the main investments in the so-called secondary ISI sectors such as steel, oil, aluminum, and chemicals, as well as transport equipment such as aviation, cars, or shipbuilding. Spain’s state holding company Instituto Nacional de Industria (INI) created a wide range of firms, including a domestically owned automobile industry, and expanded existing steelmaking capacity dating from the nineteenth century. In Brazil the major state-managed national champions Petrobras (oil), Vale Rio Doce (mining), CSN (steel), and eventually Embraer (aviation) fostered production in basic industries and transport materials through a large number of subsidiaries. But outside of oil giant Pemex and the usual infrastructure firms, Mexico lacked significant state-owned industry. TNCs seeking sheltered markets became crucial actors of ISI production in both Spain and Brazil. At the same time, these states elaborated extensive industrial developmental

ISI States Reverse Course    451 plans, using Spain’s INI and the BNDES as the main bureaucratic and financial locus of late ISI. In Portugal, Argentina, and Mexico, by contrast, a local bourgeoisie organized around a handful of concentrated and powerful business groups—the “seven families” in Portugal, the Monterrey grupos in Mexico, and the capitanes de la industria in Argentina—pushed forward deeper ISI in basic goods and more complex industries. Though these ISI states also welcomed TNCs, the influence of these TNCs was countered by the hegemonic local business groups with their strong connections to the local state. The second variation relates to the political regime under which late ISI was consolidated. In Brazil and Spain, lasting military bureaucratic-authoritarian regimes strongly backed by the US permitted a definitive expansion of state production, the unrestrained operation of TNCs, and a more uniform repression of labor costs. Argentina and Mexico, by contrast, oscillated between populist episodes, such as the interregnums of Luis Echeverría Álvarez and Perón’s third presidency, and more authoritarian administrations, under which the local business groups thrived. In Portugal, finally, Salazar commanded a kind of personal dictatorship until 1968. Its essential elements were a corporatist institutional structure and Salazar’s alliance with the families that controlled colonial commerce, rather than an alliance with the military bureaucracy. All of the Ibero-American countries were more like Australia and New Zealand in that the creation of a fragmented and overstaffed industrial sector helped resolve employment pressures. In sum, although the classic O’Donnell (1973) and dependency theories (Cardoso and Falletto 1968; Collier and Cardoso 1979) linking authoritarianism and ISI deepening have been questioned, it can hardly be doubted that late ISI expanded more in the bureaucratic-military regimes of Spain and Brazil, which commanded bold projects of state-driven industrialization.

2  Breakdown of the ISI model Two parallel phenomena undermined the ISI state in the mid- to late 1970s: the unfolding of democratization “from below,” and the pressures for international economic liberalization “from above.” The ISI model began breaking down in all countries well in advance of the 1979/80 Thatcher-Reagan revolution that conventionally benchmarks the global onset of neoliberal policies. By the 1960s and early 1970s the limits of the ISI model were already apparent, prompting political efforts to modify the central feature of the ISI model, namely protected, domestically oriented automobile industries. Indeed, if we code the 1974 Portuguese Carnation Revolution as a decisive political break with the old ISI state, then only New Zealand emerges as the real laggard. The ISI model shared the common political defects of the postwar Fordist model in the advanced economies. While the centralization and expansion of welfare services was a great boon, it also put more and more people under bureaucratic surveillance. To be sure, this was nothing when compared to the political surveillance experienced in Iberia. But centralization triggered counter-pressure to decentralize and accommodate individual and regional differences everywhere. Equally so, the exclusion of most political actors aside from organized capital and labor—which in Iberia effectively meant just capital—generated a growing backlash in the 1960s. In Spain, for example, Franco’s Planes de Desarrollo

452    Herman Schwartz and Sebastián Etchemendy ironically had the effect of intensifying industrialization and thus new demands for regional autonomy in the Basque country and Catalonia. For Iberia the dual oil shocks of the 1970s and for Latin America the 1982 Mexican default signaled the demise of ISI. Inflation, fiscal and foreign exchange crisis, and international pressures—stemming from the European Commission in Iberia and the multilateral institutions in Latin America— made adjustment and market liberalization unavoidable. From an economic point of view, the ISI model generated its own distinct contradiction by constantly expanding the sheltered manufacturing sector without generating sufficient export revenue to offset the cost of debt service, non-substitutable imports (particularly oil), and capital goods. Aside from tourism to Spain, primary product exports faced declining and volatile terms of trade, as well as slow volume growth. At the same time, the inefficient local production of manufacturers lowered export competitiveness. Consequently, all of the ISI states began to develop current account deficits. Inward Foreign Direct Investment (FDI) and direct borrowing abroad helped bridge the gap. But both created new demands on future foreign exchange earnings and eroded national control over the economy. While FDI solved the economic problem of ISI, it recreated the economic semi-sovereignty ISI was intended to remedy. Similarly, the ISI states used public foreign borrowing to bridge the employment and fiscal gaps of the 1970s. As with FDI, this proved unsustainable in the absence of robust growth in export revenues. Canada made the first critical turn away from the ISI model. In 1965 it negotiated the Automotive Products Trade Agreement with the US. The Auto Pact allowed US-based transnational car companies to treat Canada as part of an integrated North American production system rather than as a separate national market, provided that production did not fall below the levels existing in 1964 (Anastakis 2005). The TNCs could then rationalize production, maximizing economies of scale. This eliminated the economic problems created by the relatively smaller scale of car production in Canada without risking a significant erosion of Canadian (primarily Ontarian) employment. By allowing the consolidation of headquarters and design in US locations, it also set limits on Canadian efforts to attain economic sovereignty. Given the relative weakness of the Canadian dollar and the benefit conveyed by single payer health insurance, automobile and parts trade soon turned from a deficit to a surplus for Canada. Ottawa’s efforts to construct a National Energy Program in 1980 represented a temporary, budget-driven reversal of the new trend. But the Auto Pact set the pattern for further integration of the US and Canadian economies, culminating in the Canada-US Free Trade Agreement (CUSFTA of 1988) and then the North American Free Trade Agreement (NAFTA of 1994). Although Spain’s tourist and remittance receipts put it in the strongest position of all with respect to foreign exchange, it also made two early turns away from the old ISI model. The reforms of 1959 ended the multiple exchange rate regime that had helped shift resources towards manufacturing, although protection continued in the form of import quotas and high tariffs. Spain’s 1970 deal with Ford replicated the essential features of Canada’s Automobile Pact with the US. While a full rationalization of Spanish and Portuguese automobile production waited on accession to the EU, preferential trade agreements in 1970 (Spain) and 1972 (Portugal) began the integration process. Like Korea in Asia and Mexico in North America, Spain was initially Europe’s primary small car winner in the emergence of the global car production concept. Spanish automobile output soared to 1 million units by 1980 and 1.6 million by 1990.

ISI States Reverse Course    453 In Australia, the 1972–73 Labor Party government of Gough Whitlam also undertook major reforms of the trade regime and state structures. The Whitlam government attempted drastic reductions in what were some of the highest tariffs in the industrial world. It transformed the heretofore omnipotent Tariff Board into the Industries Assistance Commission, changed its mandate from the production of tailor-made tariffs to efforts to boost competitiveness, and cut tariffs across the board by 25 percent (Capling and Galligan 1992). The Whitlam government also presaged the reorganization of the Australian welfare state away from the existing indirect, wage-based system towards a more European welfare state. But rising unemployment, inflation, and a constitutional coup d’état delayed further reforms until the 1980s. New Zealand had encountered the same problems faced by Australia in the 1960s and early 1970s. The policy mix of hesitant steps away from the ISI model was somewhat different, as it involved a brief period of free collective bargaining. But as in Australia, the ISI model proved unable to deal with simultaneous commodity price and wage shocks. The resulting stagflation produced a conservative government committed to maximum interference in the economy in pursuit of minimal institutional change. Much as in post-1974 Portugal, this involved an expansion of direct state ownership and investment. Despite political pressure to change welfare state administration, including the formation of a third party, little changed until the late 1980s. In Latin America, Brazil, Mexico, and Argentina launched bold interventionist projects of ISI-deepening in the late 1960s. Deepening was coterminous with increasingly authoritarian politics, with coups in Brazil and Argentina led by Generals Castello Branco and Juan Carlos Onganía in 1964 and 1966, and a repressive turn for the PRI under Díaz Ordaz. In Argentina, these policies were checked by the popular revolt of the 1969 Cordobazo and partially reversed by the new neoliberal military regime in 1976. But in Brazil and Mexico ISI did not decisively end until the debt crisis of 1982 in practice closed international capital markets for Latin America. In general, external borrowing from the liquid world financial markets of the 1970s had temporarily abated the foreign exchange crises that had hindered earlier Latin American ISI, and, in the words of Rosemary Thorp (1998: 201-240), functioned as an “artificial respirator” of late ISI. Although each country took steps towards a new model in the 1960s and early 1970s, none succeeded in fully implementing that model. Instead, the bulk of the old policy routines ran their course, funded by expanding internal and external debt. By the early 1980s, each country reached the political limits of the model when the 1979–82 recessions and the debt crisis triggered sharp increases in unemployment, public debt, and debt service.

3  New States All of our ISI states shifted away from models with considerable government management of the economy and substantial disguised redistribution to urban actors towards indirect management and some politically directed—that is, pushed by democratic and leftist governments—redistribution to the popular sectors. Similarly, trade and financial liberalization increased the relative political weight of the tradable sectors and of foreign capital relative to non-traded sectors and in particular the public sector. All countries imported

454    Herman Schwartz and Sebastián Etchemendy the new public management to varying degrees. In Latin America and Iberia, liberalization of the economy and liberalization of politics went hand in hand. Finally, Spain and Canada both reversed ISI-era centralization by devolving important welfare state and economic management to provincial governments. As Michael Pusey’s (1991) subtitle—A Nation-Building State Changes its Mind—suggests, nation-building states changed their minds about that project. In Australia and New Zealand an alliance of fiscal bureaucrats, traded-sector labor, and traded-sector capital sought these changes (Schwartz 1994). In 1983 and 1984 left governments replaced incumbent right governments committed to the old model. Each new Labor government quickly floated the currency and liberalized financial markets, disabling the state’s ability to channel capital to favored sectors. Each systematically reduced tariffs, although in Australia politically sensitive and employment-rich sectors were given more breathing room than other sectors. Equally so, each slashed agricultural subsidies, which had risen as a form of compensation for high tariffs. Finally, both governments, as well as their follow-on right wing coalitions, privatized many state-owned enterprises. This included the largest banks in each country, telecoms, airlines, and power generation firms. The state also withdrew from direct efforts to create industrial firms or sectors, aside from continued support for agricultural research. Combined with privatization and a strict commitment to balanced budgets, this allowed a gradual substitution of private overseas debt for foreign public debt. While both countries continued to run current account deficits which were necessarily funded via foreign debt, that debt no longer fell on the state’s balance sheet. So the state’s withdrawal from direct management was paralleled by increasing insulation of the state from global capital markets. Australian and New Zealand general government net financial liabilities peaked at 26 percent and 44 percent of GDP in 1995 and 1994, respectively. However, by 2005 both governments were net creditors, as compared to an average net liability of 45 percent of GDP for the OECD. Although the share of trade in GDP expanded, the proportion of manufactures and finished goods stopped rising in the 2000s, when China’s enormous appetite for iron ore, coal, and food decisively moved both countries back into the business of being a quarry for industry elsewhere. Australia and New Zealand both signed important bilateral Free Trade Agreements with the US and with each other, New Zealand signed one with China, and Australia is negotiating one with China. These lock each country into the current global division of labor. In Canada, the federal government made three broad changes that effectively undid the old ISI model. First, it shifted the provision of social protection away from itself and towards the provinces, and in doing so changed the nature of social protection. Up until the 1980s the Canadian federal government funded roughly half of the cost of health and social assistance, imposing national standards and portability, and was wholly responsible for unemployment insurance and a large universal child tax credit. Conservative and Liberal governments in the 1980s and 1990s changed health and welfare funding from a reimbursement system to a block grant system and then began reducing those grants. These cuts helped reduce program spending from roughly 20 percent of GDP to 13 percent from the mid-1980s to the mid-1990s (OECD 1996: 49). Second, as noted earlier, trade liberalization expanded in two large steps from the original Auto Pact. First the Canada-US Free Trade Agreement and then the North American

ISI States Reverse Course    455 Free Trade Agreement thoroughly integrated the Canadian economy with the US economy. Trade integration decisively locked Ontario into the role of automobile producer, which simultaneously locked much of Ontario’s upstream manufacturing into automobile supply industries. Ontario assembled roughly 80 percent of the 2.1 million cars built annually in Canada before the 2008 Great Recession. Trade liberalization also undid prior efforts to orient the Canadian economy along an east-west axis, instead orienting each province towards its immediately southern American neighbors. Finally, as in Australia and New Zealand, the Canadian federal state engineered a shift from public foreign debt to private foreign debt. Although Canada remained a net debtor as of the mid-2000s, net public debt declined by almost the same proportion of GDP as in New Zealand. The scale of fiscal consolidation was also enormous—almost 14 percentage points of GDP from 1992 to 2008. In Iberia and Latin America industrial liberalization trajectories were largely shaped by the type of ISI model that had prevailed in the postwar period (Etchemendy 2011). Spain and, to a lesser extent, Brazil put in place a series of state-driven reconversion plans based on subsidies that financed redundancies, mergers, and firm closures in crucial industrial sectors such as steel, chemicals, oil, and transport equipment. In brief, the INI and the BNDES subsidized the shrinkage of weak industries. In this statist liberalization of the ISI model, privatization was pursued gradually, and used to create state-leveraged national champions mostly in energy, banking, and telecoms (Spain), and in manufacturing and mining (Brazil). The state then helped these firms to compete in world markets. Banks and institutional investors became crucial allies in the sectoral reconversion and the state-controlled industrial privatization projects of Fernando Henrique Cardoso (1994–2003) and Felipe González (1982–96). In Argentina under the Carlos Saúl Menem (1990–99) government, Portugal under Cavaco Silva (1986–95) and Mexico under the neoliberal PRI administrations (1982–2000), by contrast, major deals with the national business groups—and sometimes unions—around massive privatizations and other market-share compensation prevailed. Yet in all the cases, by the year 2000 import liberalization had soared as countries integrated into the EU, NAFTA, and Mercosur, and the ISI state sector had largely disappeared. The gradual liberalization of trade and financial flows can be seen in Figures 23.1 and 23.2. Figure 23.1 shows the increase in exports and imports as a share of GDP. Spain, Canada and Mexico show the largest absolute increase in trade, which undoubtedly reflects their deep integration into continental automobile production systems, as well as Spain’s shift away from an autarkic development policy in the 1960s. Yet, Argentina experienced the greatest relative increase in trade, even if absolute trade remained relatively low. Figure 23.2 shows the average stock of inward and outward foreign direct investment in relation to GDP. Again, Spain shows the greatest change in terms of cumulative inward and outward flows, followed by Australia and Mexico. For Spain and Mexico, automobile-related investment drove inward investment, while finance, infrastructure and medium technology manufacturing drove outward investment. Inward FDI contributed on average about ten percent of Spanish gross domestic investment, but it peaked in the late 1990s and early 2000s as the automobile complex finished building out. In the 2000s, by contrast, Spanish FDI outflows exceeded inflows by a considerable amount. These outflows exploited the opportunities created by the dismantling of the Latin American ISI state, with Spanish banks, telecommunications, and energy firms buying up newly privatized state firms.

80 70

Australia

Percentage

60

Canada New Zealand

50

Portugal

40

Spain

30

Argentina

20

Brazil Mexico

10 0

1960s

1970s

1980s Year

1990s

2000s

Fig.  23.1  Average percent share of imports and exports in GDP, by decade. Sources: authors’ calculations from OECD database, http://OECD-iLibrary.org and United Nations database, http://data.un.org/Explorer.aspx?d=SNAAMA, last consulted 26 January 2014.

45 40

Inward Outward

35 30 25 20 15 10 5 0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Fig.  23.2 Inward and outward stock of foreign direct investment, 1980–2010 (average percentage of GDP for all eight countries). Source: authors’ calculations from UNCTAD FDI database, http://unctadstat.unctad.org/TableViewer/ tableView.aspx?ReportId=89, last consulted 26 January 2014.

ISI States Reverse Course    457 This shift away from the old ISI model produced dramatic declines in state employment and formal state ownership in the economy. All of our states saw significant attempted or successful efforts to reconstruct the welfare state. In the Dominions, this took the form of greater individuation of pensions, as well as the creation of a mandatory and universal private second tier pension in Australia. In Spain and Portugal, the collapse of the ISI state in the late 1970s occurred simultaneously with democratization, and also with the process of EU accession, which was formalized in 1986. Democratization opened a space for the universalization of old age pension and social welfare systems. These previously had concentrated on job security and, despite centralized management, a Bismarckian strategy to divide and conquer the labor movement through occupationally specific welfare schemes (Guillén 2008). This mostly took the form of the layering of public pensions on top of private ones, and the incorporation of non-workers into a basic or citizen’s pension system. In both countries spending on pensions, healthcare, and education almost tripled as a share of GDP from 1970 to 2000 (see Table 19.3 in Chapter 19 by Levy et al., the Introduction to Part III), broadening the old Bismarckian welfare state. In short, European aid and increased taxation helped to expand the welfare state in Spain and Portugal even in the context of industrial liberalization and monetary tightening, entry into the European Monetary system, and the adoption of the Euro. While the ex-Dominions obviously did not make any transition from authoritarianism to democracy, there were parallel democratizing changes. All three moved to create something like a formal bill of civil and/or political rights (though Australia did not pass one), all acknowledged and agreed to greater degrees of sovereignty and autonomy for their indigenous populations, and all three made electoral reforms increasing the effectiveness of individual votes. In the Latin American countries the post-ISI states reduced state direct participation in industry, increased exports and imports exponentially, and expanded welfare across the fragmented working class. Democratization and renewed social demands could not avert—and in some sense deepened—the adverse economic consequences of the debt crisis and the “lost decade.” Even segmented welfare states were downsized or partially privatized, for example, in pensions and health, during the neoliberal governments of the 1980s and 1990s in the context of rising poverty and the massive growth of the informal economy. Only after the stabilization of democratic rule and the rise of left-wing governments in Argentina and Brazil after 2000 did social policy institutional retrenchment reverse (Huber et al. 2008; Garay 2010). Massive and quasi-universal transfer programs targeted at the unemployed and poorly paid workers lacking formal legal employment protection were established or consolidated after 2000 in Brazil (Bolsa Familia), Argentina (Asignación Universal por Hijo) and Mexico (Oportunidades). Despite this general trend away from industrial policy, the Brazilian and Spanish states still supported business through cheap credit and economic diplomacy, helping Spanish infrastructure firms expand in Latin America, for example. By contrast, the Argentine, Mexican, and Portuguese states were more passive. Finally, post-ISI states vary in the degree of union empowerment after the transition, as Argentina preserved and expanded forms of national and sectoral wage coordination that are not present in any of the other post-ISI states. Similarly, collective bargaining was dramatically decentralized in New Zealand and Australia, and somewhat so in Canada.

458    Herman Schwartz and Sebastián Etchemendy Overall, in the relatively mature economies of New Zealand, Canada, and Australia, changes in the welfare state ended up being less about spending levels and more about how money was spent, with the obvious exception of Australia’s new mandatory private pension. The old ISI state was built around publicly blessed corporate identities that secured benefits on the basis of those corporate identities. The new state looked lighter and smaller in bureaucratic terms, but spending levels were basically unchanged. Figure 23.3 shows the level of public and mandatory private social expenditure as a percentage of GDP. What is most notable is the degree of relative stability. Spending rose in Australia following the introduction of a mandated private second tier pension. Similarly, spending rose strongly in Spain and Portugal with the buildup of private second and third tier programs created in the late 1980s. Spending fell in Canada after spending had ballooned during the brutal 1990s recession. Otherwise, spending levels oscillate with the business cycle. Figure 23.4 shows the deviation of total public and mandatory social spending from the OECD average. This also reveals a strong degree of stability in terms of spending. This of course masks changes in eligibility and the long-term consequences of individuation in pension payouts. States thus tried to push political struggles over the welfare state out into the market as a struggle for jobs carrying better benefits. Finally, in varying degrees, all of these states moved to reduce the degree to which monetary policy was accommodating. Except for Argentina after 2003, central banks gained considerable autonomy from politicians (though not necessarily from financial interests). In New Zealand, for example, a new organic statute committed the Reserve Bank to a contractually agreed level of inflation that is publicly negotiated with government. In Iberia, the creation of the Euro and the European Central Bank effectively removed control over monetary policy, with disastrous effects seen in 2010 and 2011. As noted earlier, parallel changes in some labor markets reinforced these changes. Despite this, the non-Latin 25.0

20.0 Australia

15.0

Canada Mexico

10.0

New Zealand Portugal Spain

5.0

0.0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

Fig. 23.3  Total public and private social spending as percentage of GDP, 1980–2003. Source: authors’ construction from OECD database, http://OECD-iLibrary.org, last consulted 26 January 2014.

ISI States Reverse Course    459 6

3

0 0 198 –3

4

198

8

198

2

199

6

199

0

200

4

200

Australia Canada

–6

New Zealand Portugal

–9

Spain Mexico

–12

–15

–18

Fig. 23.4 Deviation of total public and private social spending as percentage of GDP from the average OECD level, 1980–2007. Source: authors’ construction from OECD database, http://OECD-iLibrary.org, downloaded 4 January 2012.

American economies all experienced severe housing bubbles in the 2000s. State deregulation of finance thus had perverse effects.

4 Conclusions The Great Depression created a space in which a set of politically and economically semi-sovereign states could shift their economies away from raw materials exports, assert a more independent foreign policy, and incorporate more of their citizens into daily routines shaped or controlled by the state. These states made the best of the collapse of world trade by using new policies and institutions to shift rents from raw materials exports towards a nascent manufacturing sector. Over the next 30 years they would build up a capacity to make consumer non-durables and durables, substituting local production for imports. The localization of manufacturing created new social groups—organized capital and labor— that proved a durable social base for these states. Yet the inability to create world market competitive manufacturing—except to an extent in Canada—set limits on this development strategy. As relatively inefficient local production supplied more and more local consumption, export sectors increasingly were unable to deliver enough foreign exchange to prevent an accumulation of foreign debt. By the

460    Herman Schwartz and Sebastián Etchemendy same token, consumer and producer groups chafed at the restrictions on consumption and behavior that the regulated economy imposed. This problem was even more acute in authoritarian Ibero-America. Organized capital and sometimes labor in industries that stood to gain from greater integration pressed for an end to ISI policies in alliance with finance, which sought the liberalization of the financial side of those policies. After hesitant steps in the 1970s, all of the ISI economies turned decisively towards greater integration with world markets in the 1980s. This integration restored or recreated some of the economic semi-sovereignty of the pre-ISI period. National champions like the Spanish automobile producer SEAT were absorbed by foreign multinationals. These states also similarly returned to something akin to their old semi-sovereignty by joining a range of regional free trade zones, including the more comprehensive integration of the EU’s single market. Yet for these states, the shift away from ISI policies helped expand their autonomy from local social groups and reduce fiscal pressure. In line with other advanced industrial states, they implemented new public management, desocialized and individuated large parts of the social welfare system, and initially accepted growing income inequality. All of these processes reduced internal pressures on the state. Against this, democratization in Latin America and Iberia gave the population an opening to demand more expansive welfare states, though the size of these welfare states mostly remained below the average welfare state share of GDP in the rest of Western Europe. This expansion shifted Bismarckian welfare states towards the neoliberal model prescribed by the World Bank, although not to the fully individuated Chilean pension model. It is still too early to see if the 2007–10 global financial crisis and recession will produce a decisive shift away from the post-ISI model. The crisis has had heterogeneous effects on the countries considered here. Mexico’s close integration with the US economy and the ever-present competition of Chinese manufacturing meant that it faced a sharp contraction that has since reversed as Chinese wages have risen. The inflexibility of the Euro exacerbated Spain’s and Portugal’s contractions, exposing their public finances to an Irish style collapse and perhaps unprecedented EU intrusions. Brazil, Argentina, Australia, and New Zealand, however, sailed through the recession on the basis of Chinese demand and high commodity prices. So while the crisis has already produced policy changes in Iberia, it has not yet negatively affected the other countries. However, like the depression of the 1930s, the current crisis is likely to trigger far-reaching changes. We can offer some speculation on those changes. The greater the degree of success in the prior round of industrialization, the better the basis for future industrialization and the greater the likelihood of a shift of state intervention towards the model found in the core economies. Equally so, the greater the degree of success, the more likely that state elites and institutions are capable of finding new strategies for industrial upgrading and for handling emerging social tensions. Thus, in Australia, Brazil, and Canada, and, to a much lesser extent, in New Zealand, raw materials exports continue to drive the expansion of local industry, albeit in the face of an overly strong exchange rate. Both the Brazilian and Australian states have shifted towards R&D-heavy forms of intervention, trying to shift industry and agriculture towards higher value-added forms. Both have homegrown TNCs that are integrated into global production chains. All this inevitably will produce some of the dualisms found in other rich countries, but each retains a capacity to compensate economic losers. Spain and Portugal, by contrast, find themselves with neither robust raw materials exports nor the ability to use devaluation or overt industrial policy to boost manufacturing.

ISI States Reverse Course    461 Each faces a profound fiscal crisis that will hamper state building. Portugal is losing population through emigration, a sure sign of decay. For different reasons, Argentina and Mexico also lack the ability to translate export revenues into state or economy building. Mexican economic success is highly regional and contributes to a fragmentation of the state, and Argentina’s state lacks any capacity to shape the economy. Finally, the international environment strongly constrains what is possible. In part, the 1930s crisis helped define this group of states by forcing an opportunity for domestic market-oriented industrialization on them. The 2010s crisis is likely to fragment this group along the lines suggested above, by forcing heightened integration on them. As the nineteenth century shows, integration with global markets guarantees neither economic success nor political stability. As in the 1930s, these states need to find new tools for restoring economic growth and creating political legitimacy. What those tools will be in the next decade is an open question.

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462    Herman Schwartz and Sebastián Etchemendy Harrison, Joseph, 1985. The Spanish Economy in the Twentieth Century. Sydney, Australia: Croom Helm. Hibou, Beatrice, 2004. “From Privatizing the Economy to Privatizing the State.” In Privatizing the State, ed Beatrice Hibou, 1–47. New York: Columbia University Press. Hirschman, Albert O, 1968. “The Political Economy of Import-Substituting Industri­ alization in Latin America.” The Quarterly Journal of Economics 82 (1, February): 1–32. Huber, Evelyne; Mustillo, Thomas, and Stephens, John D, 2008. “Politics and Social Spending in Latin America.” The Journal of Politics 70 (2): 420–436. Jenkins, Rhys O, 1987. Transnational Corporations and the Latin American Automobile Industry. London, UK: Macmillan. Mann, Michael, 1986. The Sources of Social Power. Vol. 1: A History of Power from the Beginning to AD 1760. Cambridge, UK: Cambridge University Press. O’Donnell, Guillermo, 1973. Modernization and Bureaucratic-Authoritarianism: Studies in Latin-American Politics. Berkeley, CA:  University of California, Institute of International Studies. OECD, 1996. Economic Survey: Canada. Paris, France: OECD. Offe, Claus, 1981. “On the Attribution of Public Status to Private Interest Groups. Obser­ vations on the West German Case.” In Organizing Interests in Western Europe: Pluralism, Corporatism, and the Transformation of Politics, ed Suzanne Berger, 123–158. Cambridge, UK: Cambridge University Press. Pallares-Barbera, Montserrat, 1998. “Changing Production Systems: The Automobile Industry in Spain.” Economic Geography 74 (4): 344–359. Plumptre, Arthur F W W, 1947. Central Banking in the British Dominions. Toronto, Canada: Toronto University Press. Pusey, Michael, 1991. Economic Rationalism in Canberra: A Nation-Building State Changes its Mind. Cambridge, UK: Cambridge University Press. Schmitter, Philippe C, 1973. “Still the Century of ‘Corporatism’?” The Review of Politics 36 (1): 85–131. Schwartz, Herman M, 1994. “Small States in Big Trouble.” World Politics 46 (4): 527–555. ——, 2000. “Internationalization and Two Welfare States: Australia and New Zealand.” In Welfare and Work in the Open Economy. Vol. 2: Diverse Responses to Common Challenges in Twelve Countries, ed Fritz W Scharpf and Vivienne A Schmidt, 69–130. New York: Oxford University Press. Thorp, Rosemary, 1998. Progreso, pobreza y exclusión: Una historia económica ee América Latina en el siglo XX major [Progress, Poverty and Exclusion: An Economic History of Latin America in the 20th Century]. Washington, DC: IDB (Inter-American Development Bank). Tortella, Gabriel, 2000. The Development of Modern Spain: An Economic History of the Nineteenth and Twentieth Centuries. Cambridge, MA: Harvard University Press. Vogel, Steven K, 1996. Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries. Ithaca, NY: Cornell University Press.

CRUCI A L IS SU E S

Chapter 24

W elfa r e State Tr a nsfor m ation Convergence and the Rise of the Supply-Side Model

Herbert Obinger and Peter Starke

1 Introduction The welfare state is a combination of a market economy with a comprehensive, rights-based system of social protection including cash benefits, social services, and a broad set of regulatory policies. Historically, its main objective was compensation for income loss due to occupational risks and vicissitudes of life such as old age, unemployment, work injury, or death. Today, the welfare state serves additional goals, including gender equality and social investment, and has become the public budget’s heavy weight, attracting more than half of public expenditure in virtually all rich democracies. Much of its dramatic growth occurred from 1945 to the mid-1970s. This period witnessed the extension of social rights to new groups of beneficiaries, increased benefit generosity, eased eligibility rules, and new programs such as family cash benefits or social services. Even though Figure 24.1 masks considerable cross-national differences in welfare generosity for four core welfare state programs, it illustrates the postwar expansion, but also its halt between the mid-1970s and early 1980s when Western democracies were hit by the two oil shocks. These exogenous shocks were the prelude to a transformed international political economy, which, together with domestic transformations like ageing and increased female labor market participation, has generated new challenges for the old order of advanced welfare states.

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2  The Old Order: Postwar Expansion and the Variety of Welfare Regimes Demography and unprecedented levels of economic growth are among the most important structural forces that facilitated a massive growth of benefits during the bonanza years of the welfare state (Wilensky 1975; Lindert 2004). This expansion was further accelerated by the triumph of mass democracy and the closely connected credit-claiming strategies pursued by office-oriented policy-makers under conditions of fierce electoral competition (Pierson 1994). In the immediate postwar period, economic growth in Northwestern Europe was bolstered first by reconstruction, and later by trade liberalization in the wake of the formation of the European Community and the European Free Trade Association (EFTA) in the late 1950s. Since the deepening of economic integration did not initially include free capital markets, governments could practise redistributive policies by taxing corporations and capital and squeezing the wage differentials between different skill levels (Scharpf 2000). In addition, regime competition between the democratic West and the communist regimes in Eastern Europe contributed to the postwar expansion of the Western welfare state. While all these factors provided favorable conditions for public intervention across the member states of the Organisation for Economic Co-operation and Development (OECD), we can nevertheless observe a considerable diversity throughout the OECD in terms of social spending, benefit generosity, and institutional patterns. Comparative welfare state

Welfare State Transformation    467 research has identified a battery of variables accounting for these cross-national differences. To begin with, national welfare states evolved out of their unique institutional heritage that dates back at least to the 1880s. Spending dynamics were strongly related to the age of the national social security system (Wilensky 1975), and early choices about basic structural program characteristics shaped subsequent developments. Political factors play an overriding role for explaining cross-national policy variation during the twentieth century. According to arguably the most prominent theoretical account of comparative welfare state research—the “power resources approach”—the welfare state is an outcome of a “democratic class struggle” (Korpi 1983). Left power resources inside and outside parliament are considered as the main factor conducive to generous and universal social protection (Stephens 1979; Korpi 1983). Later on, Christian democratic parties were also identified as crucial supporters of the welfare state (Manow and van Kersbergen 2009). The most comprehensive welfare states therefore emerged in countries where government was controlled by strong left and/or Christian democratic parties. By contrast, the expansion of publicly provided welfare was significantly constrained in political settings dominated by liberal and secular conservative parties (Huber and Stephens 2001). However, policy-makers’ room to maneuver is, to a considerable extent, preconfigured by political institutions. In fact, institutional veto points have decisively impeded the expansion of the welfare state (Huber et al. 1993). Examples of such institutional barriers to policy change include direct democracy, constitutional courts, and interstate federalism, as in North America, Australia, and Switzerland. In consequence, veto-ridden state structures have strongly shaped the public-private mix in welfare provision, since any failure of public solutions often paved the way for private and occupational benefits or hidden forms of welfare provision, such as regulation or tax expenditures (Hacker 2002). In contrast, neocorporatist institutions, which emerged in several small European countries (Katzenstein 1985), turned out to be conducive to welfare state expansion. Another source of cross-national social policy variation that is emphasized in the literature is ethnic fragmentation. The collapse of multi-national empires in the aftermath of World War I and the catastrophe of World War II led to a high degree of ethnic homogeneity in most European societies. Some scholars argue that ethnically homogeneous nation states were much better able to achieve legitimacy for a redistributive regime among its members than were ethnically or linguistically fragmented societies (Lindert 2004: vol. 2, 71). In an effort to better understand these differences, various classificatory attempts have been made. Esping-Andersen’s (1990) typology of three ideal-type welfare regimes is arguably the most important one. The most encompassing model of the welfare state is the social democratic regime that emerged in the Nordic countries under social democratic hegemony, notably in post-war Sweden. Benefits are universal and citizenship-based and often tax-funded. Active labor market policy and encompassing social services with a view to simultaneously unburden women from family work and to increase female employment are characteristic features of this model. Public service provision contributes to generate middle-class loyalty. Both benefit generosity and spending levels are high so that markets are crowded out from benefit provision. By contrast, the liberal regime, found in the English-speaking world, celebrates individualism, self-responsibility, and an anti-state ideology. It emerged in settings with liberal

468    Herbert Obinger and Peter Starke and secular conservative incumbency. Countries belonging to this regime type typically offer minimum and means-tested benefits as well as flat-rate insurance benefits, while the social protection of those who are better-off is left to markets and private or occupational initiative. Coverage of public programs is therefore low, and the main objective is poverty alleviation. What is peculiar in some of the English-speaking nations is a large hidden welfare state based on tax breaks and occupational welfare, as in the US (Hacker 2002), or a broad set of regulatory policies historically protecting wage earners, as in the Antipodes (Castles 1985). In all cases, however, public benefits are meager and designed to cover only basic needs. The conservative-corporatist regime in Continental Europe is arrayed between these poles. Its most salient factor in political terms is the pivotal role of Christian democratic parties. Occupational position, status, hierarchy, and the notion of a male breadwinner are therefore central. Benefit eligibility is attached to labor market participation and marriage, and the level of benefits, which is merit-based, rises with income and employment record. Mandatory and occupationally fragmented social insurance funded from contributions by employers and employees is the dominant program. Service provision, in contrast, is weakly developed, as care work is traditionally left to families, that is, women. Despite various lines of criticism and suggestions of additional welfare state types, this seminal typology is still a very helpful heuristic device for understanding the impact of different welfare state types on equality, employment patterns, and gender relations, as well as their vulnerabilities and reform opportunities in a changed socio-economic environment.

3  Challenges to the Old Order Both the academic and the political debate in the 1990s and early 2000s centered on external challenges to the welfare state, notably economic globalization and European integration. The impact of globalization—that is, lower barriers to trade and capital flows between countries—may come through two main mechanisms. The first is regulatory and tax competition between jurisdictions. Here, the expectation is that increased exit options for capital lead to a “race to the bottom” in regulatory levels, tax rates and, in consequence, welfare state generosity and spending. The second theoretical mechanism, which is largely ignored in the political debate, is the so-called compensation thesis. It expects the (potential) losers of economic opening to demand compensation through social welfare benefits. Hence the expectation is that we should find persistent, if not increased, levels of social provision, at least in some areas of the welfare state. While both hypotheses have been extensively tested, no scholarly agreement has emerged so far about the overall impact of economic globalization on the welfare state. The economic dimension of European integration can be seen as a particular form of globalization at the regional level. The Maastricht Treaty of 1992 and the enlargement of the European Union (EU) to an ever more diverse group of member states drew attention to questions about the impact of integration on national welfare states and the prospects for a supranational welfare state. Again, several channels of influence on domestic welfare states are relevant and have been extensively discussed. The first channel is the direct impact of EU legislation on social matters. Due to a lack of competences in some of the core fields of

Welfare State Transformation    469 the welfare state, the impact of EU legislation has been limited so far, and earlier expectations about a supranational welfare state have been muted. However, the second channel— the indirect impact of common market compatibility requirements, which is backed by a powerful European Court of Justice—seems much more important (Leibfried and Pierson 1995). In addition, increased cross-border competition within the common market may lead to downward pressures via regulatory and tax competition. Whether and to what extent European integration has put constraints on national welfare states remains controversial. It is nevertheless safe to conclude that the process of market-building in Europe has put European welfare states under considerable reform pressure, while the re-regulation of social policy at the EU level has progressed rather slowly, due to the high level of political consensus required for shifting policy jurisdiction to the EU level (Scharpf 2010). Since EU social policy harmonization via “hard law” is difficult to achieve, the EU has tried to establish a variety of “soft” governance mechanisms in the social sphere (Trubek and Trubek 2005). The Open Method of Coordination is designed to spread best practices—and sometimes discourage bad practices—among member states. However, cross-border policy learning is not confined to the EU. Both learning and competition are increasingly seen as two mechanisms of the larger phenomenon of policy diffusion that has only recently been taken up by mainstream welfare state research (for an overview, see Obinger et al. 2013). In addition to these external challenges, mature welfare states have also been confronted with a broad set of domestic challenges (see Hemerijck 2013). This results in part from structural economic change, notably the transition from industrial to post-industrial economies. The lower productivity of the service sector reduced economic growth and led, in consequence, to lower wage growth. Technological progress, lower economic growth, and economic globalization have increased the unemployment risk of the less-educated workforce. Employment gains in the private service sector can often be achieved only at the expense of higher wage inequality unless the public sector exercises a compensatory function. In addition, the higher wage premium on education in knowledge-based post-industrial economies increased the wage differentials between different skill levels. Moreover, higher flexibility requirements in service economies and mounting unemployment are said to have increased the pressure to deregulate labor markets, giving rise to the spread of various forms of atypical employment such as part-time work, temporary work, or fixed-term employment. The resulting decline of standard employment in particular represents a major challenge for continental welfare states, since precarious employment is, by virtue of the tight nexus between benefit levels and employment record, translated into low welfare benefits. Recent decades also witnessed a massive rise of female labor market participation. Even though this often occurred only on a part-time basis, labor market entry of women increased demands for policies that help to balance employment and family work, which typically has been delivered by women. In addition, traditional family patterns underwent significant changes over time. Rising divorce rates and an increasing number of lone parent households undercut the welfare production capacity of families and was related to higher poverty risks. Demography remains a permanent issue. While life expectancy has been constantly rising for a long time, the new challenge is that since the 1970s there has been a sharp decline in fertility rates in many countries. This is of particular relevance for pay-as-you-go funded pension schemes, as a shrinking working age population has to support a growing number of

470    Herbert Obinger and Peter Starke pensioners. Moreover, the “greying of society” has increased demands for long-term care for the elderly. Finally, labor migration, which took off during the boom period of the 1960s, led to a growing ethnic heterogeneity of Western societies over time, which, according to some scholars, will reduce solidarity in contemporary societies and drive Europe towards a more American-style social policy. However, this scenario is much contested in the literature. Taken together, risk patterns have changed considerably over time. Poverty has demographically spilled downwards from the elderly to single parents, families with many children and the less-educated labor force, many of whom are migrants. As a result, old welfare states increasingly confront new social risks and new demands, which have called not just for more welfare provision but also for a different kind of welfare state (Esping-Andersen et al. 2002; Armingeon and Bonoli 2006). What is more, the political basis of the welfare state itself has been subject to a profound transformation. De-industrialization and the continuing decline of the agrarian sector have led to the erosion of the early postwar class structure. Along with secularization, these developments undercut the power resources of social democratic and Christian democratic parties, and of trade unions—that is, exactly of those collective actors that were the most important backers of the postwar expansion of the welfare state. Green parties and anti-welfare right-wing populists have been in direct electoral competition with social democrats in European countries since the mid1980s. On the other hand, well-organized welfare state constituencies, such as pensioners, emerged as new actors who forcefully defend their social entitlements (Pierson 1994). The next section will illustrate the ways in which advanced democracies have responded to this set of external and domestic challenges.

4  Transformation of the Welfare State: A New Order? OECD welfare states have been transformed into something that most observers in the 1980s and 1990s did not expect. There has been clear policy convergence. Yet rather than resembling a residual, low-expenditure, “liberal” form, OECD systems of social protection have remained large, but they have transformed into increasingly market-conforming, “enabling” (Gilbert 2002) welfare states. The new order is difficult to grasp, as it goes beyond such nonspecific categories like more and less, state vs. market, and public vs. private. Nevertheless, we will try to delineate the long-term transformation of the welfare state, starting at the most general level of analysis before drilling down to individual areas of welfare state activity and more subtle qualitative changes.

The Size and Generosity of the Welfare State First of all, despite the fears—or hopes, depending on one’s political leanings—of the end of an era of “big government,” large welfare states have not disappeared. What is more, it turns out that “big government” is even more pervasive than ever (Pierson 2011).

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Figure 24.2 displays the evolution of the unweighted mean of social expenditure ratios in 21 OECD countries (black line), the coefficient of variation (dashed black line) and spending trajectories in three very different prototypical welfare states—Germany, Sweden, and the United States (US)—between 1980 and 2012. The three countries are used only for illustrative purposes. The main pattern is revealed at first glance: social expenditure as a percentage of GDP—the common measure of “welfare state effort” (Wilensky 1975)—has stagnated or grown in most OECD countries, not decreased. The average over-time pattern is far from dramatic, especially compared to the three decades prior to 1980, and is essentially in line with Peter Flora’s (1986) characterization of a “growth to limits” of the OECD welfare state. We see an upward movement of the mean, combined with decreasing variation. In other words, public social expenditure development is marked by absolute convergence to the top, not a race to the bottom. This prima facie impression has been confirmed by more detailed analyses (Starke et al. 2008; Schmitt and Starke 2011). For most countries, we can also detect the impact of worldwide recessions—in the early 1990s and, more recently, in 2009—on welfare effort, visible as an upwards “dent” due largely to rising beneficiary numbers and a simultaneous decrease in the denominator, that is, in GDP. In addition, the importance of the welfare state function relative to other state functions has grown rather than decreased over time, as the share of social expenditure relative to total government outlays has significantly increased since 1980. Differences in the level and the growth of social spending are explained by catch-up and domestic socio-economic conditions, and, above all, by demographic ageing, economic growth rates, and unemployment. In contrast, the explanatory strength of political factors, including the partisan composition of government parties,

472    Herbert Obinger and Peter Starke has disappeared in recent decades, according to most analyses of aggregate social expenditure (Huber and Stephens 2001). Looking at aggregate spending is clearly not sufficient, however. Given the increased demands due to changing demographics and other structural changes described above, this upward convergence in spending perhaps masks a more subtle retreat of the state at the level of individual entitlements or “social rights.” A central aspect of social rights is the level of income that is replaced by transfers—be it unemployment, sickness, or pension benefits—during out-of-work periods. Net replacement rates, a central measure of social rights, reflect the relationship between the (net) income of an average beneficiary relative to the (net) wage of an average production worker. The most detailed data available for the time period of interest come from the Welfare Entitlements Dataset (Scruggs 2013; see also Scruggs 2006). Figure 24.3 displays the development of net replacement rates for four different benefits between 1971 and 2011. The picture is less clear-cut than for expenditure data. A great deal of change is visible, especially for unemployment and sickness benefits, but it seems quite heterogeneous. Some countries have seen welfare state retrenchment, while others have seen an expansion in benefit generosity. The trend in minimum and standard pensions points upwards. Absolute convergence is taking place in all benefit types except sickness benefits, and again, it is a convergence to the top (pensions) or to the middle ground (unemployment), rather than a “race to the bottom.” However, the existing Unemployment

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Welfare State Transformation    473 heterogeneity within the group of OECD countries also indicates that replacement rates are strongly shaped by domestic political forces, which is borne out by most existing studies (Korpi and Palme 2003; Allan and Scruggs 2004; Swank 2005).

The Changing Instruments of the Welfare State How can we reconcile the finding that politics does matter for measures of individual social rights with the finding that aggregate social spending is largely driven by socio-economic forces? One answer lies in the changing instruments the welfare state uses. Direct cash transfers—on which the Welfare Entitlements Database is based—have gradually lost importance across the OECD at the expense of benefits “in kind,” which mainly comprise social services such as healthcare, public childcare, and residential care for the elderly. On average, over 40 percent of what is spent on social matters is now spent on services and goods. Yet the rise of the “social service state” does not follow the rules of the traditional transfer state. It is associated with the socio-structural changes mentioned earlier, namely de-industrialization and rising female labor force participation (Jensen 2011b), and appears to be a relatively “apolitical” process compared to previous expansionary periods (but see Gingrich 2011). In sum, total spending may be increasingly shaped by two different political logics at once—an old logic of the transfer state and a new politics of the service state—which cancel each other out in the aggregate. What about social regulation, the third policy instrument in the welfare state’s toolbox? Unfortunately, there is very little cross-national quantitative information available about social policy regulation over time. One important exception is labor market regulation. The OECD index on employment protection legislation (EPL) is indicative of a marked liberalization and convergence. Deregulation mainly affected temporary employment contracts, while it has been much more moderate for the regular employed labor force, thereby increasing the “dualizing” divide between labor market insiders and outsiders in many countries (Emmenegger et al. 2012). The finding that welfare states became more similar and that today they depend less on traditional regulatory instruments (such as EPL) and more on social services does not mean that the old welfare state is dead. On the contrary, a large body of literature has shown how change is influenced by institutional heritage (Pierson 1994; Hacker 2002). The changes we observe are gradual developments, not sudden switches. On the basis of a review of the rich qualitative literature, we will now look at four important areas of welfare state activities and report some of the defining trends of how welfare states do what they do in more detail (see Castles 2009).

What Welfare States Do (Differently) Today In old age pensions, the dominant theme has been the shift towards “multi-pillar” pension systems (Immergut et al. 2007; Ebbinghaus 2011; OECD 2011). The World Bank promoted multi-pillar pensions in the 1990s as a key to solving what was considered a looming “old age crisis” (World Bank 1994). It claimed that the optimal pension mix rests on three pillars: first, a small, tax-financed basic pillar to prevent poverty in old age; second, an

474    Herbert Obinger and Peter Starke earnings-related occupational pillar; and, third, individual private savings as a voluntary top-up. For some countries, this must have sounded like old news, as they had already started to shift the task of paying for old age onto several “pillars” decades ago. In the middle of the twentieth century, OECD pension systems divided relatively neatly into two types of groups (Hinrichs and Lynch 2010): Bismarck systems, like in Germany, Austria, Italy, and the United States, and Beveridge systems, like in the United Kingdom, Sweden, Canada, and Denmark. Things got messier afterwards. The Beveridge countries started to change first, between about the 1960s and the early 1990s, and supplemented their universal, flat-rate pension with new earnings-related layers, which were sometimes disbursed on an occupational basis. Bismarck type pension systems, however, tended to stick to a single social insurance pillar, and, up to the 1990s, reforms took place within the inherited institutions. Bismarckian countries also have the highest levels of pension expenditure combined with the least favorable demographic outlook—the United States excepted. Thus, it comes as no surprise that calls for pension reform grew louder in these countries. Since the 1990s, most Bismarckian countries legislated significant structural changes. The future direction of pension systems across the OECD has clearly been tilted in a multi-pillar direction. Despite some cutbacks in first-pillar pensions, resulting in a higher retirement age, a tighter contribution-benefit nexus, and in containment of early retirement, second and third-pillar pensions were strengthened. Most Bismarckian countries have either added mandatory occupational or private pensions, like Sweden, or subsidize and regulate private retirement savings much more extensively than before, like Germany. On the whole, Bismarck and Beveridge countries have converged to some extent, and the lines between public and private have become murkier (Béland and Gran 2008). It could even be argued that the role of the state has not greatly diminished, but new tasks of financial regulation and consumer protection have been added that used to be anathema to pension policy. Differences remain, however, in terms of the average level of benefits guaranteed by the state, the extent of redistribution, and the role the state plays vis-à-vis private provision in terms of subsidization and regulation. Negative consequences have also arisen from multi-pillar reform. The financial crisis of 2008 was a powerful demonstration of the potential for political conflict that comes with a shift towards promoting more private retirement savings. Moreover, given changes in family structures, mass unemployment, and the spread of atypical work, there is a real danger that pension reforms aimed at cost saving also lead to higher inequality and poverty in old age, which is why some countries have already improved minimum retirement income schemes. Labor market policy used to be mainly about passive income replacement during unemployment spells (Sjöberg et  al. 2010). The insurance of employees stood at the center, and benefits were typically earnings-related so as to maintain the individual living standard achieved during temporary joblessness. High unemployment benefits also had the positive side effect of acting as Keynesian automatic stabilizers during downturns. Active labor market policy (ALMP) did exist in some countries like Sweden, but, overall, it did not predominate. The persistence of structural and long-term unemployment in the 1980s and 1990s led to changing goals and instruments of labor market policy in all OECD countries, albeit to varying extents. Arguably, this development was influenced by initiatives at the level of the OECD and the EU in the 1990s (OECD 1994;

Welfare State Transformation    475 Mosher and Trubek 2003). Labor market activation has become the term to describe this transformation. A huge variety of activation reforms can be observed across the OECD (Lødemel and Trickey 2001; Eichhorst et  al. 2008). The most important measures include cutbacks of some passive benefits (especially long-term benefits), stricter requirements in terms of individual job search, and participation in special programs. Many countries, however, have also improved services for the unemployed (and for potential employers), including better job search assistance, access to childcare, and training measures. One method of increasing employment has been to “make work pay,” either through benefit cutbacks or in-work benefits (Nolan 2006). Different approaches to activation differ in their mix of sticks and carrots or, put differently, between “workfare” and more “enabling” instruments. Another distinction is based on whether a broad array of policy instruments—beyond the more traditional instruments of ALMP—are used and whether the goal is long-term employment in “good” jobs or just employment (Kenworthy 2010). It is also possible to distinguish between demand-side measures—including public jobs creation, employer subsidies, and short-time work schemes—and supply-side measures, such as work requirements, placement services, and training. Notwithstanding this diversity, there are common themes that have emerged across virtually all countries since about the 1980s. In essence, instead of just insuring participants in the labor market against the consequences of unemployment, activation is driven by increasing overall labor market participation—particularly the employability of those at the margins of the labor market. Since many of those who are to be “activated” are not even registered as unemployed, activation often entails coordinating or integrating labor market schemes with social assistance, education and training, family policy, and pension programs. Hence, and despite continuing differences within the activation approach, it can be argued that qualitative policy convergence—or “contingent convergence” (Konle-Seidl and Eichhorst 2008)—has taken place. Across the OECD, family policy has gained a prominence it never had in the history of the welfare state. As mentioned before, this is true at the level of expenditure. Expenditure on families—cash and in-kind—has increased since 1980 and now stands at 2.5 percent of GDP (OECD-21 average; OECD 2012). Compared to the big program areas such as old age and healthcare, this share is still relatively small. But leaving aside resources, family policy has been transformed into something new (Bahle 2008). When state intervention emerged in the postwar years it was often geared towards the male breadwinner model, and its main goal was compensating for the cost of raising children and the alleviation of poverty. Over the past decades the goals and instruments of family policy have diversified and been aligned much more with overall economic and labor market policy objectives and, at least in part, with goals of gender equality (Lewis 2009). In line with the activation paradigm, the focus is increasingly on raising mothers’ employment rates, the reconciliation of employment and family, and on early investment in children (Esping-Andersen et al. 2002). Of course, the extent to which this is done differs markedly across countries. “New” family models such as the dual earner/dual career model are far from dominant universally. In Southern and large parts of Continental Europe, a lack of adequate childcare facilities and various disincentives built into the tax and transfer systems still make it hard for parents to share care and paid work in an egalitarian manner. And while some of

476    Herbert Obinger and Peter Starke these “laggard” countries have recently started to move, others, including countries such as Greece and Switzerland but also the United States and some other English-speaking countries, are at risk of falling behind. The pioneers in Northern Europe have not stood still—despite some more traditional turns in Denmark and Finland in recent years, overall these nations have kept updating their family policy arrangements. This widening gap between the North and much of the rest of the world is also reflected in the lack of a clear convergence trend in family policy (Gauthier 2002; Ferrarini 2006). In sum, family policy has been expanded—especially in the sense of work-family reconciliation policy—but the picture remains diverse, and sometimes contradictory, across the OECD. Healthcare has been another field of unequivocal welfare state expansion. With the average share of GDP spent by general government on healthcare increasing from five percent in 1980 to 7.5 in 2009 (OECD-21 average; OECD 2012), the issue of budgetary pressure has certainly gained in importance—although it cannot be claimed that costs are “exploding” in any sense of the word. Upwards convergence in spending levels is even stronger in healthcare than in other areas of the welfare state (Starke et al. 2008). This trend is fueled by several sources (see Freeman and Rothgang 2010: 372), including rising income levels, technological and medical progress, and “Baumol’s cost disease,” according to which services such as healthcare become more expensive over time because productivity increases in services are slower than in manufacturing and wages may not be adjusted downward accordingly. Greater cost awareness has led to healthcare reforms in virtually all OECD countries. There is little evidence of benefit retrenchment in healthcare—on the contrary, the overall trend appears to be a continuous expansion in the amount and quality of services. Instead of cutting back services, there have been numerous attempts to make health systems more efficient through structural and regulatory reform (Freeman and Moran 2000; Freeman and Rothgang 2010; Rothgang et al. 2010). The starting points of these structural reforms were very different, however. Traditionally, health systems can be broadly grouped into tax-based and state-administered “National Health Service” (NHS) systems and social insurance systems, which are contribution-financed and corporatist in terms of administration. Private insurance systems are more a theoretical possibility than a reality, but the old Swiss health system and the US health system come closest to this third type. Since the late 1980s, countries have experimented with novel ways of healthcare financing and governance. The latest and most prominent example has been the 2010 Patient Protection and Affordable Care Act in the United States (“Obamacare”), which, among other things, introduced an insurance mandate and a stronger regulation of private health insurers. Interestingly, the result of these experiments has often been that more state-dominated countries, such as the United Kingdom and New Zealand, have used the market mechanism for internal allocation of public funding. But systems that traditionally counted on fragmented private markets (e.g. Switzerland) or on self-regulation by health providers and insurance funds (e.g. Germany and the Netherlands) have tended to use hierarchical monitoring mechanisms and direct state intervention to curb costs. Moreover, some social insurance countries have also experimented with increased market incentives alongside corporatist and hierarchical regulation. Heinz Rothgang and his research group interpret this pattern as a structural convergence of healthcare systems: “Healthcare systems show increasing similarities, as they often include innovative policies or transfer policies developed in other healthcare systems,

Welfare State Transformation    477 while preserving their inherited basic features. Healthcare systems thus develop into more hybrid system types . . .” (2010: 8).

5 Conclusion The welfare state is not retreating, nor has it clearly stagnated. Cutbacks were imposed on unemployment cash benefits, but family policy, healthcare, and long-term care are expanding. Pension systems were subject to major structural reforms involving cutbacks, selective improvements, and a recalibration of the public-private mix. Welfare states have also become less transfer-intensive, and labor market regulation was liberalized. As a result, OECD welfare states are more similar to each other today than they were decades ago. Welfare state convergence needs to be qualified, though: first, it is gradual and has not produced uniformity, as differences in size and structure persist. Second, convergence is strongest for social expenditures and stronger in some welfare state areas than in others. It exists in pensions, labor market policy, and healthcare; family policy is not (yet?) converging but is expanding everywhere. Third, some studies have shown convergence as being driven by economic globalization (Jensen 2011a; Schmitt and Starke 2011), but not as a race to the bottom as expected by the literature of the 1990s. Globalization is not the end of big government, but it has constrained policy-makers’ room for maneuver. If the end of the welfare state is implausible, how then may we define these OECD-wide developments? What does the “steady-state welfare state” (Castles 2004) look like? One view was articulated two decades ago by Bob Jessop (1993)—his “Schumpeterian workfare state” captured the turn from Keynesian demand management to the focus on employability and labor supply. Another candidate is Neil Gilbert’s “enabling state” (2002). These concepts do not focus on a retreat of the state as such, but on changes in how it intervenes in markets and deals with their outcomes. But the focus is too much on labor market policy; shifts in family policy and healthcare are not well reflected. Giuliano Bonoli (2013) describes the changes in family and labor market policy simply as “active social policy,” whereas Anton Hemerijck (2013) highlights the “social investment state.” All these concepts reflect important aspects and trends of welfare state transformation over the last decades, but they also over-simplify the empirical diversity of reform trajectories across the different areas, from pensions to family policy. In our view, a candidate for capturing more nuances of welfare state transformation is the “supply-side welfare state.” It is broad enough to include activation, employability, and social investment, and it reflects the growing importance of incentives based on internal markets and market-compatible social provision in advanced welfare states. In terms of the social outcomes of the emerging new post-industrial constellation, mature welfare states face increasing difficulties in delivering on their egalitarian promises. In the last few decades, income inequality increased almost everywhere (OECD 2008), and recent labor market developments hardened the divide between well-protected insiders and a growing number of outsiders, that is, the unemployed and atypically employed. Also, the old class conflict is increasingly being replaced by new social cleavages of gender, ethnicity, educational attainment, and age.

478    Herbert Obinger and Peter Starke The future of the welfare state is open, but there is little reason for optimism given the long-term impact of the financial crisis of 2008 and its aftershocks. In the short run the welfare state was used as a crisis buffer, and cutbacks were the exception, not the rule (Starke et al. 2013). In the middle and long run, though, the repercussions of the crisis will affect public welfare provision negatively in several countries. The recent burst of public debt indicates that future austerity packages can no longer spare the welfare state. For the heavily indebted countries, the real age of permanent austerity seems to begin now (Pierson 2011). Several countries have already imposed draconian cutbacks of welfare benefits, which have had significant effects on social cohesion and democratic politics. The old convergence that we have seen since the 1980s may well be about to stop, and a new divergence may develop between welfare states trapped in a spiral of low economic growth, high public debt, and painful austerity measures, on the one hand, and those countries on the way to recovery, on the other.

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Chapter 25

The State a n d Gen der Equa lit y From Patriarchal to Women-Friendly State?

Julia S. O’Connor

1 Introduction This chapter addresses the transformation of the state in countries belonging to the Organisation for Economic Co-operation and Development (OECD) with regard to the shaping of gender relations and key factors contributing to changes in these relations over recent decades. Some of these changes are associated with policies that have an explicit gender focus, in particular policies relating to gender discrimination, body rights, genderbased violence, representation in decision-making, and the reconciliation of employment and caring demands. At a broader level, strategies and policies without a gender equality focus may have profound impacts on gender relations such as child poverty measures, education, housing, public transport, labor market, and migration policy. We address selected changes with respect to elements of both types of policy and their outcomes and also the extent to which they reflect a change in state structures. The discussion is anchored, on the one hand, by labor market change, in particular the policy objective of increasing the labor market participation of women, and, on the other hand, by change in the decision-making machinery related to gender equality. These two domains afford a lens through which progress in, and barriers to, the transformation of the state in a gender equality/woman friendly direction can be identified. Focusing on terminology and concepts in literature on the welfare state, broadly conceived, Section 2 points to significant changes in the analysis of gender inequality since the 1970s. This is followed (in Section 3 and 4) by a discussion of transformation in two senses, the first of which is the transformation of welfare states as reflected in approaches to labor market participation and the rationale for their adoption by core OECD states since the

The State and Gender Equality    483 1970s, with a particular focus on gender equality objectives and implications. The second transformation is related to the growth, and in some cases the demise, of gender equality machinery and the role of gender mainstreaming as a mechanism in the transformation of gender relations. Section 5 concludes by acknowledging the significant changes in gender relations over the past several decades and considers to what extent we can characterize contemporary states in core OECD countries as women-friendly.

2  From Women’s Policy to Gender Analysis A Note on Terminology Due to the contested nature of several key concepts used in this chapter, a note on terminology is necessary. The title refers to “gender equality” and the achievement of a “women-friendly state.” Gender refers to the socially constructed structural, relational, and symbolic differences between men and women. The concern of gender sensitive analysis is with “how gender is involved in processes and structures that previously have been conceived as having nothing to do with gender” (Acker 1989: 238). Gender differences are widely identified in contemporary analysis, but the recognition of social, economic, and political differences associated with gender—that is, gender awareness—is very different from gender analysis in feminist scholarship, which Ann Orloff (2009: 318, note 2) identifies as “studies of gender that contest gender hierarchies.” We consider this issue here in the discussion of gender awareness, rather than gender egalitarianism, in social investment strategies (Jenson 2009). The concept of the “woman-friendly state” was put forward by Helga Hernes in her analysis of Scandinavian countries in the mid-1980s (1987: 15): A woman-friendly state would not force harder choices on women than on men, or permit unjust treatment on the basis of sex . . . . [I]‌njustices on the basis of gender would be largely eliminated without an increase in other forms of inequality, such as among groups of women.

This concept and the associated concept of state feminism, or “feminism from above in the form of gender equality and social policies, and the feminization of welfare state-relevant professions” (Hernes 1987: 153), have had enormous normative influence in scholarship on the welfare state in the intervening years, although Anette Borchorst and Birte Siim (2008) conclude that they are compelling metaphors rather than strong analytical categories. This may be so, but they were major contributions to welfare state analysis: first, they affirmed the potential for the empowerment of women through the welfare state and the possibility of “feminism from above,” with its “counterpart and challenge in the ‘feminization from below’ among women activists in political and cultural activities” (Hernes 1987: 153). Second, they acknowledged that the achievement of gender equality was a political task that necessitates participation in the political system at a time when much feminist analysis saw the state in general and the welfare state in particular as inherently patriarchal institutions.

484   Julia S. O’Connor The 1990s saw a renewed interest in policy regimes, particularly in response to the publication of The Three Worlds of Welfare Capitalism (Esping-Andersen 1990). This identified three welfare regimes, referring to clusters of more or less distinct welfare state types in terms of the principles of rights and bases of stratification on which the welfare state is built:  the social democratic, as exemplified by the Scandinavian countries; liberal, as exemplified by the welfare states in the United States (US), Canada, Australia, New Zealand, Britain, and Ireland; and the corporatist or status-based regimes, as exemplified by Germany, France, and Italy. Gøsta Esping-Andersen’s book generated a lively debate concerning the bases of classification. One of the key outcomes of this debate was the recognition of a distinct southern welfare state cluster, exemplified by Italy, Spain, Portugal, and Greece (Ferrera 1996). These four regime clusters inform this analysis. Welfare regime analysis provided an opportunity for the engagement of researchers from two streams of research—those engaged in welfare state research that until then had not addressed gender issues, and feminist comparative analysis, which had addressed the same or similar issues through a gendered analysis that contested and challenged gender hierarchies. The debates have been widely rehearsed.1 It will suffice to point out that the gender-sensitive critiques and the wider body of gender analysis of welfare states turned on the concepts of citizenship, paid and unpaid care, autonomy, and dependence and interdependence, and it highlighted the important distinction between market and family provision in what was often conceived as an undifferentiated private/non-state sphere of provision. A particularly influential intervention was that of Jane Lewis on gender and the development of policy regimes (1992).

From Male-Breadwinner to “Adult-Worker Model Family” or to Varieties of “Dual-Earnership” Models? Lewis (1992) argued that the idea of the male-breadwinner family model has historically cut across established typologies of welfare states and that the model has been supported and modified in different ways and to different degrees in different countries. Services facilitating the labor force participation of women were absent or very limited in strong male-breadwinner states, such as Britain and Ireland, up to the 1990s, whereas they were relatively well developed in weak male-breadwinner states such as Sweden. This reflects the fact that weak male-breadwinner states are relatively successful in solving the issue of valuing caring work—women are compensated at market rates for caring work, which is typically unpaid, or paid at very low rates, in strong male-breadwinner states. This difference is reflected in levels of public provision of childcare and care for other dependent people, as well as in the payment rates for those, mostly women, who carry out this caring employment within welfare states. In the late twentieth century there was a shift in several economically developed countries from the male-breadwinner family model to the “one-and-a-half-earner family,” and 1  For an overview of earlier debates see Julia O’Connor (1996). The journal Social Politics has been a key forum for pushing the boundaries of debate and analysis on gender and the state since its first issue in 1992.

The State and Gender Equality    485 Table 25.1  Women aged 15–64 in the labor force, 1960–2010 (selected OECD countries arranged by welfare regime classification) Countries

Labor market participation rate 1960

Part-time employment

1990

2010

1990

2010

Full-time equivalent1 2010

Social democratic regime Denmark

44

76

76

42

26

64

Sweden

50

76

77

41

19

63

Norway

36

71

76

48

30

59

Germany

49

57

71

31

38

50

France

47

57

66

24

22

54

Netherlands2

26

53

73

62

61

46

UK

46

65

70

44

39

52

Ireland

35

40

63

17

38

51

Canada

34

68

74

24

27

58

United States

43

68

68

25

18

—

Australia

34

62

70

40

39

52

New Zealand

31

62

72

35

34

56

Italy

(1975) 33

42

51

11

32

(2009) 41

Spain

(1975) 33

41

67

14

22

(2009) 47

Portugal

(1975) 53

59

70

11

8

(2009) 58

Conservative regime

Liberal regime

Southern regime

Notes: 1 Full-time equivalent (FTE) employment rates are calculated by multiplying the employmentto-population ratio by average weekly hours worked by all employees and dividing by 40. The FTE for males ranged from 71 to 73 for all the EU countries in 2010 except France (67) and Ireland (64). The Irish figure is a sharp decrease from the 2004 figure of 75 reflecting the impact of the very deep recession there. In 2009 the male FTE was 74 for Norway, 81 for Australia, and 86 for New Zealand. 2 The Netherlands was identified as a continental/conservative welfare regime by Esping-Andersen (1990) but has gone through considerable change in the intervening period and is now recognized as demonstrating many of the characteristics traditionally associated with the social democratic welfare state cluster as well as some liberal characteristics (van Oorschot 2006). Sources: OECD (2010). For Italy, Spain, and Portugal: European Commission (2000, 2010a). For non-EU countries: OECD (2011).

in some—Lewis identifies Sweden and the US—there was a shift to an “adult-worker model family,” which assumes that all adult workers are in the labor market (Lewis 2001: 163). Table 25.1 illustrates women's increasing labor market participation from 1960 to 2010 in 14 OECD countries, including liberal, social democratic, conservative, and southern welfare regimes, with interesting variation across clusters and in the timing of change.

486   Julia S. O’Connor The social democratic cluster demonstrates the highest levels of participation from 1990 onwards, having experienced its most significant increase in female labor force participation between 1960 and 1990. A broadly similar pattern is evident for the liberal cluster, with the exception of Ireland, where the major increase occurred post-1990. Germany and Spain also experienced their greatest change in this period, and this reflects major increases in female part-time employment, particularly in Germany, as also happened in Ireland and Italy. In contrast, the percentage of women in part-time work decreased from 1990 to 2010 in the social democratic cluster and the liberal cluster, with the exception of Ireland. In 2010, both the US and Sweden had less than 20 percent of the female labor force in part-time work. In 2010, part-time employment as a proportion of total employment was less than 39 percent in the countries included in Table 25.1, excluding the Netherlands, where 61 percent of total female employment was part-time, reflecting a persistent longterm pattern (Visser 2002).2 The final column of Table 25.1 presents data on full-time equivalent participation for women in 2010. These indicate considerable support for the substantial presence of an adult worker model in all countries, excluding Italy, Spain and the Netherlands, which are the only countries with less than 50 percent full-time equivalent participation for women. In its Gender Brief, the OECD (2010) concludes that the “ ‘dual earnership’ model has become the norm” in the majority of the OECD countries, but this reflects a very mixed picture. Based on 2007 data, at least 50 percent of couple families with children aged 0–14 in 13 OECD countries are characterized by full-time dual-earnership; these countries are Finland, Portugal, all of the 2004 Eastern European accession countries to the European Union (EU) except the Czech Republic (49 percent) and Hungary (45 percent), and probably the US, where the data do not disaggregate full- and part-time employment. In Sweden and France, 41  percent of couple families with children aged 0–14 are full-time dual-earner families, while 35 percent of such families in Sweden and 24 percent in France have one parent working full-time and one working part-time. It is important to note that these countries, especially Sweden, are characterized by “long” part-time work, that is, between 20 and 30 hours per week, and Sweden has one of the highest rates of full-time equivalent female employment in the EU28 (see last column of Table 25.1). In contrast, “[o]‌ne-and-a-half earner households, though increasing over time, is the most usual arrangement only in a few countries: Austria, Germany, Switzerland, the UK [United Kingdom], and in particular the Netherlands” (OECD 2010: 11). Over 60 percent of women with children aged three to five in couple families in these countries work less than 30 hours per week—the figure is almost 82 percent in the Netherlands. The increase in full-time equivalent employment reflects change in policy orientation in several countries and is in line with the prescriptions of the EU and OECD, which have had a policy emphasis on increasing the employment rate of women over the past several decades. Yet, there is increasing recognition by such organizations that “[d]‌espite numerous improvements in women’s educational and employment outcomes, many countries have not achieved gender equality in economic opportunities and outcomes” (OECD 2013). This is the impetus for the OECD Gender Initiative, which is directed at addressing gender equality in three areas: education, employment, and entrepreneurship (OECD 2011). In a 2  This is based on a 30 hours per week cut-off for part-time work. The Eurostat figure is 76 percent for 2010 based on the Dutch 35-hour cut-off.

The State and Gender Equality    487 similar vein, the EU issued its Women’s Charter in 2010 (European Commission 2010b), which committed the EU to strengthening gender equality in all its policies. We will examine the links with specific gender strategies as reflected in policy machinery in Section 4. First we consider those strategies and policies informed by gender awareness and explicitly oriented to preventing inequality but without a specific gender equality focus. We ask if the persistence of the gender inequality underpinning these EU and OECD gender initiatives is linked to an “incomplete revolution” in women’s roles or if it is due to the absence of a gender equality emphasis in public policy even when gender awareness is clearly evident.

3  Transformation of the State and the Shaping of Gender Relations in OECD Countries The Social Investment Strategy We have chosen to focus on social investment partially because of its explicit focus on the creation of a “new architecture” to meet old needs more effectively and respond to new needs, but more particularly because of its explicit gender awareness and concern with policy areas on which feminist social policy analysis has focused for several decades. The social investment approach is the outcome of analyses by the OECD, the EU, and national governments in response to the inability of traditional economic and social policy frameworks to address changing demographic trends, including population ageing and declining birth rates in most OECD countries, high unemployment, child poverty, and the intergenerational transmission of poverty and disadvantage (OECD 1996; Esping-Andersen et al. 2002). Social investment’s future-oriented focus stresses prevention, including a strong focus on investment in families and children, so as to address child poverty, educational failure, and the intergenerational transmission of disadvantage. Fundamental to this is the reconciliation of employment and family life through parental leave, childcare, and employment flexibility, which are deemed essential to addressing low birth rates, associated demographic change, and new risks. The employment of mothers is identified as “the single most effective bulwark against child poverty” (Esping-Andersen 2002: 9–10). Other key elements of the future-oriented approach are lifelong learning and investment in human capital, as opposed to “passive” cash transfers. Underlying these objectives is the mutual reinforcement of employment and social policy goals. Within the EU context a key driver of social investment was the Lisbon Strategy, with its emphasis on increasing employment rates, particularly female employment rates, in its objective to achieve “sustainable economic growth with more and better jobs and greater social cohesion.” Bea Cantillon (2011) points out that despite growth in average income and employment since its initiation in 2000, social policies and social redistribution have become less pro-poor. This reflects the increase in work-related spending and the decline in traditional “passive” income support expenditures. In addition, the interaction of gender segregation and class results in public resources that are designed to facilitate the

488   Julia S. O’Connor reconciliation of employment and family life, such as childcare and parental leave, disproportionately benefiting dual earner, better educated, and more affluent couples (Cantillon 2011:  441; Ghysels and Van Lancker 2011). Frank Vandenbroucke and Koen Vleminckx (2011) challenge the inevitability of a middle class advantage, arguing that the problem arises not because of the childcare and parental leave policy but because of inadequate activation policy relating to low-skilled women. This ties in with Esping-Andersen’s incomplete revolution argument.

“Incomplete Revolution” and/or Gender Equality “Lost in Translation”? “The incomplete revolution” is Esping-Andersen’s characterization of the fact that the change in women’s roles has not “come to full maturation” (2009: 1). He argues that while female labor force participation “sets the stage,” it “does not define the revolution;” that would imply “decisive ruptures with the way that women and men go about their lives” and the achievement of a “gender-equality equilibrium” (172; emphasis in the original). This will require the disappearance of the current social class differences in “marriage, fertility, divorce, employment and . . . home production patterns” (172–173). The Nordic countries and North America are identified as “the ideal typical images of what is crystallizing throughout the world” (173). The welfare state, in particular a social investment oriented welfare state, is the “powerful exogenous trigger” needed to combat the inequalities resulting from the incomplete revolution (173). In contrast, Jane Jenson (2009) argues that the social investment paradigm sidelines the equality claims of adult women in favor of children. She argues that gender awareness in the social investment perspective does not carry through to gender egalitarian strategies and that “something has been lost in the translation of egalitarian feminism into the gender awareness that infuses the social investment perspective” (Jenson 2009: 472). Much of her critique centers on the future orientation of the social investment strategy and its failure to realistically address the structural bases of gender inequality in the here and now while making women central to the demographic stability of the population and the prevention of intergenerational poverty transmission. The necessary “corrective interventions” to address gender differences in part-time work and pay levels and the distribution of paid and unpaid caring work to ensure gender equality are absent (Jenson 2009: 472). While childcare and parental leave are policy instruments proposed by gender equality advocates, Jenson argues that their translation into social investment instruments has resulted in the writing-out of adult women from a gender equality perspective. Cantillon (2011) and Joris Ghysels and Wim van Lancker (2011) provide evidence that some women— specifically, women in single parent families and in less educated and less affluent couple families—are disproportionately “written out,” to use Jenson’s terminology; or, to put it another way, they are at least less likely to benefit from future-oriented social investment strategies. As a consequence, their children are also less likely to benefit from these policies, resulting in the narrowing of the future-oriented preventive impact of key social investment strategies and instruments. These patterns point to the complexity of achieving gender equality outcomes even when pursuing avowedly gender aware strategies in the context of the interaction of class and gender inequalities. As Joan Acker expresses it: “Looking at

The State and Gender Equality    489 [the same ongoing practices] from one angle we see class, from another we see gender, neither is complete without the other” (1989: 239). We return to these issues in the Conclusion (Section 5). First we focus on strategies with an explicit gender equality focus.

4  Gender Equality Agencies and Strategies The concept of “state feminism” was the subject of widespread interest in the 1990s, stimulated at least in part by the discussion arising from the UN World Conferences on Women from 1975 to 1995 (UN Division for the Advancement of Women 2000). This interest is reflected in the focus on increasing the representation of women in political systems, in the development of gender, or more usually women’s, equality agencies/machinery in several countries, and in the coming together of networks of scholars analyzing state feminism and related issues (e.g. McBride and Mazur 1995; Mazur and McBride 2007; Outshoorn and Kantola 2007). Our concern here is with state feminism as conceived by Hernes (1987: 153), in particular “feminism from above in the form of gender equality and social policies,” as reflected in state gender equality machinery and gender mainstreaming. Women’s policy machinery “describes any structure developed by government with its main purpose being the betterment of women’s social status” (Outshoorn and Kantola 2007: 3). The first UN World Conference on Women in 1975 and subsequent conferences resulted in the diffusion of ideas relating to women’s policy machinery. During the UN Decade for Women (1976–85), several UN member states established such machinery—127 had done so by 1985 and 165 by 1995 (Sawer 2007: 1). This was the period of the resurgence of second-wave feminism, when strongly mobilized women’s movements in several countries, and internationally were influential in the declaration of 1975 as International Women’s Year and 1976–85 as the United Nations Decade for Women.

Experiences with Gender Equality Machinery Since the 1970s OECD countries and several economically developing countries, have, to varying degrees, put in place ministries, units within ministries or specialist agencies with designated responsibilities for women’s issues. The approach adopted varied in line with the political, social, and cultural background and, in some, in particular the Nordic countries, reflected the recognition of gender equality as part of a broader equality agenda (Norris 1987; O’Connor et al. 1999; Outshoorn and Kantola 2007; Svensson and Gunnarsson 2012). The Nordic approach encompasses an extensive institutional gender equality structure and includes an equality ombudsman in Sweden, Finland, and Norway (Seikkula 2010). Gender equality is an integral part of a broader public policy framework reflecting a structural understanding of equality. Not only was it in place earlier than in other welfare regime clusters, its integrity has also been maintained to a greater extent than is the case in several liberal welfare states that were particularly active in the area of gender equality from the 1970s to the early 1990s. Australia’s development in the early 1970s of women’s policy machinery, the associated femocrats, and the Women’s Budget Statement are widely recognized as the vanguard of such developments worldwide. Despite its considerable success over two decades, Australia was also in the vanguard in “the dismantling of policy machinery and gender analysis within government” in the 1990s (Sawer 2007: 20).

490   Julia S. O’Connor The initial success in the 1970s was associated with the response of an Australian Labour Party (ALP) government (1972–75), elected after 23 years in opposition, to the pressure of a strong women’s movement, which included grassroots organizations, women in the labor movement, and the Women’s Electoral Lobby (WEL), all of which existed in the context of a tradition of making demands on the state. The institutional changes made during this period were maintained, with varying levels of support, by the Liberal-National coalition governments in power until 1983. The ALP held office from 1983 to 1996, and in 1984 it introduced the Women’s Budget Programme, which became the Women’s Budget Statement in 1987. This required all Commonwealth departments and agencies “to provide a detailed account of the impact of their activities on women for a document circulated by the Prime Minister on budget night” (Sawer 1990: 228). The Budget Statement had an educative role in sensitizing bureaucrats and the public on the gender impact of apparently gender-neutral policies and programs (O’Connor et al. 1999: 216), as well as other parts of the policy machinery. This was widely replicated at the state level. The LiberalNational Coalition was re-elected in 1996 and, in line with a campaign promise, abolished the Women’s Budget Statement in its first year. It also continued to cut back on the gender equality structures established over the previous two decades. The history of the Australian women’s policy machinery reflects the importance of the opportunity structure. Changes in this structure identified by Marian Sawer (2007) include the shift in the political discourse away from equal opportunity toward one of choice and market freedoms, and the election of a right wing government which stressed “governing for the mainstream” as opposed to “special interests,” within which it included women. In contrast to the previous two decades, when UN initiatives were highly influential in Australia and its contribution to international gender equality initiatives was prized, the domestic influence of the UN was diminished. Sawer argues that “[w]‌hile discursive and institutional changes . . . created a difficult context for women’s policy agencies,” the weakening and decreased mobilization of the women’s movement allowed the government to substantially restrict and cut some agencies without fear of backlash (2007: 40). We can identify a similar pattern in Canada, which developed a substantial gender equality infrastructure within the state, and which for a period supported civil society gender organizations (O’Connor et al. 1999; Brodie 2008). Several of the equality achievements since the 1980s have been challenged or overturned by the Conservative government since its election in 2006 and 2011 re-election. These include the cancellation of the National Child Care Strategy and its replacement by a modest (Canadian $100 per month) and taxable Child Tax Benefit; the cancellation of the Court Challenges Programme (CCP), which had facilitated land-mark test cases relating to language, equality, and human rights since 1978; the closing of 12 of the 16 regional offices of Status of Women Canada; and the partial or total de-funding of 20 women’s equality organizations.3 While the development and decline of gender equality machinery has been dramatic in Australia and Canada, the two liberal welfare states where bureaucratic gender equality machinery had been most extensively developed, there have been less dramatic but pervasive reversals in other liberal welfare states, reflected in the restriction of funding and/or

3  These include research organizations and advocacy groups for childcare and housing for native Canadian, immigrant, and ethnic minority women.

The State and Gender Equality    491 the sidelining of equality agencies (re: UK see Fawcett Society 2012; UK Women’s Budget Group 2011). A thread running through a review of equality machinery over time in all OECD countries and most markedly in liberal countries is the significance of the political orientation of government and the impact of changing political opportunity structures for civil society movements, including gender equality and counter-equality movements. This is evident not only in Australia and Canada, as outlined above, but also in the UK, first and most markedly in the change initiated and developed by the Blair and Brown Labour governments (Lovenduski 2007) and the cut-backs, particularly reflected in budgetary changes, by the Cameron/Clegg Conservative/Liberal coalition in 2010 (UK Women’s Budget Group 2011; Fawcett Society 2012). It is also evident in the US in the differences in the opportunity structure for equality movements between the Clinton and Bush presidencies (McBride 2007) and between the Bush and Obama presidencies (Cooper 2010). In this context it is important to note the strong emphasis on individual rights and the vindication of these rights through the courts that has characterized gender equality developments in the US and, to a lesser extent, in Canada. This contrasts with the stronger emphasis on collective rights that exemplifies the situation in the Nordic countries and Australia (O’Connor et al. 1999). This difference is reflected in the gender equality outcomes, particularly in the higher levels of gender segregation in the Nordic countries, which exist despite more widespread gender equality gains. The reverse is the case in the US (see e.g. Estévez-Abe 2005). There is considerable intra-regime variation in gender equality structures in the southern regime cluster. Italy is at one extreme of the gender equality strategy and outcome spectrum. This is reflected in low female labor force participation, a weak gender equality institutional structure and weak adherence, even where formal equality policies are in place (Berger and Dorsch 2010; Renga 2011).4 In contrast, Spain was a latecomer to gender equality, with the major equality changes commencing in 1982 when the Partido Socialista Obrero Español (PSOE) won its first election (Lombardo 2009). The PSOE was in power from 1982 to 1996, during which period it decriminalized voluntary abortion on three grounds (the life and psychological health of woman, rape, and serious fetal abnormality); reformed the Penal Code, replacing offenses against honor with offenses against sexual liberty; extended maternity leave; and made it possible for women to join the armed forces. In 1983, it established by statute the autonomous Instituto del la Mujer (WI), which was to oversee the gender equality agenda (Valiente 2007). The PSOE regained office in 2004. The gender equality institutional framework was strengthened by the establishment of the Equality Policies General Secretariat in 2004 and by the establishment of the Ministry of Equality in 2008. The latter ministry was incorporated into the Ministry of Health in 2010 during the tenure of the second Zapatero PSOE government, creating a joint Ministry of Health, Social Policy, and Equality, which incorporated responsibility for the WI and the Institute for Youth. This merger occurred in the context of the sharp financial and economic problems in Spain from 2008 onwards. The PSOE made a commitment to maintain the WI to promote gender equality alongside a

4  According to Emma Bonino (2012) Vice-President of the Italian Senate and a former EU Commissioner, Italy is one of the most backward countries in Europe in almost every indicator of gender equality.

492   Julia S. O’Connor future body covering the six inequalities identified in the EC Treaty, that is, sex, race/ethnicity, age, sexual orientation, religion/belief, and disability (Lombardo 2009). The Partido Popular (PP) assumed power in December 2011 and has maintained this ministry structure. It campaigned on, and since its election has committed to, the sharp restriction of the abortion law that was liberalized in 2008 by the PSOE, despite public opinion polls which suggest that a majority of its own supporters oppose this move (Bazinet 2012). During its previous period in office from 1996 to 2004, the PP did not reverse gender equality gains, but this was a period when the policy priority was in implementing EU equality directives. The key exemplars of the conservative welfare regime cluster, France and Germany, have highly institutionalized gender equality structures, nationally and subnationally. The significant difference is the French framing of gender equality within a universal citizenship rights framework. As in the other countries, we can identify a relatively greater emphasis on the development and political salience of gender equality machinery during the tenure of left leaning governments—the Socialist Party in France (1981–95), and the SPD and the Greens in Germany (1998–2005). The women’s movement has been of varying significance over time in both countries. Sabine Lang (2007) concludes that the relative victories in Germany “are the result of specific constellations: of mostly left-leaning parties in power, of feminists in executive office and of a policy environment that is conducive to gendered change,” and she argues that if these factors change, women’s policy agencies can be merely symbolic (Lang 2007: 137). Despite the extensive structure of agencies in France, Amy Mazur (2007) concludes that results are modest, highly politicized and marginalized. Two significant developments over the past couple of decades have changed the context within which women’s equality agencies are operating. These are the implementation of gender mainstreaming and the recent growth of single equality agencies.

Gender Mainstreaming The Fourth UN World Conference in Beijing in 1995 is noteworthy for “the shift in focus from women to the concept of gender, recognizing that the entire structure of society, and all relations within it, had to be re-evaluated” (UN Division for the Advancement of Women 2000), and for its call for the adoption of gender mainstreaming, which is “the process of assessing the implications for women and men of any planned action, including legislation, policies or programs, in all areas and at all levels” (UN Women 2000: 2). The EU made a formal commitment to gender mainstreaming in Article 2 and Article 3 paragraph 2 of the Amsterdam Treaty, which was signed in October 1997. All member states and OECD countries now profess a commitment to gender mainstreaming. Gender mainstreaming implies a transformative strategy going beyond gender awareness to an analysis of the structural bases of gender inequality. Despite its radical potential, there is little evidence of rigorous conceptualization and/or rigorous application of gender mainstreaming (Grzybek 2008; EGGSI 2010). Its transformative potential cannot be realized without the full complement of necessary instruments that allow for the measurement of gender impact and its transparent demonstration. Without cogent and transparent gender impact assessment (GIA), which identifies whether specific polices have positive, neutral, or negative impacts on gender equality, and a commitment to take the

The State and Gender Equality    493 findings into account in framing policy, including budget policy, and implementing gender budget analysis (GBA) to assess this, the practice of mainstreaming is merely a formalistic policy exercise. The transition to gender mainstreaming without these necessary instruments allows for the glossing over of persisting structural inequalities. Based on the analysis of 30 European countries, including the EU27, the Expert Group in Gender Equality, Social Inclusion, Health, and Long-term Care concluded that (EGGSI 2010: 6): Though most countries have developed initiatives that promote gender equality, a systematic and comprehensive approach for active inclusion policies is generally lacking and actual implementation is often underdeveloped. Moreover the attention paid to gender mainstreaming may be sensitive to political changes, resulting in a lack of consistency.

This conclusion is consistent with the extensive analysis and critiques and the limitations of gender mainstreaming in the EU and elsewhere.5

5  Discussion and Conclusion There is compelling evidence of significant transformation in gender relations over the past several decades in core OECD countries, which is reflected particularly in educational outcomes and employment participation, but progress has not been uniform across dimensions of equality, and full gender equality in economic opportunities and outcomes has not been achieved even in countries with overall substantial levels of progress. The extent of change varies cross-nationally, and the potential of gender equality measures is not equally achievable by all socio-economic groups in any of these countries. The persistence of gender inequality and its negative economic consequences are drivers of recent additional EU and OECD gender equality initiatives. Taking these facts into account, we cannot conclude that core OECD countries are women-friendly states in the sense used by Hernes (1987) in relation to the Nordic countries 25 years ago; that is, they are not states that do “not force harder choices on women than on men,” have eliminated all “unjust treatment on the basis of sex,” and in particular have addressed the “other forms of inequality, such as among groups of women” (Hernes 1987: 15). Yet, core OECD states have been transformed in relation to gender equality, as reflected in anti-discrimination legislation and formal processes of gender equality, albeit some far more so than others. All of these states can be characterized as gender equality awareness states. The failure to situate gender inequality within the framework of broader structural inequalities means that “other forms of inequality such as among groups of women,” as identified by Hernes, have not been addressed. This is most obvious in terms of socio-economic differences, as illustrated in labor market patterns and the social

5  See,

e.g., Diane Sainsbury and Christina Bergqvist (2009), who situate the Swedish experience in the context of the international feminist debate on mainstreaming. See also Alison Woodward (2008), Johanna Kantola (2010), as well as Cecilia Lavena and Norma Riccucci (2012).

494   Julia S. O’Connor investment strategies discussed in this chapter. These other forms of inequality are the focus of intersectional analysis, and their recognition underlies strategies on multiple discrimination, which have changed the context within which gender equality is being framed (European Commission 2007; Lombardo and Verloo 2009). This is reflected in the creation of single-equality bodies in several countries, including Norway, Sweden, and the UK (Kantola 2010). This is the model being encouraged by the EU since Article 13 of the Amsterdam Treaty (1997) identified sex, race, ethnicity, religion, age, disability, and sexuality as unacceptable grounds for discrimination. To some extent we can now speak of an equality awareness state, but this, like gender equality awareness, is constrained by the failure to address the structural basis of these inequalities and to examine their intersection, as opposed to “merely juxtaposing” them (Lombardo and Verloo 2009: 478). A key conclusion of this analysis is that politics matter in terms of developing gender equality structures, and while welfare regime clusters are important, they are not determining. The key influence is the strength of left-parties, and, more broadly, non-right parties, as illustrated by the Canadian federal level. The development of gender equality machinery in individual countries was stimulated not only by internal civil society pressure from women’s movements and political parties, most of which were social democratic parties, but also in response to international policy discourse as reflected in UN conferences and their outcomes.6 Gender equality was embedded within a broader structural understanding of inequality and paralleled by the growth and commitment to strong gender representation in parliament and in government in the Nordic cluster. The development of gender equality machinery in Spain was also the outcome of social democratic governments and of women’s movement pressure in the wake of the transition to democracy from a dictatorship that had rolled back nascent gender equality developments in the 1930s and had been particularly repressive toward women.7 The Nordic cluster and Spain have had high female representation not only in parliament but also in the social democratic controlled cabinets.8 The role of right-wing parties in the retrenchment of women’s policy machinery is most strongly evident in Australia and Canada. Some link the decline to a less vibrant women’s movement in the 1990s (Sawer 2007). This may have contributed, but the weak institutionalization and the absence of fundamental change in the framing of gender equality discourse allowed for the reversal of gains. Individual state choices relating to gender equality reflect the historical mobilization of political and economic forces, the historical policy choices made, and the policy legacies stemming from these choices. In the contemporary period the constellation of influences has broadened to encompass not only intensified global pressures but supranational regional influences, such as the EU, and more broadly focused institutions, such as the OECD, the International Labour Office (ILO), and the UN. While states today have an 6  Gender

mainstreaming in Sweden dates from 1994, but Sainsbury and Bergqvist (2009) identify evidence of such practice from the 1970s. 7  Gender representation in parliament increased from 6 percent in the first democratic election in 1997 to 36 percent in 2008. The 40 percent candidate rule was passed in 2007. 8  Despite female representation of 27 percent in the lower house, François Hollande also appointed a gender equal cabinet in 2012.

The State and Gender Equality    495 enhanced capacity to address gender inequality, as reflected in the existence of gender equality agencies and gender mainstreaming, and while they demonstrate a high level of gender equality awareness, the level of conformity to the requirements of commitments is relatively weak in most countries—this is repeatedly demonstrated in the periodic reviews of practice in signatory countries of the Convention on the Elimination of all Forms of Discrimination against Women (CEDAW 2014 and various years) and EU commitments (O’Connor 2008). In reflecting on the process of change in gender relations over the past few decades, the role of the state has been pervasive, and, at some times and in some locations, dominant, but at all times it has been governed by the dominant political orientation, including the gender representativeness of parliaments and the pressure or lack of pressure from civil society sources, and from the equality-oriented women’s movement in particular. These factors explain to a significant extent the variation in the institutionalization of equality structures and in equality outcomes.

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Chapter 26

From the Positi v e to the R egu l atory State A Transformation in the Machinery of Governance?

Katharina Holzinger and Susanne K. Schmidt

1 Introduction The regulatory state is not a new phenomenon. Its core—regulating the economy and social risks—belongs to traditional administrative state functions (Lodge and Hood 2010: 591). The literature provides us with many different definitions of regulation (Lodge 2008). We follow Barry Mitnick (1980: 7), who defines regulation as “the public administrative policing of a private activity with respect to a rule prescribed in the public interest.” The evolution towards a “regulatory state”—implying a state where regulation activity is so prominent that it becomes a defining feature—is generally seen to have started in the late nineteenth century, with the establishment of regulatory agencies in the United States (US) that began replacing the courts as solution providers. Court-based regulation had increasingly favored companies at the expense of consumers, which directly translated into favoring the rich against the poor (Glaeser and Shleifer 2003). Focusing on state transformation with a view to the regulatory state puts the policy dimension to the fore. Rather than engaging in distributive or redistributive policy-making, models of the regulatory state assume that regulation is a central activity of the state. Competition law, originating in 1890 in the US Sherman Act, shows that the regulation of market failure has been a traditional core of the regulatory state. The change from “the positive to the regulatory state” describes a transformation from a state that itself provides many of the central public, social services and utilities to its citizens to a state that provides the regulatory framework for these services to be rendered by private actors. The regulatory state was first described by Harold Seidman and Robert Gilmour (1986) when

500    Katharina Holzinger and Susanne K. Schmidt analyzing the politics of government organization in the US. The modern discussion of the regulatory state is linked with ideas about state failure tied to neoliberalism. By “bringing the market back in,” the regulatory state is closely connected to globalization, as competitive pressures on countries to liberalize their markets and change their service provision have increased. Given the general importance of international cooperation for regulation and its special importance for the European Union (EU), the regulatory state relies increasingly on governance, drawing not only on governmental steering mechanisms but also on industry’s self-organization and on other forms of cooperation with private and civil society or supranational actors. We start with an analysis of the theoretical discourse on state regulation, beginning with economic conceptions of market failure (Section 2). It is mainly the notion of state failure that frames the turn towards the regulatory state in the 1980s and 1990s. The EU is discussed as a very pronounced example of a regulatory state. In Section 3 we provide an overview of the empirical development of the regulatory state in the OECD world, and we look at cross-national and cross-sectoral variation in the trajectories towards the regulatory state. Given our interest in the transformation of the positive to the regulatory state, our focus is on processes of liberalization, privatization, and re-regulation. We then turn to the normative challenges that this transformation of the state incurs, focusing on welfare, equity, and accountability (Section 4). We close with an outlook on the future of the regulatory state (Section 5).

2  From Academic Discourse to Widely Shared Political Practice Theories of state regulation in political science have been dominated by economic thinking. Even the regulation school that stands for a distinct “political” approach to regulation, drawing on Marxism (Jessop 2006), is deeply inspired by economic thought. We will start with discussing reasons for market failure and the requisite regulatory interventions. We go on to describe the “discovery of state failure” and the move towards liberalization, privatization, and re-regulation. We end with a section on the EU as the most prominent example of a “regulatory state.”

Regulating Market Failures Welfare economics and the theory of public goods provide the background for economic theories of state regulation. The acknowledgement of market failures in the early 1900s led economists to think about the role of the state in private production and market correction. Economists distinguish between several kinds of market failures, the three most relevant of which are natural monopolies, public goods, and externalities. Natural monopolies, where the optimal size of an enterprise is “as large as possible,” may lead to competition failures. Typically, they emerge if average fixed costs are high compared to variable unit costs. This is often the case with goods that require expensive

From the Positive to the Regulatory State    501 physical networks such as water, electricity, or gas distribution, telecommunications, railways, and roads. Monopolies, however, are considered inefficient, as they produce less than the Pareto-optimal amounts of a good at too high a price (Feldman and Serrano 2010), and they require regulation or other forms of state intervention. Public goods imply the suboptimal provision of goods. The consequence of non-rivalry in the consumption of a good is its underprovision, because potential consumers do not reveal their demand and do not contribute (Samuelson 1954); the consequence of the non-excludability from a good is the overuse of a common pool resource, because consumers take a free ride (Hardin 1968). The market, therefore, cannot be relied upon to provide these goods. Typical examples of pure public goods are defense and internal security; typical examples of common pool resources are environmental goods. Many other goods have “publicness” properties in various combinations. Negative or positive externalities result if certain costs and benefits do not appear in the cost or benefit functions of producers or consumers (Pigou 1920; Coase 1960). Environmental degradation is often mentioned as a negative externality. Typical examples of positive externalities are network externalities, where the utility of a given user depends upon the number of other users in the same network (Katz and Shapiro 1985), implying that a critical mass of consumers needs to be achieved. These examples indicate that the correction of market failure should be a state responsi­ bility. Three kinds of remedies are particularly important: competition policy, the state provision of public goods, and the regulation of externalities. Competition policy is about controlling concentration processes to avoid the development of private monopolies. It is at the very heart of market regulation in that it tries to secure market functioning in accordance with the welfare enhancing properties that economic theory credits to markets. Next to controlling the abuse of market position by natural monopolies, the control of cartels and mergers are important objectives. The state provision of public goods and services substitutes for the market in the cases of natural monopolies or public goods as they are held to be preferable to private monopolies. Finally, the state regulation of negative externalities may include taxing activities that have negative externalities—Pigouvian taxes—or the prescription of certain standards. Important fields in this respect are urban and landscape planning, as well as consumer and environmental protection policies. In the case of common pool resources, privatization strategies, such as licensing or patents, can internalize negative or positive externalities by assigning property rights. Together, all this made up the “Keynesian consensus” and outlined the contours of the positive state: a large degree of state provision of goods and services, accompanied by state regulation of market failures.

Regulating State Failures—Toward the Regulatory State Among economists, however, there was always some skepticism about state solutions. From the 1970s onward, the state’s constraints and failures were increasingly emphasized. Paul Samuelson (1954) had already shown that for non-rival public goods state provision does not lead to Pareto-optimal production. Economic theories of bureaucracy, claiming that bureaucratic production is too expensive and tends to oversupply public goods (Niskanen 1971), deepened the skepticism. Concerning regulation, the Coase theorem (1960) stated that in the case of externalities it is sufficient to allocate property rights—that is, to “privatize”—and that no further regulation or taxation is needed. Moreover, positive

502    Katharina Holzinger and Susanne K. Schmidt theories of regulation claimed that state regulation will usually not serve the common good, as state representatives are “captured” by producer interest groups seeking extra rents through regulation (Stigler 1971). As a consequence, refined versions of public goods theory and competition theory worked from the assumption of state failure, implying that as much as possible should be left to the market (Wagner 2012: 2). A new “neo-liberal consensus” arose among economists and politicians during the 1980s (Buch-Hansen and Wigger 2010). During the Thatcher and Reagan years this discourse was turned into political practice. The rise of the regulatory state in Britain was ideologically fuelled, but this alone would have contained its development. However, it is also closely connected to the rapid technological change brought about by information and communications technology, which was a precondition for liberalizing the earlier natural monopolies. Moreover, the worldwide liberalization of trade in goods, services, and, finally, capital were contributing factors in the establishment of the British regulatory state. The globalization of the economy facilitated the movement of companies, strengthening their bargaining power significantly, and thereby supporting the construction of the regulatory state. In most countries, liberalization, privatization, and re-regulation went hand-in-hand. The growth of regulation in the name of deregulation occurred, as the divestiture of state monopolies required that previously internal rules regulating the functioning of integrated monopolies had to become explicit, assuring the cooperation among different parts of the liberalized industry. In addition, the liberalization of network industries and the presence of strong incumbents demanded regulation in order to make market entry viable for new competitors. New entrants had to compete against dominant enterprises that were still at least partly state-owned. Liberalization required not only new rules but also new approaches to regulation. The growth of independent regulatory authorities, therefore, is part of the changes caused by the regulatory state. For most of the twentieh century, independent regulatory commissions remained a US phenomenon (Moran 2002). A regulatory agency can be defined as “a non-departmental public organization mainly involved with rule making, which may also be responsible for fact-finding, monitoring, adjudication, and enforcement” (Levi-Faur 2011a: 11). The German Federal Cartel Office, founded after World War II, was one of the rare examples of an institutional transfer to Europe—but as an office falling under the responsibility of a ministry and not as an independent agency (Döhler 2002). In the United Kingdom (UK), the wave of liberalization and privatization activities led to particularly pronounced changes in the Thatcher years. A host of independent regulatory authorities were established, with the regulators, such as Sir Bryan Carsberg at the Office of Telecommunications (Oftel), being prominent public figures. At this time, the expectation was that regulation in the age of deregulation would be merely a transitory phenomenon (Norton 2004: 788). Markets simply needed some time to establish themselves against the incumbent old monopolies, at which point the need for regulation would wither away. This expectation proved to be false. Regulation was such a growth industry that, by the early 2000s, the government had lost track of how many independent regulatory agencies had actually been established. In 2003, the UK Better Regulation Task Force was unable to produce a comprehensive list of UK independent regulatory agencies (Norton 2004: 785 f.). Hand-in-hand with the disappointment that liberalization did not

From the Positive to the Regulatory State    503 automatically result in less “red tape,” “better regulation” became an important buzzword. Regulatory impact assessments to evaluate new regulatory proposals are one important measure of better regulation, as they use cost-benefit analyses to improve efficiency (Baldwin et al. 2010: 9). The British development of the regulatory state is exceptional. Other countries reacted differently, though they were subject to the same international and technological pressures. Depending on national administrative traditions, regulatory agencies could not always be established with the same degree of independence as were those in the UK (Döhler 2002). The regulatory state thus knows different grades in the independence of regulators (Gilardi 2002; Thatcher 2002). Independent regulators need to be credibly fair umpires, make technically sound regulatory decisions, and avoid being tainted by shortterm political interests. At the same time, independence raises principal-agent problems. For governments and parliaments, independent regulators pose the problem of ultimate political responsibility. How can a minister be held accountable if the regulatory agency really acts without political interference? Other means of accountability are therefore needed. The fear is that independent regulators in such technically complex matters are being captured by the regulated industry, causing regulators to subordinate the interests of the public to those of the regulated industry. Given the technicalities of regulation, the precise shape of market intervention through rules depends on several factors: first, there are sector-specific requirements, dependent on industry conditions and technology. Secondly, the institutional design of the regulator and its competencies matters. Thirdly, sector regulation varies by the extent of prescriptions made through supranational rules. In this highly differentiated context, regulation may target the conditions of market entry and market exit, firms’ behavior, firms’ costaccounting, the content of services, professional standards, technology, and performance. Moreover, these different regulatory targets can be met in different ways. There are often options to engage in ex-ante regulation, for instance, particular license agreements, or in ex-post measures, for instance, special ways of monitoring (Levi-Faur 2011a: 9 f.).

The EU as a Model Regulatory State The EU, in a rapid development starting in the late 1980s, has become most closely associated with the regulatory state—cultivating this development in member states as well as setting an example itself. Giandomenico Majone (1997) was very influential with his analysis of the EU as a “regulatory state.” He developed an important argument to explain why regulatory growth in the Community was taking place despite unanimity rules in the Council. In short, his argument draws on a demand- and supply-side model. Not having the financial means of a positive state at its disposal, the European Commission is interested in furthering integration via regulation. The Commission is supported by large companies, which favor European rules because these rules facilitate trans-European economic activities. However, the costs associated with increased European regulation have to be borne at the domestic level. Given that unanimity was required in many policy fields until the changes in the Treaty of Maastricht, one would have expected member-state opposition to increased regulation. However, the sector-specific composition in the Council of Ministers facilitates unanimity, given that the ministers pursue similar sectoral interests.

504    Katharina Holzinger and Susanne K. Schmidt In important ways, the EU’s regulatory activity has fostered liberalization. “Negative integration” (Scharpf 1999) dominates, due to the strength of the European Court of Justice and its interpretation of the basic economic rights—free movement of employees, goods, capital, and services—and of European competition law. Liberalization has particularly affected infrastructure services that were previously publicly provided, such as tele­ communications, electricity and gas, airways, railways, postal, and TV services—but also lotteries and healthcare services. On top of case law, a huge body of directives and regulations prescribes the liberalization necessary and provides a re-regulation framework. The establishment of independent regulatory agencies is often part of this legislation. Related to these phenomena is the growth of administrative networks, which prepare new regulatory proposals for the Commission and assist in the proposals’ homogeneous implementation among member states (Egeberg 2008). Regulation has been a dominant EU activity, leading to a situation, according to David Bach and Abraham Newman (2007), where the EU disproportionately influences international regulatory agreements when compared to its market size. Nevertheless, how much EU regulation influences its member states is disputed, given the international movement towards liberalization, which started with the divestiture of AT&T—American Telephone & Telegraph—in 1984. In a comparison of European and South American liberalization processes, David Levi-Faur (2003) finds that the impact of EU regulation is not that significant.

3  Empirical Development: The Emergence of the Regulatory State Let us give a brief empirical account of the changing landscape in state economic activity. Apart from the spread of neoliberal economic ideas, other factors also strongly influenced how the state withdrew from the direct production of public services (Simmons and Elkins 2004; Buch-Hansen and Wigger 2010). Technological developments played a role in determining the extent to which the state got involved in network industries. Moreover, in the OECD world, globalization and European market-making fuelled a general trend to privatize state-owned enterprises (OECD 2003: 25–30). Finally, budget deficits were a major motive driving privatization policies, as they generate revenues from the sales of shares and dividends, as well as through corporate taxation. The most relevant sectors are network goods and formerly natural monopolies: transport (air, rail, road, shipping), energy (electricity, oil, gas), postal services, telecommunication (radio, TV, phone, Internet), and local utilities (treating water, sewage, and waste). We first look at the OECD as a whole and then at some important EU members.

Overall OECD Developments Before the privatization and re-regulation wave started, there was great variation among countries across the OECD concerning the sectors that actually were state services or

From the Positive to the Regulatory State    505 state-owned enterprises. The shift from state provision to regulated private production took many forms, depending on the kind of public good or market failure in question and on the previous forms of service provision, as well as on the political preferences governments held. This accounts for the high country and sector-specific variance in liberalization, privatization, and re-regulation models. Market liberalization means abolishing monopolies and permitting competition. Formal privatization shifts the legal status of an enterprise from public to private. Substantial privatization is about selling state property, that is, former public enterprises, to private actors. Functional privatization occurs when states outsource the production of certain services to private firms (cf. Obinger et al. 2010). We now focus mostly on liberalization and on formal and substantial privatization. For 21 OECD countries from 1980 to 2010, Herbert Obinger et al. (2010: 213) show that formal privatization occurred in all countries for telecommunications and in more than two thirds of them for railway and postal services. As concerns functional privatization and a worldwide perspective, there was a substantial decline between 1980 and 1995 in the share of state-owned firms contributing to GDP, although this trend was least pronounced in high-income countries (Megginson and Netter 2001: 327). Privatization processes and the revenues generated by these processes peaked in the second half of the 1990s (Höpner et al. 2011), dropped in the first years of the new millennium, and reached unprecedented heights in 2009 and 2010 (Megginson 2010; Obinger et al. 2010: 214). In an encompassing study, Carina Schmitt (2011) shows again for 21 OECD countries between 1980 and 2007 that all of them have withdrawn to some extent from the three sectors of telecommunications, postal services, and railways. There is great variation, however, in the degree and speed of withdrawals. In telecommunications, we can observe convergence at a very low level of state involvement, with ever-smaller variance across countries. The degree of privatization is on average much lower for postal and rail services. Variance across countries has stayed the same in the rail sector, and it even increased in the sector of postal services. Moreover, states that had a higher degree of public provision in the past privatized much more. Similarly, Martin Höpner et al. (2011: 18) show in their broad account of liberalization policies that all countries have liberalized, but that countries that were originally characterized by high intervention levels have liberalized more, and some countries even changed ranks on the liberalization accomplishment scale. Jacint Jordana, David Levi-Faur, and Xavier Fernández-i-Marín (2011) studied the diffusion of regulatory agencies in 48 countries and 16 sectors from 1920 to 2007. They observe an astonishing extent of regulatory agency creation, with the numbers of new agencies peaking during the second half of the 1990s. They find a re-bureaucratization and an expansion in the regulatory capacities of the state, rather than the de-bureaucratization that neoliberal rhetorics assume. As for the driving forces, they find that national-level factors have been overestimated so far, as diffusion occurs much more via sectoral channels: the likelihood of a country creating an independent agency is influenced by the number of independent agencies already created in the same sector in other countries. Obinger et al. (2010: 224 f.) show the growth of regulatory authorities in 21 OECD countries since the 1980s for six sectors, namely water, rail, gas, electricity, postal services, and telecommunications. The number of independent agencies grew from ten to about 90, while at the same time the OECD regulation index value—which measures restrictions

506    Katharina Holzinger and Susanne K. Schmidt in competition for the same sectors plus road transport on a scale from 0 to 6—decreased from about 5 in 1980 to 2 in 2007. Despite great variation, we can observe some general trends: all OECD countries implemented some liberalization, privatization, or deregulation policies after the mid-1980s, and the sectors experiencing the most liberalization were transportation, communications, and energy (Höpner et al. 2011), while telecommunications were most often privatized (OECD 2003: 30). Privatization activity mostly took place at the national level and was less intense at the sub-national and local levels (Goldstein 2006). In the OECD countries, giving up state ownership met with reluctance: governments retain shares and veto powers in about two thirds of all “privatized” firms (OECD 2003: 114; Bortolotti et al. 2003). Postprivatization regulation is frequent (OECD 2003, 2010), and this justifies speaking about the regulatory state. Explanations that can cover a greater number of countries are rare (for an overview see Obinger et al. 2010: 225 ff.). Beth Simmons and Zachary Elkins (2004) find that international economic competition and the emulation by socio-economic peer countries are the most important factors for explaining the spread of liberalization policies. Simon Fink (2011) claims that the privatization of telecommunications is driven by cross-national emulation but that there is no indication of cross-sectoral contagiousness. As Serdar Dinc and Nandini Gupta (2011) show, profitable firms are the first ones to be privatized. They also find that electoral policies are relevant. Fabrizio Gilardi (2005) analyzes the diffusion of independent regulatory agencies and finds it is positively correlated with privatization, liberalization, and the number of agencies already in place in other countries. Given the long list of potential explanations for cross-national and cross-sectoral variation, the bits and pieces of explanation delivered so far are hardly satisfactory.

Cross-Country and Cross-Sectoral Patterns in the EU The extent of liberalization and privatization policies in EU member states is, on average, higher than that it is in other OECD countries (Höpner et al. 2011: 24, ­figure 3). This might be due to the liberalization policies of the EU itself that we already mentioned. If functional privatization is taken as a measure of privatization, the EU as a whole markedly moved away from the positive state at the end of the 1990s. This process came to a halt in the early 2000s, but it took off again after 2004. In the latest wave of privatization, however, sales revenues were higher in other parts of the world than in the EU (Megginson 2010: 6, 20). To point out commonalities and persisting variation in privatization approaches, we will now summarize characteristic developments in some larger member states. In the early 1980s, Italy had the largest amount of state produced services. In the second half of the 1990s, Italy was the “top OECD privatizer” (Goldstein 2006: 225). Privatization started in the banking sector, and oil and energy followed. However, the state still holds shares in major industries (Mayer 2006). So far, there is little liberalization in local utilities, such as water, waste, electricity, and local transport (Goldstein 2006: 255). The movement to the regulatory state has not yet been completed (Mayer 2006: 205). France had a similarly large public sector at the beginning of the 1980s. It began to privatize in 1986 (Kamm 2003). Privatization income from state-owned enterprises was generally high (Berne and Pogorel 2006: 170), and it was by far the greatest out of all of the

From the Positive to the Regulatory State    507 European countries in 2010 (Megginson 2010: 9). The degree of privatization depends on the sector: since 2002, France’s political objective has been to retreat from all industries active in competitive markets. In the “service publique,” however, the state is still very present (Kamm 2003). This is also true for the defense industry, for TV, and for radio (Berne and Pogorel 2006). The formal privatization of the energy sector began in 2004, slowly reducing the mandatory state share in equity from 70 to 34 percent and liberalizing the markets for gas and electricity. Competition is still weak, however. The privatization of France Télécom started in 1997, yet the state still holds about a third of the shares. The French railway SNCF has not been privatized so far. On 1 January 2011, however, the state’s monopoly on letter-sized post was dismantled, leading to a fully liberalized letter market—but La Poste still holds the biggest market share. Germany is a medium case, both in the size of the public sector during the 1980s and in the extent of its privatization (Höpner et al. 2011: 18). Privatization policies took off in the early 1990s, and state shares in enterprises decreased steadily (Kamm 2003; Mayer 2006: 244). There are, however, many areas that have not been privatized, particularly at the Länder and local levels; examples of this include public transport and public housing. The electricity markets were fully liberalized in 1999; state shares in electricity companies are less than 25 percent. The German railway is still 100 percent state owned; after the financial crisis in 2008, plans for substantial privatization were postponed. Short-distance passenger transport is open to competition since the railway reform in 1994, whereas the long-distance passenger transport monopoly fell only in 2013. Truck transport was liberalized in 1994 (Knieps 2006: 202). The liberalization of postal services began in 1989 and was completed in 2007; the public shares here are still at about 70 percent (Lippert 2005: 57). The telecommunication market was fully liberalized in 1998, with more than 40 percent of the shares remaining public. In the 1980s, compared with all EU member states, the UK had the lowest level of public production and of state intervention into markets. Nevertheless, it experienced one of the largest degrees of liberalization (Höpner et al. 2011: 18) and privatization (Bortolotti and Siniscalco 2004:  23). By 2004, the industrial sector had been completely privatized. However, welfare state institutions, such as the national health system, are largely untouched by privatization. The privatization of the Royal Mail began in October 2013. Fully privatized sectors include electricity (since 1998), railway services (since 2002, with the exception of the track network itself) and telecommunications (since 1993; Lippert 2005: 36). It is difficult to make out a clear pattern in these developments. Most countries still have some sectors in which the state is a positive state, meaning that it provides full services to citizens. It seems to be historically path-dependent as to which sectors these are. The move away from the positive state is not a parallel one happening in all states, nor does it lead to about the same degree of privatization. Some countries move farther and quicker in this area than others, and there is great variation across sectors. Still, two results are clear: first, all countries privatize to some degree, and, second, countries with formerly larger state sectors privatize more. There is no clear pattern for individual sectors, either, as can be seen with the railway and postal services. Whereas the variation in state involvement decreased in telecommunications, it increased for postal services. There seem to be two common developments, however: first, privatization is quickest and goes farthest in sectors in which private goods

508    Katharina Holzinger and Susanne K. Schmidt and services were provided by the state (weapon industry, banks) and, second, telecommunications and airlines have been privatized to a large degree by almost all countries.

4  Challenges to the Regulatory State As we saw in the first section, discussions of market and state failures led first to the positive and then to the regulatory state. We are now faced with the question: can the more complex structure of the regulatory state avoid those failures? Three challenges are discussed in the literature: can the promises of enhanced welfare and efficiency be kept? Does increased efficiency come at the cost of equity? Who can be held accountable?

The Promise of Welfare Gains The great promise of liberalization and privatization policies was that the efficiency of services production would be improved. Efficiency encompasses both the cost effectiveness of production and welfare optimizing responses to demand. Performance indicators tell us whether the shift from the positive to the regulatory state achieved this. So far there are no encompassing comparative empirical studies; however, there are some sector-specific studies focusing on several indicators (OECD 2003: 35–44). At the firm level, most studies find that privatized companies have greater productivity, profitability, real output, and efficiency; this trend continues when researchers analyze large numbers of enterprises across sectors and countries (D’Souza and Megginson 1999; Megginson and Netter 2001: 322–328). Increased cost effectiveness, however, tends to go hand-in-hand with either a decrease in wages and employment or an increase in prices. Thus, the benefits of privatization are, to a large degree, enjoyed by shareholders at the expense of consumers and the labor force. In most cases, lower prices and increased service characterize the transition to a regulatory state (OECD 2003: 35–38; Newbery 2006: 30). This is most obvious in telecommunications markets, truck transport, and airline industries (Knieps 2006: 205). In some countries, price increases are reported for electricity, rail services, water, and sewage (Holder 2000). Concerning quality of service, the dramatically negative effects of privatization on quality are felt in the case of British Rail (Coen and Héritier 2000)—in fact, due to mismanagement, the private rail company had to be transferred to a non-profit organization in 2002 (Newbery 2006: 29). Interestingly, this process is not always accompanied by sufficient political regulation. For example, in Germany and the UK, electricity markets were completely liberalized in 1999 and 1998, respectively. However, in Germany an oligopolistic market developed in which two German enterprises, RWE and E.on, looked at in combination, have a market share of 60 percent, while a private monopoly formed in the UK (Lippert 2005: 36, 58). Similarly, the liberalization of the German telecommunications sector led to substantial competition only in cellular mobile telephony, whereas the Telekom company, in which the German state is a major share holder, still has a market share of 80 percent in landline networks.

From the Positive to the Regulatory State    509

At the Cost of Equity? Equity concerns of the regulatory state are a crucial challenge. There are at least three dimensions to the problem. First, if sectors with characteristics of natural monopolies are privatized, the internal efficiency of the enterprises may increase, but this occurs at the cost of public welfare: private monopolies may deliver fewer services at inflated prices, so that poorer consumers may no longer be able to afford these services. Since the start of liberalization, re-regulation has thus focused not only on competition issues but also on public service obligations. Whether state regulation can counteract this tendency is unclear, however. Because we do not know, empirically, what the optimal size of production for a given society is, it is difficult to carry out empirical tests of the distributional effects of privatization. Second, equity issues concern the territorial spread of services, particularly those that are network-based, that is, communications, transportation, and mail. Infrastructure services in times of state monopolies cross-subsidized the countryside with the profits coming from the more cost-effective urban agglomerations. Privatization increased the risk that the countryside would lag in new technological developments. Different countries responded differently to this challenge, but, generally, the incumbent has to balance its offerings regionally, while new competitors can more easily “cream-skim” the cost-effective provision of services in cities. But, so far, empirical tests are missing. Third, enhancing internal efficiency might come at the cost of reduced employment. Empirical studies find some decrease in employment in several sectors and across countries. In a study of employment development in privatized sectors in EU member states during the 1990s, Inge Lippert (2005: 75–78) found an average decrease of 12 percent for the electricity sector but an increase in telecommunications. In mail services, there was an average decline of employment in the national postal services of about eight percent, but this was offset by increases in private services employment. Thus, the general picture is a mixed one, with considerable cross-country and sector variation.

The Effects on Accountability Of the challenges the regulatory state faces, accountability has been the most widely discussed in the literature. Accountability is defined as “the obligation to explain and justify conduct to some other party” (Lodge and Stirton 2010: 349). To assure political accountability in the regulatory state poses a conundrum: as economic arguments for increased efficiency push for independent regulators, the traditional means of parliamentary or executive control become infeasible. Only the control via the judiciary, as the third traditional mechanism, is of continued importance. Accountability is a complex issue, requiring a decision on who is accountable to whom for what (Scott 2000: 41). Moreover, different parts of the regulatory process have different requirements for accountability: decision-making, standard-setting, information-gathering and feedback, enforcement, and the behavior of the regulated entities need to be distinguished (Lodge and Stirton 2010: 358). Which accountability devices are used also depends on the prevailing worldview on accountability, as Martin Lodge and Lindsay Stirton (2010) argue. There can be an emphasis on trusteeship, consumer sovereignty, citizenship

510    Katharina Holzinger and Susanne K. Schmidt empowerment, or on surprise and distrust. Examples for accountability devices are expert review, disclosure requirements, market selection processes, deliberation, participation, persuasion, and unannounced inspection. The stringency of accountability mechanisms imposed in different areas depends greatly on the political salience of the regulatory issue, as well as on the political salience of accountability at the time an agency is established, as Christel Koop (2011) finds. John Braithwaite stresses that accountability and responsibility for the development of a sector may contradict each other: “What we must avoid is accountability mechanisms that cause regulated actors to work defensively to avoid blame, instead of creatively, to seize responsibility for achieving valued outcomes” (Braithwaite 1999: 91). Overall, the effects of the regulatory state on welfare, equity, and accountability are difficult to judge. Economists have delivered some empirical studies on the cost effectiveness of production; however, these studies encounter methodological difficulties in comparability. Although the picture is quite mixed, most studies seem to confirm an overall development towards more efficient production. We possess less information on equity consequences. As long as there are no sound empirical comparative studies, equity effects are impossible to evaluate. Largely, accountability is discussed normatively, without relying on any systematic empirical evidence on the accountability performance of different regulatory structures.

5  Future Trends The regulatory state is an amorphous entity, as we have shown. This raises concerns about the varying definitions of the term “regulation.” Given the fuzziness of the core term, Martin Lodge expects academic interest to weaken: “ . . . given the uncertain boundaries of regulation, the inherent risk is that regulation becomes the study of ‘everything’ and therefore fades away from scholarly attention” (2008: 296). Behind this lack of focus, we assume, is the stark dependence of the regulatory state on policy and on polity characteristics. Given that regulation deals with the output of state activity, the particularities of different sectors shape the regulatory state, making the studies of the regulatory state very policy-specific. At the same time, the example of the UK’s far-reaching transformation to a “regulatory state,” and the influence administrative traditions have on the implementation of core features, such as independent regulatory agencies, show that the regulatory state trajectory is very polity-dependent. Different characteristics of policies and polities thus make it difficult to speak of “the” regulatory state. After the wave of administrative changes that came with the founding of independent regulatory agencies, the literature on regulation has broadened its focus to be more aware of the fact that regulation is not exclusively a state activity. On the global level, the need for governance—without government—enhanced the attention paid to self-regulation, for instance by voluntary industry agreements, or the collaboration of industry with civil society, as is the case with the Forest Stewardship Council, which aims at the sustainable use of the world’s forests (see Dingwerth and Jörgens, Chapter 18, this volume). But regulatory activities have always been shaped by self-regulation on the national level, too. The world of technical standardization, where industry collaborates with public officials,

From the Positive to the Regulatory State    511 is a notable and important example (Schmidt and Werle 1998). New attention is devoted to different kinds of third-party regulation by market oriented NGOs, the MaNGOs, or NGOs dominated by civil society actors, the CiNGOs (Levi-Faur 2011a: 7 f.). The attempt to focus on “regulatory capitalism” as an alternative to the “regulatory state” (Levi-Faur 2011b) brings with it a broadened emphasis on regulation, including regulation by private actors. Regulation has been and will remain a core state activity. It may still rise in importance as nation states increasingly find themselves in a position similar to that of the EU, with little disposable budget for policy initiatives (Streeck and Mertens 2011). In addition, the financial crisis of 2008 and its aftermath are likely to keep regulation—and regulatory failure—continuously on the agenda. Like no other development, financial market regulation has demonstrated strikingly what the costs of insufficient regulation are. In the UK, which was prominently affected by the 2008 crisis, the crisis ended a period of reform of the state apparatus that had focused on the costs of regulation, the advantages of a light touch approach, and on ideas of risk-based regulation, all of which were about minimizing regulatory costs to industry (Black 2007; Baldwin et al. 2010). However, the ongoing crisis may also show that the state, with its essentially administrative capabilities, is at a loss when regulating a highly mobile and technically complex international sector, especially in the absence of far-reaching and internationally binding rules. The financial crisis, particularly in the Euro area, also shows how closely related regulation is to redistribution—not only at the national but also at the international level. Regulatory failure in the Euro area has prompted redistribution within the EU to an extent that had previously neither been politically feasible, nor voiced as politically desirable. Although the neoliberal consensus is still of practical consequence as privatization, deregulation, and re-regulation policies are continuing in many countries and sectors, the neoliberal political discourse has faded away in the last decade. An important reason for this development was a most prominent element of neoliberal economic policy itself: the transnational liberalization of markets. The financial crises of the last decades have shown, again, how important it is that the state can control the economy, as the need arises, and that such control increasingly requires strong regulation at the international level. EU member states were able to cope with the Euro crisis to some degree. State take­ overs of financial institutions, the founding of the European Stability Mechanism (ESM) in 2012, and the conclusion of several treaties plus the adoption of a series of regulations and directives addressing the problems of the European Monetary Union have shown that the member states are willing to politically control the European state sector and the financial markets. Still, we see only slow-moving progress in international financial market regulation. The Basle III Accord, which was agreed upon in 2010 and 2011, but whose implementation was postponed in April 2013, strengthens banking regulation. However, despite high level promises and many attempts to enact further legislation, no international agreement was struck on such issues as the strict regulations of risky financial products, a common financial transaction tax, or an effective prevention for tax evasion. The institutional set-up seems to make it easier for the EU to act on these issues, at least in comparison to the international economic institutions, but even if the EU successfully manages its own currency union and effectively regulates its economy that is no remedy against the problems originating from international financial markets.

512    Katharina Holzinger and Susanne K. Schmidt The great challenge ahead is worldwide regulation of a globalized economy. The regulatory state must be complemented by effective “regulatory” international governance institutions.

Acknowledgment We gratefully acknowledge the assistance of Amelie Mahler and Daniel Kosak in compiling the literature and the valuable comments from the editors.

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From the Positive to the Regulatory State    515 OECD, 2003. Privatising State-Owned Enterprises. An Overview of Policies and Practices in OECD Countries. Paris, France: OECD. ——, 2010. Privatisation in the 21st Century. Summary of Recent Experiences. Paris, France: OECD. Pigou, Arthur C, 1920. The Economics of Welfare. London, UK: Macmillan. Samuelson, Paul A, 1954. “The Pure Theory of Public Expenditure.” Review of Economics and Statistics 36 (4): 387–389. Scharpf, Fritz W, 1999. Governing in Europe: Effective and Democratic? Oxford, UK: Oxford University Press. Schmidt, Susanne K, and Werle, Raymund, 1998. Coordinating Technology. Theory and Case Studies of International Standardization in Telecommunications. Cambridge, MA: MIT Press. Schmitt, Carina, 2011. “Der Staat als Unternehmer bei der Bereitstellung öffentlicher Dienstleistungen—Konvergenz im internationalen Vergleich?” [The State as Entrepreneur in Providing Public Services—Convergence in Comparative Perspective?]. Dms—Der Moderne Staat 4 (1): 209–223. Scott, Colin, 2000. “Accountability in the Regulatory State.” Journal of Law and Society 27 (1): 38–60. Seidman, Harold, and Gilmour, Robert, 1986. Politics, Position, and Power. From the Positive to the Regulatory State. New York: Oxford University Press. Simmons, Beth A, and Elkins, Zachary, 2004. “The Globalization of Liberalization: Policy Diffusion in the International Political Economy.” American Political Science Review 98 (1): 171–189. Stigler, George J, 1971. “The Theory of Economic Regulation.” The Bell Journal of Economics and Management Science 2 (1): 3–21. Streeck, Wolfgang, and Mertens, Daniel, 2011. Fiscal Austerity and Public Investment: Is the Possible the Enemy of the Necessary? Cologne, Germany: Max-Planck-Institut für Gesellschaftsforschung. Available at: http://www.mpifg.de/pu/mpifg_dp/dp11-12.pdf (last consulted 28 January 2014). Thatcher, Mark, 2002. “Regulation After Delegation: Independent Regulatory Agencies in Europe.” Journal of European Public Policy 9 (6): 954–972. Wagner, Richard E, 2012. “Remembering Bill Niskanen: Pursuing Economics as a Public Science in the Service of Liberty.” Public Choice 153 (1–2, October): 1–7.

Chapter 27

Migr ation a n d the Porous Bou n da r ies of Democr atic States Rainer Bauböck

All polities define the scope of their claims to power in reference to a territory and a population. Modern states differ from earlier polities and contemporary ones at sub-state and suprastate levels in the structure of their territorial and population boundaries. The territorial jurisdiction of states is mutually exclusive, and their borders are presumed to be stable over time. In these respects, the contemporary state system is strikingly different from the multiple and overlapping sovereignties of European feudal empires (Bull 1977) and from the “frontiers on wheels” that still characterized the era of colonialism and nation-building in white settler societies. States have also replaced the multi-layered affiliations and allegiances of individuals to different rulers with a single and homogeneous legal status of nationality that defines a Staatsvolk. The presumed stability of territorial borders is matched by a presumed intergenerational continuity of the people. All states determine their nationals through the automatic acquisition of citizenship at birth, be it by descent, ius sanguinis, or by birth in the territory, ius soli. Traditional legal theory has, therefore, defined the state as a unity of territory, people, and political rule (Jellinek 1929 [1900]). Given these basic characteristics of state jurisdiction, international migration raises a big challenge: how can states maintain exclusive territorial jurisdiction and intergenerational continuity of their Staatsvolk when they experience large-scale immigration or emigration? Much of political science literature on migration tries to explain migration policies as an output of political systems. Historical institutionalist explanations focus on stable citizenship regimes that differ across countries (Brubaker 1992), while agency-centered approaches focus on the diverging interests or ideologies of actors in domestic political arenas (Freeman 1995). There are also various attempts to combine both perspectives (Lahav and Guiraudon 2006; Boswell 2007). In both approaches, the focus is on how states regulate migration rather than on how migration affects states. This chapter will, instead, consider how state regulation of migration and citizenship determines the territorial and membership boundaries of states. Structural change in the

Migration and the Porous Boundaries of Democratic States    517 permeability of boundaries points, in this view, to a broader transformation in the nature of the state. The chapter will explore, in particular, how liberal democratic states cope with the tension between their universalistic normative commitment to equality of opportunity and individual freedom, on the one hand, and with their special commitment to the promotion of the common good of a particular citizenry, on the other hand. My geographic focus is the OECD world—that is, the world of states that belong to the Organisation for Economic Co-operation and Development—although I will occasionally refer to similarities, differences, and connections with non-democratic and less developed states.

1  Ambiguous Concepts: Mobility, Migration, and Borders Human geographers study patterns of mobility in time and space (Ravenstein 1885; Hägerstrand 1975). In contrast to the broader concept of mobility, the crossing of social, cultural, and political boundaries is constitutive of what we call migration. Migration can be perceived and counted only against the background of territorially defined borders (Bauböck 1998), and, vice versa: the structures we call borders imply a distinction between a stable internal population and those who have come in from “outside” or leave the “inside” to live in some other territory. “[T]‌he very process by which collectivities manage movers by naming and counting them, and thereby distinguishing them from nonmovers or residents, is the fundamental way in which the territorial nation state society constitutes itself in the first place” (Favell 2007: 271). That mutually constitutive relationship between state borders and migration generates some interesting paradoxes: the first one is that the volume of migration depends on the size of political units. The more densely a geographic space is subdivided by borders, the more mobility in this space will be registered as border-crossing migration. This explains why some smaller European states, such as Luxembourg, Switzerland, Belgium, or Austria, have a higher share of foreign-born than do large immigrant nations like the United States (US). A second paradox is that the territorial instability of state borders blurs the distinction between migrants and stable populations. After the breakup of the Soviet Union and Yugoslavia, some groups that had previously been considered stable residents with a history of internal migration became stateless (e.g. postwar internal migrants from Russia in Estonia and Latvia) or were erased from the civil registry (e.g. citizens of the other former Yugoslav republics in Slovenia). The distinction between territorially stable and migrant groups does not presuppose, however, that migration is state-controlled or state-restricted. Political borders have two distinct functions:  Their primary function is to demarcate distinct jurisdictions within which a political authority claims the power to impose collectively binding decisions. A secondary purpose of borders is to serve as control sites for the flow of goods, services, information, or people. Open borders that do not restrict migration can still clearly demarcate the territory in which a political authority may subject all persons to its laws. In liberal states borders are generally open intra-territorially—between

518   Rainer Bauböck constituent units of a federation, between provinces or municipalities—and borders are increasingly open also within the European Union (EU) and its Schengen Area. Open borders between states need not lead to a loss of self-government, if the latter is understood as the capacity to adopt and enforce laws that differ across jurisdictions. As conflicts in international private law—over marriage, divorce, child custody, etc.—or between social security systems illustrate, migration highlights differences in state legislation more than it flattens them. Borders used to demarcate territory and to control population flows do not necessarily coincide. The location of the territorial border is generally identical with land borders between states or with imaginary lines in the sea that delimit the coastal waters over which maritime states have special jurisdictional power. The borders where migration is controlled are, however, not always physical lines grafted onto territory: they are better understood as sites where state power is exercised to distinguish the mobility rights of insiders and outsiders. These include border fences and crossing points, but also international airports inside a state territory, or embassies and consulates on the outside. An extreme example is the Australian law of 16 May 2013 that excised the whole mainland and offshore territory of the federation from its “migration zone,” in which newly arriving individuals may file applications for visa. The effect is that no unauthorized immigrant can ask for asylum anywhere in Australia. The purpose of immigration control has thus led Australia to turn all of its territory into a quasi-extraterritorial border zone. In a wider sense, state borders are “semi-permeable filters” that allow “for openness and closure at the same time” (Mau et al. 2012: 194). External filters include visa systems and the carrier liability of private transport companies, while internal filters encompass various types of residence permits or sanctions for employers of irregular migrants. Contemporary immigration states simultaneously fold their borders into their territory through attempts to enforce departures (Bosniak 2006) and project their borders outward by “remote control” of immigration (Zolberg 2003).

2  Nationality and Citizenship: A Trend Towards Blurred Boundaries States structure migration not only with territorial borders, but also by allocating legal status. Most fundamentally, all states distinguish between their nationals and those of other states. Nationality is a legal linkage between states and individuals. It creates a second boundary structure that assigns to states certain privileges vis-à-vis and responsibilities for their nationals. In liberal democracies, nationals are also citizens in the sense of having special rights and bearing distinctive duties. Most important among these rights is the unconditional right to residence and the right to vote. Citizenship structures migration in two ways: it opens the border to a category of externals by granting them unconditional admission rights, and it divides the resident population into citizens and foreign nationals and assigns to them different sets of legal rights and obligations. Starting in the 1990s, scholars have noted that in Western democracies these boundaries of membership have become increasingly blurred. Long-term resident foreign

Migration and the Porous Boundaries of Democratic States    519 nationals now enjoy many rights that were traditionally attached to citizenship status only, including the right to secure residence and protection against expulsion; the civil liberties of free association, speech, and political activity; equal treatment with regard to social welfare; protection against ethnic, racial, and religious discrimination; and—in 14 European states—voting rights at the local level (Shaw 2007:  78–81). Groups of immigrant origin have thus benefited from a residential quasi-citizenship or “denizenship” (Hammar 1990). Some scholars have interpreted this trend as resulting from the global spread of human rights norms that have devalued citizenship by attaching rights to the person rather than to nationality (Soysal 1994; Jacobson 1996; Sassen 1996), while others see the trend as being driven mainly by the democratic and constitutional norms of liberal citizenship itself (Bauböck 1994; Joppke 1999, 2010). The boundary between citizens and foreigners was also blurred in a second way:  through the proliferation of dual citizenship. Until the 1960s, having several nationalities was regarded as an irregularity in the international state system: it generates jurisdictional conflicts between states; it exposes individuals to conflicting duties, rival demands on their loyalty, and a lack of diplomatic protection; and it provides them with unfair privileges compared to persons who possess only one citizenship. However, state sovereignty in matters of citizenship had always made it impossible to prevent dual nationalities. Since the 1970s, gender equality norms have also led to a broader acceptance of dual citizenship acquired at birth from parents of different nationalities or through the combined effects of ius sanguinis and ius soli. Many immigrant-receiving states thus see no point in enforcing a renunciation of an earlier nationality as a condition for naturalization (Hailbronner and Martin 2003; Faist and Kivisto 2007; Blatter et al. 2009; Sejersen 2008; Spiro 2010). The interest of liberal receiving states in promoting immigrant integration is complemented by the sending states’ interest in retaining legal links to their emigrants. The global trend towards strengthening the rights of citizens residing abroad involves a significant change in the democratic norms concerning the franchise: a large majority of democratic states have, in the recent past, introduced some form of absentee ballot in elections (IDEA and IFE 2007). Several states—still reluctant to offer their emigrants dual citizenship and the franchise—have established other legal links to former nationals and ethnic kin minorities by offering an external quasi-citizenship status (Bauböck 2009). The best-known examples are the “Overseas Citizenship of India” (Adeney and Lall 2005; Naujoks 2013); the Turkish “blue card,” originally introduced in 1995 as a “pink card” (Çağlar 2004); and the Hungarian Status Law of 2001 (Csergo and Goldgeier 2004; Ieda et al. 2004, 2006; Waterbury 2010). Immigration states’ efforts have thus been complemented by emigration states’ and ethnic kin states’ efforts to keep their borders wide open for the “return migration” of persons who are often neither their nationals nor people born on their territory. The combined effect of these wider trends towards denizenship, dual citizenship, and external (quasi) citizenship is that the membership boundaries of states are significantly less clear-cut than are their territorial borders. These two boundaries overlap and lead to multiple gradations in rights and status for populations with a migratory background. Such a differentiated citizenship is both migration-induced and migration-inducing, as it multiplies the opportunities for free movement across international borders.

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3  Shifting Concerns in Migration Control John Torpey has argued that it has been crucial for the formation of modern states to acquire a “monopoly over legitimate means of movement” (2000:  1). States simultaneously enable and control migration, and liberal states do so in a very asymmetric fashion with regard to exit, entry, and internal migration. While there is no right of noncitizens to immigration, international human rights law proclaims a universal right of lawful residents to unhindered intra-state movement and emigration (Article 13 Universal Declaration of Human Rights; Article 12 International Covenant on Civil and Political Rights). Neither free emigration nor internal movement are absolute rights, as they may be restricted for reasons of national security, public order, public health, public morals, or the rights and freedoms of others. States that respect these human rights create internal spaces that make free movement in their territory possible, opening their borders for free exit while retaining only a general right to control the incoming migration of foreign nationals. Migration control in contemporary democracies is thus characterized by two fundamental features—first, a sharp distinction between internal and international migration and, second, a focus on control over territorial admission rather than exit. The exclusive focus on the control of immigration across external borders, the first feature, is a rather recent historical development. In late medieval and early modern European empires, internal movement was hampered by restricted access to free cities, whose walls served both military defense and immigration control purposes. To build the modern state, such obstacles to internal movement had to be dismantled, and with them went the privileges of cities or local lords protected by these barriers. This process was, however, uneven and protracted. In Central Europe, internal movement remained restricted during most of the nineteenth century by a peculiar form of local citizenship, the Heimatrecht. In the Habsburg Empire, citizens living in a municipality where they did not enjoy Heimatrecht could be deported if they could not support themselves and became a public burden. In this way, Heimatrecht restricted the territorial scope of social assistance and operated as a control mechanism for internal migration (Heindl and Saurer 2000). Apart from a few exceptions—including the Swiss Bürgergemeinde, in which membership is usually inherited independent of birthplace and residence—local citizenship in today’s liberal democracies is derived from ius domicilii, which means it is automatically acquired through residence and is lost by taking up residence elsewhere. However, barriers to free movement based on local registration systems have been a prominent feature of communist states. The hukou system in the People’s Republic of China still restricts access to employment, education, and welfare for at least 130 million internal migrants (Meng and Manning 2010: 7). In contrast to Heimatrecht, the hukou system is based on ius sanguinis: the children of migrant workers inherit their parents’ hukou at birth. In this respect, the hukou system is strikingly similar to the Western European “guest worker” policies of the 1960s and early 1970s. The second feature of migration control in democratic states is that it is applied to entry but not to exit. Again, this normative asymmetry is a recent development linked to the rise of economic and political liberalism in the nineteenth century. Mercantilist doctrine had asserted that the wealth of a state largely consists in its population and, therefore,

Migration and the Porous Boundaries of Democratic States    521 emigration must be restricted. In absolute monarchies the freedom of subjects to leave the country was considered a threat to sovereignty. Emigrants from the Habsburg monarchy needed a special permit, the Auswanderungspatent, until 1867—when the liberal constitution removed such constraints—but, even then, emigration was allowed only after completing the military service. The “exit revolution” started when the American revolutionaries began to fight against British emigration restrictions (Zolberg 2007) and ended when the freedom to leave became a universal human right (Dowty 1987). While there is probably no state on the globe that has formally renounced its right to control immigration, the extent to which states exercise their control has varied greatly over time. The change from mercantilist to liberal economic doctrines, as well as the imperatives of nation-building in white settler states, led to wide-open borders in nineteenth-century England and America. In the US, each new wave of immigrants broadened the ethno-religious mix but met with considerable hostility from nativist movements (Higham 1955). Yet, until the early twentieth century, immigration control consisted mainly of selective exclusion, targeting particularly the Chinese in the 1882 Chinese Exclusion Act and, since 1924, Asians more broadly. Other non-ethnic exclusion criteria were established between 1891 and 1917, keeping out, amongst others, paupers, “lunatics,” carriers of infectious diseases, anarchists, and illiterate persons. After World War I, and in a time of economic recession, Congress adopted the national quota laws of 1921 and 1924 that froze the ethnic composition of the American population in 1910 by setting ceilings for immigration by national origin (Zolberg 2006). These laws remained in force until 1965. Passports had already been used in medieval times to provide individuals with “safe passage” in a territory, but, by and large, states still lacked the instruments, administrative resources, and international coordination for effectively controlling movement across borders. Passports became a universally used instrument to control international migration only when state security concerns greatly increased during and immediately after World War I (Torpey 2000). Today, immigration-receiving states in North America, Western Europe, and Oceania wield a vastly expanded arsenal of instruments for controlling borders and immigration. It is hard to test the impact of these measures on migration flows, since migrants build expectations on opportunities for legal admission or irregular entry into their choices about timing, destination, and mode of entry. Yet, immigration control in liberal democracies remains imperfect (Castles 2004). Apart from human rights constraints on border controls and on mass deportations of irregular migrants, market economies need to keep their borders open for tourists, business persons, and other shortterm visitors; that makes it possible for many irregular migrants to enter legally and then overstay their visa and permits. Pervasive immigration control inside the state’s territory is even more difficult to establish than a tough external border regime, since it is likely to affect the freedom and legal protection of citizen voters (Ngai 2004). Why, then, do democratic states invest ever-increasing resources into immigration control? One answer is that governments and competitors for public office are responsive to public opinion, which supports more restrictions on immigration nearly everywhere, regardless of what the current immigration level is. This answer, however, leads to two new questions: why do democratic governments admit more immigrants than voters are willing to accept? And why is public opinion on immigration negative even where experts agree that it is economically and/or demographically beneficial for the country? Explanations would have to combine answers at three different levels: at the first level, we

522   Rainer Bauböck need to explain how, in the domestic political arena, conflicting interests regarding immigration impact policy-making (Freeman 1995). At the second level, we have to consider the broader structural transformations of regimes and discourses that account for long-term changes across and differences among states; the most important of these transformations may well be the deregulation of welfare regimes, which creates a new demand for immigrant labor, enhances a sense of social insecurity among native populations, increases the “securitization” (Buzan et al. 1998) of immigration in public discourses, and sidelines perceptions of potential economic and demographic benefits (Kymlicka and Banting 2006). At a third level, the analysis has to take into account the links that exist between migration and nation-building processes in wider regional and global contexts shared by large groups of states.

4  Migration and Nation-Building: The Incorporation of Newcomers and the Mobilization of Diasporas The constructivist turn in nationalism studies has led to abandoning the futile search for a conclusive answer to Ernest Renan’s (1887) question: “What is a Nation?” Constructivist authors emphasize that concepts such as “ethnicity, race and nation should be thought of in terms of practical categories, cultural idioms, cognitive schemas, discursive frames, organizational routines, institutional forms, political projects and contingent events” (Brubaker 2004: 167). To understand how the concept “nation” works practically, we still need to understand which features of that concept distinguish it from other related concepts like ethnicity or race. As Michael Keating points out (Chapter 27, this volume), nations are always imagined as political communities with rights to self-government, and claims to be a nation serve to either legitimize or challenge the political boundaries of a state. The boundaries of nations and the borders of states become incongruent in two contexts: in pluri-national states, analyzed in Keating’s contribution, the state’s territory hosts several rivalling nation-building projects whose claims to territory and population often overlap and are in conflict with each other; and in migration settings, where nations are often constructed by excluding immigrants and including diasporas. Comparative analyses of nation-building in Europe commonly distinguish cases where a stable territory and central government power predates the cultural unification of a nation from cases where a widely shared national language and culture precedes territorial unification. France and Germany are seen as the prototypical cases for the two types, and their different passages to nation-building are thought to be accompanied by predominantly civic (France) or ethnic (Germany) conceptions of national membership, differing in their capacity to include immigrants as citizens (Brubaker 1992). These two types, however, do not exhaust the varieties of nation-building. In colonial and postcolonial contexts, for example, we find nation-building by European settlers as well as by indigenous populations resisting European colonialism. In the settler cases, immigration is turned into an integral part of the national founding myth that is invoked, time and again, in conflicts accompanying the incorporation of new waves of immigrants, while in

Migration and the Porous Boundaries of Democratic States    523 the indigenous cases immigration has become associated with the traumatic experience of imperial domination. The circumstances of nation-building at independence or during a revolutionary regime change are likely to create path dependencies that shape later attitudes to immigration, but history is not destiny: apart from changing international and domestic circumstances, the changing pattern of migration itself may feed back into public perceptions of nationhood. The West German post-World War II experience illustrates this. First, and somewhat paradoxically, the revival of an ethnic concept of the German nation in Article 116 of the 1949 Federal Constitution was related to Western Germany accepting responsibility for the consequences of the Nazi atrocities, which also implied a commitment to receive ethnic Germans who were expelled en masse from communist states in Central and Eastern Europe. The second major reason for the peculiar German path was the non-recognition of the division of Germany into two states; it was the basis for the legal fiction that citizens of the German Democratic Republic were also citizens of the Federal Republic, which saw itself as the de iure successor of the German Reich. After reunification in 1990 and with the transitions to democracy in the post-communist states of Central and Eastern Europe (see Part IV of this Handbook), both reasons became obsolete. Since the 1960s, strong industrial growth in West Germany had triggered the large-scale immigration of “guest workers,” who were transformed into permanent immigrants by the recruitment freeze of 1973. In this radically changed context, the unlimited admission of ethnic German Aussiedler, the strict ius sanguinis conception of German citizenship enshrined in the 1913 nationality law, and the high barriers for naturalization of non-ethnic Germans became increasingly anachronistic and turned into a target of domestic and international critique (Barbieri 1998; Rubio-Marín 2000). Since 1991, the number of ethnic Germans admitted to Germany has been ever more reduced with annual caps and language tests. It took, however, a change of government in 1998 to pave the way for the 2000 citizenship law that introduced a conditional ius soli and naturalization entitlements after eight years of residence. The Western and Southern European experience is generally interpreted as a transition from emigrant nations to societies of immigration. The distinction between nation and society introduced here is not accidental: immigrant settlement is now widely accepted as an irreversible fact, but it is still rarely seen as a contribution to nation-building. Contrasting responses to immigration-induced diversity in Europe and in traditional immigration states overseas highlight this difference: in 1971 Canada was the first country to officially call itself a multicultural state. Australia followed in 1973. While Canadian and Australian conceptions of multiculturalism were aimed at including immigrants and indigenous populations, US debates on multiculturalism differed in their predominantly laissez-faire approach to immigrant integration and in their emphasis on affirmative action for African Americans. In Western Europe in the 1990s, the Netherlands, the UK, and Sweden developed multicultural discourses. With the partial exception of the UK, however, these were largely justifications for incorporation policies that targeted ethnic and religious minorities of immigrant origin, and these policies did not challenge traditional conceptions of nationhood. The widely noted European backlash against multiculturalism in the first decade of the twenty-first century has many causes (Modood 2007; Vertovec and Wessendorf 2009), including the perceived failure of social, economic, and cultural integration of some

524   Rainer Bauböck groups of immigrant origin; a noted lack of control over the selection of immigrants, most of whom had arrived as asylum seekers, as family members of already settled immigrants, irregular migrants, or EU free movers; and a perceived “Muslim threat” (Kymlicka 2007). It is striking that multiculturalism is now routinely blamed for immigrant incorporation problems even in countries where it had never been an official policy frame, as in Germany. In retrospect, the problem with multiculturalism appears to be that it offered a culturalist interpretation of problems that were primarily socioeconomic and political: a lack of socioeconomic mobility among immigrant groups and conceptions of political community that did not see them as future citizens contributing to the common good. Interestingly, though, today we find in Europe’s stateless nations—specifically in Scotland, the Basque Country, and Catalonia—the strongest public rhetoric referring to immigration and ethnic diversity as resources for territorial nation-building. Nation-building requires responses to immigration but also to emigration. The global trend to strengthen rights and political participation of external citizens in their countries of origin has been enabled by technological developments, be it cheap air fares, smooth money transfers, or internet-based communication, that facilitate transnational mobility and strengthen national links. Sending states reacted to such transnational practices by discovering that their emigrants are no longer lost populations but can be utilized as an economic and political resource (Bauböck 2003; Østergaard-Nielsen 2003; Gamlen 2008). This often involves constructing emigrant populations as national “diasporas” and the homeland as a “global nation.” Such nationalist rhetoric tries to thicken the thin legal ties that states are able to extend to citizens outside their territory (Bauböck 2010). However, a diaspora identity cannot be created by actions of the homeland state alone. “Ethnic entrepreneurs” in immigrant communities are the crucial external actors required, and they will fail to mobilize local constituencies when there is no sense of alienation from the native population of the state of residence or when there are no homeland conflicts that generate new waves of emigration and kindle the bitter memories of those who already left the country much earlier. Emigrants from states divided by ethno-national or ethnoreligious conflicts will therefore often regroup into double-diasporas, one state-led and one state-opposing. In contrast to the proliferation of transnational citizenship status and rights, the formation of diasporas and their relation to homeland states should be analyzed as a contingent outcome of political mobilization and not as a characteristic transformation of national statehood in contemporary migration contexts.

5  The European Free Movement Experiment In Section 1 I pointed out that migration control is not a necessary condition for democratic self-government, and in Section 3 I emphasized that the focus of state migration control has shifted from the control of internal movement and of emigration to the control of immigration. The EU’s supranational citizenship—with the freedom of movement as its core right—and the abolishing of internal border controls in the Schengen Area are natural experiments for testing how states are transformed when they open their borders. Back in 1957 the Treaty of Rome that established the European Economic Community identified the free movement of persons, goods, services, and capital as the four core

Migration and the Porous Boundaries of Democratic States    525 freedoms of the common market. The free movement of persons was the first major European innovation, and it was realized early on. For a long time the meaning of “persons” was narrowed to mean workers, but an active interpretation of the “finality” of European integration by the European Court of Justice (ECJ) expanded the range of the right to move freely to ever-wider circles until the 1992 Maastricht Treaty formally enshrined it as a right for all citizens of the Union, that is, for all nationals of member states. The evolution of this right did not stop there, as today it also includes family members of EU citizens who are third-country nationals. Free movement is not only the core right of EU citizenship from which most others are derived, but has also created a competency for EU legislation to protect inter-state mobility against the actions of other member states. In the original construction, this competency was limited by carving out a sphere of “purely internal situations” from the scope of EU law. Essentially, this meant that “static citizens” who had not moved across internal EU borders or been otherwise engaged in border-crossing activities could not rely on protection by EU law in the same way as mobile EU citizens could. This construction has led to the paradoxical phenomenon of “reverse discrimination,” that is, a situation in which EU migrants are legally privileged over non-mobile citizens residing permanently within the territory of the member state whose nationals they are. One example is transnationally mobile EU citizens’ rights to family reunification with third-country national relatives, which is much more extensive than equivalent rights for national citizens under most states’ laws. In a series of recent decisions, the ECJ has considerably narrowed the scope of purely internal situations.1 The Court’s 1999 dictum in Grzelczyk (Case C-184/99) that “citizenship of the Union is destined to be the fundamental status of nationals of the Member States” seems to place the EU on a trajectory of “geographic fusion” of citizenship that parallels T. H. Marshall’s account of the evolution of national citizenship (1965 [1949]: 79). The free movement of EU citizens is still qualified, as there are conditions attached to movement, such as having sufficient income and health insurance, which are meant to protect national welfare regimes. In addition, the access to employment by citizens of new member states has been temporarily restricted in several other member states. But, overall, the dominant trend has been an expanding scope of the right to free movement. The second major European innovation was the abolishment of internal borders in the Schengen Area. Unlike the free movement of citizens—a core provision of the EC Treaties from the start—the Schengen Agreement of 1985 and the implementing Convention of 1990 were intergovernmental treaties of a group of member states. Today that group even includes some non-EU members such as Iceland, Norway, and Switzerland. However, since the Schengen acquis2 was incorporated into EU law in the 1997 Amsterdam Treaty, the European Commission, Parliament, and Court have gained the power to monitor and coordinate member states’ actions. The abolition of internal borders is not irreversible: member states may

1  The relevant cases are: Carlos Garcia Avello v État Belge, Case C-148/02; Zhu and Chen v Secretary of State for the Home Department, Case C-200/02; Metock and Others v Minister for Justice, Case C-127/08; Janko Rottmann v Freistaat Bayern, Case C-135/08; Ruiz Zambrano v Office national de l’emploi, Case C-34/09. 2 The acquis designates the accumulated legislation, legal acts, and court decisions, which constitute the body of European Union law.

526   Rainer Bauböck reintroduce border controls when national security and public order are threatened. And the present balance of powers between national governments and the Commission in determining when border controls are to be reintroduced has been challenged in several instances. This may lead to a more decisive “communitarization”—that is, to more Community powers in Brussels, to a return to wider national discretion, or to some pendulum movement in both directions. European states that are under the open-internal-borders regime and the strong legal protection of free movement, which prohibits discrimination on grounds of nationality, have not fully abandoned sovereignty in matters of migration control. They continue to determine conditions of settlement and access to citizenship for third-country nationals. Constitutionally, they remain independent states, participate in the international state system, and have not become provinces of a federal polity. Nevertheless, freedom of movement requires them to make a considerable coordination and harmonization effort in their mobility policies in at least three areas: external border control, welfare state provisions, and access to citizenship status. The harmonization of external border controls is not a corollary of the rights of EU citizens to take up residence and employment in other member states, but it is an unavoidable consequence of abolishing internal border controls in the Schengen Agreement. The relationship between transnational free movement and national welfare regimes is less straightforward: the standard economic model of utility-maximizing migrants would predict that free access to higher levels of welfare benefits in another state will attract migrants, and that this, in turn, will force states to harmonize their welfare benefits to avoid excessive demands on the most generous national systems. This assumption is plausible for certain types of benefits that are attractive for highly mobile groups. Free tuition and unlimited access to tertiary education in Austria and Belgium has recently triggered a substantial inflow of German and French students respectively. Still, the overall level of welfare state benefits in member states does not seem to explain the direction of intra-EU migration flows. Sweden is the only member state that opened its labor market immediately and fully for the 2004 and 2007 EU accession states, yet it received much lower numbers of migrants than the UK and Ireland (Münz and Tamas 2006; Kahanec and Zimmermann 2009). The reason may well be that most migrants seek jobs rather than welfare benefits, and the neoliberal British and Irish welfare states offered more opportunities at the lower income-cumskill end of the labor market. Since free movement is a privilege of EU citizens and EU citizenship derives from member state nationality, it would seem obvious that member states also need to coordinate their nationality laws. The EC and EU Treaties have, however, always preserved national citizenship as an exclusive domain of member state sovereignty. The implication is that, through its own laws, each member state creates EU citizens who have free access to all other member states. Until 2004, rather low levels of intra-EU migration kept this dilemma from appearing on the political agenda. Since then, there have been a few incidents when individual member states or the Commission raised concerns, such as the 2009 protests against Romania’s citizenship offer to most of the Moldovan population, whom the Romanian government regards as former Romanian citizens or as Romanian citizens’ descendants. In January 2014, the Commission successfully pushed Malta to modify a law that would have offered EU citizenship to foreign investors without requiring that they first take up residence in Malta.

Migration and the Porous Boundaries of Democratic States    527 The EU and the non-member states participating in the Schengen Agreement have created a large and contiguous area of free movement across international borders. There are many conditions of this experiment that cannot be easily replicated in other regions of the globe. Among these are the absence of a single dominant regional power and the presence of sufficiently stable democracies with limited disparities in economic development and social protection. These unique conditions do not mean that free movement across state borders is impossible between European and non-European states or in other world regions, however. As I showed in Section 1, the very lack of coordination between states has created a second type of free movement regime for citizens with several passports who enjoy unconditional admission rights in more than one state. Neither regional European integration nor multiple citizenship can realize the cosmopolitan dream of having open state borders everywhere, for exit as well as for entry. Yet, both trends reveal that borders and the membership boundaries of contemporary democracies are much less closed than we have traditionally assumed. The increasing permeability of some state borders for free movement, however, is concurrent with a counter-trend in which land borders are fortified with walls that demarcate great disparities in economic development or seal states off from security risks. The new walls built by the US and Israel are emblematic of a global trend that is replicated on the Arab peninsula and between India and its neighboring states (Thränhardt 2012).

6  Future Lines of Research Since World War II, international migration has transformed nearly the whole OECD world in two ways. First, almost all of these states have become immigration states—not only in the demographic sense of absorbing a rising share of immigrants as residents or in the economic sense of satisfying a structural labor market demand for immigrant labor, but also in the political sense of states’ having to adapt their conceptions of nationhood to migration-induced cultural diversity. That adaptation has not been smooth, but, under conditions of democratic government, it seems irreversible. Second, together with many states outside the OECD world, wealthy democratic countries have also become emigration states—again not only in the demographic sense of experiencing outflows of citizens, but also in the economic sense of regarding emigrants as a potential source of return flow in human capital, and in the political sense of continuing to include emigrants as citizens and voters in the democratic life of their country of origin. These transformations have been analyzed extensively in historical and political migration studies. Still, a more recent development in migration policies has not been adequately conceptualized and theorized: in the last decade, international organizations such as the World Bank (Ozden and Schiff 2007) and the United Nations Development Programme (UNDP 2009) have promoted an instrumental view of emigration, in which emigration is a resource for development. In the OECD world, there is a parallel, but less researched, trend towards regarding migration as a resource in the global competition for human capital and as a remedy for demography-induced economic decline. These state imperatives have revived temporary migration schemes and led to the spread of skill-based selection mechanisms in immigration policy. Competing states try to attract not only foreign investment, which they do primarily with tax incentives, but also the human capital of

528   Rainer Bauböck migrants, who are attracted by good education systems and flexible labor markets. This trend already affects the composition of migration flows, with China becoming the largest sending country for new immigration into the OECD overall, and with China, India, and South Korea supplying the three largest contingents of international students (OECD 2012: 38, 47). The control of unwanted migration is likely to be increasingly complemented with state policies that aim at pro-actively attracting desired migrants. In this global competition, it is not only states that select migrants, by offering them admission, educational and job opportunities, but also migrants who select states. Because opportunities for free movement and human capital migration are expanding, the coercive power of states to impose taxes to finance the provision of public goods will be constrained not only by footloose capital but also by footloose populations. Internationally mobile and highly skilled groups are increasingly dissatisfied with the quality of public services provided, and they opt for private education, healthcare, and security services, which, in turn, further deteriorates the quality of public provision. To understand the mechanisms underlying this trend, migration policy research will have to be complemented by more studies of mobility patterns on the migrants with multiple citizenships, free movement rights, and the mobility of human capital assets. The broader challenge lies in combining migration and mobility perspectives in one coherent analytical frame. The UN counts less than 4 percent of the globe’s population as international migrants who have resided outside their country of birth for more than a year. In OECD states, such migrants already make up 13 percent of the population (OECD 2012: 50). Nevertheless, since 1950 the slow increase in the stock of international migrants has been dwarfed by the phenomenal rise in international border crossings by tourists and other short-term visitors (Mau et al. 2012: 32). We already live in a world of highly permeable state borders that can no longer contain resident populations in their home territory. Instead, borders serve as instruments that, through a differentiated attribution of rights to residence, employment, social welfare, and political participation, regulate geographic movements. More than any demographic or economic effect of immigration, it is the impact of this differentiation of rights that transforms democratic statehood. Enhanced mobility challenges the state’s capacity to provide public goods to its residents, and it challenges the democratic legitimacy of coercive legislation that is not derived from the representation of those subjected to it. These challenges still need to be fully addressed.

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Chapter 28

Plu r i nationa l States Michael Keating

1  Nation and State It is a strange circumstance that one of the most common terms in social science, the “nation state,” should have such an ambivalent meaning. For some, it refers to an independent or sovereign state, the basic unit of world order. For others, the compound term refers to cases where state and nation coincide and is contrasted with multinational or plurinational states where they do not. Moreover, both state and nation can be contested terms in themselves. The state is changing its form, as the chapters of this Handbook testify. The nation can be conceptualized in many ways. For some it is an ethnic community, for some it is a cultural community. It may be seen as a sociological reality or a subjective sense of identity and be realized across a variety of cultural, social, and economic expressions. For this chapter, however, the nation is essentially a political community; its relationship with the state is contingent and often a matter of contention.

Traditional Conceptions Traditional social science has arrived at the idea of the nation state in a variety of ways. For some, the state comes first, constructed either by the coming together of disparate territories or the breakaway of others. Modernization theory presents the construction of states as essentially a process of territorial integration and functional differentiation in which common norms are diffused through territories and institutions are established; in areas where this is too difficult, the problematic territory breaks away to form its own integrated state. Many scholars of nationalism start by looking at the nation, which they see as coming before the state, but they are divided on the origins of the nation. Primordialists see nations as rooted in ineffable ethnic sentiments, while perennialists start from the existence of deeply rooted ethnic communities, which predate modernity and the state but which may expand to incorporate wider territories (Smith 1986). Modernists take a radically different tack, insisting that nations and nationalism are the product of modernity

Plurinational States   533 and cannot be understood without it (Anderson 1983; Gellner 1983). Instrumentalists stress the role of elites in making nations from the top down to serve their interests so that the state creates the nation. These approaches have long been regarded as being in radical opposition to each other, and recent decades have seen vigorous, but inconclusive, arguments among them. In one sense, however, they are similar. They are all teleological, seeing the nation state as the normal form of modernity and only disagreeing on which came first and on the process by which they come into alignment. This is perhaps because in the twentieth century nation and state seemed such a natural fit and because the nation state had such a strong normative charge. It was not only political scientists and sociologists who were inclined to such methodological nationalism. Historians wrote essentially national histories and talked unproblematically about the “unification”—rather than the creation—of Germany or Italy, while legal scholars were equally state-bound. American scholars, while having little conception of the state in the European sense—until they rediscovered it in the 1980s—were strongly attached to the idea of the nation state, in both an analytical and a normative sense. In a more explicitly normative way, John Stuart Mill (1972) argued that only homogeneous nation states could sustain the trust necessary for democracy, an argument reprised later by David Miller (1995) in relation to social welfare. Eric Hobsbawm (1992) and Ralph Dahrendorf (1995) joined other modernists in arguing explicitly for large nation states, assumed to be based on principles of liberalism and democracy, against the demands of minority nationalists, assumed to be backward (echoing Mill) and exclusive.

Newer Approaches More recent approaches seek to escape from these arguments with a more constructivist approach to both nation and state, seeing both as works in progress that are often contested and rarely complete. Stein Rokkan showed how national integration in Western Europe was incomplete and that states were engaged in territorial management (Rokkan and Urwin 1983; Flora et  al. 1999). Charles Tilly (1975, 1990) charted the ways in which states were formed, first emphasizing force and then incorporating the economic dimension. Hendrik Spruyt (1994) noted how different state forms could thrive in different global security and economic conditions:  small states, large states, maritime states, and city states. Others have shown how territorial distinctiveness is not merely a legacy of incomplete state-building but is reproduced within the modern state (Keating 1988, 1998). The nation is to be seen neither as an objective thing, nor as a purely subjective sentiment, but rather as an inter-subjective construction, successful to the degree that people share a belief in it and construct their social and political life around it. Nationalism refers to a political program for the conscious construction of such political communities and to the belief that these communities should be the prime basis for constitutional authority. This does not necessarily mean that such communities must become independent states, since the state is historically contingent and the ideal of a sovereign, independent entity is merely one form that the national aspiration can take. Whatever the arguments about the origins of nations, nationalism in this sense is the product of the modern era, and a distinct way of underpinning political authority and

534   Michael Keating legitimacy. In the nineteenth century, this often meant creating large states and asserting their prerogatives, but it also took the form of demands for self-government within larger, overarching units. Irish nationalism aimed originally for Home Rule rather than independence, and even Sinn Féin was founded in the early twentieth century to campaign for a dual monarchy along Austro-Hungarian lines. Nationalist movements in the Habsburg lands often favored some kind of Danubian federation, conscious as they were of their inability to defend themselves in a hostile world and of the inextricable mixture of nationalities on the ground. Gradually, starting in the early nineteenth century with Greece and Serbia, Eastern Europe evolved into territorial nationalisms, but separatism occurred because the empires collapsed from the center during World War I.

The Apotheosis of the Nation State It was during the mid-twentieth century that the idea of the nation state came closest to realization. The large states of the West had succeeded to varying degrees in imposing national unity—national unity was greater, for example, in France than in Spain. They had penetrated their domestic territories to establish unified forms of administration. It was possible to speak of national economies, to the degree that states were able to manage and plan them, and to establish unified markets. The fixing of external boundaries had turned politics inwards, encouraging state-level forms of accommodation and social compromise. Individual and collective rights were largely linked to citizenship of, and residency in, states. Shared national identities underpinned the welfare state. The normative worth of the nation state model was largely unquestioned, except by some utopian cosmopolitans. Present-day transformations of the state, however, have led to a questioning not only of the present and future, but also of the past. The various aspects of the nation state— economy, culture, society, identity, institutions—are increasingly delinked. In the face of transnational influences and continental-level processes of integration as well as internal territorial challenges, the nation state has to legitimate itself rather than being taken for granted. Early reactions to the revival of territorial politics in Western states were often dismissive. Territorial distinctiveness was seen as evidence of retarded modernity in societies that had not made the requisite transition in the nineteenth century, or even as a revolt against modernity (Lipset 1985). More recent interpretations see the strong nation state as the historical exception and the recent questioning of the identity of state and nation as normal.

Defining the Terms So, there is wide confusion over the terms nation and state, and this applies also to the definition of national entities that are not states. The semantic difficulty is compounded by the constructivist turn in social science, since these entities are not fixed categories, to be defined according to an agreed taxonomy, but rather projects in contention. One term is “stateless nation,” referring to a nation that does not have its own sovereign state. The claim for nationhood is sometimes uncontested, even if its political implications are; such is the case of Scotland. In other cases, nationhood is disputed both within the group concerned

Plurinational States   535 and beyond it, as in Catalonia or the Basque Country (Moral 1998). Brittany is referred to as a nation only by the most ardent nationalists. The Northern League’s claim to a Padanian nation (Oneto 1997) carries little resonance at home or beyond. Self-description as a nation, indeed, is less a sociological fact than a claim to self-determination, given the widespread view that nations have such a right. That being said, some movements are able to make such claims credibly and gain substantial support for them. The sociological precondition for this is the building of institutions in state and society and the mobilization of people around shared identity. The nation thus emerges as an intersubjective understanding and set of references. A related term is “national minority.” Strictly speaking, a minority implies a majority, so that any group within the state that does not share the national sentiments of the majority can be considered a minority. Parties of stateless nations, however, insist that they are the majority in their home territories and that it is only with reference to the arbitrary and unfair borders of states that they are minorities. A better solution would seem to be to separate out this category and reserve the term minority for those groups which do not have a territorial nation (Roma and, in the past, Jews, may fit this description) and for groups within a state who identify with the titular nation of a neighboring state—this is certainly the normal usage. The term “multinational state” has often been used for states in which there is more than one recognized nationality. This should be distinguished from multinational empires, which are common and in which there is no expectation that nationality and statehood should coincide, although it is not always easy to distinguish between the two. The term multinational state suggests a state in which there are distinct national realities but a shared state above them all. More common, however, is a situation in which in some parts of the state’s people have just one national identity, that with the state, while in others they have two. The term “Canadian” as used outside Quebec implies a single nation of which Quebec is part, while within Quebec it refers—among Quebec nationalists—to the rest of Canada, and among other Quebeckers to one of their dual national identities. There is not, in other words, a nation of Canada-outside-Quebec (or English-Canada). The same is true in Spain, where there is no nation of Spain without the minority nations. This is not strictly the case in the United Kingdom, where there are three nations and part of a fourth, but the English habit of confusing England and the United Kingdom means that the same problem does arise. I have referred to these cases as plurinational states, since not only is there more than one nation, but also the very meaning of nation differs from one part of the state to the other (Keating 2001a). In one part of the state it has a unitary meaning, while in the others most people possess dual national identities. This asymmetry of identities sustains demands for constitutional asymmetry. Whether sociologically plurinational states become plurinational officially or constitutionally is a question discussed later. A crucial distinction in practice is between nations and minorities that are territorially concentrated and those that are dispersed. The former is more common in Western Europe, where nation-building projects have been under way since the late nineteenth century and have more recently built upon increasing territorialization in public policy and governing institutions or on functional regionalism. In Central and Eastern Europe, minorities have been created by the redrawing of the boundaries of national states, which have left out co-ethnics who may or may not subsequently have mobilized for recognition (Brubaker 1996).

536   Michael Keating

2  The Issues A persistent view in the literature about nationalism, nationalities, and plurinational states is that the issues at stake are fundamentally about culture (Tamir 1993; Kymlicka 1995). This is misleading. The issues driving nationality politics may be about culture, but they may equally well be economic or social. Uneven development and the bounding of a territory by an economic frontier historically creates winners and losers. The creation of “national” markets in the nineteenth century converted some former maritime central places into peripheries and some landlocked areas into centers. The opening of markets since the 1960s has had a similar effect, changing the calculations of economic actors. The combination of economic and cultural factors creates new dynamics. Industrialization in late nineteenth-century Basque society fractured existing relations and provoked an anti-modernist nationalism emphasizing race and language, but nationalism soon attracted a sector of the industrial bourgeoisie. Nationalism in Catalonia at that time was led by a bourgeoisie, which was still largely attached to its language and whose economic interests lay in modernization and breaking the power of conservative political, clerical, and military elites in Madrid; however, they needed the Spanish state to secure a protected market for their goods. Language has been a driving force for nationalism in Quebec, but so has the defense of what is seen as a distinct social model, which, ironically, are the same elements that sustain Canadian nationalism in the face of the United States. There is almost no language issue in Scotland, but nationalism is linked to a defense of a social democratic welfare settlement. Conversely, not all cases of cultural pluralism can be defined as plurinationalism. This is only the case where there are nation-building aspirations and demands for self-determination in the name of the group. This is not to say that nationalism can be reduced to economics or welfare any more than to culture. Rather, economic and social concerns, like cultural ones, can be carried by nationalism in the same way that they are carried by other collective identities, such as class. Nationalism is essentially about defining the boundaries of the political community and concentrating and dividing political power. This involves constitutional arguments about the distribution of competences and resources, but what distinguishes nationalist from mere regionalist or localist claims is their normative underpinnings. Nationalists will claim rights of self-determination, based upon universally conceded rights of peoples. States that signed the relevant international declarations, of course, never expected them to be used against themselves. Consequently, there have been many efforts to limit the right of self-determination by insisting that it applies only to states—which seems to make it redundant—or to “salt-water” colonialism. Hence, many of the arguments in plurinational states focus on apparently arcane matters of historical interpretation and original rights. Nationalist movements define the nation in a variety of ways, which are more or less inclusive or exclusive. It is rare for them to practice anything like Sabino Arana’s original definition of Basqueness, which was rooted in ancestry, but cultural or linguistic barriers may be high or low. Nationalisms based on language may use language as an ethnic marker to define their own communities against others, or as a mechanism of integration into the nation, as in Catalonia and Quebec. Nationalist movements may be xenophobic and racist,

Plurinational States   537 as are the Flemish Vlaams Belang and the Italian Lega Nord, or multiculturalist, as is the Scottish National Party. There is a tendency in Western Europe and in Quebec, however, for nationalist movements to de-emphasize ethnicity, where this is based on ascriptive criteria, and to consciously adopt the language of civic nationalism. In this they are conforming to international norms, since ethnicity, as opposed to declared preferences, is no longer seen as a valid basis for self-determination. In articulating their claims, they use the vehicle of democracy and rights, also universally accepted, rather than nationality alone. The extent to which this inclusive definition is accepted within the local society, however, differs; those strongly identifying with the nation often have a narrower definition of who belongs to it than the definition provided by the official national movement. At one level, this more inclusive definition of the nation may make the management of national differences easier. Yet, at another, it makes it more difficult. The stateless nationalist movements are now competing on the same normative ground as the state itself, making the same claims to legitimacy and, rather than articulating partial demands for cultural recognition, are staking claims to redefine the political community. This is “de Tocqueville’s paradox” (Dion 1991), in which political alienation increases even as value differences diminish. Scotland is a clear example of the process (Keating 2009).

3  Nationalist Demands Nationalist movements are the vehicles for all sorts of demands, including cultural, economic, social, and political ones. Cultural demands are usually expressed as collective rights, that is to say, rights inherent to the group, not just to the individuals who compose it. This might be because the integrity of the group is itself important for those making the demands, or it may just be that sustaining a culture is inherently a collective enterprise, requiring common institutions and a public domain. Social and economic demands may also be expressed in a group framework as being essential for maintaining the viability of the group or the territory on which it is located. In the strict sense, however, nationalism is about deciding the boundaries of political community. At one time it was assumed that nationalism was necessarily about moving state borders: secession in the case of stateless nations, or irredentism in the case of national minorities. It is defined this way by Anthony Smith (1971) in the first edition of his book, although not in subsequent editions. Historically, movements seeking federal self-government or decentralization were often dismissed as “regionalist.” In recent years, however, it is more widely accepted that the independent state is just one possible national aspiration and that, before and after the mid-twentieth century, many nationalist movements had other aims. Often there is no clear line between strong devolution and independence, but rather a spectrum of possibilities. Lucien Bouchard, former premier of Quebec, was widely criticized in English-speaking Canada for shifting in and out of the independence camp, but one might argue that he moved only small distances across an invisible line. Scottish nationalist intellectual Neil MacCormick—like his father before him—maintained a rather consistent position, but he could be placed on either side of the independence line depending on the time and the definition being used. Catalan First Minister Arthur Mas and his predecessor in office Jordi Pujol, neither of them previously

538   Michael Keating known as separatists, announced that they had voted “yes” in the civil society referendum on Catalan independence held in Barcelona in 2011. Survey evidence is abundant to show that electors do not see a clear distinction between independence and autonomy (Keating 2001a). Large numbers of voters in Quebec have been shown to support both Quebec independence and a united Canada. The same is recorded in Scotland, where support for independence can go up to 50 percent or down to 20 percent depending on how the question is worded (Keating 2009). A series of polls in Catalonia during the 1990s and 2000s recorded around 17 percent of the population as supporting Catalan independence but double that figure as “agreeing with the concept” (Keating 2001a). Substantial numbers of Basques have been found to prefer staying in Spain but with a Basque passport. Further investigation will often reveal a deeper consistency in the responses; for example, most Scottish voters want control over almost all domestic policy, are less interested in foreign affairs, but favor a more direct line to the European Union (Keating 2009; Curtice and Ormston 2011). In many cases, including Scotland, voters favor more autonomy in social policy but do not desire differences in social entitlements, apparently wanting the best of both worlds. Transnational integration in the form of the European Union (EU) and the North America Free Trade Agreement (NAFTA) has had an important influence in reshaping the nationalist project. Some stateless nationalist movements—in the Basque Country, for example—saw the potential of a united Europe as early as the 1930s, but others remained hostile until the 1980s, seeing Europe as even more remote than their state capital. Since then, a connection has been made between transformations of the state from above and from below, and Europe has been presented as a new context for national aspirations. For some, including the Scottish National Party, Europe lowers the threshold for independence, taking care of externalities, market access, borders, the currency, and defense. Others, however, have moved to a “post-sovereignty” position (MacCormick 1999; Keating 2001a), arguing that in Europe sovereignty is necessarily shared between levels and that this could be done as well at three levels as at two. This provides a new framework for movements that have always been ambivalent about independence, as in mainstream Catalan and Welsh nationalism. Basque nationalism, which had taken a separatist turn under Sabino Arana, also has a confederal and pactist tradition that seized on Europe as the ideal framework. Minority movements in Central and Eastern Europe have often embraced Europe as something that opens state borders and allows the expression of collective demands. Silesian activists at one stage eagerly embraced a European regional identity as a way out of the old dilemma as to whether they were German or Polish (Keating 2001a). Other movements, however, have remained Euroskeptic, since they do not share the core liberal and democratic values of the European project. These movements include radical Flemish and Basque nationalists and the Lega Nord, which abandoned its early Europeanism after being rejected by its European counterparts (Keating 2004). The Parti Québécois has strongly supported NAFTA, even while many of its electors and activists see NAFTA as a neoliberal imposition against their social democratic instincts and thus oppose its implications (Keating 2001b). Post-sovereignty reasoning has sometimes taken the form of ambiguity about long-term aims. When asked about the long-term future of their nation, Catalan nationalists will often answer with questions about the long-term future of Europe. Welsh nationalists (Plaid Cymru) have used a variety of ambivalent phrases about full national status.

Plurinational States   539 Quebec nationalists prefer the term “sovereignty” to the word “independence,” which is favored by the Scottish National Party. Only rarely have these middle-range formulas been spelled out. In 1980, the Parti Québécois proposed “sovereignty-association” in its referendum. The Ibarretxe Plan of the former Basque First Minister proposed that the Basque Country become a “freely-associated state,” which would remain in confederation with Spain but also have a European dimension. The failure of such formulas often provokes a re-affirmation of a commitment to independence pure and simple, as in Quebec after 1980, Wales in the early 2000s, and Catalonia in the early 2010s. Yet, when this, in turn, is elaborated, it usually turns back to some sort of confederal formula. So, despite ostensibly dropping sovereignty-association when its first referendum failed, the Parti Québécois returned to its substance in 1995 with sovereignty and “partnership.” Plaid Cymru quickly modified its ideas about independence. Even the Scottish National Party, filling out its plans for independence in 2009–10 in preparation for a referendum, introduced ideas about joint institutions, keeping the Pound sterling and sharing embassies. All this might seem to point to ways in which nationalist demands can be compromised and accommodated, and, to a large degree, this happens in practice. These demands are not, however, resolved, since there remains an underlying issue about the nature and locus of sovereignty, which, even in a post-sovereignty era, remains a potent issue.

4  Constitutional Responses Plurinationalism as a sociological fact is one thing, constituting states along explicitly plurinational lines is another. States in the Western world are now more inclined to make concessions to plurinationalism. Liberalism is no longer associated with assimilation and uniformity, but with the tolerance of diversity. States no longer possess the means for national assimilation that they possessed in their heyday. They are obliged, for reasons of effectiveness, to decentralize their operations in various ways, which may or may not coincide with the accommodation of nationalities. In Central and Eastern Europe, on the other hand, as well as in France, there is still a strong identification of the state with the titular nation and a reluctance to embrace national pluralism. There is a gamut of constitutional, institutional, and policy responses available to states seeking to manage plurinationality. One is to grant cultural rights to communities to practice their own language and traditions. This is widely conceded across Europe and North America. Minority languages are not generally persecuted and are often given constitutional recognition. Some authors have revived the old Austro-Marxist idea of national cultural autonomy, by which cultural and linguistic communities would have self-governing rights on a non-territorial basis (Nimni 2005). In a limited form, this might represent an extension of long-standing arrangements whereby certain religious groups are allowed their own schools. In its more elaborate form, it entails broader forms of autonomy, covering social services as well as education as in the case of the language communities in Brussels. As a general principle, however, this is difficult to apply, since it requires people to identify with national or ethnic groups, which they may not want to do. Moreover, most public services now have an inescapable territorial element, while language and cultural communities thrive best in territorial propinquity. So, apart from Brussels and some

540   Michael Keating more-or-less symbolic gestures in Hungary and Russia, national cultural autonomy has not featured in modern Western constitutions. Consociationalism is a classic device for managing national diversity, although as a normative and analytical device it has been subjected to sustained criticism. In its essence, it is about combining autonomy (territorial or cultural) with shared rule at the center, its distinguishing feature being the latter element. Power-sharing is the first resort for policymakers dealing with post-conflict situations, where the trust does not exist to permit alternation in power and where there are permanent minorities and majorities. Consociational power-sharing is entrenched in Bosnia and Herzegovina, in Macedonia and in Northern Ireland, where mutually antagonistic communities co-exist. It has also featured in Belgian constitutional practice and, in a less formal way, in Canadian federal government, where care is usually taken to include both language groups and people from both Quebec and outside Quebec. There has, however, been a tendency in these cases for consociationalism to give way to territorial federalism. In some cases, state elites have sought to rebuild the nation on rather more pluralistic lines, as they are now obliged to secure the state’s own legitimacy. Sometimes this is accomplished under the rubric of multiculturalism, bringing both long-standing communities and those arising from immigration into the same framework as a strategy for reinforcing the nation state. This was Pierre Trudeau’s method when he sought to create a unified but bilingual and multicultural Canadian federation. The last Labour government in the United Kingdom pursued a similar goal, as it devoted a considerable effort to promoting a Britishness that would be an overarching and common identity, below which could be distinctive identities, such as Scottish, Welsh, or Muslim (Goldsmith 2008). The difficulty is that the question of multiculturalism is not the same as that of plurinationalism. National demands may or not be about culture, but they are inevitably about the locus of authority and the boundaries of political community, which multiculturalism does not necessarily address. As Scottish and Quebec nationalists— and not just nationalists—will insist, these are themselves complex nations, with a full range of social institutions, which are reaching their own multicultural compromises. It is also a mistake in these cases to postulate a common Canadian or British identity above the cultural and national variety. The essence of a plurinational state is that the state identity itself varies from one constituent part to the other so that, as mentioned earlier, for some people the state identity is the only one, while for others it is one of two. Being Canadian in Alberta does not necessarily mean the same as being Canadian in Quebec, and being British in Northern Ireland is certainly a different thing from being British in the South of England. Accommodating this form of difference implies the acceptance of deeper forms of constitutional diversity. Territorial self-government is a widely-practiced mechanism for accommodating nationality questions. The legal distinction between federalism and devolution is of little significance in practice; for example, Spain is federal without proclaiming it, while Austria is formally federal, but is actually more centralized. The key point is that there should be a territorial division between tiers of government, with the competences and autonomy of each guaranteed either by law or by custom. It was once widely believed that federalism could work only in homogeneous societies and must be symmetrical (Tarlton 1965), and that giving autonomy to nationally distinct communities would necessarily lead to secession (Horowitz 1985). There is now a substantial literature on multinational federalism and

Plurinational States   541 asymmetry in theory and in practice (Requejo 1999; Gagnon and Tully 2001; Burgess 2006; Gagnon and Keating 2012). This shows that it is difficult to draw general conclusions and that much depends on the context. The Spanish constitution of 1978 represents a compromise, allowing a fast track to autonomy for those regions that had gained autonomy under the Second Republic, and providing a slower track for the rest. In practice, other regions rapidly developed autonomy movements and consistently demanded parity with the leaders, a process known as café para todos—coffee all round—or ethno-territorial competition (Moreno 1997). In Canada, concessions proposed for Quebec tend to be taken up as demands by other provinces. In the United Kingdom, on the other hand, devolution for Scotland and Wales did not lead to demands within England; on the contrary, the one English region to vote on devolution—the North East in 2004—rejected it overwhelmingly. Provision for Northern Ireland is not usually taken as a precedent for anything. There are many examples of special autonomy regimes for peripheral or small regions that do not set a precedent for the state as a whole, such as in the Aaland Islands, Greenland, the Faroes, Corsica, or the border and island regions of Italy. In some cases, accommodation involves a combination of territorial and non-territorial measures. The Northern Ireland settlement devolves power to the province, but with an internal consociational power-sharing arrangement, as well as a broader framework allowing individuals to identify with the Republic of Ireland or Great Britain. Self-government in the Basque Country builds on the autonomous community of three provinces, but without renouncing the wider idea of Basque nationality, embracing Navarre and three provinces in France. Bosnia and Herzegovina has a complex federal structure imposed upon consociational power-sharing at all levels. The most acute conflicts, however, have concerned symbolic issues pertaining to the language of nationality or to sovereignty. The term “nation” has a strong normative charge from its association with the right of “national self-determination” and the nation state, so that labeling oneself as a nation is not a mere sociological description but a normative claim. The 1978 Spanish constitution left a deliberate ambiguity by stipulating the unity of the Spanish nation but referring to the nationalities and regions within it without specifying who was which. When the three historic nationalities assumed the term, other regions followed, upon which the Catalans insisted on being a nation, bringing them into conflict with Spanish nationalists. Much of the debate and jurisprudence on the reformed Catalan statute of autonomy hinged on the term nation, which was used in the text, and then moved to the preamble, and then expressed merely as the opinion of the Catalan Parliament. The revised statute for Andalucia has some convoluted language about Andalucia as a historic national reality. Canada has also grappled with this issue. The Meech Lake Accord of the 1980s stipulated that Quebec was a “distinct society,” which was too much for most of English Canada. Years later, the Canadian Parliament recognized Quebec as a nation within Canada, but only when much of the symbolic meaning had been emptied from the phrase. In the UK, on the other hand, the term nation is used both for Great Britain—sometimes the UK—and its constituent parts with no difficulty whatever. The symbolic recognition of plurinationalism is very rare in Central and Eastern Europe, except in Bosnia, where it has been imposed by the international community. The French constitutional court has regularly struck down anything suggesting that France is other than a unitary nation state. The deep issue here is about sovereignty and the ultimate source of political authority. Even nationalists who favor federal arrangements will insist that the federation is based on

542   Michael Keating self-determining units coming together of their own will. Appeals to history are made to resolve the issue, but these merely generate historiographical disputes, which rehearse the same arguments that are being made about the present. Quebeckers insist on the doctrine that Canada has two founding peoples—or three, with the recognition of aboriginal rights. Basque nationalists insist on the prior existence of their historic rights or fueros, which are not therefore the product of the constitution of 1978. Spanish democratic nationalists reply that the nation is based on the founding moment of the Constitution of Cadiz of 1812. Scottish nationalists emphasize Scottish understandings of sovereignty, in defiance of the Westminster doctrine (MacCormick 1999). The Basque Ibarretxe Plan, which started off as a way of redefining sovereignty and defining power, rapidly turned into an opportunity for both sides to rehearse rather conventional doctrines about sovereignty (Keating and Bray 2006). A federal solution for the Cyprus conflict has been bedeviled by an insistence on the Turkish Cypriot side that the Turkish Republic of Cyprus be recognized as an independent state, if only for half an hour, before unification, thereby making the point that they are a founding element. Bosnian Serb leaders insist that theirs is a self-determining community in voluntary association with the state, in defiance of the internationally accepted doctrine that it is the product of the Dayton Accords and that, outside these, the Republika Srpska has no legitimate existence.

5  The Transnational Dimension Transnational integration and state transformation have facilitated asymmetry within states by externalizing important state competences and guaranteeing market unity. They have also provided a doctrinal basis for notions of shared sovereignty and complex federalism. Within the European Union and NAFTA, regions have emerged as new economic spaces, political spaces and, in some cases, actors in transnational networks. This has facilitated the accommodation of nationalities questions, since nationalist movements have widely adopted the themes of the “new regionalism” (Keating 1998) to construct territorial systems of action spanning economic development and political protagonism in Europe. This is not to say that nationalist movements have become merely regionalist, but rather that they use regionalism in the reconstruction of the nation as a system of action and avail themselves of institutional opportunities in Europe. Quebec nationalists have also placed a strong emphasis on constructing the nation as an economic actor in North American and global markets. During the 1990s there was much talk of a Europe of the Regions, in which regions would emerge as a third level of the European institutional architecture (Bullmann 1994). More utopian nationalists, usually on the post-materialist left, talked of a Europe of the Peoples. Regions have certainly become important as economic spaces within Europe, and some opportunities have been given for regions to participate in the European project. They can, where the state makes provision, represent the state in the Council of Ministers. There is a Committee of the Regions. More than 200 regions have offices in Brussels. These opportunities do not, however, satisfy the demands of most nationalist movements. In the Council of Ministers, they speak for the state, not themselves, and they must reach advance agreement with the rest of the state on the line to take. The Committee of the Regions is a

Plurinational States   543 rather ineffective body and represents all types of sub-state governments, refusing to recognize a distinction between “national” regions and others; indeed, it is difficult to see how agreement could ever be reached on all cases. Since the height of the Europe of the Regions movement at the time of the Maastricht Treaty (1992), there has been a certain return to intergovernmentalism in Europe, for the opportunities it might provide, and less enthusiasm for nationalist movements. Europe in the wider sense has also impacted the nationalities question, taking it out of the exclusive control of the states. International and European bodies have, however, interpreted minority rights in a rather restrictive manner, to refer to the individual rights of members of minorities or, at most, rights to collective provision, rather than to the right for national autonomy. The Council of Europe has a Framework Convention on National Minorities and a Charter of Minority and Regional Languages. The European Union has made some use of these and of the work of the Commissioner for National Minorities of the Organization for Security and Cooperation in Europe in assessing the performance of candidate countries. Respect for minority rights is one of the Copenhagen criteria for accession. There have been some successes in this area in the Baltic States, and the matter of Hungarian minorities has been less conflictual than it might have been in the absence of the accession process. On the other hand, the minority rights criterion was not incorporated into the acquis,1 so it does not apply to the older member states nor, after accession, to the new ones. European integration has also affected the politics of borders and of irredentism. The fact that, within the European Union, state borders are almost uncontested has facilitated cross-border cooperation, since it can proceed without raising fears of secession. The accession of Austria to the EU in 1995 facilitated a resolution of the South Tyrol question, while the presence of both the Republic of Ireland and the United Kingdom in the EU eased the Northern Ireland settlement, even if a direct European role was lacking. There are numerous cross-border cooperation programs, some of which allow ethnic or cultural kin groups to come together. A wider acceptance of dual citizenship and/or reciprocal rights across borders can also reduce irredentist pressures. Again, however, the context is critical. Cross-border cooperation and extension of citizenship rights to co-ethnics on the other side may be a gesture to post-sovereignty and dual identities, as in Northern Ireland, but in the hands of a nationalist government, it can amount to provocation. The Hungarian Status Law of 2001, which provided for certain rights for ethnic Hungarians in neighboring countries, and which was promoted by a government that talked of “reversing Trianon,” could be seen as provocation, whatever its precise content (Kemp 2006).

6 Conclusion The nationalities question can never definitively be resolved. Nations and nationalities are not fixed categories but are constructed and reconstructed over time, impinging on the geographical state in complex and asymmetrical ways; this is the essence of 1  The

Community acquis or acquis communautaire, sometimes labeled the “EU acquis” and often shortened simply to acquis, denotes the accumulated legislation, legal acts, and court decisions which constitute the body of European Union law.

544   Michael Keating plurinationality, as opposed to a more symmetrical multinational order. Nations do not generate a uniform set of demands, either in policy or in institutions. At the same time, states are also experiencing changes in their internal spatial configuration, their external relations and their functions. There are many institutional mechanisms available for dealing with policy issues, but, if the issue at stake is about sovereignty and ultimate political authority, then there is no solution. Since these issues can never be resolved, there are just two ways forward. One is to move the question to the terrain of democracy, as did the Supreme Court of Canada in its judgment on the Quebec secession reference. It said that if any province decided to secede following a referendum with a clear majority on a clear question, then the government of Canada would be obliged to negotiate. It did not say what constituted a clear question or clear majority but moved the issue back into the political area. The second way forward is a form of constitutional pluralism that allows different constituent parts of the state to maintain distinct views about their foundation, nationality, the source of sovereignty and the existence of, as well as the nature of, the constitutional telos or end point. Again, what matters is that constitutionalism and democracy are the shared fundamentals as ways of proceeding, rather than any particular view about the nature of the state. The issue can, therefore, be managed and incorporated into daily politics, rather than seen as an existential issue that must be resolved before “ordinary politics” can start. Constitutional arrangements that were fixed at one time may be unsuited for new times, which implies a need for a certain flexibility. Constitutions like that of Canada and Spain, however, are extremely difficult to reform, while in Belgium constitutional reform threatens to encompass the whole of state-level politics. A subtler alternative might be constitutional reinterpretation (Tierney 2004), which sees the constitution as a living document. There is a need for agreement about the rules of behavior and the division of competences, but this does not imply an agreement about where the constitution came from, where it is going, or where ultimate authority resides. There is now recognition that constitutional pluralism in this deeper sense may be the way to deal with both plurinational states and the emerging transnational order.

Acknowledgement This work is supported by an ESRC Professorial Fellowship.

References Anderson, Benedict [RO’G], 1983. Imagined Communities: Reflections on the Origin and Spread of Nationalism. London, UK: Verso. Brubaker, Rogers, 1996. Nationalism Reframed: Nationhood and the National Question in the New Europe. Cambridge, UK: Cambridge University Press. Bullmann, Udo, ed, 1994. Die Politik der dritten Ebene. Regionen im Europa der Union [Politics at the Third Level. Regions in Unified Europe]. Baden-Baden, Germany: Nomos.

Plurinational States   545 Burgess, Michael, 2006. Comparative Federalism:  Theory and Practice. London, UK: Routledge. Curtice, John, and Ormston, Rachel, 2011. Ready to Take Another Leap? Public Opinion on How Scotland Should Be Governed. Edinburgh, UK: Scottish Centre for Social Research. Dahrendorf, Ralf, 1995. “Preserving Prosperity.” New Statesmen and Society 13 (29  Dec­ember): 36–40. Dion, Stéphane, 1991. “Le nationalisme dans la convergence culturelle. Le Québec contemporain et le paradoxe de Tocqueville.” [Nationalism in the Context of Cultural Convergence. Contemporary Quebec and de Tocqueville’s Paradox]. In L’engagement intellectuel. Mélanges en l’honneur de Léon Dion, ed Raymond Hudon and Réjean Pelletier, 46–54. Sainte-Foy, Canada: Presses de l’Université de Laval. Flora, Peter; Kuhnle, Stein, and Urwin, Derek W, ed, 1999. State Formation, Nationbuilding, and Mass Politics in Europe: The Theory of Stein Rokkan: Based on His Collected Works. New York: Oxford University Press. Gagnon, Alain–G, and Keating, Michael, 2012. Political Autonomy and Divided Societies: Imagining Democratic Alternatives in Complex Settings. Basingstoke, UK: Palgrave Macmillan. Gagnon, Alain–G, and Tully, James, ed, 2001. Multinational Democracies. Cambridge, UK: Cambridge University Press. Gellner, Ernest A, 1983. Nations and Nationalism. Oxford, UK: Blackwell. Goldsmith, Lord Peter Henry, 2008. Citizenship:  Our Common Bond. Report of the Citizenship Review. London, UK: Ministry of Justice. Hobsbawm, Eric, 1992. “Nationalism: Whose Fault-line Is It Anyway?” New Statesman and Society 5 (24 April): 23–26. Horowitz, Donald L, 1985. Ethnic Groups in Conflict. Berkeley, CA: University of California Press. Keating, Michael, 1988. State and Regional Nationalism: Territorial Politics and the European State. Brighton, UK: Wheatsheaf. ——, 1998. The New Regionalism in Western Europe: Territorial Restructuring and Political Change. Cheltenham, UK: Edward Elgar. ——, 2001a. Plurinational Democracy: Stateless Nations in a Post-Sovereignty Era. Oxford, UK: Oxford University Press. ——, 2001b. Nations Against the State: The New Politics of Nationalism in Quebec, Catalonia, and Scotland. Second edition (first edition 1996). London, UK: Palgrave. ——, 2004. “European Integration and the Nationalities Question.” Politics & Society 32 (3, September): 367–388. ——, 2009. The Independence of Scotland: Self-government and the Shifting Politics of Union. Oxford, UK: Oxford University Press. ——, and Bray, Zoë, 2006. “Renegotiating Sovereignty: Basque Nationalism and the Rise and Fall of the Ibarretxe Plan.” Ethnopolitics 5 (4): 347–364. Kemp, Walter A, 2006. “Kin States Protecting National Minorities:  Positive Trend or Dangerous Precedent?” In European Integration and the Nationalities Question, ed John McGarry and Michael Keating, 103–123. London, UK: Routledge. Kymlicka, Will, 1995. Multicultural Citizenship. Oxford, UK: Oxford University Press. Lipset, Seymour Martin, 1985. “The Revolt Against Modernity.” In Consensus and Conflict. Essays in Political Sociology, ed Seymour M Lipset, 55–63. Ithaca, NY: Cornell University Press.

546   Michael Keating MacCormick, Neil, 1999. Questioning Sovereignty: Law, State, and Nation in the European Commonwealth. Oxford, UK: Oxford University Press. Mill, John Stuart, 1972. On Liberty, Utilitarianism, and Considerations on Representative Government, London, UK: Dent. Miller, David, 1995. On Nationality. Oxford, UK: Oxford University Press. Moral, Félix, 1998. Identidad regional y nacionalismo en el Estado de las Autonomías [Regional Identity and Nationalism in the Estado de las Autonomías (= the territorial administration of the autonomous communities of Spain)]. Series Opiniones y Actitudes # 18. Madrid, Spain: Centro de Investigaciones Sociológicas. Moreno, Luis Fernández, 1997. La federalización de España. Poder político y territorio [The Federalization of Spain. Political Power and Territory]. Madrid, Spain: Siglo XXI. Nimni, Ephraim J, 2005. “Introduction: The National Cultural Autonomy Model Revisited.” In National Cultural Autonomy and Its Contemporary Critics, ed Ephraim J Nimni, 1–14. London, UK: Routledge. Oneto, Gilberto, 1997. L’invenzione della Padania: La rinascita della comunità più antica d’Europa [The Invention of Padania. The Renaissance of the Oldest Community of Europe]. Bergamo, Italy: Foedus. Requejo, Ferran, 1999. “La acomodación ‘federal’ de la plurinacionalidad. Democracia liberal y federalismo plural en España” [Federal Accommodation of Plurinationality. Liberal Democracy and Pluralist Federalism in Spain]. In Asimetría federal y Estado plurinational, ed Enric Fossas and Ferran Resquejo, 16–29. Madrid, Spain: Trotta. Rokkan, Stein, and Urwin, Derek W, 1983. Economy, Territory, Identity: Politics of West European Peripheries. London, UK: Sage Publications. Smith, Anthony D, 1971. Theories of Nationalism. London, UK: Duckworth. ——, 1986. The Ethnic Origins of Nations. Oxford, UK: B. Blackwell. Spruyt, Hendrik, 1994. The Sovereign State and Its Competitors:  An Analysis of Systems Change. Princeton, NJ: Princeton University Press. Tamir, Yael, 1993. Liberal Nationalism. Princeton, NJ: Princeton University Press. Tarlton, Charles D, 1965. “Symmetry and Asymmetry as Elements of Federalism: A Theoretical Speculation.” The Journal of Politics 27 (4): 861–874. Tierney, Stephen, 2004. Constitutional Law and National Pluralism. Oxford, UK: Oxford University Press. Tilly, Charles, 1975. The Formation of National States in Western Europe. Princeton, NJ: Princeton University Press. ——, 1990. Coercion, Capital, and European States, AD 990-1992. Oxford, UK: Blackwell.

Chapter 29

The Ch a ngi ng A rchitectu r e of the Nationa l Secu r it y State Andreas Busch

1 Introduction Fulfilling its citizens’ desire for security has always been seen as a classic task of the state as well as a justification for its existence. This argument dates back a long time in the history of political ideas, at least to Hobbes’ description of the Leviathan. To absolve itself of that task, the state developed instruments to deal with external threats—mainly the military—and to provide internal security; it is the latter aspect that this chapter focuses on. The distinction between the two spheres of external and internal security, however, is more analytical than grounded in reality, for—as will become evident in the discussions below—mutual influences evidently exist between the two. But a further reason to distinguish their analysis is that the tasks of the military and the police have classically been separated in the modern Western state (Reinhard 1999: 363–370). Much has been written about the relationship between the state and physical force, from Thucydides’ account of the Peloponnesian war to Charles Tilly, whose phrase that “war makes states and states make war” (1990) remains influential but contested. On the domestic side, though, Max Weber’s definition of the modern state as possessing a monopoly of legitimate physical force is generally accepted. The shape of modern states and the tasks they fulfill, however, have been subject to substantial change in the century since Weber coined that phrase. In recent years, the transformations of the state that this Handbook covers have not left the area of domestic security unaffected, either. However, as will be argued below, here we find a deviation from the well-known pattern that research has shown to dominate most other policy areas, in which the state has been delegating tasks to other actors and has been taking on a more “hands-off” approach (Genschel and Zangl 2008, 2014): in the field of domestic security, state involvement—measured by such indicators as manpower, legislation, and budgets—has increased substantially. The domestic national security state,

548   Andreas Busch in other words, has grown at a time when state involvement experienced a reversal of the trend of growth that had characterized the decades after World War II; while other dimensions of the state shrank, the elements of the state concerned with domestic security have experienced growth and structural change.

2  Theoretical Perspectives on the National Security State The “national security state” is a concept that has several meanings, ranging from the realist state concept in the study of international relations to the concrete construction of the US security system in 1947—when the National Security Act set up institutions such as the National Security Council and the Central Intelligence Agency (CIA) as foundations of the national security state—to a general understanding of the institutions that in any state are charged with the conduct of security policy (Ripsman and Paul 2010: 10–12). In this chapter, the term “national security state” will focus on the latter meaning, with special emphasis on the domestic sphere, that is, the maintenance of internal security. As mentioned earlier, this is a distinction in terms of the instruments the state predominantly uses (police, not military) and at whom its efforts are directed (inhabitants of the state territory, not outsiders). This distinction is analytical, because the internal security sphere is not necessarily independent from the external security sphere: threats from abroad can influence the national security state substantially.

The “Garrison State” Harold Lasswell’s theory of the “garrison state” (Lasswell 1941, 1962) was perhaps the most influential attempt at predicting influences from outside threats on the internal workings and structures of the state. The predicted “world of ‘garrison states’—a world in which the specialists on violence are the most powerful group in society” (Lasswell 1941: 455) was to be the consequence of totalitarian systems challenging established democracies, and the ensuing permanent threat (especially from aerial warfare) was theorized to lead to a “socialization of danger,” which required the nation to become “one unified technical enterprise” in response (Lasswell 1941:  459). In that state, “authority will be dictatorial, governmentalized, centralized, integrated” (Lasswell 1941:  455)—a system resembling George Orwell’s 1984, which was indeed influenced by Lasswell’s writings (Friedberg 2000). Large-scale coercion would be used by the military-police elites, who would take over from the relatively mixed elites who had dominated in the nineteenth century. These new military-police elites would above all need “skill in the manipulation of symbols in the interest of morale and public relations” (Lasswell 1941: 455). All this mobilization would be necessary in order to extract the resources needed for defense, and, as Lasswell added later, the fact that the advent of repression had been delayed thus far was due to the “huge techno-scientific advance” that had allowed “the supply of consumer goods” to be maintained (Lasswell 1962: 66). Still, he doubted this would be continued into the future, and

The Changing Architecture of the National Security State    549 he thus concluded, “however reluctantly, that the garrison hypothesis provides a probable image of the past and future of our epoch. We would prefer it to be a self-disconfirming hypothesis” (Lasswell 1962: 67). Lasswell was heavily influenced in his outlook by the rise of authoritarianism in the 1930s—he published the first essay on the “garrison state” in 1937—and subsequently by the mobilization effort of World War II. But by the 1970s it had become clear that developments were unfolding differently from his predictions. Reviewing Lasswell’s theory, Raymond Aron critically pointed out that “bargaining experts”—such as lawyers and administrators—continued to hold top positions in the political elite of industrialized democracies, and that they had not, as predicted, been replaced by the “managers of violence” (Aron 1979: 349). The militarization experienced during World Wars I and II had been substantially reversed, and in spite of the nuclear threat, no practical preparation for such a war—for example, building shelters for a substantial part of the population—took place. He concluded: “In brief, the industrialized world is more removed than ever before from the garrison state” (Aron 1979: 355). After the end of the Cold War, Aaron Friedberg went on to analyze the reasons why “Lasswell was wrong” (Friedberg 1992: 113) and why the US had not turned into a garrison state. He pointed to the importance of “countervailing pressures,” chief among them Americans’ adherence to liberalism and skepticism against state intervention (Friedberg 1992: 142). He noted that by keeping defense spending in check and emphasizing individual liberty, they had prevented the overstretch of an exhausted economy and the development of a militarized society, thereby forestalling two of the main causal factors in the breakdown of the US’ adversary, the superficially strong “garrison state” of the Soviet Union (Friedberg 1992: 142).

The “Preemptive State” Liberalism thus prevented the emergence of an almighty state under Cold War conditions. But liberalism—in the American sense—has also contributed to the state’s taking on more and more new tasks in most areas of modern life, ranging from ensuring the safety of technical systems to preventing diseases and managing many aspects of economic and social security. However, turning a state based on the traditional rule of law into a “preemptive” or “preventative state,” which prevents societal ills through preemptive action, risks undermining the very foundations of the liberal state, as scholars from public law have argued (e.g. Denninger 1990; Grimm 1994). Originating in the legal regulation of technical safety and environmental protection, the idea of the “prevention principle” has spread to many other areas of policy-making, challenging traditional practices. However, it is particularly dangerous when applied to the field of domestic security, as it threatens to undermine the restrictions to state executive power on which liberal democracy is based (Denninger 2008). In the past, police and law enforcement were allowed to take preventative action as well, but that mandate was restricted to a “concrete danger” to public safety based on individual suspicion. Such restrictions on executive action are central for the balance between civil liberty and state power. Once laws become more focused on prevention, however, they emphasize the goals to be achieved rather than the description of measures to be taken.

550   Andreas Busch As a consequence, executive and administrative actions become less predictable and more based on ad hoc assessments (Grimm 1994: 199). This causes a rise in the power of the state and a reduction in the protection of the individual against illegitimate state action, as states no longer try to protect their citizens from concrete dangers but also from potential ones. Thus, the citizens’ relationship to the state changes: traditionally, the citizen could avoid state involvement in his or her personal life by complying with rules. But in the new era, this option no longer exists, for in the “preventative state” every citizen is a potential risk, and thus behaving in an inconspicuous way can become particularly suspicious (Huster and Rudolph 2008: 17). While the rule of law threatens to sanction behavior that violates legal rules, the preventative state aims to anticipate norm violations and prevent them from happening. In order to do that it must collect comprehensive information about each individual citizen and build up executive capacity to effectively avert every plausible threat that could emerge from such norm violations. But such a transformation changes the very character of the state that now needs to regard all of its citizens as potential violators of legal rights who need to be watched with suspicion. As theorists of the “preventative state” warn, such a state does not protect the liberty of its citizens but instead threatens to undermine it, in addition to undermining democratic checks and balances and the rule of law (Grimm 1994; Denninger 2008).

3 Transformations Unlike most of the transformations of the state discussed in this Handbook, those affecting the national security state can be linked to a specific date, namely September 11, 2001— or “9/11,” as it is often referred to—which is when the terrorist attacks on the United States (US) took place. While those attacks did not cause the transformations directly—some technological and structural changes were already under way, caused by leaps in information and communication technology (ICT) and supranational integration, respectively— the issue of domestic security was thrown into sharp relief on that day. 9/11 thus served as a trigger to devote a much greater share of state resources to the quest for domestic security. Spending in this area is notoriously opaque, for security reasons, but it is estimated that in 2013 the US spent some $52.6 billion on the 16 agencies—among them the CIA and the National Security Agency (NSA)—that make up the country’s intelligence community and which together employ 107,035 people (Gellman and Miller 2013). To parse these numbers further, a quarter of this manpower and a third of the spending are devoted to counterterrorism programs (Gellman and Miller 2013). The consequences of 9/11 with regard to the national security state are numerous and have been discussed extensively in the literature (e.g. Caidi and Ross 2005; Patman 2009; Held 2010). This section will, in a generalized fashion, discuss three particular developments that stand out: the structural change blurring the borders between domestic and foreign security policy; the amalgamation and blending of police, secret service, and military tasks; and the rising use of high tech—especially in the field of ICT—as a tool of the national security state. Together they have transformed the situation in this field substantially, even when compared to the state of the field only three or four decades back.

The Changing Architecture of the National Security State    551

Structural Change: Blurring the Borders Between the Domestic and the Foreign Although the airplanes used as weapons in the attacks of September 11, 2001 had started on US domestic territory, the events were perceived by the US and most of the international community as a foreign attack. Since the terrorists had been foreign nationals, defining their attacks as a foreign-guided attack was plausible.1 This view was strengthened by the link existing between the attackers and radical Islamic ideology, and the protection the Afghan Taliban regime extended to the terrorist supporters. But this new threat from individual or small groups of terrorists could not be countered by the traditional means of protecting territorial integrity at national borders, since armies, airplanes, and battle ships were of limited help. The defense against potential new attacks thus had to take place at territorial border controls, harbors, and airports, and therefore by means traditionally in the realm of the police forces. As a result, the decades-long process in which the importance of these borders had declined through processes of economic integration was reversed, and borders changed their character (Andreas 2003). Challenges to the governance of migration had already arisen from European integration and the internal market project in the 1980s, and both have since contributed to a process of tighter regulation, digitization, and securitization (Broeders and Hampshire 2013). This process intensified as border control mechanisms that had focused on illegal immigration and drug trafficking were now reorganized to identify and refute potential terrorists among the many tens of millions of travelers crossing countries’ borders every year. To do this without interrupting economically important transactions and tourism, processes of black-, green- and grey-listing travelers were employed (Andreas 2003). Increasing the number of personnel working in this area and employing new technological solutions were the preferred strategies for making border controls as reliable as possible, because even a small number of false negatives—that is, unidentified terrorists—could cause serious harm. However, since the fortification of borders and the detailed control of both goods and persons crossing them threaten to interrupt the exchange of goods and thereby endanger economic welfare, squaring that circle is an ongoing challenge. An example from the month after September 2001 may serve as an illustration: the attempt to exclude threats at the Canadian-American border led to mile-long queues and the interruption of supply chains that caused the closure of several factories in the automobile industry (Andreas and Biersteker 2003). The changing nature of borders and the blurring of the distinction between domestic and foreign policy thus results in costs both for business and individuals, making it clear that the quest for increased security exacts a price in terms of economic welfare.

1  At that point the problem of so-called home-grown terrorism—where domestic citizens with or without a migratory background commit attacks—did not yet exist. It emerged later, e.g. in the UK and in Germany.

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Organizational Change: Centralization and the Amalgamation of Police, Secret Service, and Military Tasks The changing nature of borders and the evaporation of distinct domestic and foreign policy areas was also reflected in a shrinking distinction between internal and external security on the executive level of the state. The long-established distinctions between police work (law enforcement), domestic secret service work (protecting the constitutional order), and military tasks (protection against external threats) increasingly began to dissolve. These developments have been debated under headings such as homeland security in the US or new security architecture in Germany. Besides organizational changes, these developments have also been the cause of changes in state power structures, especially in federal states. Generally speaking, they led to a centralization of competences, which has often been justified by functional requirements. According to that argument, due to the central role that information—about persons, organizations, facts, etc.—plays, a unitary organizational structure is required, for only a comprehensive database and consistent access to data allows effective use of that information for state security. The changing security structure can be observed in the further centralization of bureaucratic competences and in a strengthening of the federal level in federal countries such as the US and Germany (Lange 2008). In the US, for example, the new Department of Homeland Security was established to “prevent terrorist attacks within the United States [and] reduce the vulnerability of the United States to terrorism” (Homeland Security Act of 2002 [116 Stat. 2135]: Sec. 101). Twenty-two agencies, with a total of 180,000 workers in departments ranging from the Customs Service and Immigration Services to the Coast Guard and the Secret Service, were brought under this new department, when previously they had been under half a dozen different departments (Kettl 2004). The extension of competences of the German Bundeskriminalamt through the BKA Act of 2008 (BGBl. 2008 I # 66: 3083–3094), the establishment in 2003 of the Joint Terrorism Analysis Centre (JTAC) in the UK (Hennessy 2010: 374 f.) and the National Counterterrorism Center (NCTC) in the US (Best 2011) are further illustrations of that trend, and similar developments can be found in most other OECD countries. By sharing work that was formerly delegated specifically to the police, the secret service, and the military, boundaries have been broken down in an effort to enhance efficiency. However, this has caused practical problems of coordination, and it is also problematic from a constitutional point of view. The separation of tasks between these areas and their separate agencies is linked to the restriction of state powers and the protection of civil liberties. However, over the last decade a growing number of executive fora have sprung up where forces are joined to analyze both internal and external security matters, often under the name of a “national security council” (Werkner 2011: 80 f.). Consequently, more and more institutions share a self-interest in strengthening and extending all aspects of domestic security, which may lead to budget-maximizing behavior. This goes beyond the area of the state, for in the private sector a dynamic new industry has emerged to provide tools and instruments for surveillance and control technologies. This new industry has been labeled the “security economy” (OECD 2004) or the “surveillance-industrial complex” (ACLU

The Changing Architecture of the National Security State    553 2004) and was already estimated to have an annual turnover of between US$100 and 120 billion a decade ago (OECD 2004: 9).

Technological Change: Increasing Reliance on Information Technology In parallel with the general spread of ICT in society over the last two decades, agencies of the national security state have increasingly come to rely on such technologies for help with their work. They have built up enormous capacities to store data and link it with other data. Using data and signal intelligence has thus come to play an ever more important role in this area, which has contributed to worries regarding data protection; combined with the difficulty—as well as unwillingness—to distinguish between domestic and foreign sources of data, this has led to substantial political controversy (as evidenced by the secret material leaked by former NSA contractor Edward Snowden in the summer of 2013). As mentioned above, ICT use was a popular way of dealing with the exponentially growing cross-border flows which—especially in Europe—were linked to increasing economic and political integration (Broeders and Hampshire 2013). Different types of data sources flowed together to police borders, from visa application systems, entry-exit systems, criminal watch lists, and—after 9/11—also from Passenger Name Records (PNRs) provided by air carriers and RFID-equipped passports. More and more countries also started to collect DNA data from criminals—the United Kingdom (UK) leads the field here with 6.97 million subject profiles—or one in nine inhabitants—on record as of March 2012 (Home Office 2013). In addition, existing databases that had been built up separately were joined together—as in Germany, where a new anti-terror database links 334 separate databases and 511 protocol files and grants common access to all data stored in this new database to 38 different state agencies (Busch 2010: 409–410). If technologies like closed-circuit television (CCTV) and automatic number plate recognition are added to the picture, it is thus possible to produce quite detailed profiles of people’s habits and character traits, as a UK House of Lords inquiry remarked critically (House of Lords 2009: vol. 2, 16). When the Internet emerged as an encompassing technology in the 1990s, states saw their sovereignty threatened and feared that governments would lose influence now that they no longer controlled communications networks, especially if strong encryption became widespread (Nelson 1998). But much effort and expense has been put both into the ability to monitor communication and to read it: the NSA has built a surveillance network with the capacity to read 75 percent of all US Internet traffic (Gorman and Valentino-Devries 2013), and there are reports that the agency has been able to break as well as weaken encryption standards commonly used in Internet communication (Ball et al. 2013), which has as yet unclear consequences for the Internet economy and e-commerce. The vast build-up of ICT resources, however, creates its own problems, since information overload has become an acute challenge for counterterrorism intelligence (Priest and Arkin 2011). This is not new: directly after 9/11 it was emphasized that “it was not the lack of information so much as the lack of analysis of information which created the surprise element of the attacks” (Lyon 2003: 121).

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4  National Measures To illustrate the transformations described in the previous section, this section looks at select cases of national measures and adds to the information given above by putting it in context. The focus will be on legislative and institutional change as well as political contentiousness.

The United States As the country most directly affected by the attacks of September 11, 2001, the US’ policy reaction flowed from the interpretation that the country was involved in a “war on terror” that demanded harsh countermeasures. Within six weeks, the 300-page long USA Patriot Act (HR 3262) was passed with overwhelming majorities by Congress. It drastically extended executive powers in such areas as the definition of terrorist associations, wiretapping rights, house searches, information on financial transactions and military tribunals, and it authorized US state agencies to demand extensive information from foreign nationals traveling through the US. The CIA—the intelligence service for operations abroad—was now allowed to work on domestic affairs as well. Initially restricted to four years, the Patriot Act was extended for another five years in March 2006, with only very minor changes, and again in 2011. Publicized criticisms of the extension of state powers and the substantial restriction of civil rights and liberties had little effect, as the terrorist attacks had strengthened public opinion support for the Bush administration’s course (Braml 2003). The fortification of border protection through technical means could tap into political support around the issue of immigration. Biometric data and comprehensive databases were employed in the US-VISIT System (United States Visitor and Immigration Status Indicator Technology) to prevent the immigration of terrorists, criminals, and illegal immigrants. Other measures were more contentious, such as the indeterminate detention of several hundred persons suspected of terrorism in Guantánamo Bay—a US marine base in Cuba without access to the American legal system—or the Bush administration’s unclear attitude towards the use of torture when questioning detainees. These practices were also heavily criticized internationally, and thus they undermined the moral position of the US as a defender of the rule of law. Given that these practices were likely to help terrorist adversaries find further support in the Islamic world, there remained substantial doubt about these strategies’ effectiveness (cf. Wattellier 2004). In spite of widespread public support, the state also encountered some political defeats in trying to increase state involvement in security matters. The attempt to introduce a general and unforgeable identity card was rejected, above all because it triggered skepticism about a further strengthening of state powers. The Bush administration had tried to pass the Real ID Act in 2005 in an omnibus bill together with essential military spending and Tsunami help in order to overcome legislative resistance within Congress (cf. Ni and Ho 2008). Still, many of the states—including a number of those governed by the Republican Party—refused to introduce the respective standards for ID cards, and the measure has still not been implemented.

The Changing Architecture of the National Security State    555

The Federal Republic of Germany Legislative reaction to 9/11 in Germany was even quicker than in the US; four of the principal attackers had lived in Hamburg for an extended period of time and attended institutions of higher education there, as well, so the German government felt a particular obligation to respond to the attacks. Before the month was out, Security Package I had been passed and was soon followed with Security Package II in January 2002. Both omnibus bills contained a multitude of individual regulations that strengthened state capacity in the fight against terrorism, such as the abolition of the religious privilege in the law of associations, the outlawing of foreign terrorist associations in penal law, the facilitation of data exchange between the various security agencies, and an increase in funding for domestic security tasks and their agencies (Busch 2007). In contrast to the US, however, Germany continued to define terrorism as a criminal act (a practice established in the 1970s). A five-year sunset clause was attached to the breaking down of barriers between the domestic secret service (the Bundesnachrichtendienst), the military secret service, and the Bundeskriminalamt, the German equivalent of the FBI. The measures had been largely non-contentious between the different parties in the German parliament, but critical reactions came from civil rights groups and data protection offices both on the federal level and the state, or Land, level. The federal data protection commissioner questioned the proportionality of the measures and warned that “more surveillance . . . will not automatically lead to more security, but always to less liberty” (cited after Busch 2010: 408). Two changes of government in the years after 9/11 did not lead to any substantial alterations in this area; the temporary legal measures were extended twice without much controversy. While the consensus between Christian Democrats and Social Democrats is repeatedly challenged by the more civil-rights oriented Greens and Liberals, this criticism is most acute when either of the latter two parties is in opposition (cf. Busch 2003, 2007, 2010). It should be noted, however, that that consensus has so far not had to withstand large successful terrorist attacks on German territory. The Constitutional Court struck down parts of the security measures as unconstitutional: the Air Security Bill of 2005—which authorized the shooting down of passenger airplanes if these were being used as attack weapons—and the 2007 Law on Data Retention of Telecommunications Data (implementing a 2006 EU directive).

The United Kingdom The UK has had experience with Northern Irish terrorism for decades and with transnational terrorism in the attacks on London public transport in July 2005. The highly centralized structure of the unitary British state, with its dominance of government over parliament, facilitated a quick reaction to 9/11: on 13 December 2001, the Antiterrorism, Crime and Security Act of 2001 was passed. Even though the Terrorism Act of 2000 had been passed only a year earlier, the new law contained numerous regulations further extending the state’s rights to collect information as well as the police’s capacity to identify individuals and their authorization to access electronic communication data with the help of telecommunication companies and internet providers (Moran and Phythian 2008). The

556   Andreas Busch home secretary was authorized to detain foreigners suspected of terrorism for an indeterminate time, in line with the perception that terrorism was a threat coming from outside the country. Additionally, the position of Minister of State for Immigration, Citizenship and Counter-Terrorism was created, and the individual holding this office was, before 2002, in charge of asylum and immigration issues. The powers of the British state in the area of antiterrorism policy had already been considerable compared to other European states (Grote 2004). Political factors such as strong one-party government, a weak political opposition, and a constrained judiciary contributed to the executive’s empowerment and enabled it to implement its measures against terrorism in a practically unrestrained manner (Haubrich 2003: 28). Fighting terrorism stood above everything else, as Prime Minister Tony Blair declared in the parliamentary debate of the Prevention of Terrorism Act 2005: I think that the civil liberties of the subject are extremely important, but I think that there is one basic civil liberty, which is the right to life. I think that freedom from terrorism is the most important consideration, which must be uppermost in our minds.

(Hansard, 9 March 2005: col. 1513)2 Substantial political consensus around this exists between the main parties, and the securitization of domestic policy goes even further, as a minister in charge at the Home Office discussed before an inquiry of the House of Lords: “CCTV, DNA database and the whole range of these other elements are not there as a response of exceptional threats and exceptional circumstances . . . I think that is routine in the 21st century” (House of Lords 2009: vol. 2, 12). A “National Antiterrorism Strategy” (HM Government 2009) and the so-called e-Borders Programme (Amoore 2006) confirm this further. With no written constitution offering protection, the executive abrogated international conventions such as Article 9 of the General Declaration of Human Rights and Article 5 of the European Convention on Human Rights and detained terrorism suspects for years without charge. While this met with strong criticism from the Law Lords, the government continued the practice of internment without trial by executive order.

Comparative Analysis The terrorist attacks of September 11, 2001 opened the floodgates of the national security state. While structural and technological developments had already led to gradual change before, this event became literally a call to arms. States reacted quickly and comprehensively, with legislative and institutional measures to fight transnational terrorism. The executives dominated, and little time was taken for deliberation or consultation. In many countries, security agencies used this window of opportunity to introduce measures they had wanted to see in legislation for a long time; this was, for example, evident in the volume of regulations that had been rejected by Congress in previous bills but passed in the Patriot Act (Donohue 2008).

2 

http://www.publications.parliament.uk/pa/cm200405/cmhansrd/vo050309/debtext/50309-03.htm

The Changing Architecture of the National Security State    557 Yet substantial differences between national security states’ reactions can also be found. The extent of interference in citizens’ fundamental rights varies considerably between states (Haubrich 2003; Crenshaw 2010), as does governments’ success in implementing desired measures. Differences can best be explained by institutional and historical factors. Among the former one can count the differences between federal and unitary political systems, with the latter facing fewer veto points to the implementation of government policy. In federal systems, central governments generally face more obstacles; if competences are neatly delineated, the central government has few possibilities to force the states to introduce measures they reject. In cooperative federal countries, bargaining opportunities and political barter may help. The UK, the US, and Germany, respectively, illustrate these categories. Written constitutions and strong constitutional courts are further institutional variables that help explain differences in reactions: their presence directly protects citizens’ fundamental rights and can restrict government plans, for example, by declaring certain measures unconstitutional. Historical experience influences developments in the area under consideration here in the form of lessons drawn from the past. Whether or not one conceptualizes the task at hand as a war has consequences for the spectrum of reactions considered acceptable (Katzenstein 2003). Prior experience with—more national forms of—terrorism thus plays an important role, as does existing legislation that introduces path dependencies into the set of possible strategies for the national security state. As detailed case studies can show, anti-terror legislation that existed prior to 9/11 is a major influence on the reactions after the attacks (Wiegand 2011).

5  International Cooperation Given the international impact of transnational terrorism, attempts to fight it through increased international cooperation were at the top of the political agenda from an early stage. However, while international and supranational cooperation does exist and has had some influence on national reactions, they are minor when compared to the national determinants of security-state developments described in the previous section. The goals of domestic national security require a degree of international cooperation if they are to be successfully achieved. But a number of obstacles have presented themselves in this area, leading to a practical level of supra- or international delegation that is clearly lower than in other policy areas, such as economic or trade policy. Many policy reactions in antiterrorism policy center on flows of information. An example of successfully using international institutions to further that policy agenda is the US’ lobbying of the International Civil Aviation Organisation (ICAO). ICAO governs regulations about international travel documents, and the US government managed to include the integration of so-called RFID (radio-frequency identification) chips into the organization’s recommendations about passports. RFID chips can store data (such as digitized photographs or biometric data), they can be read remotely, and they make it almost impossible to forge passports. In 2003, the recommendations were accordingly amended, and the US and many other countries quickly added the new technology to their passport—in spite of the security problems inherent in that technology (Weinberg 2007: 800–802).

558   Andreas Busch Agreement in other areas of international cooperation proved more difficult, especially when it came to agreements between the US and the European Union. Through the Aviation and Security Act of September 2001, the US had legally obligated all airlines touching its territory to submit comprehensive information about their passengers, the so-called Passenger Name Records or PNR. Since these contain highly personal data, a conflict with European data protection regulations ensued. Ultimately, the US managed to impose its will in terms of data access and storage, but only after a lengthy conflict (Busch 2012). Relations between both sides were soured when the Europeans discovered that the US government had managed to obtain detailed records of worldwide financial transactions in its quest to track terrorist funding. This had happened through court ordered access to the US computing center of the Society for Worldwide Interbank Financial Telecommunication (SWIFT), an industrial cooperative located in Belgium that conducts up to 12 million transactions between 200 countries with a daily turnover of up to US$6 trillion (Lichtblau and Risen 2006). In spite of the shared goal of fighting transnational terrorism, a broad spectrum of interactions, ranging from cooperation to conflict, has thus been visible on the international level. Different, deeply rooted attitudes about data protection have contributed to this, particularly between countries on opposite sides of the Atlantic; in addition, little delegation to the supra- or international level has taken place in the area of domestic security policy, since states have little incentive to delegate in this manner. Whether compromises or political developments will move positions closer and lead to more cooperation remains to be seen. The handling of PNRs—now also intended to be used in the EU—is an example that shows positions are not immutable.

6 Consequences The terrorist attacks of 9/11 were the most important political moment since the fall of the Berlin Wall. If “terrorism is about the politics of threat magnification” (Katzenstein 2003: 734), then these attacks were highly successful: they put the fight against terrorism on center stage in both foreign policy and domestic politics, with clear consequences for the national security state. Most OECD states, on which Part III of the Handbook concentrates, have existed in a “perpetual state of yellow” (Priest and Arkin 2011: xix) ever since 9/11. Indeed, the color-coded terrorism indicators invented in the US and the UK by authorities intent on quick communication have never dropped below the “substantial” level in either country and have mostly oscillated between “severe” and “critical.” Although countries reacted differently to the attacks—the US declared a “war on terror,” while others (like Germany or Japan) classified the attacks as “crime” or spoke of a “crisis” (Katzenstein 2003)—the polarization of political debate was a defining characteristic of states’ responses. The blunt alternative President George W. Bush posed to nations in his speech before Congress on 20 September 2001—“Either you are with us, or you are with the terrorists”—also influenced domestic discourse in many states, stifling the debate about possible alternative reactions to a strengthening of the security state. The massive reactions described in this chapter have to be assessed in terms of their effects and their effectiveness. The quick and comprehensive legislation following (and, in

The Changing Architecture of the National Security State    559 some cases—such as the UK Terrorism Act of 2000—also predating) the attacks resulted, on the one hand, in a strengthening of penal provisions (mainly new criminal offenses) as a means of deterrence or retribution, and, on the other hand, in a considerable extension of state competences, not least with regard to the collection and use of information. As comparative studies show, the strengthened penal provisions have only been used in a small number of cases—very few people have been convicted under the new antiterrorist laws (Haubrich 2006: 413). The extension of state capacities and data collection for the purpose of antiterrorism, in contrast, has grown drastically and now extends far beyond anything previously imaginable. A clear buildup of state surveillance and control mechanisms has taken place, even though assessments have cast doubt on their effectiveness (NRC 2008). Consequences also have to be assessed in terms of how these security measures have affected the working of the democratic political systems that they were intended to protect. Past experiences have shown there to be effects: a comprehensive study of Germany’s experience with 1970s terrorism found a “loss of distance” between the legislature and the executive, disadvantaging the former and benefiting the latter (Berlit and Dreier 1984: 261); the control function of Parliament declined as the legislature attempted to support the executive in its fight against terrorism. Similar effects can be detected in various countries in the years since 9/11, as the executive has shifted the balance of power in its favor, prompting fears that (at least parts of) the security state may be out of control. Power of authority has been interpreted extensively—for example, in the case of US National Security Letters (issued by government agencies to demand specific information and whose existence the recipient may not reveal), which have become a standard tool of investigation and whose use has increased more than sixfold to about 50 000 per year since 9/11 (Donohue 2008: 236–242). The sweeping surveillance of Internet communication by intelligence agencies was uncovered by whistleblower Edward Snowden in the summer of 2013 and criticized widely. Other flagrant cases of the abuse of the sweeping powers granted by anti-terrorism legislation have also occurred, with the most drastic probably being the UK government’s unfounded use of anti-terrorism powers to freeze an Icelandic bank’s assets in Britain with the purpose of compensating UK depositors during the financial markets crisis of 2008 (Financial Times 2008). Many countries have established periodic independent reviews of their security measures and these measures’ effects. This is a positive sign of defense mechanisms against an overbearing executive. For example, the UK’s Independent Reviewer of Terrorism Legislation (2012) has recommended liberalizing the rules governing terrorist detention and port and border controls; a similar review in Germany in the summer of 2013 also advocated substantial changes in the application of counterterrorism measures (BdI and BdJ 2013); and, as far back as 2007, a review by the US Department of Justice found that the FBI’s use of National Security Letters violated statutes, guidelines, and policies, which caused the Department of Justice to recommend changes (USDJ 2007). Whether these recommendations will be followed by executive actions remains to be seen. Still, they make it clear how difficult it is to monitor legislative intentions in the implementation of laws by the executive, and they also highlight that national security state action runs the risk of undermining the very values of democratic societies that it is intended to protect. Theories of transformations of the state have argued that the modern state is metamorphosing from a “monopolist of authority” to a “manager of authority” that lets go of direct involvement (Genschel and Zangl 2008, 2014). But the national security state, as this

560   Andreas Busch chapter has argued, may be seen as a counterexample to this general trend. In this area, the state has further consolidated and concentrated its involvement, as various indicators demonstrate: manpower has risen considerably, as pointed out earlier; in the decade after 9/11, the US and UK’s respective intelligence budgets have at least doubled (Hennessy 2010: 373; Priest and Arkin 2010); and legislative activity has been extensive. During the post-9/11 period, there have been no terrorist attacks on a scale comparable to those of 9/11—with hundreds or thousands of deaths—but whether this is a direct result of effective preventative action by security state measures is unknowable to an academic reviewer. Terrorism has always been a statistically insignificant cause of death (Katzenstein 2003: 734; Zenko and Cohen 2012: 83), and thus this finding is in line with expectations, whether or not one believes in the effectiveness of the national security state. However one assesses this causal relationship, which involves a comparison between the widespread securitization of public life and the extensive counterterrorism effort (in terms of manpower employed and budget spent), on the one hand, and the objective threat (in terms of actual lives lost), on the other hand, one must conclude that the national security state has been able to impose its priorities and exert power over society in a substantial way, especially given that austerity and economic hardship have enforced cuts elsewhere.

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Chapter 30

Tr a nsfor m ations of the Democr atic State Frank Nullmeier, Steffen Schneider, and Andreas Hepp

Before 1875, only two nation states—Switzerland and the United States (US)—could be said to be genuine democracies with universal male suffrage. In the interwar period of the twentieth century a large number of regime changes took place, both in the direction of democratic systems and back to authoritarianism. Yet all technologically advanced countries in Western Europe, North America, and the Antipodes have been democracies since at least World War II, with the exception of Spain and Portugal up to the 1970s and the short period of military rule in Greece.1 The level of democratic quality achieved by these states has been consistently high, no matter what comparative indicators—Freedom House, the Polity IV Project, or the new Democracy Barometer (Bühlmann et al. 2012)—we use. Hence the state of the technologically advanced capitalist countries since 1945 can be said to be a democratic state—characterized by free and general elections,2 governments that are directly elected or responsible to parliaments, extensive and firmly entrenched civil and human rights guarantees, the submission of all branches of government to the rule of law and a constitution, the civilian control of the military, and pluralistic public spheres. The democratic state may therefore be qualified as a remarkably stable state form. However, the democratic state did not emerge only in places where a republican tradition helped consolidate an understanding of the political body as a regime of self-government early on, but also in “state societies” (Dyson 2009 [1980]). These were often constitutional monarchies, where the state was traditionally seen as unified and hierarchically superior to society, identified with a bureaucracy oriented toward the common good, and detached from the potentially chaotic sphere of particular private interests. Here, democratization

1  In this chapter, we study the following countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the UK, and the US. 2  With the exception of Switzerland, where female suffrage was introduced in 1971.

566    Frank Nullmeier, Steffen Schneider, and Andreas Hepp was initially considered to go hand in hand with a loss of state sovereignty, that is, as a transition to a society that might destroy political integration. However, the experiences with authoritarian and totalitarian regimes before and during World War II had already undermined these older state traditions and had prepared the ground for a combination of state and democracy that, since 1945, characterized political developments in the developed capitalist countries. The contours of the democratic state differ greatly among these countries. Arend Lijphart’s (1999) typology of majoritarian and consensus democracies dominates the comparative analysis of democracies in a way similar to the preeminence of Peter Hall and David Soskice’s “Varieties of Capitalism” (2001) in comparative political economy.3 Lijphart’s understanding of the mechanisms of political coordination and the incentives built into constitutional arrangements has largely replaced older, purely institutional typologies, such as the distinction between parliamentary and (semi-)presidential or federal and unitary systems. Yet, Lijphart’s typology has also been critically assessed, and attempts have been made to develop a finer-grained typology (Vatter and Bernauer 2009; Bühlmann et al. 2012). Taking Lijphart’s basic typology as a point of departure, we see a fairly close link between political economies and democratic structures. The liberal economies—the United Kingdom (UK), Australia, Canada, and New Zealand—are all majoritarian democracies, with the exception of the mixed case of the US, while the coordinated market economies, especially Germany, Japan, Switzerland, Austria, Belgium, the Netherlands, Sweden, Denmark and Norway, are consensus democracies, even though the consensus elements in Switzerland have been weakened after the start of the new century (see Vatter 2008).4 Only Belgium—initially a mixed case—became a pure consensus democracy with federalization, while New Zealand moved away from the majoritarian ideal type when it introduced proportional representation (PR) in 1996.5 Moreover, Greece is the only case that transitioned from democracy to an authoritarian system, but the country speedily returned to democracy in 1974, almost simultaneously with the democratic transitions in Portugal and Spain. Finally, only a single major institutional transformation occurred within the democratic regime type: France’s transition from the parliamentary regime of the Fourth Republic to the semi-presidential democracy of the Fifth Republic. And while the breakdown of the Italian party system in 1992/93 may be qualified as a major transition, ushering in a Second Republic, German reunification was implemented largely without changes in the established West German political system. As for the May 1968 events in

3  Lijphart’s

analysis is based on two dimensions: the executives-parties dimension and the federalunitary dimension. This actually suggests four types: consensus-federal or pure consensus democracies (Switzerland), majoritarian-unitary or pure majoritarian democracies (UK), consensus-unitary democracies (Sweden), and majoritarian-federal democracies (US); see Arend Lijphart (1999: 243–253). 4  The overview of institutional transformations in the core OECD states draws on the following databases: Armingeon et al. 2011; C2D Database 2011; CLEA Codebook 2010; IDEA Database 2014; OECD 2011. Moreover, country reports in the EJPR Political Data Yearbooks 1992–2011 and comparative analyses in the studies of Wolfgang Ismayr (2009) and André Kaiser (2002) were used. 5  There is only moderate evidence for a convergence of political systems, and it points in the direction of consensus democracy. New Zealand and Switzerland are the strongest cases of a significant move away from the extremes of majoritarian and consensus democracy (Vatter et al. 2014).

Transformations of the Democratic State    567 France, the failed military coup in Spain in 1981, and the constitutional crisis in Australia in 1975, they may well be classified as dramatic ruptures, but they did not lead to regime changes. Such exceptions notwithstanding, on the whole the postwar decades have not brought about fundamental changes in the historically democratic states, let alone revolutions, violent regime changes, or civil wars, phenomena that had accompanied the political development of continental and Southern European states throughout the nineteenth and early twentieth century. Transformations of the democratic state have, instead, been characterized by piecemeal institutional reforms and gradual changes in the state-society relationship.6 To be sure, these developments cannot adequately be described as mere adaptations, even if some developments—including the professionalization of parliamentary routines, the growth of state party-financing, territorial reforms such as the amalgamation of municipalities and regional administrative units, the size reduction of representative bodies, the extension of active and passive voting rights to younger citizens, and administrative modernization— could be interpreted this way. Also, the extent to which modernization has not taken place is remarkable. For instance, most of the 23 states examined here cling to parliamentary monarchy.7 In Spain the monarchy was even reintroduced during the difficult transition from the Franco regime to democracy. The crisis of the British monarchy in the 1990s has been overcome, and the 1999 Australian referendum initiative to abolish the monarchy failed. Institutions that are tied to the monarchy, such as the Dutch Council of State, have even been strengthened. An extensive reform of the British House of Lords is constantly being postponed, despite long-standing reform attempts. And the largely ceremonial role of monarchs notwithstanding, even constitutional clauses about their role in forming government—which typically accompanied the introduction of constitutional monarchies in the nineteenth century—have survived. Some adaptations to a modern understanding of democracy have come about remarkably late, for example the introduction of voting rights for Swiss women or the full recognition of the rights of indigenous people in New Zealand in 1986 and Australia in 2013. For nearly 70 years after World War II, the core institutional structures of most democratic states have thus remained unchanged. However, beneath this institutional hyper-stability a lot of minor reforms and political shifts have happened, often with ambivalent effects. Steps toward further democratization and the deepening of participation have occurred hand-in-hand with reforms cultivating the autonomy of political elites and experts. The once tight bond between democratic state, civil society, and citizens has been dramatically weakened, but this has not resulted in pronounced anti-democratic efforts or movements. The postwar transformation of the democratic state took place in three phases. In the 1950s and 1960s, which will be only briefly addressed (Section 1), the democratic state was stabilized through tight linkages between state and civil society, which in turn were mostly established by political parties (Dalton et al. 2011) and through interest groups. In the late 6  Unlike

various contributions to the democracy measurement literature, which also take different performance indicators into account, the following analysis concentrates on such institutional and structural changes. 7  Including eight European countries—Belgium, Denmark, Luxembourg, the Netherlands, Norway, Spain, Sweden, and the UK—as well as Japan, Canada, Australia, and New Zealand.

568    Frank Nullmeier, Steffen Schneider, and Andreas Hepp 1960s and early 1970s, the state began to open up for social movements and made room for new forms of participation (Section 2). The rise of neoliberal policies contained this democratizing trend and led to a restructuring of the state through the privatization of public corporations and the reorganization of administrative agencies in the spirit of efficiency and effectiveness (Section 3). This weakened the linkage between civil society and the state, which had previously been based on parties and associations. Since the 1990s, political tensions have grown enough to trigger institutional reforms, whether in electoral law, the use of direct-democratic mechanisms, the development of non-majoritarian institutions, or the parallel internationalization and decentralization of political decisionmaking. In Section 4, we ask whether the economic crises since 2007/08 have ushered in a new phase in the transformation of the democratic state.

1  The Stabilization of Democratic States—Phase One Until the early 1970s, the East-West conflict dominated political development in the technologically advanced countries, albeit to varying degrees from state to state. In this phase, states were characterized by their moderate working class, which was economically and socially appeased through market economies with social policy guarantees, and by the expansion of the public sector already during the war or in the early postwar years. A related key feature was the integration of the labor movement by consociational and corporatist arrangements or via a competitive majoritarian system that supported alternating government majorities, but always strictly excluding communist parties, with the exception of Finland. The immediate postwar years brought critical junctures: states selected either a republican or a monarchical form of government, female suffrage was introduced, all-party governments were terminated in many countries, new states began to adopt Western democratic systems, and the Cold War began (Judt 2005). After this period, not many other institutional reforms were undertaken. The linkages between the state, parties, and associations—the latter two still closely tied to classes and social milieus—were consolidated. Supported by economic growth, parties and associations could often use administrative agencies and public corporations to strengthen their clientelist linkages and patronage networks, which secured a system of mutual obligations and established a special kind of political reciprocity between citizens and the parties dominating the state and government apparatus (Kitschelt 2007). Newly emerging links between the state and its citizens, mediated by mass parties and associations as well as through corporatist and consociational integration mechanisms, helped accommodate class conflicts. The main protagonists of these state-citizen linkages and elite arrangements were strong social democratic parties, which were closely tied to the trade unions, and the new family of Christian democratic parties (Kalyvas 1996). The fact that stable democracies could form was due in large part to the new power constellation of the postwar era: The internationalization of conflicts as a result of the Cold War, accompanied by strong foreign activities of the US way beyond the Marshall Plan,

Transformations of the Democratic State    569 facilitated stabilizing domestic regimes (Judt 2005). New international institutions— notably the UN and the Bretton Woods organizations, that is, the World Bank and the International Monetary Fund (IMF)—and the overlap of the domestic capital-labor cleavage with the “conflict of systems” between market economies and socialist regimes provided the space in democratic market economies to considerably expand state intervention, to build social security systems, and to venture into market-related planning (Shonfield 1965; Fioreto 2011). In France, the end of the colonial empire brought the 1958 transition from parliamentary democracy to (semi-)presidential democracy, while the UK had to learn to accept that global political and economic hegemony had shifted to the US. Also in 1958, the establishment of the European Economic Community worked as a “rescue of the nation state” (Milward 2000) in the sense that a state could continue to be influenced by democratic procedures, though it also ushered in a system of supranational governance that pulled the state “up” into a system of multilevel governance in which democratic self-determination was problematic once again.

2  Changes Below the Surface of Constitutional Arrangements—Phase Two The period between the late 1960s and the early 1990s was characterized by the gradual erosion of the mechanisms that had traditionally integrated the democratic state and civil society, yet this happened without any fundamental institutional reforms. Instead, piecemeal reforms characterized the period. These reforms happened in three ways: 1) an opening up of the state that led to 2) the unravelling of the close linkage between state and civil society; and 3) an “economization” and “judicialization” of the state through new public management.

Opening up the State Beginning in the mid-1960s, the political development of the democratic state was strongly influenced by social movements. The civil rights movement, student protests, and the women’s movement were followed in the 1970s by new social movements protesting against environmental degradation and nuclear power. While social movements and protest activities were tied to the dominant parties and associations in the 1950s, in the 1960s independent movements began to flourish, aided by the support of highly educated members of the middle class. These citizens supported post-materialist political values, turned unconventional behavior into a politically legitimate form of action, and forced states to permit new forms of institutional participation (Kriesi et al. 1995; Cain et al. 2003; Tilly and Wood 2010; Tarrow 2011). Constitutional arrangements were not affected, but participation channels at the administrative level were expanded, and states established new participatory procedures, mostly at the municipal and regional levels, that enabled these levels to react to protests, social movement activities, and civic engagement. The environmental movement in

570    Frank Nullmeier, Steffen Schneider, and Andreas Hepp particular stimulated the growth of participation channels, for example by relying on the judiciary in class-action suits. Another type of reform that opened the state was the internal democratization of decision-making procedures in public agencies themselves—schools, universities, and public broadcasting—which was combined in some countries with expanding the co-determination rights of the staff of these institutions. Thus, the state was partially “democratized” in its executive organization.

Unravelling the Tight Linkages Between State and Civil Society In the late 1960s, the East-West conflict mellowed in the wake of the politics of détente; even when the conflict intensified again after 1979, it did not dominate domestic politics to the same extent as it had in the 1950s. The demise of the Bretton Woods system in 1971, the 1973/74 oil crisis, and the Long Recession from 1974 to 1982 (Gourevitch 1986; Bermeo and Pontusson 2012) marked the end of sovereign economic and social policy-making by nation states. While economic transitions triggered by these events hardly affected the institutional structures of Western democracies, party systems in the early 1970s—especially in Denmark, Norway, and the Netherlands—experienced increased pressure. In the late 1970s and early 1980s, government changes brought about a shift to supply-side economic policy. The growing loss of state capacity created tensions in the established political mechanisms and linkages, jeopardizing the routine use of state resources for party patronage and for stabilizing cooperative relationships between labor and capital. The dwindling economic-policy capacity of elite cartels weakened the integrative power of corporatist arrangements and also the traditional dominance of Christian and social democrats in consensus democracies. These developments had the strongest effect on countries with particularly high levels of party patronage, that is, Italy and Japan. The use of state resources for funding electoral campaigns and relying on clientele networks is no longer sustainable when public enterprises—formerly an employment opportunity for party supporters—are privatized, and when subsidies for sectors that are internationally uncompetitive overtax the shrinking fiscal capacity of the state and exceed the tax volume generated by the export industries. Beginning in the late 1980s, such a decoupling also took place in countries that were less characterized by patronage. Once the economic and socio-structural foundations for integrative politics had crumbled, reciprocity and the integration of citizens into the democratic state—via the party system, be it through social milieus or patronage networks, via corporatist institutions, or via consensus mechanisms in the system of government proper—no longer worked effectively in consensus democracies. Traditional cleavages were transformed by the dwindling population share of blue-collar workers, the rise of the service sector, and also by growing levels of prosperity. Against the backdrop of eroding social milieus and of the increasing dominance of an internally heterogeneous middle class (split by technology-based, organizational, and person-oriented activities; Oesch 2006), the pluralization of lifestyles and value orientations has, since the 1980s, invited politicization. A new party family not tied to patronage networks, corporatism, and consociationalism—the Greens—owes its existence to this impulse. Except for the older Front National

Transformations of the Democratic State    571 in France, the party family of the radical populist right has also emerged since the mid1980s (Mudde 2007; Bornschier 2010). It proved increasingly difficult for the established parties to deliver clientelist services, especially to the losers of globalization. A new political cleavage that crosscuts the old religious-secular, denominational, and socio-economic cleavages—a cultural conflict unfolding between the poles of a liberalism that aims at integration and illiberal attitudes that are about social marginalization—has, therefore, emerged (Kriesi et al. 2012). Yet, while the effective overall number of parties has grown slightly since the 1990s (Lijphart 1999), stability has prevailed (Niedermayer 2008). Hence, the fragmentation of party systems has not increased much, despite the rise of two new party families. The weakening of established parties led to the introduction of public party and campaign financing (Casa-Zamora 2005; Nassmacher 2009), the expansion of support services for members of parliaments—be it staff for individual MPs or the caucuses—and the expansion of general parliamentary services that provide expert academic advice. The direct dependence of parties on the state, however, grew to the same extent that the strong coupling between state and society, a coupling that had traditionally been managed and dominated by political parties, withered away. In countries that had no state funding for parties, these became ever more dependent on being financed by corporations. As the party press in most countries has declined since the 1970s and the state monopoly on radio and TV broadcasting ended, yet another element of the traditionally close link between citizens and party-dominated states fell away (Hallin and Mancini 2004; Hardy 2008). The “mediatization”8 of political communication (Hepp 2013) and of elections forced parties to spend more on campaigns, to professionalize, and also to commercialize electoral campaigns. A loose, marketing-type and media-dominated form of coupling replaced the old, membership-based ties.

New Public Management Reforms: Economization and Judicialization A significant transformation of the state was first brought about by introducing new public management concepts in the public administration of the UK, the US, New Zealand, and the Netherlands. Since the mid-1990s, this development has been reinforced by the introduction of e-government. The use of management techniques, competitive elements, and private-sector accounting systems enabled administrative agencies to implement more efficient and market-oriented policies. These reforms led to a transfer of responsibilities in which civil society, the private sector, or mixed arrangements, such as private-public partnerships and state-subsidized voluntary associations, took over new responsibilities from central public bodies. In consequence, the logic of economic efficiency entered public administration in full force and, together with the shift to neoliberal economic policy, narrowed the scope of government economic and social policies to liberalization and privatization measures. 8  This term is used in communications research to denote the encompassing impact of a combination of media on everyday life.

572    Frank Nullmeier, Steffen Schneider, and Andreas Hepp The growing judicialization of the democratic state is an instrument that is used to ensure that the executive remains subordinated to the democratic representative bodies and to enforce legal standards vis-à-vis the administration. Intensified judicial review permits the control of legislative acts and provides a safety valve against autocratic tendencies. Hence, it is no coincidence that constitutional courts were established in two waves, with each wave setting in after the demise of dictatorial systems—after World War II in Austria, Italy, and Germany, and in the wake of the democratic transitions in Greece in 1975, Spain in 1978, and Portugal in 1982 (Ferejohn et al. 2007).9 Strengthening judicial review in the technologically advanced democracies usually resulted in expanding civil and human rights guarantees. However, the judicialization of law-making, the pronounced judicial activism of the Supreme Court justices, and the trend to bring key political issues into court led to a primacy of legal thinking in the political process (Stone Sweet 2000; Hirschl 2004).

3  A Surge of Institutional Reforms—The Third Wave In the 1990s, more fundamental institutional reforms were implemented. After the demise of the socialist states between 1989 and 1991, the combination of liberal democracy with a capitalist market economy became the only institutional order whose legitimacy was unquestioned. Yet, in many countries, the extinction of the old ideological competitor resulted in increased criticism of existing institutions, whose democratic quality was now scrutinized. The end of socialism also encouraged considerable economic and political internationalization. The globalization of national economies, the massive internationalization of financial markets, the further expansion of international organizations, and the growing importance of “club regimes” such as the G7/G8/G20 exemplify this development, as does the deepening of regional integration in Europe in the treaties of Maastricht, Amsterdam, Nice, and Lisbon. How democracy should be institutionalized is now a question that needs to be answered in an internationalized or—in the EU—a supranationalized multilevel system. In the EU, national democracies are complemented by an overarching European political system that is not directly democratically legitimated, despite the introduction of European elections starting in 1979. Part of the problem is that participation has dwindled ever since these elections were introduced, as well as the fact that they never were more than “secondary elections,” which reflects a lack of genuine parliamentarization of the European Union. The democratic deficit has been compounded by the growth of the EU’s responsibilities and by increasing skepticism about the capacity, transparency, and fairness of national democratic institutions since the early 1990s.

9  Apart from this institution rebuilding in phases of transition from authoritarianism to democracy, fundamental reforms were infrequent in this period. They occurred in 1974 in France and in 2005/09 in the UK. The UK removed the judicial role of the House of Lords and established a Supreme Court whose rights of judicial review, however, remain strictly circumscribed.

Transformations of the Democratic State    573 The Europeanization of state functions reached a new level with the Single European Act of 1986 and the Maastricht Treaty of 1992. But then the process of further Europeanization was chilled by several national referenda—Norway voted against EU membership for the second time in 1994, and Denmark and Sweden voted against membership in the Eurozone in 1998 and 2003, respectively. Europeanization was slowed down even further by referenda that occurred after initial ratification attempts failed—this occurred when Denmark voted on the Maastricht Treaty in 1992/93, and when Ireland voted on the Nice Treaty in 2001/02 and on the Lisbon Treaty in 2008/09. Finally, Europeanization was also fundamentally modified with the downscaling of the EU Constitution to the Lisbon Treaty after the Constitutional Treaty had failed in the 2005 French and Dutch referenda. In non-EU member states, economic globalization was the dominant challenge for national politics after the end of the Cold War, forcing decisions on whether to continue neoliberal economic policy or to pursue a more Keynesian policy of market intervention. Political polarization was exacerbated, especially in majoritarian democracies, and, in consequence, the institutional mechanisms of democratic representation came under increased scrutiny. Starting in the mid-1980s, we can observe four key changes in the structures of the democratic state: 1) electoral system reforms; 2) the expansion and increased use of direct-democratic procedures and of new forms of citizen participation; 3) decentralization; and 4) the rise of independent, non-majoritarian bodies (Schmitter 2011).

Reforms of Electoral Systems The rising tensions between a party-dominated state, on the one hand, and, on the other hand, a citizenry tied less closely to parties than in the past, finally led to several attempts to reform electoral systems in the 1990s.10 These reforms were successful in countries that were marked by a strong link between state apparatus, economy, and political parties, as well as by a high degree of corruption like in Japan (dominated by the Liberal Democratic Party (Japan) [LDP]) and in Italy (dominated by the Democrazia Cristiana (Christian Democracy, Italy) [DC]); that had not experienced any change of government since 1945; and that had a center-right party characterized by strong and lasting intra-party factionalism. In Japan, the system of single non-transferable vote in multi-member districts was changed in 1994 after the split of the LDP, but in 1996 the system was again modified in favor of that party. Today a mixed system is used to elect 480 members of the House of Representatives: 300 members are elected in single-member constituencies, and the remaining 180 according to a system of proportional representation (PR) in 11 large electoral districts. A slow shift from majority systems to mixed systems is seen as the global basic trend of electoral system reforms (IDEA 2005:  24; Golder 2005; but see Renwick 2010). 10 

Only major electoral system changes are examined here. An overview is given in the CLEA Codebook 2010 (see also IDEA 2005). Smaller reforms—such as changes in the number of constituencies/districts, the territorial scope of constituencies, the number and allocation of seats, etc.—may well have had important effects on the nature of representation and party systems, but they will be mentioned only if the literature suggests that they have been particularly important.

574    Frank Nullmeier, Steffen Schneider, and Andreas Hepp Italy, however, switched from a PR system—with preference votes and negligible entry barriers for very small parties—to a mixed system in which 75 percent of the lower-chamber seats are assigned in a strictly majoritarian fashion in single-member constituencies. The reforms in Italy were trial-and-error in character and were strongly influenced by partisan strategies: between 1993 and 1995, six new electoral systems were introduced at different state levels. Moreover, in 2005, the Berlusconi government implemented—against the opposition’s wishes—an electoral system reform based on a PR system that used various thresholds but guaranteed the party or party coalition with the largest share of the vote a considerable “seat bonus,” thus creating majoritarian elements in a PR system. These reforms of electoral systems resulted from imploded party systems and attempts to restructure a future political space (Italy) or to return to the old partisan landscape (Japan). The attempt to replace party competition with a balanced intra-party factionalism, or at least to considerably reduce competition, was bound to fail, though, not least because funding for partisan and electoral campaign machines could no longer be smoothly secured; either fundraising is scandalized as a form of corruption, or funding opportunities hemorrhage in the context of a leaner state apparatus (privatization) whose intervention capacity has shrunk (Rosenbluth and Thies 2010). Reform initiatives were also numerous in majoritarian democracies, but they tended to be less successful. Only New Zealand changed its electoral system outright. After 80 years, it became the first Westminster democracy that got rid of its majoritarian electoral system (Renwick 2010; on the context: Starke 2008). The 1996 system change ushered in a partial departure from the majoritarian model, which was held to be responsible for both a highly controversial shift to neoliberal economic and social policies and for the negative effects of these policies. The open mismatch between this policy shift and the political will of the citizens triggered efforts to open up and decentralize the political system. These efforts were ultimately supported by a majority of the country’s political elites. As a result of a binding referendum in 1993, New Zealand switched from a first-past-the-post system to a mixed member proportional system (MMP) in the 1996 election. At the end of 2011, a non-binding referendum was conducted to review the changes; the referendum confirmed support for MMP. But reform attempts in the UK and some Canadian provinces failed. In Canada these attempts began in 2001, building on some earlier initiatives. Constantly shrinking electoral participation and extreme outcomes—in British Columbia the right-wing Liberals had won a 97 percent share of the seats with a 58 percent share of the vote in 2001—plus the demise of the opposition at the federal level had raised doubts about the adequacy of the single-member plurality electoral system. After the total failure of the Progressive Conservatives in the 1993 election, the Liberals and Prime Minister Jean Chrétien faced a massively weakened and fragmented opposition. By the time of the 2004 party merger creating the new Conservative Party led by Stephen Harper, which won the 2006 election, several provinces had developed reform proposals. The preparation of electoral reforms in British Columbia and Ontario in Citizens’ Assemblies—with 160 and 103 randomly selected citizens and subsequent referendum decisions—are, to date, the most ambitious combination of deliberative, representative, and direct-democratic procedures for deciding on a key political issue. The failure of referenda on introducing alternative electoral systems in British Columbia in 2005 and again in 2009, in Prince Edward Island in 2005, and in Ontario in 2007 has led, for the time being, to the end of such reform attempts. Even

Transformations of the Democratic State    575 the more recently introduced fixed election dates at the federal level were not respected, and early elections were called in 2008 and 2011. In the UK, electoral system reform was shifted from the parliamentary to the directdemocratic arena and failed: the Liberal Democrats could not impose their preference on their Conservative coalition partner, and a May 2011 referendum on introducing an “alternative vote system” was the compromise. Only 42.2 percent of the electorate participated in the referendum, and electoral reform was rejected with 67.9 percent of the votes.

Direct Democracy and New Forms of Citizen Participation Since the 1990s, forms of direct democracy, whether top-down or citizen-initiated, have grown worldwide (Altman 2010). Among the technologically advanced democracies, however, this trend is limited to only a few countries. With the exception of Liechtenstein, Switzerland remains the state that uses direct democracy most intensively, including at the national level. In 2003, the Swiss even decided—by referendum—to further expand direct-democratic citizen rights. Among the countries that permit direct-democratic procedures at the national level, these procedures are used frequently only in New Zealand, Australia, Italy, France, and Denmark (Altman 2010: 204–208; C2D Database 2011). What major themes were pursued in these direct-democratic efforts? The first major set of referenda were European in nature, as they were referenda on EU membership, accession to the Eurozone, and the European draft constitution. These referenda played an important political role in several European countries: for example, Denmark held five referenda on EU and Euro-related issues between 1996 and 2000, Norway repeatedly voted no to EU membership, and—with a pan-European impact—the Netherlands and France voted no to the ratification of the European draft constitution in 2005. National electoral systems were the focus of a second major set of referenda, which employed direct-democratic mechanisms to readjust representative democracy. What are the effects? Just like judicial activism, the frequent use of referenda may limit legislators’ space to maneuver in parliament. Uncompromising majorities encouraged by populist campaigns may impose their will much more easily through referenda than they could in parliamentary bargaining; minorities, though, have a greater chance to assert their legal position in court than in parliament. These developments may lead to political polarization, or even to the loss of fiscal powers by parliaments and governments, as has occurred in several US states (Miller 2009). At the subnational level, the weight of direct-democratic procedures increased substantially in the 1990s. The expansion of direct democracy happened in Continental European systems, including in consociational countries, such as Austria and Germany, and in Anglo-Saxon and majoritarian systems. Sometimes this was combined with the direct election of mayors, as in Great Britain and Germany. In US states, the use of ballot initiatives, which was a method usually introduced before 1918, in the Progressive era, grew fourfold between the 1950s and 1960s and again between the 1990s and 2000s (Miller 2009: 50). The growing role of direct-democratic procedures is linked with the second reform wave (cf. Section 2) at the level of increased citizen participation and grassroots democracy. Characteristic for the third wave examined here were 1) deliberation and discourse, 2)

576    Frank Nullmeier, Steffen Schneider, and Andreas Hepp the random sampling of citizens, and 3) procedures of mediation or forms of participation based on new information and communication technologies. First, the high intensity of conflicts over infrastructure projects, especially nuclear power plants, in the 1970s and 1980s triggered searches for conflict mediation procedures or for ways to include citizens early on in such procedures. These new procedures, which were occasionally implemented, were designed to prevent or resolve conflicts between actors who potentially have different interests, and they also aimed at compromises or at decreasing conflict intensity. Today, debates on political issues are based on (academic) knowledge to such an extent that procedures of expert and citizen involvement have become an important means to generate legitimacy. Deliberative procedures, such as mini-publics and deliberative polling (Fishkin 1995), citizens’ assemblies and citizens’ juries, and online deliberation procedures, mark a new generation of participatory arrangements that confront citizens with expert knowledge (Fischer 2009) and clarify or transform citizens’ preferences. Yet, both mediation and deliberative procedures are usually no more than advisory in character, and they are ad hoc creations rather than standard procedures that are entrenched in the institutional structures of municipalities, federal jurisdictions, or nation states. Reform proposals along these lines, such as Deliberation Day (Ackerman and Fishkin 2004), were not taken up. Second, examples of citizen input mechanisms in deliberative arrangements include random sampling in selecting participants (Smith 2009). Instead of including as many persons as possible, these arrangements offer the opportunity for time-intensive and information-rich deliberation to only a relatively small number of persons. Moreover, random sampling guarantees that the findings and proposals generated this way may be accepted as non-partisan. Third, by contrast, the use of information and communications technology (ICT) in e-democracy tends to involve as many persons as possible. The Internet, including web 2.0, has led to administrative innovations (e-government) and facilitated access to administrative agencies, but it has also encouraged the implementation of discussion and participation procedures that do not depend on the prior organization of citizens in parties and associations (Chadwick and Howard 2008). ICT may be linked to all the procedures mentioned so far, but it has no regular direct link to the procedures of binding decision-making. This lack of political relevance—the ultimate decisions are still made by parliaments and governments—is rarely overcome, and when it is, it is only at the local level in meetings on participatory budgeting. The experience of this lack in relevance increases pressure for the expansion of direct-democratic procedures.

Decentralization Starting in the 1980s, several countries have redesigned their structures of territorial decision-making and administration; particularly far-reaching changes were implemented in the last decade of the twentieth century. Several countries have undergone decentralization, devolution, and federal reform (Burgess 2006; Norris 2008). In 1993, Belgium experienced a fundamental change with its transition to federalism. This reform was peculiar, because both territorially defined regional units and ethno-linguistic communities were recognized in the new federal regime. Still, federalization could not stop the

Transformations of the Democratic State    577 centrifugal forces; Belgium’s future as a unified state seems less secure than ever. Reforms in the other, traditional federal regimes focused on reordering fiscal arrangements and on redistributing responsibilities in particular policy fields, and they had centralizing as well as decentralizing effects. Reforms in unitary states went even deeper: this is true for regionalization in Italy in 2001; for the autonomy process in Spain; for devolution in Great Britain in 1998, which asymmetrically decentralized authority to Scotland, Wales, and Northern Ireland, and was most far-reaching in Scotland, where the regional parliament—elected per MMP like the members of the Welsh parliament—was granted residual competence in all political matters; and for the strengthening of municipalities, départements, and regions in France with the reforms of 1982, 1986 (introducing elections), and 2003 (entrenchment of decentralization in the constitution, introduction of revenue sharing). The strengthening of regions as administrative or political units was supported, at the EU level, by the European Regional Fund, which triggered competition for financial transfers among the European regions: having a functioning administration at the regional level became attractive. A tendency towards more territorial diversity and decentralization can be observed in the administrative and political dimensions, especially in countries located near the unitary pole in Lijphart’s federal-unitary continuum.

Independent Administrative Bodies The third phase of transformation is characterized by the expansion of power sharing through non-majoritarian political institutions, especially independent administrative bodies (see also Holzinger and Schmidt, Chapter 26, this volume). The transfer of (regulatory) agencies from the US system of government to other countries breaks away from the traditional Weberian model of administration, and hence from the notion of parliamentary-democratic administrative control, as such administrative agencies are not built into a hierarchy, are not subject to the hierarchy’s commands, have organizational autonomy, and combine their largely independent administrative role with judicial and partly also legislative functions. These agencies first emerged in the US in the 1930s. The rise of such agencies today is mostly due to the privatization of industries like tele­ communications, electricity, and gas, which rely on network infrastructures. These agencies undertake public market regulation, monitoring, auditing, and risk management, but they also play a role in the production of goods and services. Particularly in the 1990s, the decisions to privatize public corporations were followed immediately by the creation of independent regulatory and monitoring agencies. Thus, the downsizing of the public sector was linked to a new type of administration in which the opportunities for party patronage and democratic-legislative influence were reduced, and which were organized more like corporations. These “unelected bodies” may be thought of as core elements in a “new separation of powers” (Vibert 2007) or as an internal decentering of the state through spheres of relatively autonomous decisions made by experts (Norris 2008; Rosanvallon 2008). In this phase, the growing autonomy of central banks was of the greatest political and economic relevance. The trust invested by the markets in the US Federal Reserve inspired reforms in Europe (R B Hall 2008). The German model of an independent central bank

578    Frank Nullmeier, Steffen Schneider, and Andreas Hepp was imposed on the EU with the decision to found a monetary union, the Eurozone; this forced all member states to adapt their national central bank organization and to accept the European Central Bank (ECB) in Frankfurt a.M. as an independent agency. The degree of central bank autonomy, especially its political autonomy, was much higher at the beginning of the 2000s than it had been in the 1980s (Arnone et al. 2009). In sum, between 1990 and 2008 a surge of institutional change took place that greatly exceeded the scope of transformations that had occurred after 1945. However, this third phase was characterized by contradictory tendencies: regionalization went hand-in-hand with supranationalization, and the rise of non-majoritarian institutions coincided with the creation of new channels for participation and the more frequent use of mechanisms of the direct-democratic sort. The growing independence of economic coordination from democratic control mechanisms has been favored by nation states and by the EU; national referenda have not stopped this trend, but instead only slowed it. At the same time, the arenas of democratic conflict expanded. The more frequent use of direct democracy and of non-binding participatory procedures is combined with a more intense judicialization of politics, the ongoing professionalization of party and associational politics, and the enormous increase in the scope of lobbying, policy consulting, and political management. The public sphere, still dominated by television and its private owners (Hallin and Mancini 2004; Hardy 2008), expanded quickly in this phase via the Internet and the opportunities offered by web 2.0 and social media. The “mediatization” of the forming of political opinion and of decision-making processes is progressing (Couldry et al. 2010; Hepp 2013). For individual citizens and for NGOs, the technical means of communication are expanding. The flip side of this expansion and pluralization of the public sphere is increasing potential for fragmentation. Despite the emergence of new party families—the Greens and the right-wing populists—the established parties defend their grip on power, but, given the shrinking capacities of nation state intervention, parties’ reduced power in a more complex institutional setting, and parties’ dwindling support from the population, they can no longer ensure representativeness and responsiveness, even though the nation state and the democratic political order have not lost their legitimacy (Hurrelmann et al. 2009; Nullmeier et al. 2010; Norris 2011). Similar problems have led to a shrinking organizational capacity of associations, while the influence of individual corporations on governments is growing. The intervention capacity of the democratic state was greatly reduced in political systems that were incapable of institutional reform and also faced with strong partisan polarization, as is the case in the US. Then, big corporations and major interest groups made use of the multiple political arenas to increase their influence.

4  A New (Post-2008) Phase of the Democratic State? The global crisis of financial markets, the new Great Recession, and the Eurozone crisis represent a major economic juncture. Political reactions—from fiscal stimulus packages to massive austerity programs—have exacerbated social inequities. Yet apart from

Transformations of the Democratic State    579 short-lived protest movements, no new social or political coalitions have formed in the wake of the crisis. With the exception of Iceland’s “pots and pans revolution” in January 2009, there have not been any citizen protests that resulted in changes of government or in fundamental institutional reforms. The distributive consequences of the current crisis management have not revived class conflict in Western democracies (Bermeo and Pontusson 2012), but these democracies have turned more and more into “unequal democracies” (Bartels 2008; see also Jacobs and Skocpol 2005). The impact of the crisis on the core manufacturing sector has been cushioned in some countries via support measures for the auto industry or by the automatic stabilizers built into the social security system. The collaboration of employers’ associations, trade unions, and corporatist institutions was strengthened as a result. As right-wing populist parties in Europe did not profit from the crisis (Kriesi et al. 2012), there was little pressure for the institutional reform of democratic regimes. Once again Iceland is an exception. It established a new constitution through innovative forms of citizen participation: a deliberative and participatory one-day forum of 950 Icelandic citizens in 2010 and the development of a draft constitution by 25 delegates who were not politicians, but were directly elected in 2010 in a discussion process distinguished by its transparency and Internet-based citizen participation. The “crowdsourced” constitution was adopted by referendum, but in 2013 ratification was postponed. This constitutional process was a model for the Irish Constitutional Convention of 2012 and for the independence process initiated by the Scottish government, which culminated in a binding referendum in 2014 in which the “no” side prevailed. These initiatives may be seen as new forms of participatory constitution-making in countries strongly affected by the crisis, but they may also be viewed as arenas diverting attention from core economic policy decisions in the wake of the crisis. In the case of Iceland, however, the distribution of property and the national ownership of natural resources are part of the new (shelved) constitution. The March 2012 European Fiscal Compact—formally the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union11—can be seen as the counter-model to Iceland, the model of intergovernmental constitution-making. It not only strengthens European stability policy beyond the European Stability Mechanism (ESM), but also requires the signatory states to entrench rules in their national constitutions that limit debts or ensure balanced budgets. Treaties negotiated among governments require these market-oriented changes of national constitutions. Nevertheless, a fundamental restructuring of the democratic state happened only in Eurozone countries like Portugal, Spain, Greece, and Ireland, which have been exposed to the public debt crisis since 2009 (Bermeo and Pontusson 2012) and where policy formulation was shifted abruptly and massively from the national to the international level. Based on European agreements, the International Monetary Fund (IMF) and the EU dictate the details of austerity measures in economic, financial, and social policy to national governments and parliaments, with massive consequences for social integration and for the democratic legitimacy of governance (Schäfer and Streeck 2013). In these countries elections are no longer very meaningful, as opposition parties are also forced by international organizations and the EU to respect the conditions of the stabilization programs. 11 Cf. http://european-council.europa.eu/media/639235/st00tscg26_en12.pdf

580    Frank Nullmeier, Steffen Schneider, and Andreas Hepp Hence governments have changed in these countries, but the policy agenda has not. The establishment of “expert governments” in Greece and Italy is also decoupling government policy from party politics and the electoral vote. The massive interventions into the systems of social security and the austerity measures taken all reduce the financial resources needed for legitimation strategies that could ensure loyalty towards the institutions of the nation state. Alternative policy paradigms are confined to the protest arena. While legitimacy is lost at the nation state level in these countries, the international and supranational actors on which these nation states increasingly depend have never obtained deep democratic legitimacy. In the EU, the European Parliament was involved only marginally in crisis management and in developing new treaty rules. There is no solid foundation for a transfer of legitimacy to the international level via the G8 and G20, as they are clubs of economically powerful states, or via the IMF, which has plutocratic voting rights. Whereas in the Eurozone decisions are made by economically dominant member states, the central banks, and the international financial institutions (the IFIs), which use the supranational organization of the EU as an instrument for intergovernmental bargaining, outside the EU economically strong nation states are clearly the dominant and most successful actors. So far international coordination has failed because of the conflicting interests between uncoordinated liberal market economies (LMEs) wishing to defend their financial sector and coordinated market economies (CMEs) that rely on their exports and manufacturing. So, no further internationalization of politics occurred at the international level. Nevertheless, we may still underestimate the internationally coordinated activities of central banks. A worsening of the Euro crisis in 2012 was avoided only by an intervention of the ECB. The decision-making center shifted to the governments of economically strong countries and to independent central banks plus the ECB. All of this leaves the institutional structures of the democratic state largely intact. Reforms of core institutions—elections and referenda, parliaments, government, and the separation of powers—are not debated. However, the bond between the democratic state and its citizens has been massively weakened, as the state can no longer offer reciprocity, protection, and patronage. Parties and associations, too, are no longer effective links to help in forming ideological and milieu-oriented communities, as they were in the 1950s and 1960s. The governments’ orientation towards world (financial) markets in hopes of maintaining or increasing their countries’ welfare goes hand-in-hand with power shifts that take place in the—otherwise unchanged—institutional facade of the democratic state. While the acceptance of democratic order remains high (Norris 2011), the linkage between the democratic state, civil society, and citizens steadily weakens. The strong coupling between the articulation of social interests and state policy made the stabilization of democracies after World War II possible, but that capacity has been lost in a long process that was accelerated by economic crises.

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582    Frank Nullmeier, Steffen Schneider, and Andreas Hepp Golder, Matt, 2005. “Democratic Electoral Systems around the World, 1946–2000.” Electoral Studies 24 (1, March): 103–121. Gourevitch, Peter A, 1986. Politics in Hard Times: Comparative Responses to International Economic Crises. Ithaca, NY: Cornell University Press. Hall, Peter A, and Soskice, David, ed, 2001. Varieties of Capitalism: The Institutional Foundations of Comparative Advantage. Oxford, UK: Oxford University Press. Hall, Rodney Bruce, 2008. Central Banking as Global Governance: Constructing Financial Credibility. Cambridge, UK: Cambridge University Press. Hallin, Daniel C, and Mancini, Paolo, 2004. Comparing Media Systems: Three Models of Media and Politics. Cambridge, UK: Cambridge University Press. Hardy, Jonathan, 2008. Western Media Systems. London, UK: Routledge. Hepp, Andreas, 2013. Cultures of Mediatization. Cambridge, UK: Polity. Hirschl, Ran, 2004. Towards Juristocracy:  The Origins and Consequences of the New Constitutionalism. Cambridge, MA: Harvard University Press. Hurrelmann, Achim; Krell-Laluhová, Zuzana; Nullmeier, Frank; Schneider, Steffen, and Wiesner, Achim, 2009. “Why the Democratic Nation-State Is Still Legitimate:  A  Study of Media Discourses.” European Journal of Political Research 48 (4): 483–515. IDEA, 2005. Electoral System Design. The New International IDEA Handbook. Stockholm, Sweden: International Institute for Democracy and Electoral Assistance. ——, 2014. Database. Available at: http://www.idea.int/uid/index.cfm (last consulted 6 February 2014). Ismayr, Wolfgang, ed, 2009. Die politischen Systeme Westeuropas [The Political Systems of Western Europe]. Fourth revised edition. Wiesbaden, Germany: VS Verlag. Jacobs, Lawrence R, and Skocpol, Theda, ed, 2005. Inequality and American Democracy:  What we Know and What we Need to Learn. New  York:  Russell Sage Foundation. Judt, Tony, 2005. Postwar: A History of Europe since 1945. New York: Penguin. Kaiser, AndrÉ, 2002. Mehrheitsdemokratie und Institutionenreform. Verfassungspolitischer Wandel in Australien, Großbritannien, Kanada und Neuseeland im Vergleich [Majoritarian Democracy and Institutional Reform. Constitutional Change in Australia, Great Britain, Canada, and New Zealand Compared]. Frankfurt a.M., Germany: Campus. Kalyvas, Stathis N, 1996. The Rise of Christian Democracy in Europe. Ithaca, NY: Cornell University Press. Kitschelt, Herbert P, 2007. “The Demise of Clientelism in Affluent Capitalist Democracies.” In Patrons, Clients, and Policies: Patterns of Democratic Accountability and Political Competition, ed Herbert P Kitschelt and Steven I Wilkinson, 298–321. Cambridge, UK: Cambridge University Press. Kriesi, Hanspeter; Koopmans, Ruud; Duyvendaak, Jan Willem, and Giugni, Marco G, 1995. New Social Movements in Western Europe: A Comparative Analysis. London: Routledge. —— ; Grande, Edgar; Dolezal, Martin; Helbing, Marc; Höglinger, Dominic; Hutter, Swen, and Wüest, Bruno, 2012. Political Conflict in Western Europe. Cambridge, UK: Cambridge University Press. Lijphart, Arend, 1999. Patterns of Democracy:  Government Forms and Performance in Thirty-Six Countries. New Haven, CT: Yale University Press.

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584    Frank Nullmeier, Steffen Schneider, and Andreas Hepp Vatter, Adrian, 2008. “Vom Extremtyp zum Normalfall? Die Schweizerische Konsensusdemokratie im Wandel: Eine Re-Analyse von Lijpharts Studie für die Schweiz von 1997 bis 2007” [From an Extreme Case to a Normal Case? The Changing Swiss Consensus Democracy. A Re-Analysis of Lijphart’s Study for Switzerland 1997–2007]. Swiss Political Science Review 14 (1): 1–47. ——, and Bernauer, Julian, 2009. “The Missing Dimension of Democracy: Institutional Patterns in 25 EU Member States between 1997 and 2006.” European Union Politics 10 (3, September): 335–359. ——; Flinders, Matthew, and Bernauer, Julian, 2014. “A Global Trend Toward Democratic Convergence? A Lijphartian Analysis of Advanced Democracies.” Comparative Political Studies 47 (6): 903–929. Vibert, Frank, 2007. The Rise of the Unelected. Democracy and the New Separation of Powers. Cambridge, UK: Cambridge University Press.

Pa rt I V

P O ST- C OM M U N IST PE C U L I A R I T I E S? STAT E T R A NSFOR M AT IONS I N T H E FOR M E R C OM M U N IST WOR L D

Chapter 31

The Pecu li a r ities of  Post- com m u n ist State Dev el opm en t Institutional Consolidation and Elite Competition

Anna Grzymała-Busse and Pauline Jones Luong

1 Introduction The peculiarities of post-communist state development have important implications for our understanding not only of state-building, but also of the institutional underpinnings of democratic and autocratic rule. States (understood as institutions that implement and enforce executive decisions) and regimes (as the rules of executive decision-making) arose simultaneously after the collapse of communist party rule in Eastern Europe and in the Soviet Union, in an apparently reinforcing process.1 Subsequently, however, state institutions have acquired a life of their own—and they now structure elite competition by influencing who can compete, over what, and by what means. Recognizing this new influence on elite competition allows us to note that institutional stability does not necessarily imply institutional capacity, democratic durability, or good governance. As post-communist state development demonstrates, state institutions can endure at low levels of capacity, and their institutionalization does not preclude regime instability.

1  In several other post-communist cases, such as China, Vietnam, or Laos, we do not see a collapse, but rather a gradual and communist party-led set of transformation processes. These have expanded the set of beneficiaries without fundamentally altering the rules of decision-making or the institutions that enforced these decisions.

588    Anna Grzymała-Busse and Pauline Jones Luong In an earlier article (Grzymała-Busse and Jones Luong 2002), we argued that the processes of post-communist state development were characterized by two departures from the familiar trajectories of state development in medieval and early modern Western Europe. First, elite competition was the critical mechanism underpinning the creation of state institutions, made all the more urgent by the rapid pace of the post-communist transitions and the lack of existing templates. Rather than the familiar story of the interplay between monarchs and societal actors (North and Weingast 1989; Tilly 1990, etc.), this was an episode of largely insulated elites making critical decisions about the structures and functions of the post-communist state. These elites comprised the occupants of top decision-making positions: presidents, parliamentarians, government ministers, regional leaders, leaders of civil society organizations and trade unions, highly placed officials of both the communist party and the opposition, and their informal allies and advisors. They decided on the kind of institutions that would be built, how these would be regulated and enforced, and the sequence of institution-building: which domains (such as markets) would get priority over others (such as regulatory regimes.) This is not to say that these elites had full autonomy. Instead, they operated under significant constraints: those of the structures inherited from the decades of communist rule; the practices, expectations, and procedures these produced; and the demands of international actors, such as international financial institutions and regional international institutions. International factors, especially, were important both in providing early institutional templates, through technical assistance and capacity-building programs, and in reinforcing democratic regime-building, through a variety of direct and indirect incentives (Vachudova 2008). Nonetheless, this influence was limited. We observe both considerable diversity in state capacity and elite rent-seeking among countries under identical pressures from the European Union to reform and increase their state administrations (Grzymała-Busse 2007). Once in the European Union, moreover, regional integration did not prevent Hungarian and Romanian governments from “backsliding” and enacting controversial and anti-democratic changes in 2012. In short, domestic elite actors, rather than international influence, civil society representatives, or the military, largely decided the institutional configurations of the modern post-communist state. Second, the interplay between elites—the degree to which they were competing with each other over access to governance, and which, if any, constituencies they were representing—was critical in deciding not only what the new post-communist state institutions would look like, but whose ends they would serve. In short, the character of competition influenced whom state institutions would favor. Elites constrained by the demands of competition and representation—as were the elites in much of East Central Europe, where civil society rapidly mobilized before and during the collapse of communism, exerting considerable pressure on elites via strikes, elections, and media campaigns—built both democratic regimes and state institutions that did not a priori entrench a given set of winners, and instead provided a slew of institutional guarantees for losers. Conversely, elites unrestrained by the demands of representation tended to produce personalistic and autocratic processes of state-building, characterized by institutions that entrenched the gains of incumbents at the expense of their opponents. Precisely because the same elites were in charge of creating both the new rules of

The Peculiarities of Post-communist State Development    589 governmental decision-making (regimes) and the new institutions that would enforce and execute these decisions (states), these state-building processes appeared to converge with and reinforce regime-building processes. Thus, elite competition led to the creation of state institutions that could either systematically favor “winners” or guarantee survival for the “losers.” These institutions were further characterized by different degrees of constraint and discretion built into them: while some state institutions gave considerable latitude to rulers, others laid out highly restrictive constraints. This discretion ranged from the ability to make appointments to state offices, to the assigning of—often conditional—property rights, to decree power given to presidents that bypassed legislative and other regime institutions. Conversely, other rulers were constrained by autonomous oversight and regulatory institutions that governed appointments to state office and precluded the awarding of contracts and lucrative seats to allies, as well as by legislative institutions and judicial monitoring that constrained rulers both through ex ante anticipation of vetoes and ex post review of their actions. The results of these state-building processes are durable. The institutional outcomes are stable, with surprisingly few changes to the configurations of state institutions (see e.g. Armingeon and Careja 2008). Constitutions that served to enumerate presidential powers, establish parliaments and judiciaries, and demarcate lines of authority across these branches of government, for example, have largely remained intact. Contrary examples, such as the highly controversial overhaul of the Hungarian constitution in 2012, are remarkable not only for their rarity, but for the means by which they were achieved: a democratically elected party using an unprecedented parliamentary supermajority to radically alter the constitution and other state institutions. Beyond such general institutions as constitutions, we also find a considerable degree of stability and duration concerning more specific aspects of the state such as central banks, the civil service, and financial regulatory agencies. This institutional durability has underpinned both the diversity of post-communist regimes and their change over time. State institutions have remained stable both where democracy is flourishing (the Baltics, much of East Central Europe), where it was delayed (much of the former Yugoslavia), where it has wobbled (Romania, Hungary, Kyrgyzstan, Slovakia in the 1990s), where it has stalled (Georgia, Russia, Ukraine), and where it has never fully taken root (much of the former Soviet Union.) Such overall institutional stability has also underpinned a variety of economic systems and steadied both free markets and state-dominated economies. In Section 2, we first review the recent literature on the post-communist state and its emphases on the durability of state institutions that were established in the 1990s as a result of elite competition, on the importance of these state institutions to economic development and outcomes, and on the prevalence of elite interactions with the state—specifically, through continued efforts at rent-seeking and the extraction of resources from the state. In Section 3, we use these as points of departure for an examination of how the consolidated state institutions now influence elite competition: who competes, over what, and how. We conclude in Section 4 that all rulers, whether democratic or autocratic, rely on state institutions, but with varying degrees of discretion in eliminating competitors and their access to state resources.

590    Anna Grzymała-Busse and Pauline Jones Luong

2  Analyzing the Post-Communist State As Thomas Carothers argued, much of the earlier literature on the transitions to democracy has assumed that the “Third Wave” of democratization involved “coherent, functioning states” (2002: 8). That widely shared assumption led many scholars in the 1990s to focus on the trinity of political institutional reform, the transition to the market, and the mobilization of civil society, to the exclusion of an examination of the state underpinnings of these transformations (Grzymała-Busse and Jones Luong 2002). In the years since, however, as the institutional underpinnings of regime collapse and subsequent transformation became apparent, there has been a considerable new focus on the state, and, specifically, on the consolidation of state institutions, the interplay between states and markets, and the central role of the state in elite rent extraction. Thus, in the two decades since the collapse of communism, a considerable body of literature has traced the development—and the pathologies—of the post-communist state. Here we differentiate between regime institutions: the rules of decision-making; and state institutions: executive and administrative rules that implement and enforce policy decisions. The difference is between electoral rules, which determine who gets to decide policy: and the monitoring, enforcement, and application of these rules. Clearly, the two interact, in that effective regulation and enforcement are critical to the functioning of any regime. More specifically, there is a peculiar asymmetry: effective states are a necessary underpinning of durable and strong democracies—but democracy is neither necessary nor sufficient to produce durable and strong states. One could easily make a similar argument about autocracies, though here the causal linkages have been less clearly spelled out. Indeed, the post-communist experience suggests that authoritarian regimes can endure at varying levels of state capacity. A critical finding of this literature is, first, that state institutions have largely consolidated (Armingeon and Careja 2008; Götz and Zubek 2007; Levitz and Pop-Eleches 2010.) As late as the late 1990s, post-communist states were still undergoing rapid and radical transformations, under the pressure of actors ranging from the European Union to domestic regional identity groups and local mobilizers (Remington 2001; Herrera 2005; StonerWeiss 2006; Epstein 2008; Vachudova 2008). By the 2000s, however, the pace and intensity of state building efforts have decreased considerably, with the result that we observe fewer institutional transformations, and these are largely marginal in nature. There are, of course, exceptions to this general trend: the dismantling of state regulatory and oversight institutions in Hungary after 2010 by the Fidesz government was a spectacular episode of institutional transformation. The new constitution enacted in January 2012 effectively brought the Central Bank, the judiciary, and numerous oversight institutions under the political control of the government, in addition to transforming regime institutions such as laws on political party registration, electoral districts, and the number of parliamentarians. Such episodes were rare, however. The Hungarian exception was made possible only by Fidesz’s gaining an extraordinary parliamentary supermajority, itself the result of an electoral system that translated 53 percent of the votes into 68 percent of the seats in the 2010 elections. (Another case, still unresolved in 2014, is Ukraine.) As we will see, such episodes exemplify both the

The Peculiarities of Post-communist State Development    591 continuation of elite efforts to target institutions to favor themselves—and the rarity of the opportunities to do so in consolidated regimes. Second, as they consolidated, state and regime institutions structured the political game(s) and began to profoundly shape economic development and the implementation of economic, regulatory, and other policies. Thus, scholars have found that privatization is more effective where the state is stronger:  specifically, where there are more bureaucrats per capita (Brown et al. 2009). Conversely, other scholars have argued that powerful and unrestrained individual state bureaucrats can hamper privatization and the rise of effective markets (Frye and Shleifer 1997; Hellman 1998; Shleifer and Treisman 2000). State institutions are critical not only in the implementation of market policies, but also in regulating how financial actors behave: if property rights are conditional, or stock markets unmonitored, the opportunities for bureaucratic rent-seeking are far greater than if property rights are autonomous of politics, and financial markets are monitored, regulated, and transparent. As the impact of post-communist state institutions on markets and economic development has become more visible, so have their pathologies. Accordingly, scholars of the post-communist state have focused on elite extraction from the state and how elites have used the institutions and resources of the state to enrich and to entrench themselves (Easter 2002; Ganev 2005, 2007; Way 2005; Grzymała-Busse 2008). Whether directly extracting funds from state coffers, assigning contracts to political allies, taking over state enterprises, or obtaining lucrative seats on enterprise boards, political elites—whether parliamentarians, presidents, or high-ranking bureaucrats—were able to use public office for personal and political gain, thereby enriching themselves, their political coteries and political parties, and their families. Elite competition, and the extent to which it limits such extraction, has been a critical focus of these studies. Configurations of elite competition shaped both state-building and the opportunities for extracting rents from the state (Steen and Ruus 2002; O’Dwyer 2006; Grzymała-Busse 2007). At the outset, elite competition was the main constraint and influence on state-building and rent extraction: where such competition was more robust, we see a smaller and less politicized public administration, more powerful and independent regulatory and oversight institutions, and political party funding regimes that are both more transparent and more controlled by independent state authorities. Episodes of radical state institutional reconstruction such as Hungary after 2010 can thus be seen through this prism as the result of a dearth of political competition: not only was Fidesz able to obtain an absolute majority of the votes, but the opposition was minimal and could not form a credible governing alternative, having earlier discredited itself through its own lies and governing scandals. Fidesz was left relatively free to remake the state. More broadly, the attempts to extract rents from state institutions illustrate a broader phenomenon discussed in Section 3: the continued attempts by elites to target state institutions, both because the state is a rich source of material resources for elites and because state institutions have become powerful constraints on elite behavior, competition, and composition. State institutions now shape elite competition and composition—and, precisely for that reason, elites target the state as the focus of competition.

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3  How Institutions Currently Influence Elite Competition Elite competition as a state-building process has given way to state institutions constraining elite behavior and competition. This reversal is critical to the trajectories of state development, because this ruling coalition can fundamentally alter the rules of the game and the institutions that enforce these rules. While scholars of advanced democracies and West European state development often take such constraint for granted and focus on institutions rather than elite actors as critical to state development, the post-communist state belies such easy assumptions. Elites initially chose the institutions of both the state and the regime: and the degree to which they competed through formal institutions and relied on distinct popular constituencies for their support affected the kind of state-building processes that arose. Subsequently, as these institutions have become entrenched and have solidified, state institutions affect the pool of elites who can compete, the resources over which they compete, and the means by which they do so. Thus, state institutions have taken on a life of their own—and one area where they exert their influence is on which elites can compete, over what, and how.

Who Can Compete? State institutions have influenced who could compete by broadening or narrowing down the pool of competitive elites, and by determining the form the guarantees for winners and losers would take. In the post-communist context, one key distinction is between institutions that protect the gains of early winners of elite competition, and those that create guarantees for the losers of this competition. Among the former are winner-take-all electoral systems, presidential executives, highly centralized governance structures, and conditional or unclear property rights. These are knife-edge institutions, both in that they create sharp divisions between those who are in power and those who are not, and in that the margin between these groups is narrow, so that a loss of power can become irreversible and devastating. For the losers of presidential contests, for example, there is no clear alternative space in which to continue to exert political influence, or even to survive as a politically relevant figure. Similarly, where property rights are conditional, falling afoul of the governing executives means losing one’s livelihood—and, as economic elites in Russia have discovered, one’s freedom. Highly centralized governance systems mean that appointments to lower levels of government are dependent on the discretion of the central executive. Even more dramatically, language and lustration laws have effectively targeted and eliminated entire classes of elites from political life, such as Russian elites in the former Baltic republics of the Soviet Union, or former communist elites across East Central Europe, respectively. Finally, since market elites are dependent on the state for protection and can easily suffer from unfavorable tax regimes or conditional property rights, this is another area where state institutions can pick winners and ensure their survival—or, conversely, irreversibly create losers (Schoenman 2005).

The Peculiarities of Post-communist State Development    593 In contrast, among institutions that protect losers are electoral systems that ensure proportional representation; parliamentary regimes; decentralized governance with multiple layers of local and regional officials that are elected by voters, rather than selected by the central executive; and clear property rights. These all create spaces for elites to survive when not in power: as independent businessmen, as civil servants, as local elected officials, and as the opposition in parliaments, who can form an alternative government should the parliamentary governing coalition fall. As a result, the losers of electoral or other political competition can hedge their bets and survive until the next political contest in other levels of government and the market. For example, former communist elites have been able to survive in the judiciary and in local governments far more so than in parliaments (Steen and Ruus 2002). Other state institutions that favor guarantees to losers are those that limit rent-seeking by the incumbents: civil service and administrative reforms designed to increase transparency and efficiency within the state, procurement and contracting regulations, conflict of interest laws, and state institutions for monitoring and oversight (Grzymała-Busse 2007; O’Dwyer and Kovalčík 2007; Vachudova 2009). The discretion built into state institutions further allows some rulers to determine who the current and future elites will be. These rulers can narrow down the pool of competitive elites by eliminating their bases of power (as Putin did by making regional governors an appointed rather than elected position), revoking the conditional property rights of oligarchs who become politically threatening, or through the elimination of political parties and independent media (Kryshtanovskaya 2008). Rulers also have the discretion to recruit from specific settings and existing allied networks: for example, the Russian federal elite is composed increasingly of military people (42 percent by 2008 by one estimate; see Kryshtanovskaya and White 2003; Kryshtanovskaya 2008). By the same token, Russian elites have become self-contained: while there used to be mutual flow between bureaucratic and political elites, the two now constitute autonomous spheres (Kryshtanovskaya 2008). Putin further shows a commitment to his elites, in that rather than firing them, he has “parked” them in various positions and sinecures, thus ensuring their continued loyalty—unlike Yeltsin or Gorbachev, who would summarily fire their subordinates. As a result, Russian elite recruitment often comes at the discretion of the incumbent executives, rather than through institutionalized practices and thresholds. Even as the presidential administration itself serves as a training ground for high-ranking elites, individual presidents have considerable discretion to go outside these channels (see e.g. Huskey 2010.) In contrast, state institutions that guarantee the survival of losers can limit rulers’ discretion in determining either the makeup of the elite, or where the losers survive. The result is that there is greater opportunity for the recruitment of new elites, and for the outflow of old elites, especially into the worlds of business (Steen and Ruus 2002). The recruitment of new political, economic, and bureaucratic elites in Poland, for example, is starkly different from the “funnel” of Putin’s appointments in Russia. It is characterized as relatively open, with elites flowing into governmental posts from political parties, government positions, trade union leadership, parliamentary experience, academic expertise, and high positions in the media, or the economic or cultural elite (Raciborski 2007). By lowering the material advantages accrued to the incumbents, such institutions lower incentives to hold onto office at all costs and lower the relative advantage of incumbents over challengers. As a result, winner-take-all institutions tend to concentrate the pool of executive elites, while institutions that build in guarantees for losers of elite contests tend to enlarge the pool of

594    Anna Grzymała-Busse and Pauline Jones Luong potential elites. This is not to say that losers cannot survive at all in systems that favor rulers, but rather that their survival is at the discretion of the ruler, who determines the institutional space for the losers, as well as who these survivors might be.

Over What do they Compete? State institutions have influenced not only who competes—that is, the pool of elites—but also over what these elites compete. Generally speaking, post-communist state institutions in the 2000s have structured elite competition around state resources, both institutional and material. They thus became targets of elite competition as well. Here, the constraints (or discretion) that the initial set of competing elites built into these institutions in the 1990s again plays a key role, as some elites have sought to concentrate resources in the state apparatus. The pool of elites is also relevant, because concentrating resources in the state is more difficult to accomplish where other centers of authority exist outside the central state, for example in popularly elected local governments, an independent media, and civil society organizations. Scholars of post-communism have focused on the elite extraction of material resources via the state, as well as its consequences. Yet scholars have paid less attention to the effects of elites’ targeting of the state’s institutional resources, which elites have done to an equal, if not greater, extent. Positions within the state, and the decision-making scope and power they command, have become a key target of elite competition and a critical resource for ruling elites. In short, elites continue to struggle over not only who gets to occupy positions of power, but also the authority relationships among these positions and the power they command to further shape elite configurations. Where the underlying institutional logic is to protect the gains of winners, this has affected the targets of elite competition in three distinct and potent ways: first, by concentrating political power in a few institutions; second, by depoliticizing competition and thus making it less representative of societal interests; third, by lowering incentives to compete for office at all, and instead increasing the incentives to curry favor with incumbents. In the “winners-take-all” systems throughout the former Soviet Union, this has primarily taken the form of promoting incumbency advantage and centralizing decision-making authority in the chief executive. Authoritarian rulers in several former Soviet republics, for example, have utilized executive powers and procedures enumerated in the constitution, over whose creation they presided in the 1990s, to ensure their ability to stay in office and/or to preserve privileges they enjoyed while in office long after their departure. Strong presidents have succeeded in enlisting parliamentary support via legislation or in orchestrating popular approval via referenda to extend or exempt them from term limits in Azerbaijan (2009), Belarus (2004), Kazakhstan (2007), Kyrgyzstan (2000), Tajikistan (2003), Turkmenistan (1999), and Uzbekistan (2002)—although only in Turkmenistan has the now former chief executive, Saparmurad Niyazov, been declared “president for life.”3 Others have observed constitutionally defined term limits only to ensure that they can continue to influence political

3  Saparmurad Niyazov’s reign was brought to an end by his death in 2006. President Nazarbaev of Kazakhstan has so far resisted similar proposals, allegedly originating from within parliament.

The Peculiarities of Post-communist State Development    595 decision-making by occupying another high-ranking position in government or by facilitating the election of either a close ally or family member. Examples abound, including the two most recent (and highly visible) cases of former President Vladimir Putin in Russia and President Robert Kocharian in Armenia—both of whom (allegedly) anointed successors (Medvedev and Sargsyan, respectively) to serve as a placeholder until they could legally be re-elected to the presidency.4 One rather striking (and less cited) example comes from Azerbaijan, where the terminally ill President Heydar Aliyev altered the constitution via a popular referendum to secure the transfer of power to the prime minister—a position his son (Ilham Aliyev) occupied at the time—in case the president became incapacitated. Post-Soviet elites have also endeavored to deliberately disadvantage or even debilitate losers by enervating already weak parliaments and opposition parties, re-centralizing government authority to weaken local governments, and depriving opponents of their livelihoods and property. Some blatant examples of this include presidents using their decree powers and resorting to referenda in order to circumvent the role of parliament in drafting, approving, and opposing legislation.5 A less widely recognized and yet potentially more effective tactic, however, has been the creation of centralized political parties with privileged access to organizational, financial, and media resources. In Azerbaijan (New Azerbaijan Party), Kazakhstan (Nur Otan), Russia (United Russia), and Tajikistan (People’s Party of Tajikistan), to name just a few, chief executives have used their position of relative strength vis-à-vis legislatures to create pro-presidential parties or “parties of power,” not only to secure their own political advantage but also to actively disadvantage competing parties and discourage would-be challengers. Incorporating local government officials into the party apparatus, for example, provided added insurance that they would remain loyal to the central government, particularly in those states (including Kazakhstan, Russia, and Tajikistan) that underwent a significant degree of decentralization (whether de facto or de jure) in the 1990s.6 In contrast, where the underlying logic of institutions is to provide guarantees for the losers, the targets of elite competition are much broader, because power is deliberately de-concentrated, creating multiple centers of authority, and, thus, desirable political positions. This can be accomplished by maintaining a balance of power among branches of government, particularly between legislatures and executives; promoting administrative and political decentralization; limiting the number of appointed positions vis-à-vis elected offices; and/or facilitating party competition—for example, by increasing the number of seats elected under proportional representation (PR) and/or lowering thresholds to bring smaller parties into parliament. As a result, for reasons enumerated in the previous section, there is not only a larger pool of elites who can compete, but also greater incentives for these elites to engage in competition; in other words, elites are encouraged to compete for political office, rather than for alliances with the rulers, not only because multiple positions wield power and thus are attractive but also because they have a chance of winning

4 

The contrast is President Boris Yeltsin, who clearly “anointed” then Prime Minister Vladimir Putin as his successor just before the end of his second term in 1999 but without any intention of returning to power himself. 5  President Akaev is a prime example. For details, see Pauline Jones Luong (2010). 6  The example of the few autocrats who did not follow this strategy, including President Karimov in Uzbekistan and President Lukashenko in Belarus, is instructive, because they preserved a highly centralized system of government—i.e. local officials continued to be appointed and frequently rotated.

596    Anna Grzymała-Busse and Pauline Jones Luong these positions over and over again. Elites thus compete through formal representative channels, and if they fail to obtain office (or are defeated), they can survive politically in local or regional governments, independent think-tanks, and, above all, in the parliamentary opposition, which is not only allowed to survive but is frequently given state subventions to carry out its responsibilities. More importantly, there is greater differentiation among elites: it is not necessary to be favored by the political authorities in order to own extensive economic holdings, for example. As noted earlier, such favor is helpful—but it is not necessary either for elite survival or for elites’ success in other domains. Such institutional configurations can also affect the nature of elite competition—that is, they can encourage elites to view competition as positive-sum rather than zero sum process and as a series of repeated interactions rather than as a one-shot interaction. This is facilitated, in turn, by how broadly elites can compete; the greater the extent to which institutional spaces are created—and preserved—for losers outside the state apparatus, the more elites can continue to exert some influence even if they do not win a particular political office or attain a governmental position. Across the post-communist world, the state has also served as a locus of elite competition, owing to the potentially vast material resources and rents under its control. The elites who were central to the processes of state-building were in an ideal position to reap benefits from the processes of institutional creation. They did so directly, by extracting rents, and indirectly, by building in loopholes and favorable laws. In a “reversed Tillyan perspective,” Venelin Ganev (2005) shows how elites have been able to extract resources from the state to maintain themselves—and, at the same time, how this extraction dampens incentives to build new state institutions. The use of the state for personal enrichment—and thus the perpetuation of incumbent elites—has taken place across the post-communist world: in Russia (Easter 2008), Ukraine (Way 2005), East Central Europe (O’Dwyer 2006; Grzymała-Busse 2007; Gwiazda 2009), and the Central Asian republics (McGlinchey 2011). State intervention itself became a guarantee or a subsidy: thus, where enterprises have mixed private-state ownership, they have enjoyed lower tax rates than their purely private counterparts (Schoenman 2005). Enterprise boards became a particularly lucrative source of income for regime-affiliated elites, both in Poland and in Russia (Schoenman 2005; Grzymała-Busse 2007; Kryshtanovskaya 2008; Huskey 2010.) Elites have thus benefitted disproportionately from access to state institutions, either directly (via the extraction of resources for specific individuals) or indirectly (via the enforcement of favorable policy decisions that affect entire categories). The accumulation of property in state hands, therefore, has also served to concentrate political power, and thus, to create incentives for currying favor with state authorities. The question is of degree: these elites have not operated under the same degree of constraint. Post-Soviet presidents in the 2000s, for example, have deliberately exploited the legacy of both concentrated and conditional private property rights in order to further constrain those who would oppose them, either by “capturing” the very oligarchies that emerged out of rapid voucher privatization and the concentration of firms in the 1990s (e.g. Yakovlev 2006), or by assuming direct state ownership over the most coveted (i.e. high rent) assets such as petroleum, as we have witnessed most demonstratively in both Russia and Kazakhstan since the mid-2000s. Conversely, where property rights have remained highly concentrated in the state, as in Belarus and Uzbekistan, control over key state assets and large enterprises has been an effective vehicle for securing elite loyalty to the regime

The Peculiarities of Post-communist State Development    597 and mollifying the opposition. It has also been an effective vehicle for silencing elites who became wealthy via lucrative state positions in the 1990s but are no longer considered loyal, as has occurred most recently in Azerbaijan (e.g. Radnitz 2012). The preponderance of state-owned entities in the economic sector has not, however, precluded the survival of losers. Here the case of Kyrgyzstan comes immediately to mind, where both privatization and decentralization were extensive in the 1990s and not curtailed in the 2000s. Thus, while President Askar Akaev of Kyrgyzstan succeeded in enriching his chosen set of winners through privileged access to lucrative state contracts and resource rents, he did not effectively deprive the losers of their economic gains, which they effectively utilized to challenge his rule in 2005 (e.g. Radnitz 2010). Similarly, privatization in Ukraine led to the creation of regional oligarchies with “linkages to particular regional administrations and interests” (Kowall and Zimmer 2002) that formed the basis for opposition forces that launched the so-called Orange Revolution in late November 2004.

How do they Compete? Institutions built in the 1990s have also influenced the means of elite competition in the 2000s. Simply put: despite the varying degrees of discretion that they enjoy, post-communist elites all rely on institutions. The character of these political institutions may vary widely, as we have seen earlier, with some state institutions favoring the winners, while others foster the survival of the losers. But across the post-communist world, in both democratic and autocratic countries (and the modal post-communist country lies someplace between), constitutions are upheld, term limits observed, and presidencies strengthened. For all the charges of electoral fraud, we do not see coups, overstaying in power through extralegal means, personalist grabs, or the willful obliteration of formal state institutions. That elites in democratic regimes would compete through formal representative institutions is perhaps not surprising. However, the same holds for autocratic regimes as well. While the blatant attempts to preserve autocratic power described here might tempt some to conclude that institutions are simply endogenous to regimes, such a view suggests a bit of historical amnesia. After all, the driving rationale for concentrating power in the chief executive—that is, creating super-presidential systems—in the early 1990s in Russia, Belarus, Kazakhstan, and elsewhere was building strong sovereign states, not propping-up authoritarian regimes (e.g. Frye 1997; Jones Luong 2002). Moreover, by the end of the 2000s, strong presidencies as institutions were already well established, with little subsequent fluctuation (expansion or contraction) in presidential powers (e.g. Frye 2002; Kurtov 2007). Finally, the aforementioned examples attest to the fact that institutions cannot simply be ignored, even by autocrats. Most of the leaders who altered pre-existing rules to extend their terms of office did so through legal means, and several others (including Askar Akaev of Kyrgyzstan in 2002 and Eduard Shevardnadze of Georgia in 2003) expressed their intention to abide by these rules and step down at the end of their term, only to be compelled (at the behest of social forces) to leave office prematurely. It would also be inaccurate to use such examples to conclude that these are simply “personalistic regimes,” defined as one that is based on the charismatic authority of a single leader rather than on institutions. The two are often confused, because the more institutions allow elites to exercise discretion, the more it seems that institutions are

598    Anna Grzymała-Busse and Pauline Jones Luong subordinate to the incumbent regime. In fact, autocratic states deliberately blur boundaries with regimes as part of their strategy for remaining in power. And yet, they are not functional equivalents:  exercising discretion built into institutions is not the same as personalism. Even the post-Soviet regime that most closely approximated a personalistic one—Turkmenistan under President Niyazov, also known as the Turkmenbashi—implemented clear rules for succession upon the incumbent’s unexpected death, despite all expectations to the contrary (see e.g. Olcott 2003). This also begs a key question: why do elites with discretionary authority rely on institutions rather than simply on personal rule? The short answer is that personal rule is too costly, because it provides the incumbent with no fallback options and concentrates all responsibility for both success and failure in the ruler’s hands. As a result, personalist rulers are also then the direct target of international contempt and domestic fury. Institutions, in contrast, provide incumbents with two distinct advantages that reduce the chances of directed censure. First, they can serve as sources of legitimation for rulers’ actions, which can appease domestic and international audiences alike. Second, they can serve as a means for deflecting blame: “It’s not my fault, I’m just following the rules,” and it is those rules that bear responsibility for economic, political, or policy outcomes. Indeed, one of the most common features of post-communist rule is not the neglect of but the reliance on institutions. One indicator of this is the lack of regime change; for the most part, institutions have not served to subvert or undermine regimes, but rather to buttress and consolidate them. Where the underlying logic of institutional creation was to protect the gains of winners, elites have sought to consolidate authoritarian regimes, both by ensuring that institutions consistently protect the gains of early/current as well as subsequent/future winners, and by eliminating the institutional space for losers—that is, imposing a truly “winners-take-all” system. Conversely, where institutions were designed primarily to provide guarantees for losers, regime consolidation has consisted not only in preventing winners from securing their gains beyond the previous or current round of competition but also in extending guarantees for losers in subsequent rounds—that is, ensuring that “losers always survive,” and perhaps even thrive. This is not to say that they have been equally effective in doing so. In fact, an important lesson of the post-communist experience is that losers survive and winners lock-in their victories, even where institutions should have hindered such outcomes. In Ukraine and Kyrgyzstan, for example, we have seen the continued beneficiaries of early decentralization and privatization policies serve as the basis for opposition and a turnover of incumbents. And in Hungary, Slovakia, and most recently Romania, we have seen parliamentary majorities exploit this opportunity to advantage their own party over others in future rounds of competition.

4 Conclusion The post-communist state has largely consolidated, and the tables have turned: state institutions and resources now constrain and shape the very elites that had constructed the state. These institutions now influence who can compete, over what resources, and by what means. The result is two broad trajectories: one in which winner-take-all institutions make

The Peculiarities of Post-communist State Development    599 losing the political game largely irreversible and inordinately painful, leading elites to compete over positions within the state and proximity to the rulers, and another one in which guarantees to losers lead to a much broader and churning pool of elites that flow in and out of state positions as they compete over popular support, rather than proximity to power, and in which losers can rely on a variety of institutional spaces in which to survive. In both trajectories, state institutions are the critical resource and target of elite competition—and in both trajectories, they are the fundamental instruments that constrain elite competition. The consolidation of state institutions, however, should not be conflated with state capacity. As the experience of the post-communist state makes clear, just because institutions have become more stable does not mean that they have become more efficacious. This is in part because what has made institutions stable in the first place is the ability of elites to manipulate them; that is, to utilize the discretionary power built into these institutions to further their own political and economic goals. Contra the conventional wisdom, they have thus eschewed personalism in favor of relying on institutions to retain power.

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The Peculiarities of Post-communist State Development    601 Raciborski, Jacek, 2007. “Forming Government Elites in a New Democracy: The Case of Poland.” Communist and Post-Communist Studies 40 (1, March): 17–40. Radnitz, Scott, 2010. Weapons of the Wealthy: Predatory Regimes and Elite-Led Protests in Central Asia. Ithaca, NY: Cornell University Press. ——, 2012. “Oil in the Family:  Managing Presidential Succession in Azerbaijan.” Democratization 19 (1): 60–77. Remington, Thomas F, 2001. The Russian Parliament: Institutional Evolution in a Trans­i­ tional Regime, 1989–1999. New Haven, CT: Yale University Press. Schoenman, Roger, 2005. “Captains or Pirates? State-Business Relations in Post-Socialist Poland.” East European Politics & Societies 19 (1, February): 40–75. Shleifer, Andrei, and Treisman, Daniel, 2000. Without a Map:  Political Tactics and Economic Reform in Russia. Cambridge, MA: MIT Press. Steen, Anton, and Ruus, Jüri, 2002. “Change of Regime—Continuity of Elites? The Case of Estonia.” East European Politics & Societies 16 (1, February): 223–248. Stoner-Weiss, Kathryn, 2006. Resisting the State: Reform and Retrenchment in Post-Soviet Russia. Cambridge, UK: Cambridge University Press. Tilly, Charles, 1990. Coercion, Capital, and European States, AD 990–1992. Cambridge, UK: Basil Blackwell. Vachudova, Milada A, 2008. “Tempered by the EU? Political Parties and Party Systems Before and After Accession.” Journal of European Public Policy 15 (6): 861–879. ——, 2009. “Corruption and Compliance in the EU’s Post-Communist Members and Candidates.” Journal of Common Market Studies (JCMS) 47 (Supplement 1: The JCMS Annual Review of the European Union in 2008, September): 43–62. Way, Lucan, 2005. “Authoritarian State Building and the Sources of Regime Competi­ tiveness in the Fourth Wave: The Cases of Belarus, Moldova, Russia, and Ukraine.” World Politics 57 (2): 231–261. Yakovlev, Andrei A, 2006. “The Evolution of Business—State Interaction in Russia: From State Capture to Business Capture?” Europe-Asia Studies 58 (7): 1033–1056.

Chapter 32

The Tr a nsfor m ation of the State i n E aster n Eu rope Milada Anna Vachudova

The transformation of the state in post-communist Europe began across the region in 1989 with, at least nominally, the same goal of building liberal democracy and market capitalism. Twenty-five years later, some post-communist states are liberal democracies with functioning market economies. Most, however, are either hybrid regimes or authoritarian ones. In many, competitive elections have at least become the norm, planting the seed for different kinds of electoral breakthroughs, however modest or temporary (Tucker 2007; Kalandadze and Orenstein 2009; Bunce and Wolchik 2011; Hale 2013). Even among the states of East Central and South Eastern Europe that joined the European Union (EU) in 2004 and 2007, there has been dramatic variation in the trajectories of domestic politics and state reform after 1989. In the broadest strokes, scholars have explained this divergence by identifying variation in the legacies of the communist and pre-communist period and showing how these legacies determined which constellation of elites and institutions were most powerful at the critical moment of regime change and in the decisive early transition years (Bunce 1999a; Orenstein 2001; Ekiert and Hanson 2003; Fish 2005; Vachudova 2005; Grzymała-Busse 2007; Pop-Eleches 2007). The enlargement of the EU became a kind of super-structure for external influence in the region—and it remains so to this day. While in some cases EU leverage reinforced an existing liberal democratic trajectory, in other cases it was critical in helping to move a state away from illiberal or authoritarian rule. Eventually, the EU recognized enlargement as its most effective foreign policy tool, and it is likely that enlargement has been the most successful democracy promotion policy ever implemented by an external actor (Vachudova 2005). It is worth stressing, however, that the bar for the EU here is very low: comparative politics scholars have generally found that external actors have little success in fostering democratization. It has also become clear that conflating earning EU membership with attaining a high quality of democracy was too optimistic. In this c­ hapter I first consider the different trajectories of political change among the EU-eligible post-communist states of East Central and South Eastern Europe, highlighting

The Transformation of the State in Eastern Europe    603 the changing nature of elite competition introduced by Anna Grzymała-Busse and Pauline Jones Luong in Chapter 31 (Section 1), this volume. Then I explore the leverage of the EU on domestic political competition and on the reform of state institutions (Section 2). In Section 3, I consider the cases of Bulgaria and Romania, where the reform of the state has been insufficient, as evinced by high levels of corruption, low state capacity, and poor judicial quality. Then I briefly explore the implications of the recent rollback of liberal democracy in Hungary by its right-wing Fidesz government (Section 4). Next, I sketch the trajectories of political change in the Western Balkan states and argue that the EU’s active leverage continues to have a democratizing effect on some candidate states in the region (Section 5). I conclude with reflections on how the EU’s leverage has impacted state-building over the long term (Section 6).

1  Different Trajectories of Political Change in Post-Communist Europe In Europe Undivided (2005) I argue that the quality of political competition at the moment of regime change helped determine whether post-communist states embarked on a liberal or an illiberal pattern of political change. In the liberal pattern, high-quality political competition emerged rapidly in states such as Poland, Hungary, and Czechoslovakia, where the communist regime was forced to exit from power by a credible and well-organized opposition to communism whose leaders had internalized the Western model of liberal democracy, rule of law and market capitalism long before 1989 (Michnik 1985; Judt 1988; Kis 1989; Dienstbier 1990). In the illiberal pattern, widespread among post-communist states, conditions of limited political competition allowed rent-seeking elites to win and hold power by further suppressing rival groups, promising slow economic reform, and exploiting ethnic nationalism—all the while extracting significant rents from slow economic reform (Vachudova 2005: chs 1, 2). Other scholars have offered compatible explanations for the variation in political outcomes that we can observe after 1989. These include the configuration of domestic elites at the moment of regime change, the outcome of the first democratic elections, and the character of elite competition in the new polity (Fish 1998; Bunce 1999b; Orenstein 2001; Ekiert 2003; Grzymała-Busse 2003, 2007; Kitschelt 2003; Fish 2005). For its part, the EU and other international actors had little impact on the regime trajectory of either group of states until the EU began using its active leverage in about 1994 (Vachudova 2005). There is a separate, though related, debate about additional domestic factors that brought to power the regimes that presided over the ethnic cleansing and civil war that accompanied the disintegration of Yugoslavia (Bunce 1999a; Dolenec 2013). More than two decades later, even among the EU’s new post-communist members, we can see that the nature of political competition during and after regime change has had an abiding impact on the performance of state institutions and on levels of corruption— especially on the state’s ability and will to combat it. Corruption has been the highest in those states where a narrow group of elites initially governed with little political competition from other political forces and with little effective scrutiny from the media and civic groups (see O’Dwyer 2006; Ganev 2007; Grzymała-Busse 2007; Hanley 2008; Vachudova

604   Milada Anna Vachudova 2009). Much has been written about the potential windfall of a partially reformed economy for well-positioned elites. Research shows that in such an economy elites can extract greater rents for a longer period of time and at a greater cost to society than elites in a rapidly liberalizing economy, where the state is forced to limit and redefine its role in the economy more quickly (Hellman 1998; Gould 2004; Spendzharova 2008). More broadly, it is clear that the quality of democracy, the completeness of economic reforms, and the level of aggregate social welfare have tended to travel together in the post-communist world. That is, those countries with the most robust democratic institutions put in place the most rapid and complete economic reforms; these same countries recovered most quickly from the economic collapse of the early 1990s, registered the highest levels of economic growth, and generated the smallest increase in income inequality (Ekiert et al. 2007; Frye 2012; on whether East Central Europe is catching up economically, Epstein 2014).

2  The Leverage of the European Union on EU Candidate States When it comes to the mechanics of EU leverage, for two decades now the basic equation underpinning the decision by eligible post-communist states to seek EU membership has not changed: the substantial benefits of joining the EU and the costs of being excluded create incentives for post-communist governments to satisfy the EU’s comparatively vast entry requirements. Membership brings a host of economic benefits, including access to the world’s largest consumer market, development funds, agricultural support, and employment opportunities for migrant workers. Membership also confers a very agreeable geopolitical change of fortune through the protection of EU rules, a new status vis-à-vis neighboring states, and a voice in EU institutions (Vachudova 2005). These benefits continue to be substantial despite the financial upheaval and the loss of confidence that have plagued European integration since the onset of the financial crisis in 2008 (Vachudova 2014; see also Epstein and Jacoby 2014). In comparison, other international organizations and other kinds of external actors still have, individually, much less to offer—and have asked for much less in return. The concepts of “passive” and “active” leverage separate theoretically the kinds of influence that the EU can have on states that wish to join it. By passive leverage I mean the attraction of EU membership, and by active leverage I mean the deliberate conditionality exercised in the EU’s pre-accession process vis-à-vis EU-eligible states. What kinds of domestic changes can the EU’s active leverage really help bring about, and what are the causal mechanisms that translate EU policies into consequential domestic change? Scholars have explained the variation in how the EU’s pre-accession process has shaped policy-making across different policy areas (Jacoby 2004; Kelley 2004; Schimmelfennig and Sedelmeier 2004; Grabbe 2006; Epstein 2008; for an overview, see Sedelmeier 2011). They have also illuminated the differential impact of the EU on one policy area in different countries—for example, on regional policy (Hughes et al. 2004; Brusis 2005), the environment (Andonova 2003), public administration (Dimitrova 2002), border

The Transformation of the State in Eastern Europe    605 and migration policies (Jileva 2002), regulatory reform (Mattli and Plümper 2004; Bruszt and McDermott 2012), and economic policy (Epstein 2006, 2014). On the domestic side, the key causal mechanisms include political party and government officials responding directly to material incentives as well as to socialization. Studies in the rationalist camp generally argue that mechanisms based on material interests and rewards explain the lion’s share of policy change (Kelley 2004; Vachudova 2005). Studies in the constructivist camp argue that other, cognitive mechanisms based on the power of the normative social environment must also be taken into account to fully understand the timing and content of externally driven domestic change (Grabbe 2006; Epstein 2008; Subotić 2011). Taking a broader view of the domestic impact of the EU, I argue in Europe Undivided (2005) that EU leverage can help determine regime type by pushing EU-eligible states from one trajectory of political change to another. While in some cases EU leverage reinforces an existing liberal democratic trajectory, in other cases it has been critical in helping to move a state away from illiberal or authoritarian rule (Vachudova 2005; Cameron 2007). By influencing the informational and institutional environment, EU leverage helped create what these states were missing at the moment of transition: a coherent and moderate opposition, and an open and pluralistic political arena. Here the causal mechanisms center around political parties:  over time even formerly authoritarian parties adopt an EU-compatible agenda in order to stay in the political game after competing political parties, interest groups, local civil society groups, and even voters have coalesced around the goal of joining the EU. The shift in party agendas helps open up the political arena and also to narrow the parameters of domestic debate as important parties abandon nationalist and anti-Western appeals (Vachudova 2008). In illiberal democracies, where the EU requirements were at loggerheads with the sources of political power of ruling elites, progress toward the EU was initially slow or stopped. The EU’s active leverage had little success in changing the policies of governing political parties in Slovakia, Bulgaria, or Romania—or indeed in Croatia or Serbia-Montenegro. Over time, evaluations of a country’s progress within the EU’s pre-accession process provided a powerful alternative source of information on the political and economic performance of the government. Meanwhile, the institutional environment changed in three ways. First, joining the EU served as a focal point of cooperation for disparate groups that opposed the ruling illiberal parties. Second, EU membership created incentives for politicians and other elites to adapt their political agenda to be compatible with moving forward in the EU’s pre-accession process. Third, once in office, political parties that promised to move the country toward EU membership had to follow through with the implementation of specific reforms in order to move forward in the pre-accession process. The process itself served as a credible commitment mechanism to ongoing reform, because reversing direction would be costly for any future government. As candidates moved forward in the process, governments were locked into a more predictable course of economic policy-making that served as an important signal to internal and external economic actors (Vachudova 2005: chs 6, 7). Illiberal regimes lost elections in Romania in 1996, in Bulgaria in 1997, in Slovakia in 1998, in Croatia in 2000, and in Serbia-Montenegro in 2000. The new governments then began to implement political and economic reforms and move the countries forward in the EU’s pre-accession process. Once a state has become enmeshed in the EU’s pre-accession process, the high costs of pulling out have motivated even previously illiberal ruling

606   Milada Anna Vachudova parties to adopt a political strategy that is compatible with qualifying for EU membership. After the watershed elections, we see progress as successive governments continue political and economic reforms. They may move forward quickly (Slovakia) or slowly (Serbia-Montenegro), but the commitment to staying in the EU pre-accession process survives electoral turnover. Sooner or later, more open political competition, in combination with the costs of being excluded from “Europe,” drives most political parties in the candidate states toward a consensus on qualifying for EU membership. This can be understood as the second phase of adapting: now it is the formerly illiberal rulers who adapt their political agenda to EU membership. Due to the mechanisms of adapting, there are virtually no parties in the countries that are in the EU queue that oppose qualifying for membership and that might not take part in a governing coalition. In the case of Serbia, for example, the adapting of formerly illiberal elites was at first just a trickle—but by 2010 it had become a flood, with only one anti-EU party left in parliament after the 2012 elections (Vachudova 2014). Scholars also look at the relative political weight of domestic actors such as civil society organizations and interest groups that see EU integration as furthering their interests. Over time, joining the EU does strengthen the hand of some actors at the expense of others. The causal chain, however, can be fascinating and complicated: Connor O’Dwyer (2012) shows, for example, that in the area of LGBT rights,1 it was the mobilization of hostile groups in response to the EU’s demands for greater tolerance that in turn sparked a counter-mobilization and organization of pro-LGBT groups that have been able to push domestically not just for legislative changes but also for changes in social attitudes.

3  Bulgaria and Romania: Success and Failure in Reforming the State For all EU candidates, a critical part of the EU’s pre-accession process should be rebuilding and reforming the state. The sine qua non of being able to implement the acquis communautaire—the rules and regulations in force among EU members—and to function as an EU member is high state capacity, including courts that faithfully apply EU law and a state that energetically and efficiently regulates its economy. So while the EU required the withdrawal of the state from the economy through privatization and strict limits on state subsidies, it also insisted that the state deliver better regulation, rule of law, and oversight in the economy—and this attention paid to the state makes it distinct from democracy promotion by the United States and other governments that focuses mostly on the power of citizens and of civil society organizations (Kopstein 2006; see also: Demeš and Forbrig 2007; Bunce and Wolchik 2011; and Petrova 2014). The two post-communist states that joined in 2007, Bulgaria and Romania, have revealed, however, that the pre-accession process was not sufficiently effective in reforming the state. Severe problems with corruption, judicial quality, and state capacity remain. During the pre-accession process, strict enforcement in some areas was limited to the 1 

LGBT is an acronym that stands for lesbian, gay, bisexual, and transgender.

The Transformation of the State in Eastern Europe    607 adoption, not the implementation, of EU rules. In other areas, especially those related to corruption, there were few specific rules to enforce. After 20  years of democratization, Bulgaria and Romania found themselves in the category of “semi-consolidated democracies”—in contrast to the other eight post-communist EU members that are considered “consolidated” (Freedom House 2010). As discussed earlier, for much of the 1990s partial economic reform enriched the elite and entrenched networks of corruption, while prolonging the economic hardships of the average citizen (see, among many:  Ganev 2007; Grzymała-Busse 2007). In both countries, the communist successor parties have been implicated in the most far-reaching and systematic corruption, as years of state capture by these parties would have led one to predict. By 2000, however, both Bulgaria and Romania were making relatively dramatic progress. The benefits of qualifying for EU membership clearly inspired some of this effort, including significant changes in party positions and important domestic institutional reform (Grabbe 2006; Vachudova 2008; on limits see Haughton 2007; Dimitrova 2010). But was it enough? The scale of the problem of corruption in Bulgaria and Romania, in comparison to the “old” EU member states, depends entirely on which old member state serves as the point of reference. In Transparency International’s 2013 corruption rankings—which are based on perceptions of corruption—ten EU member states are on the list of the world’s 20 least corrupt countries. But Romania is ranked 69th and Bulgaria 77th; however, Bulgaria and Romania are not alone far down on the list, as Italy keeps them company as number 69, tied with Romania, while Greece sits at number 80.2 In the run-up to the 2004 enlargement, the EU was fairly effective in requiring candidate states to adopt and implement the acquis. In general, greater attention was paid to those parts of the acquis that determine the performance of state institutions and economic actors in the internal market. On the one hand, new members must be competitive in the internal market; on the other, they must enforce EU rules in order to ensure a level playing field. Many observers were concerned about what would happen when the leverage of the pre-accession process disappeared at accession. After all, the adoption of legislation is generally much easier to track than are the quality and durability of the institutions that implement and enforce it. Here, however, the preliminary evidence is more positive than expected: the eight post-communist states that joined the EU in 2004 have outperformed older members in many respects when it comes to enacting EU law and dealing with infringements (Sedelmeier 2008). Reforming large swathes of the state and equipping it to fight corruption, however, is not part of the acquis. The process of joining the EU may help combat corruption, but only in indirect ways. Liberalization of the economy, including privatization, and the promotion of new small and medium enterprises, should reduce the reach of state officials in the economy. Also, the reform of state institutions—including greater transparency and efficiency—may at least constrain the opportunities for corruption across different levels of government. However, the experiences of Bulgaria and Romania show that these indirect measures alone are insufficient when a critical mass of high-level politicians are corrupt, when organized crime has thoroughly penetrated the economy, and when the judiciary is weak and corrupt.

2  Cf. for Transparency International’s 2013 corruption rankings http://cpi.transparency.org/cpi2013/ results

608   Milada Anna Vachudova The EU created the Cooperation and Verification Mechanism (CVM) for Romania and Bulgaria to extend some of its leverage on reform of the state to the post-accession period. The CVM needed to move mountains, but it was given a toy shovel to do this. The CVM did have some effect: specific legislative and institutional reforms were clearly pushed through in response to CVM reports, especially when progress was tied early on to the provision of EU funds or, more recently, to entry into Schengen. The CVM had the most traction on Bulgarian and Romanian governments when ruling political parties saw a positive report as being directly tied to their electoral chances (Spendzharova and Vachudova 2012). While useful, the CVM has not had enough traction to compel comprehensive reform in either country—and everyone agrees that pre-accession leverage is far more powerful (see also Ganev 2013). In response the EU has intensified its active leverage on reform of the state in the Western Balkan candidate states.

4  Hungary and the Threat of Democratic Reversal As a rule, reforms in post-communist states have suffered few reversals after membership in the EU is achieved (Levitz and Pop-Eleches 2010). This is only meaningful, however, if state institutions and rules are adequate at the moment of accession; we have already seen that this has not been the case for the rule of law and the fight against corruption. Since the elections in Hungary in 2010, the EU has been faced with a different kind of reversal: the ruling Fidesz party in Hungary has been at work carefully and cleverly dismantling the “liberal” in liberal democracy, undermining liberal democratic principles and fundamental rights (Wittenberg 2013). Fidesz enjoys a supermajority in parliament and is able to amend the constitution at will because of three factors: the collapse of the left-wing parties owing to the financial crisis and corruption scandals; the Hungarian electoral laws that substantially amplify the seat count of winning parties; and the Hungarian constitution that does not require anything except a two-thirds vote in parliament to amend the constitution—a referendum, for example, is not required. Fidesz has been steadily carrying out long-held plans to concentrate power in the hands of party members, chiefly by passing legislation and constitutional amendments, but also by violating norms related to the participation of rival political party members as well as independent individuals in the running of public institutions. While many of its individual maneuvers, such as disempowering the constitutional court, gerrymandering the electoral map, decapitating the judiciary, and consolidating control of the media, may be consistent with the practice of one or more Western democracies, the combination of all of these measures in one country undermines democratic standards (Scheppele 2013). Fidesz has also exploited the important position of the state in the economy, the arts, and civil society by channeling state contracts and EU funds to Fidesz-loyal firms, artists, and interest groups. The EU, distracted by the ongoing financial crisis, was taken by surprise by Viktor Orban’s assault on liberal democratic principles and forced to confront the real limits on its ability to prevent the erosion of democratic standards in an existing EU member

The Transformation of the State in Eastern Europe    609 state (Sedelmeier 2014). The problem is that there exists very little acquis on the quality of democracy as such. The European Commission has launched infringement proceedings against the Orban government in a few areas where the acquis was clearly violated, including the independence of the Central Bank, the independence of the media, and the forced retirement of judges. The Orban government, however, retreated only at the margins. The case of the forced retirement of judges, for example, was settled as a discrimination case; the powerful judges that Fidesz had cleared away to make room for its own judges were given the choice of jobs at a lower position or lucrative settlement packages. In practice, no judge came back. Article 7 of the Treaty of European Union (TEU) does allow for EU members to sanction a country where democracy is at risk, but EU governments have refused to invoke this clause against Hungary for a complicated mix of reasons, including partisanship and normative disagreements (see Sedelmeier 2014). Hungary’s troubles have sparked a wave of speculation and worry about “democratic backsliding” in the EU’s new post-communist members. The unique conditions allowing Fidesz to act with impunity, however, are unlikely to repeat themselves. The Ponta government in Romania, for example, attempted to amend the constitution in 2012, giving rise to the fear of a new “Orban playbook” for post-communist ruling parties, but it has run into many more obstacles at home and met a firmer response from the EU (Pop-Eleches 2013). Hungary’s “backsliding” has triggered an unfair and inaccurate assumption that democracy is under threat in all of the EU’s new post-communist members—and only there. Yet problems with the rule of law and the fight against corruption appear to have a north-south dimension, and this may well prove to be true for the quality of democracy as well. In any case, the recent tumult has triggered an interesting debate about how the EU could and should increase its ability to oversee the quality of democracy in its member states.

5  The Western Balkans: The EU’s Leverage Marches On The commitment to revitalize and integrate the Western Balkan states by offering them the prospect of membership has been reaffirmed many times since it was first made by EU leaders in Sarajevo as part of the Stability Pact for South Eastern Europe in 1999. This was seen as a watershed moment for EU foreign policy. The EU would use the power of its enlargement process to transform the Western Balkans, opening a new chapter after a decade of failure in the region. EU members have had a strong interest in seeing the EU’s “best available tools” work as promised in Western Balkan states, bringing to power moderate, EU-compatible political parties that implement fundamental institutional reforms in order to qualify for membership. The Western Balkans pose a greater challenge than Bulgaria and Romania because war, sanctions, and isolation have more profoundly warped the rebuilding of the state after communism (Šelo Šabić 2003; Žilović 2011; Dolenec 2013). Authoritarian rule gave ruling elites absolute power in Croatia, Serbia and Montenegro from 1990 to 2000, while war and sanctions intensified the grip of organized crime on the economy (Gould 2004). In the three constituent nations of Bosnia, nationalist parties have controlled the different

610   Milada Anna Vachudova parts of the state since 1990, and they continue to control much of the country’s economic activity for the benefit of the few at the expense of the many. There has been greater political competition in Macedonia and Albania, but under conditions of extremely weak state administrative capacity and little or no willingness to combat corruption. Throughout the region, elites protect old clientelistic networks and the rewards of a partially reformed economy; elites are benefiting from relationships with organized crime, but they are also intimidated and pressured into protecting criminals from prosecution. Taking a broad view, EU actors have learned three things from previous rounds of enlargement: that leverage works well only before accession, that a longer period for exercising conditionality is needed, and that fostering the rule of law and independent state institutions takes requirements that are finer grained and also better enforced. To meet these greater challenges and also higher expectations, leverage has become more detailed and has been delivered earlier in the process: the EU has created more moments where it can apply leverage well before negotiations begin, and it has embedded into the negotiation process a system of “benchmarking” that lets the Commission set benchmarks for the opening, interim, and closing of each negotiation chapter (European Commission 2013a). The new approach that started with Croatia’s accession negotiations also includes a new Chapter 23 on the judiciary and fundamental rights—and tries to embed fundamental rights, the rule of law, and the performance of the judiciary more effectively in the preaccession process. For Montenegro the EU has chosen to start the negotiations with the most vexing chapters—Chapters 23 (Judiciary and fundamental rights) and 24 (Justice, freedom and security)—so that these areas get the most possible scrutiny. What is perhaps worrying is that the EU rejected a CVM for Croatia, as this would signal the failure to reform before accession—and yet the Commission’s March 2013 report, the last before Croatia joined the EU, pointed to abiding problems related to reform of the state and the rule of law (European Commission 2013b). A problem that the EU has encountered in its efforts to shepherd the Western Balkan states through the pre-accession process is that conditionality is more contested on issues related to national sovereignty and identity (Bieber 2011; Noutcheva 2012). In each case, slow progress can reflect in different parts the strategies of power-seeking elites as well as public and elite conceptions of the national interest. While several East Central European candidates had to comply on issues related to borders, citizenship, and minority rights, some of the issues in the Western Balkans have been more intractable. For example, the EU made full cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY) a precondition for moving forward in the pre-accession process, usefully lending out its leverage but also stalling the accession process with Croatia and Serbia for several years until ruling elites complied. Serbia’s progress has also been stalled by the imperative of regulating its relations with Kosovo. EU leaders have clearly learned lessons from admitting a divided Cyprus in 2004 that, a decade later, continues to bedevil regional cooperation and economic development. In response, the EU, led by Germany, has prioritized the resolution of issues bearing on national sovereignty, territory and identity, especially, in recent years, the Kosovo issue. It took many years and several governments before the current Serbian government chose to move forward decisively—and here the EU’s foreign policy team enjoyed a much needed triumph in 2013 by brokering a deal between Belgrade and Pristina that, if it works, will also boost perceptions that the EU acts competently in trying to solve outstanding issues related to sovereignty and territory in the region (Bechev 2013).

The Transformation of the State in Eastern Europe    611 Despite the many challenges, EU leverage appears to have worked well in some candidate states. Croatia succeeded in joining the EU in 2013 after shifts in party positions, an overhaul of state institutions, and a strengthening of the rule of law. Croatia’s political party system experienced a dramatic change after 2000, not just with the ousting of the authoritarian regime of Franjo Tudjman but also, crucially, with the transformation of the agenda (if not the membership) of his extreme right-wing Croatian Democratic Union (HDZ) party. As my model of party behavior in the EU accession queue would predict, the HDZ embraced democratic reforms and preparations for EU membership (Vachudova 2008). This was perhaps easier than in neighboring Serbia because Croatia’s belonging to Western Europe had never been questioned by the HDZ (Subotić 2011) and because the destructive grip of authoritarian forces was somewhat weaker (Dolenec 2013). After the HDZ recaptured power at the end of 2003, Prime Minister Ivo Sanader led a government that put preparations for EU membership at the heart of its governing program—and that included reforming the judiciary and bolstering institutions to fight corruption (Konitzer 2011). What Sanader apparently did not consider, however, was that these stronger and more independent institutions might go after him. He was indicted on a colorful array of corruption charges and, in November 2012, he was sentenced to ten years in prison by a Croatian court. Following in the footsteps of Croatia, the axis of competition in Serbia has shifted quite dramatically over the last decade (Dolenec 2013). The powerful extreme right-wing Radical Party split in 2008, with Tomislav Nikolić bringing many party members into his new Progressive Party. Nikolić proclaimed that it was his support for Serbia’s integration into the EU that forced a split from the Radical Party loyal to warmonger Vojislav Šešelj. Meanwhile, the Socialist Party of Serbia, the party of Slobodan Milošević, has also moved toward reform and adopted an agenda supporting Serbia’s membership in the EU under its new leader, Ivica Dačić. After the May 2012 parliamentary elections, the Progressive Party and the Socialist Party formed a coalition, and Dačić became prime minister, marking a return to power of Milošević’s closest allies. Some supporters of opposing parties even voted for the Progressives on the logic that the tempering effect of government could be beneficial for Serbia’s largest political party, and that alternating out of power could be beneficial for the so-called pro-Western parties. After two years there is evidence that this may be true: the new leader of the Progressive Party, Alexander Vučić, has had the most powerful tycoon in Serbia arrested on corruption charges, concluded a historic agreement regulating relations with Kosovo, and has managed to begin negotiations on EU membership for Serbia. The missing piece in Serbia, however, is concerted pressure for reform on the part of voters, civil society, and interest groups (on variation in post-communist Europe, see Pop-Eleches and Tucker 2011; Ceka 2013). Without this kind of systematic pressure, the Vučić/Dačić government may prosecute tycoons and make slow progress on Kosovo even as it builds up its own corruption rackets. The EU does have substantial leverage over Serbia—and it is this leverage that explains Serbia’s cooperation on the Kosovo issue. But as the EU and especially German leaders continuously prioritize the resolution of the Kosovo issue, they also need to apply sufficient pressure on the Serbian government to pursue high-quality reforms of the state and the economy. In Bosnia the engagement of citizens and interest groups in politics, so important in helping to improve performance and accountability, is weaker than in Serbia.

612   Milada Anna Vachudova Consequently, the costs for politicians of not complying with EU requirements are apparently minimal. Bosnia’s unwieldy institutions create such terrible incentives for politicians at myriad levels of government that it is hard to see how citizens or civil society groups can ever break through. Politics in Bosnia has been reduced to backroom deals between the leaders of the six main political parties—and these parties have been transformed into rigid, authoritarian structures that doggedly pursue personal and party agendas at great cost to the citizens. Another barometer for the ongoing effectiveness of EU leverage is Montenegro. Very small and quite rich, Montenegro was given the green light by EU leaders to start negotiations in 2012. But for these negotiations to conclude successfully, Montenegro’s state institutions, especially the judiciary, will need a thorough overhaul that includes dramatic improvements in the fight against corruption and organized crime, and putting longtime leader Milo Đukanović and his associates behind bars.

6 Conclusion The ambitious and extensive enlargement of the EU to include 11 post-communist members by 2013—with six more waiting in the wings—has shown both the impressive scope and the limits of the EU’s state-building efforts. EU leverage within the pre-accession process has helped push some states from illiberal democracy and even authoritarianism to liberal democracy and a better functioning state. EU leverage for all candidate states has led to the adoption of the EU’s vast acquis and the reform of state institutions in order to implement and enforce it. All 11 post-communist members are operating within the EU’s internal market, improving human development and economic growth. As compared to the old member states, the Commission judges that post-communist members have, on balance, adopted the acquis more quickly and effectively, needing fewer infringement actions than old member states. When the EU began to contemplate an eastern enlargement in 1992, it was mainly an economic organization—and it is still true that the lion’s share of the EU’s acquis concerns the operation of the internal market. The EU had few common rules or practices in many areas where the post-communist state needed to be dismantled and built anew, or where the transition from communism created extraordinary opportunities for rent-seeking elites to capture power and to steal from the state. Yet some 25 years on, when it comes to state capacity and the rule of law, we may be seeing the emergence of a north/south as opposed to a western/post-communist divide among EU member states. While the abrogation of liberal democratic principles in Hungary is a serious problem, and it may be intractable, high levels of corruption in southern EU member states are the more abiding and corrosive problem. Countries such as Greece and Italy have shown how little reform can be imposed on long-standing member states, which is why in 1995 officials in the Commission were already designing the new pre-accession process with an eye toward not repeating the mistakes made with Southern Europe. And today it is the mistakes made with Bulgaria and Romania as well as with Cyprus that are informing enlargement policies towards the Western Balkans. The EU now stands resolute about enforcing higher standards related to the rule of law and the reform of the state, but it has relatively little expertise in accomplishing this, since these and other areas bearing on the quality

The Transformation of the State in Eastern Europe    613 of democracy have been addressed only indirectly by the existing acquis (see Kochenov 2008). Overall, from the perspective of democracy promotion and reform of the state and the economy, enlargement has been a success. It is well worth it to ask the counterfactual: how would things look if the country had been denied EU membership? Even Romania and Bulgaria, the mal-performers of EU enlargement, have made progress in many areas. And while the illiberal behavior of the Fidesz government empowered by a legislative supermajority in Hungary has caused concern, there is no question that EU membership has had a restraining influence. The 2014 pro-EU protests in Ukraine have shown that the EU’s passive leverage—the attraction of membership—still resonates and that political change might have been different if the EU had offered Ukraine substantial help and the prospect of membership. How scholars and other observers debate the merits of the EU’s enlargement process for the quality of democracy, the rule of law, and the reform of state institutions in new and prospective members has changed dramatically over the last decade. It is worth remembering that the abiding concern in many academic circles used to be that the EU was too heavy-handed and too dictatorial in imposing its rules and institutions on post-communist members, thereby undermining fledgling democratic institutions and processes. Once authoritarian rulers left the stage and negotiations for EU membership began, scholars pointed to a variety of ways that the top-down, externally driven process of complying with EU rules and adopting the acquis may hollow out domestic institutions (for a survey of this debate, see Vachudova 2005: 224–232). Now these concerns have been entirely eclipsed by criticism in academic and policy circles that the EU was not stringent, explicit, and consistent enough in its demands on prospective members—and not vigilant enough in their enforcement. In this area, it is fair to say that too many scholars have mirrored the behavior of politicians: It is easier for politicians to blame the EU for what frustrates their voters than to offer them a necessarily complicated picture of real causes and possible remedies. Similarly, when faced with a stalled or shoddy reform of the state or the economy in a prospective or new EU member, it is easier for scholars to point to the shortcomings of EU policy than to untangle the complicated domestic factors that have allowed contented power holders to concentrate power and steal from the state. It is ultimately domestic actors who respond to EU incentives—or not—as they make choices about the pace and quality of reform. Given the complexity, breadth, and relative uniformity of the EU’s accession requirements, the great variation in outcomes, even across the EU’s 11 new post-communist members, underscores that many details of domestic policies have largely been determined by the domestic dynamics of reform.

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Chapter 33

R esources as Constr aints? Natu r a l R esou rce W e a lth a n d the Possibilit y of Dev elopm en ta l States i n the For m er Sov iet U n ion Pauline Jones Luong

The rise of developmental states in East Asia in the second half of the twentieth century has elicited a rich body of literature seeking to identify what factors contributed to their success and whether their experience can be replicated (e.g. Johnson 1982; Amsden 1989; Wade 1990; Woo-Cumings 1999). And yet, there is no clear consensus concerning the factors that contributed to their emergence. For example, although scholars have commonly invoked a threat to regime or state survival as a key driving force behind the adoption of successful state-led growth strategies in Japan and the so-called “Asian Tigers” (i.e. Hong Kong, Singapore, South Korea, and Taiwan), the nature of this threat and its source remain largely unspecified.1 Where scholars do tend to agree, however, is in identifying the main impediment to the emergence of developmental states—namely resource wealth (e.g. Ranis and Schultz 1988; Ranis 1991; Auty 1997, 2000, 2001; Booth 1999; Sachs 1999; Ross 2001). In short, they argue that resource-rich states are at a critical disadvantage vis-à-vis their resource-poor counterparts, not merely because they tend to be predatory, but because they are governed by elites who are corrupt, rent-seeking, and myopic, rather than by elites who are benevolent, value-producing, and forward-looking. Thus, they are antithetical to fostering the kind of

1  The threat can take the form of multiple economic crises, which Chalmers Johnson (1982: 307) claims propelled Japan’s state-led growth; or the lack of political legitimacy, which Robert Wade (1990: 296) argues inspired Taiwan’s developmental elite; or military insecurity (e.g. Woo-Cumings 1999: 322). Richard Doner et al. (2005) is an important exception from this threat approach.

Resources as Constraints    619 institutions that are needed to successfully promote long-term economic growth aimed at an equitable distribution of gains across society. Yet, the experience of the Soviet successor states to date calls into question the notion that resource abundance is necessarily a detriment to the emergence of a developmental state, while resource scarcity is necessarily an advantage. First, the main impediments to emulating the twentieth-century model of a development state across these countries are ideological and structural, whether resource rich or resource poor. In other words, the dearth of developmental states in the region should not be attributed to these countries’ access to resource wealth, but rather to their shared Soviet legacy and the timing of their independence from Soviet rule. Second, these states also face similar impediments to adopting the new twenty-first-century model of the developmental state, impediments that are unrelated to resource wealth: namely, autocratic rule and weak civil society. In short, since the late 1990s, there has been a fundamental shift in thinking regarding the goals of development that emphasizes the need for a democratic state with close ties to civil society rather than a technocratic state with close ties to industrial elites (for details, see Evans and Heller, Chapter 37, this volume). Finally, the resource-rich states may actually have an advantage vis-à-vis their resource-poor counterparts when it comes to confronting the obstacles to building a twentieth-century developmental state, and they may suggest an alternative path whereby the twenty-first-century developmental state might emerge. This chapter adopts a “conditional approach,” which rejects the deterministic view that resource wealth necessarily fosters authoritarian regimes, unbalanced economic growth, weak states, and civil war, and instead specifies the conditions under which resource wealth can facilitate or undermine more desirable political and economic outcomes (e.g. Dunning 2008; Jones Luong and Weinthal 2010).2 As such, it contributes to ongoing debates among scholars of both the developmental state and the so-called “resource curse.”

1  The Twentieth-Century Developmental State While there is certainly no prototype of the “developmental state,” there is nonetheless a set of widely recognized shared characteristics that set such states apart from others, and, hence, warrant this classification (e.g. Johnson 1982; Amsden 1989; Wade 1990). First and foremost, these states are governed by elites who are committed to development as their highest priority; indeed, development becomes the ideological motivation and justification for the regime. Thus, in sharp contrast to predatory states, they place achieving long-term economic development over both short-term political gains and their own personal enrichment (e.g. Leftwich 2000). Second, these states possess an autonomous, well-trained, and ideologically coherent bureaucracy capable of implementing this development strategy. While this is most

2 

This is consistent with what David Waldner and Ben Smith (Chapter 38, this volume) describe as a “heterodox position.”

620   Pauline Jones Luong often equated with a Weberian bureaucracy (e.g. Evans 1995; Evans and Rauch 1999), it can also come in the form of a single “pilot agency” that orchestrates development from above (Johnson 1982: 320). In either case, the crucial element is meritocratic recruitment such that those who staff government agencies are more able to avoid “capture” by particularistic interests. Third, developmental states are characterized by “good” relations with industry; that is, government elites have the ability to work positively with industrial elites, whether in the private or public sector,3 in order to design and adapt an appropriate development strategy, that is, identify and support the winning industries. More importantly, bureaucrats are able to channel state resources most effectively when they have achieved a high degree of “embeddedness” with key social groups—here, industrial elites; in other words, when they are linked closely to those groups with whom they share a joint project of transformation via institutionalized channels through which they can constantly (re-)negotiate objectives and policies (Evans 1995). A final feature of the developmental state that is crucial to all three of the aforementioned components, and yet not always made explicit, is a prostrate civil society. This helps to ensure both that the particular developmental vision of the governing elite goes unchallenged and that societal pressures do not impede the implementation of this vision. Given that the twentieth-century model of the developmental state is based on an industrial policy that systematically discriminates against labor, for example, it is most likely to emerge where labor unions are weak.

2  Common Constraints to the Twentieth-Century Developmental State in the Former Soviet Union As I have argued elsewhere, the five petroleum-rich Soviet successor states—Azerbaijan, Kazakhstan, Russia, Turkmenistan, and Uzbekistan4—demonstrate all too well that weak institutions are not endogenous to mineral wealth (Jones Luong and Weinthal 2010). The experience of all the Soviet successor states over the past two decades also strongly suggests that the emergence of a particular set of institutions—those associated with the twentieth-century developmental state—is neither primarily nor solely dependent on a country’s access to natural resource wealth. The dearth of developmental states in the region should instead be attributed to the common obstacles they face due to a combination of their shared Soviet past and the timing of their emergence onto the international scene. This suggests that, at least in the former Soviet Union (FSU), there is no discernable disadvantage to being petroleum rich when it comes to the emergence of a twentieth-century developmental state. 3  Early models emphasized government relations with the private sector (e.g. Johnson 1982), whereas later models have incorporated the public sector (e.g. Wade 1990). 4 The seven petroleum-poor Soviet successor states are:  Armenia, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, and Ukraine.

Resources as Constraints    621

Ideological Constraints The key obstacle to the emergence of a twentieth-century developmental state in the FSU is the lack of an elite with a developmental vision. The root of the problem is not that post-Soviet elites prioritize short-term political gains and their own personal enrichment over long-term economic goals; rather, it is that they suffer from an ideological deficit that has fostered both their myopia and their predatory behavior. This deficit is twofold. On the one hand, the Soviet system promoted the need for an ideology5 to inspire elites and masses alike. On the other, both the Soviet legacy and the timing of independence have limited the basis for new ideologies to form. It is thus shared—more or less—equally across the FSU. Resource-poor countries are thus no more likely than are resource-rich countries to emphasize economic growth promotion because the elite “align[s]‌its interests with the low-income majority” (Auty 2000: 350). In fact, the two countries in which leaders claim explicitly to base their economic policy on doing what is best for the disadvantaged masses are resource-poor Belarus and resource-rich Uzbekistan. The preponderance of evidence gathered after the Soviet collapse suggests that ideology played a significant role in both motivating leaders and mobilizing society, even toward the last decades of the regime (e.g. Hanson 1996; Yurchak 2005). As several scholars have argued, the inability of Mikhail Gorbachev to produce a viable alternative to Marxist-Leninist ideology after exposing the communist system’s gross deficiencies precipitated the collapse of the Soviet Union (e.g. Hanson 1991; Brown 1996). This same failure has plagued his successors, so to speak, throughout the former Soviet Union. Like Gorbachev, their departure from and thus rejection of the Soviet system made it nearly impossible for them to continue to rely on communist ideology.6 Moreover, unlike leaders of developmental states, the Soviet legacy also made it difficult to derive legitimacy “from devotion to a widely believed-in revolutionary project” centered on short-term sacrifice in order to achieve long-term economic growth (Woo-Cumings 1999: 20). Instead, post-Soviet governing elites have relied on nationalist or ethno-nationalist appeals as the basis for creating a unifying ideology, often consciously converting Soviet slogans into national ones (e.g. Dave 2007).7 Achieving independence and securing sovereignty in the name of the nation—narrowly or broadly defined—became the primary basis for justifying the new economic and political order. The content of this new political and economic order, moreover, was primarily a product of both unrepresentative elites focused on short-term gains (Grzymała-Busse and Jones Luong 2002) and the dominant model of economic development at the time, that is, the “Washington Consensus.” In effect, these elites were presented with two polarized paths: 1) dismantle the communist state apparatus and build a market economy, beginning with price liberalization and voucher privatization; or 2)  adopt a “revised” Soviet 5 

I am defining ideology here as a belief system that justifies a preferred economic and political order. The contrast is China, where elites embarked on economic reform without questioning the legitimacy of Communist Party rule, and indeed, made successful economic growth a pillar of the regime’s ideology (e.g. Solnick 1996). 7  As others have argued, the reliance on ethno-nationalism was also a legacy of the Soviet system, which promoted ethnic identity and eroded class identity over time (e.g. Roeder 1993; Slezkine 1994). 6 

622   Pauline Jones Luong model of cradle-to-grave welfare at a minimum level of subsistence.8 Not surprisingly, most embarked down the former path, moving from Chalmers Johnson’s (1982:  18)  extreme of “plan-ideological” economic system to the other extreme of a “market economy” without even considering the middle option of a “plan-rational” system that characterized Japan and, later, the East Asian tigers. This path, in turn, served the interests of a myopic elite who could seize financial assets for themselves and use their initial political status to lock in their dual advantage; all the more so where the transition to markets remained incomplete (Hellman 1998). But some—namely, Belarus, Turkmenistan, and Uzbekistan—have held steadfastly to the latter path, albeit with varying degrees of emphasis on the “plan” versus the “ideology.” Among the three, Uzbekistan has achieved the greatest balance, managing to construct an ideology that justifies continued state control over most of the economy but stresses economic security and political stability over growth and democracy (e.g. March 2003). In contrast, Belarus and Turkmenistan have emphasized plan and ideology, respectively. Importantly, in no case has the continuation of a Soviet style economic and political system precluded well-positioned elites from enriching themselves and their closest allies. The international context into which the Soviet successor states emerged also hindered the emergence of an elite with a developmental vision because of the absence of an external threat. One well-recognized commonality across the developmental states of East Asia is that they faced some kind of a severe crisis—economic, security, or both— that compelled states’ leaders to prioritize economic growth in general and industrial transformation in particular (e.g. Johnson 1982; Wade 1990; Woo-Cumings 1999). In the clearest and most convincing rendition of this argument to date, Richard F. Doner, Bryan K. Ritchie, and Dan Slater (2005) attribute the rise of developmental states to “systemic vulnerability,” or when elites confront the simultaneous threats of mass unrest due to deteriorating living standards and a foreign invasion with a paucity of resources to counter these threats. The implication is that, even facing a severe economic and/or military crisis, leaders of resource-rich states are far less likely to prioritize development than leaders of resource-poor states, because they can essentially buy their way out. In the absence of such a crisis, it is impossible to assess the validity of this claim. However, this may serve as a powerful alternative explanation for why we have not yet seen the emergence of a developmental elite anywhere in the former Soviet Union. At the same time, the lack of a crisis magnifies the problem of an ideological deficit among post-Soviet elites, because it makes the need to generate an internal demand for development all the more essential.

Bureaucratic Constraints Although secondary to the need for an elite committed to development, the lack of a competent, coherent, and meritocratic (i.e. Weberian) bureaucracy has also hindered the emergence of a developmental state across the FSU.9 This, too, is due to the combined effects 8 This polarized choice was reinforced by the common notion that these were states in need of “transition” from a failed economic system rather than in need of economic “development.” 9  As Chalmers Johnson (1982: 306) emphasizes, a developmental elite is a prerequisite for the emergence of a developmental state. Moreover, in several cases, including South Korea and Taiwan, a Weberian

Resources as Constraints    623 of the Soviet institutional legacy and the timing of independence. The post-Soviet elites inherited states with varying degrees of administrative capacity but all were more capable than most developing countries. For example, in 1996 the Soviet successor states scored higher across all of the World Bank’s (2012 ff.) Governance Indicators, including effectiveness and control of corruption, than did the ten African states with the largest GDP in 2010.10 However, none possessed anything closely resembling a Weberian bureaucracy. Despite moderate degrees of competence and even meritocratic recruitment, the key deficiency was coherence, defined here as the ability of bureaucrats to implement policies strictly according to the law. In the late 1990s, for example, all former Soviet republics, with the exception of Belarus and the Baltic States (Estonia, Latvia, and Lithuania), had either medium or high levels of administrative corruption, according to the widely used EBRD-World Bank Business Environment and Enterprise Performance Survey (BEEPS; for details, see Hellman et al. 2003).11 It is noteworthy that among these, the only countries that had medium levels, and thus fell within ranges more comparable to countries in Central and Eastern Europe, were the two most well endowed with mineral resources—Russia and Kazakhstan. A more recent survey conducted by the Quality of Government Institute at the University of Gothenburg seems to confirm these results. According to this survey, the FSU countries score close to more developed countries such as Brazil and Indonesia and even some OECD countries when it comes to indicators of bureaucratic professionalism, and yet they score much lower when it comes to indicators of bureaucratic impartiality (for details, see Teorell et al. 2011). And here, too, the resource-rich states actually perform slightly better—not worse—than their resource-poor counterparts:  resource-rich Azerbaijan, Uzbekistan, and Kazakhstan receive the three highest scores on professionalism, followed by resource-poor Armenia.12 Nonetheless, in the context of an international system that emphasized state-dismantling over state-building, priority was placed not on increasing administrative capacity but rather on decreasing the reach of the state. More specifically, because markets, not states, were still being touted as the key to development, the mandate was to vastly reduce the state’s role in the economy, limiting its involvement to promoting markets. In most of the Soviet successor states, elites attempted to fulfill this mandate largely via the privatization of state property and the elimination of some of its basic welfare functions. By some estimates, real government expenditures fell by 50 percent or more in the first several years following independence across the FSU (Popov 2000). Only a handful of states— Belarus, Estonia, and Uzbekistan—resisted pressures to dramatically reduce the size of the state, and instead sought to maintain spending as close to pre-independence levels as possible (Popov 2000). Spending on health and education, for example, declined precipitously during the first decade of independence, and the human development index (HDI) plummeted—at least partly, if not mostly—as a result (see Figure 33.1). These spending patterns

bureaucracy had to be created over an extended period of time, and this was one of the key contributions of the developmental elite. 10  I use 1996 as the comparator because this is the first year for which these data are available for the FSU. 11  Administrative corruption refers to unofficial payments to public officials in exchange for preferential treatment. 12 Interestingly, resource-poor Moldova receives the lowest score for both professionalism and impartiality.

624   Pauline Jones Luong 0.9

0.85

Armenia

0.8

Azerbaijan Belarus Georgia

0.75

Kazakhstan Kyrgyz Republic Moldova

0.7

Russian Federation Tajikistan Turkmenistan

0.65

Ukraine Uzbekistan

0.6

0.55

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Fig. 33.1  Evolution of the Human Development Index (HDI) by country, 1993–2009. Note:  Data for 2010 are not included because it uses indicators that are previously absent, thus making comparison to other years difficult. Source: Compiled and calculated by the author from UN (1993–2010).

were reversed in some countries in the 2000s, but the majority still had not maintained or recovered the level of HDI recorded in the early 1990s by the end of the next decade. Among those countries that did manage to do so, two are resource rich (Kazakhstan and Uzbekistan), and two are resource poor (Kyrgyzstan and Tajikistan).

Economic Constraints Finally, the Soviet successor states—resource rich and resource poor alike—shared significant economic constraints with the emergence of twentieth-century developmental states. These took primarily two forms: structural and ideational. Structural constraints can be traced directly to the Soviet industrial legacy. Because each former republic was part of an integrated economy, industry was deliberately designed to supply particular goods and services to other parts of the Soviet empire. Not only were these industrial linkages severely disrupted after the Soviet Union’s collapse, leaving factories without critical inputs and diminishing “demand” for their outputs, but the newly independent states were left with misallocated human and physical capital. Thus, industrialization policy required more than coordinating investment and even restructuring inefficient state enterprises; it also required “recasting the human and physical capital frozen in socialist-era factories and skill profiles into forms and structures that can produce goods and offer services that are competitive on the world market” (Slay 2010: 2–3). In this regard, producers of raw commodities actually had a short-term advantage, because they could more easily tap into pre-existing markets outside the boundaries of the Soviet empire. Uzbekistan’s capacity to both sustain social spending and finance import

Resources as Constraints    625 substitution industrialization (ISI) in the 1990s, for example, can be attributed to its ability to begin exporting cotton abroad immediately after independence. The resource-rich successor states could also attract higher levels of foreign direct investment, which both Azerbaijan and Kazakhstan capitalized on to a much greater degree in the mid-1990s than did Russia, Turkmenistan, and Uzbekistan. Ideational constraints are tied to the timing of independence. The Soviet successor states emerged onto the international scene a decade before conventional understandings of what constitutes “development” had changed dramatically among international financial institutions, the IFIs (e.g. World Bank 2005: 1–23; Rodrik 2008). By the early 2000s, Amartya Sen’s path-breaking work had shifted the debate away from economic growth as the primary goal and indicator of development and towards a more comprehensive emphasis on the “expansion of capabilities of persons to lead the kind of lives they value—and have reason to value” (Sen 2000). This change in ideas was accompanied by a new model of development that, in contrast to earlier models, valued human development as an end in itself.13 One of its core requirements, therefore, is building human capital, for example, by directing state investment toward healthcare and education—two areas in which the FSU had an advantage at the beginning of the 1990s, but which it lost via the dismantling of the state functions discussed previously. At the same time, shifts in international markets reinforced the growing recognition that human development was both the underpinning of sustained economic growth and intrinsically valuable. As world demand declined due to shrinking economies in the West (and growing protectionism), IFIs also began questioning the viability of industrial policy aimed at export-led growth and emphasized instead the need to boost domestic demand, which sharpens the need to invest in education and job creation at home (e.g. Rodrik 2008). The Soviet successor states had thus attempted to restructure their economies according to ideas that were already outdated.

3  Common Constraints to the Twenty-First-Century Developmental State in the FSU Perhaps the greatest irony of IFIs’ recent conversion to Sen’s “capabilities” approach to development is that it suggests that an interventionist state is needed now more than ever. In essence, the emphasis on individual empowerment places the impetus on the state to expand its role beyond even what was required of the twentieth-century developmental state. Alongside a viable industrial policy,14 the state must implement a comprehensive social policy aimed at creating equity among its citizens—that is, “equal opportunities

13  It would be erroneous to claim that earlier models did not value human capital formation. Its reputed worth, however, was entirely instrumental rather than intrinsic (see e.g. Evans and Heller, Chapter 37, this volume). 14 As we will see later, scholars and practitioners have emphasized the twenty-first-century developmental state’s role in orchestrating industrial policy to different degrees.

626   Pauline Jones Luong to pursue a life of their choosing and [to] be spared from extreme deprivation and outcomes” (World Bank 2005: 2). More specifically, the mandate for state-led development has changed to include an emphasis on providing equal access to public goods and social services, such as healthcare and education, while also alleviating poverty and reducing, if not eliminating, inequality. In order to achieve these lofty goals, moreover, the twenty-first-century model of development requires that the state pursue a different kind of embeddedness. In order to successfully implement a comprehensive social policy, governments must establish broader linkages with their citizenry; specifically, they must reach beyond industrial elites and private capital to embrace civil society (e.g. Evans 2008; Rodrik 2008). The obvious implication is that authoritarian regimes will be less conducive to fostering a developmental state because they are far less likely not only to accept a role for civil society but also to empower civil society such that it can serve as a genuine “co-producer” in the delivery of public goods and social services (Heller 2001). In sum, while the twenty-first-century developmental state must be strong in ways similar to its twentieth-century predecessor, it requires a certain type of state capacity. Specifically, advocates of this approach to development argue that it necessitates a democratic state with close ties to a robust civil society rather than a technocratic state with close ties to powerful industrial elites (e.g. Evans and Heller, Chapter 37, this volume). The Soviet successor states thus also face similar impediments to adopting the new twenty-first-century model of the developmental state that are unrelated to resource wealth: namely, autocratic rule and weak civil society. One of the two main political deficits in the FSU is democracy. The CIS average for two of the most widely used indicators of the level of democracy (Freedom House 2012)15 and Voice and Accountability (World Bank 2012 ff.)16 is woefully low, and only a handful of countries, including Russia, scored above the CIS average between 1991 and 2010. It is worth noting that this average declined in nearly every FSU country during the first half of the 2000s. Also noteworthy is the fact that, contra the resource curse literature that links resource wealth to authoritarian regimes, according to these indicators, the petroleum-rich Soviet successor states are no less democratic than their resourcepoor counterparts (Jones Luong and Weinthal 2010: ch. 10).17 The third of these indicators, Polity scores, are arguably more accurate, both because they rate countries using a 21-point scale from -10 (most authoritarian) to +10 (most democratic), and because they provide consistent indicators over time rather than a snapshot view of regime type. Here, the Soviet successor states receive slightly higher marks on the level of democracy. Nonetheless, this indicator also suggests that there is no discernable relationship between petroleum wealth and level of democracy (Jones Luong and Weinthal 2010: ch. 10).

15 

Scores range from 1 (highest) to 7 (lowest). Scores range from -2.5 (lowest) to 2.5 (highest). Average does not include data for years 1997, 1999, and 2001 because they are not available. 17  According to the 2011 Freedom House report, for example, more than half (8/15) are classified as “consolidated authoritarian regimes.” While the remainder—outside the three Baltic countries—are classified as “semi-authoritarian” (1) and “transitional government/hybrid regime” (3). For details, see Freedom House (2011). 16 

Resources as Constraints    627 8

7

6

Armenia Azerbaijan Belarus

5

Georgia Kazakhstan Kyrgyz Republic

4

Moldova Russian Federation

3

Tajikistan Turkmenistan Ukraine

2

Uzbekistan

1

0

1997

1998

1999

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Fig. 33.2  Freedom House civil society scores, 1997–2010. Note:  Data unavailable for 2000. Source:  Freedom House (2011 ff.).

The other political deficit across the FSU is a robust civil society. This, of course, is directly related to the prominence of authoritarian and semi-authoritarian regimes in the region. When it comes to granting associational rights to non-governmental organizations (including unions), for example, the CIS average has not dipped below 5 since 1993, only two states (Armenia and Moldova) have maintained scores of 4 or below throughout both the first and second decades of independence, only one (Ukraine) has consistently improved its score in the second decade, and none has received a score better than 2.75 (see Figure 33.2).18

4  Alternative Paths to the Emergence of a Developmental State in the FSU Given the obstacles to the emergence of both the twentieth- and twenty-first-century developmental state in the FSU, we might conclude that no such possibility exists. Such a view, however, neglects both the historical origins of the mandate for state-led development and the diversity of strategies and trajectories among those states we now describe as “developmental.” It thus also overlooks the potential advantage that resource-rich states may have in promoting developmental outcomes in the twenty-first century. 18 

As is the case with the level of democracy, scores range from 1 (highest) to 7 (lowest).

628   Pauline Jones Luong The impetus behind calls for state-led development was the plight of late developers that, without state intervention, would remain hopelessly backward vis-à-vis early developers (Hirschman 1958; Gerschenkron 1962). State intervention was not viewed simply as desirable but as essential, because the state was considered uniquely capable of providing the two fundamental ingredients for fueling rapid and successful industrialization—beyond its access to surplus capital: the technocratic capacity to design and coordinate an industrial strategy, and the ideological capacity to amass broad societal support. Not coincidentally, these are two of the twentieth-century developmental state’s core features, and yet, oddly, both are de-emphasized in the new model of the twenty-first-century developmental state. As a result, its advocates have also downplayed the crucial role of visionary elites committed to expanding the economic pie for collective benefit as the precursor to the developmental state. The irony is that each of these three elements is also crucial to the emergence of a twenty-first-century developmental state.19 Putting capabilities expansion at the forefront of development does not preclude the need for economic growth, and in fact necessitates a certain amount of growth in order to finance education, healthcare, and poverty reduction. This, in turn, requires a viable industrial policy. In other words, even as its mandate shifts to social policy, the developmental state’s main role remains the “co-design and coordination of industrial development” in the classical sense (Breznitz 2005: 6). The current international context, moreover, warrants a different kind of industrial strategy that relies even more on the state’s assuming a leading organizational role as both chief technocrat and motivator. In short, domestic firms in developing countries face strong incentives to become multinational corporations, MNCs (Contractor et al. 2011), and yet they require significant state support in order to exploit these advantages (e.g. Hausmann and Rodrik 2003; Sabel 2009). By addressing these challenges, then, the state is in a unique position to convince entrepreneurs to adopt what they might consider to be a risky strategy (e.g. Rodrik 2008). Effective social service delivery also requires technocratic capacity. Technocrats have been crucial, for example, in the design and implementation of conditional cash transfer (CCT) programs across various municipalities and states in Brazil, including Bolsa Escola and later Bolsa Família (e.g. Lindert et al. 2007; Melo 2008). The policy shift toward capabilities expansion, moreover, must be preceded by a fundamental ideological shift that can be realized only via the emergence of a developmental elite. In the case of Brazil, for example, this policy shift was embodied in the 1988 Constitution, which emphasized social rights and the need to rectify the plight of the poor. Importantly, it was innovative and altruistic politicians—at both the subnational and federal levels of government—that made the implementation of such lofty goals possible (e.g. Lindert et al. 2007; Melo 2008). This is not to diminish the role that civil society has played, for example, in improving the quality of social service delivery (de Castro and Bursztyn 2008: 4), but rather to clarify that its role is secondary in terms of both timing and substance to that of both technocrats and developmental elites. And yet, despite these similar core features, both twentieth- and twenty-first-century developmental states have had distinct origins and followed diverse trajectories. As already mentioned, the elite that launched developmental projects in Japan and the Asian Tigers,

19  Indeed, this is why the most successful twenty-first-century developmental states—South Korea and Taiwan—were also highly successful twentieth-century developmental states (Evans and Heller, Chapter 37, this volume).

Resources as Constraints    629 for example, emerged from very different kinds of national-level crises. The source of such an elite in subsequent developmental states, including Brazil as well as China,20 in contrast, seems to have been both more evolutionary and primarily local (e.g. Segal and Thun 2001; Tsai 2007). Developmental states have also adopted different policies to promote the growth of domestic industry. Those among the first wave (i.e. 1950s–1980s), for example, opted to rely on the public versus the private sector to varying degrees, while those among the second wave (i.e. 1990s–2000s) have provided varying levels of state financial and diplomatic support to encourage domestic firms to expand abroad.21 Much of this diversity across twentieth- and twenty-first-century developmental states can be attributed to geography and timing. As others have acknowledged, the phenomenon of the twentieth-century developmental state was regionally concentrated; that is, largely peculiar to East Asia. It also occurred within a particular geopolitical context in which a large subset of the countries within this region pursued a similar industrialization strategy, because they faced similar external threats combined with similar internal constraints to respond to these threats (Doner et al. 2005). Chief among these constraints was a paucity of natural resource wealth. Simply put: resource scarcity made it imperative that these countries did not merely promote export-led growth but that they did so via “upgrading” or elevating their status “from lower-value to higher-value economic activities within global commodity chains” (Doner et al. 2005: 328). Outside East Asia, the emergence of developmental states has not only been rare but also limited to a single country within a larger geographical region. The link between external threats and resource scarcity as the primary internal constraint also does not seem to hold outside East Asia. Consider, for example, the fact that in Africa, resource-rich Botswana is the sole exemplar of a twentieth-century developmental state, and resource-rich South Africa is the sole contender for a twenty-first-century developmental state (e.g. Meyns and Musamba 2010). It is also worth noting that for developmental states among the second wave, including Brazil and Malaysia, the national oil company (NOC) has provided a ready-made “international champion” to launch the government’s highly effective industrial policy aimed at achieving internationalization across sectors (Jones Luong and Sierra 2011). In sum, the emergence of twentieth-century developmental states was geographically and historically bounded. Within this particular place and time, moreover, access to resource wealth played a distinctive role. Thus, there is no a priori reason for us to expect either the same set of conditions to foster developmental states in other regions and time periods or for the paucity of resources to play a pivotal role in their emergence. There is very good reason, however, to expect that twenty-first-century developmental states will emerge along multiple paths (Evans and Heller, Chapter 37 this volume). In our search for likely candidates, then, perhaps we should consider what conditions are likely to be most conducive to fostering the three aforementioned core features of a developmental state in a particular regional and international context. In the former Soviet Union, these conditions appear to be political stability combined with sustained economic growth. Consider the prospects for the emergence of a developmental elite. In a region dominated by authoritarian regimes and weak civil society, elites are more 20 

Scholars disagree over whether China can be classified as a “developmental state” (see, e.g., Pei 2006). lending to domestic firms pursuing internationalization via state-owned banks or development funds, for example, has been a fundamental component of Brazil and Malaysia’s industrial strategy, but not South Africa’s. 21 Directed

630   Pauline Jones Luong likely to pursue an expansion of the economic pie for collective benefit when their position is secure. In other words, only when the incumbent elites expect that they will be in power long enough to reap the benefits of economic expansion will they become developmental. Given the immense amount of rent-seeking that has occurred throughout the FSU (see Grzymała-Busse and Jones Luong, Chapter 31, this volume), this is understandably difficult to imagine. We should remind ourselves, however, that to be considered “developmental” elites do not have to be “immune to rent-seeking,” but rather have to provide some collective goods and “on balance” to promote rather than impede economic growth (Evans 1992: 148). We should also entertain the plausibility of Mancur Olson’s (1993) alternative scenario of “stationary bandits,” whereby incumbent security rather than insecurity can induce elites to both provide public goods and promote prosperity for society as a whole. When the country has already experienced some level of continued growth, moreover, such elites are more likely to feel secure in linking the regime’s domestic legitimacy to its economic performance. Political stability combined with economic growth can also promote the emergence of a developmental elite by fostering aspirations for regional and global leadership. Confident in their ability to sustain both power and growth, this elite may seek recognition outside of its own country for its—real and perceived—accomplishments. The elite’s own ambitions can thus act as a constraint on its desire for rent-seeking. Because they often lack international legitimacy, moreover, authoritarian regimes may actually be more likely to foster such ambitions. Political stability and economic growth are also essential ingredients when it comes to developing technocratic capacity. Given the massive decline in state expenditures and consequent loss of administrative capacity in most of the Soviet successor states in the 1990s, as well as the absence of domestic savings, economic growth may provide the only means for governments to finance the dual policy objectives of the twenty-first-century developmental state. Political stability helps to ensure that incumbents capture a sizeable share of revenue from growth, enabling them to build human capital and invest in industrialization simultaneously and thus to avoid the conundrum of which goal to prioritize (e.g. Koeberle et al. 2006). The demand for an industrial policy that facilitates the expansion of domestic firms into MNCs, moreover, makes state financing an essential ingredient. Where economic growth fuels higher standards of living, states also have a much greater chance of retaining and attracting bureaucrats who either have or are willing to acquire the necessary knowledge and skills to become technocrats. In this regard, growth also contributes more directly to a viable industrial policy in the current international environment of global recession, which necessitates stimulating internal demand for domestic goods. Growth also appears to have an independent effect on poverty reduction (Dollar and Kraay 2002). The states in which these two conditions have prevailed in the FSU are resource rich. Although many regimes have consolidated their power (Grzymała-Busse and Jones Luong, Chapter 31, this volume), the resource-rich states have benefitted from continued economic growth since the 1990s and much higher levels of growth since the 2000s than their resource-poor counterparts (Jones Luong 2011). As incomes have increased, leaders of some resource-rich states have not only witnessed increasing degrees of popular legitimacy but also been increasingly willing to link their legitimacy to economic performance.22 This is particularly the case in Kazakhstan, where rapid resource-led growth 22  See, for example, President Nursultan Nazarbayev’s “State of the Nation” addresses since 2005, available at: http://kazakhstanun.org/press-releases/annual-state-of-the-nation-address-of-thepresident-of-kazakhstan.html (last consulted 9 February 2014).

Resources as Constraints    631 Table 33.1  Government effectiveness Average Score, 1996–2010 Armenia Azerbaijan

Score 2010

Percentile Rank 2010

Change in Score, 1996–2010

39.5

-0.15

49.8

+0.26

-0.94

16.6

-0.84

22

+0.10

Score 1996

Percentile Rank 1996

-0.25

-0.41

-0.81

Belarus

-0.97

-0.41

39.5

-1.13

12

-0.72

Georgia

-0.30

-0.67

27.8

+0.29

64.1

+0.96

Kazakhstan

-0.61

-1.07

13.2

-0.27

44.5

+0.80

Kyrgyzstan

-0.65

-0.41

39.5

-0.63

30.6

-0.22

Moldova

-0.65

-0.37

41.5

-0.63

31.1

-0.26

Russian Federation

-0.46

-0.55

32.7

-0.39

41.6

+0.16

Tajikistan

-1.15

-1.46

5.4

-0.91

18.2

+0.55

Turkmenistan

-1.46

-1.20

11.2

-1.58

3.3

-0.38

Ukraine

-0.71

-0.78

23.4

-0.77

24.9

0.01

Uzbekistan

-1.00

-1.15

11.7

-0.80

23.9

+0.35

Note: Does not include 1997, 1999, or 2001. Source: World Bank (2012 ff.).

since 2000 has contributed to more favorable attitudes toward both the political regime and its market-oriented economic policies (e.g. Junisbai 2010). Part of the reason for this is that growth has contributed to improvements in human development in two separate but mutually reinforcing ways: first, it has had a direct impact on reducing poverty rates (e.g. Agrawal 2007); and second, it has helped finance increased spending on education, healthcare, and social assistance (including pensions).23 While Kazakhstan’s ruling elite has long held ambitions to be a regional and global leader, continued economic growth has bolstered this drive, because its own success is viewed as a model for other Central Asian countries (Simon 2009: 78) and because its economic strategy continues to rely on attracting foreign direct investment (FDI) beyond its petroleum sector. Growth has also enabled the petroleum-rich Soviet successor states to rebound from the decline in state capacity, which occurred as a result of huge budget cuts in the 1990s. While all of the Soviet successor states received persistently low scores throughout the 1990s and 2000s according to the widely deployed World Bank Government Effectiveness indicator,24 as Table 33.1 23  Welfare spending in Kazakhstan more than doubled from 2000 to 2010 (McCullaugh 2011). Spending across these categories over this same period was slightly higher in Russia and much lower in Azerbaijan (McCullaugh 2011). Concerning healthcare in particular, since 2000 the petroleum-rich countries have spent far more—both as a percentage of GDP and per capita—than their petroleum-poor counterparts. For details see: World Bank Development Database and World Health Statistics 2011, available at: http://www. who.int/whosis/whostat/2011/en/index.html (last consulted 9 February 2014). 24  Each country is assigned a score between -2.5 to 2.5 and a percentile rank that “rang[es] from 0 (lowest) to 100 (highest) among all countries worldwide” based on perceptions of the quality of public services, the civil service, and the government’s ability to formulate and implement policies (Kaufmann et al. 2010: 12).

632   Pauline Jones Luong illustrates, the countries with the greatest improvement over time are all petroleum-rich (except for Armenia and Georgia), whereas the sharpest drop in government effectiveness occurs among petroleum-poor countries (except for Turkmenistan). There is clearly still much room for improvement. And yet, two of the five petroleum-rich countries (Kazakhstan and Russia) and two of the petroleum-poor countries (Armenia and Georgia) have reached levels of government effectiveness that are comparable to Brazil’s when it launched its successful development strategy.

5 Conclusion In sum, the experience of the Soviet successor states to date calls into question the notion that resource abundance is necessarily a detriment to the emergence of a developmental state, while resource scarcity is necessarily an advantage. First, the dearth of developmental states in the region should not be attributed to these countries’ access to resource wealth, but rather to their shared Soviet legacy and the timing of their independence from Soviet rule. Second, these states also face similar impediments to adopting the new twenty-first-century model of the developmental state that are unrelated to resource wealth: namely, autocratic rule and weak civil society. Finally, the resource-rich states may actually have an advantage vis-à-vis their resource-poor counterparts when it comes to building a developmental state in the twenty-first century.

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Chapter 34

The Tr a nsfor m ation of  the Russi a n State Brian D. Taylor

1 Introduction State death is rare in the contemporary world (Fazal 2007), so the sudden demise of one of the two nuclear superpowers, the Soviet Union (USSR), was particularly shocking and unexpected. Reclassifying the corpse as an empire (Matlock 1995) only partially helps us understand how we went so quickly “from the impossible to the inevitable” (Beissinger 2002: 1). The USSR was widely seen as a strong and coherent state (e.g. Huntington 1968), which suggests either that we misunderstood the nature of this state or that stateness can change quite significantly in a short period of time. The trajectory of the core successor state of the USSR, Russia, raises further questions about how we understand stateness and what explains variation and change in it. At the turn of the millennium, Boris Yeltsin’s Russia was widely viewed by Russians and non-Russians alike as a weak state. Russia’s transformation since 2000 under Vladimir Putin is a much more contested affair, both in terms of how strong or weak this state is and what explains this outcome. This chapter will use the transformation of the Russian state as an important case for thinking about how we assess and explain stateness. More specifically, two issues loom large in our exploration. First, assessing stateness depends significantly on which dimensions of stateness are being investigated, and how we choose to measure them. Second, explaining changes in stateness is bound up with the perennial agent-structure debate, and different accounts of the role of rulers in the process. Structuralists are more inclined to see processes of “state formation” driven by impersonal forces, whereas agent-centered accounts are interested in “state-building” by specific leaders (Volkov 2002: 157). As we shall see, the lack of scholarly consensus on the nature and direction of Russian state transformation is directly connected to disagreements about how to measure and explain stateness. To simplify this scholarly dissensus, I  categorize arguments about the Russian state along two dimensions: whether they see the state under Vladimir Putin as weak or strong, and whether they prioritize agency or structure in explaining their assessment. I label the

638   Brian D. Taylor four basic accounts the liberal, manager, legacies, and Muscovite perspectives. Each frame highlights certain features of the transformation of the Russian state, and thus by necessity downplays other features of this process. This chapter begins in Section 2 with a review of the consensus among scholars in the 1990s that Russian state weakness was a key obstacle to further political and economic reform. Section 3 describes in detail the four perspectives on state-building under Putin listed in the previous paragraph. Section 4 elaborates on the sources of this dissensus, rooted in different ways of assessing stateness. Despite this disagreement, there is one area of commonality among most of this literature: the Russian state remains plagued by “bad governance”—corruption, poor protection of property rights, and weak rule of law.

2  The Russian State in the Early Transition: Stateness as a Cause The collapse of the communist bloc in 1989 and the USSR in 1991 was initially welcomed as a continuation and expansion of the “Third Wave” of democracy (Huntington 1991). At the same time, although the language of “transitions” was perhaps used too easily, for the most part post-communist specialists sought to emphasize important differences from other regions experiencing democratization, such as the simultaneous retreat from command-style centralized planning throughout the region and the sharp contests over national identity and state boundaries in some countries (Offe 1991; Kuzio 2001). Because of the multiple dimensions of transition, many scholars were uncomfortable with treating the changes in the post-communist world as just an extension of a broader worldwide process of democratization. That said, Jordan Gans-Morse (2004) shows that the transitions framework, although often approached critically, was more common than alternative lenses such as revolution, state collapse, or decolonization. A focus on revolutions would have highlighted the prominence of state weakness as a cause of fundamental change, and state-building as a critical arena in the aftermath of the revolutionary moment itself (Skocpol 1979). Instead, at least in the short term, state collapse and state weakness received little attention. This situation began to change in the mid- to late 1990s, as references to the state began to feature more prominently in scholarship on Russia.1 At first, scholars were most interested in the state not as an object of study in itself, but as a cause of other important outcomes. Most centrally, experts invoked the weakness of the Russian state as a key factor in the perceived political and economic failings of the so-called transition. Stephen Holmes (1996: 49 and 1997) argued this point clearly in two forceful essays, writing that “liberalization cannot succeed under conditions of state collapse, for the democratization of state authority is pointless if no state authority exists.” Similarly, market economies and private property rest on a functioning institutional and legal framework. Michael McFaul (1998: 193) characterized the Russian state in the 1990s as both “bad,” captured by economic oligarchs and thus not representing the interests of average Russians, and “weak,” 1  Excellent work on the Soviet collapse that emphasized statist themes also began to appear (Solnick 1998; Bunce 1999; Beissinger 2002; Derluguian 2005).

The Transformation of the Russian State    639 lacking the capacity to implement decisions, and thus “one of the greatest impediments to deepening both political and economic reform.” Detailed studies of specific issue areas demonstrated the low autonomy and weak capacity of the Russian state. Volkov (2002) showed how in the 1990s the protection of property rights was carried out by “violent entrepreneurs”—first bandits and mafia groups and then increasingly “privatized” state agents from the police and other law enforcement agencies. The ideal state of Douglass North (1990) and Max Weber (1946 [1919]), in which property rights are protected as a public good by state agents possessing a monopoly of legitimate violence, remained a distant goal. In the fiscal realm, David Woodruff (1999) demonstrated that a more fundamental process than the typical focus on “economic reform” was the difficult effort to achieve monetary consolidation in which the state would assert sovereignty over money, rooting out barter and regional forms of payment. Center-regional relations were marked by vigorous battles in which powerful governors used extra-constitutional and anti-constitutional means to resist Moscow’s efforts to extend its power throughout the country’s territory (Stepan 2000; Kahn 2002). Some analysts (Galeotti 1999; Baev 2001) argued that the central government was losing control over not only law enforcement agencies but also the armed forces, raising the question of whether Russia would go the way of the USSR (Evangelista 2002; Hale 2005). By the end of the 1990s and Boris Yeltsin’s presidency, a seeming consensus had emerged that state weakness was a defining feature and major problem of the Russian transformation. The emerging scholarly consensus was captured in several edited volumes on state-building (Smith 1999; Sperling 2000) and a review essay on “Bringing the Russian State Back In” (Roberts and Sherlock 1999). Cynthia Roberts and Thomas Sherlock (1999) argued that the Soviet collapse had left the Russian government without adequate institutional mechanisms to enforce its rules or decisions, as well as with attendant corruption by administrative personnel, and that rulers had little incentive to engage in long-term state-building projects, but were instead using state resources to attract political support from other elites.2 The Russian state’s low autonomy from the oligarchs and weak institutional capacity meant that it was likely stuck in a “partial-reform equilibrium” (Hellman 1998) in which further market reform and democratization would be difficult.

3  State-Building Under Putin The Western scholarly consensus by the turn of the millennium on the obstacle presented to further reform by state weakness was reflected in a simultaneous elite agreement in Russia that state-building was the most important priority for Russia’s new president, Vladimir Putin. Putin (1999) articulated the issues clearly in his first major public statement as ruler. He noted that Russia has a strong state tradition, different from liberal societies like England or the United States, and that for Russians the state is the “source and guarantee of order, the initiator and prime moving force of any change.” Russia, he

2  For more on elite competition and post-communist state-building, see Grzymała-Busse and Luong, Chapter 31, this volume.

640   Brian D. Taylor declared, “needs strong state power and must have it.” At the same time, he added that this strong state would be a “democratic, rule-of-law, capable federal state.” There is broad agreement that Putin changed Russian politics in highly important ways.3 There is less consensus, however, on how to describe the logic of Putin’s state-building strategy and its results. Scholars differ both on the extent to which Putin’s actual policies affected Russian stateness and on how effective these policies were. Those who believe his policies were highly consequential lean towards the agency side of the agent-structure debate, whereas those who downplay his personal preferences embrace more structuralist accounts. Furthermore, some analysts believe that the Russian state is once again powerful, whereas others believe it remains quite weak and not significantly different from Yeltsin’s Russia. These alternatives give us four basic accounts of the transformation of the Russian state: 1) Liberal. A liberal account gives considerable weight to Putin and his policies, but contends that he pursued a fundamentally flawed authoritarian state-building strategy, one that undermined democracy while leaving the Russian state weak. 2) Manager. This perspective also maintains that Putin’s influence was paramount, but believes he was a highly successful state-builder. This is arguably the dominant view in mainstream commentary about Putin, although its adherents differ on whether Putin was a “bad” manager whose KGB background led him to recreate a contemporary version of the Soviet state or a “good” manager whose state-building efforts will ultimately pave the way for a long-term transition to democracy. 3) Legacies. This viewpoint agrees with the liberal account that the Russian state under Putin remains weak, but downplays his role in this outcome. Instead, state weakness is a largely inevitable result of the institutional inheritances from communist rule. 4) Muscovite. This structural perspective believes the Russian state is once again strong after the chaos of the Soviet collapse and its aftermath. However, it explains this outcome not in terms of personality or policies, but rather in terms of historical regularities conditioned by factors such as geographic position, international standing, and political culture. The rest of this section discusses these four alternatives and what they imply for studies of state transformation.

Manager The dominant view of Russian state transformation sees Putin as a highly effective manager who rebuilt a strong Russian state after Yeltsin’s “wild ’90s.” For example, the journalist C. J. Chivers (2008) maintained at the end of Putin’s second term as president that “Putin’s signature legacy” was the building “of a more sophisticated and rational police state than the failed USSR.” Other prominent analysts took similar positions, with Thomas Graham (2008) hailing Putin as a “modernizing Czar.” 3  Note that I treat the Dmitriy Medvedev presidency largely as a continuation of Putin’s rule, rather than a separate period with a distinct approach to state-building.

The Transformation of the Russian State    641 Putin’s state-building strategy was based on his stated desire to “restore vertical power.” This was true in several important realms. In federal relations, Putin wanted to bring wayward governors back under central control, believing they had achieved too much independence under Yeltsin. He imposed greater central oversight and eventually cancelled gubernatorial elections from 2004 until 2012. Whether Putin had restored a necessary balance to center-regional relations (Willerton et al. 2005) or returned Russia to a form of “sham federalism” (Ross 2005) similar to Soviet federalism, his regional policies were seen as highly consequential. Similarly, in the economic sphere, Putin replaced the “fragmented and competitive” system of crony capitalism inherited from Yeltsin with a “centralized and noncompetitive” version of crony capitalism (Sharafutdinova 2010). Political oligarchs, or, more precisely, those oligarchs who might pursue a different set of policies than those endorsed by Putin, were expropriated, jailed, or driven into exile (Tompson 2005). Examples of Putin’s approach could be extended to several other realms, such as the legislature (Chaisty 2008), political parties (Gel’man 2008), and civil society (Richter 2009). Those who adopt the manager approach to state-building under Putin tend to see a coherent set of plans to rebuild state power and a largely successful effort in this respect. The disagreement among this group of analysts concerns not whether Putin was a successful manager, but whether his ends were good or bad. The “bad manager” school sees Putin as a largely unreconstructed KGB agent who built up state power by killing democracy and pluralism (Kryshtanovskaya and White 2009). The “good manager” adherents tend to embrace a “sequencing” logic, which maintains that efforts to introduce democracy under conditions of state fragility are likely to fail, and that democracy should be delayed until after state-building. Tilly (2007: 23, 133–137) argued that the same steps that were “dedemocratizing Russia” were also “state strengthening” moves, such as the end of governor elections, efforts to rein in the oligarchs, and restrictions on the media and non-governmental organizations (NGOs). He suggested that an authoritarian turn in the short run was necessary for increasing Russian state capacity, and that in the long run this would allow for democratization as well. Perhaps the most original sequencing argument that justified Putin’s state-building strategy was that of Ottorino Cappelli (2008), who maintained that the key to understanding Putin’s approach was the recognition that Russia today is in a “pre-modern” condition more akin to feudalism than to the modern states of the West, with the center dominated by both private actors and the periphery. By necessity, Russia had to pass through “absolutism” with the use of violence, patrimonialism, and corruption to centralize “rapacious racketeering” at the national level. For authors in this camp, the diagnosis that the weak state in Yeltsin’s Russia was an impediment to further democratization demonstrated the necessity of Putin’s state-building strategy, one that was generally successful.

Liberal The liberal account, or perhaps critique, of Putin’s state-building strategy agrees with the manager perspective that agency and leadership matter. It differs by contending that Putin’s approach to state-building has been a failure, with the Russian state not noticeably stronger now than the one Putin inherited in 2000. The liberal view is consistent with

642   Brian D. Taylor Thomas Carothers’ (2007) general critique of sequencing—delaying democracy in order to build a stronger state and the rule of law is a mistake, because autocrats are generally terrible at both of these tasks. McFaul and Kathryn Stoner-Weiss (2008; see also Stoner-Weiss 2006) set out the liberal account quite clearly. After cataloguing the increasingly authoritarian nature of Putin’s Russia, they maintain that in key areas of governance such as the provision of security, secure property rights, and the delivery of public services such as healthcare, the Russian state became less, not more efficient. Moshim Hashim (2005) describes Putin as a “strong leader in a weak state,” noting that his efforts to achieve greater autonomy from competing sources of power, like oligarchs and regional leaders, did not generate more capacity. The state itself remained weak, corrupt, and arbitrary, and would remain so without effective institutions of horizontal accountability and a stronger political and civil society. In my own work (Taylor 2011) I have argued along broadly similar lines. Although there was some increase in state capacity under Putin, that came mainly in the implementation of what I call “extraordinary tasks,” such as selectively targeting regime enemies— oligarchs, opposition politicians, recalcitrant governors, etc. A  “regime of repression” (Beissinger 2002) was built that employed “low intensity coercion” (Levitsky and Way 2010) more effectively than under Yeltsin. But the capacity of the state in other, more routine realms, such as providing personal security against crime or terrorist attacks, or protecting property rights, was broadly similar to that in the 1990s. I argue that this result can be explained by a neglect of “state quality”—whether the state and its officials serve the interests of the population in a fair manner that promotes the general welfare. Why did Putin pursue his particular version of authoritarian state-building? The most cynical account, which is broadly consistent with a rationalist account of state leaders as predatory revenue maximizers (Levi 1988; Olson 1993), contends that Putin had no real interest in strengthening the state, but was simply preying on the state (Ganev 2007) for the benefit of himself and his cronies. This version is not without merit (Dawisha 2011), but it is not necessary to adopt this version of events to explain Putin’s actions. The liberal critique, like the “bad manager” account, sees his strategy as a product of his particular worldview, and that of his allies from military and security forces, the so-called siloviki (Kryshtanovskaya and White 2003). Putin’s professional background as a secret policeman and a bureaucrat, not a politician, played a very important role not only in what he defined as the key problem facing Russia—state weakness—but also in his strategy for combating it. Putin’s cure for state weakness depended on a particular state-building strategy that Hanna Bäck and Axel Hadenius (2008) label “steering from above.” Thomas Ertman (1997) calls this the authoritarian, or monocratic, strategy, which he contrasts with a constitutionalist, or power-sharing, strategy—what Bäck and Hadenius call “steering from below.” Given Putin’s background, it probably never occurred to him that the way to increase state capacity was to constrain the executive and empower other state actors by horizontal accountability and society by vertical accountability (O’Donnell 1998). This liberal critique of Putinism, which suggests that greater democracy and liberalism would have strengthened the state, is weakened because of its reliance on an unproven counterfactual. Sequencers would argue that the Russian state was so weak that its capacity had to be built before a meaningful democracy, based on the rule of law, could be introduced. A more fundamental challenge comes from structural accounts, which downplay the role of agency in state formation. Two alternative structuralist stories exist for

The Transformation of the Russian State    643 contemporary Russian state formation—one that sees a return to a classic “strong state, weak society” pattern of development, and a different narrative that sees the persistence of a weak state and a weak society after communism.

Muscovite The structuralist account that sees contemporary Russia as a strong state assumes that state formation is driven by historically conditioned patterns. Thus the label Muscovite, which implies that a strong authoritarian state is a return to Russia’s natural condition. This approach might be considered cultural or historical, and it is underpinned more by a circular than a linear logic. The basic argument, although not applied to Putin, is sketched in a highly stimulating précis of Russian history by Marshall Poe. Poe (2003) contends that the signal fact about Russian history for 500 years was its ability to hold off the more advanced and more powerful states of Western Europe, and that it did so by building a strong, centralized autocracy that could close the borders, control the economy, and focus on military power. This pattern recurs in Muscovy, Imperial Russia, and the USSR. Thus, according to Hedlund (2005, 2006), there is a “Muscovite matrix” of institutional forms to which Russia, in path dependent fashion, continually returns. Although this institutional matrix occasionally breaks down in “times of trouble,” such as in the early seventeenth century, during the Russian revolution, and under Mikhail Gorbachev and Yeltsin, eventually Russia reverts to a “service state” in which property rights are insecure and elites are bound to the state. The Muscovite approach differs from the alternatives by explicitly placing the Russian story in an international context. The nature of the Russian state throughout the centuries can be explained by second-image reversed pressures (Gourevitch 1978), especially war (Hintze 1975). Geography also plays a key role, with Russia’s location and climate creating high “costs of production” and high “costs of security” (Lynch 2005) that make an autocratic, patrimonial state and a weak, dependent society a likely institutional outcome. Some versions of the Muscovite perspective move in the direction of political culture arguments about inherent Russian authoritarianism (Rosefielde and Hedlund 2009: 9–11). Gerald Easter (2008) provides a strong statement of the basic logic of the Muscovite perspective when applied to Putin’s Russia, an account he labels “realist,” in contrast to the liberal one described earlier. For Easter, Russia under Putin is a “normal police state,” arguing that Russia has had a strong state only when society is subordinate to the state and the control of wealth and power is centralized in the executive. Thus, coercion dominates law as an instrument of rule, the bureaucracy is fundamentally patrimonial, an ideological “cult of the state” is promoted, and the economy is a form of “concessions capitalism” in which large industries remain under state control. For Easter and others in this tradition, it is not that Putin was not important or did not make choices, but the policies he pursued come as no surprise to those who understand the deep currents of Russian history. One potential question faced by a structural approach to state formation that hinges on longue durée historical, international, geographic, and cultural factors is the potential for change in these driving forces. For example, Allen Lynch (2005) stresses that in the past poor geographic conditions and international pressure from Europe led to a coercive and patrimonial approach to Russian state-building that created an autocratic state

644   Brian D. Taylor unconstrained by society. But the title of his book, How Russia Is Not Ruled, suggests the weaknesses of this model, and he indicates that in the current “liberal world order” the Russian state is likely to remain weak and fragile. For Lynch, then, a different international system makes a strong autocratic Russian state less likely. Further, Lynch looks to different, more recent structural forces—the legacies of communist rule—as another key force shaping Russian stateness.

Legacies Like the Muscovite approach, the legacies approach also thinks state formation is driven much more by structural forces than leadership decisions. However, for legacy arguments the structural determinants of stateness are more recent, located in the communist experience. They also lead to a different outcome than a traditional Muscovite strong state—a weak, post-communist state. The foundational statement of the legacies school came from Ken Jowitt (1992), in what was an early rejoinder to what he saw as the unwarranted optimism of the transitions school. The post-communist world was not a blank slate, but one profoundly shaped by “the cultural, political, and economic ‘inheritance’ of forty years of Leninist rule” (1992: 286). Most centrally for stateness, Leninist regimes had failed to create a “culture of impersonal measured action” among state officials (Jowitt 1992: 291), which made any efforts to build state capacity in the region a very uphill battle. As noted, Lynch (2005) also invoked legacies as an explanation for Russian stateness. Lynch notes the ability of some late-Soviet elites to gain private economic control over previously state-owned economic assets. This process of “stealing the state” (Solnick 1998) meant that the new Russian state had little capacity to adopt and implement economic or political reforms that advanced the general interest, particularly given the weakness of post-communist societies. One issue for legacy accounts of state formation in the post-communist world is that they seem to imply a uniformity of conditions in the post-communist world that is hard to square with radically divergent outcomes across the region. However, Grigore Pop-Eleches (2007) contends that differences in the type—cultural, economic, institutional—and strength of legacies across the region can explain much of the variation in outcomes. Further, the role of supranational organizations such as the European Union in “adopting” many of the states of Central and Eastern Europe may also explain the divergent trajectories (Howard 2006). In contrast, the post-Soviet non-Baltic states were condemned to weak stateness and non-democratic regimes. Thus, in the post-Soviet region we see “varieties of weak states” (Tsygankov 2007), but no strong states.

4  The State of the Russian State Scholars of the Russian state have offered divergent accounts of its post-communist transformation, both in terms of the outcome of this process and its causes. I label these accounts the manager, liberal, Muscovite, and legacies perspectives. Of course, as the

The Transformation of the Russian State    645 example of Lynch (2005) suggested, not all work on the Russian state fits neatly into one of these categories, but this basic scheme does capture the diversity of the literature. The rest of the chapter looks at different measures of stateness and what they tell us about this debate. Despite the different arguments about how to assess Russian stateness, one underlying area of congruence comes through—bad governance is a persistent problem. Thus far the evaluation of Russian stateness has been confined to the relatively loose notions of “weak” and “strong.” Gabriel Almond (1988: 869) complained that terms such as “state strength” were employed so loosely that “the neostatist movement … cannot expect this approach to research to be taken seriously.” Neostatists responded to this challenge by refining both concepts and measures. For example, most scholars treated stateness as multidimensional, such as the distinction between state capacity and state autonomy (Skocpol 1985) or between infrastructural and despotic power (Mann 1986). Other researchers broke down these subtypes further or developed theoretical accounts of why certain types of these attributes, such as “embedded autonomy” (Evans 1995), were particularly important for explaining outcomes such as economic development. Similarly, considerable thought and effort have gone into attempts to develop better quantitative measures of aspects of stateness (e.g. World Bank 2006; La Porta et al. 1999). We see a similar degree of conceptual and measurement refinement when looking at the literature on the Russian state. Some scholars have followed Theda Skocpol and analyzed state capacity and autonomy (McFaul 1998; Sperling 2000), while others have emulated Mann and examined infrastructural and despotic power (Stoner-Weiss 2006). There is considerable political economy work on the Russian state that broadly takes its cue from Douglass North and the new institutional economics, investigating the ways in which the Russian state does—or does not—protect property rights, regulate markets, and collect taxes (e.g. Volkov 2002; Gehlbach 2008; Frye 2010). Further, like the general comparative work on state capacity, scholars have tried to think about different types of capacity, whether it be fiscal capacity (Easter 2006), or multiple categories, such as Roberts and Sherlock’s (1999) discussion of institutional, political, and administrative capacity or William Tompson’s (2005) distinction between coercive, extractive, regulatory, rule-making, and administrative capacity. Anna Grzymała-Busse and Pauline Jones Luong (Chapter 31, this volume), writing about the post-communist region as a whole, conceptualize state-building as the creation of formal institutions such as constitutions, electoral rules, property right regimes, and civil service and administrative structures. Verena Fritz (2007) and Taylor (2011), following the literature on government quality (La Porta et al. 1999; Rothstein and Teorell 2008), have introduced “state quality” as a separate dimension of stateness. Not surprisingly, how one conceptualizes and measures stateness has important implications for how one assesses the nature of the Russian state. This goes to the heart of the debate about the current strength of the Russian state. Grzymała-Busse and Jones Luong (Chapter 31, this volume) implicitly code Russia as a case of “consolidated” state institutions, but they are silent on the strong versus weak debate. Hashim (2005) suggests that Putin increased state autonomy from “societal, regional, oligarchic, sectoral and parliamentary interests” but not state capacity in terms of the ability to effectively implement policies. Stoner-Weiss (2006), examining infrastructural power in terms of center-regional relations, also finds little change in the ability of the central state to overcome the “business-government” nexus at the regional level. Easter (2006) finds

646   Brian D. Taylor a definite increase in fiscal capacity. Vladimir Popov (2004) observes not only an increase in tax capacity, but also a stronger coercive and monetary monopoly at the end of Putin’s first term. Taylor (2011), using a variety of measures of state capacity and quality, finds a small but noticeable increase in some aspects of state capacity (fiscal, repressive), little increase in other realms (such as the protection of property rights and the establishment of law and order by fighting crime and terrorism), and no change in state quality (countering corruption, enforcing the rule of law, accountability to citizens). Steven Levitsky and Lucan Way (2010) detect a noticeable increase in state coercive and organizational capacity under Putin. Tompson (2005) also contends that Putin’s Russia has strong coercive capacity but severe weaknesses in the provision of state services, effective regulation, and the protection of property rights. Volkov (2009) generally agrees with Tompson, finding an increased coercive capacity and greater control over the economy, but a low quality of public goods and a weak rule of law. Thus, adjudicating the debate about whether the Russian state under Putin is strong or weak depends crucially on what aspects of stateness are being measured. Summing up the above findings, the dominant view seems to be that state autonomy has increased, state quality has not improved, and change in state capacity is variable, with improvements in some realms (repression/coercion, fiscal) and not others (service delivery, property rights protection). Further, we would clearly witness regional variation in stateness, with the North Caucasus in particular a region of relative state weakness (Taylor 2011). To gain further traction on the disputed nature of contemporary Russian stateness, I  look to two attempts to create multi-component, cross-national indexes of stateness. Focusing specifically on the post-communist region, Jessica Fortin (2010, 2012) constructs a quantitative index of state capacity based on five components: tax capacity, property rights enforcement, contract intensive money (ratio of currency to bank deposits), corruption, and infrastructure reform. Russia sits slightly below average in this index, both in terms of ranking (15th out of 26 countries) and in terms of score on the standardized index. Rankings generally correspond to expectations, with wealthier Central and Eastern European EU member states at the top, and poorer Central Asian and South Caucasus states at the bottom. Overall, Fortin puts Russia in the “weaker state” category. Like most of the post-communist states, Russia shows some improvement over time, although initial capacity is a very strong predictor of future levels. This finding would seem to support a structural or legacies account of state-building, with policies and leadership mattering little. However, this conclusion seems unwarranted given that much of the data for the earliest years had to be imputed from later years, so it is not clear that Fortin has a valid measure of initial state capacity. Finally, it is worth noting that Fortin’s measure is focused specifically on administrative capacity and the provision of public goods, and thus does not capture other dimensions of stateness such as coercive capacity or state autonomy. A second effort to measure stateness, specifically good governance, is the World Bank Worldwide Governance Indicators (WGI) project.4 WGI measures six components of governance—Political Stability/Absence of Violence, Government Effectiveness, Regulatory Quality, Rule of Law, Control of Corruption, and Voice and Accountability—for most 4 

For data and discussion, see World Bank (2014 ff.) and World Bank (2006).

The Transformation of the Russian State    647 world states since 1996. Russia’s WGI scores for 2011, the twentieth anniversary of the Soviet collapse, ranged from the 42nd percentile ranking (compared to all states) for government effectiveness down to the 13th percentile ranking for control of corruption. If we compare Russia in 2011 to the other non-Baltic post-Soviet states, Russia performs better than the regional average in four categories and worse in two, although for most categories the difference is not significant. If we compare Russia to its income category worldwide in 2011 (upper middle income by World Bank measures), Russia performs considerably worse. The average upper-middle-income country scores around the 50th percentile in all WGI categories. In contrast, Russia ranks at around the 25th percentile or lower in the majority of categories. These data are obviously not definitive, but along with Fortin’s measures they at least raise questions about the central claim of both the manager and Muscovite perspectives— that Russia under Putin is a strong state. WGI data suggest that Russia is a weak state in most categories compared to global averages and its income peers, and an average state when compared to its generally poorer post-Soviet neighbors. Of course, the Muscovite account would not be surprised by inadequacies with the rule of law, voice and accountability, and control of corruption, which are consistent with historical Russian patterns. The data also support the point that stateness is a multidimensional concept, with Russia performing considerably better in some realms than others. Moreover, the snapshot approach tells us nothing about change over time, which is central to any evaluation of state-building in post-communist Russia. There is little disagreement that the Russian state after the Soviet collapse was quite weak—the question is what has happened in the two decades since independence. Figure 34.1 shows change over time in stateness/governance. Governance in Figure 34.1 is a combined WGI measure, averaging five of the six scores—absent Voice and Accountability, which is more a measure of regime type than stateness, and is also the indicator which saw the biggest drop under Putin. For the WGI governance average the raw scores are shown: possible range 2.5 to −2.5, with 2.5 indicating strong performance across the measures and −2.5 indicating weak performance. Figure 34.1 shows a relatively stable, low level of stateness for Russia from 1996–2011. There is little change over time, with a slight decline from 1996–2000, a moderate jump up in 2002, and then a leveling off. This time series of Russian governance, to the extent that it represents a valid measure of state strength, raises further questions about the manager and Muscovite perspectives, which claim that Russia under Putin became a strong state. Moreover, given that in general richer countries tend to have stronger states, it is striking that the growing wealth of Russia—from 1997 to 2010 Russian GDP per capita (PPP) rose from $5,722 to $19,971, according to World Bank data—apparently had little impact on state strength. Overall, multiple assessments of Russian stateness provide a mixed picture, but they tend to suggest that Russia remains a relatively weak state in most respects. Quantitative measures from Fortin and WGI show relative weakness in most categories and, more importantly, little change over time. More detailed analyses provide a more mixed picture, with many experts seeing improvement in at least some realms under Putin, yet little change in other areas. If we take the qualitative and quantitative assessments together, one area of general consensus does emerge: regardless of how one evaluates the overall power or strength of the state, most analysts see a failure of good governance. Weak property rights, high levels of corruption, and the “unrule of law” (Gel’man 2004) have been

648   Brian D. Taylor 2.5 2.0 1.5

World Governance Indicators

1.0 0.5 0.0 –0.5 –1.0 –1.5 –2.0 –2.5

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Year

Fig. 34.1 Combined Worldwide Governance Indicator (WGI) scores for Russia, 1996–2011. relatively constant attributes of the Russian state throughout its post-Soviet history, and there is considerable consensus on this point.

5 Conclusion After a brief period of early neglect, the transformation of the Russian state has been a topic of considerable scholarly investigation since the late 1990s. The positive aspects of this attention are both a renewed consensus on the importance of state-building, and many rich studies of various aspects of the process. But this consensus on the importance of the state, and the earlier agreement that state weakness was an important factor in explaining the perceived failure of democratization and marketization under Boris Yeltsin, is counterbalanced by remarkable dissensus on the outcomes of state-building since Vladimir Putin rose to power in 2000. Scholars cannot agree on whether the Russian state is now strong or weak, nor can they agree on the extent to which the state of the Russian state is best explained by leadership and policies or by longer-term historical and structural factors. At one level this conclusion is discouraging, calling into question the possibility of the cumulation of knowledge when scholars cannot agree on fundamental issues of methodology, epistemology, and ontology. Different measures of different aspects of stateness lead to

The Transformation of the Russian State    649 different results, and endogeneity and other common problems of causal complexity make it hard to disentangle the relationship between different factors. This problem, of course, is hardly unique to studies of the state. On the other hand, the agreement that Russia is plagued by bad governance—insecure property rights, high corruption, the weak rule of law—is both important and a foundation for future scholarship. Disagreement persists about whether bad governance is a product of particular state-building strategies (the liberal and “bad manager” view), a largely unavoidable consequence of historical pre-communist or communist inheritances (the Muscovite and legacies approaches), or of a series of difficult problems that can be tackled now that some measure of state capacity has been rebuilt over the last decade (the “good manager” perspective). Variation within the post-communist region on this issue may give us some leverage toward resolving this debate, and some of the work reviewed in this chapter has attempted to disentangle the competing explanations for these differences. Another way this debate may be resolved is by future developments. The Muscovite perspective, with its circular logic, sees Russia as largely stuck in an institutional matrix of bad governance, one from which it will be hard to break free. Legacy accounts, in contrast, are somewhat more hopeful about the long-term prospects for change, given generational replacement (Howard 2003:  157–159). Agency-centered accounts also suggest that change is possible, particularly if there is leadership replacement, although obviously the skills and worldviews of new leaders would matter greatly. Liberals would predict that only democratically inclined leaders will be able to tackle bad governance, and assert that the state will remain weak overall as long as problems such as corruption and weak property rights persist. Alternatively, the manager perspective would warn that weak leadership of any stripe could potentially make things worse, possibly reversing some of Putin’s achievements. Given the practical importance of bad governance, especially for Russians themselves, one can only welcome further research on this question. The existing cleavages in the literature, however, suggest that scholarly agreement will not come easily or soon.

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Chapter 35

Chi na

Economic Liberalization, Adaptive Informal Institutions, and Party-State Resilience

Kellee S. Tsai

When Mao Zedong passed away in 1976, the People’s Republic of China (PRC) had a socialist economy dominated by state-owned enterprises and agricultural collectives. Private businesses were illegal, and the country had severely restricted the inflow of foreign capital since the consolidation of communist rule. By the beginning of the twenty-first century, however, China was the leading destination of foreign direct investment in the world, the private economy was generating more output than the state sector, and over 200 million rural residents had migrated to urban areas. How can the endurance of China’s communist party-state be explained in light of these dramatic structural transformations? The persistence of one-party rule in China is particularly remarkable given the proliferation of potential threats to regime stability. Many of these stresses on the system are associated with the extraordinary pace of private sector development. Within the span of three decades, about 30 million private businesses were established, leading external observers to portend that China’s emergent “capitalist class” would provide the basis for a transition to democracy. In the process of economic liberalization, income inequality and corruption have reached pre-revolutionary levels, and deterioration in public order is evidenced by official acknowledgement of the increasing incidence of riots, strikes, protests, and other “mass incidents.” Meanwhile, several communist parties in the former Eastern bloc have already experienced a full cycle of dissolution and political reconstitution. Yet the Chinese Communist Party (CCP) continues to monopolize political power against what are conventionally understood to be powerful odds against authoritarian survival: rapidly growing commercial and middle classes, official venality, social instability, and the demonstration effect of regime transition in former socialist countries. In order to explain regime durability under these circumstances, this chapter re-conceptualizes the analytic issue as one of the party-state’s institutional resilience and adaptability to informal practices. China has maintained the same type of regime since 1949,

China   655 and the country’s governing elite is still dominated by CCP members. Yet, in substance, the party would be virtually unrecognizable to the revolutionaries who led its establishment in 1921. Despite continuities in nomenclature and official symbols, China’s partystate has changed radically in terms of composition, policy objectives, and ideology. Well-educated technocrats rather than revolutionaries hold the highest positions in the Politburo. Following decades of persecution, capitalists have been welcomed into the CCP, and, in a reversal of its founding principles, the PRC State Constitution protects private property rights. Of particular interest, these major institutional transformations occurred endogenously, in the absence of external shocks or foreign intervention. This chapter thus examines how China’s party-state has managed to redefine itself while presiding over one of the most successful cases of economic development (in GDP terms) of the late twentieth and early twenty-first century. In so doing, the analysis builds on insights derived from historical institutionalism and proposes that the concept of “adaptive informal institutions” may elucidate the causal mechanisms underlying party-state resilience. While existing theories of the state tend to portray informal practices on the part of societal actors in compromising terms, the case of China demonstrates that adaptive informality may facilitate reforms that revitalize state institutions that are on the verge of anachronistic irrelevance and decay. This chapter proceeds as follows. The first section situates the anomalies posed by the durability of China’s party-state as an empirical bridge among existing literatures on state formation and endogenous institutional change. Recent scholarship on post-communist states provides a comparative framework for distinguishing among modes of elite competition in the process of state-building and regime transition. The fact that reform-era China engaged in state-building without experiencing regime change, however, presents an opportunity to identify the sources and causal pathways of party-state resilience. Concepts from the literature on endogenous institutional change, such as institutional layering, drift, and conversion, are helpful for describing modes of institutional evolution. But, ultimately, attending to the informal adaptive practices of state and non-state actors can elucidate how the transformation of party-state institutions may occur in the absence of societal mobilization or communist collapse. The second section illustrates the logic of these observations through empirical examples of major institutional change in China’s political economy. The third section highlights the party-state’s institutional adaptations for channeling political participation, which fall short of formal transition to democracy, but which provide a certain degree of stability in an otherwise volatile social and political climate. The chapter concludes with the theoretical implications of party-state transformation in the absence of regime change.

1  The Challenge of Explaining Party-State Survival As seen in other chapters of this Handbook, a rich and methodologically diverse literature on modern state formation in the developing world has emerged (see Chapters 3–7, 9, 36–43). In contrast to state formation in the West, which was driven by the fiscal

656   Kellee S. Tsai exigencies of territorial consolidation through militaristic coercion (Tilly 1990; see also John Hall, Chapter 3, this volume), the third wave of state formation was mediated by the institutional legacies of colonialism (see Lange, Chapter 6, this volume). Variation among postcolonial states in Africa and Asia could thus be traced to particular colonial-era variables, such as direct/indirect rule and the dominant economic function of the colony for the metropole (among others, Young 1994; Acemoǧlu et al. 2001). Studies of postcolonial states do not typically include the PRC, however, because Chinese state formation dates back to 221 BC, when the Qin Emperor unified the sovereign Warring States under consolidated rule (Hui 2005). Nonetheless, the tumultuous “century of humiliation” between China’s defeat in the Opium Wars in 1842 and the establishment of the PRC in 1949 left such a contested gap in national administration and governance that it would be appropriate to speak of state (re)formation and state-building under early communist rule. Moreover, the CCP inherited imperial debts, Republican-era bureaucracies, and contested territories. In 1949, mainland China was a nation, but the state had to be reconstituted. Arguably, the same could be said three decades later following the death in 1976 of communist China’s paramount leader, Mao Zedong. During the tumultuous decade of the Cultural Revolution (1966–76), the People’s Liberation Army attacked both the Chinese Communist Party and the PRC state. As a result, a host of formal party-state institutions, including the entire higher education system, were suspended from normal operations. For example, according to the State Constitution, deputies to the National People’s Congress are supposed to serve five-year terms, but the legislative body did not even meet between 1964 and 1975. Under Deng Xiaoping’s leadership, the early part of the reform era thus entailed the revitalization of key political and economic institutions in the form of restoring administrative functionality, depoliticizing enterprise management, and rehabilitating officials who had been purged during the previous decade (Shirk 1993; Baum 1994; Lieberthal 1995). In addition to reclaiming party-state authority at the national level, state (re)formation also occurred at the local level, as communes were reorganized into county governments and production brigades were converted into township governments. Elizabeth Remick describes the resultant local state-building as a “process by which state actors make a state organization grow in size, extend its reach, and increase its functions” (2004: 12). In other words, it would be fitting to regard reform-era China as a dual case of both central and local state formation (Remick 2004; Korzec 2004). What implications do these bifurcated state-building processes have for the regime’s adaptive capacity and stability? At the national level, a central insight from the literature on post-communism is that communist-era institutions and resources mediate the political dynamics of state-building. In particular, Anna Grzymała-Busse and Pauline Jones Luong’s (2002) typology of post-communist state-building processes differentiates between the channels of competition among elites (informal vs. formal channels) and the nature of these elites (self-contained vs. representative elites), depending on two institutional legacies—the existence of a central state apparatus and the extent of voluntary organization in society. In settings with relatively weak state institutions, for example, informal networks may supersede formal institutions in shaping the channels for political contention (Grzymała-Busse 2010). When formal state institutions are robust, however, informal institutions are more likely to complement and reinforce state authority. As for “who competes,” pre-existing

China   657 mobilization makes it more likely that representative elites will compete to serve the interests of societal groups, but when there are few organized societal constituencies, political competition among self-contained elites may be expected. The two-by-two typology thus yields four ideal types of state-building processes—autocratic, democratic, personalistic, and fractious. Although China does not define itself as a post-communist state, the descriptive dimensions are helpful for understanding the case in comparative perspective. Specifically, the scope for voluntary societal organization remains highly restricted. Meanwhile, it is apparent that China is still in transition—not necessarily from one form of regime to another—but rather, from informal channels of political competition to more formal channels. During the Mao era, elite competition for Mao’s succession was characterized by factions and interpersonal rivalries (e.g. Huang 2000). Since Mao’s passing, party-state politics have indeed become more institutionalized and shifted away from personal dictatorship towards collective leadership; nonetheless, intra-party factions remain strong, and the politics of succession lacks transparency (Li 2001). In terms of Grzymała-Busse and Luong’s typology of state-building processes, contemporary Chinese politics is becoming more “autocratic” than “personalistic,” but the sources of party-state resilience extend beyond the channels of elite competition at the national level. Indeed, state-building at the local level has presented double-edged implications for central state capacity. On the one hand, fiscal decentralization in the early reform era motivated local governments to promote economic growth in a dynamic that Jean Oi (1992) dubbed “local state corporatism.” In certain regions, fiscal reforms led to the emergence of local developmental states that supported enterprises through subsidized loans, tax breaks, and preferential access to land (Blecher and Shue 2001; Whiting 2001). On the other hand, the same policies also created incentives for localities to engage in predatory extraction—as in “booty socialism” (Lü 2000)—and hide revenues from the center (Wang 1995). In other words, local state-building in reform-era China enhanced local state autonomy from the center. As such, the center has implemented a series of centralizing reforms to strengthen the party-state’s extractive and regulatory capacity (Yang 2004). These efforts have enabled the center to redress some of the administrative challenges associated with governing a large and diverse country. Yet reforms such as eliminating the right of local governments to collect fees have also led to destabilizing unintended consequences such as “illegal land grabs,” that is, the arbitrary confiscation of farmland by local governments for property development. In short, the local state is both a critical partner and potential threat to the center. As discussed later, given its direct role in policy implementation, the local state is also a site for the diffusion of popular practices that may capture the attention of central authorities. While theories of the state provide insight into broad dimensions of regime stability versus instability, historical institutionalist literature on endogenous institutional change offers more causal pathways for explaining why certain institutions persist even as they experience radical redefinition of their normative essence, operations, and sponsors over time. In particular, the 2010 volume edited by James Mahoney and Kathleen Thelen, Explaining Institutional Change: Ambiguity, Agency, and Power, identifies four modal forms of gradual institutional change—“displacement,” “layering,” “drift,” and “conversion”—and outlines a series of typological propositions linking these modes of change with particular institutional

658   Kellee S. Tsai properties, political conditions, and change agents. Although the analytic insights of the four types of change originated in studies of advanced industrialized countries, the volume demonstrates that their causal logic travels to contexts as varied as healthcare reform in Brazil, land documentation in Kenya, and regime change in Indonesia (Falleti 2010; Onoma 2010; Slater 2010). Building on this comparative research agenda, the following empirical section of this chapter shows how institutional change through drift, layering, and conversion can also be observed in reform-era China, and it proposes that the concept of “adaptive informal institutions” may serve as an analytic bridge between formal institutions and informal behaviors in general theories of endogenous institutional change (for more see Tsai 2006, 2007). Empirically, adaptive informal institutions refer to widely practiced strategies that arise in response to the constraints and possibilities of formal institutions. Analytically, they represent potential sources of institutional innovation that are typically overlooked in explanations of gradual institutional change. Thus far, the existing literature in historical institutionalism has focused on shifts in (formal) institutions involving third-party enforcement rather than informal institutions, which are assumed to be self-enforcing by social convention. As Wolfgang Streeck and Kathleen Thelen (2005: 10) explain: “Modern, formal, legal-political institutions differ in a variety of ways from informal ‘anthropological’ ones, not least in how they change: the former by decision and the latter by cultural evolution.” Arguably, however, not all informal behaviors are embedded in the normative fabric of society. Some informal practices emerge due to the limits and opportunities presented by “modern, formal, legal-political institutions.” Bracketing the entire universe of informal institutions as culturally sustained thus misses out on a non-primordial subset of informal repertoires, which are motivated by the logic of formal institutions. Under certain institutional and political circumstances, the emergence of adaptive informal institutions may represent a critical intermediate causal link in explaining when, how, and why formal state institutions generate the sources of their own transformation. The case of China demonstrates that apparently marginal reforms of socialist-era institutions have not only facilitated their survival well beyond their ideological heyday, but stimulated a proliferation of informal activities by economic and political entrepreneurs at the local level. Some of these informal innovations have become institutionalized into adaptive informal institutions, which have in turn played a pivotal role in enabling reformers to transform the country’s leading political and economic institutions.

2  The Empirical Origins of Adaptive Informal Institutions in China’s Political Economy One of the most striking paradoxes in the political economy of contemporary China is the simultaneous strengths and weaknesses of the country’s formal institutions. On the one hand, the PRC clearly has an authoritarian regime with considerable coercive capacity. The Chinese party-state continues to possess a high level of “despotic power”

China   659 as defined by Michael Mann (1988). On the other hand, glaring gaps exist between the intentions of the party-state’s formal institutions and informal practices at the local level, calling into question the extent of the central state’s “infrastructural power” or its capacity for policy implementation.1 Meanwhile, China’s most important formal institutions have changed almost beyond recognition in the last three decades. On the eve of reform in 1978, private enterprises were illegal, capitalists were banned from the Communist Party, and the party-state’s official ideology was Marxism-Leninism-Mao Zedong Thought. By the early 2000s, the non-state sector accounted for over two-thirds of China’s industrial output, the CCP was actively recruiting capitalists, and the country’s hyphenated official ideology had acquired another two principles contradicting the first three. How did this de facto redefinition of the PRC state’s founding institutions occur in such a modest time frame—and in the absence of cataclysmic events such as war or regime change? Conventional approaches in the study of Chinese politics such as factionalism, bureaucratic politics, and state-society relations are not well equipped to address these puzzles of institutional adaptation and transformation. Borrowing from historical institutionalism and American political development, the concepts of layering, conversion, and reactive sequences are particularly fruitful in revealing how incremental adjustments in institutions could lead to truly remarkable and often unintended institutional changes (Mahoney 2000; Schickler 2001; Thelen 2004). As the following empirical examples will show, layering, conversion, and reactive sequences provide a general conceptual vocabulary to describe a host of counterintuitive phenomena in reform-era China that traditional area specialists are prone to ascribe to the particularities of Chinese leaders and history, while more theoretically inclined China scholars coin terms that are rarely cited beyond the subfield. For example, what Eric Schickler (2001) refers to as “layering” resonates with Kenneth Lieberthal and Michael Oksenberg’s (1988) description of “fragmented authoritarianism” in China’s complex and evolving matrix of vertical and horizontal administration. X.L. Ding’s (1994) notion of “institutional amphibiousness,” whereby actors appropriate existing institutions to achieve goals deviating from original institutional intentions, is akin to what Thelen (2004) calls “conversion.” And the oscillating fang/shou (reform/ retrenchment) cycles observed by various China scholars (e.g. Baum 1994) mirror the logic of James Mahoney (2000) and Paul Pierson’s (2004) discussion of reactive and non-self-reinforcing sequences, respectively. Regardless of their appellation, however, none of these concepts capture a key empirical dynamic in contemporary China: the widespread reliance of ordinary political and economic actors on informal coping strategies. Some specific examples will clarify this contention (for more detail see Tsai 2007).

Legalization of Private Enterprise When Deng Xiaoping and other reformers consolidated power at the end of the 1970s, China’s new leaders did not have a blueprint of how reform would unfold or where it

1 

Dan Slater (2010) makes a similar observation in the case of Indonesia under Suharto (1967–98).

660   Kellee S. Tsai would lead. Instead, they adopted a pragmatic stance towards policies that could improve the country’s economic performance. Apparently unrelated reforms, however, created the institutional space for a host of more “radical” reforms. For example, fiscal decentralization gave township and village governments incentives to operate “collective enterprises,” because they could retain a greater portion of locally generated revenue (e.g. Oi 1992). Meanwhile, the center permitted “individual households” (getihu) with less than eight employees to engage in petty commerce. Both policies were intended to promote economic growth and help absorb the surplus rural labor created by agricultural decollectivization. These objectives were achieved. But the combination of fiscal decentralization and the legalization of petty commerce also enabled local officials and entrepreneurs to expand China’s private sector far beyond what reformers initially intended. During the 1980s, business owners who wanted to hire more than eight employees found a way around that restriction by registering their operations as “collective enterprises (jiti qiye),” which did not face numerical limits on their workforce. Falsely registering a private factory as a collective one carried additional benefits: collective enterprises were more politically acceptable, less likely to be persecuted during ideological campaigns that targeted private businesses, and enjoyed privileged access to bank credit and land. Given all these advantages, more and more private entrepreneurs started disguising their ventures as collective ones. Such firms became known as “red hat enterprises” because they were only wearing an ideologically “red” label (collective registration) while functioning as large, private businesses in practice.2 By the end of the decade, it was no longer realistic for Beijing to pretend that all collective enterprises were really being run by local governments. With the legalization of “private enterprises” (siying qiye) in 1988, it was revealed that there were over 500,000 red hat enterprises in China, and in some localities, 90 to 95 percent of registered collective enterprises were really privately owned (Parris 1993). To put this in analytic terms, China’s enterprise registration regime experienced “institutional drift” during the early years of reform. Socialist restrictions on commercial production remained in place despite the rapid expansion of private firms. While these restrictions became increasingly anachronistic, however, local officials and private entrepreneurs essentially “converted” the collective enterprise registration category into a vehicle for operating larger private businesses. By repeatedly violating the spirit of what it meant to be registered as a collective enterprise, they paved the way for reformers to introduce a more fitting registration status for private companies with more than eight workers: “private enterprises.” But what enabled conversion to occur on a large scale was institutional layering. The fact that it was permissible to run a small-scale private business as a getihu provided a base from which entrepreneurs could grow into red hat collective enterprises. During the Mao era, there were anecdotal accounts about the existence of private traders (punished upon discovery), but it was only after the legalization of “individual households” in 1981 that private entrepreneurship became a more plausible pursuit for the larger population. 2 

A variant of the “red hat enterprise” is the “hang-on enterprise,” which refers to a private business registered as a subsidiary or unit of a state-owned enterprise. These are called “hang-on enterprises” because private businesses “hang on” to the side of a state-owned enterprise by using its name, tax numbers, etc.

China   661 In addition to the introduction of individual households as a parallel layer of business registration, China’s pre-existing multi-tiered administrative apparatus also facilitated the creative interpretation of central mandates at the subnational level. As long as local officials were rewarded for promoting local growth, they were willing to do it through a variety of means, including supporting genuinely collective enterprises or falsely registering private ones as collectives. Under these circumstances, local bureaucrats exercised a high level of discretion in enforcing economic institutions, both new and old. Ultimately, the growing popularity and subsequent legalization of private-sector activity allowed reformers to build support for bringing the PRC’s most important political institutions in line with unanticipated economic realities. These institutions include the Chinese Communist Party, the PRC State Constitution, and official national ideology. Lifting the ban on private entrepreneurs’ membership in the CCP was politically delicate, but it was also practical, because a large percentage of private entrepreneurs were already party members.3 Meanwhile, the controversial change in party eligibility was accompanied by incremental, yet substantively re-defining amendments to the PRC Constitution and official ideology. Rather than institutional displacement, private-sector development legitimated the conversion of the PRC’s original institutions to reflect changes in the country’s social structure and political economy. As with the emergence of red hat enterprises, conversion of these political institutions occurred through layering. Rather than representing an insulated or distinct mode of institutional change, in the Chinese context, conversion both derived from and contributed to layering. Specifically, the addition of new economic policies alongside socialist-era institutions (layering) enabled local economic and political actors to convert existing institutions to serve alternative ends (private profit). In turn, the explosive growth in private entrepreneurship created the political conditions for the further conversion and layering of key political institutions. Between 1982 and 2004, the PRC Constitution was amended four times, starting with a subtle nod that the private sector is “a complement to the socialist economy,” and culminating with a bold pronouncement that China’s Constitution protects private property rights. China’s lengthy official ideology embodies an even more literal demonstration of layering: “Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the important thought of the Three Represents, and Scientific Outlook on Development.” The first three ideological traditions were central to China’s communist revolution and the first three decades of socialist construction. Deng Xiaoping Theory reflects commitment to economic modernization through pragmatic means. The Three Represents was Jiang Zemin’s theoretical innovation that justified the admission of capitalists into the CCP. And Hu Jintao’s Outlook on Scientific Development aims to “put people first” and promote sustainable economic development to develop a harmonious socialist society in China. Despite the awkwardness of this layered list of official ideologies, their unique juxtaposition is how the CCP rationalizes its leadership in developing “market socialism with

3  Official surveys of private entrepreneurs found that over 20 percent of business owners were party members in 2000. The ban on entrepreneurs’ party membership was lifted in 2001.

662   Kellee S. Tsai Chinese characteristics.” The ambiguity of this national goal and its associated ideology provides ongoing room for policy experimentation.

Sharpening Causation with Adaptive Informal Institutions in Reactive Sequences But how was such ideological layering and complementary conversion of China’s governing institutions even possible? How were China’s reformers able to manage the political controversy surrounding such dramatic departure from the PRC’s founding principles? Attending to informal practices, and more specifically, adaptive informal institutions, provides further insight into the constitutive dynamics of endogenous institutional change. Adaptive informal institutions lie in the analytic space between formal institutions and how people respond to official rules and regulations. While conversion and layering refer to changes in the formal institutional environment, the emergence of adaptive informal institutions can be an intermediate step prior to formal conversion or layering. In the cases discussed earlier, for example, the strategy of “wearing a red hat” evolved in reaction to restrictions on the number of employees in private businesses. The disguising strategy became so common that it became “institutionalized” as an informal adaptation to official restrictions on the private sector. Over time, the adaptive informal institution of “red hat enterprises” provided evidence to reformers—and their rivals—that legalizing “private enterprises” with over eight employees would not be as radical as it may have appeared at the outset of reform. Indeed, the widespread popularity of red hat enterprises meant that allowing private businesses to have more than eight employees would be sanctioning something that was already happening in practice. The broader implication of this contention is that the concept of adaptive informal institutions can flesh out the manner in which certain combinations of formal institutions give rise to their own transformation. This logic can also be mapped onto Mahoney’s notion of reactive sequences, which refers to “chains of temporally ordered and causally connected events” (Mahoney 2000: 526). In other words, initial (formal) institutional conditions can trigger the development of adaptive informal institutions, which in turn, facilitate reforms of the original institutional environment. The latter processes may occur through layering, conversion, drift, or displacement. But the main point is that informal responses to formal institutions may contribute to the causal groundwork for those modes of institutional change. Relatedly, the concept of adaptive informal institutions also calls attention to the potential divergence in interests between central and local authorities.4 Formal institutions that are designed by the central state but implemented by local state agents carry potential for variation in enforcement (cf. Migdal 2001).

4  This idea is captured by the Chinese saying, “When the center issues policies, the localities have counter strategies.”

China   663

3  The Political Impact of Adaptive Informal Institutions The cases presented above are all instances where major changes in formal institutions were foreshadowed by adaptive informal institutions. Yet the mere emergence of informal coping strategies does not guarantee transformative impact on formal institutions. To the contrary, there are multiple instances of adaptive adjustments in the political realm that mediate the destabilizing effects of a rapidly changing society and economy. Such adaptations can be found at both the level of party-state governance and society more broadly. At the national level, reformers have introduced more predictable norms in leadership succession and in the functioning of formal political institutions. Meanwhile, the development of various input institutions has expanded the scope for public opinion and political participation in a manner that has been termed “consultative Leninism,” “consultative authoritarianism,” “contentious authoritarianism,” and “deliberative authoritarianism.” Taken together, these within-system reforms have, to date, facilitated authoritarian resilience by accommodating new pressures through more institutionalized channels (Nathan 2003). A sampling of these adaptive reforms will now be highlighted, followed by some propositions about the circumstances under which informal institutions are likely to result in formal institution change.

Institutionalizing Elite Politics In traditional socialist regimes, the politics of leadership succession—especially that of the “paramount leader” (dictator)—has typically provoked extensive political uncertainty, if not outright crisis. This was certainly the case in pre-reform China, as much of elite politics during the Mao era was consumed by the question of who would succeed Mao Zedong as the party-state’s revolutionary, paramount leader. Each of his apparently chosen successors fell from political grace: Liu Shaoqi was purged at the outset of the Cultural Revolution; Lin Biao died mysteriously in a plane crash; and, following Mao’s death, Hua Guofeng lacked the political capital to resist Deng Xiaoping’s reform coalition. Since Deng’s passing in 1997, however, both age and term limits have been observed in senior leadership, and there have been two orderly transitions in party-state leadership—from Deng to Jiang Zemin in 1997, and from Jiang Zemin to Hu Jintao in 2002. In both of these transitions, the designated successors were identified informally by the Politburo of the CCP years in advance, and no one contested the lineup. The succession to the “fifth generation” of leadership in 2012 was surrounded by more political intrigue (with the purging of Bo Xilai). Nevertheless, the successor to Hu, Xi Jinping, still assumed the two highest positions in the party and state: General Secretary of the CCP and President of the PRC, respectively. More importantly, as with the Jiang and Hu successions, the process occurred peacefully and without involvement by the military. These orderly transitions in political power—or what Andrew Nathan (2003) has called “norm-bound succession politics”—demonstrate the logic of adaptive informal

664   Kellee S. Tsai institutions at the higher level of elite governance. Specifically, in response to the political turmoil of the Mao era, the Politburo has since developed informal norms of leadership selection that provide greater stability and predictability to the transition process. The normative criteria for promotion and political office have also shifted from ideological “revolutionary” credentials to more meritocratic indicators, as seen in the rise of China’s technocratic elite (Andreas 2009). These norms were not imposed by external fiat, but rather, emerged endogenously in response to the perceived need for more regularized processes. As with changes to the scope of CCP membership, the informal institutionalization of succession norms and rule by consensus have contributed to party-state resilience.

Authoritarianism with (Informal) Adjectives In addition to stabilizing leadership succession, the party-state has introduced a number of ad hoc input institutions that pluralize the possibilities for political expression and participation in China, albeit in delimited spheres. This has inspired China scholars to coin various categorical terms along the lines of “authoritarianism with adjectives,” which comes on the heels of the “democracy with adjectives” literature (Collier and Levitsky 1997). Arguably, informal amendments to standard authoritarianism have reinforced rather than eroded the party-state’s claim to legitimacy. Indeed, Steve Tsang (2009) describes the PRC’s regime type as “consultative Leninism” because the Party recognizes the practical value of allowing some degree of societal and international input when potential challenges to CCP rule emerge. Examples of broader input include the revival of the Chinese People’s Political Consultative Conference (CPPCC), which enables non-communist parties to convey opinions to the central government, the online solicitation of public comments on draft laws and regulations, and the introduction of local (township and village) elections. Meanwhile, official think tanks, major foreign governments, multinational corporations, and corporate leaders have also been given the opportunity to offer policy advice. Tsang (2009: 875) explains that the CCP “consults not due to recognition of the intrinsic value of consultation, but because it sees consultation as useful in enabling the Leninist system to retain control.” Coupled with nationalism, which Tsang describes as “the new though informal state ideology,” selective consultation has enhanced the party-state’s capacity for survival (2009: 876). Along similar lines, Baogang He and Mark Warren (2011) argue that the emergence of “deliberative authoritarianism” in China serves multiple functions, including co-opting dissent, maintaining order, providing feedback to the regime, and, above all, creating legitimacy for a regime that lacks a compelling ideology. Practices such as public hearings, deliberative polls, and village elections enable the regime to enhance transparency and “deflect responsibility on to processes to avoid blame.” Short of democracy, these state-defined participatory opportunities empower citizens with selective rights and increase government accountability, which in turn helps to defuse social tensions associated with marketizing reforms. In this sense, authoritarian deliberation represents a form of “persuasion-based influence” rather than the coerced compliance associated with classic authoritarianism. Finally, Xi Chen (2011) takes the logic a step further in his analysis of “contentious authoritarianism.” Over the course of the reform era, increasing income inequality,

China   665 corruption, environmental degradation, and other perceived injustices have fomented popular protest and collective petitions by farmers, laid-off workers, and other aggrieved parties. Most of these grievances are levied against the local government as the primary point of contact with ordinary citizens. Building on the logic of consultative Leninism (Tsang 2009) and deliberative authoritarianism (He and Warren 2011), Chen finds that the rise of routinized contention and bargaining provides a safety valve for the regime, and, ultimately, contributes to political resiliency. In other words, popular collective action does not necessarily destabilize authoritarianism. Writing in the context of the expanded space for civil society—especially non-governmental organizations that provide social services and public goods—Jessica Teets (2013) concurs that “consultative authoritarianism” promotes regime survival rather than portending democratization. Taken together, the “consultative,” “deliberative,” and “contentious” modifiers to authoritarianism are ad hoc adaptations that introduce pluralizing flexibility to a party-state that has strayed far from its original ideological basis for governance. These adaptive practices provide the possibility for more “legitimate domination” in Weberian terms. In so doing, China’s party-state has demonstrated the capacity for endogenous institutional change without undermining its coercive apparatus. Informal adaptive institutions have enabled the regime to redefine the parameters for political participation in circumscribed areas while preserving its overarching authoritarian architecture.

Informal Adaptations and Formal Institutional Change: Some Propositions Thus far, the adaptations to “classic” authoritarianism discussed above have extended regime survival rather than triggered regime transition. The incremental pluralization of political participation falls far short of democratization. Yet it is undeniable that China’s party-state has experienced significant change, as seen in the reversals of its revolutionary ideology and economic policies. What, then, are the conditions under which lower level adaptive informal institutions are more likely to result in formal institution change? The three-stage framework presented in Mahoney and Thelen (2010) provides a helpful base for deriving initial propositions about the emergence and potential impact of adaptive informal institutions. First, we need to assess the “characteristics of the political context,” meaning the relative availability of veto points to actors who prefer the status quo. Following this line of reasoning, adaptive informal institutions are more likely to emerge in political contexts with strong veto possibilities. Second, the characteristics of the targeted institution are also central because they define the scope for discretion in enforcement. Adaptive informal institutions are more likely to emerge in areas where institutions entail a high level of discretion in interpretation/enforcement. Indeed, adaptive informal institutions can be sustained only when the enforcers of formal institutions are complicit in allowing deviant practices to occur repeatedly, whether through non-intervention, protection from external scrutiny, or active collusion. Complementing the contextual logic of the first two propositions, I would add a third political-institutional variable:  the degree of decentralization in the political system. Adaptive informal institutions are more likely to emerge in political contexts where policy

666   Kellee S. Tsai Table 35.1  Favorable Political and Institutional Conditions for the Emergence of Adaptive Informal Institutions   •  Disjuncture between formal institutions and environmental conditions (including possible institutional drift)   •  Political system with high veto possibilities   •  High level of discretion in institutional interpretation and enforcement

implementation is relatively decentralized. To borrow a term from the social movement literature (e.g. Tarrow 1994), decentralized policy implementation provides a more favorable “opportunity structure” for informal coping strategies to develop and spread at the subnational level.5 This effect is also enhanced in policy areas that involve multiple bureaucracies or are governed by cross-cutting mandates. Fourth, an additional contextual variable is needed to explain whether actors are likely to introduce adaptive informal institutions in a decentralized, multilayered context where the staff of the state can exercise considerable discretion in enforcement. This variable is the relative fit (or misfit) between formal institutions and the aspirations of actors in a given policy area. In instances of policy drift, sometimes institutions may not keep up with changing circumstances, which renders them less relevant to present-day concerns (Hacker 2004). Widening gaps between formal institutions and new realities help to explain why local state and non-state actors would tap into the permissive possibilities of an institutional environment. Adaptive informal institutions are more likely to emerge when there is a notable disjuncture between formal institutions and ground-level realities. (Table 35.1 summarizes these propositions.) Within a given political and institutional context, there are different types of potential change agents, which are distinguished by the extent to which they aim to preserve existing institutional rules, as well as by the extent to which actors follow those rules (Mahoney and Thelen 2010:  22–31). Adaptive informal institutions are more likely to be created by actors who work within the system while introducing alternative practices to serve their purposes (“subversives”), actors who exploit opportunities in existing institutions to achieve their goals (“opportunists”), and actors who depend on institutional rules while violating the original spirit of the institution (“parasitic symbionts”). In the case of adaptive informal institutions, the source of agency may take the form of collaboration among local state and non-state actors who share convergent interests. Completing the causal logic, change agents are associated with particular modes of institutional change:  subversives with layering, parasitic “symbionts”—who live together with another organism—with drift, insurrectionaries with displacement, and opportunists with conversion. By extension, adaptive informal institutions are more likely to influence formal institutions through layering, drift, and conversion. Institutional displacement is less likely to be preceded by a transitional phase of adaptive informality.

5  Note that the notion of “institutional opportunity structure” has been used in the context of multilevel governance in the European Union (Gualini 2004).

China   667 Finally, when are the architects of formal institutions more likely to enact reforms that obviate the incentives for informal practices in a particular sphere? By the time that unofficial strategies qualify as “institutionalized” (due to widespread repetition), institutional designers confront the choice of whether to look the other way, introduce efforts to contain them, or legalize them in part or in whole. As an initial cut, criminal activity with deleterious effects on society is not likely to be sanctioned. It is the remaining universe of quasi-legal adaptations that presents decision-making dilemmas. Positive elite responses to adaptive informal institutions may placate these adaptations’ practitioners, but it can also compromise the integrity and interests of those favoring the institutional status quo. Hence, institutional designers are more likely to reform formal institutions in a manner that incorporates adaptive informal institutions when the latter are framed as providing clear economic, social, and or political benefits to existing and emergent stakeholders. Providing meaningful content to this proposition requires empirical analysis.

4 Conclusion Making sense of China’s party-state transformation and survival after several decades of economic liberalization entails selective reference to disparate literatures because it is sui generis in a number of ways. The PRC maintains postcolonial myths, but is not exactly a postcolonial state (Callahan 2004). It would offend the sensibilities of its communist rulers to call it a post-communist state, yet the welfare amenities of state socialism have been largely dismantled (Frazier 2010). It has aspired to be a virtuous East Asian developmental state, but it lacks key attributes beyond the outcome of rapid economic growth (Tsai and Cook 2005). It is in many ways a predatory state, yet it eschews many of the developmental pathologies associated with predation (Wedeman 2012). Fitting China into categories derived from other contexts runs the risk of conceptstretching. However, reform-era China presents a potentially generalizable explanatory challenge for existing theories of the state: how is party-state transformation possible in the absence of regime change? Analyses of endogenous institutional change typically focus on formal institutions as both independent and dependent variables. In the study of political economy, the privileging of formal institutions on both ends of a causal sequence makes empirical sense: official governing and regulatory institutions define the public boundaries of production, exchange, distribution, and participation. Moreover, because formal institutions are subject to third-party enforcement, they carry an obligatory and legitimating dimension that distinguishes them from cultural norms (Streeck and Thelen 2005: 10-14). Working within these conceptual parameters, this chapter proposes that formal state institutions may generate informal responses that become institutionalized by praxis. While the resulting institutional innovations deviate from the letter and/or spirit of formal institutions, they should be not be conflated with deeper-rooted expressions of informality. Instead, adaptive informal institutions are fashioned out of the silences, contradictions, boundaries, and possibilities of formal state institutions. Within a particular policy arena, the emergence of adaptive informal institutions signals to institutional

668   Kellee S. Tsai designers that state institutions are being eroded by their enforcers and other actors. Elite reactions to these infractions may range from prioritizing compliance with the compromised institutions to deliberating on ways to realign institutions with contemporary pressures. Under the latter conditions, informal institutions are poised to play a pivotal role in reforming the original institutional architecture that inspired them. When this actually occurs, adaptive informal institutions represent an intervening variable bracketed by formal institutions. Ultimately, the causal fate of particular adaptive informal institutions is challenging to specify ex ante. The cases discussed in this chapter derive from a context where policy elites built political support for amending socialist institutions by referencing the advantages of certain adaptive informal institutions. But when the latter veer into the realm of corruption and criminality or when they threaten the interests of powerful stakeholders, legalizing them is less likely to occur. There is nothing automatic or inevitable about the causal relevance of adaptive informal institutions. By the same token, the chapter reserves judgment on the normative desirability of such relevance. The conclusion is modest: identifying patterned manifestations of informal reactions to formal institutions provides empirical clues on the potential direction of state transformations while serving as a second-order conceptual category for general explanations of endogenous institutional change.

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Pa rt V

STAT E T R A NSFOR M AT IONS I N T H E NON- OE C D WOR L D

Chapter 36

States i n the Globa l Sou th

Transformations, Trends, and Diversity

Matthew Lange

Part III of this volume explores state transformations in the core OECD, and Part IV analyzes state transformation in former communist countries. The present part, in turn, focuses on state transformations in the rest of the world, a large and eclectic group of countries comprising Latin America, Africa, much of Asia, and various island countries scattered around the world. This three-part categorization largely coincides with the global divisions that emerged during the Cold War—the First, Second, and Third Worlds. The term “Third World” originally designated countries that were not aligned with either of the world’s superpowers, and these countries generally held marginal positions within the global geopolitical system. During the Cold War, the meaning of “Third World” transformed to increasingly designate countries with low levels of economic and social development, and “Third World” became synonymous with “developing world.” More recently, the term “Global South,” which refers to countries concentrated around the equator and in the southern hemisphere with relatively low levels of both geopolitical power and development, has gained increasing usage. This chapter serves as an introduction to Part V and therefore offers an overview of states and state transformations in the Global South. It begins by briefly reviewing the major characteristics and transformations of states in the region, noting commonalities, differences, and variation over time (Section 1). Then, it discusses key issues affecting the region’s states and their transformations, focusing on poverty, dependence and globalization, ethnic and national divisions, and late development (Section 2). The chapter ends by introducing the subsequent chapters in Part V (Section 3).

674   Matthew Lange

1  States and State Transformations in the Global South Despite several common characteristics, the countries in the Global South are very diverse, with different populations, cultures, and economies. Some cases also have considerably more geopolitical power and higher levels of development than others, with India being an example of the former and Singapore being an example of the latter. Of greater interest to this volume, the countries in the Global South also possess a diverse assortment of states, and these states have transformed dramatically since the 1950s. State diversity in the Global South has existed for centuries. Some regions have had large state-like institutions for thousands of years. Indeed, large and complex political institutions first emerged in different regions of the Global South, most notably, the Middle East, North Africa, South Asia, and East Asia. Other regions of the Global South first developed large and complex political institutions considerably later. In the Americas, complex political institutions began to develop in Mesoamerica around the beginning of the Christian era and in the Andes in the thirteenth century. For the rest of the Americas, however, political institutions remained quite small-scale—usually at the tribal or band level—at the time of their first contact with Europeans. In sub-Saharan Africa, Ethiopia, Somalia, and Sudan are exceptional cases that possessed relatively large and unified political units since the beginning of the Christian era. In addition, the political units in other regions of sub-Saharan Africa began to expand gradually around 1100 A.D., with several relatively large proto-states emerging in the Great Lakes district, West Africa, and the savannahs south of the Congo River. Throughout much of sub-Saharan Africa, however, large and complex political institutions were absent until the twentieth century. Overseas colonialism was a major force that brought state-like institutions to most of sub-Saharan Africa and the Americas. In addition, it had major effects on the political institutions in the regions of the Global South that had large and complex political institutions prior to colonialism. The Americas were the first region colonized by European powers, and colonialism effectively created the first states throughout most of the region. In the Andes and Mesoamerica, the indigenous states were conquered by the Spanish and replaced by new ones that were focused on controlling indigenous laborers and extracting resources. A similar process occurred later in Asia and Africa, as European powers—and eventually Japan and the United States (US)—either established new states or radically restructured old ones to make them better suited for colonial control and extraction. Although the overwhelming majority of Africa and Asia fell to colonial rule, some regions avoided colonial domination. Japan is a unique case because it avoided European rule and ultimately mimicked Europe’s imperial efforts by colonizing Taiwan, Korea, and parts of China. European powers also colonized parts of China, but the overwhelming majority of it remained independent. Along with Japan and China, Bhutan, Ethiopia, Iran, Mongolia, Nepal, Saudi Arabia, Thailand, and Turkey are additional regions outside of Europe that largely—although in some cases, not completely—avoided colonialism. One common trait shared by several of these cases is inhospitable environments, in particular, mountains, which undoubtedly impeded colonial conquest and control. In addition, all regions that avoided colonial domination—with the exception of Saudi

States in the Global South    675 Arabia—possessed relatively large and powerful political institutions, a factor that strengthened resistance to colonial conquest and thereby helped prevent it. Similarly, the rulers of several of these regions initiated extensive state reforms that copied the European model in an effort to stave off colonialism, with Japan and Thailand being notable examples. In this way, whether colonized or not, colonialism shaped the political institutions of all countries within the Global South. (For detailed reviews of how colonialism shaped states in the Global South, see Chapter 5 by Kelly and Mahoney and Chapter 6 by Lange, both this volume.) In addition to their origins, states in the Global South also vary greatly in their level of democracy. Figure 36.1 presents Polity IV data on the average level of democracy by region between 1960 and 2003, with 10 designating the most democratic and -10 designating the least democratic. The figure shows that few places in the Global South were ruled democratically in 1960 and that the average level of democracy actually declined in the Middle East, North Africa, Latin America, the Caribbean, and Asia between 1960 and the mid1970s. In all regions of the Global South except for the Middle East and North Africa, however, there was a sharp increase in level of democracy beginning in either the mid-1970s (in Latin America and the Caribbean), the mid-1980s (Asia), or the early 1990s (sub-Saharan Africa). The figure shows that Latin America is now approaching the core OECD’s average level of democracy. Despite increases, the level of democracy in Asia and sub-Saharan Africa remain low relative to the OECD and Latin America, although it is much higher than in the Middle East and North Africa (MENA). Notably, these averages hide considerable variation within the major regions of the Global South, with all regions except the Middle East and North Africa having cases at all levels of democracy in recent years. A large number of countries possess hybrid regimes that combine democracy and authoritarianism in different ways and to different extents. In Malaysia, for example, democratic elections occur regularly. Since its independence in 1960, however, the same coalition of parties has controlled the state and has employed different non-democratic techniques to maintain its position. These techniques include control and 10

5

2003

1993

1983

1973

1963

0

Asia MENA Sub-Saharan Africa Latin America & Caribbean OECD

–5

–10

Fig. 36.1  Democracy by region, 1960–2003. Source:  Marshall and Jaggers (2002).

676   Matthew Lange use of the media and courts and the incarceration and intimidation of outspoken opponents, such as the arrest of opposition leader Anwar Ibrahim on charges of sodomy. In addition to level of democracy, there is considerable variation in terms of present state capacity in the Global South. At the upper extreme, Singapore, Barbados, Botswana, and Chile have states that are quite capable of implementing complex policy. Related to this capacity, their states have been able to provide their populations with numerous goods and services, such as education, healthcare, the rule of law, and transportation. Not surprisingly, the countries in the Global South with the most effective states also have among the highest levels of development in the region. At the other extreme, a few states are unable to perform even the most basic actions, including taxation, controlling borders and peoples, and offering goods and services. Robert Jackson and Carl Rosberg (1982) claim that extreme examples of these states are simply “juridical states,” that is, they are recognized by the international community as states but lack the organizational components of statehood. According to the Fund For Peace’s Failed State Index, 13 countries—all located in the Global South, of which eight are in sub-Saharan Africa—lacked states with the ability to perform basic functions in 2011: Afghanistan, Central African Republic, Chad, Cote d’Ivoire, Democratic Republic of Congo, Guinea, Haiti, Iraq, Pakistan, Somalia, Sudan, Yemen, and Zimbabwe (Fund For Peace 2012). Figure 36.2 presents data from the World Bank that help capture some of this variation in state capacity. It gives the average scores of three variables—government effectiveness, rule of law, and absence of corruption—by region. The variables measure the standard deviation from the global average, so a positive score shows that a region’s score is greater than the global average, and a negative score shows that a region’s score is less than the global average. The figure highlights two things. First, all regions in the Global South have average scores considerably below Europe’s and—other than the Caribbean—consistently below the global average. Second, the Caribbean region consistently has the highest average scores within the Global South, sub-Saharan Africa consistently has the lowest, and the remaining three regions have similar scores. The data therefore suggest that, on average, the states in the Global South have relatively low levels of state capacity, especially sub-Saharan African states. 1.5

Government effectiveness Rule of law Lack of corruption

Europe

1 0.5 Caribbean 0

Asia

Latin America

MENA

Africa

–0.5 –1

Fig. 36.2  World Bank Governance Indicators by region, 2010. Source:  World Bank (2012b).

States in the Global South    677

2  Crucial Issues in the Global South The category “Global South” is both useful and dangerous. Generally speaking, the states in the Global South differ from states in the core OECD in important ways, making the categorization useful for the analysis of states and their transformations. At the same time, states in the region vary enormously, making broad generalizations about Global-South states fraught with inaccuracies. In this section, I begin by briefly discussing four important issues affecting state transformations in the Global South: poverty; dependence and globalization; late development; and ethnic diversity and conflict. In general, all affect state transformations in the Global South more than in the core OECD, making them important factors that must be considered for any analysis of state change in the region. At the same time, all four affect some states in the Global South more than others, meaning that one cannot ignore variation.

Poverty As mentioned previously, limited economic development is a defining feature of the Global South, and it is a pressing issue for the large majority of countries in the region. Poverty, in turn, affects states in diverse ways and must be considered a common determinant of the characteristics and transformations of states in the Global South.

20000 18000 16000

East Asia & Pacific (all income levels)

14000

Latin America & Caribbean (all income levels)

12000 10000

Middle East & North Africa (all income levels)

8000 6000

Sub-Saharan Africa (all income levels)

4000

OECD members

2000

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009

0

Fig. 36.3  Per capita GDP (in constant 2000 US$) by region, 1970–2009. Source:  World Bank (2012a).

678   Matthew Lange The impoverishment of the Global South can be measured in different ways, such as life expectancy or access to basic services, but the most common indicator is per capita GDP. Figure 36.3 lists the per capita GDPs in constant US dollars of the main regions of the Global South since 1970. It also includes the core OECD for comparative purposes. The figure clearly shows that all regions of the Global South were much poorer than the OECD in 1970 and that their relative poverty increased considerably over the last four decades. Indeed, the absolute growth in per capita GDP was greatest in the core OECD, which grew so much that it is literally off the chart—its per capita GDP was nearly $25,000 in 2009. Latin America and the Caribbean, the Middle East and North Africa, and East Asia and the Pacific also grew over the last four decades: over the entire 40-year period, per capita GDP expanded by 74 percent in Latin America and the Caribbean, 119 percent in the Middle East and North Africa, and 170 percent in East Asia and the Pacific. Even with this growth, however, the average per capita GDPs of all three regions grew little in absolute terms relative to the OECD. Indeed, the average per capita GDP in 2009 was only $4,921 in Asia and the Pacific, $4,796 in Latin America and the Caribbean, and $3,665 in the Middle East and North Africa, whereas the average per capita GDP of the OECD was over $11,000 in 1970 and increased by an additional $12,000 by 2009. Sub-Saharan Africa differs markedly from all other regions in the Global South in terms of the economy. First, the region was considerably poorer than all other regions of the Global South in 1970, with a per capita GDP of only $550. Moreover, whereas the other regions experienced some growth, sub-Saharan Africa experienced virtually no growth over the entire 40-year period, increasing by an average of less than 0.4 percent per year. Within the regional averages, there is considerable variation in per capita GDP, with countries like Singapore, South Korea, Botswana, Barbados, and Chile experiencing impressive growth and having per capita GDPs well above the regional averages. Indeed, South Korea, Taiwan, and Singapore experienced such rapid economic growth over the last half-century that many no longer consider them part of the Global South. Other countries experienced negative growth throughout the period, and these countries are heavily concentrated in sub-Saharan Africa. The Democratic Republic of Congo, for example, saw its per capita GDP in constant US dollars decline from $332 in 1970 to only $104 in 2009. The relative and absolute poverty present throughout much of the Global South affects the region’s states in different ways. Most obviously, it affects the resources that the states control, as limited economic development usually constrains the resources that states can extract. In fact, average government expenditure as a percentage of GDP is lower in the Global South than in the OECD, meaning that governments in the region control fewer resources than their relatively low GDPs suggest.1 Staffing a state, in turn, is very expensive, thereby creating an important obstacle to state expansion in the Global South. Moreover, scarce state resources limit the pay and benefits that state employees receive, causing many to receive very poor remuneration. This affects the state by increasing the risk that employees shirk their duties out of resentment over inadequate pay or a need for additional jobs. It can also increase the risk of corruption, as poorly and irregularly paid state employees

1 

In 2009, government expenditure accounted for 19.5 percent of GDP in the OECD but only 16.9 percent in sub-Saharan Africa, 15.5 percent in Latin America and the Caribbean, 12.7 percent in MENA (Middle East and North Africa), and 12.6 percent in Asia and the Pacific (World Bank 2012a).

States in the Global South    679 might be more likely to abuse their positions for personal benefit. Such corruption, in turn, can further limit the organizational capacity of the state. Limited resources can also affect the services that states offer their citizens. Most notably, education, healthcare, and social safety nets are all extremely expensive, and states with limited resources face severe constraints providing them to their citizens. Limited resources can therefore contribute to poor human development. Scarce resources also affect the types of policies states in the Global South pursue. Although limited resources constrain the ability of states to pay for services, it also creates a need for such services. Poverty commonly prevents people from meeting their basic needs and keeps them from receiving important services such as healthcare and education. Such needs do not necessarily push states to struggle to offer services. When combined with effective social mobilization and a left-leaning and responsive government, however, states in the Global South have exerted considerable effort to expand services despite limited resources, with Kerala, Mauritius, Costa Rica, and Sri Lanka being notable examples (see Heller 1999; Sandbrook et al. 2006). The limited availability of resources can also create competing pressures on economic policy. As Alexander Gerschenkron (1962) notes, states are oftentimes forced to play a more active role in economic management and production when domestic capital is limited. Indeed, the state has historically played very active and influential roles promoting industrialization in late developers. Still, active state economic management is not cheap, and poor states might not possess the resources and organizational capacity needed for such economic policy. In addition to their impact on state size, services, and policies, limited resources also affect states because their absence poses a risk to states. Most notably, low per capita GDP is a strong predictor of civil war and rebellion and therefore helps explain why such violence is quite common in the Global South. The mechanisms underlying this relationship are uncertain, but at least three appear relevant. First, states with resources are able to buy support and restrain anti-state resentment by providing their citizens with valuable goods and services. Second, states with resources are able to pay for personnel and infrastructure that allow the government to contain anti-state violence. Finally, states are the best source of valuable resources in a resource-scarce environment, creating incentives for their capture.

Dependence, Globalization, and the State The poverty of the Global South is commonly attributed to diverse factors, most of them domestic. Nevertheless, several scholars note that the international political and economic position of the Global South contributes to poverty. They also have independent effects on the region’s states and state transformations. Different theories of development—most notably, world-systems theory and dependency theory—claim that the Global South is dependent on powerful actors within the core regions of the world and that this dependence has negative effects on development. Dependence implies that peoples and institutions lack the autonomy to act in desired ways because external actors have considerable influence. As a result, state policy is geared increasingly toward external interests and less toward domestic concerns. Notably, not all countries in the Global South find themselves in situations of high dependence,

680   Matthew Lange and level of dependence can vary considerably over time. Moreover, all countries in the world—no matter how rich and powerful—are constrained by the global economic and political systems in different ways. As such, dependence is not an all-powerful force in the Global South, nor is it limited to this region. That said, both dependency theory and world-systems theory correctly recognize that the Global South has among the highest levels of dependence in the world because it has relatively little economic and political power, and this dependence has important implications for the region’s states. The dependence of the Global South has historic roots. As noted previously, most areas in the region were colonized by European powers at some time over the past few centuries. Colonialism allowed foreign powers to take control of the political and economic institutions of the colonies, thereby creating dependent relationships and allowing the colonial powers to use their colonial possessions to further their own political and economic interests. A famous example concerns British colonial policy in India, which favored British exports over Indian domestic production and had very negative effects on the production of diverse Indian goods, most notably textiles (Habib 1975). Despite lingering remnants of colonial dependence in many countries, independence allowed former colonies to free themselves from most vestiges of colonial dependence. Still, because of the relatively low geopolitical and economic power of the Global South, countries in the region have relatively little ability to shape global processes and, in turn, have limited abilities to stave off their influence. As a result, dependence continues in different forms. One can see this dependence with powerful international institutions. Both the International Monetary Fund (IMF) and the World Bank, for example, are funded and run primarily by the wealthiest and most powerful countries in the world, giving these nations considerable influence over the IMF and the World Bank. Bilateral forms of dependence also continue. Most notably, the world’s leading economic and political powers vie for influence throughout the world. Although this competition can limit dependence by opening up multiple options, economic and political actors in the most powerful countries continue to have an advantage in negotiating agreements because of their greater strength and resources. Most notably, a number of governments in the Global South depend on foreign donors—including countries, global institutions, private banks, and non-governmental organizations (NGOs)—for revenue and services, making some degree of dependence a fact of life. Dependence affects states in different ways. Most notably, it removes autonomy and thereby limits the ability of state officials to pursue their interests, be they personal interests or national interests. In this way, dependence can limit the policy options of state officials and pressure them to pursue certain policies that they would not have pursued otherwise. Stiglitz’s (2002) discussion of the IMF and its impact on economic and political policy within the Global South during the 1990s offers a notable example, whereby state officials were pressured to implement standard structural adjustment programs that negatively affected economic development. Taking a different view, the IMF suggests that its policies force countries to implement unpopular but needed policy and help limit government corruption and mismanagement. Although dependence weakens states in this way, one must also recognize that it has the potential to strengthen them in others. Because the international system is based on sovereignty, international actors wishing to influence a country must recognize state sovereignty and work with the state, which can strengthen states and give them an advantage over their domestic and international adversaries. As James Ferguson (1994) notes in his

States in the Global South    681 well-known analysis of Lesotho, even weak states can co-opt international actors, thereby using them to better pursue their own interests. Along these same lines, Peter Evans (1979) famously notes that dependence does not necessarily prevent state autonomy, as the state can effectively work with local business and foreign actors in ways that strengthen it. Dependence continues to be a pressing issue for many regions of the Global South, but the literature on the state and development in the Global South presently pays much more attention to a different element of the international environment:  globalization. Globalization refers to the growing integration of social relations at the global level, and such relations include economic, political, cultural, and criminal arenas. It has shaped states in different ways, one of which is by proliferating liberal and neoliberal ideologies and policy prescriptions. Liberalism is a political ideology supporting individual rights and liberties and democracy. It was popularized in Western Europe and North America beginning in the seventeenth and eighteenth centuries and spread worldwide by the mid-twentieth century. Alternatively, neoliberalism refers to more economic elements of liberalism commonly associated with free trade and limited regulation. It became very prominent in the US and United Kingdom during the 1980s and 1990s and was subsequently promoted by influential global institutions like the World Trade Organization (WTO), IMF, and World Bank. Although liberalism and neoliberalism have similar ideological origins, they do not necessarily coincide. Most notably, neoliberalism prioritizes the economy and suggests that difficult and unpopular policies are sometimes needed, and such policies commonly subvert democracy because of their unpopularity. Both liberalism and neoliberalism offer particular policy prescriptions that shape states in different ways and have gained considerable influence in the Global South over the past few decades. Liberalism has proliferated in all corners of the region, creating popular interest in and demands for democratization. Its spread is influenced by powerful global actors—such as the United Nations and NGOs—that have stressed the importance of democracy and pressured governments to reform accordingly. At the same time, many people in countries throughout the Global South have accepted liberalism’s policy prescriptions and pressured their own governments to democratize. Both external and domestic pressure, in turn, appear to have contributed to growing levels of democracy in the Global South. Neoliberalism has been influential on the economic front. Global economic institutions enforce neoliberal policy prescriptions ranging from free trade to minimal government to limited debt to the opening up of capital accounts. This is especially the case among countries that implement structural adjustment programs with the IMF or World Bank. Economic globalization, in turn, has promoted neoliberal economic policy in additional ways. Growing trade and openness allow companies to search for the ideal environment to locate their production. Those looking for low taxes, limited government regulation, and cheap labor are therefore attracted to countries that follow neoliberal policies, thereby pressing governments to implement neoliberal policy in an effort to retain and attract businesses. According to Nita Rudra (2008), neoliberal globalization promotes a race to the bottom much more in the Global South than in other regions because the Global South is most dependent on low-value-added manufacturing. Although the impact of neoliberalism on states is hotly debated and uncertain, it has the potential to shape states in different ways. Importantly, the Global South is at the greatest risk of following neoliberal policy prescriptions because of its relatively high levels of

682   Matthew Lange dependence and poverty and the importance of low-value-added manufacturing in the region. And, because one element of neoliberalism involves reducing the size and outlays of the state, neoliberalism can create pressure to implement reforms that reduce the size of the state. Hand-in-hand with a smaller state, neoliberalism also pressures states to cut education, healthcare, and other services and to reduce state management of the economy, thereby decreasing the ability of states to participate in state-led development. At the same time, neoliberal policy has commonly fueled backlashes in the form of social movements that push the state to withstand neoliberal pressures and actually increase state services (Almeida 2010). Just as in the OECD, one therefore cannot assume that neoliberal pressures necessarily result in neoliberal policies, especially in responsive democracies with vibrant civil societies.

Ethnic and National Diversity The terms “state” and “nation state” are commonly used synonymously (but see Keating, Chapter 28, this volume), but in political science and sociology the latter refers to a particular type of state—a state that rules over a population with a unified national identity. State and nation state are commonly used interchangeably because many view nation states as the norm. In reality, few countries in the contemporary world closely conform to the nation state model, most having populations with multiple and competing national identities. Similarly, nearly all countries have populations composed of multiple communities (ethnic, religious, kin, racial, etc.), some of which view themselves as national communities and others of which do not. In large parts of the world, including the Global South, such diversity is common and can have important effects on states. National diversity is quite common in the Global South. Linguistically, for example, countries in the Global South almost always contain peoples speaking diverse languages, a situation that commonly hinders national integration. Data on the risk that two randomly selected co-nationals speak different languages offer some insight into this diversity and show considerable variation in the Global South: the risk is 0.66 in sub-Saharan Africa, 0.38 in Asia, 0.20 in Latin America, 0.13 in the Caribbean, and 0.11 in the Middle East and North Africa—as a point of reference, Europe’s average score is 0.11. Limited linguistic diversity is hardly the same thing as a unified nation, however. In sub-Saharan Africa, for example, Burundi, Rwanda, and Somalia have three of the four lowest levels of linguistic diversity in the region, but all three have experienced extreme violence as a result of ethnic and national divisions. Moreover, although there is little linguistic diversity in the Middle East and North Africa, religious differences commonly promote powerful social divisions. Several factors promote variation in national diversity. Both mountainous terrain and dense forests, for example, can limit social interaction and thereby promote diversity. Similarly, the historic absence of settled agriculture appears to promote national diversity by creating small and disparate communities. More particular historical factors are also important, such as the timing of nationalizing policy and colonialism. One of the reasons for such high levels of linguistic diversity in sub-Saharan Africa, for example, is that the colonial powers divided up the continent among themselves quite arbitrarily and did not worry about maintaining the integrity of preexisting communities. As a result, some communities were divided among different states, and nearly all states contained diverse communities within

States in the Global South    683 their boundaries. Studies, in turn, find that the division of communities by national borders hinders state legitimacy and promotes war (Englebert 2000; Miller 2010). As described in Chapter 6 (Lange, this volume), colonialism also commonly played an important role in strengthening ethnic identities and institutionalizing ethnic competition in both Africa and Asia. In the Americas, such diversity was based largely on race, with white settlers, African slaves, and indigenous Americans comprising the three main communities. In several slave-based colonies, racial cleavages and competition diminished greatly after independence, as the black population was numerically dominant throughout the Caribbean and gained control of major national institutions. The more limited use of African slavery and the decimation of the indigenous population also resulted in relatively high levels of national cohesion in many Latin American countries. Even in the Latin American countries that maintained large indigenous populations, the economic and political domination of the white settler population, the greater politicization of class cleavages, and the ability of indigenous peoples to “whiten” themselves through education and economic mobility all helped limit and conceal racial divisions, although indigenous movements are increasingly highlighting them (see Yashar 2005). Ethnic and national diversity has two important implications on states in the Global South, although these effects are hardly universal. First, it can have negative effects on the effectiveness of states. Most notably, ethnic divisions are commonly politicized and promote extreme competition among communities. In such a situation, state officials and politicians are more interested in offering goods to their communities, and diversity hinders the construction of large states and the offering of nationwide goods and services. In this situation, political elites play the role of ethnic broker, which limits their legitimacy among citizens who are not part of their community and promotes more personalized forms of rule. Ethnic and national divisions can also cause violence and civil war. Indeed, ethnic conflict can escalate into extreme violence and cause prolonged civil wars. Such wars, in turn, can result in state division, as in Ethiopia and Sudan, or in state breakdown, as in Somalia and the Democratic Republic of Congo. Alternatively, it can result in one side winning and institutionalizing the power of their own community, as occurred in Myanmar and Sri Lanka. The latter also occurred in Rwanda after the Hutu Revolution in 1959, although the fall of the Hutu-dominated regime after the 1993 genocide and the subsequent rise of a Tutsi-dominated regime shows how conflict and violence can persist over long periods of time in divided countries. Ethnic violence, in turn, has become increasingly prevalent in the Global South. Figure 36.4 presents data from the Ethnic Power Relations dataset on ethnic civil war to highlight this consistent and rapid increase. The figure adds the total number of years a country experienced ethnic-based civil war in a given decade (ranging from 0 to 10) and then sums the total for all countries in the Global South. In the 1950s, there were only 26 years of ethnic-based civil war in the Global South. Civil war in Israel/Palestine and Myanmar accounted for 20 of the 26 years, and the violence resulted from ethnic struggles that began during the independence process over control of the postcolonial state. Additional conflicts began as an increasing number of countries in the Global South gained their independences in the 1960s, and the total number of years of ethnic civil wars nearly tripled to 74 in the 1960s. While some of these civil wars ended, several new ones emerged in the 1980s and 1990s, and the number of years of ethnic civil war increased to

684   Matthew Lange 250 200 150 100 50 0

1950s

1960s

1970s

1980s

1990s

Fig. 36.4  Years of ethnic civil war in the Global South by decade, 1950–1999. Source:  Wucherpfennig et  al. (2010).

230 years in the 1990s, a 10-fold increase from the 1950s. Notably, alternative data on ethnic conflict highlight a similar trend (Gurr 2000: 37–42).

Late Development and Emerging Powers Poverty, dependence, national diversity, and conflict all affect states in a variety of ways. Most notably, they hinder democratization and state effectiveness. Because of the enormous diversity in the Global South, however, this is only one side of the story. Indeed, several countries in the Global South have either avoided or overcome these obstacles and developed powerful states. These states, in turn, have effectively promoted development and limited dependence. In fact, the power and wealth of several countries in the Global South have grown to such an extent over the past half-century that some—such as South Korea, Singapore, and Taiwan—are no longer viewed as members of the Global South. Moreover, Brazil, China, and India are emerging global economic and political powerhouses. Such cases help highlight the important role states can play in the emerging regions of the Global South. In comparison to other states in the region, the cases also highlight the great inequalities in the Global South in terms of state capacity. The fact that several regions within the Global South have experienced rapid economic development forces the consideration of just how they managed to exit the vicious circles of poverty and dependence. A common conclusion of the literature on this topic is that their states played vital roles helping to manage the national economy in ways that spurred growth and industrialization. Indeed, the most developmentally dynamic regions of the Global South—including those places that have left it—all had powerful states that actively worked with domestic business and managed the national economy. These developmental states were not simply focused on the economy, however. The states in Singapore, South Korea, and Taiwan also provided high quality healthcare, education, and other services. Such human development, in turn, was not simply valuable in its own right; it also helped

States in the Global South    685 improve worker skills and efficiency and thereby proved vital to subsequent economic expansion. The state appears to have played similar developmental roles in China (see Tsai, Chapter 35, this volume), although its earlier focus on human development seems to have turned into a near obsession with economic growth. In India, on the other hand, state-led development has historically been limited by the relatively low organizational capacity of the state, and its turn toward neoliberalism in the 1990s has limited state involvement in the economy and the provisioning of services. From the developmental state perspective at least, therefore, there are reasons to question whether India can continue to grow like the other emerging economies in the Global South. An important question concerning India is whether it offers a typical example of state involvement in development in the present era of globalization and neoliberalism. That is, do globalization and neoliberalism rule out past developmental-state strategies pursued by South Korea and other emerging economies, or is India simply an aberrant emerging power? Both Vivek Chibber (2003) and Atul Kohli (2004) suggest the latter. They point to weak and ineffective states as hindering state-led development (unlike South Korea, Taiwan, and Singapore), both because they lack the capacity to formulate effective policy and because they are not sufficiently powerful to control domestic economic elites. The Indian state of Kerala will be an important litmus test for this view in the near future, as it has a very effective local government that is more involved with economic management and social services. The fact that it is one of the fastest growing regions in India over the past two decades, transforming from an economic laggard to a region with a per capita income above the national average, supports this view. The growing economic and political power of certain countries within the Global South has implications on states and their transformations. Most notably, the level of dependence of emerging powers has declined considerably in a number of ways. In fact, one can now see a situation where the core members of the OECD are increasingly dependent on emerging powers, with American dependence on China being the most notable example. Similarly, countries from the Global South are now entering the OECD, including South Korea (1996), Mexico (1994), and Chile (2010). The states in the developing regions also find themselves with more resources, as growth has allowed them to gather more revenue. At the same time, economic growth has greatly empowered domestic economic actors both by allowing them to become multinational corporations and by increasing their size and resources. As a consequence, the autonomy of the state to implement economic decisions can be limited, as major corporations can effectively block them. South Korea’s decreasing control over the chaebol is one notable example. In addition, the major transformations occurring in the emerging powers affect various communities differently, and problems of national diversity and integration are increasingly important issues in China, India, and other emerging powers.

3  Outline of Part V The subsequent seven chapters in Part V deal with particular issues concerning states and state transformations in the Global South and raise several of the issues presented in the

686   Matthew Lange previous sections of this chapter. Four chapters focus on different typologies that states in the Global South resemble to different extents. In Chapter 37, Peter Evans and Patrick Heller focus on developmental states. As noted previously, developmental states were vital to late development in the emerging regions of the Global South, but some question whether the model is still viable in the changing global order. Evans and Heller consider this issue and find that the developmental state is more important than ever, but they suggest that the developmental state is changing. They describe how developmental states now have to be more concerned with human development and must engage a broader array of social actors. In Chapter 38 of this volume, David Waldner and Benjamin Smith analyze rentier states. Such states are relatively common in the Global South, as natural resources make up a disproportionate share of economic output and are an important source of state revenue. Moreover, a seemingly endless trajectory of growing global demand for natural resources is increasing the share of natural resources in the economies of the Global South, thereby making the issue more and more relevant. The chapter reviews the large and growing literature on the topic, most of which suggests that natural resources affect states in multiple ways: they limit economic growth, promote authoritarianism, contribute to civil war, and constrain state expansion. Waldner and Smith review this literature and suggest that these claims are overblown. They do not deny, however, that natural resources affect states, and they outline potential directions the rentier state literature is going. (For a related discussion, consult Jones Luong, Chapter 33, this volume.) The next two chapters analyze types of states that are relatively concentrated in the Global South: predatory states and failed states. In Chapter 39 of this volume, William Reno considers predatory states. He conceptualizes predatory states and reviews the different perspectives on them. He also considers how predatory states transform and lays out important areas of future research. Sven Chojnacki and Anne Menzel author Chapter 40 on failed states. They problematize the concept and consider the determinants of failed states as well as the ways these states transform. Importantly, the authors note that even the most extreme examples of failed states, which they refer to as “collapsed states,” maintain systems of governance and control, although these systems differ greatly from the Weberian ideal type of the state. The final three chapters of Part V consider important issues shaping states and state transformations in the Global South. Chapter 41 of this volume turns to the issue of ethnic and national diversity in the Global South. In it, Matthew Lange and Klaus Schlichte consider just how such diversity affects states. They pay particular attention to the militarization of states, state borders, consociationalism and decentralization, the communalization of states, and state capacity. While ethnic diversity hardly affects all states in the region, Lange and Schlichte offer evidence that it is relatively common and influences state transformations in several countries. Chapter 42 is written by Grigore Pop-Eleches and Graeme Robertson and explores democratization in the Global South. The authors pay particular attention to the role states play in democratization and claim that the relatively low capacities of states in the region will likely hinder further democratization and democratic deepening. Finally, Evelyne Huber and Sara Niedzwiecki investigate state provisioning of services in Chapter 43, focusing on social protection in Latin America and East Asia. Globalization theory suggests that states should offer fewer and fewer services to their populations. This

States in the Global South    687 would appear particularly relevant to the Global South, as the region is relatively impoverished and therefore should have difficulty raising the funds necessary to provide goods and services. Yet the authors find that states in both regions have increased their provisioning of such services in recent years, thereby offering evidence that the effects of globalization and poverty on states might not be so straightforward.

References Almeida, Paul D, 2010. “Globalization and Collective Action.” In Handbook of Politics: State and Society in Global Perspective, ed Keith Leicht and J Craig Jenkins, 305–326. New York: Springer. Chibber, Vivek, 2003. Locked in Place: State-Building and Late Industrialization in India. Princeton, NJ: Princeton University Press. Englebert, Pierre, 2000. State Legitimacy and Development in Africa. Boulder, CO: Lynne Rienner. Evans, Peter B, 1979. Dependent Development:  The Alliance of Multinational, State, and Local Capital in Brazil. Princeton, NJ: Princeton University Press. Ferguson, James, 1994. The Anti-Politics Machine:  “Development,” Depoliticization, and Bureaucratic Power in Lesotho. Minneapolis, MN: University of Minnesota Press. Fund for Peace, 2012. Database:  Failed States Index 2011. Available at:  http://www.fund forpeace.org/global/?q=fsi (last consulted 4 February 2014). Gerschenkron, Alexander, 1962. Economic Backwardness in Historical Perspective, a Book of Essays. Cambridge, MA: Belknap Press of Harvard University Press. Gurr, Ted R, 2000. Peoples Versus States: Minorities at Risk in the New Century. Washington, DC: United States Institute of Peace Press. Habib, Irfan, 1975. “Colonialization of the Indian Economy, 1757–1900.” Social Scientist 3 (8, March): 23–53. Heller, Patrick, 1999. The Labor of Development:  Workers and the Transformation of Capitalism in Kerala, India. Ithaca, NY: Cornell University Press. Jackson, Robert H, and Rosberg, Carl G, 1982. “Why Africa’s Weak States Persist: The Empirical and the Juridical in Statehood.” World Politics 35 (1): 1–24. Kohli, Atul, 2004. State-Directed Development: Political Power and Industrialization in the Global Periphery. Cambridge, UK: Cambridge University Press. Marshall, Monty, and Jaggers, Keith, 2002. Database: Polity IV Project: Political Regime Characteristics and Transitions, 1800-2002. Version p4v2002e. College Park, MD: Center for International Development and Conflict Management, University of Maryland. Available at: http://www.systemicpeace.org/polity/polity4.htm (last consulted 4 February 2014). Miller, Benjamin, 2010. “State, Nations, and the Regional Security Order of South Asia.” In South Asia’s Weak States: Understanding the Regional Insecurity Predicament, ed Thazha V Paul, 74–97. Stanford, CA: Stanford University Press. Rudra, Nita, 2008. Globalization and the Race to the Bottom in Developing Countries: Who Really Gets Hurt? Cambridge, UK: Cambridge University Press. Sandbrook, Richard; Edelman, Marc; Heller, Patrick, and Teichman, Judith, 2006. Social Democracy in the Global Periphery:  Origins, Challenges, Prospects. Cambridge, UK: Cambridge University Press.

688   Matthew Lange Stiglitz, Joseph E, 2002. Globalization and Its Discontents. New York: W. W. Norton. World Bank, 2012a. Database: World Development Indicators On-Line. Available at: http:// web.worldbank.org/data-catalog/world-development-indicators (last consulted 4 February 2014). ——, 2012b. Database: Worldwide Governance Indicators, 1996–2006. Available at:  http:// info.worldbank.org/governance/wgi/index.aspx#home (last consulted 4 February 2014). Wucherpfennig, Julian; Weidmann, Nils; Cederman, Lars-Erik; Girardin, Luc; Duhart, Philippe; Brown, Gustav; Flora, James, and Wimmer, Andreas, 2010. Database: GeoEPR Dataset. Version 2. Available at: http://hdl.handle.net/1902.1/14206 (last consulted 4 February 2014). Yashar, Deborah J, 2005. Contesting Citizenship in Latin America: The Rise of Indigenous Movements and the Postliberal Challenge. Cambridge, UK: Cambridge University Press.

CRUCI A L T Y PE S

Chapter 37

Hum a n Dev el opm en t, State Tr a nsfor m ation, a n d the Politics of the Dev elopm en ta l State Peter B. Evans and Patrick Heller

The idea of the “developmental state” has proved one of the most robust, charismatic concepts in development theory. In the 1980s and 1990s, the concept played two roles in developmental debates. First, it provided a coherent counter narrative to the dominant neoliberal narrative that portrayed the market as the master institution underlying both growth and welfare. Second, it focused attention on the extraordinary success of economic transformation in the East Asia region. By the turn of the millennium, the application of the concept had spread beyond these origins, but it is still useful to recall its beginnings. Chalmers Johnson (1982) deserves credit for having used the concept of the developmental state to explain Japan’s rebirth from the ashes of World War II as an industrial power, but Korea and Taiwan, especially as portrayed in the influential work of Alice Amsden (1989) and Robert Wade (1990), were the iconic cases. Korea and Taiwan were even more powerful cases for the transformative role of the state than Japan. Japan had been an imperial power with sufficient industrial capacity to undertake a world war before the period described by Johnson. Korea and Taiwan were former colonies with income levels below those of the more successful countries of Africa in the immediate post-World War II period. When analysts like Amsden and Wade laid out connections between state structures and strategies and the ability of these countries to create globally competitive industrial sectors, the impact on developmental debates was fundamental (see the discussion in Lange, Chapter 36, this volume, as well as Evans 1995). We will not review these seminal formulations or the early history of the key cases on which they were based in any detail. Our aim instead is to focus on the more recent transformations of the developmental state. One task is updating the understanding of original developmental states themselves by chronicling their historical transformation. The classic characterizations of the development state in Korea and Taiwan are focused on the period from the mid-1960s through the mid-1980s. Any contemporary discussion of the developmental state must take equal account of the evolution of these iconic cases from the 1980s to the present.

692    Peter B. Evans and Patrick Heller Even more important, however, is looking at the developmental state as a theoretical concept rather than as a description of a particular set of state apparatuses during a particular historical conjuncture. Removing traditional Anglo-Saxon blinders and admitting that successful developmental outcomes depend on particular configurations of the state apparatus itself and its relations to society is a start. One must then ask, what are the particular structural characteristics associated with developmental success, and what are the political and organizational dynamics of their evolution? This in turn requires locating the analysis of the developmental state within a more general theory of what outcomes constitute “development” and what inputs are most crucial to producing those outcomes. We will begin by setting out the general theoretical approach to development that underlies our understanding of the developmental state (Section 1). Its core is “Senian,” emphasizing the essential role of expanding human capabilities, not just as the ultimate goal of development, but also as an essential means for generating the increased productivity that is the foundation of economic growth (Sen 1999). We will then elaborate on the implications of that perspective for re-conceptualizing the developmental state (Section 2). The bureaucratic capacity of the developmental state looks even more important than classic analyses suggested. The analysis of the politics of the developmental state (Section 3), however, requires serious revision. Rather than being a relatively simple politics of rational but authoritarian efforts to realize a national project of accumulation, the politics of the developmental state become the complex and often ambiguous politics of democratic deepening. We flesh out this theoretical understanding of the developmental state by looking at three pairs of case studies (Section 4). First, we will turn to the parallel evolution of the iconic developmental states during the last three decades—Korea and Taiwan. Then we will look at Brazil and South Africa—two major developing states that have been characterized as at least partial embodiments of the developmental state, but which have taken divergent paths during the period under consideration. Finally, we will look at the two giants of the Global South—India and China. While neither of these two states has been traditionally considered a classic developmental state, they are key cases for any general understanding of the connection between state structures, state-society relations, and developmental outcomes. In the empirical analysis, as in the theoretical discussion, our emphasis is on the political complexities of connecting the state to civil society in a way that enables a broad-based expansion of human capabilities.

1  Development Theory and the Developmental State Understandings of the role of the developmental state have changed, first of all, because development theory has changed. Amartya Sen’s (1999) capability approach to development converges with modern models of growth.1 Sen’s focus on expansion of human capabilities as both the paramount goal of development and the leading means of achieving 1  Amartya Sen (1999: 18) a rgues that “well-being” involves more than increasing contentment or reducing suffering; it involves the capacity of human beings to do the things that they want to do. Thinking in

Developmental States and State Transformations    693 economic growth dovetails with a variety of strands in “modern economics.” It fits nicely with conventional econometric wisdom regarding the powerful role of “human capital” in generating economic growth. It also fits with the theoretical arguments and empirical evidence put forward by new growth theorists, who have made the case that creating and utilizing new ideas was more important to twentieth-century growth than the accumulation of plants, equipment, and other tangible capital.2 Traditional, mid-twentieth-century economic thinking was often read as arguing that the accumulation of capital was the driver of growth, and growth was the cause of improvements in health, education and well-being. Current research on economic growth emphasizes improvements in human development indicators as causing growth in income. The evidence is rich, varied, and incontrovertible. In a series of econometric papers, Gustav Ranis, Frances Stewart, and their collaborators looked at the interactions between growth and human development (see Ranis et al. 2000; Boozer et al. 2003; Ranis and Stewart 2006). Their data analysis “contradicts the conventional view that HD [human development] is purely a result of, as opposed to being a critical input into long run expansions in EG [economic growth]” (Boozer et al. 2003: 25). They conclude that “HD improvements must precede growth-oriented policies if growth is to be sustained” (Boozer et al. 2003: 25). This argument expands on the classic work of Robert Barro (1997) demonstrating the powerful growth consequences of investment in education. Recent work by Eric Hanushek and Ludger Wößmann (2008, 2012), using cognitive skills rather than years of education, shows how better measurements would further strengthen the dominant role of human capability expansion in propelling growth, as well as development in its full sense. The connection between capability expansion and growth is robust across a wide range of economic levels and strategies. On the one hand, as Jeffrey Nugent and James Robinson argue (2010) even in agricultural economies, such as Central American coffee producers, more egalitarian economic orders that give peasants incentives to invest in their own capabilities have better growth records. At the other end of the spectrum, Jingjing Huo and John Stephens (Chapter 21, this volume) chronicle the effectiveness of the “social investment state” in Scandinavia at promoting growth built around a shift to knowledge-intensive production and high tech industries. Obviously, the specifics of the capabilities being fostered and the strategies of fostering them are quite different, depending on the kind of production involved, but the connection between capability expansion and growth is robust across a wide range of economic contexts. The shift to capability-centered theories of development also dovetails nicely with the resuscitation of classic concerns with the relation between inequality and development. As Huber and Stephens (2012) point out, there is a strong correlation between inequality and poverty and, more specifically, between educational inequality and lower overall educational attainment. A  large literature confirms the destructive consequences of terms of “capabilities” rather than just “well-being” draws our attention to the fact that human capabilities are both ends in themselves and the key means to intermediate goals, such as economic growth and the construction of democratic institutions that help us to “lead the kind of lives we value.” 2 

The “new growth theory,” as put forward by theorists like Robert Lucas and Paul Romer, built on early work by Robert Solow and has been subsequently developed by a range of economists like Philippe Aghion and Peter Howitt (1998) and Elhanan Helpman (2004).

694    Peter B. Evans and Patrick Heller inequality for individual and community well-being, even in the most affluent societies (see Wilkinson 2005; Hacker 2006; Zuberi 2006). Cross-national data show a relation between lower levels of inequality and increased longevity. There is now a wealth of evidence that inequality can slow and even negate the poverty-reducing impact of growth, and the World Bank now recognizes that inequality has perverse effects on institutions and undermines “good governance” (World Bank 2006). Shifting from an accumulationist to a capability-centered focus shifts attention to new kinds of political dynamics. While the relationship between democratic political forms and income growth remains a long-debated and still unresolved theoretical issue, existing research comes down in favor of a connection between accountability from below and capability expansion. At the most rudimentary level, the connection is illustrated by Sen’s proposition that independent countries with even modestly democratic political institutions do not suffer from famine. Over 25 years ago, John Caldwell (1986) famously argued that democracy and social activism positively contributed to superior health outcomes, especially in low-income countries. More recently, a careful econometric study by Timothy Besley and Masayuki Kudamatsu (2006: 1) concludes: “The data show a strong (conditional) correlation between life expectancy and democracy. This relationship is robust to controlling for the initial level of human capital as well as political histories. The data also suggest that health policy interventions are superior in democracies.” 3 Likewise, James McGuire (2010) provides both quantitative evidence and eight careful case studies to demonstrate the link between democracy and health outcomes, a link that he argues results from the heightened expectations that citizens in democratic societies have for broad-based provisioning of social services. This empirically grounded theoretical revolution has profound implications for theories of the developmental state. If the first generation of research on the developmental state established the centrality of the state’s role in economic growth, seeing development as capability expansion makes the state’s role even more central and important. The “developmental state” that is central is, however, a very different sort of developmental state than the one that was lionized in the 1980s and 1990s (see Evans 2010a, 2010b, 2012).

2  Re-Conceptualizing the “Developmental State” Once development is conceptualized as capability expansion, different kinds of problem-solving challenges confront the state. Incentivizing and supporting investment in industrial activity is a complex task, but delivering quality education or healthcare requires even more state capacity. Industrial growth can be achieved by aligning with a fairly narrow group, deploying well-known policy instruments (e.g. subsidies, interest rates, state procurement) and can be measured against certain hard indicators (e.g. 3 

Another recent paper by Madsayuki Kudamatsu finds that even in Sub-Saharan Africa, where most assume that the implantation of electoral democracy has had little developmental payoff, “democratization has reduced infant mortality” (2007: 34).

Developmental States and State Transformations    695 exports, manufacturing output). Delivery of high quality services requires interventions that are deeper and more socially and politically intrusive than industrial policy. Because capability-enhancement is about removing unfreedoms, it butts up directly against the forms of traditional authority and organized power of clans, castes, and patriarchs, and challenges the political hegemony of capitalist elites, as well. A state that can deliver such services is one that must have both significant “infrastructural power,” the power to reach into society and deliver things, as well as significant “authoritative power,” the power to get individuals and groups to willingly obey commands. Since more efficient administrative structures ultimately depend on new forms of embeddedness, state-society ties are inextricably linked to state capacity. The tradeoffs between different development projects are often acute in both social and material terms. How social preferences are formed becomes key, and this in effect puts a premium on deliberation and coordination, two functions that require intensive engagement with those impacted by decisions.4 Therefore, we argue that it is certain democratic forms of embeddedness—a concept we elaborate in more detail later—that are most likely to strengthen capability-enhancing state interventions. Without multiple channels to source accurate information and continuous feedback loops that allow for policy-corrections, the developmental state will end up investing inefficiently and wasting precious public resources. The centrality of accurate information makes deliberative institutions key contributors to development as well as building blocks for democratic politics. While organizational and institutional forms will vary depending on the cultural and historical context, effective mechanisms of deliberation that include a broad cross-section of society are the foundation of effective public policy (Evans 2004). The continuous monitoring and feedback of civil society sensors can radically reduce leakage and improve both the quality and quantity of delivery, especially for goods that cannot be readily standardized, for example, quality education and local planning. Active participation by citizens is in fact a key ingredient for many social policies. Education is co-produced by students (and their families). Health is “co-produced” by patients, their families, and their communities (Ostrom 1996). Environmental regulation is effective only when the state has allies in civil society capable of monitoring and exposing environmental problems. Indeed, following the line of reasoning developed in the new heterodox theories of industrial policy that point to the need for continuous experimentation, feedback, and bootstrapping (Sabel 1995; Rodrik 2007), it can be argued that intense state-civil society interactions are the key to policy innovation (Baiocchi et al. 2011). Effective state-society linkages depend on the organization of civil society as well as on the capacity of the state, but the state can help facilitate the organization of “civil society.” The twentieth-century developmental state’s interaction with industrial elites gave these elites a reason to become a more collectively coherent class. The twenty-first-century developmental state needs to undertake a similar but more difficult task: constructing shared coherent goals whose concrete implementation can then be “co-produced” by public agencies and the communities themselves.

4  This is what leads a long line of thinkers as diverse as Jürgen Habermas (1996), Amartya Sen (1999), and Dani Rodrik (1997) to identify democratic deliberation as the meta-capability.

696    Peter B. Evans and Patrick Heller The importance of building engagement with a broad cross-section of civil society is increased by the contradictions between the increasingly globalized agenda of capital and a project of development as capability expansion. The old model of a shared national project of transformation uniting “national” capital and the state looks increasingly anachronistic. Even if the profit-maximizing strategies of capital were still nationally focused, the logic of private profit is harder to harness to capability expansion projects. The large “collective goods” element in capability-expansion makes it harder to construct productive alliances with private capital. Social returns to the expansion of human capabilities are substantially higher than private returns, and firms are likely to channel investment to areas where total returns are lower but private returns appear higher. Our basic general argument can be reiterated in simple terms:



1) Competent, coherent public bureaucracies are even more important than we thought they were. Without them, capability-expanding public services will not be effectively designed, to say nothing of delivered. 2) The ability of the state to pursue collective goals, rather than responding to the subjectively defined, immediate, particularistic demands of elites, is even more essential than earlier work on the developmental state suggested. 3) “Embeddedness”—the dense sets of interactive ties that connect the apparatus of the state administratively and politically to civil society—not only becomes more important but must focus on a broad cross-section of civil society rather than focusing simply on industrial elites. 4) State effectiveness is not so much a technocratic problem as a political problem, and state-society relations are at the heart of the politics involved.

In short, the transformation of the state requires re-directing analytical attention from technocratic politics that are either internal to the state or connect it to a restricted set of elite allies, focusing instead on how the state apparatus is connected to that analytically problematic set of actors referred to as “civil society.”

3  The Politics of the Developmental State The character of society is as central to the politics of state-society relations as the character of the state. Sadly, we must abandon the notion that there is a single, coherent, and potentially efficacious historical subject that can act as the interlocutor of the developmental state— whether the working class or a national bourgeoisie—and admit that the state’s most crucial interlocutor is in fact that most ambiguous and ambivalent of actors, “civil society.”5 While an ideal typical civil society is at the core of democratic politics, the associational life that is at the core of civil society is not inherently democratizing. Some associations are clearly 5  We define civil society as the full range of voluntary associations and movements that operate outside the market, the state, and primary affiliations and that specifically orient themselves to shaping the public sphere. This would include social movements, unions, advocacy groups, and autonomous non-governmental organizations (NGOs) and community-based organizations (CBOs). From a

Developmental States and State Transformations    697 uncivil, formed for the purposes of denying other groups their associational rights, for example, Hindu-chauvinist groups in India and the Ku Klux Klan in the United States. Whether civil society expands rights-based conceptions of democratic inclusion, serves as an extension of state hegemony (Burawoy 2003), or devolves into involutionary forms of retrenchment (Castells 2004) is an empirical question. A strong civil society—one that is internally well organized and capable of autonomous action—can on balance be democratizing for two reasons. First, in an established civil society, one that is backed by the rule of law, the basis of legitimacy for all civil society groups is the pursuit of rights (Somers 2008). Of course, rights can be expressed in exclusionary terms, but these are hard to defend as legitimate in the public sphere. Civil society, in other words, has a bias towards universalistic claims-making.6 Second, a functioning civil society is one that allows for associational freedoms. These in turn give subordinate groups the possibility of collective action, a possibility enhanced by a more open civil society (Rueschemeyer et al. 1992; Huber and Stephens 2012). Effective electoral competition is the sine qua non of any democracy and is critical to an effective civil society. By holding those who control the state periodically accountable to electoral majorities, electoral competition holds the permanent capture of power by particular elite groups in check and creates the possibilities for challenges to the status quo. Nonetheless, elections and party competition are very blunt instruments of accountability. Absent party discipline or a vigilant civil society, the default mode of competitive politics is clientelism. While electoral democracies in the Global South have dramatically expanded the spaces for subordinate politics,7 pervasive inequalities between citizens and severe problems in preserving the chain of sovereignty between citizen and state have limited the effective representativity of democratic institutions (Törnquist 2009). These fundamental deficits of representative democracy in the Global South have hampered subordinate group collective action and severely restricted the possibilities for building effective welfare states. To connect electoral representation to substantive outcomes, subordinate groups must be able to meaningfully practice formal political rights and to leverage them to demand social rights. Much as Karl Polanyi (1944) argued that civil society represented a countervailing force to the market, a civil society in which unprivileged groups have developed effective means of engaging parties and the state serves as a countervailing force sociological perspective, actors in civil society rely primarily on “social (as opposed to legal/bureaucratic or market) modes of mediation among people [organizing collective action] through language, norms, shared purposes, and agreements” (Warren 2001:  8). This civic (Varshney 2002) or communicative (Habermas 1996) mode of action is as such distinct from the pursuit of political power, profits, or the reproduction of primary ties and identities. 6  See also Tilly’s argument that while some social movements often press particularistic claims, they nonetheless expand possibilities for subordinate claims:

Social movements assert popular sovereignty . . . the stress on popular consent fundamentally challenges divine right to kingship, traditional inheritance of rule, warlord control and aristocratic predominance. Even in systems of representative government . . . social movements pose a crucial question: do sovereignty and its accumulated wisdom lie in the legislature or in the people it claims to represent? (2004: 13). 7  The increased mobilization of lower castes in India over the past two decades (Yadav 2000) and the dramatic rise of indigenous political power in the Andean nations (Yashar 2005) are only two examples.

698    Peter B. Evans and Patrick Heller to the deficits of representative democracy. Civil society can also have more mundane, but equally democratizing, effects by supporting continuous, detailed and interstitial feedback. The multiple associations, media, issue networks, and publics that constitute a vibrant civil society are in fact an array of highly sensitive sensors that both transmit information to states and transmit information about states and state actions back to society. Focusing on “civil society” as the key interlocutor of a developmental state apparatus is less analytically comfortable than assuming that the state’s societal counterpart is a unified political actor such as the working class or “national capital,” but such a perspective is not without historical precedent. The developmental capacity of the European social democracies was founded on the strength of encompassing multi-class alliances. Solidaristic class politics did not emerge spontaneously, but were forged in the public spaces of bourgeois democracies, through a range of associations—from unions to book clubs—and through episodic periods of social mobilization. And many of the core ideas—both in terms of widely held norms and innovative social policies—that would eventually set the stage for social democracy had their origins in local government efforts to address labor-capital conflicts (Rothstein 1999). The comparative literature on European welfare states establishes a fairly direct tie between developmental success and embeddedness:  the degree, scope, and encompassingness of working class mobilization is directly correlated with the size and depth of the welfare state, which is in turn directly correlated with more egalitarian economic and social outcomes (Huber and Stephens 2001). Remarkably, the model has prospered in the post-industrial, knowledge-intensive economy:  increased social investments, including advanced and flexible human capital formation and new forms of social support, have enabled social democracies to successfully adapt to the competitive challenges of globalization (Kristensen and Lilja 2012; Huo and Stephens, Chapter 21, this volume). This is not to say that the analytic frame used for looking at social democracies in the North can simply be transposed to capability-enhancing states in the twenty-first-century Global South. The conditions of capitalist development in the Global South have never been favorable to a politics based on the formation of a traditional working class. Nonetheless, the link between subordinate class politics, robust civil societies and social development in the Global South does apply. Richard Sandbrook, Marc Edelman, Patrick Heller, and Judith Teichman (2007), for example, examine a set of cases of southern social democracies (Costa Rica, Chile, Mauritius, and Kerala) that have replicated significant aspects of the developmental state, despite being tiny countries fully subject to forces of global markets. Their politics were driven by subordinate class mobilization even though the mass protagonist was a quite diverse assemblage of subordinate classes, including, along with a small but active working class, landless laborers and small farmers. These class fractions converged into mobilized political forces through iterated political struggles that took place in what were relatively open civil societies. The key point here, and the parallel with the history of northern European social democracies, is that a politics of solidarity emerged out of civil society and became the foundation for a broadly-based, embedded developmental state. Evelyne Huber and John Stephens (2012: 253) make a similar argument with respect to the connections between class mobilization, party politics, and state policies in contemporary Latin America, arguing that mass parties with “relations to civil society organizations,

Developmental States and State Transformations    699 most prominently unions” are more likely to be “aggressively redistributive and universalistic in their policy proposals.” From his rather unique vantage point, former president of Brazil and sociologist Fernando H. Cardoso reinforces this point when he notes that in “Latin America social democracy is a political response to the need for fast integration of poor masses, conducted through a broad and dynamic partnership between state and civil society, energized by an active public opinion . . . It is this diffuse public opinion, more than political parties or specific social classes, that stimulates government action and holds it accountable for reducing poverty and inequality” (2009: 312). There are solid grounds for identifying civil society as the key interlocutor of a developmental state, but the complex ambiguities of civil society as a composite social actor undermine any simple formula for predicting how the politics of synergy between a potential developmental state and civil society will play out. The concrete examination of historical cases is the best vehicle for exploring the role of state-society relations in the transformation of the developmental state.

4  Empirical Variations in Development and State Transformation In order to move from general arguments to more nuanced analysis of the political dynamics of the developmental state, we will examine three pairs of countries:



1) Korea and Taiwan: two archetypes of the twentieth-century developmental state, which have evolved in parallel since their initial periods of industrial success, and which, for reasons still not fully understood, managed to deliver exceptional performance with regard to capability expansion in the neoliberal era; 2) South Africa and Brazil:  two major, middle-income developing countries that have experienced contrasting trajectories in terms of capability expansion over the course of the last two decades; 3) China and India:  two giants of the Global South, whose ambiguous trajectories with regard to capability expansion illustrate the complexities of the dynamics of the developmental state.

Korea and Taiwan as Capability-Enhancing States The state capacities exhibited in Korea and Taiwan’s successful industrial transformations have been well specified. The coherence and quality of the bureaucratic apparatus, combined with the ability to create dense ties to industrial elites, made it possible for political elites to construct a transformative economic response to their geopolitical vulnerabilities. The centrality of capability expansion to the economic success of the East Asian tigers has, however, been relatively neglected. Even during their initial drives for industrial transformation, these states were pioneers in capability expansion, renowned for their levels of

700    Peter B. Evans and Patrick Heller investment in human capital. They began their periods of accelerated economic growth with education levels that made them outliers for countries at their income levels, and they continued to invest in the expansion of education throughout the period of their rapid expansion. If we refocus on these states in the last 30  years, the centrality of capability expansion to their development strategies becomes more explicit. As both Korea and Taiwan moved toward democratization in the 1980s, these states began a notable expansion of social protection (see Wong 2004; Peng and Wong 2008; Dostal 2010; McGuire 2010). The last quarter-century has been a period of socio-political transformation that looks more than anything else like an effort to construct a twenty-first-century East Asian version of post-World War II Golden Age social democracy. Over the course of the last 30 years, Korea and Taiwan stand out both in terms of their ability to preserve low levels of inequality8 and in their continued improvements in terms of the basic indicators of capability expansion, education, and health (Siddiqi and Hertzman 2001). The comparison between China and Korea that is highlighted by Jean Drèze and Amartya Sen (2002) provides a dramatic example of Korea’s social development successes. Starting in the 1980s with levels of life expectancy comparable to China’s, Korea ends up at the end of the first decade of the new millennium with levels comparable to the EU and higher than the US. The divergence in the performance of China and Korea in terms of basic health indicators is as dramatic as the divergence between Brazil and South Africa (Drèze and Sen 2002: 125). Infant mortality trends provide another window into divergent abilities to deliver capability expansion. In the period from 1960 to 1981, when China’s performance in terms of income growth was significantly inferior to Korea’s, China outperformed Korea in terms of reductions in infant mortality. In contrast, in the period from 1990 to 1999, improvements in infant mortality collapsed in China, despite spectacular rates of income growth, while Korea’s performance in terms of infant mortality accelerated, despite lower rates of economic growth. The politics of increased state involvement in capability expansion in Taiwan and Korea fit our general argument nicely. First, there is a clear connection between the emergence of electoral competition and state initiatives to increase investments in human capabilities. Ito Peng and Joseph Wong (2008: 74) observe that contestation from below led to more competitive democratic politics in 1987, and by 1990 Korea had moved from being a “laggard” on state-supported health insurance to having universalized coverage.9 Likewise, in Taiwan, the state initiatives to provide universalized health insurance began in 1986 “precisely at the time the opposition party, the Democratic Progressive Party (DPP), was formed” (Peng and Wong 2008: 75). Along with increased electoral competition, engagement by civil society actors played a key role. Peng and Wong (2008: 77) note that in Korea, . . . organizations such as People’s Solidarity for Participatory Democracy (PSPD), the Citizen’s Coalition for Economic Justice (CCEJ), and the Women’s Association United 8 

There are, of course, countries that have consistently achieved even lower levels of inequality, with the Nordic countries being the prime examples, but in the set of countries considered here, Korea and Taiwan stand out. 9  OECD data, which now include South Korea (but not Taiwan), show that social expenditure in Korea climbed from 3 percent of GDP in 1990 to 10 percent in 2010 (Adema et al. 2011).

Developmental States and State Transformations    701 (WAU) played central roles in directly negotiating with the government in health care and pension reform, in the extension of family and child care, and in steering the government’s attention toward gender issues in public policy more generally.

James McGuire (2010: 300) notes that a network of “progressive doctors, academics, and former democracy advocates lobbied successfully for the introduction of single-payer national health insurance” in Korea in the early 1990s. Jorg Dostal (2010: 165) highlights “democratization and political mobilization” as the most significant factors in expanding social provision in both Korea and Taiwan (see also Wong 2004). Despite the political specifics of the move toward capability expansion, skeptics might still argue that there is an inevitable “modernization” logic that pushes states in this direction once incomes pass a certain level. Evelyne Huber and Sara Niedzwiecki’s (Chapter 43, this volume) analysis of comparative dynamics across Latin America and East Asia argues against such an interpretation. The contrast between Brazil and South Africa makes it even clearer that a shift toward more effective capability expansion is not inevitable even among democratic, middle-income states in the Global South.

South Africa and Brazil—Cases of Divergent Capability Performance Brazil and South Africa both democratized over the course of the last 20 to 30 years, overcoming historical legacies of extremely inegalitarian social structures and exceptionally high levels of economic inequality. Starting in the 1990s, newly elected democratic political leadership in both countries shared the goal of remedying the injustices of historical inequality and expanding capabilities. Despite their apparently similar political trajectories, South Africa and Brazil have diverged in terms of delivering well-being during recent decades of democratic rule. Instead of growth bringing greater social disparities in Brazil, as it had under the military in the 1970s, it was “accompanied by rising average earnings, more formal employment, greater social protection for the population as a whole, greater equality in household income and wages, and a reduction in poverty” (Kerstenetsky 2009: 15). Bolsa Família, Brazil’s conditional transfer program, was small in terms of overall expenditures, but it transformed the lives of tens of millions of poor Brazilians, almost a quarter of the entire population. Access to healthcare and education expanded as well. In South Africa, investments in health and education have not delivered the same kind of returns. In Brazil, the rate of infant mortality was cut almost in half between 1996 and 2006. In South Africa, infant mortality increased in the same period. In Brazil, the proportion of girls in primary school rose from 83 percent to 95 percent between 1991 and 2004. In South Africa, it dropped from 92 percent to 88 percent in the same period.10 The divergence was even more dramatic in terms of levels of inequality. By the turn of the millennium, Brazil relinquished its 400-year-old claim to being a world champion of inequality. Brazil’s efforts at reducing its historic levels of inequality have begun to show

10 

See World Health Organization, WHOSIS Database, http://www.who.int/whosis/en

702    Peter B. Evans and Patrick Heller up in the Gini Index. In addition, data show a reduction of inequalities in very basic measures of human capabilities, such as child-stunting. Carlos Augusto Monteiro et al. (2010) report significant reductions in the ratio of stunting in the bottom quintile of the income distribution as compared to the top quintile. They conclude (2010: 309), “[t]‌he Brazilian experience is an example of the critical effect that policies to promote income redistribution and universal access to education, health, water supply, and sanitation services may have on child undernutrition.” In South Africa, in contrast, the turn of the millennium saw a disturbing shift from historically high levels of inequality to levels that were even higher. What accounts for the ability of the Brazilian state to gain traction as a twenty-first-century developmental state and the inability of the South African state to do likewise? It is probably not differences in traditional bureaucratic capacity. The South African state began the period with relatively high administrative capacity of the traditional developmental state type, certainly not clearly inferior to Brazil’s. A variety of explanations might be put forward,11 but the relationship between “political society”—roughly the state as a political entity and political parties—and “civil society” is a very plausible candidate. Despite the fact that both countries have vibrant civil societies in which subordinate groups have organized and made claims on the state, the relation between political society and civil society is quite different. In South Africa, the broad-based civil society organizations that emerged from the anti-apartheid struggle have “become estranged from political society” (Heller 2011a: 15), as an electorally dominant political party, the ANC, sought to extend its hegemony over popular organizations. Participatory structures that were part of the architecture of South Africa’s new democracy were dismantled or hollowed out after the ANC unilaterally embraced neoliberal reforms in 1996 and turned to a much more technocratic and managerialist strategy of delivery. Consequently, subaltern civil society has more or less been sidelined from the political process, and the past few years have seen a dramatic rise in often violent “service-delivery protests” by the urban poor. In contrast, in Brazil, a relatively autonomous civil society that can effectively engage the state through a range of participatory institutions has emerged, generating clear instances of civil society projecting itself into the state to shape policy, as well as instances of the institutionalization of a wide range of participatory structures and the strengthening of local democratic government (Heller 2011a: 27). The “co-evolution” of party politics and civil society was the key to this process. Brazilian political parties at the time of democratization were notorious for being elite-dominated and ineffective (Baiocchi et al. 2011). It was social movements and a vibrant sector of activist non-governmental organizations (NGOs) that drew the state in by demanding participatory institutions of engagement and then projecting themselves into the state. The key agent of welfare expansion in the second phase of Brazil’s social turn was a political party, the PT, but a political party 11 

It is tempting to point to the devastating effects of AIDS in South Africa as a simple explanation for the divergence. The divergent trajectory of AIDS in the two countries is, however, endogenous to differences in political institutions. Brazil’s greater effectiveness at dealing with AIDS is in itself a result of very different relations between civil society groups affected by AIDS and the state, and, consequently, sharp differences in policy responses (see e.g. Gauri and Lieberman 2006).

Developmental States and State Transformations    703 that nonetheless had its origins in civil society and that despite its increasingly professional and electorally driven modus operandi (Hunter 2010) still maintains key ties to civil society. In an important analysis from a different perspective, Giovanni Arrighi, Nicole Ashcroft, and Ben Scully (2010) complement our argument by looking at the relationship between the South African state and capital. They start by making what is in effect an argument for the construction of a capability-expanding developmental state, arguing (2010: 435) that without “structural reforms that re-invent the welfare state on foundations that can be generalized to the vast majority of the population, the economic and social performance of the South African state will continue to deteriorate.” They then go on to connect the failure to move in this direction to the failure to challenge the political hegemony of the current alliance of national and global capitalists. The current global boom in demand for natural resources has the potential to “provide natural-resource-rich South Africa with significant opportunities to generate jobs, incomes, and taxable surpluses, as well as preferential market arrangements” (Arrighi et al. 2010: 434). If these revenues could be appropriated and effectively invested in capability expansion by the state rather than left in the hands of capital, they could “be used to promote and generate activities capable of re-inventing the welfare state on foundations that can be generalized to the vast majority of the population.” What has happened instead, Arrighi and his collaborators argue, is that the South African state ended up “betting on capital,” focusing its demands on “Black Economic Empowerment,” which meant making the capitalist elite more multi-racial, rather than claiming a larger share of the windfall profits from the resource boom. Thereby, the state “forfeited the kind of investments in the welfare of the population (housing, public transport, health and, above all, mass lower and higher education) that would have been key developmental objectives in themselves and may well be the most essential, though by no means sufficient, condition of renewed economic expansion” (2010: 435). While it built ties to capital, the state failed to enable civil society to engage in the “co-production” of capability expansion.

India and China: Two Developing Giants In the post-World War II era, China and India looked like the obvious contrast to the East Asian Tigers. In India, the Nehruvian state had bureaucratic capacity, but its transformative ambitions were stymied by “a regime of clientelist machine politics, fostered by a flabby and heterogeneous dominant coalition preoccupied with an anarchical grabbing of public resources . . . ” (Bardhan 1983: 221). China’s egalitarian socialist model enabled massive, broadly distributed investment in health and education, but there was no capitalist class to ally with at all. Over the course of four decades, China has become the epitome of economic dynamism, and India is a close second. Yet in recent decades, as the original East Asian tigers have moved in the direction of capability expansion, China and India are seen by at least some analysts as unable to deliver the capability expansion that helped provide the foundations of their current growth. Certainly these are telling trajectories from the point of view of any theory of the developmental state. We will start with China (see also Tsai, Chapter 35, this volume).

704    Peter B. Evans and Patrick Heller Few would deny the central role of China’s creation of an educated populace with extended life spans in creating the foundation for its economic competitiveness in the last two decades of the twentieth century. Gillian Hart (2002) contrasts the success of this more capability-oriented Chinese approach to the economic costs of South Africa’s neglect of capabilities. Yet Drèze and Sen (2002) argue that just as China began to reap growth returns from its earlier investments in human development, its performance in terms of capability expansion began to falter. One interpretation of this reversal can only be explained by highlighting the particular nature of the Chinese state’s broad-based but authoritarian embeddedness. In the aftermath of a peasant revolution, embeddedness was secured through authoritarian structures, and particularly through the organizational prowess of a highly disciplined, mass-based party that could reach into villages and factory floors to deliver results. But if this form of top-down command and control power was good at universalizing access to basic capabilities, in the absence of democratic checks and balances it lacked feedback mechanisms. This is how Drèze and Sen (1989) explain the paradox that a high capacity state could preside over the Great Famine that took the lives of millions even as local party authorities kept reporting bumper crops. While China’s overall levels of performance in terms of standard measures of capability expansion remain enviable, the rhythm of improvement in provision of key collective goods has slowed down with the transition to a more market-oriented approach, as Drèze and Sen’s data on China’s lagging performance relative to Korea with regard to reducing infant mortality in the 1990s illustrate (see earlier discussion). Pranab Bardhan argues that much of the poverty reduction in China took place before foreign trade and investment began to drive growth in the 1990s. New data from the World Bank in fact show that poverty reduction in China was mainly due to agricultural growth, which itself was tied to huge infrastructural and social investments in the socialist period (Bardhan 2010: 93–94). In areas like healthcare, where a poor China delivered a level of health performance that was extraordinary for a country at its level of income, current performance has become a source of concern (see e.g. Wang 2004). Chinese society has also suffered from sharply rising income inequality and a withdrawal of prior social protections (see Davis and Wang 2009). Economically successful “communist capitalism” has erased China’s exceptionally low levels of inequality and contributed relatively little to the high levels of social protection that had characterized China in the socialist period. During the “communist capitalism” period, a combination of foreign corporations and local private capitalist elite groups gained increasing access to the party and the state at the national level, as well as at the local level in the most economically dynamic regions of the country. As a corollary of this political shift, the state (and the Party) increasingly withdrew from its traditional role of directly providing welfare. State-owned industries stopped providing workers with social benefits (danwei), and land privatization in rural areas undermined the basis of the local welfare state. As the party-state withdrew, access to housing, education, and health has increasingly become dependent on the market. Will the Chinese state shift in the direction of greater emphasis on capability expansion in the absence of democratic pressures of the type that prompted this shift in Korea and Taiwan? Hu Jintao’s recent emphasis on the “harmonious society,” the 2008 Labor Law and an apparent increase in tolerance for strikes, various efforts to re-invigorate public efforts to provide healthcare, and a gradual shift of the state budget toward giving “social

Developmental States and State Transformations    705 and educational expenditures” a greater share, all point toward more support for capability expansion.12 At the same time, the continuing dispossession of the Chinese peasantry by urban land developers creates a powerful structural movement toward greater inequality, and the refusal to tolerate organized challenges from civil society also makes it hard to believe that a real shift is underway. The case of India provides further evidence of how a lack of broad-based embeddedness can undermine the capacity of a state to translate growth into capabilities, albeit under democratic conditions. Over the past two decades, the Indian state has largely failed to translate the dividend of two decades of rapid growth into higher levels of social provisioning. New Delhi has embraced policies that are aimed at capability expansion, but delivery continues to be highly top-down, more or less monopolized by the “bureaucratic-politician nexus,” and is subject to massive leakage. Historically, the Gini coefficient for India has been comparatively low, but it is climbing, and by some estimates it has now surpassed China (Bardhan 2010: 97). But other indicators leave little doubt that there is a disconnect between dynamic growth and capability expansion. Thus, despite very significant increases in educational spending and a now near-universal rate of primary school enrolment, teacher absenteeism remains chronic, caste discrimination rampant, and school failure endemic (Ramachandran 2009). The most recent comprehensive national evaluation concluded that by the end of the fifth year of education, more than half of the school children have yet to acquire a second-year level of reading (Assessment Survey Evaluation Research Centre 2011). Even as the upper caste/classes of India reap the rewards of the global knowledge economy, World Bank data (World Bank 2006) show that India continues to be beset by levels of inequality of educational opportunity that surpass almost all Latin American countries and even some African countries. Even more striking is the complete failure to deliver the most basic of capabilities—food and health. A recent assessment found that in 2006, 48 percent of children under the age of five suffered from stunting (the highest level of malnutrition in the world), a condition that has severe long-term health consequences (Government of India 2009). Annual reports from the National Nutrition Monitoring Bureau actually show a decline in the consumption of calories over the past two decades. How do state capacity and state-society relations figure in India’s failure to deliver capability expansion? The commanding heights of the Indian state enjoy significant capacity and some autonomy from particularistic interests, particularly in the realm of macro-economic policy. Yet as one moves downward from the center through the subnational state and into local government, state capacity deteriorates the more the state directly engages with society. The existence of subnational states that have demonstrated a marked capacity for enhancing capabilities, most notably Kerala, Tamil Nadu, and Himachel Pradesh, while drawing on the same resources, institutional forms and bureaucratic structures of other states, suggests that the problem is more political (the chain of sovereignty) than organizational (the chain of command) (Heller 2011b). The Indian state, and in particular the subnational and local state, are deeply embedded in society, but only through linkages of party representation. And party representation 12  Estimates

of budgetary shifts are based on an unpublished analysis by Professor Yuen Yuen Ang (University of Michigan, Department of Political Science) of data from China Public Finance Yearbook 2004, PROC Ministry of Finance.

706    Peter B. Evans and Patrick Heller in India has become highly fragmented and highly particularistic, reducing the state to a patronage machine (Chandra 2004). Party politics have such an exclusive hold on how the state engages with society that civil society, in a pattern that resembles South Africa, has been almost entirely shut out (Heller 2009). The Indian state as such has few sensors, no effective feedback mechanisms, and no co-producers. It can deliver on macro-economic policy and some mega projects, but it cannot get teachers to teach, nurses to show up, or municipalities to make their budgets transparent. The counterfactuals are instructive. The dramatic progress in social development in the Southern states of Kerala and Tamil Nadu can be tied directly to their historical patterns of social mobilization. Broad-based anti-caste movements produced enduring encompassing political formations that not only strengthened the demand-side dynamic of civil society, but also created more competitive, redistributive party politics (Heller 2000; Harriss 2003). Our comparison of China and India brings more nuance to our understanding of the relationship between the capability-enhancing state and growth, and how forms of state embeddedness mediate that relationship. In the pre-market period, the Chinese state was deeply embedded through authoritarian structures in society. This form of embeddedness facilitated rapid capability expansion and helped set the stage for China’s dramatic economic take-off. Bardhan (2010) explicitly ties China’s greater success in promoting capabilities and its more broad-based and diversified pattern of growth to the fact that China has much stronger and more developmental forms of local government—in our terms the greater institutional embeddedness of the state. But in the absence of democratic checks, there has been little to stop an increasingly business-oriented Party from pursuing growth at the expense of its traditional involvement in expanding capabilities. India has also failed to capitalize on its growth dividend, and inequality is also growing, significantly so in income terms, but even more dramatically in human capability terms. In part, the state is increasingly constrained by its determination to promote accumulation. Atul Kohli (2012: 213) concludes that “the narrowness of the ruling coalition helps explain both the forces that have accelerated growth in India and the disproportionate distribution of the fruits of that growth.” In India’s noisy and increasingly mobilized democracy, however, the imperative to facilitate accumulation has to be balanced by the need for legitimacy. Thus, the center has recognized the need to enhance capabilities and has made significant efforts to tackle India’s massive deficits in service delivery.13 But electoral imperatives in the absence of embeddedness undermine the state’s developmental efficacy. In the absence of effective systems for delivery and local accountability, coordination remains poor, and the rate of capture remains high. In urban areas, where much of the recent growth has been concentrated, efforts to develop urban infrastructure and social services have been stymied by the dominance of “landgrab” politics, as developers and politicians collude in capturing the rents of exploding urban land prices. Drèze and Sen (2011: 9) note that celebrations of India’s growth have to be tempered by the recognition that “[t]‌he growing influence of corporate interests 13  It

is notable that many of these new initiatives have been driven in part by organized NGOs and expert-activists—such as Jean Drèze—and have included new laws on right-to-information, an ambitious new rural poverty-reduction scheme, and food security legislation. But such engagements remain the exception, and in any event fall short of providing the continuous input and vigilance that co-production requires.

Developmental States and State Transformations    707 on public policy and democratic institutions does not particularly facilitate the reorientation of policy priorities towards the needs of the unprivileged.” They go on to point out that, in contrast to Brazil, where public expenditures account for more than half of health expenditure and have resulted in the universalization of access to primary care, in India public monies account for less than a quarter of health expenditure. And that with the growing influence of commercial insurance companies, the prospects for building a public healthcare system are not very good. Counterfactual cases within India suggest that the problem lies less in the issue of state capacity than with the way in which the state’s relationship to society is constrained by political dynamics. State interventions continue to be captive to narrow, patronage-driven political imperatives that are highly entrenched at the subnational and local level. In the absence of countervailing civil society organizations that can hold bureaucrats and politicians to account, as well as more broad-based forms of demand-making that would favor the provisioning of public goods, the prospects for successful capability expansion in India remain limited. In both India and China, the state has failed to fully translate growth into capability expansion. In China, this is a story of broad-based but authoritarian embeddedness that has narrowed without being replaced by a complementary democratic accountability to civil society. India, a state that was democratically accountable but narrowly embedded, has failed to develop even the most basic capabilities. In both cases, the limits of the state’s accountability and responsiveness to subordinate groups are directly related to its increased ties to economic elites. The increasing political power of capital works in different ways in these two very different polities, but in both cases it works to undermine the engagement with civil society on which the effective production and delivery of collective goods depends.

5 Conclusion The conceptual analysis with which we began was premised on a sea change in development theory over the course of the last 25  years, one that has undercut the traditional preeminence of capital accumulation in favor of a perspective in which the expansion of human capabilities is both the ultimate goal and primary means of development. When applied to the developmental state, this perspective led to the argument that if the developmental state is to play an effective role in promoting development as capability expansion, the key lies in transforming state-society relations. Our three paired comparisons of country cases reinforced the analytical argument. They revealed just how important the state is in organizing the relationship between a capitalist economy and capability-enhancing development. Because markets necessarily undersupply public goods, the state plays a critical role in ensuring that growth can be translated into capability enhancement and that capability enhancement and social investment more generally can in turn promote growth. Promoting capabilities in the contemporary global capitalist economy requires broad-based embeddedness. In its optimal form, such embeddedness implies three things: links to a plurality of groups; multiple points of contact with the state that reduce the

708    Peter B. Evans and Patrick Heller costs of transaction between state and society; and modes of intermediation that promote co-production and coordination over domination, coercion, or dependency. In our paired studies, we have highlighted two sources of differences in the nature of embeddedness. The first has to do with how broad the state’s engagement is with society. States can be linked to select groups, or they can be articulated with a more encompassing set of social actors and interests. If twentieth-century theories of the social democratic state located the source of more “encompassing” embeddedness in the formation of the working class, revisionist accounts and our interpretation of twenty-first-century cases suggest the importance of developing more nuanced understandings of the conditions under which civil society can produce solidaristic politics. The second has to do with how that form of engagement is mediated. It can take an authoritarian form, in which the state enjoys despotic power, or it can take a democratic form, in which the state must negotiate the terms of its intervention with civil society. The authoritarian form can be expedient, but in the absence of countervailing forces, it can be subject to the problems that James Scott (1998) identified in his critique of high modernism. Authoritarian embeddedness limits the effective functioning of the development state by short-circuiting the flow of information, disincentivizing cooperation, and precluding the type of institutional fine-tuning that is so critical to building effective forms of intervention. Our argument thus reaffirms Michael Mann’s (1986) classic finding that states whose power is democratically authorized have been much more successful in the long run in developing synergistic relations with society than have authoritarian states. Representative institutions by themselves cannot ensure that the state’s engagement with society produces developmental outcomes. A competitive party system is critical to countering the problem of elite capture. But, as the case of India underscores, even in a highly consolidated and extremely competitive electoral system, representative mechanisms can still fail to ensure a government’s accountability to its citizens. Electoral calculations in a majoritarian system in a diverse society can favor the logic of clientelism over the logic of public provisioning. Movement toward a more universalistic logic requires both civil society organizations with a capacity for engagement and political intermediation by parties able to avoid “embedded particularism” (Herring 1999). From our six cases we can identify three configurations of embeddedness. Brazil, Taiwan, and South Korea have all achieved a form of democratic embeddedness. Though the developmental state has actively pursued market reforms and helped build economic dynamism, it has also supported capability expansion. Though the pattern of democratization itself varied significantly, in all three cases this helped create the political support for extending social services. We lack the same depth and variety of research on the role of civil society in Taiwan and South Korea, but some preliminary propositions are still possible. There is consensus that a combination of a cross-class anti-authoritarian alliance and working-class mobilization drove democratization in South Korea. Conversely, the emergence of electoral competition was fundamental in expanding the political space in which civil society organization could engage the state. Nonetheless, it also seems clear that an increasingly active role of civil society has been critical to promoting social reforms in both countries, especially when compared with the relative quiescence of political parties themselves on social issues. South Africa stands as a cautionary tale. Because of the anti-apartheid struggle, democratic South Africa inherited a vibrant and organized civil society, one in which

Developmental States and State Transformations    709 rights-based discourses were powerful and subordinate groups enjoyed significant capacity for collective action. South Africa might very well have traveled the same path as Brazil, except that the dominant party status of the ANC has more or less insulated the state from subordinate civil society. In the absence of feedback mechanisms and countervailing democratic power, state power has increasingly tended towards a form of high modernism. This has produced both policy disasters, such as the refusal by the Mbeki administration to address the HIV-AIDs pandemic, as well as a more general policy drift that has favored capital over capability expansion. The ambiguous cases of India and China underline both the different dynamics associated with different kinds of state-society relations and the continuing importance of the state’s autonomy in relation to the agendas of capitalist elites. While it is possible to imagine paths from either India’s democratically accountable, but narrowly embedded, state or China’s broad-based but authoritarian embeddedness to a more deeply democratic embeddedness that would be consistent with the effective promotion of capability expansion, it is even easier to envisage negative trajectories. These cases make it clear that there is no functionalist logic that insures the positive transformation of the developmental state. In all three pairs of cases, as in the conceptual analysis that preceded them, politics are primary. Technocratic and organizational capacities are still fundamental to the success of the developmental state, but absent a complementary politics of encompassing engagement with a broad cross-section of society, technocratic capacity is sterile and ineffectual. In building a politics of capability expansion, the state itself cannot be the only actor, nor can it rely only on elite allies. Absent an effective conglomerate of societal actors capable of embodying the roles intrinsic to “civil society” as an ideal type, the developmental state cannot deliver capability expansion. A continuous process of transformation in response to the challenges of development is the primary feature of states that succeed in remaining persistently developmental.

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Chapter 38

R en tier States a n d State Tr a nsfor m ations David Waldner and Benjamin Smith

1 Introduction A growing literature posits a causal relationship between resource abundance and important political-economic outcomes. Rentier state theory claims that resource abundance causes weak and predatory state institutions. The resource curse thesis claims that oil rents generate economic stagnation, authoritarianism, and heightened vulnerability to civil war. The two theories are intimately related; most theories of the resource curse make these outcomes conditional on weak state institutions. These issues are central to the Global South in a way that is rare among OECD nations: resource revenues generally make up a substantially larger share of GDP among the former than in the latter, rendering them more vulnerable to price fluctuations and to subsequent domestic effects of commodity export dependence. Since so many scholars view resource wealth as a net negative, it is incumbent on them to explore closely any systematic “resource curse.” In this chapter we review the evidence for the resource curse and find reason to be skeptical. In Section 2 we underscore the diversity of empirical findings, organizing them into three types. An orthodox position argues for an unmediated effect of resource abundance. A heterodox position argues for a mediated relationship between resource abundance and heterogeneous outcomes; under certain circumstances, its effects may be positive or negative. Finally, a dissenting or heretical position denies any systematic relationship between resource abundance and political-economic outcomes. In Section 3 we raise questions about the studies that have been used to advance causal accounts of the relationship between resource abundance, state institutions, and political-economic outcomes. We begin this inquiry by looking at measures of resource abundance, echoing concerns that common measures either conflate resource abundance and resource dependence or inadequately address omitted variable or endogeneity bias. We continue by considering counterfactual implications, suggesting that it is unlikely that weak states in resource-abundant economies would be strong and competent

Rentier States and State Transformations    715 states without oil; indeed, we think the evidence often suggests the opposite. We conclude with a survey of the causal mechanisms theorized to link resource abundance and political-economic outcomes, finding little evidence for them. We incline toward studies that either deny any systematic relationship between resource abundance and dysfunctional political economies or that find conditional relationships. We reach this position in large part because of our prior theoretical beliefs that state institutions are exogenous to natural resource rents. In Section 4 of the chapter, we draw on our own prior work to consider broader theoretical frameworks of state formation and transformation under which studies of the rentier state and resource curse might be fruitfully subsumed. We suggest that normalizing the politics of resource wealth and integrating it into broader comparative inquiry is much more promising than continued theoretical isolation.

2  Findings and Disputes This section surveys the vast literature that explores whether resource abundance affects three political-economic outcomes:  slow growth, authoritarianism, and civil conflict. Within each section, we begin with studies positing a direct relationship and then consider studies finding a conditional relationship or no systematic relationship. We identify these works as orthodox, heterodox, and dissenting, respectively.

Does Resource Abundance Depress Economic Growth? One might expect that resource-abundant economies would outperform their resource-poor counterparts, but much research suggests that oil-rich economies in Latin America, Africa, and the Middle East have grown more slowly. Allan Gelb (1988) initiated research into the negative growth effects of resource abundance and a wave of subsequent studies confirmed this dispiriting finding. Jeffrey Sachs and Andrew Warner (1995, 1999, 2001) found that resource-based exports depressed economic growth between 1970 and 1989. Carlos Leite and Jens Weidmann (2002) replicated these findings, while Richard Auty (2001b) also confirmed them. Many remained skeptical, however; many of today’s advanced economies were resourceabundant in the late nineteenth century. Subsequently, a parallel wave of studies deviated from the orthodox claim by positing that conditioning variables could alter the effect of resource abundance on growth, potentially changing its influence from negative to positive (Dunning 2008a). One excellent recent book noted that the entire corpus of resource curse scholarship hinges on the question of who owns the oil sector and under what rules (Jones Luong and Weinthal 2010), which is nearly always assumed but rarely ques­ tioned. Absent direct state ownership, they argue and later conclude, “oil is not a curse.” Similarly, reviewing a decade of such studies, Jeffrey Frankel (2010: 4) concluded that oil wealth [does not] necessarily lead to inferior economic or political development, through any of these channels. Rather, it is best to view oil abundance as a double-edged sword, with both benefits and dangers. The outcome can be ill as easily as good.

716    David Waldner and Benjamin Smith Among the heterodox, Claudio Bravo-Ortega and José de Gregorio (2007) find that the impact of resource abundance on growth is conditional on the level of human capital; once a relatively low threshold has been crossed, natural resources promote economic growth. Jørgen Andersen and Silje Aslaksen (2008) restrict their analysis to democratic regimes, finding no evidence of a resource curse in parliamentary democracies but one in presidential systems. The most important conditioning variable, however, is institutional quality. For such studies, it is the state and not resource abundance itself that turns a potential blessing into a curse. James Robinson, Ragnar Torvik, and Thierry Verdier (2006: 447) argue that: Countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create. Countries without such institutions however may suffer from a resource curse.

Halvior Mehlum, Karl Moene, and Ragnar Torvik (2006) argue that natural resources promote development when institutions are “producer-friendly,” but depress it when weak rule of law, dysfunctional bureaucracy, and corruption create “grabber-friendly” institutions. Torvik (2009) finds that countries with abundant resources and hospitable institutions constituted the first wave of industrializers but also that, over time, resourceabundant countries have been concentrated among late developers with poor institutions. Hence, over the past 40 years there has been a robust negative correlation between resource wealth and economic growth. Finally, Daren Acemoğlu, Simon Johnson, and James Robinson (2003) find that, unlike most of sub-Saharan Africa, Botswana enjoys state institutions that promote good policy, protect private property, and create an environment for secure investment. There is also a sizable body of dissenting studies that find no evidence for any such relationship. Graham Davis (1995) was an early dissenter, finding that the resource curse was more of an exception than the rule. More recent work supports that finding. Christa Brunschweiler (2007) makes a distinction between resource abundance and resource dependence. Using a new measure to reflect this, she finds a positive effect on growth. In the most comprehensive dissenting study, Daniel Lederman and William Maloney (2007) explore the robustness of the core relationship by using different estimation techniques and including different conditioning variables. They further criticize the reliance of previous studies on cross-sectional analysis and estimate models using panel data, lagged values of endogenous variables as instruments, and fixed effects to control for country-specific heterogeneity. Their findings starkly challenge the mainstream view: there is no evidence of a resource curse, especially in models with fixed effects. Lederman and Maloney (2007: 32) conclude: We should abandon the stylized fact that natural resource abundance is somehow bad for growth and even perhaps consider a research agenda on the channels through which it may have a positive effect, possibly through inducing higher productivity growth.

Michael Ross (2012: Ch. 6) recently came to an analogous conclusion, finding that growth rates in oil-rich countries have differed little from their oil-poor counterparts. The question for Ross is why oil-rich countries have had “normal” growth rates.

Rentier States and State Transformations    717

Authoritarianism Drawing on much prior case study research, Ross (2001) provides the seminal argument that oil wealth hinders democracy. He finds a powerful relationship: oil wealth tends to make political regimes less democratic. Specifically, he finds that (342): The antidemocratic properties of oil and mineral wealth are substantial: a single standard deviation rise in the Oil variable produces a.49 drop in the 0-10 democracy index over the five-year period . . . A state that is highly reliant on oil exports—at the 1995 level of Angola, Nigeria, or Kuwait—would lose 1.5 points on the democracy scale due to its oil wealth alone.

Below, we discuss the mechanisms Ross suggests explain this relationship. We note, however, some ambiguity in the model’s interpretation. It is not clear whether oil causes a democracy to become a dictatorship—implied by the substantive discussion of the model, where oil produces a drop in the democracy index—or whether oil makes it easier for a prior dictatorship to resist pressures to democratize. The former interpretation makes authoritarianism endogenous to oil wealth; the latter interpretation makes authoritarian origins exogenous but survival endogenous to oil wealth. In more recent work, Ross (2012: Ch. 3) argues that the main effect of oil is to secure autocratic incumbents in power and suggests, with limited empirical support, that oil may erode democracies as well, by making elected incumbents less accountable and perhaps more willing to stay in power by undermining democratic institutions. Furthermore, Ross argues that these anti-democratic effects are evident from only the late 1970s to the late 1990s; prior to the 1970s, “oil producers were just as democratic—or undemocratic—as other countries” (Ross 2012: 63). Some subsequent research strongly supports the hypothesis that oil is associated with authoritarianism. Nathan Jensen and Leonard Wantchekon (2004) note that recent successful democratic transitions in Africa have occurred only in resource-poor countries. They find that moving from the lowest level to the highest level of natural resource dependence depresses a country’s democracy score by 1.59 points on a 20-point democracy scale. This effect is substantively modest, but given that the average democracy score in Africa during this period was only 5.63—that is to say, on average, African countries were non-democratic—the finding becomes somewhat more substantively important. Both of the works cited take as their dependent variable a measure of a country’s political regime and estimate that score using time-series, cross-sectional data. This research design has trouble distinguishing between oil as a cause of the origins of authoritarian regimes and oil as a cause of the resilience of authoritarian regimes. Jay Ulfelder (2007) explores this riddle using an event-history model that estimates the risk of a dictatorship undergoing a democratic transition in any given year. His results strongly support the orthodox position on rentier states: as resource revenues constitute a larger share of national income, the probability of a transition to democracy in a given year declines. Even the median country, deriving under two percent of national income from mineral resources, is very unlikely to experience a transition to democracy in a given year. As resource dependence increases, the already small probability of a democratic transition becomes miniscule. Kevin Tsui (2011) uses oil discoveries as an instrument for oil wealth to estimate the effects of oil on the survival of non-democracies. For non-democratic countries, the

718    David Waldner and Benjamin Smith discovery of a huge oil field of 100 billion barrels—roughly the entire oil endowment of Iraq—has a relatively small dampening effect on democracy scores three decades after the discovery. A similar discovery has no effect on democracies: in other words, oil does not cause dictatorship but rather prolongs pre-existing dictatorships. The effect is strengthened when additional instruments are employed: the number of exploratory wells being drilled, the higher the quality of the oil, and the size of extraction and exploration costs. The implicit model is that dictators forecast future oil wealth and augment their efforts to secure their tenure in office. Despite evidence for an anti-democratic resource effect, Thad Dunning (2008b) argues persuasively for a more nuanced approach. Conditional on private inequality, resource wealth can promote autocracy or democracy. Given high inequality, the demand for redistribution is high; resource rents have a democratizing effect because they mitigate a significant threat to elites. Conversely, given low inequality, the demand for redistribution is lower, and elites emphasize the opportunity costs of democracy, restoring the anti-democratic effect of oil rents. Dunning tests this argument both quantitatively and qualitatively, conducting the latter test in an intensive case study of Venezuela. In the quantitative analysis, the unmediated effect of oil rents is consistent with the orthodox view: the sign on the coefficient is negative and statistically significant. But the inclusion of an interaction term produces results supporting his conditional theory. When private inequality is below its mean level, resource rents are positively related to authoritarianism. When private inequality is above its mean, on the other hand, resource rents are positively related to democracy. Dissenters have been equally active. Michael Herb (2005) poses a compelling challenge to rentier state theory. Most models use national income as a control variable, positing that resource rents will have an anti-democratic effect larger than their prodemocratic wealth effect. The thorny measurement problem is that the measure of national income includes resource wealth, thereby making the effect of wealth partially endogenous to resource rents. If we were to intervene to set resource rents to zero, we could not hold income constant, but rather we would have to subtract the value of resource rents from national income. To imagine Kuwait without oil, in other words, is not to imagine a wealthy non-oil producer, but rather a poor non-oil producer. We would thus expect Kuwait to be non-democratic. Herb thus derives a counterfactual GDP figure for resource-abundant countries by substituting the GDP of resource-poor neighbors. With this counterfactual GDP as a control variable, the coefficients on alternative measures of resource dependence are small and statistically insignificant. Thus, Kuwait without oil would likely be a poor dictatorship, not a wealthy democracy. Stephen Haber and Victor Menaldo (2011) re-examine the resource curse using a data set covering 168 countries stretching back to 1800, ensuring that their analysis covers the period preceding the onset of natural-resource dependence. In other words, rather than looking for a country similar to Venezuela but without oil, the new dataset looks directly at Venezuela before the discovery of oil. In addition, they combine a country-by-country time-series approach with a dynamic panel framework with country fixed effects to control for unobserved country heterogeneity. Further, to maximize leverage over counterfactual outcomes, they develop a difference-in-difference estimator that estimates the effect of a continuous variable. As they note (2011: 3):

Rentier States and State Transformations    719 No matter how we look at the long-run data—we cannot find a resource curse. In fact, to the degree that we detect any statistically significant relationships, they point to a resource blessing: increases in natural resource income are associated with increases in democracy.

David Waldner (2013) complements this finding, theorizing that rural incorporation provides both democratic and authoritarian regimes with the support needed to survive destabilizing crises. Waldner hypothesizes that these coalitions between urban elites and middle-class farmers sharply reduce the likelihood of a regime failure by a factor of approximately five. Oil resources, on the other hand, do not have a substantively and statistically significant effect in any of the models.

Civil Wars James Fearon and David Laitin (2003) and Paul Collier and Anke Hoeffler (2004) are orthodox statements of the relationship between resource abundance and internal conflict. Much of the subsequent literature has gradually refined these early studies. For Collier and Hoeffler, the motivation was to distinguish between greed- and grievance-based theories of civil conflict. Greed-based theories treat civil war as opportunistic; people rebel under propitious circumstances. Theories of grievance take ideology and inequity more seriously; people rebel to redress exclusion or oppression. Opportunities for rebellion are enhanced by external funding from diaspora communities, foreign powers, or the exploitation of natural resources. They find that primary commodity exports substantially increase the risk of conflict, a finding they interpret as increasing the opportunities to finance rebellions. Fearon and Laitin provide an alternative perspective. Oil exporters suffer from political Dutch disease. Weak states pursue inept policing and counter-insurgency strategies, favoring insurgents. Their analysis shows that states deriving at least one third of export revenues from fossil fuels face double the odds of an insurgency. Oil revenues are causally significant not because they can finance insurgency, but because they weaken state institutions. Collier and Hoeffler’s main findings have come under criticism from multiple quarters. One critique has been measurement choice—their use of primary commodity exports as a share of GDP. Fearon (2005) shows that results using this measure fail robustness tests. Ross (2004b) argued that the measure is endogenous to conflict itself. Given that a country year is coded as experiencing a civil war only after a relatively high casualty threshold has been crossed, Ross notes that a country could undergo low-intensity conflict for years prior to crossing this threshold. During this initial period, actors anticipating conflict move assets abroad. As GDP shrinks, the ratio of primary commodity exports rises by default. Weak states might also poorly protect property rights and stifle economic growth while simultaneously creating opportunity for insurgency. Ross’s (2004a) case study evidence leads him to reject the claim that looting links oil to civil war. Finally, Ross (2006) advances a new measure of resource wealth that is arguably exogenous to anticipated civil war.1 A country is resource-rich if it produces more than $100 per capita in fuel rents. Ross 1  Note, however, that in the late 1970s Iran and other oil exporters’ oil industry strikes drove down production (and fuel income) well before the onset of civil war.

720    David Waldner and Benjamin Smith finds a robust correlation between this measure and the onset of conflict. Substantively, this is a high threshold to cross before resource rents significantly increase the likelihood of violence. All else equal, a country with zero fuel rents has a risk of conflict of 0.92 percent; a country with fuel rents of $100 has a risk of conflict of only 0.99 percent. Thus, while statistically significant, resources have a modest substantive effect on violence. To pose a substantial increase in the risk of conflict, a country must have more than $1,000 in fuel rents—such as Venezuela, Iraq, or Gabon—to reach a risk of conflict of 1.8 percent. Even here, the risk rises only from one to almost two percent. However, Matthias Basedau and Thomas Richter (2010) find that at higher levels of resource abundance violent civil conflict is nonexistent.

3  Causal Models Suppose that resource abundance has no effect on growth and that resource endowments are distributed randomly with respect to the true but unobserved sources of growth. Over time, fast-growing economies drop out of the sample. Natural resources as a share of exports decline, and these countries become non-rentier states. In slow-growth countries, on the other hand, natural resources retain their large share of national income, so we observe a group of resource-dependent, slow-growth economies. Similar stories could be told about the linkage between resources, authoritarianism, and civil conflict. After all, as Gavin Wright and Jesse Czelusta (2004, 2007) argue, resource abundance is not exogenous. Dependence on natural resource rents may depend on contingent investments in infrastructure, geological knowledge, and technologies for extraction, refinement, and utilization. Furthermore, the pace of exploitation may similarly depend on contingent factors, such as how much leaders discount the future. Finally, Collier (2010) has found that resource exploration is substantially more likely in wealthier, more stable countries, so that poorer, less stable states may be less likely to enjoy the full potential of their resource bases. This section considers three challenges to the claim that natural resources cause slower economic growth, authoritarianism, or civil war. The first subsection looks at measures of resource dependence. The second subsection considers counterfactual analysis of the causal claim. The third subsection looks at the causal mechanisms that have been proposed as linkages between resource endowments and political-economic outcomes.

Measures Seminal early work by Collier and Hoeffler (2004) and Ross (2001) used resource export revenues as a share of GDP to capture resource wealth. For all of the reasons mentioned earlier, scholars increasingly employ a better measure: fuel rents per capita (Ross 2006). This measure captures fuel consumed domestically and accounts for effective rents per citizen, and it is less tied to overall national income. However, it is not a perfect instrument; less exploration in poorer, less stable countries means fewer rents per head but still does not account for the relative importance of rents in any average citizen’s income. Employing fuel rents as a share of each citizen’s average income might better capture the

Rentier States and State Transformations    721 political utility of resource wealth in different country settings, getting us closer to measuring how politically influential a state’s rents are. Benjamin Smith (2013) develops such a measure, termed “rent leverage,” and shows that its yearly measure does not significantly influence civil war onset but that annual changes do: year-on-year increases make civil war less likely. Efforts to develop exogenous instruments have been admirable but not entirely successful. One measure—a country’s proven reserves (Humphreys 2005)—is highly politicized. OPEC quotas depend on proven reserves, providing strong incentives for members to inflate those figures. In contrast, Kristopher Ramsay (2011) uses natural disasters in producing countries. However, as Haber and Menaldo (2011) note, Saudi capacity to increase production to make up for drops elsewhere calls the utility of this measure into question. In short, even these measures are endogenous to politics.

Counterfactuals Consider resource wealth the treatment in a randomized experiment. We assume that each country has a potential outcome under treatment and a potential outcome under control, and that the observed outcome is simply their difference. Because we cannot observe individual units in both states, one takes the expected value of this difference to obtain the average causal effect. To claim that “[c]‌ountries often end up poor precisely because they are oil rich” (Birdsall and Subramanian 2004: 77) is to claim that in the absence of these oil riches, on average, the resource-deprived country would have been wealthy. There are two ways to justify this counterfactual. The first is to draw a contrast to the implicit “control” group, the East Asian tigers. The second is to make a theoretical argument relating state revenue sources to state institutions and behavior. As Robert Bates (2001: 107) defines this position: States in resource-rich economies tend to secure revenues by extracting them; those in resource poor nations, by promoting the creation of wealth. Differences in natural endowments thus appear to shape the behavior of governments.

Auty (2000: 351) and Terry Lynn Karl (1997: 128–139) explicitly argue that resource rents induce predatory states, while resource scarcity induces the type of state-society relations characteristic of developmental states. The contrast with the East Asian economies is not persuasive; there is a vast gap between claiming that East Asian economies developed because they lacked resources and claiming that the absence of natural resources “has not proven to be a fatal barrier to economic success” (Humphreys et al. 2007: 1). This is the gap between rapid growth because of resource scarcity and rapid growth despite it. The former claim verges on suggesting that we would expect Nigeria without oil to be an African counterpart to Korea. The latter claim sees resource scarcity as a counteracting cause that can be overcome and thus implies omitted variables that account for East Asian success. This version of the argument would not support the counterfactual that, without abundant resources, rentier states would become economic success stories: Nigeria without oil would be Ghana. The balance of evidence supports the latter claim; the East Asian cases succeeded despite their lack of resources.

722    David Waldner and Benjamin Smith Indeed, when one turns to the voluminous literature on the origins of East Asia’s success, one finds abundant evidence that relatively idiosyncratic factors account for the regionʼs economic success. To take a few examples, Atul Kohli (2004) attributes East Asian economic success to Japanese colonialism. In contrast to British rule in Nigeria, the Japanese in Korea transformed a corrupt agrarian bureaucracy into a highly penetrating political organization, established close ties to dominant classes while keeping them subordinate, and controlled lower classes while creating a disciplined labor force. Waldner (1999) examines the coalitions that made East Asian development possible, while Richard Doner, Bryan Ritchie, and Dan Slater (2005) argue that resource scarcity and intense security threats distinguish the East Asian states from their Southeast Asian cousins. Conversely, Jeffrey Herbst (2000) argues that a low land-to-labor ratio and a permissive international environment condemned Africa to weak patrimonial states that hindered economic growth. Finally, Acemoğlu, Johnson, and Robinson (2003) argue that British colonialism in Botswana created the framework for successful development despite its resource abundance. Given these arguments, we find it difficult to accept the counterfactual that, absent oil, Nigeria would resemble Korea, not Ghana. We have similar concerns about the counterfactual that, absent oil, many resource-abundant regimes would be more democratic. As we saw earlier, Jensen and Wantchekon (2004: 833) find that substantial natural resource dependence depresses the average African country’s democracy score by 1.59 points on a 20-point scale. But during the time period studied, most African countries were non-democratic. Thus, Nigeria without oil is most likely another non-democracy. Douglas Yates (1996) notes that while Angola, Cameroon, Congo, and Nigeria “conform” to rentier theory, one cannot attribute their regimes to oil because their non-rentier neighbors were equally likely to be non-democratic. One might object that the most relevant comparator for a counterfactual thought experiment is not a contemporary neighbor but the resource-abundant country just before the discovery and exploitation of its resources. Resource curse arguments fare equally poorly here. Consider oilʼs state-weakening effects, as discussed in the case of Venezuela (Karl 1997). If resource abundance creates weak states, must we believe that resource scarcity creates strong states? Venezuelan history would suggest otherwise, for in the century before the discovery of oil, the Venezuelan state remained weak. During the nineteenth and early twentieth centuries, Venezuela could not develop a strong state because of factional conflict and caudillo politics (Di John 2011: 174). The Venezuelan state was thus weak both prior to, and subsequent to, the exploitation of oil. As Karl (1997) notes, when institutions are strong prior to the discovery and exploitation of resources, as in Norway, the effects of oil exploitation can be quite beneficial. It appears that state strength is exogenous to natural resource rents, a point we develop further below. The basic point can be seen more clearly in the case of Ecuador. Oil was produced in small quantities as early as 1911, but major oil fields were discovered only in the late 1960s, and large-scale production began only in the early 1970s. Yet, prior to 1972, Ecuador was at the bottom of the American income hierarchy, marked by enormous disparity between elite and mass, as the former controlled the export economic sector while the latter remained stuck in the poverty engendered by subsistence agriculture. Politics in Ecuador were highly unstable before and after the discovery of oil, alternating military intervention

Rentier States and State Transformations    723 and caudillo politics. These economic and political patterns continued into the oil era. Most notably, political instability “shortened the horizons of policymakers and so affected the way Ecuador used its oil windfalls” (Marshall-Silva 1988: 174). A statistical model like Sachs and Warner’s that began in the 1970s would attribute Ecuador’s problems to oil. However, as can be clearly seen from a case study, the discovery of oil did not fundamentally disrupt pre-oil patterns. From a counterfactual perspective, there is a seemingly simple implication of the thesis: if resource abundance is a curse, why not refrain from exploiting these resources? Frankel (2010: 13) explicitly poses the challenge: It is not that countries with oil wealth will necessarily achieve worse performance than those without. Few would think that a country with oil or other natural resources would be better off destroying them or refraining from developing them.

Likewise, Paul Stevens (2003: 18) considers “leaving [the oil] in the ground,” but quickly concludes that “this cannot be considered a serious option.” But if defenders of the thesis disagree that making Nigeria resource poor would have made it wealthier, how confident can we be about their claims regarding the effects of resource abundance on wealth?

Mechanisms We have outlined reasons to be skeptical of the claim that, on average, resource-abundant countries deprived of natural resource wealth would become high-performance economies or democracies. An alternative is to identify, through theory and evidence, the mechanisms that link resource abundance to outcomes. Evidence of these mechanisms would bolster the causal inferences of the resource curse; the absence of such mechanisms, on the other hand, would discredit them. We review these efforts and find that, on balance, there is not yet strong support for mechanisms validating the resource curse hypothesis. Two families of theories explain why resources curse economic growth, one focusing on macro-economic and the other on political-economic factors. The economic theory centers on “Dutch disease,” in which resource export windfalls produce currency appreciation, greater demand for manufactured imports, and reallocation of capital and labor from the traded manufacturing sector to the non-traded sector (Neary and Van Wijnbergen 1986). There are, however, two major problems with linking slow growth to Dutch disease. First, as Mohsen Fardmanesh (1991) explains, oil price hikes raise global prices for manufactured goods, providing new market opportunities for domestic manufacturers to sell locally. Fardmanesh argues that this “global effect” explains the expansion of manufacturing sectors in many oil-rich developing countries in the 1970s. Second, even if Dutch disease hurt the domestic manufacturing sector, it is not clear why the rise of the non-traded sector would result in lower rates of growth. Crowding out of investment and labor from the manufacturing sector accounts for the coexistence of booming and lagging sectors; it does not account for slower rates of growth, unless one appends an argument about higher rates of productivity growth in manufacturing, an argument most economists are loathe to advance.

724    David Waldner and Benjamin Smith The second set of mechanisms linking resource abundance and slow growth center on institutions and rent-seeking. Auty (2001a), Jonathan Isham et al. (2005) and Karl (1997) argue that resource dependence weakens institutions, producing predatory states and depressing economic performance. Isham et al. (2005: 143) consider three pathways by which resource endowments weaken institutions: rentier effects, delayed modernization, and entrenched inequality. Xavier Sala-i Martin and Arvind Subramanian (2003) find no direct effect of resources on growth, but they find an indirect effect through which they weaken institutions, hence depressing growth. However, it is equally possible that the prior existence of weak institutions influences the political effects of oil rents. For example, Aaron Tornell and Philip Lane (1999) argue that the “voracity effect” by which resource windfalls promote patronage, hindering growth, occurs in economies plagued by weak political institutions. Scholars who note the superior performance of resource-abundant economies in the nineteenth century echo this claim. Wright and Czelusta (2007: 208) argue that the oil boom of the 1970s coincided with the end of decolonization, when new states were formed with weak state institutions; weak states preceded oil exploitation in many such cases. Similarly, Ragnar Torvik (2009:  250)  argues that countries with stronger institutions exploited natural resources for development; later developers with weaker institutions could not replicate this experience. These findings suggest that state institutions are largely exogenous to resource endowments, or we would not observe such variance between generations of resource-abundant economies. Turn next to the mechanisms linking oil wealth to authoritarianism. Ross (2001) uses lagged values of several intervening variables to make a case for three mechanisms: a “rentier effect,” by which states fund themselves by means other than direct taxes; a “repression effect,” by which oil revenues fund coercive apparatuses; and a “modernization effect,” by which oil-based growth hinders economic diversification. The models provide “at least tentative support for [the] three causal mechanisms” (Ross 2001: 356). Note that all three hinder democracy by making regimes less vulnerable to pressures for democracy. In other words, oil extends the lifespan of exogenously authoritarian regimes rather than catalyzing new ones. In his more recent work, Ross (2012) offers a new causal model that emphasizes the rentier effect. Oil-rich dictatorships can increase the gap between the benefits they provide and the taxes they collect. By thus maintaining support and avoiding pro-democratic rebellions, dictators prolong their rule. Moreover, oil-rich dictators can exploit information asymmetries, hide oil revenues, and thus increase their perceived spending-to-revenue ratio; now citizens feel even more strongly that their governments are “delivering the goods,” and so are less likely to rebel. Finally, we turn to the mechanisms linking resource abundance to the onset of civil wars. Two mechanisms are of particular relevance: that natural resource abundance makes looting more feasible and hence provides incentives for opportunistic insurgents (Collier and Hoeffler 2004), and that oil producers suffer from weaker state structures (Fearon and Laitin 2003). Ross (2004a) compiles evidence from 13 case studies to test these hypotheses. Ross finds no evidence to support the looting hypothesis; in none of the cases did rebel groups either loot natural resources or extort funds from those engaged in resource exploitation. Moreover, Ross was unable to investigate the hypothesis that natural resources make civil wars more likely by sapping state capacity.

Rentier States and State Transformations    725 It is difficult to know what the observable implications of this hypothesis are at the case study level. The mechanisms that may link oil to bureaucratic weakness—and more problematically, bureaucratic weakness to subsequent conflict—could be diffuse and subtle. Advocates of this mechanism must further specify its logic before it can be tested with case studies (Ross 2004a: 42).

Natural resources may affect the onset of civil war by other mechanisms, such as triggering secessionist demands, and they may affect other dimensions of conflict, such as duration, geographic distribution, and intensity. But for the most part, while the literature suggests “an embarrassment of mechanisms,” and while there has been some significant effort to unpack and test these mechanisms (Humphreys 2005: 510), there is as little evidence of mechanisms linking natural resource endowments to the onset of civil wars as there is linking them to economic backwardness or transitions to authoritarianism. Accordingly, Anca Cotet and Kevin Tsui (2013) find that, after accounting for country fixed effects, oil wealth has no influence on the likelihood of civil war onset.

4  Conclusion: State Formation and Resource Endowments How persuasive is the argument that resource endowments shape state institutions? Karl (1997) provides what many consider the gold standard of arguments in attributing institutions to resource endowments. Dependence on commodity exports constrains the revenue basis of the state, relieving rulers of the burden of taxing citizens and local economic actors. This reliance on “external” sources of tax revenue in turn shapes incentives over policies and institutions. State revenues and the mode of revenue collection define the nature of the state. The result is a state that relentlessly expands its jurisdiction at the same time that its authority is eroding. Faced with powerful interest groups, and enjoying the luxury of using fiscal and welfare policies, public spending displaces statecraft, and state capacity suffers. Yet much of the developing world similarly depends on external sources of revenue. In that sense, Venezuela does not differ from the rest of Latin America, where executives centralize power and expand the state’s jurisdictional boundaries yet cannot overcome weak administrative structures. “Venezuela is unique, however,” Karl (1997: 89) protests, “in the extent to which these features typify state development and the roots to which they were acquired.” However, her book does not systematically compare petro-states to non-petro states, which weakens its claim that petro states are systematically different from non-petro states. In addition, we have already seen how weak the Venezuelan state was prior to the discovery of oil. Moreover, there is substantial variation among petro-states. Indonesia and Norway are but two of the major exceptions that Karl and others cannot explain through the rentier-state framework. We are thus struck by the large discrepancy between the fundaments of rentier state theory and the weak empirical and theoretical support for it. To reiterate, without a theory of the rentier state, many claims about the resource curse lack theoretical foundations, for they require that state institutions be endogenous to resource endowments. But

726    David Waldner and Benjamin Smith theory and evidence appear more to support an exogenous theory of state formation and transformation. We conclude, therefore, by underscoring the need to embed resource-rich states in broader approaches to state building. The causes of weak state institutions in the developing world are, unfortunately, over determined. Joel Migdal (1988) attributes weak states to strong societal groups and institutions. Miguel Centeno (2002) and Herbst (2000) attribute weak states in Latin America and Africa, respectively, to the absence of warfare and reliance on external funding. Kohli (2004) attributes weak states to colonial legacies. These and other approaches provide strong theoretical priors of weak states that are exogenous to resource endowments. They also suggest that we will make more progress on questions of economic growth, democracy and authoritarianism, and civil conflict not by focusing on the subset of resource-abundant countries, but by developing broader and more encompassing theories of state formation. We offer some perspective from our prior work on state building. Waldner (1999) offers an account of the contrast between developmental states in East Asia and patently non-developmental states in the Middle East. He argues that high levels of elite conflict induce political leaders to build large, cross-class coalitions based on high levels of side payments. This coalitional structure generates precocious Keynesian states. The introduction of oil rents is a permissive condition that potentially extends the life of these weak state institutions but is not a contributing cause of their origins. Smith (2007) makes a related argument about coalitions and state institutions. Challenging the classic view that oil rents have uniform effects on institutions, Smith argues that when powerful opposition movements exist prior to the introduction of substantial oil revenues, rulers must build robust coalitions and state institutions that can effectively gather revenues and exert social control. We believe that subsuming the theory of the rentier state into some version of a coalition-centric theory of state formation promises more progress than continuing to rely on largely unjustified claims that state institutions are endogenous to resource endowments. Coalitional arguments are, of course, but one of a range of potential starting points from which to theorize state formation. Our point here is less to say that our coalition-centric explanations are the only way than to say that we want to argue strongly for incorporating oil exporting states into mainstream analyses of postcolonial state formation. By normalizing politics in oil-rich countries, we stand to uncover their dynamics much more extensively than by continuing to keep them in theoretical isolation and incorporating oil into coalition-centered theories is but one way to start. There is much intellectual room with this and other approaches for common exploration of the ways in which commodity export revenues have become central parts of both state and regime projects in the postcolonial world.

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Chapter 39

Pr edatory States a n d State Tr a nsfor m ation William Reno

1  What are Predatory States? A reluctant taxpayer may believe that all states are predatory. This perception points to the dilemmas of defining “predatory states” as a distinct category. Predation from one perspective may be a critical ingredient of a developmental state from another; a “good,” as opposed to “bad” predation. Peter Evans offers a more careful definition of a predatory state as one that “preys upon its citizens, terrorizing them, despoiling their common patrimony, and providing little in the way of services in return” (1995: 45). Many citizens of Greece could be excused for believing that their poor economic situation fits Evans’ definition of predatory state in the sense that it reflects the choices of self-serving elite groups. One route out of this definitional conundrum is to consider why some political leaders pursue policies that are antithetical to maximizing available resources. These leaders recognize that improving the welfare of citizens could bring a fundamental shift in political power that would threaten their own survival. These leaders conclude that retaining power and promoting economic development are mutually exclusive goals, a contradiction that points to several underlying conditions. First, holding onto political power must be particularly rewarding, especially if other avenues for aggrandizement are scarce. This is more likely if state power provides exclusive access to a valuable natural resource or other rent-seeking opportunity. Second, leaders and other elite members of these political establishments may see themselves as particularly vulnerable to internal threats such as coups, rebel attacks, and separatist opposition. Retarding the development of other political forces, including the group interests of commercial entrepreneurs, is fundamental to ensuring the regime’s survival. Third, those holding political power may believe that their own ranks contain individuals and groups with diverse and perhaps dangerous interests. Ambitious insiders could use the institutions of development-oriented states to build their own power bases. Under these three conditions, bureaucratic efficiency, property rights and other elements of the rule of law that are ordinarily associated with the provision of public goods to citizens threaten regime survival.

Predatory States and State Transformation    731 Predatory states in this analysis are not simply states that engage in excessive extraction from citizens. Predatory state regimes purposefully undermine the institutions and policies necessary to maintain even a static level of economic development as part of a strategy of survival through maximizing regime autonomy from threatening political groups. Stronger institutions and economic transformation thus are not in the immediate interests of a predatory state autocrat. “The disorganization of civil society is the sine qua non of political survival,” wrote Evans: “For predatory states ‘low-level equilibrium traps’ are not something to be escaped, they are something to be cherished” (1995: 248). This political strategy usually involves concentrating authority in the hands of a single, often long-serving leader and a group of personally connected individuals. Wider political authority is exercised through extensive networks of personal patronage that include inefficient bureaucracies staffed with officials selected for their political loyalties rather than for their technical qualifications. Intentionally weakening bureaucracies creates obstacles to economic growth, leading to declining economic output, rising insecurity, and diminished social welfare measures of citizen well-being. Nonetheless, predatory state authority can be stable for long periods of time. As of 2014, for example, the presidents of Equatorial Guinea, Angola, Zimbabwe, Cameroon, Republic of the Congo, Uganda, and Burkina Faso had each been in office for more than a quarter of a century. Elements of this regime survival strategy appear in other African patronage-based regimes, and in varying degrees elsewhere, such as in Haiti, parts of the Middle East, and the successor regimes to Soviet rule, particularly in Central Asia. Margaret Levi (1988) shows how some rulers encounter incentives that differ from those facing other leaders. She notes that all rulers are predatory in the broad sense of trying to maximize revenues, but that structural factors ultimately constrain this drive among some. Most rulers experience constraints in their bargaining power vis-à-vis existing groups, including productive ones, which leads to a tendency to look for reciprocities of interests. These reciprocities fostered the historical evolution of European states and more recently appear among the rapidly growing economies and state administrations of some countries in Asia. But rulers that encounter severe discount rates against future revenues grab what resources they can as quickly as possible to shore up control. Levi’s observation points to the role of past coups d’état, uprisings, and competitions of factionalized elites in creating the shortened time horizons that create incentives for some incumbent regimes to engage in more predatory behavior than their officials might otherwise prefer. This is a serious problem in sub-Saharan Africa. For example, during the last four decades of the twentieth century, presidents of African countries faced about a 60 percent chance that they would be removed from office in a manner that would result in death or exile (McGowan 2003). Using the prerogatives that come with the control of a state for predation under these conditions is at least rational, if lamentable. The low levels of public goods provision under predatory state rule puts these states in the lower reaches of broad indices of social well-being, such as the United Nations (UN) Human Development Index, and of political liberties, such as the Freedom House Index, and of the comparative economic data of the World Bank and the International Monetary Fund. Predatory regime practices include unofficial tolerance of paramilitaries under the control of favored politicians, systematic manipulations of law enforcement to target potential critics and rivals and to protect regime partners, and the acceptance of political clients’ participation in illicit activities that in some cases extend to drug trafficking,

732   William Reno money laundering, piracy, and other behavior that undermines the stability and wellbeing of people even beyond the borders of a particular state. Since bureaucracies in predatory states are not intended to work effectively, because predatory state regimes exploit insecurity to keep critics preoccupied and disorganized, and because these regimes tolerate illicit behavior in the service of patronage, some label them as failed states for their divergence from conventional expectations about how states should perform (Rotberg 2004; Ghani and Lockhart 2008). But predatory state regimes succeed if they remain in power. From the perspective of this chapter, state failure occurs when predatory state regimes lose the capacity to regulate political networks. The violence and turmoil of failed states results from the unrestrained competition among elements of these fragmented political networks as the leaders of these different factions fight among themselves to assume control over the state.

2  The Intellectual Evolution of the Concept of Predatory States The concept of predatory states has evolved in three strands of scholarly literature. The first “global environmental” strand focuses on how changes in global structures shape the emergence and development of reciprocal relations between rulers and ruled. In some historical examples, predation was a virtue, and it helped to finance the building of a state. In the context of our own era, this strand sees predation as a destructive vice. The second “incentive” strand points to the role of immediate rent-seeking opportunities in reducing long-term incentives to bargain with and provide public goods to populations, effectively insulating ruling groups from the need to be concerned about the welfare of subjects. The third “patrimonial” strand considers social contexts and inquires as to whether patrimonial cultures of political authority in Africa account for the appearance of so many predatory states on that continent—an indigenization of European-style states gone wrong, as these states are subsumed in patron-client relationships. This first, global environmental strand of investigations, particularly among historical sociologists studying state-building in early modern Europe, focuses on how political authorities shifted from deliberate looting to more measured extractions from people under their control. Charles Tilly saw in European historical experience a “portrait of war makers and state makers as coercive and self-seeking entrepreneurs” in which predators recognized self-interest in assuring that “victims” become as productive as possible (1985: 169). This idea builds on earlier work of Frederic Lane, who noted that “[a]‌plunderer could become in effect the chief of police as soon as he regularized his ‘take’, adapted it to the capacity to pay, defend his preserve against other plunderers, and maintain his territorial monopoly long enough for custom to make it legitimate” (1958: 403). Predation is good in the hindsight upon which these historical accounts of state-building rely. Rulers recognize the superior returns associated with monopolizing control over coercion and in taking into account the interests of productive segments of society. Predation is a critical part of the evolution toward a ruler’s provision of public goods. Mancur Olson explains how and when this virtuous connection between predation

Predatory States and State Transformation    733 and public goods appears and when it does not—the latter being most relevant to our definition of contemporary predatory states—in his consideration of the element of time horizons and discount rates of predators. His ideal type of the stationary bandit successfully monopolizes theft in his domain so that the victim need not worry about theft by others (1993: 568). This dominance allows the bandit to provide long-term benefits to help the victim become more productive; the victim is the goose that lays the golden eggs. Bandits who rove do not visit victims on a foreseeable schedule and thus have an incentive to appropriate as much as possible. Studies of contemporary warfare in places like Congo and Sudan show how these roving bandits actually work, terrorizing civilian communities to provoke flight so that looting can proceed on a more thorough and systematic basis. Olson’s time horizons provide useful insights into situations confronting some contemporary regimes. Those that perceive immediate threats to their monopoly of control over their “victims” face incentives to strip the assets of the productive members of their societies and to make everyone less secure if rulers think that this will protect them from immediate domestic threats to their hold on power. These resources can be used to manage those who cannot be suppressed, such as strongmen representing ethnic communities, commanders of the military and security forces, and other more resilient local bosses. Predation need not follow Olson’s territorial logic and instead can follow a social logic. Groups that control resources are seen as threats, and those whom the ruler is not compelled to include in negotiations instead become targets for predation. Commercial entrepreneurs are prime candidates for predation under these conditions, as they usually lack a strong social base in poor countries. If they are truly interested in the pursuit of efficiency, their political interests are likely to clash with the immediate aims of regimes that are anxious to prevent the formation of any autonomous political interest groups. Tilly’s work brings comparisons of the historical process of state-building to bear on the analysis of the inner workings of contemporary predatory states. States that became independent after World War II did not recapitulate the European state-building trajectory. Most inherited divided populations, and in many cases colonial administrations ruled over subjects on the basis of their ethnicity. Rulers of new states thus encountered powerful ethnic intermediaries that occupied key administrative posts and often inherited military forces that were dominated by one ethnic group and skilled in repressing other ethnic populations. In any event, no matter the degree of internal disunity and turmoil or unpreparedness of indigenous elites to take the reins of power, these states did not face extinction. This development reflected the global consensus after World War II that forbade conquest of other states, which protected regimes that pursued political strategies that produced declining economic output, crumbling bureaucracies, and internal turmoil. Thus, writes Tilly, “governments became more unstable as their borders became more secure” (1990: 203). This relationship between predation and global structures features in Jackson and Rosberg’s (1982) explanation for the persistence of weak states that preside over internal turmoil. They linked this survival to the global consensus that each former colony was entitled to “self-determination” in the form of rule by indigenous elites within the inherited colonial boundaries, no matter the level of preparation for independence. These rulers are not compelled to engage in difficult and politically risky strategies of negotiating with and ceding privileges to some subjects in exchange for a share of their wealth and productive energies. Such states, argued Robert Jackson, are in fact quasi-states that survive as

734   William Reno juridical sovereigns with leaders exercising all of the associated prerogatives, regardless of their paltry capacities or lack of interest in providing public goods (1990). This explains why so many predatory states appeared in Africa. Unlike states along the Cold War divide in East Asia (Haggard 1990), rulers of African states faced little external pressure to succeed as state builders. Those that aligned with Western powers (primarily France and the United States) received resources that insulated rulers from the consequences of their predatory behavior. Jeffrey Herbst agreed with this assessment, and explained how the geographical fixity of African states—most inheriting from colonial rule suboptimal geographic and social configurations—protects regimes from the compulsion to actually govern all of their realms, leaving them free to prey upon those who they cannot control directly (2000). The capacity of “victims” to leave predatory states further relieves rulers of the old imperative to engage the productive energies of politically influential commercial groups in long-term political bargains. The most energetic groups in these societies simply leave states with poor records of governance, a mobility that helps predatory regimes get rid of people who otherwise might create domestic pressures to reverse economically destructive policies (Hirschman 1970). The 2000 United States (US) census indicated that 83 percent of the 109,000 adult Nigerian immigrants to the US possessed university educations. Africans as a whole are, by a considerable margin, the most educated group of immigrants to the US and to the UK, when compared with immigrants from any other global region and when compared to native-born populations (Kapur and McHale 2005: 17). Though it is hard to be certain, had these people not been mobile, their unrewarded investments in their educations and their unmet aspirations may well have turned them into powerful voices for reform or led them to take up arms against their governments. The reality in Nigeria, as in most contemporary predatory states, underscores the inverse relationship between geographical mobility and political participation that Hirschman noted. This first, “global environmental” strand of literature reflects the importance of the global hierarchy of states and its historical development, the role of norms that prohibit conquest and inhibit intervention, and the reinforcing power of path dependency. The second “incentive” strand of scholarship does not reject these findings, but focuses instead on the role of more immediate rent-seeking incentives on the calculations of rulers as regimes become wedded to rentier economies to survive. If state institutions are already weak, trade and industry suffer where abundant natural resources are readily available. It is unclear in much of this literature, however, whether rent-seeking opportunities lure rulers away from riskier but more productive alternatives in the first instance, or whether regimes that are wary of the political risks associated with effective bureaucracies end up stunting productive activities so that rent-seeking opportunities become more prominent in relative terms. In any event, rents from these resources go to those most adept at manipulating political connections, usually coalitions of state officials and their privileged business partners. Their influence cascades through the structure of the state as they focus economic policies and institutions on extracting rents for their own benefit, to the disadvantage of less remunerative but ultimately more productive activities and the communities that rely upon them. Though awareness of a “resource curse” and the moral hazards of these unearned incomes have deep roots in classical economics, attention to its impact on the nature of governance is more recent. During the 1950s and 1960s, abundant resources were viewed as

Predatory States and State Transformation    735 contributors to economic “take off” (Rostow 1960), both as sources of investment and as a way to pay for consumption. By the end of the Cold War, the association between dependence on natural resource export revenues and incidences of violent and corrupt governments, poor economic performance, and civil wars drew more attention. Richard Auty explained that this was the outcome of rational decisions on the part of officials to buy off groups needed to control the source of rents and use the proceeds to pacify or exclude other groups (1993). Michael Ross (2001) noted the particularly strong association between oil exports and authoritarian regimes, an idea that had prior currency among Middle East area specialists (Chaudhry 1997) and was integrated into the study of democratic transitions and their failures (Karl 1997). Thad Dunning (2008) explores more closely this link between natural resources and regime type in a conditional theory of the resource curse. In a variation on the idea that some regimes intentionally make populations worse off, Dunning observes that officials refrain from promoting economic diversification out of fear that diversification would lead to the formation of politically demanding groups. In highly divided societies, officials link the preservation of their monopolies over rents to political deals with politically vulnerable groups, which is an invitation to play upon and exacerbate ethnic tensions for narrow elite gain. In a seminal article, Paul Collier and Anke Hoeffler (1998) clarified the association between violent civil conflict and dependence on resource export revenues. Predation is attractive to rebels as well as government officials, particularly where rent-seeking weakens state institutions. This focus on immediate incentives presents a very different picture of predation than the historically grounded scholarship on state-building does. Collier (2000) explained that rent-seeking for personal aggrandizement rather than as a tool to prevail over political rivals is the primary objective in many conflicts. Rebel leaders recruit followers and hold together their organizations by providing opportunities for predation, a process on display among rebel groups that fought in West Africa in the 1990s and in Congo in the late 1990s and early 2000s. These rebels and the governments that they fought benefit from continued conflict when it increases turmoil and uncertainty for other groups that are less able than the combatants to manage uncertainty. This intentional refusal to provide public goods takes seriously the proposition that some political actors find it in their interests to make others poorer and more insecure if this opens up personal opportunities to loot valuable resources and sell protection to vulnerable communities. This alternative strategy for exercising political authority in ways that undermine the provision of public goods gets to the core of the definition of predatory state mentioned earlier. This second strand, for whatever flaws it may have in terms of explaining antecedent conditions leading to predation, highlights mechanisms that show how short-term incentives can create a path-dependent trajectory away from state-building. The resource curse explains important mainsprings of predation very well, but it does not explain change very well at all. Institutions are presented as coordinators of collective action, which explains why Norway’s oil revenues go into a sovereign fund while Equatorial Guinea’s sustains a presidential clique, for example. Unlike the first strand of scholarship that focuses on state-building, this second strand offers no real theory of the origins of collective action and institutions. Predation is open-ended, disrupts meaningful attempts to organize alternatives, and ultimately springs from the particular distribution of opportunities at the outset (Weinstein 2007). This strand provides little

736   William Reno account of variations in constraints on predation when institutions are weak; for example, it does not explain why some rebels that rely on drug trafficking for revenues attempt to govern civilians, such as Afghanistan’s Taliban, while violent drug trafficking cartels in Mexico fit the predatory rent-seeking model much better, or why Nigeria’s successive governments have exhibited variations in their degrees of predatory behavior that in recent years have not correlated well with degrees of dependence or absolute earnings from oil exports. The third “patrimonial” approach to predation addresses some of these critiques, as it takes into account the role of social institutions and how these shape interactions between states and subjects. Many of these efforts to explain predation build on Max Weber’s idea of patrimonial authority as the personalization of the state and the use of its offices and assets as “prebends” to distribute to his or her kinship group (1978 [1921/22]: 1006–1069). Jean-Francois Bayart (1989) contextualizes predation in the processes of “neopatrimonialism” in Africa, a concept drawn from the work of Shmuel N. Eisenstadt’s examination of the relationship between contemporary states and kinship-based patronage networks (1972). Bayart explains how political authorities in Africa exploit their subordination in global political and economic relationships to capture the benefits of exchanges for themselves and to support their roles as patrons to others, a process that he identifies as reaching back across several centuries. They use official positions to skim off resources and control other people’s access to them to protect their positions in hierarchies of patronage. Political relationships are transactional as subordinates try to get a share of this loot. Thus, he writes that corruption is part of “the state’s fabric, and the struggle for power is perhaps, chiefly, a struggle for wealth” (1989: 89). Jean-Francois Médard studied how political patrons used state office and institutions as instruments to discipline and control clients as well as to reinforce social relationships of dependence that are rooted in customary notions of clientage (1991). His work showed how predation is part of a process of the construction of a distinct kind of political authority. Global recognition of existing sovereign states gives officials in even the weakest states leeway to instrumentalize their formal positions, as their status as legal sovereigns excludes rival claims (Englebert 2009). This strand of scholarship illuminates the social relationships that link predation with the maintenance of authority structures, particularly in Africa. Patrick Chabal and Jean-Claude Daloz (1999) developed a seminal argument about the instrumentality of regime uses of violence and impoverishment as a strategy of control. They argue that regime officials exploit ties of patronage to sow dissention among clients and then use their official positions to act as mediators. This fosters dependence among clients for protection from local rivals and prevents collective action among them, as individuals advance through personal deals with those in positions of power. These authors raise questions about the role of culture in the construction of predatory rule in Africa through wider public acceptance of practices that are otherwise considered illicit or antisocial in other contexts. They argue that underlying ideas about religion and political authority enable these regimes to legitimate predation as a form of “big man” politics. Others argue that kinship solidarities sustain an ethic that accepts predatory activities if these benefit the group. Corruption, in this view, is an extension of the practice of patronage that is based on traditions of gift-giving and protection that are deeply rooted in local political cultures (Olivier de Sardan 1999; Schatzberg 2001).

Predatory States and State Transformation    737 This integration of social relationships into the study of predatory authority helps to explain variation in how resources and political authority interact. This includes the study of how predation, particularly during warfare, changes social relationships, and it also encompasses the impact that these changes have on the post-conflict provisioning of public goods and the construction of durable institutions of governance. Like Charles Tilly, this approach takes issue with the idea that war always plays a negative role in the evolution of governance and notes that wartime organizations sometimes turn into business firms after fighting stops. Containing members who have been detached from their old social networks, these organizations focus more on profitability than on social obligations. In an interesting analytical turn, one study of the processes of contemporary conflicts paints a picture much like that of the historical sociologists, which depicts productive groups as demanding that state officials promote economic efficiency and take into account the interests of these groups (Cramer 2006).

3  The Current State of Predatory States Hegel (1952 [1821]: 7) wrote that “the owl of Minerva spreads its wings only with the falling of the dusk,” by which he meant that wisdom is gained only after the main events have taken place. For Hegel, this was no tragedy, as he viewed his own time as an end of history and an opportunity to conclusively understand its developmental logic. Has the developmental logic of predatory states unfolded just as these regimes are poised to disappear? The study of the concept focuses on a distinctive set of postcolonial regimes that really have emerged only in the latter half of the twentieth century. The third “patrimonial” strand of literature, focused on local contexts and social relationships, identifies deeper indigenous roots in predatory rule, but those “global environmentalists” of the first strand that link the phenomenon to broad global structures concentrate on conditions that came to fruition during processes specific to post-World War II decolonization. It may be that the “incentive” strand merely plays a facilitating role, with the pursuit of individual incentives occurring within the wider contexts of the other two strands. The end of the Cold War created difficulties for many predatory regimes. At the start of the 1980s, Liberia, Somalia, and Congo were Africa’s three largest recipients of US foreign aid, and all three benefited from US pressure on international creditors to provide commercially unviable loans. By the late 1980s, US Congress ended this aid, and then all three states promptly collapsed. Since 1991, Somalia has lacked an effective national government. Congo’s feeble government devotes 90 percent of its expenditures to the capital city. Liberia survives as a ward of international agencies that together spend many times the country’s domestic output to hold its government together. Those predatory regimes suddenly lacked the capacity to manipulate their subordinate roles in superpower competition to draw patronage and protection for their domestic strategies of authority, a tactic identified as supporting otherwise unsustainable predatory behavior (David 1991). The end of superpower competition marked the start of a trend of outside interference in the domestic affairs of predatory states, signaling that the protective structural conditions that Tilly and others identified were changing. The rapid decline of international tolerance for regime violence against citizens illustrates this trend. In 1977, for example,

738   William Reno Ugandan President Idi Amin’s regime took its place on the United Nation’s Human Rights Commission while his government massacred a quarter-million citizens. In 2009, Captain Dadis Camara’s military regime in Guinea could not survive international embargoes, travel restrictions on regime members, and domestic pressure to leave power and turn over reins to an elected civilian government after soldiers killed about 150 protestors and systematically raped others. Liberia’s Charles Taylor was indicted for war crimes and crimes against humanity while the sitting head of state and then forced from power in 2003 to stand trial for his crimes. A Congolese former Vice President and sitting Senator shared this fate in 2008. Since predatory states are marginal in global terms by definition in the structural explanations that account for their predatory characters, regimes in these states should fear powerful states’ enforcement of new conditions linked to the acceptance of their sovereignty. This international insistence on standards of regime performance mimics historical conditions in which regimes had to demonstrate their capacities to mobilize and benefit from the productive energies of subjects—the “good predation” referred to earlier—if they were to survive and avoid excessive external interference. Basic standards appear in the UN’s Responsibility to Protect (R2P) initiative established in 2005 (see Daase, Chapter 16, this volume). This initiative calls for states to protect populations from atrocities and enjoins other states to intervene in cases where regimes will not protect citizens. Clearly external intervention in the affairs of predatory regimes is inconsistent, reflecting the national interests and capabilities of potential intervening parties. Nonetheless, the R2P initiative provided the logic for armed intervention in 2011 directed at removing a regime in Libya and for implementing sanctions in 2012 aimed at forcing Syria’s regime from power. Similar justifications were employed in 1998, when a West African expeditionary force with UN political backing removed Sierra Leone’s military regime from power, and in 2003, when Charles Taylor’s violent regime was removed from Liberia. Arguably, external intervention has emerged as a real threat to predatory regimes, particularly when they face widely publicized domestic challenges and international concerns about the potential for domestic instability to generate refugees and human rights violations. This international pressure can be proactive, too. The leaks of US diplomatic cables in 2011 shed light on the extent to which US officials had assisted local activists to undermine authoritarian regimes, including helping activists to create networks between opposition groups and activists in the Middle East and those in other countries, such as the activists who organized to overthrow Serbia’s President Milosevic in 2000 and thereby aided his apprehension and trial for war crimes. Predatory state regimes face other pressures to perform. From the end of World War II to the very end of the twentieth century, secession was an affair of mutual agreement, with the sole exception of East Pakistan’s Indian-mediated separation from its Western counterpart to become Bangladesh. Then, in 1999, NATO forces helped a rebel army to separate Kosovo from Serbia after Serbia’s security forces precipitated a massive refugee flight from Kosovo. The US-mediated 2005 Comprehensive Peace Agreement ending the civil war in Sudan led to the 2011 secession of the southern part of that country. Though Sudan’s regime tolerated the separation in legal terms, armed clashes have plagued this process ever since. These developments, alongside the effective separation of Kurdistan from Iraq, may enhance negative consequences of predatory rule, as citizens discover that they can recruit international support to pursue a new exit option from predatory regimes that fail to provide them with basic protection.

Predatory States and State Transformation    739 It is not clear that predatory states enjoy immunity from military threats from neighbors. Barry Buzan and Ole Wæver (2003) point out that proxy warfare has been common in recent decades, particularly between states in South Asia and in parts of Africa. More recent investigations reveal considerable evidence that neighboring states take advantage of weaknesses in state capacities to govern in Congo, Uganda, and Sudan (Day 2011). It is reasonable to propose that these cross-border activities add to the pressures upon predatory regimes to exercise power in more efficient and capable ways, particularly when rebel proxies vie for control of resources that are critical to financing patronage networks. These developments affecting predatory states generate fresh research agendas. These contemporary challenges to predatory regime strategies could be viewed as consequences of shifts in global power. In this framing, the US and to some extent its allies emerge as a sometimes destabilizing force willing to assist in the overthrow of regimes that come into conflict with US interests, as well as to help break up states such as Iraq, Serbia, and Sudan that undermine America’s regional agendas. Alternatively, enterprising scholars could use these developments to investigate how issue framing shapes views on what counts as a problem and how events are noticed (such as the killing of 150 protestors in Guinea in 2009) or ignored (such as the killing of a quarter million Ugandans in the 1970s), as well as whether they are interpreted as worthy of an international response or as a domestic problem. The survival of predatory states in this changing environment poses important questions. A sensible approach toward research could build on some of the observations of scholars that focus on the social relationships underlying predatory regime strategies to identify clues as to how and why these regimes survive. Robert Bates (2008) explores how authoritarian regime survival was affected by the advent of multiparty elections in Africa, a feature of politics that became nearly universal in Africa by the late 1990s, at least in a formal sense, with the exception of Libya. He explained how rulers faced with electoral challenges from rivals in the 1960s built patronage networks to manage uncertainty. They also preferred single party-states to lower the costs of patronage, leaving clients with no choice but to affiliate with the sole official party. Suddenly confronted with multiparty elections in the 1990s, subordinate strongmen realized that they could use direct appeals to the electorate to force a renegotiation of their positions in the political network. These politicians promised to use their control over part of the state on behalf of ethnic constituencies, sparking competitive violence and a virulent nationalism of “the sons of the soil” against ethnic “newcomers” that led to civil wars in Côte d’Ivoire, Congo-Brazzaville, and nearly so in Kenya (Lynch and Anderson 2013). Violent nationalist mobilization is properly seen as a response to the crisis of predatory states. Politicians find the greatest temptation to use nationalist and ethnic appeals when institutions of the state are weakest, a primary consequence of the strategies of predatory state survival noted earlier. Jack Snyder (2000) provides important insights into this dynamic in his explanation of how “elite persuasion” and instrumental uses of ethnic violence provide ways for politicians to be popular without being fully democratic and to expand their own power at the expense of the eroding stability of the old regime. A rapidly proliferating literature on electoral violence, particularly in Africa, provides important insights into these mechanisms of elite survival in failing predatory states (Basedau et al. 2007). Other processes support the survival of predatory state regimes, such as those that utilize inter-communal violence to disorganize communities that are beyond the control of formal state institutions. Paul Staniland (2014) investigates this phenomenon from the perspective

740   William Reno of rebel groups that have varied types and intensities of relationships with incumbent political establishments. He shows how some states use armed groups as instruments of disruption and domination when they lack the capacities or political will to rule regions directly. Are these desperate strategies of predatory state regime survival actually the death knells of predatory states? A broader focus on the nature of elite networks and coalitions in predatory states can help to address this question. A comparative approach focused on the durability of authoritarian regimes more generally provides important clues. Why, for example, have some authoritarian states in East Asia been so proficient at promoting economic accumulation and rising prosperity for citizens amidst terrible corruption and insider “crony” politics? Investigations into the causes of stability of these elite coalitions (Slater 2010) and into how fragmentation affects these networks (Kang 2002) provide bases for analyzing changes in elite coalition in predatory states when economies shrink and insecurity grows. Direct cross-regional comparisons (Kohli 2004; Lewis 2007) show how relationships among and within networks influence how rent-seeking opportunities are distributed, and in particular the mechanisms that some officials employ to escape the trap of predatory state strategies. A focus on elite strategies and the social relationships between state and business networks illuminates some of the inner workings of predatory regime strategies and how they change when confronted with crises. Khairunnisa Mohamedali’s study (2014) of the relationships between ethnic minority business networks and state officials in Uganda and Kenya over the past half century uncovers a history of negotiation, failure, predation, exit, and more recently of shared efforts to use informal agreements and non-state authorities to provide credible guarantees to private capital so that states can tax more efficiently for mutual benefit. Her work paints a picture that looks more like the process of “good predation” and the evolution of reciprocal relationships that Tilly identifies as the underpinnings of state-building in early modern Europe, and it also shows how shifts in social relationships affected this change. Perhaps the study of predatory states in the early twenty-first century is fated to be about the demise of predatory states and the violent and non-violent responses to demise. If this is so, contemporary predatory states will take their place with the litter of failed states left in the trail of the academic history of state-building that focuses on the processes that led to success. It is also possible that these changes are temporary, and predatory states are a permanent fixture. Whether the contemporary politics of predatory states is a reprise of historical processes or the advent of a new global system of humanitarian intervention is an intriguing question to which the study of predatory states provides a portal.

4  The Futures of Predatory States Venturing propositions about the future of predatory states is risky. One need only think of articles published as late as 1991 proposing that reforms were strengthening the Soviet Union, or conclusions in the late 1980s that Somalia’s shared language and traditions made it a reasonable bet for political unity. Such are the dangers of extrapolating from present conditions. Instead, inquiry into the future of predatory states is better sought in the

Predatory States and State Transformation    741 pursuit of research agendas based on intriguing developments associated with the changes noted in the last section. A broad investigation could start with historical comparisons. Early nineteenthcentury, newly independent Latin American states lacked the extensive explicit protections that African states enjoyed at independence. Nonetheless, they were distinctive in their time for mutual recognition of vulnerabilities and the (uneven) commitment to refrain from conquest. Like Africa, early nineteenth-century Latin America saw the collapse of several federations (Central America, Nuevo Grenada) that mirrored the incapacity of African federations (the Rhodesia and Nyasaland, the Sudanese Republic, the East African Federation), leaving Nigeria as the sole surviving federation, and even it nearly succumbed to a separatist conflict in the 1960s. Early nineteenth-century Latin American states exhibited many of the elite strategies later associated with predatory states. From a position at the half century mark of Latin American independence, the entire project would seem to have been a significant disappointment, if not a failure from a state-building perspective. Yet that was the time at which many of these states embarked on a new and much more dynamic engagement with the global economy, leading soon after to booming domestic economies and the rapid expansion of state institutions. The rise of China, India, and Brazil as global powers raises questions about the future of relations between global structures and predatory states explored earlier. A clever strategy for research into the domestic strategies of predatory state regimes in Africa, for example, would take into account the role of Chinese firms and diplomats. Commercial operators and diplomats of these states seek out institutionally weak and predatory states that face Western pressure precisely because competitor firms and diplomats are often more reluctant to engage these regimes. Does this strategy of the rising powers restore the leverage that the weak enjoyed during the Cold War that enabled them to play global patrons off one another? This development might roll back recent infringements on old standards of uncritical global acceptance of predatory state sovereignty, allowing officials in these states to make full political use of the prerogatives associated with sovereignty in their pursuits of regime survival, which includes the capacity to shield domestic transactions, even in illicit businesses, from external gaze. Alternatively, this engagement could open new avenues for accumulation to form the basis for new domestic political bargains. The evolution of international norms provides another fertile region for inquiry. Regional pressures to abide by constitutional standards on matters governing regime change have appeared in Latin America and Africa. The 2001 Inter-American Charter of Democracy codified the principle of the irreversibility of democratic transitions. The 2007 African Union’s Charter on Democracy, Elections and Governance establishes similar principles prohibiting regime change through coups and other violent means. These agreements are readily explainable as tools for mutually vulnerable regimes to protect themselves, even if these agreements are violated in practice. But even in Africa, violation comes at a cost. Subsequent coups in Mauritania and Madagascar were not reversed, but regimes in both countries suffered sanctions to the point that Madagascar’s economy reached a state of collapse after 2010. Niger’s 2010 coup leaders were pressured to hand over power to a civilian regime, as were the 2008 coup leaders in Guinea. The significance of regional cooperation in support of constitutional processes to change regimes lies in the potential for cooperation to reduce an incumbent regime’s risk

742   William Reno of violent overthrow. If Bates and others are correct in their arguments that short time horizons create incentives for regime behavior that counters threats but ultimately promotes predatory behavior, lowering risk should give more leeway to rulers to embark on difficult paths of reform without as great a fear of fatal consequences. Elite strategies pose interesting questions related to the fate of predatory states. The crisis of predatory states referred to above often becomes apparent at moments of succession. This is because the strategies of predatory states are hostile to institutions and to the provision of public goods—the basis for the definition of predatory states in this chapter— and thus foreclose most conventional practices for managing the succession of rulers. The uncertainties surrounding succession are invitations to violent competition among regime insiders for position when a leader dies or is removed. One of the few avenues open to these regimes is to turn themselves into republican monarchies. Sons have succeeded president-for-life fathers in Gabon, Togo, Turkmenistan, and Syria, a dramatic sign of the personalization of high state office. Other regimes have taken steps in this direction, grooming sons—and occasionally daughters—to succeed ageing fathers. Research into the mechanisms of republican monarchies may provide an entry into understanding the processes of elite negotiation and elite relations with other social networks in the institutionalization, and perhaps transition, of predatory states. Is this form of institutionalization compatible with reform, or is it a viable strategy of predatory state survival in its current form?

5 Conclusion Whether predatory states are an artifact of peculiar conditions in the latter part of the twentieth century—simply the visible manifestation of states that are in the process of failing—or a durable category of regime type, their politics shed light on many other political phenomena. The strategies of their regimes show how hierarchies in global politics and the world economy actually work. They demonstrate surprising capabilities to manipulate otherwise much stronger partners. Their domestic survival strategies shed light on how institutions are formed and the alternative strategies for exercising authority when institutions are weak or absent. For these reasons, predatory states provide a gateway into a plethora of research agendas, whether these states are on the brink of demise or are here to stay.

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Predatory States and State Transformation    743 Buzan, Barry, and Wæver, Ole, 2003. Regions and Powers: The Structure of International Security. New York: Cambridge University Press. Chabal, Patrick, and Daloz, Jean-Pascal, 1999. Africa Works:  Disorder as Political Instrument. Bloomington, IN: Indiana University Press. Chaudhry, Kiren Aziz, 1997. The Price of Wealth: Economies and Institutions in the Middle East. Ithaca, NY: Cornell University Press. Collier, Paul, 2000. “Rebellion as a Quasi-Criminal Activity.” Journal of Conflict Resolution 44 (6, December): 839–853. ——, and Hoeffler, Anke, 1998. “On Economic Causes of Civil War.” Oxford Economic Papers 50 (4, October): 563–573. Cramer, Christopher, 2006. Violence in Developing Countries. Bloomington, IN: Indiana University Press. David, Steven R, 1991. Choosing Sides:  Alignment and Realignment in the Third World. Baltimore, MD: Johns Hopkins University Press. Day, Christopher R, 2011. “The Fates of Rebels:  Insurgencies in Uganda.” Comparative Politics 43 (4): 439–458. Dunning, Thad, 2008. Crude Democracy: Natural Resource Wealth and Political Regimes. New York: Cambridge University Press. Eisenstadt, Shmuel N [Aizenshṭadṭ, Shemu’el Noaḥ], 1972. Traditional Patrimonialism and Modern Neopatrimonialism. Beverly Hills, CA: Sage Publications. Englebert, Pierre, 2009. Africa:  Unity, Sovereignty, and Sorrow. Boulder, CO:  Lynne Rienner Publishers. Evans, Peter B, 1995. Embedded Autonomy: States and Industrial Transformation. Princeton, NJ: Princeton University Press. Ghani, Ashraf, and Lockhart, Claire, 2008. Fixing Failed States:  A  Framework for Rebuilding a Fractured World. New York: Oxford University Press. Haggard, Stephan M, 1990. Pathways from the Periphery: The Politics of Growth in Newly Industrializing Countries. Ithaca, NY: Cornell University Press. Hegel, Georg Wilhelm Friedrich, 1952 [1821]. The Philosophy of Right: The Philosophy of History, translated by Thomas Malcolm Knox. Chicago, IL: Encyklopaedia Britannica (first published 1821 and part of his preface to Grundlinien zu einer Philosophie des Rechts). Herbst, Jeffrey I, 2000. States and Power in Africa: Comparative Lessons in Authority and Control. Princeton, NJ: Princeton University Press. Hirschman, Albert O, 1970. Exit, Voice, and Loyalty:  Responses to Decline in Firms, Organizations, and States. Cambridge, MA: Harvard University Press. Jackson, Robert H, 1990. Quasi-States: Sovereignty, International Relations and the Third World. New York: Cambridge University Press. ——, and Rosberg, Carl G, 1982. “Why Africa’s Weak States Persist: The Empirical and the Juridical in Statehood.” World Politics 35 (1): 1–24. Kang, David C, 2002. Crony Capitalism: Corruption and Development in South Korea and the Philippines. New York: Cambridge University Press. Kapur, Devesh, and McHale, John, 2005. Give Us Your Best and Brightest: The Global Hunt for Talent and its Impact on the Developing World. Washington, DC: Center for Global Development. Available at:  http://www.cgdev.org/sites/default/files/9781933286037-Ka pur-Hale-best-and-brightest.pdf (last consulted 4 May 2014). Karl, Terry Lynn, 1997. The Paradox of Plenty:  Oil Booms and Petro-States. Berkeley, CA: University of California Press.

744   William Reno Kohli, Atul, 2004. State-Directed Development: Political Power and Industrialization in the Global Periphery. New York: Cambridge University Press. Lane, Frederic C, 1958. “Economic Consequences of Organized Violence.” Journal of Economic History 18 (4): 401–417. Levi, Margaret, 1988. Of Rule and Revenue. Berkeley, CA: University of California Press. Lewis, Peter M, 2007. Growing Apart: Oil, Politics and Economic Change in Indonesia and Nigeria. Ann Arbor, MI: University of Michigan Press. Lynch, Gabrielle, and Anderson, David M, 2013. “Democratization and Ethnic Violence in Kenya: Electoral Cycles and Shifting Identities.” In Democratization and Ethnic Minorities: Conflict or Accommodation?, ed Jacques Bertrand and Oded Haklai, 161–179. London, UK: Routledge. McGowan, Patrick J, 2003. “African Military Coups D’État, 1956–2001: Frequency, Trends and Distribution.” The Journal of Modern African Studies 41 (3): 339–370. Médard, Jean-François, 1991. “L’État néo-patrimonial en Afrique noire” [The Neo-patrimonial State in Black Africa]. In États d’Afrique noire: Formations, mécanismes et crises, ed Jean-François Médard, 323–353. Paris, France: Karthala. Mohamedali, Khairunnisa, 2014. Negotiating the State: Formal and Informal Institutions in State-Building. Ph.D. Dissertation. Evanston, IL: Northwestern University, Department of Political Science. (Soon available at University Microfilms.) Olivier de Sardan, Jean-Pierre, 1999. “A Moral Economy of Corruption in Africa?” The Journal of Modern African Studies 37 (1): 25–52. Olson, Mancur, jr, 1993. “Dictatorship, Democracy, and Development.” The American Political Science Review 87 (3, September): 567–576. Ross, Michael L, 2001. “Does Oil Hinder Democracy?” World Politics 53 (3): 325–361. Rostow, Walt W, 1960. The Stages of Economic Growth:  A  Non-Communist Manifesto. New York: Cambridge University Press. Rotberg, Robert I, ed, 2004. When States Fail:  Causes and Consequences. Princeton, NJ: Princeton University Press. Schatzberg, Michael G, 2001. Political Legitimacy in Middle Africa: Father, Family, Food. Bloomington, IN: Indiana University Press. Slater, Dan, 2010. Ordering Power: Contentious Politics and Authoritarian Leviathans in Southeast Asia. New York: Cambridge University Press. Snyder, Jack L, 2000. From Voting to Violence: Democratization and Nationalist Conflict. New York: Norton. Staniland, Paul, 2014. Networks of Rebellion: Explaining Insurgent Cohesion and Collapse. Ithaca, NY: Cornell University Press. Tilly, Charles, 1985. “War Making and State Making as Organized Crime.” In Bringing the State Back In, ed Peter B Evans, Dietrich Rueschemeyer, and Theda Skocpol, 169–191. New York: Cambridge University Press. ——, 1990. Coercion, Capital, and European States, AD 990–1992. Oxford, UK: B. Blackwell. Weber, Max, 1978 [1921/22]. Economy and Society: An Outline of Interpretive Sociology, 2 volumes, ed and transl. by Guenter Roth and Claus Wittich. Berkeley, CA: University of California Press (first in German 1921/22 Tübingen, Germany: Mohr). Weinstein, Jeremy M, 2007. Inside Rebellion:  The Politics of Insurgent Violence. New York: Cambridge University Press.

Chapter 40

State Fa ilu r e a n d State Tr a nsfor m ation Sven Chojnacki and Anne Menzel

In this chapter, we consider state failure and its impact on state transformations in the Global South. After introducing “state failure” (Section 1), we define failed states and assess their strengths and weaknesses in light of alternative approaches, in particular by integrating the idea of modes of governance beyond the state (Section 2). We then detail institutional and functional failures, that is, we move on to an evaluation of current evidence that supports different dimensions of violent state transformation (institutional and physical characteristics) as well as the nexus between making war and (un-)making the state (Section 3). Following up, we sketch the different pathways to failure, warfare, and state collapse, as there is no single path that typically tips failing states “over the edge” into widespread warfare, nor one common characteristic defining actors’ strategies and dynamics in such situations (Section 4). Finally we outline the role of international interventions to further peace-keeping and state-building in these trajectories (Section 5). We conclude by outlining further substantive and methodological research opportunities (Section 6).

1 Introduction State failure and the even more striking phenomenon of state collapse interest policy-makers and political scientists alike. Both groups share the underlying assumption that a considerable erosion in the state’s monopoly on the use of force that coincides with internal armed conflict, poses serious challenges to regional and/or international security, requiring international responses. In the realm of politics, the emergence and diffusion of violent internal conflicts and their related episodes of state disruption raise concerns that have found their normative expression in the United Nation’s (UN) Agenda for Peace and its Responsibility to Protect (see Daase, Chapter 16, this volume)—each of which advocates making state sovereignty conditional upon delivering some measure of (human) security, both at the national and international system levels. In this context, state failure or state collapse has come to be regarded as a major cause of mass human suffering and an obstacle to development. As Kofi Annan (2005) bluntly put it, it poses a threat to international

746    Sven Chojnacki and Anne Menzel security that, if ignored, “creates problems that sometimes come back to bite us.” From the perspective of political science, these developments suggest that state transformations, changing patterns of warfare, and the nexus of local, regional, and global levels carry much greater weight than state-centered theorists, such as the neorealists, have been willing to accept (cf. among others Waltz 1993). From a historical perspective, state failure is anything but new. The intertwined developments of state-making and war-making have long been closely related to the failure of political orders. The Italian and German wars of unification of the nineteenth century, as well as the Yugoslav and Post-Soviet wars of secession of the late twentieth century, are just two sides of the same coin: the violent making and unmaking of political orders. Analyzing the political, institutional, economic, and technological transformations in Europe from the Middle Ages to the end of the Cold War, Charles Tilly was right to conclude that “war made the state, and the state made war” (1985: 42). As a result of historical processes from the seventeenth century onward—with the Westphalian Peace of 1648 as the initiating moment of “modern statehood” in Europe—the sovereign state has become the normative standard of political-institutional order throughout the international system, and this process has been reinforced by defining procedures of state formation at the major international peace conferences in the aftermath of large inter-state wars (e.g. Holsti 1991).1 There is, however, wide variance within and across political entities. The processes and outcomes of state-making vary with regard to institutional expressions of state structure (bureaucratic/patrimonial, colonial/independent, centralized/decentralized), material capacities (developmental, predatory, or rentier states) and actors’ strategies at different times and levels (local, regional, and/or international level). This is particularly evident with regard to the postcolonial Global South, where state failure is most common—or, rather, where patterns of state failure and state collapse are most often detected according to the predominant definitions, which we will discuss in this chapter. Colonial rule prompted the emergence of fragile political orders whose illegitimate, exploitative, and exclusionary structures undermined the coherence of ideal-typical statehood (R. Jackson 1990; Holsti 1996). In the course of decolonization, statehood was often conferred by the international community in the form of “negative sovereignty” (cf. Sørensen 2001) that was not achieved by way of a Tillyan logic: that is, by eliminating external rivals (war-making) and prevailing over internal rivals (state-making), allowing state actors to provide security as a public good for a defined group (protection) and to extract resources from their clients through a system of taxation (extraction). As a consequence, wars and (post)colonial rule-making have not uniformly produced states; rival, non-state actors in regions populated by weak or failing states continue to make war beyond the confines of the state.2 Rather than leading to states, violent and non-violent decolonization in many cases resulted in “quasi-states” (R. Jackson 1990), which enjoyed international recognition (and often financial support), but which lacked domestic capacities and legitimacy.

1  For an account of the emergence of “modern statehood” in Europe and the US, see Manow and Ziblatt, Chapter 4, this volume. 2  For a more detailed discussion of why Tilly’s concept might not work in the Global South, see Georg Sørensen (2001); Brian Taylor and Roxana Botea (2008); and Karen Rasler and William Thompson (2012).

State Failure and State Transformation    747 And even though states undoubtedly make war, they are far from the only actors “on stage,” with others violently making and unmaking states and sometimes producing alternative forms of governance. To put it in a Tillyan way: wars do not necessarily produce states, nor are state actors the only ones waging wars. States are formed, persist, and fail in various ways, forcing us to analyze the spatio-temporal variations of state transformations carefully and to avoid overly hasty generalizations. Today, deviations from the Westphalian ideal range from postcolonial “quasi-states” to de facto states that lack international recognition, such as the Republic of Somaliland, to recently war-torn areas of failed or even collapsed statehood (Zartman 1995; Rotberg 2003; Bates 2008a). Against this backdrop, it is even more important to consider the dynamics and changes at the state level (state failure, war-making) and the international level (externally induced disruptions and/or state-building measures), not only empirically, but also with respect to competing theoretical explanations in political science. In order to meet the challenges, the second section of this chapter starts by discussing the most common definitions of state failure and state collapse.

2  Defining Failed States What is the surest way to identify failed states? Academic discourses in the political science subdisciplines of international relations, comparative politics, and conflict research contain a plethora of similar or at least roughly compatible notions. These hint at a broad concept of state failure while allowing implied causal relationships between war-making and state-unmaking to remain blurred. As a common research practice, quantitative projects link state failure to the occurrence and duration of internal armed conflict. Accordingly, the Political Instability Task Force (PITF)3 has defined state failure as large-scale violent conflict (civil war of various kinds), genocide, and/or adverse regime change, such as “abrupt shifts in patterns of governance, including state collapse, periods of severe instability, and shifts towards authoritarian rule” (Esty et al. 1995: 2). The rationale behind this definition is that state failure in a “narrow sense,” namely actual state collapse marked by a prolonged absence of state authority, such as in contemporary Afghanistan and Somalia, is an event too rare for meaningful statistical analysis; thus, it is necessary to include other types of instabilities (Esty et al. 1995: 1). Or, to state it more simply, a “collapsed state is a rare and extreme version of a failed state” (Rotberg 2004: 9). In contrast to the PITF, a more narrow definition of state failure focuses exclusively on one mechanism of violent state failure: the formation of militias. Robert Bates (2008b: 3) treats the “mobilization of militias and the spread of violence” as the critical material measures of state failure. He argues that, given a strong statistical correlation between incidents of civil war and occurrences of state failure, insights into the causes of civil war are likely to offer clues toward the causes of state failure as well: “In 60 per cent of the 3 

In 2003, the name of the project was changed from State Failure Task Force to Political Instability Task Force in order to reflect the broader scope of its work. See http://globalpolicy.gmu.edu/pitf/ (last consulted 6 February 2014).

748    Sven Chojnacki and Anne Menzel country-years in which there were failed states in Africa between 1970 and 1995, there were also civil wars; and in 70 per cent of the country-years in which there were civil wars, there were failed states” (Bates 2008b: 3). This Weberian perspective, however, underestimates the different types and functions of state-sponsored or pro-government militias as components of state strategies for operating in insecure environments or in governing the borderlands, for example, in Colombia. At the same time, it overestimates the extent to which militias constitute the crucial category along the nexus of state failure and organized violence, since many of these militias operate outside of civil war contexts (e.g. Carey et al. 2013). By adopting a more dynamic perspective and proposing an analytical distinction between state failure and state collapse, Jennifer Milliken and Keith Krause (2002) suggest that state failure be understood as a condition in which state institutions are unable to provide security, legitimate representation, an environment conducive to gainful economic activity, and/or basic public welfare services. State collapse, in contrast, requires that state institutions not only fail in fulfilling their functions, but that they also dissolve. This took place, for example, in Liberia and Sierra Leone during the civil wars of the 1990s, in Afghanistan after the Soviet intervention in 1979 and after the overthrow of the Taliban government in 2001, and in Somalia after the fall of the Siad Barre regime in 1991. But defining state failure and state collapse is only a first and relatively easy step toward understanding conflict-torn political spaces marked by state failure or state collapse. The next necessary step involves critically reflecting upon the nation state and opening the “black box” of state failure along the vertical and horizontal axes. By drawing heavily on the relatively static boundary conditions of territorial states, the epistemic program of so-called “methodological nationalism” bears the risk of acting as an ontological blinder. As Andreas Wimmer and Nina Glick Schiller put it: “The social sciences have become obsessed with describing processes within nation state boundaries . . . the web of social life was spun within the container of the national society, and everything extending over its borders was cut off analytically” (2002: 307). This also holds true for the study of state failure and civil war. Quantitative research based on PITF data mostly operates in a territorial container. While this strand of research has demonstrated some correlations between material state transformations and armed conflict in order to explain or predict state failure, it faces serious limitations when incorporating the horizontal (transnational) dimension and the international level, both of which can trigger and reinforce local dynamics of state failure and civil warfare. Contrary to the conventional distinction between failed and collapsed states (Rotberg 2003, 2004), which uses the state as the central unit of analysis, research on new modes of governance focuses on “areas of limited statehood” (Risse 2011; see also Risse, Chapter 8, this volume). The term denotes geographical spaces in which a formally recognized government lacks the assertiveness to implement collectively binding decisions and is not capable of sustaining territorial control and containing violence. The greatest strength of this approach is therefore its configurational conception, which reflects the spatio-temporal variations in the provision of public goods (e.g. security) and allows for the analysis of specific dynamics within or across territorial boundaries. In conjunction with the governance perspective, it enables researchers to analyze rule-making through vertical decision-making (governance with government), as well as territorially segmented rulemaking by non-state actors (governance without government). In the latter case, organized armed actors such as rebel groups or warlords arrive at collectively binding decisions and

State Failure and State Transformation    749 govern in areas of limited statehood, at least for a certain period of time (P. Jackson 2003; Menkhaus 2006/07; Branović and Chojnacki 2011). For analytical purposes, we can distinguish between different but often overlapping processes of rule-making:  governance via hierarchical configurations of control (e.g. in Somaliland or Puntland), governance via transfer by external interveners (e.g. in Kosovo or Afghanistan) and governance via delegation to third parties such as private military companies (e.g. in Iraq) or to pro-government armed groups (militias, paramilitary groups, irregular forces, or vigilantes). In many of these instances, governance must be seen as an intrinsically transnational activity, since the security problems in question occur across borders, and external actors are involved in processes of security provision, for example, the fight against drug-related crime in Mexico involving US support through the Mérida Initiative. Theoretically, this perspective accounts for the various activities of non-state armed actors in failed states as “new” or “alternative” forms of governance (cf. Duffield 2001; P. Jackson 2003). More precisely, it includes the particular strategies of militarily potent actors who invest in the establishment of a monopoly on the use of force and advance processes of governance formation—that is, the establishment of institutionalized political and economic systems of rule vis-à-vis a civilian population. With this perspective in mind, it becomes clear that the most frequently used metaphors to describe state collapse—such as “black hole” (Rotberg 2003), “chaos,” or “anarchy” (Kaplan 1994)—are inappropriate attributions and analytically misleading. A failed or collapsed state should not be equated with the complete absence of social order and political authority. As state institutions dwindle or even disappear, non-state actors, quasi-state actors, or international actors step into the authority vacuum and often provide more or less stable and more or less inclusive forms of subnational protection or even reliable “security governance” (Branović and Chojnacki 2011). These forms of governance are not necessary linked to the (re-)formation of the state; rather, they represent alternative formations of territorial control alongside the state.

3  Institutional and Functional Failure Differing definitions and theoretical perspectives aside, there are common empirical characteristics observable in episodes generally considered to be cases of state failure. In order to clarify the concept of state failure by opening perspectives for the war-making↔state(un)making nexus and other causal pathways, Jennifer Milliken and Keith Krause (2002: 754) propose a useful analytical differentiation between the institutional and functional dimensions of state failure: Every claim that a state has collapsed, is failing, or is going to fail, contains two usually implicit definitions or benchmarks. One concerns the “stateness” against which any given state should be measured as having succeeded or failed (the institutional dimension of state collapse), and the other concerns the normative and practical implications of such a failure (the functional dimension of state failure).

Put in even more explicit terms, the institutional dimension refers to a state’s basic legitimacy and its institutional capacity to exercise authority over people and a given

750    Sven Chojnacki and Anne Menzel territory—that is, to uphold the state monopoly on violence, to maintain viable systems of taxation and state jurisdiction, and to secure state borders. The functional dimension refers to state actors’ material capacity and willingness to provide the state’s people with public goods and services such as the rule of law, protection from illegitimate violence (by state or non-state actors), infrastructure, public education, and healthcare. While some degree of failure or weakness along one dimension or even both dimensions is quite common even within the OECD world (see also Risse, Chapter 8, this volume), massive failure along both dimensions has largely been restricted to the post-independence Global South. Within the post-independence Global South, the highest concentration of cases of massive state failure has been found in sub-Saharan Africa, often accompanied by the formation of transnational networks and regional clusters of violence as in the Great Lakes and the Mano River regions. The why and how of massive state failure have inspired numerous case studies and comparative analyses, unsurprisingly with a pronounced regional focus on sub-Saharan Africa (see e.g. Reno 1999; Bates 2008a). Within the resulting research literature, there is wide agreement that paths of “incomplete” democratization and state formation emerged from legacies of indirect colonial rule, which relied on “decentralized despotism” (Mamdani 1996) executed by “tribal” authorities, that is, selected local elites, as auxiliaries to the respective colonial power,4 as well as from imbalanced international policies toward post-independence states, most of which achieved formal independence starting in the 1950s. These paths often led to the emergence of internationally recognized but internally dysfunctional and illegitimate “quasi-states” (R. Jackson 1990), which have proven to be prone to massive and protracted state failure (e.g. Bayart 1993; Reno 1995; Clapham 1996). Although post-independence quasi-states often have not been viable in their own right, financial superpower patronage, development aid, international loans, and foreign investments that come with an interest in regime stability have allowed state elites to maintain unpopular and failing regimes and have even freed state elites from the immediate necessity of grounding their authority in empirically legitimate representation, sustainable systems of taxation, and the provision of public goods and services. In other words: external “recognition” of sovereign statehood in combination with external financial support has allowed quasi-states and their state elites to not build legitimate state institutions and functional state capacities, since they have not had to rely on the approval and support of their populations. At the same time, the institutional weakness of quasi-states has enabled the persistence of non-state institutions and relations of political and/or juridical authority, usually organized and maintained based on some form of ethnic or familial kinship and patrimonialism. Although such non-state institutions and authority relations have sometimes presented opportunities for local populations to resist state repression and predation and/or offered the means to manage functional state failure, non-state institutions and authority relations have often become—more or less loosely—incorporated into illegitimate, repressive, and often predatory state structures (e.g. Reno 1995; Mamdani 1996; Hesselbein 2007). In some cases, non-state authorities have also pursued repressive and predatory policies

4  On colonial legacies and indirect colonial rule, which constituted the mode of colonial governance most widely employed throughout sub-Saharan Africa, see also Lange, Chapter 6, this volume.

State Failure and State Transformation    751 of their own. With regard to Sierra Leone, where the state violently collapsed in the course of the 1990s, Richard Fanthorpe (2001) describes how the simultaneous functional failure of the state and traditional institutions had long led to a situation in which many Sierra Leoneans found themselves to be “neither citizen nor subject.” Still, quasi-state elites have usually found it necessary to accommodate crucial internal allies. While many post-independence regimes have increasingly employed repressive and predatory policies toward large parts of their populations, allied “strongmen” (Reno 1999) or “big men” (Bayart 1993; Utas 2012) have been granted privileges and rewarded with external patronage and/or predatory dividends in order to ensure their regime allegiance (Reno 1995, 1999; and Reno, Chapter 39, this volume). Against this backdrop, institutional and functional failure of states correlates with identity-based factors and (changing) economic conditions. As previous research has shown, collective identities are without doubt of central importance to understanding the dynamics of violent conflicts (Horowitz 1985; Roe 1999). From a process perspective, the social construction of identity as a marker for the delimitation of groups is more likely to become a problem under conditions of functional failure: when overall living conditions tend to be miserable and pathways to socio-economic improvement are narrow and reserved for members and clients of a ruling class. Although identity issues alone cause neither state failure nor violent conflict, the processes of functional failure contribute to sharpening competition between opposing groups (e.g. Bates 2008a). As schemes of interpretation referring to cultural or historical ties such as language or religion, collective identities are by no means naturally given; rather, they are closely related to conflict-oriented processes of mobilization, political manipulation, and polarization within settings of state failure or state collapse (Autessere 2006; Kaldor 2006 [1998]). The significance of identity politics increases with the cumulative effects of poverty, over-population, rural flight, rapid urbanization, and the erosion of political order (e.g. Bates 2008a). As has been argued, the salience of these factors is not only attributable to endemic political dynamics. Ethnic polarization is either rooted in the (post)colonial practice of discriminating against certain ethnic groups, as we have seen in Rwanda or Congo-Kinshasa, or related to ideological frameworks that fail to integrate autochthonous groups and result in elite privileges, economic inequalities, and protracted social conflicts, as in the former Yugoslavia. The internal structural conditions favoring the erosion of political institutions and mobilization or even polarization along ethnic ties contribute, on the one hand, to the rise of local entrepreneurs of violence. On the other hand, local armed groups benefit from changing opportunity structures (decline of public revenues and public services, changes in the global economy) by developing strategies of enrichment at the expense of the state or of the civilian population (e.g. looting, extortion, or resource exploitation). Thus, state failure and war-making are closely connected not only to the emergence of identity politics, but also to the availability of resources financing rebel activities. By comparing critical cases of state failure and relying on evidence from quantitative and qualitative studies, however, conflict research does not provide any justification for one particular causal path related to the “resource curse,” as assumed by Paul Collier and Anke Hoeffler (2004).5 The

5  The absence of determinate path dependencies is also discussed in David Waldner and Ben Smith in their chapter on rentier states (Chapter 38, this volume).

752    Sven Chojnacki and Anne Menzel interconnected dynamics of war-making and the unmaking of the state are, rather, related to the type of resources, constellations of actors, and their organizational capabilities. The effects of resources—for example, diamonds, oil, or coltan—on waging war vary not only by type (Fearon 2004; Ross 2004), but also in time and space and in respect to the degree of organization of the armed groups. At the end of the day, economic factors such as natural resources and commodity exports should be considered correlates of state failure or intervening variables related to war-making rather than causal pathways to the violent unmaking of states (Bates 2008a: 11; Rasler and Thompson 2012: 246). As security measures decrease and economic incentives for (foreign) investors increase, a critical group of commercial actors comes into play: private military companies (PMCs). Highly specialized PMCs such as DynCorp or Academi—previously known as Xe Services LLC and Blackwater—are the visible expression of a system that delegates selected security functions to commercial enterprises in failed states (cf. Avant 2005). While functional and institutional failures affect calculations by the state or intervening third parties—inviting these entities to outsource certain forms of military activity to private specialists—the involvement of this group of actors influences both the military power relationship and local conflict dynamics. As Colombia and Iraq show, these security dynamics often turn out to have particularly serious consequences: external interventionists who support internal armed groups become competitors for resources themselves and aggravate both the asymmetries of information available and the intensity of conflicts on the ground (Branović and Chojnacki 2011). It is therefore theoretically significant that we view local dynamics of security provision as being closely related to exogenous state-building approaches.

4  Failure, Warfare, and State Collapse Just as there is no automatic mechanism leading from colonial past, identity politics, or economic structure to massive state failure, there is no single path that typically tips failing states “over the edge” into widespread warfare, nor one common characteristic defining actors’ strategies and dynamics in such situations. These issues become apparent when considering the cases of Somalia, Zaire (present-day Congo-Kinshasa), and Liberia. The end of bloc confrontation in the late 1980s and early 1990s stripped both the Siad Barre regime in Somalia and the Mobutu Sese Seko regime in Congo-Kinshasa of their previous Western superpower patronage. In Somalia, on the one hand, the freezing of external financial assistance was quickly followed by internal war and state collapse (Bakonyi and Stuvøy 2005). The Mobutu regime, on the other hand, managed to cling to power until 1997. At this point, the Zairian army had already disintegrated as a result of the refugee crisis and armed conflict following the Rwandan genocide. The army posed no challenge to the insurgency led by Laurent Desiré Kabila, a long-time contender against the Mobutu regime who was now receiving military and financial backing from Rwanda, Uganda, and Angola; all three governments took interest in the replacement of the Mobutu regime, the security situation in Eastern Zaire, and Zaire’s abundant natural resources (Lemarchand 2003; Hesselbein 2007). For Liberia, by contrast, the decisive trigger to internal war came in the form of logistical support—weapons and money—that the Gaddafi regime in Libya granted to Charles

State Failure and State Transformation    753 Taylor’s armed group, the National Patriotic Front of Liberia (NPFL). Taylor, a former high-ranking Liberian civil servant who had lost favor with the regime, formed this group among exiled Liberians in the late 1980s (Ellis 1999: 65–73). He, in turn, helped trigger the violent collapse of the long-failing state in Sierra Leone by providing support to a small group of Sierra Leonean self-declared revolutionaries, whose leader he may have met in Libya (Abdullah 1998: 213–222). Muammar al-Gaddafi hosted and supported prospective sub-Saharan African insurgents throughout the 1980s, long before he was killed by rebel forces in the wake of the revolutionary protests and dynamics of collective violence that have spread across the Middle East and North Africa since 2010. The violent patterns of the Arab uprisings, in particular the occurrence and spread of large-scale civil wars, confirm that there are different paths leading from state failure to state collapse. Taking into account variation in opportunity structures—for example, per capita income, oil and gas revenues, different levels of repression, degrees of state capacity, and varying protest dynamics—the cases of Yemen, Libya, and Syria have highlighted several different processes of unmaking the state and waging war (Noueihed and Warren 2012). In the case of Yemen, longstanding internal armed conflicts, US counter-terrorism measures (e.g. drone strikes), and a low degree of state capacity (high unemployment rates, corruption, and institutional failures) facilitated the 2011 Yemeni revolution and further triggered disintegration. Meanwhile, the cases of Libya and Syria have shown that the fragmentation of the military’s loyalty, security force defection, and differing or incoherent strategies of international actors can lead to very different types of violent and state-wrecking outcomes. The more promising the political, military, and economic profits for rebel groups in such instances, the higher the risks of territorial fragmentation and political separation, and the more probable it is that violent conflicts over disputed territories will endure or recur. These dynamics, in turn, certainly affect the prospects of peace and for (re-)building states. In stressing the interplay between unmaking the state, waging war, and (re-)building states, however, political scientists and practitioners of state-building tend to overlook one important aspect: state collapse is neither synonymous with chaos nor identical to the absence of governance. This becomes clear when we consider the case of Somalia, which is not only the most protracted situation of state collapse, but also one of the most misunderstood. By viewing Somalia solely through lenses of violent, chaotic disorder and total societal breakdown, external policy-makers seeking to end violence and restore Somali statehood have overlooked not only the spatio-temporal variations of violence, which indicate that Somalia decayed into small zones controlled by a wide variety of clan-based militias and warlords in the course of state collapse and ongoing warfare (Chojnacki et al. 2012), but also the subnational efforts to contain violence and lawlessness. These efforts were usually organized by coalitions formed among local clan elders, businessmen, and Muslim clergy, who employed local militias and exercised localized control based on clan customary law and/or Islamic law (Menkhaus 2006/07: 85). The introduction of an internationally supported Somali transitional federal government has threatened the political authority of these local coalitions. This, in combination with indirect US counter-terrorism interventions, has since spurred the rise of radical Islamist militias, large-scale internal violence, and humanitarian catastrophes (Menkhaus 2010). By contrast, Somaliland and Puntland have remained stable, though not internationally recognized, political entities throughout this turmoil. Although they lack international

754    Sven Chojnacki and Anne Menzel recognition as sovereign states—while Somalia “as a whole” is still an internationally recognized state—they have been relatively stable and functional entities of political authority based on increasing numbers of state-like clan alliances that have emerged after the fall of the Siad Barre regime (Bakonyi and Stuvøy 2005; Renders 2012). In both cases, but more successfully in Somaliland, dominant violent groups have expanded their territorial control and demanded more efficient resource allocation to maintain their organizational capacities. As a result, formerly roving violent groups have become stationary, invested in the provision of security, and developed modes of governance. In particular, an effective reconciliation process in Somaliland (see Bradbury 2008) may have decreased the number of armed groups, which, in turn, decreased violence. Thus, from the perspective of governance, it is important to recognize that, under certain conditions, non-state armed actors have invested in the establishment of territorial control and social regulatory structures—for example, health systems, rule of law—and developed forms of internal control to manage their security relationship with the civilian population and cope with external threats. The quality and scope of governance vary from “minimal rule” or “warlord configuration” to “comprehensive rule” or “quasi-state” (Bakonyi and Stuvøy 2005; Arjona 2008). At a later stage, the interrelated processes of building administrative infrastructures, upholding a system of taxation, and establishing a monopoly over the use of violence could certainly result in statehood. As an unusual case, Somaliland today comes close to the European path of state-making (Rasler and Thompson 2012: 243). The contemporary patterns of political order in South-Central Somalia, the eastern provinces of Kongo-Kinshasa, and Afghanistan, however, tell another story: in contrast to the Tillyan logic linking war-making to state-making, multiple zones of military and political control often emerge, giving rise to (transboundary) formations of governance beyond state control (Reno 1999; Duffield 2001).

5  State-Building Interventions As state transformations in recent years have shown, the interplay between war-making and state failure/collapse is not merely an internal process; rather, state failure and civil wars have been reinforced by biased international interventions intended to contain the human consequences of armed conflict. In the course of the 1990s and 2000s, the rebuilding of collapsed state institutions came to be regarded as the central priority of international peace-building, which also included a wide variety of democratization and reconciliation measures (e.g. Paris and Sisk 2009). Most interventions have operated under official mandates to resolve humanitarian crises and/or support the implementation of peace accords, for example, in Somalia, Bosnia and Herzegovina, Kosovo, Timor-Leste, Rwanda, Liberia, Sierra Leone, Burundi, and Congo-Kinshasa. The exceptions are Afghanistan and Iraq, where peace-building became an integral part of the “War on Terror” military interventions. Within the context of post–Cold War peace-building, Iraq is also unique in that state collapse following the removal of the Saddam Hussein regime in 2003 was brought about by the same powers that later tried to rebuild the state (e.g. Dodge 2006). Ideally, from the perspective of international policy-makers, peace-building is expected to produce stable state institutions with the necessary capacities to guarantee “the

State Failure and State Transformation    755 provision of security, the rule of law (including a codified and promulgated body of laws with a reasonably effective police and justice system), [and] basic services (including emergency relief, support for the poorest, and essential healthcare)” (Paris and Sisk 2009: 15). In other words, state-building is expected to be the necessary condition for stable and durable “peace,” understood in terms of stability, some measure of legitimacy, and human security. In reality, however, state-building has rarely produced these desired outcomes. Instead, most newly rebuilt states are more or less failing, and their future outlooks remain uncertain, even though their basic institutional make-up once again resembles that of long-consolidated Western states. Nonetheless, proponents of state-building argue that there is simply no sensible alternative to state-building: “such missions, in spite of their many flaws, have done more good than harm,” and giving up state-building “would be tantamount to abandoning tens of millions of people to lawlessness, predation, disease and fear” (Paris 2010: 338). Other authors propose that opening up to local ideas about functional and legitimate forms of political authority and governance may lead to new and more viable paths to state formation (e.g. Herbst 2003; Utas 2012). With regard to Somalia, which has been deemed much too unstable and dangerous for international peace-building efforts to commence so far, Ken Menkhaus (2006/07: 87) has argued that any kind of international state-building seeking to remake Somalia in the image of Western-style statehood is doomed to fail: There is perhaps no other issue on which the worldviews of external actors and Somalis diverge more than their radically different understanding of the state. For external actors, the conventional wisdom is that a responsive and effective state is an essential prerequisite for development, a proposition enshrined in virtually every World Bank and UN strategy on development. For many Somalis, the state is an instrument of accumulation and domination, enriching and empowering those who control it and exploiting and harassing the rest of the population.

This critique has been acknowledged by many proponents of the dominant, policy-oriented research agenda, although attention to local ideas and existing forms of local governance is only embraced as a possible component of—rather than an alternative to—Western-style state-building. Some correctly note that local alternatives are not necessarily very functional and/or legitimate. They may also serve local elite interests in repressive domination, rendering their adoption reminiscent of indirect colonial rule (e.g. Kahler 2009: 207; Paris 2010: 357– 361). Drawing on these findings, a more fundamental critique claims that state-building and development practices already amount to a kind of indirect rule and power politics that serves Western interests—usually in the name of development, peace, and security (Duffield 2007). This critique offers revealing insights into the underlying logics and presumptions of state-building and development discourses that all too often remain unexamined.

6 Conclusion State failure comprises different political and social processes, just as multiple paths can lead to the escalation of warfare and even state collapse. War-making itself is not, in contrast to Tilly, the principal pathway to state-making (Rasler and Thompson 2012: 242), nor

756    Sven Chojnacki and Anne Menzel are processes of state failure and state collapse independent from international efforts to shape and build states. Notwithstanding causal variations and different consequences, comparative research reveals that state transformations in recent times have certain common characteristics: first, institutional and functional failures to maintain legitimate political authority over a state territory and a people and to provide basic public goods and services; second, dynamics of internal or transnational violence that can escalate into full-scale warfare and may even cause already failing states to collapse, but which also create spaces for alternative forms of governance beyond the state; third, international interventions designed to end violence and rebuild failed states. These interventions seem to succeed in establishing at least some semblance of Western-style statehood, thereby containing failure and internal violence at levels deemed relatively tolerable and controllable (e.g. Duffield 2007). Whether or not international state-building strategies really have the potential to move societies beyond state failure remains a question up for further debate among policy-makers, practitioners, and political scientists. The collapse of states or the failure of international responses does not mean that the state has lost its significance. Statehood may very well remain the central frame of reference for weak governments and rebel groups within the Global South—either as a source of revenue or as a territorial basis of legitimization and as a pre-condition for international recognition. But with the striking exception of Somaliland, the logic of war-making in failed or collapsed states does not necessarily entail an evolution toward state-making. Instead, we should pay attention to the emerging forms of political order within or beyond the state. Areas of failing or even collapsed statehood are not characterized simply by chaos or anarchy, but by multiple and changing modes of governance. The establishment of governance structures should be expected as a preferred strategy for non-state actors seeking to exert control over a defined territory under certain material conditions (i.e. within economically valuable territories), and it should be expected to engage in social relations (collaboration with civilians) in order to overcome or balance the risks of survival and negative effects in zones of permanent violence. The implementation of governance tasks fails or becomes the cause of its own undoing if armed groups refrain from providing both a minimum of internal security and deterrence from external threats, if resources are limited or become scarce, and if support within the armed group or population decreases. The question remains, however, as to how governance structures will persist over time— and possibly pursue the path to statehood. In any case, alternative modes of governance, as well as international responses to state collapse (e.g. military interventions, protectorates), should not be considered as merely transitory in nature, but as more permanent and multifaceted deviations from the Weberian model of states. For political science, the state remains methodologically and theoretically important, but its analytical perspective should be complemented by both disaggregated and multilevel research strategies. Rather than focusing solely on the aggregate of the state and state-based variables, we have to explain spatial and temporal variance that is important to understanding both the dynamics of state failure and transnational or regional differences in the ways political orders come under pressure. In order to systematically trace the spatio-temporal variations of state failure and state collapse, future research requires subnational measures of spatial changes (degree of territorial fragmentation, ethnic alliances);

State Failure and State Transformation    757 institutional developments (unequal reach and deficits of political institutions); and economic conditions such as poverty (unsatisfied basic needs), municipal tax collection, or population density. These dimensions should be analyzed in light of underlying conditions (e.g. colonial past, historical experiences) and triggering factors (e.g. third-party interventions, abrupt changes, refugee flows) that may foster violent state transformations. Methodologically, this necessitates relying on a mixture of macro perspectives and micro-analytical foundations (see Kalyvas 2006), which help us understand the inherent behavioral logics of making war and (un-)making the state at different stages and levels, as well as in different regional settings. Thus, to explain variation and different paths to state failure/collapse theoretically, we are confronted with the problems of multicausality and multilevel modelling. Although there are no easy solutions, we propose at least three promising strategies for future research. The first builds on the idea of integrating substate dynamics, transnational processes, and international responses to state failure into the governance framework (e.g. P. Jackson 2003; Branović and Chojnacki 2011; Risse 2011). This perspective should be complemented, second, by further developing the war-making↔state-making nexus (Rasler and Thompson 2012) to incorporate mediating factors such as multiple constellations of armed actors and their respective strategies in complex local or transnational environments. Finally, future research should analyze contemporary dynamics of state failure as they persist or unfold under conditions of international state-building measures, power politics, and normative changes (e.g. Duffield 2007; Utas 2012).

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CRUCI A L IS SU E S

Chapter 41

Eth n icit y a n d State Tr a nsfor m ation i n the Globa l Sou th Matthew Lange and Klaus Schlichte

The literature on ethnicity has exploded in recent decades. In this chapter, we engage this literature but limit our discussion in two ways. The first limitation is geographic: conforming to Part V of this volume, we focus on the Global South. Secondly, the chapter differs from the majority of the literature by analyzing ethnicity as an independent variable, not a dependent variable. In particular, we consider how ethnicity affects states and their transformations. Coinciding with our particular focus, we divide the chapter into three sections. The first compares ethnicity in the Global South and the core OECD and considers the causes of differences. In the second section, we consider the impact of ethnic diversity on state transformations in the Global South, paying particular attention to changes in state boundaries, state militarization, consociationalism and decentralization, the communalization of states, and state capacities. Thirdly and finally, we briefly compare the effects of ethnicity on states in the Global South and the core OECD to highlight the differences between them and to point to future areas of research.

1  Ethnicity Compared: The Global South and the Core OECD To begin, it is helpful to briefly define the main concepts we employ. According to Max Weber (1968 [1921/22]), ethnic communities are composed of individuals who believe they are united by particular characteristics, such as common language, ancestry, and cultural beliefs and practices. Alternatively, nations are political communities that either possess their own political organization or strive to obtain one. Ethnonationalism combines elements of both nation and ethnicity, designating the pursuit of greater political rights and autonomy for an ethnic community (Connor 1994). Regions with ethnonationalist

764    Matthew Lange and Klaus Schlichte movements therefore have multiple and competing ideas of nation; we refer to this situation as plurinationalism. As Michael Keating notes (Chapter 28, this volume), plurinationalism is common in the core OECD. Compared to the OECD, however, plurinationalism is even more common in the Global South and has even greater effects on states. For one, most regions of the Global South are more ethnically diverse than the core OECD. According to data on linguistic fractionalization, for example, the chance that two randomly selected individuals from the same country speak different languages is only 11 percent in both North America and Western Europe but 66 percent in sub-Saharan Africa, 38 percent in Asia, and 20 percent in Latin America. Indeed, whereas several countries in the Global South have dozens if not hundreds of languages (Papua New Guinea has nearly a thousand, and Nigeria has around 250), few countries in the core OECD have more than a handful. Formal political discrimination and exclusion is another important area of difference between the Global South and the core OECD. The Ethnic Power Relations dataset estimates the percentage of national populations that faces formal political discrimination. Between the years 1946 and 2005, the average percentage of the population that faced formal political discrimination was only 2.2 percent in the core OECD but 16.5 percent in North Africa and the Middle East, 17.7 percent in sub-Saharan Africa, 5.2 percent in Asia, and 8.7 percent in Latin America and the Caribbean (Wimmer 2013: 264). A third notable difference between the core OECD and the Global South concerns ethnic-based violence. As shown in Figure 41.1, ethnic civil wars—or wars that pit states against domestic opponents and are motivated, at least in part, by ethnic difference— have been quite prevalent outside the OECD over the last three decades, peaking at 27 countries experiencing at least one ethnic civil war in 1993. Alternatively, there has not been a single ethnic civil war in the core OECD since 1982—the Basque and Northern Ireland conflicts do not reach the mobilization and death thresholds necessary to be categorized as civil wars. Similarly, Figure 41.2 shows that communal violence, defined as civilian-on-civilian violence motivated at least in part by communal difference, has increased markedly in the Global South since the 1960s but remained stable in the core OECD. In particular, the figure shows the number of countries by region that experienced either communal riots or communal warfare within a given decade. The data for the 2000s end in 2006, but the Global South had already surpassed the number of countries experiencing communal violence during the entire 1990s. Percentage-wise, the figure suggests that nearly one third of all countries in the Global South with available data experienced either communal riots or warfare between 2000 and 2006, whereas the corresponding figure for the core OECD is less than ten percent. In addition to the prevalence of violence, the dynamics of communal violence also appear to depend on the region. Matthew Lange (2012) runs cross-sectional time-series analyses on the correlates of communal violence among a set of 120 countries between 1960 and 1999 and divides the set between high-income and mid/low-income countries. The results between the two sets vary greatly. For one, the models for high-income countries—which overwhelmingly comprise core-OECD countries—account for only a third of variation in communal violence, whereas the same models for mid/low-income countries account for nearly half of variation. Moreover, most variables that are significantly related to communal violence in one model are not related to communal violence in the

Ethnicity and State Transformation in the Global South    765 30

OECD Rest of world

25 20 15 10 5

2005

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1995

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1985

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1975

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0

Fig. 41.1  The number of ethnic civil wars by region, 1955–2010. Source: Political Instability Task Force (2013).

40 30 20 10 0 1960s

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1980s

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Fig. 41.2  The prevalence of communal violence by region, 1960–2006. Source: Minorities at Risk Project (2009).

other:  education, population size, and per capita GDP are significantly related among mid/low-income countries but are unrelated among high-income countries, and level of democracy is significantly related among high-income countries but is unrelated among low-income countries. In many regards, therefore, ethnic diversity in the Global South differs from ethnic diversity in the OECD and is commonly a more pressing issue. Several analyses of ethnic

766    Matthew Lange and Klaus Schlichte diversity offer insight into why this might be the case. As noted by Lange (Chapter 6, this volume), many analyses highlight overseas colonialism as a determinant of ethnonationalist movements and ethnic violence, and overseas colonies are concentrated in the Global South. For example, Lange and Andrew Dawson (2009) use statistical methods and find that former colonies—and especially former British colonies and the former colonies of minor colonial powers—were at a heightened risk of communal violence between 1960 and 1999. In their review of the more qualitative literature, in turn, they highlight eight ways in which colonialism potentially affected postcolonial violence: by (1) constructing and transforming ethnic identities, (2) institutionalizing ethnic-based divisions of labor, (3) creating or transforming ethnic-based hierarchies, (4) introducing foreign populations, (5) imposing arbitrary political borders, (6) promoting despotic forms of rule, (7) institutionalizing ineffective states, and (8) opening a power vacuum at independence. The case of Burma helps highlight most of these mechanisms. Until recently, Burma was the location of the world’s longest civil war, which pitted the government against a separatist movement led by ethnic Karens. The war erupted when the British colonizers left in 1948, showing how political openings at independence contributed to conflict. In fact, the violence began during World War II, as a Japanese invasion created another political vacuum during which ethnic Burmans attacked Karens. After the end of World War II, the British made little effort to reestablish a functioning state, thereby creating a gaping institutional opening that allowed the Karen separatist movement to establish itself. In addition to a power vacuum, colonialism also contributed to ethnonationalist violence in Burma by strengthening identities and creating emotional motivation for conflict. Considering the latter, colonialism heightened resentment and fear among ethnic Burmans, as British rule destroyed the precolonial Burman kingdom, the Konbaung dynasty, and ruled Burma as part of colonial India for 100 years. In turn, colonial transformations helped focus this resentment and fear on Karens. Most notably, Karens had historically collaborated closely with the British and even helped the British defeat Burman uprisings on two occasions. The close ties between Karens and the British also gave Karens privileged access to government positions, causing them to become overrepresented in the administration and the military. Importantly, Karens held the lowest position in the social hierarchy prior to British rule, and ethnic Burmans resented the growing economic and political influence of Karens. One reason for the mobility of the Karens was education, as they became the most highly educated ethnic community during the colonial period. Such high levels of education among the Karens, in turn, was caused by very high levels of missionary activities within their communities. Even more, the missionaries played an instrumental role in the construction of strong Karen identities, as such identities were largely absent prior to colonialism, and ethnic Karens on the Thai side of the border never developed powerful collective identities—despite constant political discrimination faced by Karens in Thailand. The missionaries helped build a powerful Karen identity in diverse ways: by formalizing and creating a written Karen language, teaching material describing Karens as an organic community that had historically been marginalized by the Burmans, establishing popular presses that published newspapers and other material that focused on current events affecting Karens, and founding diverse Karen associations. As one missionary active among Karens during the late nineteenth century proclaimed about their influence, “this is just welding the Karens into a nation, not an aggregation of clans.” (Smeaton 1920: 15).

Ethnicity and State Transformation in the Global South    767 Instead of colonialism, several classic and contemporary works focus more generally on “modernization” as the main cause of variation in ethnic diversity and violence (Tönnies 1957 [1887]; Durkheim 1984 [1893]; Huntington 1968; Anderson 1983; Gellner 1983; Smith 1998). This view sees nationalism as a byproduct of political and economic modernization, suggesting that uneven modernization promotes variation in ethnic and national diversity. The literature points to two general ways in which modernization potentially shapes ethnic and national diversity. The first focuses on nation- and state-building processes. This view notes that core OECD countries also had greater ethnic diversity at one time but that state policies effectively reduced such diversity, thereby facilitating nation-building. The literature points to different ways in which states reduced diversity. The more functionalist strand of the modernist literature focuses on policy seeking to build nations by expanding consensus through assimilation. In a well-known example, Eugen Weber (1976) offers evidence that the French state played a very important role in building a nation out of a relatively diverse population, thereby turning peasants into Frenchmen. He places emphasis on the state creation of national markets, state investments in internal transportation, military conscription, and—especially—state-sponsored education. The more conflict-oriented strand of the modernist literature, on the other hand, pays greater attention to nation-building via exclusion. In Western Europe, for example, there was a long history of ethnic purging and violence that ultimately resulted in more homogenous national states (Marx 2003; Mann 2005). Notable examples include the murder and expulsion of Huguenots in France and of Muslims and Jews in Spain, both of which helped create more homogenous populations. The Nazi genocide had similar effects, as did the removal of aboriginal peoples in Australia, Canada, New Zealand, and the United States. Instead of exploring how states create unified populations, the second and more recent strand of the modernist position focuses on how processes associated with modernization help alleviate pressures contributing to ethnic movements and violence. Economic prosperity, for example, is negatively related to ethnic civil war and communal conflict and appears to commonly impede both by limiting communal competition. Moreover, democratic deepening allows ethnic communities to voice their political concerns and address ethnic grievances through formal political channels. It also helps limit formal political discrimination. As a result, ethnic communities have fewer grievances and possess effective means of addressing their grievances peacefully in robust democracies. Finally, some note that powerful states help prevent communal violence and civil war by suppressing and containing them (Tilly 1992; Goodwin 2001; Fearon and Laitin 2003). The presence of greater wealth, more robust democracies, and more effective states in the core OECD therefore potentially helps explain the different level of communal violence and civil war in the Global South and the core OECD. Although certain core elements of the modernist position suggest that ethnic diversity should diminish in the Global South over time as modernization processes continue, many contemporary researchers influenced by the modernist perspective disagree (Breuilly 1994; Lange 2012; Wimmer 2013; Darden 2015). They recognize that the social and historical context causes modernization processes to unravel very differently from place to place and suggest that such differences have important implications on ethnic diversity. Some note, for example, that core OECD countries were much more capable of diminishing diversity through assimilatory policy because such policies were

768    Matthew Lange and Klaus Schlichte implemented at a time when alternative collective identities were relatively weak and therefore did not compete with the national identities pushed by the states. Alternatively, colonialism commonly strengthened ethnic identities in large parts of the Global South, thereby complicating efforts to instill more inclusive national identities after independence (Breuilly 1994; Mamdani 2001). Similarly, mass education usually preceded nationbuilding efforts outside the core OECD, and the educational systems commonly instilled identities that competed with future state efforts to create a unified national community (Lange 2012; Darden 2015). In this way, colonialism and the early spread of education have potentially created obstacles to nation building in the Global South. Moreover, classic modernization theory’s claims about the stages of development have not held, leaving many—but hardly all—countries in the Global South poor and with relatively ineffective and non-democratic political institutions. As a result, some regions in the Global South lack several of the conditions that help contain ethnic mobilization and violence, and it is uncertain when they will ever have them. For these reasons, most contemporary scholars conclude that ethnic diversity will not disappear and will likely remain an influential force in several countries within the Global South for the foreseeable future.

2  The Impact of Ethnic Diversity on States in the Global South The prevalence, level, and form of ethnic diversity in the Global South have important implications on other social phenomena. In this section, we consider how they affect states. We focus on five general yet interrelated aspects of states: borders, militarization, consociationalism and decentralization, communalization, and capacity.

Ethnonationalism and State Borders A common goal of ethnonationalist movements is the construction of a new nation state ruled by and for the ethnic community. Looking back at the waves of state formation since World War I, it is striking to see that ethnically driven secession movements are rarely successful, and nearly all the successful cases occurred when major transformations in the international state system were underway. The most important changes in the global landscape of states connected with ethnonationalist movements occurred at the end of empires: the end of the Austro-Hungarian and Ottoman Empires after World War I, the dissolution of overseas colonial empires between 1940 and 1970, and the decay of the Soviet Union in the early 1990s. The single largest transformation in the state system over the past hundred years— and the one with the greatest impact on the Global South—was the dismantling of colonial empires. One might therefore expect considerable transformations in state borders at this time. A  quick look at postcolonial states, however, shows that very few changes have occurred, with the separation of India and Pakistan—followed by the separation of Bangladesh from Pakistan—being the most notable example. One does see considerable

Ethnicity and State Transformation in the Global South    769 transformations in borders in postcolonial Latin America as well, although these changes occurred much earlier and were the result of geopolitical competition, not ethnonationalist movements. The stickiness of colonial borders is all the more surprising because colonialism commonly exacerbated ethnic mobilization and violence. There are at least three reasons for the maintenance of state boundaries. First, and likely most importantly, states commonly suppressed ethnonationalist aspirations by force (Schetter and Wimmer 2003). Second, changing borders challenged established patterns of conduct between states. Most notably, tolerance towards secession might stir mistrust between neighboring states. This was the argument that the Organization for African Unity has used to sanctify the postcolonial borders since its inception in 1963. Finally, the belief in the legitimacy of the existing order of states has buttressed postcolonial states. The globalization of an image of the state evidently stabilized the existing order (Migdal and Schlichte 2005).

Ethnic Civil War and the Militarization of States Over the past two decades, three ethnonationalist movements in the Global South have successfully transformed state borders by creating new countries: East Timor, Eritrea, and South Sudan. One notable similarity among all three cases is that separation was preceded by extreme violence, and most of this violence was committed by military forces. These examples show that states commonly militarize in the face of ethnonationalism and, in the terminology of Michael Mann (1986), gain “despotic power.” This is not limited to extreme cases in which prolonged violence eventually leads to the construction of a new country. Instead, it is a relatively common outcome—albeit to different extents—whenever states oppose ethnonationalist movements. One notable example is Sri Lanka, which Laksiri Jayasuriya (2004) describes as possessing a social welfare state up until an ethnic civil war turned it into a social warfare state. Additional cases of state militarization in the face of ethnonationalist movements include Burma, Burundi, India, Israel/Palestine, Lebanon, Nigeria, Rwanda, South Africa, Turkey, and Uganda. As the term suggests, a militarized state is one in which the military is large and plays an important role regulating social relations. This can occur in a military dictatorship, as in Burma, or with elected governments, such as Sri Lanka. In the case of the former, military presence is more widespread and is the face of the state for much of the population. In the case of the latter, military presence is focused on populations and regions under the influence of the opposition movements. To date, scholars have paid little attention to how ethnic diversity in the form of ethnonationalist movements militarizes states. This is likely because the impact of ethnonationalism on state militarization is both relatively rare and self-evident. Still, the issue raises important questions that merit more attention. For example, is state militarization via ethnonationalist violence a symmetric process whereby the level of state militarization returns to pre-conflict levels once the conflict ends, or is it an asymmetric process whereby state militarization becomes institutionalized and remains at high levels after the conflict ends? The latter seems especially likely when political leaders see ethnonationalism as a continued threat. In this way, militarization might be pursued as a semi-permanent solution to ethnonationalist conflict.

770    Matthew Lange and Klaus Schlichte

Plurinationalism, Consociationalism, and State Decentralization Although few scholars pay much attention to the militarization of the state as a strategy to counter ethnonationalist conflict, state officials almost certainly employ it much more frequently than the two strategies that have received the most attention: consociationalism and decentralization. Both consociationalism and decentralization make power-sharing between different plurinational communities possible, which allows communities to have some degree of self-rule while maintaining the territorial integrity of the state. The rarity of consociationalism and decentralization is caused by a number of factors, most notably strong opposition from state officials who do not want to hand over powers to their ethnonationalist opponents and from ethnonationalist leaders who see such reforms as an impediment to their dreams of a separate state. According to Arend Lijphart (1977), consociationalism is a form of power-sharing that offers the best way to manage conflict in plurinational societies. It has four main components:  a coalitional government between members of different communities, mutual veto by community leaders, proportional representation, and communal autonomy. The Netherlands and Belgium are the most notable examples in the world today. In the Global South, Lebanon is arguably the only case that conforms to the consociational model. Lebanon has had a consociational structure since 1943, with a system of government that allocates certain positions and the number of parliamentary seats based on communal membership. Notably, communal violence has been common in Lebanon under consociationalism, and it has also been much more severe than pre-reform violence, offering some evidence against Lijphart’s well-known claims (Salamey 2009). Still, the extreme rarity of consociationalism in the Global South prevents any sort of conclusion. Instead of power-sharing at the center through consociationalism, another related strategy is decentralizing state power (O’Leary 2005; Stepan et al. 2011). It is similar to consociationalism because it offers a means of sharing power but differs because it involves power-sharing between the central government and at least one local government, with the local governments controlled by minority communities in an effort to give the latter greater self-rule. Ethiopia offers one notable example of how this can work, as Miles Zenawi, leader of Ethiopia between 1991 and 2012, promoted a system of ethnic federalism in an effort to limit ethnonationalist movements and violence after the successful secession of Eritrea. India is a better-known example. Stepan et  al. (2011) claim that its decentralization efforts have been very successful at limiting ethnonationalist violence, a view that seems true given the enormous size and diversity of the country’s population. At the same time, postcolonial India experienced considerable communal violence, and it is hard to tell what role the federal structure really had in limiting such violence (Adeney 2007). Indeed, the political accommodation of such challenges is still ongoing, as at least a dozen larger communal conflicts exist (Baruah 2010). Moreover, the creation of ethnically based states created demands by other communities to have their own ethnic states, resulting in a snowball effect. One therefore cannot be sure what the final outcome will be. Nigeria is also commonly given as an example of state decentralization in the face of ethnic diversity. It differs markedly from India, however, because the reforms actually sought

Ethnicity and State Transformation in the Global South    771 to divide ethnic communities and strengthen the power of the central state. At independence, Nigeria’s initial federal structure was the result of combining three different colonies during the final years of colonial rule. Less than a decade after independence, extreme violence against ethnic Igbos and their limited political power motivated a movement to separate Igboland—one of the three federal units—from the country. After a bloody war, the separatist movement was defeated, and the government expanded the number of federal units to 36 in an effort to limit future ethnonationalist opposition. At the same time, the reforms actually resulted in a greater centralization of state power. The example therefore shows how decentralization can be a strategy to increase the power of the central state, not decrease it. One might infer from the experience of Lebanon, India, and Nigeria that consociationalism and decentralization might either contain or provoke violence. Numerous scholars are therefore very skeptical about the use of each, especially when they are viewed as one-size-fits-all solutions to ethnonationalist conflict (Oxhorn et al. 2004; Brancati 2006; Monteux 2006; Dickovick 2011). While this skepticism will likely limit the use of consociationalism and decentralization as strategies for dealing with ethnonationalism, the fact that several countries in the Global South have low levels of state capacity also bodes poorly for their use. As Daniel Ziblatt (2006) notes, decentralization requires pre-existing infrastructural power and capacity at the regional level, and both are quite limited in several countries in the Global South. Similarly, Lange (2009) notes that successful decentralization requires a central state with relatively high levels of pre-existing capacity, an argument that can also be extended to consociationalism.

Ethnic Diversity and State Capacity To the extent that state decentralization requires considerable state capacities, a new and growing body of literature suggests that leaders wishing to decentralize power to limit ethnonationalist movements in the Global South might face a catch-22. This literature looks at the impact of ethnic diversity on state capacity and commonly finds that ethnic diversity limits it. Several statistical analyses, for example, find that ethnic diversity is negatively related to different aspects of state capacity. In one of the first analyses, William Easterly and Ross Levine (1997) find that linguistic diversity helps explain cross-country differences in public policies and other economic indicators like low schooling, political instability, high governmental deficits, and insufficient infrastructure. The authors suggest that diversity creates collective action problems, as it hinders the punishment of free riders. Easterly et al. (2006) look at the relation between ethnic diversity and institutional development. Such diversity, they find, creates a lack of social cohesion that negatively affects the strength of institutions. Easterly and Levine (1997) and others also suggest that ethnic diversity promotes competitive rent-seeking, which wastes resources and hinders the construction of public goods. Most recent research has broken this down to an argument of “ethnic favoritism” (Englebert 2000; Franck and Rainer 2012; Wimmer 2013). State leaders favor their ethnic communities in the distribution of resources, undermining the legitimacy of public institutions. Both Englebert (2000) and Wimmer (2013) focus on the delegitimizing impact of diversity and clearly link their arguments to the communalization of state power, whereby

772    Matthew Lange and Klaus Schlichte the control of the state by one ethnic community delegitimizes the state among all other communities. One additional but largely overlooked way in which ethnic diversity might affect state capacity is through the conflict it sometimes promotes. Most notably, a few cases of extreme communal violence have contributed to the breakdown—usually temporarily— of state structures in large parts of the territory. This commonly results in a situation where a single country has multiple governments, although only one is recognized internationally. During the Sri Lankan civil war, for example, the Sri Lankan government lost direct control over large parts of the country for extended periods of time, and the Tamil Tigers effectively established their own system of government in the territory they controlled. This situation can limit state capacity in the areas affected by the violence long after the conflict ends. Alternatively, Charles Tilly’s argument about war-making and state-making might apply to ethnic civil war, suggesting that the latter could actually enhance state capacities by forcing states to build effective states to overcome ethnic opposition. Still, Tilly (1992) claims that his argument does not likely hold for contemporary countries in the Global South because the present international environment reduces government incentives to build effective taxation systems to finance warfare. Miguel Centeno (2002) makes similar claims in his analysis of state-making in Latin America but also notes how domestic conditions—such as the establishment of political authority—affect whether conflict promotes or deters state-building. Along these same lines, Deborah Boucoyannis (2010) finds that relatively high levels of state capacity are a necessary precondition for warfare to strengthen states, and the latter was quite common in Europe but is frequently lacking in the contemporary Global South. Finally, Tilly’s argument focuses on international warfare, not civil war, and ethnic civil wars are commonly destructive and exacerbate ethnic differences, thereby destroying states and undermining state legitimacy.

Ethnic Diversity and the Communalization of State Power A fifth broad way in which ethnic diversity can affect states is by communalizing state power, whereby the state is controlled and serves the interests of one or more ethnic communities above all others. Such communalization occurs to different extents in different places. At one extreme, only individuals from particular communities are allowed to hold high-level positions. Highly communalized states also treat the civilian population differently depending on their ethnicity, with certain groups having superior access to public goods and services. Finally, highly communalized states commonly encourage or even perpetrate violence against excluded communities. The Hutu-dominated government of pre-genocide Rwanda epitomizes the communalization of state power in all three ways. It is difficult to say just how many states in the Global South experience highly communalized state power, but formal political discrimination against ethnic communities offers some insight. Based on data from the Minorities at Risk project, nearly one third of countries in the Global South experienced formal, ethnic-based, political discrimination throughout the 1990s, and 35 ethnic communities in 23 countries in the Global South continued to face severe political discrimination in 2006 (Minorities at Risk Project 2009).

Ethnicity and State Transformation in the Global South    773 The Ethnic Power Relations dataset estimates the percentage of all ethnic communities— not individuals—that were excluded from political power either through discriminatory or non-discriminatory practices between 1946 and 2005. During this period, the average percentage of ethnic communities that were excluded was 70 percent in Asia, 51 percent in North Africa and the Middle East, 44 percent in sub-Saharan Africa, and 61 percent in Latin America and the Caribbean (Wimmer 2013: 265). Within democracies, evidence of state communalization can be gained by analyzing the support given to ethnic-based parties. Studies of democratization in sub-Saharan Africa, for example, offer consistent evidence that ethnicity affects voting behavior in several—but hardly all—countries (Mozaffar et al. 2003; Norris and Mattes 2003; Posner 2005; Fridy 2007). These studies suggest that democratization does not prevent the communalization of state power and likely exacerbates it when democratic practices are not institutionalized, a finding that coincides with earlier work on the topic (Horowitz 1985; Snyder 2000). The communalization of state power has several important implications for states. As described in the previous section of this chapter, state communalization potentially affects state capacity. This argument, in turn, suggests that communalized states are corrupt and lack legitimacy. State communalization appears linked to corruption via ethnic brokering, whereby leaders distribute resources to loyal ethnic backers. Supporting this view, Raphaël Franck and Ilia Rainer (2012) analyze 18 countries in sub-Saharan Africa and find that the education and health of ethnic communities were strongly affected by changes in the ethnicity of the state leaders. Communalization limits state legitimacy, in turn, by excluding large numbers of citizens from state power and resources, which causes excluded communities to view the state as unjust and foreign. Largely through their effects on corruption and legitimacy, communalized states also contribute to political violence. Indeed, political exclusion and discrimination is one of the best predictors of communal violence and ethnic-based civil war (Horowitz 1985; Gurr 1993; Sambanis 2001; Wimmer et al. 2009; Lange 2012; Wimmer 2013). The literature on the communalization of state power is primarily interested in these political effects. Others also try to explain variation in state communalization or explore why only some cleavages become politicized. Analyses looking into both questions are necessarily historical and therefore commonly highlight determinants that are particular to certain cases. Among studies of the Global South, considerable attention is once again given to the impact of overseas colonialism. For example, several works find that ethnic identities are strong in former British colonies in sub-Saharan Africa and that their states are commonly communalized, whereas other works find that both ethnic identities and the communalization of politics are weaker in former French colonies. This finding coincides with other works offering evidence that British colonialism communalized politics and heightened ethnic-based competition more than French colonialism (Abernethy 2000; Blanton et al. 2001; Lange and Dawson 2009; Lange 2012). Daniel Posner (2005) also focuses on the impact of British colonialism but considers why certain cleavages in Zambia became politicized while others did not. He notes that British colonialism strengthened tribal—instead of linguistic—identities but that the importance of tribe and linguistic group have varied over time during the postcolonial period. He argues that this variation was determined by changes in the political institutions, with linguistic-based politics during periods of multiparty democracy—due to a need to maximize votes—but tribal-based politics during periods of one-party rule.

774    Matthew Lange and Klaus Schlichte Instead of focusing on the processes through which states are communalized, other works explore the ways in which states become more inclusive. In addition to South Africa, the region within the Global South in which such movements are most common is Latin America, where indigenous peoples have mobilized widely to gain greater political recognition and rights (De la Peña 2005; Yashar 2005; Itzigsohn and vom Hau 2006).

3  Future Agendas Ethnicity therefore appears to shape states in the Global South in important ways, albeit in some ways more than others. Because this is a relatively new area of study, much more research is still needed, and it seems likely that such research will continue to expand in the near future. In this final section, we use a comparison of the Global South and the core OECD to highlight potential directions this literature might go. Comparison offers evidence that ethnicity does not shape states in the core OECD in the same way it does in the Global South. In the wealthy and democratic areas of the world, ethnic diversity promotes constitutional negotiations between the central state and ethnic leaders over the extent of ethnic self-rule. In Spain, the United Kingdom (UK), and Canada, for example, separatist parties lead negotiations with the central government in pursuit of greater control of communal affairs. Such negotiations also occur in the Global South, but ethnic competition over control of the central state is more common. This difference has two main causes. First, whereas Spain, the UK, and Canada have dominant national communities that minorities cannot possibly overcome to take control of the central state, many countries in the Global South lack dominant national communities, making ethnic competition for control of the state more common. Second, countries in the core OECD have more institutionalized democracies and more effective states, two factors that are vital for constitutional negotiations over greater self-rule. Because of these differences, the issues of decentralization, consociationalism, and sovereignty are much more relevant in the core OECD than the Global South, but the communalization of state power is of considerably greater relevance in the Global South. The impact of ethnicity on state capacity also seems more relevant in the Global South than the core OECD. In the core OECD, effective states already exist, and the focus is on negotiating some form of power sharing between the central state and ethnic regions. While these negotiations can reach deadlocks that cripple the state in certain ways, the states are generally effective enough to withstand these periods of crisis, and the negotiations usually reorganize state power in ways that either maintain or enhance state capacity. In the Global South, on the other hand, states are generally less effective, and ethnic leaders are more likely to compete for control of the state. The combination of these two traits, in turn, promotes rent-seeking activities, ethnic favoritism, and limited state legitimacy, all of which commonly limit state capacity even further. Finally, ethnicity is more likely to promote state militarization in the Global South. The combination of less effective states, ethnic competition over state control, and limited democracy have made ethnic-based political violence much more common in the Global South than the core OECD. This violence, in turn, has made the military a much more important basis of domestic state power in the Global South.

Ethnicity and State Transformation in the Global South    775 Together, these differences between the core OECD and the Global South suggest that the social context mediates the impact of ethnicity on the state and that ethnicity can therefore have very different effects depending on the context. Universal theories on the topic therefore do not appear appropriate, and future research must explore these conditions. Moreover, certain effects of ethnicity appear much more relevant to the Global South, most notably the impact of ethnicity on the communalization of state power, state capacity, and the militarization of states. In Chapter 28 of this volume, Michael Keating fails to mention any of these in his discussion of the core OECD because they lack relevance among the world’s more wealthy democracies, and he focuses exclusively on democratic negotiations between states and subnational units (see Keating, Chapter 28, this volume). While the latter are still relevant in the Global South, the former are also extremely important, and future research must focus on them.

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776    Matthew Lange and Klaus Schlichte Easterly, William; Ritzen, Jozef, and Woolcock, Michael, 2006. “Social Cohesion, Institutions, and Growth.” Economics & Politics 18 (2): 103–120. Englebert, Pierre, 2000. State Legitimacy and Development in Africa. Boulder, CO: Lynne Rienner Publishers. Fearon, James D, and Laitin, David D, 2003. “Ethnicity, Insurgency, and Civil War.” American Political Science Review 97 (1): 75–90. Franck, Raphaël, and Rainer, Ilia, 2012. “Does the Leader’s Ethnicity Matter? Ethnic Favoritism, Education, and Health in Sub-Saharan Africa.” American Political Science Review 106 (2): 294–325. Fridy, Kevin S, 2007. “The Elephant, Umbrella, and Quarrelling Cocks:  Disaggregating Partisanship in Ghana’s Fourth Republic.” African Affairs 106 (423, April): 281–305. Gellner, Ernest, 1983. Nations and Nationalism. Ithaca, NY: Cornell University Press. Goodwin, Jeff, 2001. No Other Way Out: States and Revolutionary Movements, 1945–1991. New York: Cambridge University Press. Gurr, Ted R, 1993. Minorities at Risk: A Global View of Ethnopolitical Conflict. Washington, DC: United States Institute of Peace Press. Horowitz, Donald L, 1985. Ethnic Groups in Conflict. Berkeley, CA: University of California Press. Huntington, Samuel P, 1968. Political Order in Changing Societies. New Haven, CT: Yale University Press. Itzigsohn, José, and vom Hau, Matthias, 2006. “Unfinished Imagined Commu­ nities: States, Social Movements, and Nationalism in Latin America.” Theory and Society 35 (2, April): 193–212. Jayasuriya, Laksiri, 2004. “Social Policy and the Sri Lankan Welfare State:  The British Colonial Legacy.” In Social Policy and the Commonwealth: Prospects for Social Inclusion, ed Catherine Jones Finer and Paul Smyth, 109–124. New York: Palgrave Macmillan. Lange, Matthew, 2009. Lineages of Despotism and Development: British Colonialism and State Power. Chicago, IL: The University of Chicago Press. ——, 2012. Educations in Ethnic Violence:  Identity, Educational Bubbles, and Resource Mobilization. New York: Cambridge University Press. ——, and Dawson, Andrew, 2009. “Dividing and Ruling the World? A  Statistical Test of the Effects of Colonialism on Postcolonial Civil Violence.” Social Forces 88 (2, December): 785–817. Lijphart, Arend, 1977. Democracy in Plural Societies. New Haven, CT: Yale University Press. Mamdani, Mahmood, 2001. When Victims Become Killers: Colonialism, Nativism, and the Genocide in Rwanda. Princeton, NJ: Princeton University Press. Mann, Michael, 1986. “The Autonomous Power of the State: Its Origins, Mechanisms and Results.” In States in History, ed John A Hall, 109–136. Oxford, UK: Basil Blackwell. ——, 2005. The Dark Side of Democracy:  Explaining Ethnic Cleansing. Cambridge, UK: Cambridge University Press. Marx, Anthony W, 2003. Faith in Nation:  Exclusionary Origins of Nationalism. New York: Oxford University Press. Migdal, Joel S, and Schlichte, Klaus, 2005. “Rethinking the State.” In The Dynamics of Statehood:  The Formation and Crises of State Domination, ed Klaus Schlichte, 1–40. Aldershot, UK: Ashgate. Minorities at Risk Project, 2009. Database:  Minorities at Risk Dataset. College Park, MD: Center for International Development and Conflict Management. Available at: http:// www.cidcm.umd.edu/mar/ (last consulted 6 February 2014).

Ethnicity and State Transformation in the Global South    777 Monteux, Cammille A, 2006. “Decentralisation:  The New Delusion of Ethnic Conflict Regulation.” Journal of Multicultural Societies 8 (2): 162–182. Mozaffar, Shaheen; Scarritt, James R, and Galaich, Glen, 2003. “Electoral Institutions, Ethnopolitical Cleavages, and Party Systems in Africa’s Emerging Democracies.” American Political Science Review 97 (3): 379–390. Norris, Pippa, and Mattes, Robert, 2003. Does Ethnicity Determine Support for the Governing Party? The Structural and Attitudinal Basis of Partisan Identification in 12 African Nations. SSRN Scholarly Paper ID 385209. Rochester, NY: Social Science Research Network. Available at: http://papers.ssrn.com/abstract=385209 (last consulted 6 February 2014). O’Leary, Brendan, 2005. “Power Sharing, Pluralist Federation, and Federacy.” In The Future of Kurdistan in Iraq, ed Brendan O’Leary, John McGary, and Kaled Salih, 47–91. Philadelphia, PA: University of Pennsylvania Press. Oxhorn, Philip; Tulchin, Joseph S, and Selee, Andrew D, ed, 2004. Decentralization, Democratic Governance, and Civil Society in Comparative Perspective: Africa, Asia, and Latin America. Baltimore, PA: Johns Hopkins University Press. Political Instability Task Force, 2013. Database: Internal Wars and Failures of Governance, 1955–Most Recent Year. Available at:  http://globalpolicy.gmu.edu/political-instabilitytask-force-home/pitf-problem-set-codebook/ (last consulted 6 February 2013). Posner, Daniel N, 2005. Institutions and Ethnic Politics in Africa. New York: Cambridge University Press. Salamey, Imad, 2009. “Failing Consociationalism in Lebanon and Integrative Options.” International Journal of Peace Studies 14 (2): 83–105. Sambanis, Nicholas, 2001. “Do Ethnic and Non-Ethnic Civil Wars Have the Same Causes? A  Theoretical and Empirical Inquiry (Part One).” Journal of Conflict Resolution 45 (3): 259–282. Schetter, Conrad, and Wimmer, Andreas, 2003. “Ethnic Violence.” In International Handbook of Research on Violence, ed Wilhelm Heitmeyer and John Hagan, 247–260. Dordrecht, The Netherlands: Kluwer. Smeaton, Donald M, 1920. The Loyal Karens of Burma. London, UK: Kegan Paul, Trench, Trubner & Co. Smith, Anthony D, 1998. Nationalism and Modernism: A Critical Survey of Recent Theories of Nations and Nationalism. London, UK: Routledge. Snyder, Jack L, 2000. From Voting to Violence: Democratization and Nationalist Conflict. New York: Norton. Stepan, Alfred C; Linz, Juan J, and Yadav, Yogendra, 2011. Crafting State-Nations: India and other Multinational Democracies. Baltimore, MD: Johns Hopkins University Press. Tilly, Charles, 1992. Coercion, Capital, and European States, AD 990–1992. Cambridge, UK: Basil Blackwell (rev. 1990 edn.) Tönnies, Ferdinand, 1957 [1887]. Community & Society. East Lansing, MI: Michigan State University Press (first German edition 1887). Weber, Eugen J, 1976. Peasants into Frenchmen: The Modernization of Rural France, 1870– 1914. Stanford, CA: Stanford University Press. Weber, Max, 1968 [1921/22]. Economy and Society:  An Outline of Interpretive Sociology. Translation by Guenther Roth and Claus Wittich. London, UK: Bedminster Press (first published in German 1921/1922). Wimmer, Andreas, 2013. Waves of War: Nationalism, State Formation, and Ethnic Exclusion in the Modern World. New York: Cambridge University Press.

778    Matthew Lange and Klaus Schlichte ——; Cederman, Lars-Erik, and Min, Brian, 2009. “Ethnic Politics and Armed Conflict: A Configurational Analysis of a New Global Data Set.” American Sociological Review 74 (2, April): 316–337. Yashar, Deborah J, 2005. Contesting Citizenship in Latin America: The Rise of Indigenous Movements and the Postliberal Challenge. Cambridge, UK: Cambridge University Press. Ziblatt, Daniel, 2006. Structuring the State: The Formation of Italy and Germany and the Puzzle of Federalism. Princeton, NJ: Princeton University Press.

Chapter 42

DEMOCR ACY A N D R EGIM E CH A NGE I N THE GLOBA L SOU TH: CAUSES A N D TR EN DS Grigore Pop-Eleches and Graeme B. Robertson

In January 2011 protesters in Tunisia forced the resignation of the incumbent authoritarian President Zine El Abidine Ben Ali. In February of the same year, Egypt’s Hosni Mubarak became the next Arab autocrat to be forced out by crowds in the streets. In the fall of 2011, Libya’s long-time dictator, Muammar Gaddafi, was unseated and eventually killed after a bloody civil war. In the months that followed, protesters crowded the streets of Bahrain and Moscow, and a bloody uprising got underway in Syria. For students of democratization, this chain of events had a familiar ring. First, one autocrat falls, and suddenly people in other similar regimes are out in the street demanding changes in their own countries. One after one, autocrats fall, as late risers emulate the success of the early cases. To paraphrase Mark Beissinger (2002), what once looked impossible starts to seem inevitable as autocrats are swept away in country after country. Democratization, so we have learned, comes in waves. However, experience in the Middle East and elsewhere has not only taught us about waves of democratization, but it has also taught us about reverse-waves and backsliding. Revolution and democratization, as Russians, Iranians, Kyrgyz and now Egyptians, Syrians, and countless others can tell you, are not necessarily the same thing, and whether this latest wave of revolution actually becomes a wave of democratization remains to be seen. So what are the chances that the revolts and uprisings we have seen and will continue to see in the Global South will lead towards genuine democratization? In this chapter, we attempt to assess what research on democratization has to say about this question. While the literature is vast, we argue that the research points in particular to three sets of factors that are likely to strongly influence whether a given country will democratize successfully and whether democracy will consolidate: social and economic structure, the quality of the state, and the nature of existing political regimes. We then ask what the prospects for further democratization in the Global South will be if the existing literature

780    Grigore Pop-Eleches and Graeme B. Robertson has something to tell us about patterns in the future. Using data on structural factors, state development, and regime type, we identify some tensions raised by the existing literature. On the one hand, we show that there has been considerable movement in the types of political regime in the Global South in a direction that the literature suggests is supportive of further democratic development. On the other hand, however, we also illustrate why the challenges of democratization in today’s autocracies are likely to be more severe than those faced by states in previous waves of democratization. Focusing on some of the same issues already raised elsewhere in this Part (see Lange, Chapter 36, this volume)— poverty, development, ethnonational divisions and the challenges of state-building—we argue that the existing group of authoritarian or hybrid regimes in the Global South (and elsewhere) face severe structural challenges that make the establishment of democracy in those countries difficult. While structure is not everything in politics, and democracy can potentially be built in less than promising circumstances, we believe that the structural conditions we describe are likely to constrain further democratization. The chapter proceeds as follows. First, we very briefly review the theoretical literature on democratization and argue that while the short-term politics of democratization matter in third wave transitions, analysis of longer-term factors like social structure and state development is vitally important if we are to assess realistically the chances of lasting democratization in contemporary authoritarian regimes in general, and in the Global South in particular (Section 1). Next, we review the literature on authoritarian transitions to democracy (Section 2): much of the literature places heavy emphasis on regime type as a predictor of more democratic development, with competitive or hybrid authoritarianism being seen as a stepping stone or pathway to democracy. We then use some simple data to illustrate patterns in the Global South over time (Sections 3–5), arguing that although the average regime type has improved in the last decades, structural variables and state quality in most authoritarian—and especially in hybrid regimes in the Global South—have improved little over the post-Cold War era, and so prospects for further democratization are not bright.

1  Structure, State, Political Competition, and Democratization In this section, we analyze scholarship on structural and other determinants of democratization. We distinguish between three streams in the literature—scholars who place heavy emphasis on the structural conditions that are hospitable to democracy, scholars who focus on the role of the state and the close relationship between democratization and state-building, and scholars who focus more on politics than on structures and states. While summarizing the lessons of a vast literature like that on democratization is difficult, we focus on what we think are the key implications of the most recent scholarship for democratization in the Global South. We argue that three issues stand out most prominently: socio-economic structure, state-building, and the existing degree of political competition in a state. Work on democratization has a long history in political science. Indeed, it has been argued, not entirely implausibly, that the whole sub-field of comparative politics can be thought of as an exercise in trying to understand—and promote—democratization (Cammack 1997). While the details of different prescriptions for democratization differ,

DemocraCY AND REGIME CHANGE    781 some strong themes emerge that have had staying power over the decades. Perhaps the strongest of these is the notion that the emergence and survival of democracy is closely associated with particular forms of social structure. With roots in both British colonial anthropology and historical sociology (Moore 1966; Rueschemeyer et al. 1992), scholars of comparative politics have long thought that social structure—and in particular the class structure associated with advanced industrial capitalism—is a crucial element in the longrun development of democracy. Arguments over the precise configuration of classes that historically produced democracy (Moore 1966; Rueschemeyer, et al. 1992; Collier 1999; Acemoğlu and Robinson 2006), or over the specific mechanisms at play (Przeworski and Limongi 1997; Boix and Stokes 2003; Acemoğlu et al. 2008), can be vigorous, but the association of democracy with high levels of capitalist economic development is hard to controvert and has held over most of the last 200 years (Boix 2011). Another important set of arguments about social structure focuses on the effects of ethno-linguistic and religious diversity on political regime outcomes. Ethnic fragmentation poses a fundamental challenge to the consolidation of liberal democracy because it exacerbates the inherent tension between the democratic principle of majority rule and the liberal requirement of minority protections. This raises significant institutional design problems in “plural” societies (Lijphart 1977; Roeder 1999), which would lead us to expect that ethnic fragmentation would undermine progress in democratization, particularly outside advanced industrialized democracies. These expectations have been confirmed in the post-communist context, where ethnically heterogeneous countries have made slower progress towards democracy in the first 15 years of the postSoviet transition than their homogeneous counterparts (Roeder 1999; Pop-Eleches 2007). On the other hand, given that ethnic fragmentation generally fuels political conflict (Horowitz 1985; Dahl 1991), it is conceivable that ethnic fragmentation would undermine both democratic and authoritarian stability, thereby leading to a proliferation of conflict-prone hybrid regimes, characterized by what Way (2002) calls “pluralism by default.” At the same time, not all scholars have emphasized the role of socio-economic development. A related but different, and often quite antagonistic, strain in the literature emphasizes not socio-economic structure, but rather the emergence of a state that could order and discipline social forces, making possible first order and then democracy. For scholarss, archetypically Huntington (1968), in this political development tradition, the problem of the state precedes the problem of democratization—only once a stable, autonomous state apparatus was in place could the question of democratization be meaningfully raised. As with the social structure literature, recent contributions to the study of democratization have continued to emphasize this traditional theme of the literature. An important trend in democratization studies has been the emergence of a new historical turn in the study of earlier democratizers in particular. These studies have tended to complicate the received wisdom of democratization in the North, emphasizing the contingency, the drawn-out time frame and the degree of contention that were associated with the early processes of democratization (Tilly 2004; Ziblatt 2006), while at the same time re-emphasizing the crucial role of an autonomous and competent state in making democracy possible—though not inevitable. A third stream in the literature on democratization has emphasized less the big forces of socio-economic development and state-building and more the specific political processes through which democratic institutions are adopted, improved, and maintained. The seminal work in this regard, of course, is that of Dankwart Rustow (1970), who argued that

782    Grigore Pop-Eleches and Graeme B. Robertson democracy without preconditions was possible and was the outcome of political conflict rather than social structure. Rustow’s work inspired many to think carefully about how the balance of political forces and the nature of political struggles themselves can affect the prospects of democratization. In this tradition, aspects as diverse as divisions within the ruling elite (O’Donnell and Schmitter 1986), the degree of domestic political competition (Grzymała-Busse 2007), the nature of international assistance (Vachudova 2005), and many other factors have been identified as crucial in shaping short-run political outcomes that are in turn seen as consequential for long-term democratization. A common theme in many of the most recent contributions to this part of the literature has been the importance of an already existing degree of open political competition and, in particular, somewhat competitive elections, in creating the conditions that make further democratization possible. It has been argued that most democratizations are likely to come not all at once, but rather through the intermediate step of holding elections that, while not meeting international democratic standards, nonetheless include elements of genuine political competition. Transitions to democracy among authoritarian regimes with some political competition and elections of this kind are thought to be more common—in the post-Cold War era at least—than among other kinds of authoritarianism (Lindberg 2006; Hadenius and Teorell 2007; Brownlee 2009). A number of different mechanisms are posited to explain this phenomenon. While some kinds of electoral authoritarian incumbents may be more vulnerable than others (Levitsky and Way 2010), in general, manipulated but somewhat competitive elections can create the opportunities for opposition coalitions to be formed to oust dictatorial incumbents (Howard and Roessler 2006), or they may create opportunities for international democracy-promotion non-governmental organizations (NGOs) and domestic civil societies to unite and wage creative anti-authoritarian campaigns (Bunce and Wolchik 2011). In addition, using evidence from sub-Saharan Africa, it has been argued that the holding of at least somewhat competitive elections has, in itself, a cumulative effect over time, as expectations evolve and a culture of respect for elections and democratic processes is increasingly established (Lindberg 2006), although authoritarian elections might also lead to a closing rather than an opening of the political regime, as in Iran in 2009 (Pop-Eleches and Robertson 2015). In the rest of the chapter, we consider the prospects for democratization in the current crop of non-democratic regimes in the world, based on these three arguments. We show that there are grounds for optimism about democratization if we believe that the very existence of political competition in non-democratic regimes really is a “portent of pluralism” (Brownlee 2009). Nevertheless, as we also demonstrate in the rest of this chapter, the structural legacies and state-building challenges that will need to be overcome to democratize today’s authoritarian states in the Global South and elsewhere are very substantial indeed.

2  Contemporary Authoritarianism A key premise of this chapter is that in order to understand the prospects for democratization in the Global South, it is important to analyze what the existing set of non-democratic

DemocraCY AND REGIME CHANGE    783 regimes in the world looks like. In this section we discuss contemporary thinking on non-democratic regimes and outline our approach to the problem. While for some questions, distinguishing different structures of authoritarianism is useful, in this chapter we focus on variations in the degree of existing political competition in these states as the key predictor of democratic development. The study of non-democratic regimes is currently a major area of growth in the field of comparative politics. While the basic underlying motivation tends to be largely about asking when and how authoritarianism will collapse, the apparent robustness of many contemporary non-democratic regimes is generating growing interest in the inner workings of authoritarianism and the implications of different strategies of authoritarian governance for economic and political outcomes (Malesky and Shuler 2010; Gehlbach and Keefer 2012). This has meant, among other things, a renaissance of almost defunct debates about how to classify and think about different kinds of authoritarian regimes. There are at least two different and empirically productive ways to think about regime classifications that have emerged as competitive research paradigms in recent years. One stream, building on the foundational work of Juan Linz (1975) and Barbara Geddes (1999), focuses on the nature of the political institutions in authoritarian states and how those institutions shape outcomes such as political stability and economic growth (Hadenius and Teorell 2007; Gandhi 2008). Different institutional configurations, such as military regimes, theocracies, single party regimes, and multi-party authoritarian regimes, are expected to behave differently on key variables such as stability. Moreover, these regimes are thought of as constituting different nominal categories, rather than as ordinal rankings of regimes. Roughly speaking, this approach has tended to dominate among scholars who see authoritarianism as a durable system of rule, with elements that are sufficiently stable and fixed to merit the development of new sub-types that are analytically useful. A second set of scholars has drawn much broader distinctions between different kinds of regimes, based largely on the presence or absence of politically consequential elections and the extent of legitimate public political contestation (Diamond 2002; Howard and Roessler 2006; Brownlee 2009). While recognizing that different sub-types of authoritarian regimes exist and can be analytically important, this literature makes broader distinctions among regimes that can be placed on some sort of ordinal scale, such as the ones often produced by organizations like Freedom House or the Polity Project, in the belief that the extent of political competition is itself consequential for various outcomes (Robertson and Teitelbaum 2011), including the prospects of democratization. Since the focus of this chapter is primarily on the prospects for democratization of the current crop of authoritarian regimes, rather than delineating differences in and among types of authoritarianism, we follow the latter approach here and examine the existing set of non-democratic regimes in three broad categories: closed authoritarian regimes, hybrid regimes, and democracies. While there are many different ways to operationalize a general distinction of this nature, to illustrate our argument we adopt the simple three-part categorization used by Freedom House. While this, and all ratings systems of this kind, are open to criticism (Munck and Verkruilen 2002), these categories correspond well to the general distinction between closed authoritarian regimes, hybrid regimes, and democracies that underlies arguments about the democratizing effects of political competition.

784    Grigore Pop-Eleches and Graeme B. Robertson

3  Regime Change in the Global South In this Section, we present some data that illustrate patterns of political regime change in the Global South over the last 30 years. We demonstrate that the end of the Cold War was accompanied by significant changes in the nature of political regimes, not just in the post-communist states, but in the Global South, too. However, while some of this change has consisted of increases in the numbers of democratic states in the region, more has taken place in formerly closed authoritarian regimes that introduced some degree of political competition without becoming fully democratic. Furthermore, there are significant differences in the nature of regime change in different regions in the Global South, with Africa accounting for most of the increase in the number of hybrid regimes. The first panel in Figure 42.1 illustrates the overall pattern of regime change in the Global South from 1972 to 2008. For the purposes of this analysis, we defined the rather vague term “Global South” empirically to mean all countries except the United States, Canada, New Zealand, Australia, and those in Western Europe, Eastern Europe and the former Soviet Union.1 We follow Freedom House (2014) in defining as an autocracy any country with an average Freedom House political and civil rights score of 5.5 to 7, as a hybrid those averaging 3 to 5, and as a democracy those averaging 1 to 2.5. While it is well known that the collapse of Communism transformed regimes across Eastern Europe and the former Soviet Union, as Figure 42.1 shows, the geopolitical transformations of the late 1980s and 1990s also gave rise to huge changes in the patterns of political regimes in the Global South. In 1980, only 18 percent of states in the Global South qualified as democratic under the criteria we apply here. By 1991, this proportion had increased to 25 percent, and by the end of the period it had steadied at around 28 percent. In addition to this roughly 50 percent increase in the number of democracies, there were even larger increases in the number of hybrid regimes, especially after 1988. From a low of around 27 percent in 1987 (the year Gorbachev’s reforms in the USSR began), the number of hybrid regimes in the Global South grew to 45 percent in 1995 and by 2008 stood at around half the total number of political regimes in the Global South. Thus, the post-Cold War era has been one of democratization, but even more massively it has been an era of hybridization of previously closed authoritarian regimes. However, what is true of the Global South as a whole is not true of all of its parts. Panel D of Figure 42.1 illustrates the point by showing patterns of regime change in the Western Hemisphere,2 where the story fits the hybridization story less well than elsewhere in the world—the proportion of hybrids has bounced around somewhat, but by 2008 was back around roughly the same 40 percent as in 1980. Instead, it is in the Americas where the great “democratization” took place. From a low of around 22  percent in 1976 and 1977, the proportion of states considered fully democratic under our criteria rose to nearly 1 

In this sense, the term is very close to what used to be called the “Third World” during much of the Cold War period. 2  The US and Canada are excluded given our focus on the “south.”

DemocraCY AND REGIME CHANGE    785 A. Global South

Proportion of all regimes

60 50

60

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20 10

0 1970

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60

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B. Africa

80

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50 40

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Fig.  42.1  Evolution of regime type of region. Source: Freedom House (2014).

60 percent in the late 2000s, and only one (Cuba) remained classified as fully authoritarian. Moreover, a striking feature of the Latin American experience of the last 30 years is the movement of some of the most developed countries in the region—for example, Brazil, Chile, Argentina, and Uruguay—from fully authoritarian into the fully democratic group. Meanwhile, most of the countries that remained “hybrid” in Latin America by 2008— Bolivia, Ecuador, Guatemala, Honduras, Colombia, Nicaragua, Paraguay, Haiti, and Venezuela—were amongst the poorest on the continent. Nor, as Panel C in Figure 42.1 illustrates, is the general trend of hybridization over the last 30 years driven by the experience of countries in Asia. In fact, in Asia, as in the Americas, the proportion of regimes that are hybrids has not increased over the period, but has fallen somewhat. With some notable exceptions, our broad regime classifications show a lot of stability in Asia when comparing Cold War and post-Cold War data. In 1985, only

786    Grigore Pop-Eleches and Graeme B. Robertson two of the 23 countries in our Asia sample were fully democratic—India and Japan3—and ten were fully authoritarian, that is Afghanistan, Cambodia, China, Indonesia, Iran, North Korea, Laos, Myanmar, Vietnam, and Mongolia. By 2008, all but two members of the authoritarian “class of 1985” were still authoritarian, though Mongolia and Indonesia had become democracies. Similarly, of the 1985 hybrids, only Korea and Taiwan had democratized, and Bangladesh, Bhutan, Malaysia, Nepal, Pakistan, Philippines, Singapore, Sri Lanka, and Thailand remained hybrids. Thus, while Korea, Indonesia, Mongolia, and Taiwan democratized, most authoritarian regimes and hybrids in Asia remained in their respective groups. If the growth in hybrids in the Global South has come neither from the Americas nor from Asia, Panel B in Figure 42.1 illustrates that hybridization is strongly an African phenomenon. In 1985, Africa was the most authoritarian of our three Global South comparisons—30 of the 39 states in our dataset were classified as fully authoritarian, seven were hybrids (Gambia, Liberia, Lesotho, Senegal, Uganda, Zimbabwe, and Sierra Leone) and two were considered democratic (Botswana and Mauritius). By 2008, however, the number of authoritarian regimes had halved, the number of hybrids had tripled and the number of democracies quadrupled (from two to eight).4 Furthermore, most of the movement was toward greater liberalization. All but one of the authoritarian regimes in 2008 had been authoritarian in 1985. Zimbabwe was the sole exception. At the other end of the spectrum, both 1985 democracies were still classified as such in 2008, and they were joined by four former authoritarians (South Africa, Benin, Ghana, and Mali) and two hybrids (Lesotho and Namibia).5 Most strikingly, while Africa provided only 21 percent of global hybrids in 1985 (7 of 33), some 37 percent were African in 2008 (21 of 56). As the overview in this section shows, the third wave of democratization, though it began in Europe, had strong effects on the nature of political regimes around the Global South. A substantial number of countries, often relatively wealthy and developed states like South Africa and countries in the southern cone of the Americas, abandoned authoritarianism and became democratic. But the wave was not limited to places with high levels of development and strong states—the democratizers include places as diverse as Indonesia, Mali, Mongolia, and Ghana. Moreover, as has been well established, the third wave and the associated end of Communism as a vital global force meant, in Africa in particular, a weakening of controls in authoritarian regimes without the establishment of full democracy. From the perspective of democratization theories, this general shift of global regimes in a more competitive if not necessarily liberal direction is good news for the possibility of long-term democratic development. More openness, as noted earlier, should create opportunities for further liberalization (Hadenius and Teorell 2007; Brownlee 2009), whether through the habitus of elections (Lindberg 2006), opposition mobilization (Bunce and Wolchik 2011), opposition coalitions (Howard and Roessler 2006), or the possibility 3  As a member of the OECD, Japan is not usually considered to be part of the “Global South.” Given that all its neighbors are included, this distinction seems rather arbitrary. None of our results depend upon including Japan. 4  The number of countries in our sample had also increased—from 39 to 44. 5  In the dataset there are two new observations in the authoritarian column—Eritrea, which was part of authoritarian Ethiopia in 1985, and Equatorial Guinea, whose population did not cross the 500 000 population threshold for the dataset until 2005.

DemocraCY AND REGIME CHANGE    787 of international linkage and leverage (Levitsky and Way 2010). However, for scholars of a more structural bent, as we show in the next section, the successful transition of many countries toward democracy during the third wave has also served to widen the gap on key variables between the existing group of democracies and both contemporary authoritarians and hybrids.

4  Socio-Economic Development, Ethnic Fractionalization, and Regime If we can be optimistic about the prospects of democratization in the Global South based upon the substantial increases in political competition over the last 30 years, patterns of development on structural variables associated in the literature with democratization suggest that that optimism should be cautious at best. In this section, we look at three key elements of socio-economic structure that have been associated with democratization. We demonstrate that, even as they have become more competitive, the structural characteristics of non-democratic regimes have worsened relative to democracies. Moreover, the structural position of hybrid regimes, the group supposedly most “available” for greater democratization, is much closer to that of the authoritarian group than it is to democracies and has deteriorated rather than improved over time. To illustrate the point, we look in turn at levels of per capita income, levels of urbanization, and ethnic fractionalization. In each chart we first classify countries by year into one of our three regime categories—authoritarian, hybrid, or democratic. Next, we take the average value (mean) on the variable in question for each regime and chart the evolution of these category means by year. Panel A in Figure 42.2 shows patterns of change over the last 30 years in the variable that is probably the most prominent one in quantitative studies of democratization—income (Przeworski and Limongi 1997; Epstein et al. 2006; Boix 2011). We measure income using World Bank data on Gross Domestic Product (GDP) per capita at purchasing power parity (PPP) in constant (2005) dollars (World Bank 2014a). This is the most appropriate measure, as it takes into account changes in relative prices both across time and across countries. Panel A illustrates that whereas per capita income levels have grown steadily among democracies and authoritarian regimes over the past three decades, the average economic development level of hybrid regimes declined significantly from 1980 until 1990 and has been largely stagnant ever since. As a result, authoritarian regimes have, on average, overtaken hybrid regimes in terms of economic development levels, and the gap between democracies and hybrid regimes has continued to widen. The picture of declining relative performance of hybrids in terms of income is also reflected, albeit less starkly, in other measures of development. Panel B in Figure 42.2 shows the evolution of urbanization levels, defined by the proportion of the population living in urban areas (World Bank 2014b), over the last 30 years for the three regime types. This suggests that the group of hybrid regimes on average became more urban from the early 1970s to the early 1990s but that the average level of urbanization has largely stagnated since and actually declined somewhat in the last decade. This is in striking contrast to both

1980

60 50 40

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0

5000 10000 15000 20000

788    Grigore Pop-Eleches and Graeme B. Robertson

1990

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1 1990

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.5 .4 .3 .1

.2

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.6

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1990

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Fig.  42.2  Developmental characteristics by regime types. Sources: Nils Petter Gleditsch et al. (2002); Alberto Alesina et al. (2003); World Bank (2014a, b); World Bank (2014a, b); and ICRG (2014).

democracies and full-blown authoritarian regimes, which have experienced a much steadier improvement in urbanization levels over the past four decades. The result is that the gap between hybrids and authoritarian regimes has disappeared, while that between hybrids and democracies has grown since the early 1990s. Consequently, there is good evidence to support the view that even as the shares of both democratic and hybrid regimes have increased, the gap between the two in terms of socio-economic development has also increased. There are at least two potential reasons for this. Many have argued that democracies have real advantages in terms of socio-economic development over other regime types (Siegle et al. 2004), and, if this is so, we would expect to see the gap between the different regime types increase over time. On the other hand, authoritarian regimes, at least on the very general picture presented here, seem to have done as well as democracies. It may be that it is not that democracies enjoy

DemocraCY AND REGIME CHANGE    789 advantages in terms of economic development, but that hybrids have disadvantages relative to both democracies and authoritarian regimes in terms of the incentives to foster economic development (Reuter and Robertson 2012). A second potential reason for the change in the relative status of hybrids is simply that poorer countries and less developed states have moved into the group of hybrids and out of the authoritarian group—there has been little backsliding among the full democracies. The regional breakdown of regime patterns that we have presented suggests that this might indeed be the case. If so, the data suggest an interesting puzzle: are economically less-developed autocracies more likely to liberalize and become hybrids? And, if so, why? Moving beyond economic development, we next focus on another structural condition that prior studies have shown to be important for the prospects of democratization: ethnic diversity (Lijphart 1977; Horowitz 1985; Roeder 1999). Panel C in Figure 42.2 further reinforces the picture of the eroding structural position of hybrid regimes. In this panel we show mean levels of the ethnic fractionalization index developed by Alberto Alesina et al. (2003). The chart shows a pattern not dissimilar to that for economic development in that ethnic fragmentation is much higher in both hybrid and authoritarian regimes than in democracies. Moreover, whereas ethnic fragmentation declined rather dramatically after 1990 for authoritarian regimes, hybrid regimes experienced the opposite trend. In this case, the explanation is more straightforward, since, on average, regime type probably has not had much of a direct effect on the degree of ethnic fragmentation over such a short period of time. Since overall ethnic fragmentation in most countries has not changed dramatically, these patterns suggest that the countries that “graduated” from fully authoritarian to hybrid regimes during this period have generally been much more ethnically diverse than either earlier cohorts of mixed regimes or their more resilient authoritarian counterparts. For scholars of political regimes, this again raises an interesting question: why have more ethnically fragmented authoritarian states apparently been more prone to increases in political competition than less fragmented authoritarian states? And, if this pattern holds, what does it mean for the likelihood that the resulting hybrids will make the next step toward political democracy?

5  State-Building and Regime If contemporary hybrids do indeed face serious developmental and societal challenges in creating democracy, then a key to overcoming these disadvantages is likely to be found in developing a strong and effective state that is able to govern in an efficient, impartial, and effective manner. In fact, since the end of the Cold War, the idea that state-building and good governance are key not just to democracy-building but also to overcoming economic development challenges has been a central plank of policy for the international donor community. Consequently, hybrids with strong states and good governance structures are more likely to be in a position to develop into fuller democracies than countries with ineffective and corrupt states. In this section, we present some preliminary evidence that the relative quality of states in hybrid regimes has not gotten better in recent decades, and, if anything, has declined. To illustrate the argument, we use the same technique as in the previous Section to graph

790    Grigore Pop-Eleches and Graeme B. Robertson the regime means of bureaucratic quality, corruption control, and internal conflict over the last three decades. While the quality and availability of data on state effectiveness are inadequate for demonstrating this proposition beyond a doubt, the data that are available suggest deteriorating rather than improving state capacity. In Panel D in Figure 42.2, we graph mean levels of bureaucratic quality by regime type, using data from the International Country Risk Guide (ICRG 2014). The data measure the institutional strength and quality of the bureaucracy on a scale of 0–4, and while the indicator has some methodological drawbacks, it is the only bureaucratic quality measure that has significant geographic coverage in the Global South during the 1980s and early 1990s.6 The chart illustrates two principal elements that are potentially consequential for the prospects of the further democratization of today’s population of non-democratic regimes. First, and most importantly, the chart shows a very wide governance gap between democracies on the one hand and hybrid and authoritarian regimes on the other. In general, hybrids and authoritarian states exhibit quite similar levels of bureaucratic quality. Democracies, by contrast, exhibit much higher and more consistent levels of bureaucratic effectiveness. The second point to note from the chart is that while hybrid regimes have made some progress both in absolute terms and relative to their authoritarian counterparts since the late 1990s, on average they still have noticeably weaker bureaucracies than they did in the early to mid-1990s. Another key dimension of state quality that has drawn increasing attention in development and democratization circles is corruption. The capacity to control corruption is thought to be a key factor in achieving both good governance and economic development. In Panel E of Figure 42.2, we use ICRG corruption scores, which measure the control of corruption in the political system on a scale from 0–6—with higher scores indicating better performance—to illustrate patterns in corruption control over time.7 Panel E suggests a similar pattern to that seen with bureaucratic quality. After a noticeable improvement in the late 1980s and early 1990s, the corruption situation has deteriorated significantly over the past 15 years. Ironically, the only “bright spot” in this picture is that democracies have declined even more dramatically from 1993 to 2002, thereby keeping the governance gap largely unchanged. If the state in today’s hybrids faces significant problems in terms of bureaucratic quality and corruption control, data on conflict are also indicative of the difficult context in which governance takes place outside of the world’s democracies. If states are unable to achieve the minimal task of preventing violent internal conflict, then the prospects for achieving other goals are not bright. More specifically, as the experience of Rwanda, Central America, and elsewhere illustrates, constructing democracy in post-conflict situations is particularly difficult. In Panel F of Figure 42.2 we illustrate trends over the last 30 years in countries’ experience of violent internal conflict. Conflict is measured dichotomously to indicate whether a country had experienced violent internal conflict with at least 25 casualties during the past decade based on data from the Uppsala Conflict Data Program 6  Since

the Political Risk Services (PRS) group, which publishes the ICRG ratings, is a for-profit consulting group, it publishes only a general overview of its proprietary methodological approach (ICRG 2014) but does not provide detailed coding rules for its indicators. 7 Since it is drawn from the same data source (ICRG), the indicator has similar advantages and drawbacks as the bureaucratic quality indicator discussed above.

DemocraCY AND REGIME CHANGE    791 (Gleditsch et al. 2002). Interpreting this data requires some caution. Not all conflicts are alike, but because the data collection technique treats them as though they are, it misses critical variation on dimensions such as breadth, intensity, and the causes of the conflict. Furthermore, different conflicts vary in their long-term consequences. For the purposes of collecting average data, we have treated one decade as the relevant period over which significant violent internal conflict is likely to continue to affect the polity, but this clearly is somewhat arbitrary. For the purposes of thinking about the prospects of specific countries, there are clearly better measures to take into account. Nevertheless, for our current purpose of broadly characterizing a large number of varied countries on a key dimension, the measure does provide at least some guide that helps us to identify trends over time. The trends of violent internal conflict across different regime types further reinforce the idea that hybrid regimes are much more akin to authoritarian regimes than to full democracies. Thus, whereas in democracies the share of countries with a recent history of violent domestic conflict declined noticeably (though somewhat unevenly) after the early 1980s, non-democratic countries experienced noticeable increases in the early 1990s, and these challenges were particularly severe in hybrid regimes, where the share of post-conflict societies peaked at almost 60 percent in the late 1990s. While the last decade has seen a significant decline in post-conflict countries among hybrid regimes, it is too early to tell whether this progress will be durable and whether it will translate into greater democratic progress as the history of violent conflict gradually recedes into the past.

6 Conclusion In this chapter we have outlined some of the lessons from research on democratization that we think are important to bear in mind in thinking about democratization and its prospects in the Global South. We argued that much of the most recent literature focuses on the politics of regime change and sees the existence of at least some open political competition as important in creating the basis for a transition to democracy. Through a range of different mechanisms, the very existence of some competition creates the opportunity for more competition, as well as for improving the quality of that competition. While we agree with much of this work, we also stressed, however, the continuing relevance of older streams in the democratization literature that emphasize politics less and put more weight on socio-economic structure and state quality. Put simply, rudimentary or rough-and-tumble political competition is more likely to turn into stable democracy if the broader supporting conditions are favorable and if the state is effective than if the environment is hostile and the state is weak. Consequently, if we are to assess prospects for further democratization in the Global South, it is important to take into account three kinds of factors: the existing degree of political competition, the socio-economic context, and challenges to state-building. We then presented some simple data on each of these dimensions. We showed that the level of political competition in the Global South in general has increased significantly in the last three decades or so. The end of the Cold War in Europe facilitated waves of both democratization and hybridization in the South. Democratization was most marked in the Americas, where a number of formerly authoritarian regimes became functional

792    Grigore Pop-Eleches and Graeme B. Robertson democracies. In Asia, some democratization also took place, though for the most part the regime space seems to have remained quite stable—while communism died ideologically in Europe, the Leninist party systems to which it gave birth in Asia have remained surprisingly robust. In contrast to Asia, the regime space in Africa has been extremely dynamic. The number of democracies grew from a low base, but a large number of authoritarian regimes also introduced at least some form of political competition, giving birth to an array of hybrid regimes across the continent. This growth in political competition, especially in Africa, is encouraging from the perspective of much of the recent literature on democratization (see especially Lindberg 2006). However, we argued that any optimism engendered by the spread of political competition ought to be tempered by an understanding of the extremely difficult structural context for democratization that characterizes most of the world’s remaining hybrid and authoritarian regimes. We showed, using simple measures of income, economic development, and ethnic fractionalization, that today’s non-democratic regimes face real challenges on variables widely believed to be important in conditioning the likelihood of the emergence and survival of democracy. In fact, on many key variables authoritarian regimes look better than hybrids, and the relative position of hybrids has been deteriorating, not improving, over time. Moreover, we also demonstrated that these structural challenges are being faced by states that, for the most part, are quite weak and operate in situations characterized by recent internal conflict. In considering the evidence that we have presented, a number of caveats are important to bear in mind. First, the data we have presented are averages across a large number of countries. Obviously, some places do much better within the same regime categories than others. Second, as we have noted, the quality of the data in some cases is hard to interpret, especially when we look at data on state strength and experience of violent conflict. Even with these caveats in mind, we believe that the data do illustrate the relative, and in some cases, absolute, deterioration of the structural position of hybrid regimes over the last 30 years. It is true that there is much more open political competition in the world today than there was in 1985, but it is also true that the difference in structural conditions and state quality between democracies and other regimes is bigger now than it was 30 years ago. What does this mean? Clearly, the arguments we have presented do not mean that democratization is impossible. As noted earlier, if countries as different on almost every dimension as Mongolia and Indonesia can democratize, it ought to be pretty clear that there are no structural barriers that render democratization impossible. However, structural barriers can certainly make democratization more difficult. Furthermore, as Adam Przeworski and Fernando Limongi (1997) warned, and as the recent experience of instability in one of our exceptional cases, Mali, reminds us, structural problems such as lack of economic development, ethno-linguistic conflicts, and weak states can make sustaining democracy over any period of time very difficult indeed. Moreover, if the existing set of hybrids is the next group ripe for democratization, as much of the contemporary literature would argue, then our analysis shows that this would entail one of two possible alternatives. Either the process will be slow and will happen through gradual improvement in structural conditions and state quality, in which case we ought not to expect substantial advances in democratization soon.8 Alternatively, if democratization 8 

We use the term “improvement” with regard to ethno-linguistic diversity in an ironic sense.

DemocraCY AND REGIME CHANGE    793 were to happen in the medium term in today’s hybrids, this will mean a significant decline in the average quality of democracies on the dimensions we have highlighted. If this were to happen, then a major reevaluation of our foundational theories of democratization would be in order.

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794    Grigore Pop-Eleches and Graeme B. Robertson Gleditsch, Nils Petter; Wallensteen, Peter; Eriksson, Mikael; Sollenberg, Margareta, and Strand, Håvard, 2002. Dataset: “Armed Conflict 1946–2001: A New Dataset.” Journal of Peace Research 39 (5, September): 615–637. Grzymała-Busse, Anna, 2007. Rebuilding Leviathan: Party Competition and State Exploit­ ation in Post-Communist Democracies. Cambridge, UK: Cambridge University Press. Hadenius, Axel, and Teorell, Jan, 2007. “Pathways from Authoritarianism.” Journal of Democracy 18 (1): 143–157. Horowitz, Donald L, 1985. Ethnic Groups in Conflict. Berkeley, CA: University of California Press. Howard, Marc Morjé, and Roessler, Philip G, 2006. “Liberalizing Electoral Outcomes in Competitive Authoritarian Regimes.” American Journal of Political Science 50 (2): 365–381. Huntington, Samuel P, 1968. Political Order in Changing Societies. New Haven, CT: Yale University Press. ICRG, 2014. Database: International Country Risk Guide. Available at: http://www.prsgroup. com/ICRG_Methodology.aspx (last consulted 13 February 2014). Levitsky, Steven, and Way, Lucan, 2010. Competitive Authoritarianism: Hybrid Regimes after the Cold War. New York: Cambridge University Press. Lijphart, Arend, 1977. Democracy in Plural Societies. New Haven, CT: Yale University Press. Lindberg, Staffan I, 2006. Democracy and Elections in Africa. Baltimore, MD:  Johns Hopkins University Press. Linz, Juan J, 1975. “Authoritarianism.” In Handbook of Political Science, Vol. 3: Macropolitical Theory, ed Fred I Greenstein and Nelson W Polsby, 353–457. Reading, MA: Addison-Wesley Press. Malesky, Edmund J, and Schuler, Paul J, 2010. “Nodding or Needling: Analyzing Delegate Responsiveness in an Authoritarian Parliament.” American Political Science Review 104 (3): 482–502. Moore, Barrington, jr, 1966. Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making of the Modern World. Boston, MA: Beacon Press. Munck, Gerardo L, and Verkuilen, Jay, 2002. “Conceptualizing and Measuring Democracy Evaluating Alternative Indices.” Comparative Political Studies 35 (1, February): 5–34. O’Donnell, Guillermo A, and Schmitter, Philippe C, 1986. Transitions from Author­ itarian Rule. Tentative Conclusions about Uncertain Democracies. Baltimore, MD: Johns Hopkins University Press. Pop-Eleches, Grigore, 2007. “Historical Legacies and Post-Communist Regime Change.” Journal of Politics 69 (4): 908–926. ——, and Robertson, Graeme B., 2015. “Information, Elections and Political Change.” Comparative Politics 48 (1), in print. Przeworski, Adam, and Limongi, Fernando P, 1997. “Modernization: Theories and Facts.” World Politics 49 (2): 155–183. Reuter, Ora J, and Robertson, Graeme B, 2012. “Sub-National Appointments in Authori­ tarian Regimes: Evidence from Russian Gubernatorial Appointments.” Journal of Politics 74 (4): 1023–1037. Robertson, Graeme B, and Teitelbaum, Emmanuel, 2011. “Globalization, Regime Type and Labor Protest in Developing Countries.” American Journal of Political Science 55 (3): 665–677.

DemocraCY AND REGIME CHANGE    795 Roeder, Philip G, 1999. “Peoples and States after 1989: The Political Costs of Incomplete National Revolutions.” Slavic Review 58 (4): 854–882. Rueschemeyer, Dietrich; Huber Stephens, Evelyne, and Stephens, John D, 1992. Capitalist Development and Democracy. Chicago, IL: University of Chicago Press. Rustow, Dankwart A, 1970. “Transitions to Democracy:  Toward a Dynamic Model.” Comparative Politics 2 (3, April): 337–363. Siegle, Joseph T; Weinstein, Michael M, and Halperin, Morton H, 2004. “Why Democracies Excel.” Foreign Affairs 83 (5): 57-71. Tilly, Charles, 2004. Contention and Democracy in Europe, 1650–2000. Cambridge, UK: Cambridge University Press. Vachudova, Milada A, 2005. Europe Undivided: Democracy, Leverage, and Integration after Communism. Oxford, UK: Oxford University Press. Way, Lucan, 2002. “Pluralism by Default in Moldova.” Journal of Democracy 13 (4): 127–141. World Bank, 2014a. Database: GDP per capita, PPP. Available at: http://data.worldbank.org/ indicator/NY.GDP.PCAP.PP.KD (last consulted 13 February 2014). ——, 2014b. Database: Urban Population (% of total). Available at: http://data.worldbank.org/ indicator/SP.URB.TOTL.IN.ZS (last consulted 13 February 2014). Ziblatt, Daniel, 2006. “How Did Europe Democratize?” World Politics 58 (2): 311–338.

Chapter 43

Em ergi ng W elfa r e States i n L ati n A m er ica a n d East  Asi a Evelyne Huber and Sara Niedzwiecki

As the Introduction to Part V (Lange, Chapter 36, this volume) lays out, the array of states in the Global South ranges from failed and predatory states to developmental and incipient welfare states. Incipient welfare states are to be found in the most advanced countries of East Asia and Latin America. Welfare states provide contributory social insurance, non-contributory social assistance, and social services—from health and education to childcare and elderly care. The extent of coverage and the structure and generosity of the benefits combine to define the effectiveness of the welfare state in keeping people out of poverty and building human capital. The prerequisite for building an effective welfare state is the presence of an effective state. The state’s capacity to extract and allocate resources in a deliberate manner has to grow if social policy is to expand and become effective in promoting human welfare and the accumulation of human capital. This in turn has implications for state structure, as the administrative apparatus has to be strengthened. An effective welfare state in turn is an essential component of the new developmental state because, as Peter Evans and Patrick Heller (Chapter 37, this volume) make clear, the new developmental state puts a premium on human capital. This chapter focuses on the countries with the most advanced welfare states in the Global South: Argentina, Brazil, Chile, Costa Rica, Uruguay, South Korea, and Taiwan. These countries followed different paths to welfare state development, linked to democratization or to co-optation of labor under authoritarian auspices, and the East Asian countries followed these paths significantly later than the Latin American countries. Over the past three decades, different economic trajectories variously favoured retrenchment or expansion of social policy regimes, but in the most recent period developments in both regions have tended in a more universalistic direction than ever before. Gender issues have also begun to form part of the agenda. At each step, policy legacies from previous periods shaped the range of policy options considered. During democratic periods, political parties and advocacy groups were the

Emerging Welfare States in Latin America and East Asia    797 key actors promoting the different options. The recent turn to basic universalism in Latin America is linked to the “left turn,” that is, the increase in the strength of left parties and their control of government. The delay of welfare state expansion in East Asia is related to the weakness of left parties there. We will portray this development in the two world regions in three steps—up to 1980, 1980 to 2000, after 2000 (Sections 1–3)—and then discuss the emerging issues (Section 4).

1  Social Protection Systems up to 1980 Latin America Latin American states launched social protection systems in a context of dependent development, unstable and restricted democracy, and weak labor movements and leftist parties. In the more economically advanced countries, import substitution industrialization (ISI) strategies financed social security systems in the 1930s and 1940s through a combination of employer, employee, and state contributions. This legacy resulted in fragmented and stratified systems that resembled the Bismarckian type of welfare state, which was based on the social insurance principle (Esping-Andersen 1990; Huber 1996; Huber and Stephens 2001). Social protection was not a citizenship right, and the informal and rural sectors were generally excluded. No land reforms were implemented, and the rural sector—other than the landlords—by and large remained politically excluded. Carmelo Mesa-Lago’s (1978) foundational work discusses how pressure groups and power politics account for the high levels of fragmentation: these systems virtually uniformly protected the most powerful groups first, such as the military, the judiciary, and top-level civil servants; then they gradually covered pivotal middle and working class sectors, such as bankers, teachers, and railroad workers; and finally they expanded to middle and working classes more broadly. Stephan Haggard and Robert Kaufman (2008) incorporate the roles of fiscal capacity, political institutions, and democracy. Evelyne Huber and John Stephens (2012) demonstrate that democracy in the long run favors the expansion of welfare states, in part because it enables groups representing the poor to organize and center-left parties to consolidate. Chile, Uruguay, Costa Rica, Argentina, and Brazil developed the most advanced welfare states (Mesa-Lago 1978; Huber and Stephens 2010, 2012). In Uruguay, 90 percent of the economically active population were covered in the 1970s, 85 percent in Brazil, 75 percent in Chile, and 70 percent in Argentina. Costa Rica’s 40 percent coverage expanded in the 1970s (Mesa-Lago 1994: 22). There were two distinct paths towards social state expansion within this group. Uruguay, Costa Rica, and Chile adopted a democratic competitive path, while Brazil and Argentina followed a cooptation of labor path (Huber 1996). By the late 1950s, Uruguay had an employment-based social insurance scheme and a small non-contributory safety net of pensions for elderly, indigent, and disabled people; a maternal healthcare program; an extensive system of public hospitals; and universal free, secular primary education (Papadópulos 1992: 45; Filgueira 1995). The combination of a center-left party named the Colorado Party, pressures from the existing pension beneficiaries, and the presence of a mobilized urban labor sector in the 1920s accounts for

798    Evelyne Huber and Sara Niedzwiecki these developments (Mesa-Lago 1978). At the same time, urbanization had promoted the mobilization of a mass electorate (Rueschemeyer et al. 1992). Chile was perhaps the most fragmented and least egalitarian system of all five cases. The high level of segmentation responded, in part, to the highly decentralized and politically diverse labor movement (Huber 1996: 148). Although different health services were unified (in 1952) and further expanded, all efforts to unify the pension system failed before Pinochet’s dictatorship (Borzutzky 2002; Castiglioni 2005). The Costa Rican welfare state developed in the absence of high economic development (Segura-Ubiergo 2007: 64). Given its universalization of healthcare and overall low degree of fragmentation of social security, it resembled a social democratic welfare state. The role of the social democratic party Partido de Liberación Nacional (Lehoucq 2010; Martínez-Franzoni 2010) and the strength of civil society (Huber and Stephens 2012) were pivotal for the early consolidation of democracy and the universalization of the social protection system. In contrast to Costa Rica, Uruguay, and Chile, powerful leaders—Juan Perón and Getúlio Vargas—mobilized and co-opted the newly organized urban working classes in Argentina and Brazil (Collier and Collier 1991). In the context of ISI and an expanding urban labor force, the Peronist Party in Argentina established a major social protection system that included pensions, as well as the expansion of the union-run mutual health insurance (obras sociales) and the public hospitals (Rock 1985; Lloyd-Sherlock 2000). Vargas’ regime (1930–45) in Brazil placed the foundation for urban sector incorporation in the social security system, and the military’s bureaucratic-authoritarian regime expanded coverage to the rural sector in 1971. Paternalistic leaders co-opted the rural sector and labor organizations (Malloy 1979). The results in both cases were significant but highly stratified, and they fragmented social protection systems.

East Asia Welfare state formation in East Asia was delayed because these countries were all affected by the Cold War and came to be ruled by profoundly conservative governments, though in most cases governments strongly committed to economic development. These governments established controls over labor and repressed leftist political parties, thus preventing the emergence of popular pressures for the construction of welfare states. South Korea and Taiwan became the trailblazers in economic development, pursuing a growth model based on manufacturing exports beginning in the 1960s. Thus, in order to understand the emergence of incipient welfare states in East Asia in comparison to the more advanced states in Latin America, we focus on South Korea and Taiwan. The authoritarian states in South Korea and Taiwan were fundamentally shaped by the confrontation with their communist adversaries. They were above all concerned with national security and national development. They repressed left-wing political forces and controlled labor, but they had initially carried out important land reforms that laid the groundwork for much less unequal distributions of income than in Latin America. These regimes put social policy in the service of economic development and thus concentrated heavily on investment in education and training (Rieger and Leibfried 2003: 254 ff.). Public health measures, such as vaccination, health education, and basic primary care, which also constitute an investment in human capital, were expanded to rural areas,

Emerging Welfare States in Latin America and East Asia    799 but publicly mandated health insurance remained very limited. Scholars described these social states as productivist welfare regimes (Holliday 2000; Gough 2004). In Taiwan, government employees and employees of large enterprises received health insurance and pensions, but coverage remained highly restricted (Wong 2004: 8). In South Korea, all enterprises with more than 500 workers were required to provide health insurance in 1977, followed by the public sector in 1978. In both countries, elementary school was compulsory, and the governments invested in primary and secondary education (McGuire 2010: 189, 209). Social assistance was limited to very basic poor relief (Goodman and Peng 1996; Peng and Wong 2008, 2010). The contrast in terms of coverage with Latin America is stark: in 1980, Taiwan’s GDP per capita, adjusted for purchasing power parities, stood at $8,000, Brazil’s at $6,070, Uruguay’s at $5,872, and South Korea’s at $5,750 (Haggard and Kaufman 2008: 373), but the coverage rates for social insurance were 17, 85, 90, and 24 percent, respectively. The social safety net outside of employment was the family. This state of affairs was to change rapidly in the 1980s as a result of popular mobilization and democratization. Three crucial differences from Latin America kept inequality much lower: the development of the rural sector in the wake of the land reforms and subsequent investment in the sector, the high level of employment in industry, and the investment in primary and secondary public education. Better conditions in the rural sector, including an expansion of education that reduced rural illiteracy to 10 percent by 1970 in South Korea (Teichman 2012), and higher industrial employment prevented the emergence of the large reserve armies of unemployed rural-urban migrants that characterized many Latin American countries.

2  Social Protection Systems, 1980–2000 Latin America The 1980s in Latin America are called the lost decade because of the regional debt crisis. Due in part to the debt crisis, many of the region’s authoritarian regimes became destabilized. Argentina, Uruguay, Brazil, and Chile all made the transition to democracy during that decade. However, democratization did not generate social policy expansion in the short run, because the democratic governments also faced severe economic constraints and pressures from international financial institutions (IFIs) for austerity and neoliberal reforms. Counter-pressures were feeble because labor movements and the left had been and continued to be weakened by repression and market-oriented reforms, which reduced the size of industrial and public sectors and expanded the informal sector. Social security systems were in crisis, especially in pioneering countries, due to a declining ratio of workers to pensioners and low levels of contribution (Cruz Saco and Mesa-Lago 1998: 7–8; Kay 1999: 406). In this context, the 1980s and 1990s were decades of overall retrenchment of welfare states. The IFIs’ prescriptions influenced policies mostly through the conditionality of funds, but also through networks of technocrats who had studied in the same universities (Teichman 2001). These prescriptions entailed reduction of government expenditure, privatization, deregulation, and liberalization of trade and financial markets. The blueprint

800    Evelyne Huber and Sara Niedzwiecki for social policy reform was to narrowly target the provision of social assistance, partially or fully privatize social security, and increase the participation of private providers in healthcare and education. Nine Latin American countries fully (e.g. Chile) or partially (e.g. Argentina, Uruguay, and Costa Rica) privatized their pension systems between 1981 and 2001 (Isuani and San Martino 1993; Kay 1999; Madrid 2003; Martínez Franzoni and Mesa-Lago 2003; Draibe 2004; Mesa-Lago 2008; Pribble 2008). The blueprint for health reforms was not as straightforward as that of the pension reform, and the number of stakeholders was also higher (Cruz Saco and Mesa-Lago 1998; Kaufman and Nelson 2004; Huber and Stephens 2012). Reforms in education tended towards territorial decentralization of responsibility and did not necessarily produce state retrenchment. The most dramatic changes took place in Chile, where Pinochet decentralized education and weakened teachers’ unions by turning educators into municipal employees. He also segmented education between fully public schools, publicly subsidized private schools, and fully private schools. The quality and accessibility of educational institutions were inversely correlated. Conversely, Argentina, Uruguay, and Brazil strengthened public education in the 1990s. The implementation of these prescriptions varied widely among cases, from orthodox shock therapy to gradualism. Such variation was influenced by the extent of each country’s room to maneuver, differing policy legacies, and the balance of power between supporters and opponents of the reforms (Huber and Stephens 2012). Countries with larger economies, such as Argentina and Brazil, enjoyed more leverage with IFIs than smaller economies. In contexts where pensions offered wide coverage, had matured, and ran large deficits, the pressures to reform were more intense (Madrid 2003). At the same time, the broad coverage of the pension system made reform difficult. The influence of the balance of power on the implementation of “Washington Consensus” reforms is best represented by two opposing contexts, Chile and Brazil. Chile was an extreme neoliberal reformer in part because Pinochet’s dictatorship wielded significant executive power; conversely, union pressures and a lack of partisan control in Congress hindered Brazilian presidents from enacting such prescriptions. Brazil’s 1988 democratic Constitution offered a window of opportunity for creating a unified health system and expanding non-contributory pensions. Although legislation took years to be fully implemented, this legacy set a precedent for Brazil’s social protection evolution. The main outcome of trade and labor market reforms was the loss of industrial jobs and the increase in the number of workers in the informal sector. Accordingly, contributors to the social security system decreased to between 45 and 60 percent of the labor force. Social assistance remained targeted on the extremely poor and generally cost less than 1 percent of GDP. Poverty and inequality levels increased, and public hospitals and clinics were severely underfunded.

East Asia In the 1980s, South Korea and Taiwan began to democratize, and at the same time social policy began to expand very significantly. The East Asian countries continued to grow rapidly until the financial crisis of 1997. Thus, whereas Latin American countries labored under IFIs’ pressures, South Korea and Taiwan maintained the capacity to shape their

Emerging Welfare States in Latin America and East Asia    801 social policy regimes in a more autonomous fashion. The 1997 financial crisis constituted an economic shock to the region, but recovery was relatively fast. Given the still young social security systems, they could not be blamed for contributing to the crisis—as they were in Latin America—and, accordingly, the crisis stimulated pressures for further expansion of social policy, rather than for cutbacks, as in Latin America. In Korea, protest movements and strikes involving labor unions, students, and middle class groups pushed the authoritarian regime to announce presidential elections for December 1987. In anticipation of these elections, the government announced its intention to expand health insurance and establish a national pension scheme (Haggard and Kaufman 2008: 229–230; Peng and Wong 2008, 2010). Roh Tae Woo, the conservative winner of the elections, then extended health insurance to rural and urban self-employed, and he made pension coverage mandatory for all firms with ten, and later five or more, workers. Joseph Wong (2004: 72–73) points out that the expansion of health insurance had a strong patronage component, building support for Roh among regional political elites. The 1992 presidential elections brought more campaign promises for social policy innovation. The winner introduced unemployment insurance linked to active labor market policies and extended pension coverage to farmers, fishermen, and the rural self-employed. Democratization in Taiwan was a longer, drawn-out process, managed largely from above by the Kuomintang (KMT). Accordingly, social policy expansion was slower than in South Korea. In 1986, the opposition Democratic Progressive Party (DPP) was legally recognized. In 1987, the KMT government lifted martial law, but full free elections for central government bodies were not held until 1991 and 1992; president elections were not held until 1996. The KMT remained electorally successful, and it was only in 2000 that the DPP candidate won the presidency. Anticipating growing political competition, the KMT government in 1986 announced the introduction of a national healthcare system. The system was designed to universalize coverage through a single-payer plan. It took until 1995 to be implemented, but the use of services escalated rapidly and—in the absence of effective cost controls—pushed the program into deficit by 1998. These financial problems generated proposals for partial privatization, which, however, were vigorously opposed in the legislature and by civil society groups, and therefore went nowhere (Wong 2004: 113–130). In the area of pensions, several DPP candidates in local elections in 1993 proposed non-contributory old-age allowances, and the KMT responded with means-tested pensions (Haggard and Kaufman 2008: 227). In South Korea, democratization and the expansion of social policy were both driven from below by pressures from civil society and opposition leaders, who then formed opposition parties. In Taiwan, democratization was more managed by the incumbent KMT, but pressures from the opposition DPP, and increasingly from mobilized groups in civil society, were important for moving the process forward and for linking it to a transformation of social policy. Given the history of authoritarianism, strident anti-communism, and state control of organized labor, there was no space in either country for the emergence of left-wing parties with strong social bases. Accordingly, socio-economic cleavages were not politicized and were not the basis for party alignments. Given the demands from civil society for better social protection and social services, politicians from all parties perceived electoral opportunities in the form of promises for expansive social policy measures (Wong 2004: 138–142). The context of strong economic growth mitigated the trade-off pressures and potential resistance from privileged groups (Haggard and Kaufman 2008: 221–232).

802    Evelyne Huber and Sara Niedzwiecki

3  Social Protection Systems since 2000 Latin America By the late-1990s, discontent with the effects of market-oriented policies, combined with the progressive consolidation of democracy, facilitated the rise of left-of-center governments. In 2010, ten Latin American countries and two-thirds of Latin America’s population were headed by left governments (Weyland et al. 2010). These governments, buoyed by the 2003–07 commodity export boom, were able to increase their autonomy from the IFIs and govern on a left platform (Levitsky and Roberts 2011: 2, 11). Uruguay, Chile, Brazil, and, to a lesser extent, Argentina and Costa Rica, introduced significant reforms towards basic universalism, understood as a principle that stated that not only should everybody have the right to basic welfare, but also that social policies should be good-quality and broadly targeted (Molina 2006). Nevertheless, the degree to which these countries moved towards basic universalism was shaped by their policy legacies and the character of their political parties (Pribble 2008, 2013). In Costa Rica, there was mainly continuity in terms of social policy. The expansion of primary healthcare was built upon the unified healthcare system that had been developed by the social democratic PLN (Martínez-Franzoni 2010) and thus did not encounter effective opposition from private providers. Similarly, in Uruguay the privatization of social policy had been limited, and social assistance pensions already covered a significant part of the population (Castiglioni 2010). Unlike Costa Rica, however, Uruguay did embark on comprehensive reforms in the 2000s. The Frente Amplio, a mass-organic party with strong ties to civil society organizations, introduced the most social democratic reforms in the region (Pribble and Huber 2011). For example, their Plan Equidad considerably increased the value of non-contributory family allowances for one third of Uruguayan families (Amarante et al. 2008), and their health reform unified and equalized financing. The Socialist Party in Chile implemented less ambitious policies, in part due to the electoral-professional character of the party, which had no ties to civil society organizations, and in part due to previous policies that had strengthened private providers (Huber et al. 2010). The 2008 pension reform guaranteed coverage to people in the bottom 60 percent of income earners. The health-sector reform provided universal coverage for a list of the most common illnesses, 69 by 2010. Due to opposition from private providers and insurers, the introduction of a solidarity fund for risk-pooling failed (Dávila 2005). Finally, the Lagos administration introduced Chile Solidario, a program that provided income security and access to basic social services to the extreme poor. Brazil also expanded its welfare state after the left-wing party PT came to power in 2002, deepening a trend that had started under Fernando Henrique Cardoso. Of particular importance had been Cardoso’s expansion of secondary education. Similar to Uruguay’s Frente Amplio, the PT enjoyed strong support from popular social movements (Hunter 2010). Lula’s major social policy achievement was the expansion of the conditional cash transfer program Bolsa Família to 13 million families, or 23 percent of all Brazilian families, in 2011. Different analyses have evaluated the program as being free overall from clientelistic machines (Hunter and Sugiyama 2009; Zucco 2013). The health sector saw improvements

Emerging Welfare States in Latin America and East Asia    803 through increased funding and access to primary and preventive healthcare. The pension reform imposed stronger limits on benefit ceilings and equalized the benefits for new entrants to the public and private sectors. Finally, the legal minimum wage, which is also used to value many transfers targeted to the poor, has been consistently increasing since the administration of Lula’s predecessor Cardoso (Kingstone and Ponce 2010: 113). In Argentina, social policies also expanded but have questionable financial sustainability (Cruces et al. 2008; Garay 2010; Niedzwiecki 2010a,b). In 2008, Cristina Kirchner’s government renationalized the pension system (Arza 2009; Kay 2009), and previous pension reforms by Néstor Kirchner had expanded coverage to those with insufficient contributions in exchange for a payment plan. In terms of social assistance, following the legacy of the 2002 emergency program, a more ambitious program was created in 2009, which came to cover 3.6 million children by 2011 (Ministerio de Trabajo 2011). In healthcare, first aid kits were distributed to the primary health centers, and public clinics and hospitals began to be reimbursed for services for uninsured pregnant women and children under the age of six, which greatly increased the take-up rate. The trend towards more broadly targeted social policies, increases in the minimum wage, the expansion of secondary education, and periods of economic upturns contributed to the decrease in overall levels of poverty and inequality (López-Calva and Lustig 2010). However, in spite of efforts to equalize the quality of education in Chile, Uruguay, and Argentina, none of these countries has altered the structural inequities of its respective system. In addition, Chile and Uruguay’s health reforms and Argentina’s non-contributory pensions do not cover informal sector workers above the poverty line (Arza 2009: 2; Huber and Stephens 2012). The increasing size of the informal sector remains a key challenge for these countries. Left parties need to represent the interests of both their traditional organized constituencies and the unemployed and community-based social movements, such as unemployed groups in Argentina, the landless in Brazil, and indigenous movements in Bolivia (Anria and Niedzwiecki 2011; Etchemendy and Garay 2011; Hunter 2011).

East Asia Despite the considerable expansion of social policy in South Korea and Taiwan in the 1980s, their welfare states remained incomplete by the late 1990s (Kwon 2005a; Ringen et al. 2011). The 1997 financial crisis exposed these weaknesses; it caused rising unemployment, atypical employment, and poverty, and increased pressures for social policy innovation and expansion. This stimulated a response in the form of unemployment insurance and active labor market policy (Lue and Park 2013). Political change in both countries added to the impetus for reform. Democratization had made it possible for opposition parties to strengthen their organizations and begin to win elections at various levels, even including the presidential level. Grassroots organizations supporting social policy reform had likewise been able to strengthen, form larger coalitions, and ultimately reach important positions in government and the bureaucracy. These groups included feminists, and as a result gender issues were put on the social policy agenda in the first decade of the twenty-first century (Peng 2004: 414–415). In South Korea, the crisis coincided with the presidential election in December 1997, in which a longtime leader of the opposition, Kim Dae-Jung, won the election. In Taiwan, it

804    Evelyne Huber and Sara Niedzwiecki was followed in 2000 by the election of Chen Shui-Bian, the first DPP candidate to win the presidency. Though neither one of these presidents had a conventional left ideology, platform, or party base, they were both concerned with and campaigned on making improvements in social policy in a more inclusive and egalitarian direction. They also both sought to forge a compromise among key stakeholders by including them in discussions of reform proposals. Kim Dae-Jung formed a tripartite commission with representatives of the government, employers, and both major trade union confederations in 1998. This commission reached an agreement under which the unions accepted labor market flexibilization in exchange for an expansion of unemployment insurance, employment services, and social assistance. The government also launched a series of public work projects to deal with the sharp rise in unemployment (Wong 2004: 97). In 2000, legislation was passed that ensured a means-tested allowance to every citizen and improved the value of this benefit (Kwon 2005b: 491). This was an important change, as before this point, non-poor family members had been held responsible for taking care of destitute elderly. The health insurance system suffered from fragmentation, inequality of benefits, and extremely high out-of-pocket expenses. Efforts to unify the many funds had faltered repeatedly because of resistance from providers and administrators. Under Kim Dae-Jung, the advocacy coalition behind unification gained sufficient political support to push administrative unification through (Wong 2004: 87–98). Nevertheless, financial unification of the healthcare funds was not completed because of opposition in the legislature (Kwon 2005b: 491). Before his election to the presidency of Taiwan, Chen Shui-Bian had undertaken a study tour of Europe and become acquainted with British Prime Minister Tony Blair’s Third Way. The Third Way’s emphasis on investment in education and training, complemented by insistence on a social safety net, constituted a good fit with Taiwan’s efforts in industrial upgrading (Lin and Chou 2007: 108–109). However, the DPP controlled less than a third of seats in the legislature and thus needed votes from other parties to pass any legislation. Both major parties have been heavily factionalized, and party discipline has been low, which has made it difficult to implement any ambitious reform plans (Wong 2004: 124–125). Moreover, Taiwan suffered a recession in 2001. In spite of these constraints, the government launched the National Social Welfare Conference in 2002 and framed social justice and social welfare as an integral part of economic development (Lin and Chou 2007: 120). With support from grassroots coalitions, a new integrated Employment Insurance Program was launched, and the Gender Equality in Employment Act was passed (Peng and Wong 2008).

4  Emerging Issues and Cutting Edge Research In both regions, gender issues have been put on the agenda in the past two decades. The economic crises and loss of male formal sector jobs forced more women to pursue paid employment. Increasing female participation in the labor market exposed continuing gender

Emerging Welfare States in Latin America and East Asia    805 discrimination by employers and gender inequities in access to social security. Changing family structures, such as the decline of multi-generation households and the increase in female-headed households, raised the issue of care for children, the sick, and the elderly. Governments came under pressure from women’s movements and advocacy groups to address these problems, and most responded by establishing some kind of bureaucratic agency in charge of women’s issues. However, the concrete actions of these agencies varied widely, depending on the orientation of the incumbent governments and the strength of movements and advocacy coalitions with feminist or maternalist orientations. In Latin America, women compose a disproportionate share of informal workers and, together with children, are overrepresented among the poor (Organización Internacional del Trabajo 2009). In this context, some important gender egalitarian provisions have been put in place since the 2000s. In the 2008 pension reform in Chile, women were compensated for the years in which they left the labor market to take care of a newborn. The 2005 pension reform in Argentina allowed workers to retire even if they had not finished their contribution years, a policy that particularly benefitted women who had had more interrupted and shorter histories of contribution to the system. In addition, the expansion of conditional cash transfer (CCT) programs, such as Bolsa Família and Chile Solidario, has improved women’s position through investment in school attendance and health check-ups. Nevertheless, that same conditionality of CCTs also tends to reinforce the role of women as caretakers (Soares and Silva 2010). In East Asia, policy innovation after the 1997 crisis also came to include gender equity. The South Korean government established the Ministry of Gender Equality in 1999 and recruited many feminist leaders into these and other positions in the administration (Peng 2004: 415). In the same year, the government introduced a workfare program that included medical assistance, childcare, school fees, and counseling. Some 70 percent of the beneficiaries of this program were women (Peng 2004: 403). During the Roh Moohyun regime (2003–08), the Korean government further expanded its gender equity policies by implementing gender mainstreaming, expanding family-work reconciliation policies, and introducing the long-term care insurance program (Peng 2011). Taiwan lagged slightly behind in policy innovation, but it began to move in a gender egalitarian direction with legislation in 2001 on equal pay for equal work, and it progressed further in 2003 with a strengthening of women’s rights and expanded maternity and parental leave. In 2005 the government announced plans for developing home care services for the elderly and expanding childcare and family support (Peng and Wong 2008). One of the key issues at the research frontier is the relationship between economic and social development. With somewhat overdrawn abstraction one could say that in Latin America many policy-makers have started to discover that social development is an essential ingredient for economic development rather than a diversion necessitated by political pressures, whereas in East Asia many policy-makers have discovered that social development has a value in its own right, not only as an instrument for economic development. There is little doubt that a healthy and well-educated population is essential for developing an economy that can be competitive in the international knowledge economy. What is in doubt is that high levels of economic development are a prerequisite for—and thus should take precedence over—a good educational system and good healthcare. James McGuire (2010) has demonstrated that this is not the case for healthcare; relatively low cost preventive and primary care measures can go a long way towards lowering premature mortality.

806    Evelyne Huber and Sara Niedzwiecki The East Asian countries expanded primary and secondary education much faster than their Latin American counterparts at similar or higher levels of economic development, and this arguably contributed essentially not only to lower levels of inequality but also to the more rapid rise of these countries in the world economy. An additional emerging issue is the uneven provision of welfare across the national territory. In large and highly decentralized countries, the social protection that individuals receive is designed and implemented at multiple levels: national, intermediate, and local. Brazilian and Argentinean states and municipalities, for instance, have designed an array of non-contributory social programs that interact, sometimes competing and sometimes complementing, with nationally designed social provisions (Niedzwiecki 2012). The characteristics of non-contributory transfers and services implemented throughout the territory, as well as party alliances and the capacity of the state to reach its population, are potential factors shaping these policies’ outcomes. A  systematic empirical analysis of the factors that shape these subnational social policies and overall outcomes remains a much-needed endeavor. Yet another key issue is the relationship between democracy and social policy. The Latin American experience before the 1980s suggested that democracy did favor expansion of social policy, but that it could well produce very fragmented and inegalitarian welfare states, based on formal-sector employment. Only Costa Rica had a relatively unified social security system complemented by non-contributory benefits for those outside the formal labor market. In East Asia, democracy was clearly associated with an expansion of social policy, but in both cases social policy initially focused on formal-sector workers, also. The patterns began to change in East Asia after the 1997 Asian crisis and after 2000 in Latin America, with a turn toward greater emphasis on the unemployed and those in the informal economy. This new direction took the form of expansion of unemployment insurance and training, non-contributory social assistance, and universal access to healthcare. The question is what produced this reorientation and whether it will last. We would argue that the key dynamic is the strengthening of organizations, both parties and groups in civil society, that represent the interests of underprivileged groups, which was made possible under democracy. Such strengthening takes time, and indeed we find empirically that in Latin America it took some 20 years of democracy for a significant downward effect on inequality to occur (Huber and Stephens 2012). In Latin America the strengthening of left parties was crucial, and in East Asia, given the legacies of anti-leftism and the lack of class-based parties, it was the strengthening of advocacy groups in civil society that had the biggest impact. The expansion and reorientation of social policy in East Asia remains hampered by the weakness of the labor movement and left parties. In Korea, unions remain confined to the enterprise level (like in Chile), and the single member district electoral system greatly disadvantages new parties, including an emerging left party (Kang 2012; Yang 2012). Korean total public social expenditures in 2011 were still only 8 percent of GDP, less than half of those of Brazil and Uruguay, despite a GDP per capita of close to double that of Brazil. We do have some preliminary evidence to suggest that this reorientation is likely to last, at least for the medium term. The resistance against partial privatization of the new healthcare system in Taiwan showed that people did not want to lose the benefits they had enjoyed. In Korea, welfare policy moved to the center of the campaign for the 2010 local elections and remained there for the 2012 presidential elections, with even the conservative

Emerging Welfare States in Latin America and East Asia    807 party rhetorically embracing a universalistic project (Mah 2012). In Chile, the center-right candidate in the 2010 election promised not to roll back any of the social policy reforms his center-left predecessors had implemented, and he kept his promise. We do know from the experience of advanced industrial countries that universalistic programs, with entitlements as citizenship rights, are the most difficult to roll back. Yet, we also know that a shared perception of economic crisis or economic constraints can generate the political will to reduce such benefits. What remains to be seen is whether the universalistic, as opposed to fragmented, structure of social policy will prevail even under economically difficult circumstances.

Acknowledgment The authors would like to thank Jeffrey Erbig, Peter Evans, Tulia Falleti, Matthew Lange, Stephan Leibfried, Ito Peng, and John Stephens for comments.

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812    Evelyne Huber and Sara Niedzwiecki ——, 2012. Social Forces and States: Poverty and Distributional Outcomes in South Korea, Chile, and Mexico. Palo Alto, CA: Stanford University Press. Weyland, Kurt Gerhard; Madrid, Raúl L, and Hunter, Wendy, ed, 2010. Leftist Governments in Latin America:  Successes and Shortcomings. New  York:  Cambridge University Press. Wong, Joseph, 2004. Healthy Democracies:  Welfare Politics in Taiwan and South Korea. Ithaca, NY: Cornell University Press. Yang, Jae-Jin, 2012. Parochial Welfare Politics and the Small Welfare State in South Korea. Paper delivered at the International Conference of the Korean Political Science Association. Seoul, Korea University. (Available from the chapter authors upon request.) Zucco, Cesar, jr, 2013. “Conditional Cash Transfers and Voting Behavior in Brazil 2002–10.” American Journal of Political Science 57 (4): 810–822. Available also at: http://www.fgv.br/ professor/cesar.zucco/files/PaperAJPS2013.pdf (last consulted 4 May 2014).

Pa rt V I

C ONC LUSION

Chapter 44

Conclusion States Transforming

Evelyne Huber, Matthew Lange, Stephan Leibfried, Jonah D. Levy, Frank Nullmeier, and John D. Stephens

The essays in this volume leave no doubt that states and the state system have changed in major ways and that there is clear regional variation in such transformations. Yet, even within regions, there has been considerable variation. Building on our conceptual discussion in the Introduction (Huber et al., Chapter 1 and Levy et al., Chapter 2, this volume), and in Levy, Chapter 9, we will examine the changes in the international and domestic spheres and the transformations that states have gone through in response to these changes (Section 1). We will also analyze the nature of the state transformations themselves and how the states in different regions are equipped to respond to these diverse challenges. In particular, we will trace changes in the tools, purposes, and capacities of states and inquire into the transformations of the structures of authority and political community (Section 2). We will then look at “the shape of things to come,” though unlike H. G.  Wells, we will not look ahead 180 years, but just a few decades (Section 3).

1  Determinants of State Transformation To study the determinants of state transformation we could have started with one of— or a combination of—the four traditions of state theory, the neo-Marxist class-analytical, liberal, neo-Weberian, and culturalist approaches, as systematically analyzed by Matthias vom Hau (Chapter 7, this volume). Instead, we follow the same structure as in Chapter 1 and consider three broad categories of determinants: international, domestic, and state. This approach provides us with more than enough space to accommodate several theoretical traditions.

816    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens

International Determinants Major changes in the international system affect all countries, albeit at different times and with varying intensity. Both the changes in the world economy and the restructuring of the world system of states have been driving forces in the transformation of the state. The dominant trend in the international economy in the second half of the twentieth century was clearly growing integration or globalization (Osterhammel 2005; Eichengreen 2008). Technological innovations in transport and communications facilitated international trade and financial transactions, as well as the emergence of extended production chains and the expansion of international migration. The major political transformation in the system of states was the growth of international institutions, which led to an internationally entangled system of embedded states—first in the bipolar world of the Cold War, and today in the multipolar world that emerged after the end of the Cold War, the decline of American hegemony, and the appearance of new international players. The processes of economic opening and integration had some precedent in the world economy in the latter half of the “long nineteenth century,” i.e. in the first era of globalization. The United Kingdom (UK), for instance, was as open to trade in the early twentieth century as it was in 1980. In the interwar period, protectionism grew in strength and reduced trade integration overall. Many countries embarked upon a strategy of import substitution industrialization (ISI) behind high tariff walls. However, from roughly the mid-1970s on, economic integration proceeded very rapidly and in most countries came to exceed the levels of the early twentieth century in the free movement of goods, capital, and services, though not in the free movement of labor. The developed world led the way and Latin America—under the impact of the debt crisis in the 1980s—followed suit, as Herman Schwartz and Sebastián Etchemendy show in Chapter 23. In Africa and Asia one also sees a general move in the same direction, albeit more recently, modestly, and with greater variability. At the same time, as chains of production were internationalized, new forms of trade began to complement or replace the traditional flows of raw materials and finished products, with goods at various stages of production crisscrossing the globe in what is often referred to as “global commodity chains”. Arguably, the most dramatic changes with the biggest impact on national economies took place in financial markets. Investment from the UK and US had dominated many economies in the developing world at the beginning of the twentieth century, the scale of foreign direct investment in developed countries now reached an entirely new level (Levy et al., Chapter 19). Foreign direct investment was not necessarily investment in new productive ventures, but also included buy-outs of national firms. An even greater departure from the past was the growth in portfolio investment and rapid speculative capital flows. These flows made countries highly vulnerable to financial crises driven by speculation aimed directly against them and to financial contagion from loss of investor confidence in neighboring or similarly situated countries. The extent to which these developments were driven by technological innovation or by policy choices is the subject of an unresolved debate. Clearly, both factors were at work: technological innovation made it possible to transfer unprecedented amounts of money across the world in seconds, but it was the decision of the governments in the largest developed economies to liberalize their financial markets that then forced governments in smaller developed economies to follow suit. And, in the aftermath of financial crises, a coalition of governments in the developed world, represented by the International Monetary Fund

Conclusion   817 (IMF), the World Bank, and the largest international banks forced countries in the developing world to open their economies to the free flow of capital. The IMF and the World Bank, finally, did serve the purpose for which they had been constructed at Bretton Woods—to prevent another collapse of the flow of goods and money in the world economy, as had happened after the 1929 crash (Helleiner 1994, 2014; Eichengreen and Pak 2012). The transformation of the world system of states was no less monumental than that of the world economy. The rebuilding of the international economy through the Bretton Woods system of international economic institutions was part of a more general development: the rise of international institutions. Starting in the 1940s from a system of nation states, the world system has changed into a decentralized and fragmented polity that includes nation states, international institutions, transnational corporations, and nongovernmental organizations (NGOs) as main players. The former state system was normatively governed by the regulative idea of traditional sovereignty (Krasner 1999). In Chapter 10, Michael Zürn and Nicole Deitelhoff outline the four components of this concept: (1) reciprocal recognition of states referring to the capacity to control their territory, (2) formal equality, (3) final authority of the state, and (4) a certain degree of social and economic independence. The status of sovereignty as a norm in the past and at present is highly contested in the discipline of international relations, as Thomas Risse points out in Chapter 8. On a behavioral level, none of the components of traditional sovereignty have ever been realized fully. However, sovereignty as a regulative idea has never disappeared. Sovereignty itself was transformed; we observe a shift from “absolute” to “relative” sovereignty. This remodeled sovereignty amounts to “responsible sovereignty”: a state only deserves recognition by other states and international institutions when sovereignty is an instrument that realizes global values as well as national interests. Normative change taking place at the moral and legal levels has readjusted the rights and obligations of states, as Christopher Daase shows in Chapter 16 through his analysis of the so-called “Responsibility to Protect” (R2P). The condition of formal equality has been weakened, as vertical stratification, weighted voting, and majoritarian decisions became part of the new system of states and international institutions. The final authority of the state has been replaced by a multilevel system of national, supranational, and international authorities. Today, high degrees of interdependence in the political, economic, and social dimensions mean that “limited autonomy” is the rule. Shrinking policy options for states—different by policy area—are in part compensated by the right to participate in international decisions. The modern state of relative sovereignty is an internationally “embedded state”—as Tine Hanrieder and Bernhard Zangl show in Chapter 13. The effects of internationalization on the state may lead to a—partial—internationalization of the state. In sum, as Zürn and Deitelhoff show in Chapter 10, the international side of the traditional sovereign state is being reshaped today in all four components. We observe (1) the evolution of a responsible sovereignty in the state system, (2) different degrees of state sovereignty (embedded in a stratified system), with some states more sovereign than others, (3) the existence of several authorities in a multilevel, multi-layered fashion—rather than one final “sovereign” authority, and (4) much more limited autonomy at the socio-economic level than in the past.1 1  It should be noted that the four dimensions correspond internationally to what was reported in the Introduction (Huber et al., Chapter 1, this volume, note 4) as the domestic normative ideal of “stateness”

818    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens The emergence of the bipolar structure of the Cold War coincided with a massive process of decolonization in Africa and parts of Asia, which allowed the two superpowers to project their power onto and into the emerging independent states. On the positive side, massive US support, which was motivated geopolitically, helped South Korea and Taiwan to become the first newly industrialized countries (NICs). On the negative side, the superpowers propped up states, many of them governed by authoritarian governments, that would have fallen without such support. Accordingly, the end of the Cold War was accompanied or followed by a wave of democratization on the one hand and by a wave of state failures on the other. By the end of the twentieth century three kinds of new actors in the world system of states assumed importance—the largest industrializing countries like Brazil, Russia, India, and China (BRIC), sometimes with South Africa included (BRICS), transnational social movements, and international terrorist networks. Emerging industrial powers began to push for changes in the governing structures of the major international organizations, thus potentially reshaping the supranational structures of authority. Transnational social movements helped to constitute a global civil society and emerged as a base of “opposition” in a system of global governance without government. Terrorist networks came to constitute a major threat to all states, which elicited defensive reactions from governments in the major target states through increased security measures that infringed on the civil liberties of their populations, thus changing the domestic relationships between state and society. The threat of terrorism also elicited offensive reactions by the target states against many of the “originating states,” be it as declared wars (Afghanistan and Iraq) or as undeclared warfare (Pakistan and Yemen). Three more worldwide developments that presented states with challenges of a new magnitude are international migration (Bauböck, Chapter 27), the spread of disease, and environmental degradation (Dingwerth and Jörgens, Chapter 18). Although there had been high levels of international migration in the past, the direction of migration changed and receiving countries increased their efforts to regulate and manage immigration. Instead of North-North (Europe to US) or North-South (Europe to the colonies and to Latin America) migration, the main migration flows at the end of the twentieth century were South-North: from the developing to the developed world, and within Europe from the new to the old European Union (EU) member states. Increased speed and volume of travel intensified the dangers of transmission of disease, as manifested for instance in the rapid spread of the Asian bird flu. And the increased use of fossil fuels the world over caused air and water quality to deteriorate and spurred global warming. These problems, separately and combined, increased the need for effective supranational and international authority structures.

Domestic Determinants Societies and economies in individual countries underwent major changes in the second half of the twentieth century, and these changes also shaped state transformations in important ways. Parallel to developments in the international system, technological labeled “TRUDI”:  the nation state had “evolved four dimensions and fashioned them into a tightly woven fabric—the Territorial State, the state that secured the Rule of Law, the Democratic State and the Intervention State” (Zürn and Leibfried 2005: 3).

Conclusion   819 change interacted with political decisions to bring about these changes, and some are corollaries of developments in the international economy. These changes varied from case to case, depending on a country’s location in the world economy and the system of states, and its economic and political history. For instance, deindustrialization and the transition to the knowledge society affected predominantly advanced industrial societies and newly industrialized countries in Latin America and East Asia, as industrial jobs migrated to the next generation of industrializing societies, primarily to China and India. Accordingly, states transformed in different ways in response to these new challenges. The first three decades after World War II saw an unprecedented record of sustained economic growth in the advanced industrial countries, initially fueled by state coordinated reconstruction in Europe and Japan. Until the 1970s, this growth took place in a rather closed-economy setting, but the General Agreement on Trade and Tariffs (GATT) since 1947 and European market integration since 1957 provided the necessary momentum for opening up these economies. Korea and Taiwan went through a catch-up spurt, and the more advanced Latin American countries attempted the same through the pursuit of ISI. Growth began to slow down in the 1970s in the advanced industrial countries, came to a complete halt and even a reversal in Latin America in the 1980s, and slowed down in East Asia after the financial crisis of the late 1990s. In sub-Saharan Africa, growth stagnated throughout the entire period. In the twenty-first century, the rise of China has provided a new impetus for growth to many developing regions through high demand for raw material exports. By the same token, industrialization in less developed countries in Latin America and Asia, and then the rise of China, has meant intensified import competition and the loss of manufacturing jobs in advanced industrial and some of the more advanced Latin American and East Asian countries. Technological change contributed to deindustrialization insofar as technological advances increased productivity and decreased the demand for labor in the industrial sector. As labor shifted to the service sector, where productivity tends to be lower, reasonable wages for low-skilled workers became more difficult to secure. By contrast, the information and communication technology (ICT) revolution generated strong demand for highly skilled workers, particularly in business services, but also in some parts of wholesale and retail trade. Deindustrialization in turn contributed to increasing volatility and informalization of labor markets for the low skilled, that is, the growth of unstable jobs without or with less protection by labor laws and social security systems. Where states had established social safety nets in earlier growth periods, these labor market changes constituted challenges to the resource base and partly to the design of these safety nets and induced states to conduct reforms. Technological advances changed the political economies of advanced industrial countries in other ways. They eroded the public monopolies in communication and transportation, thus making it politically costly for states to maintain the public service monopolies and, consequently, pushing for political decisions to lift those monopolies; in Europe this process was, after 1957, reinforced supranationally by the European Economic Community (EEC), then after 1967 by the European Community (EC) or, finally, after 1993, by the EU. The technological innovations that enabled financial institutions to effect major instantaneous transactions worldwide also affected domestic financial markets and strengthened advocates of financial liberalization, primarily representatives of financial interests. Under the pressures of competition, advanced industrial countries followed

820    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens the lead of the US and the UK and liberalized their domestic capital markets. Developing countries followed suit under pressure from the international financial institutions (IFIs). Liberalized domestic and international capital markets in turn created heightened volatility of capital flows, greater susceptibility to financial crises, and decreased leverage of individual states over such processes. This vulnerability has been particularly pronounced in the Global South, but in the past decade it has also affected Europe and the US in major ways, though Western states have revealed different kinds—and mixtures—of vulnerabilities since 2007/08, be it in real estate (subprime crises), the banking systems, or the currency system (Euro) combined with sovereign debt, all of which have fed into each other in different ways. The ICT revolution has closed some gaps in access to information and economic activity, but it has opened others. The educated classes and business in the Global South have closed the information gap between themselves and their counterparts in the industrialized world, but those without education and access to the Internet both within the industrialized world and in the Global South are falling further behind. The digital divide affects not just access to information but the very capacity of parts of the population to participate in the economic, social, and public life of industrial and industrializing societies. This situation adds to pressures on states to improve coverage and quality of public education and to invest in information infrastructure. Another important change in labor markets resulted from the entry of women in advanced industrial and industrializing countries. In more traditional and rural societies, women had always worked in agriculture and trading, but in industrial societies, the male breadwinner model had been dominant. For a variety of reasons—rising female education, women’s search for careers and for greater economic independence, the decline of jobs providing a decent family wage, and the expansion of the service sector—women began to enter paid labor in large numbers from the 1960s on. Again, there were important differences among countries, both in timing and magnitude, with the US (private-led) and the Nordic (state-led) countries first and the Continental and Southern European, Latin American, and East Asian countries far behind. Women’s entry put pressure on many labor markets and generated demands for state responses and, also, restructuring. It also contributed to a change in household structure, namely the increase in households with multiple earners and households with children headed by single mothers, which further added to pressures for social safety nets, services, and education (see O’Connor, Chapter 25). Yet another major area of change was demographic. The aging of the population, along with the steep decline of fertility rates in many affluent democracies and newly industrialized countries, has created pressure to reform critical public programs, such as pensions and labor market policies. The picture in the Global South is a complex one too, as some areas of the Global South have suffered a marked increase in mortality due to the spread of AIDS. Most countries in the region, however, have also begun fertility transitions characterized by decreasing fertility and mortality, although populations continue to grow rapidly in several countries, especially in Africa and the Middle East. Societies in both advanced industrial and other parts of the world also underwent significant changes with political implications. Waves of popular mobilization and new social movements challenged the social and political orders—with different degrees of success. The Civil Rights Movement in the US, the student movements in Europe and North America, the women’s movements in different parts of the world, the pro-democracy movements in

Conclusion   821 the Global South and Eastern Europe, and the ecological (“green”) movements all forced states to respond and brought about some important changes, albeit generally less far-reaching than the participants in these movements desired. Ethnic mobilization increased as well, partly in response to a weakening of repressive regimes and the opening up of national space in communications and cross-border movement. In contrast, old social movements, specifically unions, were generally on the defensive in light of deindustrialization, but in many countries they still played very important roles in the processes of democratization and in the mobilization of resistance against impositions by the IFIs of austerity and state shrinking.

State Determinants State reaction to changing international and domestic circumstances was shaped heavily by the characteristics of states themselves (Skocpol 1979; Evans et al. 1985; Leibfried and Zürn 2005). The state as a model of political organization prevailed against city-states and empires in a long history of struggle and war, as John Hall notes in Chapter 3. Starting in Western Europe the state model spread out. As Andrew Kelly and James Mahoney show for the New World in Chapter 5 and as Matthew Lange shows for Africa and Asia in Chapter 6, the structure and scope of the state in these regions differ from the original state formation in Europe, and the respective properties of a state shape future developments. To start with the obvious, effective states are in a better position to adapt to changing circumstances than ineffective ones. What makes modern states effective is first of all the quality of their bureaucracy. A state apparatus staffed by Weberian bureaucrats (Weber 1978 [1921/1922]) is in a better position to read challenges correctly and respond to them than is a state apparatus staffed by officials who were recruited through clientelism and who relate to civil society and individuals on a clientelistic basis. Thus, Northern European states were in a better position to adapt than Southern European states, the East Asian Tigers were in a better position than Latin American and post-communist states, and many African states were in the weakest position. In order to be effective, modern states need “infrastructural power” (Mann 1984), that is, the capacity to penetrate civil society throughout their territory and to use that penetration to enliven and enforce policy. In contrast to “despotic power,” which is the state’s ability to impose rule over society, infrastructural power rests on the ability of the state to rule by enlisting cooperation from its citizens. To build infrastructural power, the state needs to ensure the literacy of the population, to provide effective systems of communication, transportation, and exchange (currency), and to supply a variety of services. Through effective infrastructural power, the state can derive legitimacy and build the kind of societal resources it needs to govern effectively. Building and maintaining infrastructural power requires resources. Natural resources may be a curse, but they may also be a blessing in this respect, as Pauline Jones Luong (Chapter 33) and David Waldner and Ben Smith (Chapter 38) show. Foreign aid can help also, if well-administered by a Weberian-like bureaucracy. Finally, in relation to a particular level of economic development, the state requires appropriate bureaucratic capacities to extract the potentially available revenues as a resource for the maintenance of the administrative organization of the state and for its policies.

822    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens A further important characteristic that makes states effective is the sheer quality of human resources in the society in terms of level of education and propensity for innovation and creativity. This factor, of course, is heavily endogenous—it is the result of past state actions in promoting inclusive and high-quality public education. So, policy legacies affect not only coalitions in civil society but also the quality of the state apparatus itself, including its “reach.” Finally, the constitutional structure of states affects their ability to transform themselves and adapt in a timely manner to changing circumstances. Constitutional structures that disperse power through the presence of many veto points privilege the status quo. Presidentialism (as opposed to parliamentary government), strong bicameralism, judicial review, and regular use of popular referenda all provide veto points, that is, opportunities for opponents of change to mobilize and block departures from the status quo. Constitutions of course can be changed, but such change is generally extremely difficult if done in a constitutional manner and extremely conflictual if not. The European countries have reached their present shape in a long series of deep conflicts and organizational innovations. Territorial consolidation, bureaucratic capacities, the rule of law, democracy, and the welfare state are overlaying elements of a multifaceted state structure. Therefore, the modern state is a “layered state,” as described by Philip Manow and Daniel Ziblatt in Chapter 4. The legacy of former political cleavages inherent in the present institutional order could either limit state capacities to react effectively to new challenges or provide a wide plurality of reaction mechanisms. Another complex infra-state mechanism of power dispersal and “state-making” may need highlighting here: federalism. It emerged in the old world (Austria, Germany, and Switzerland), spread especially to the new world (Brazil, Australia, Canada, and the US), and is present in various forms in other parts of the world (India, Nigeria, China). It is often constitutionally controlled and takes on two basic forms, “layer cake” and “marble cake.” Federalism integrated countries marked by religious-ethnic conflict in the old world or by huge spaces and immigrant diversity in the new world.

2  Nature of State Transformations The trajectories of state transformations went in different directions at different times, in different policy sectors, and in different parts of the world, as Jonah Levy notes in Chapter 9. They generally tended towards the expansion of capacities until about 1980— except for sub-Saharan Africa—and towards the decline of capacities and the search for the development of new ones thereafter. Declining capacities could result from technology that facilitated transactions that outstripped the jurisdiction of individual states and sometimes resulted from deliberate restrictions on the scope of state intervention. Initial decline could also give way to changing forms of state intervention or to the development of new capacities. The structure of authority tended towards the consolidation and deepening of democracy in advanced industrial societies during the entire time, but towards the centralization of power and authority before 1980 in the Global South and towards democratization thereafter. Developments towards multilevel governance began slowly but accelerated greatly after 1990.

Conclusion   823

State Transformations in Advanced Capitalist Societies In thinking about state transformations in the advanced capitalist world, it is useful to distinguish between the specific policies or tools available to governments and the bureaucratic capacity of the state. It is important to recognize that though the infrastructural power and the bureaucratic capacity of the state co-vary, they are not the same thing. For the advanced capitalist states, neoliberal downsizing of the state has often reduced the infrastructural power of the state—for example, cuts in education and healthcare—but not the bureaucratic efficiency of the state employees who remain. Changes in policies or tools may or may not entail a change in infrastructural power. In Chapter 19, Jonah Levy, John Stephens, and Stephan Leibfried discuss several different typologies of political economies and welfare states in the advanced capitalist world. The typology derived from the welfare state literature (Esping-Andersen 1990; Huber and Stephens 2001) fits best for our analysis of state transformations. Four regimes are identified: Nordic (social democratic), Continental European (conservative or Christian democratic), Southern, and Anglo-American (liberal) regimes. This typology overlaps with much broader political economy typologies that classify countries according to the role of the state in the economy, the system of labor relations, or the production regime, which increases the heuristic utility of the typology in tracing the transformations of the state in the period under consideration.2 For the advanced capitalist world, the first three decades of the postwar period were characterized by high (the US excepted) but varying levels of state intervention in the macro economy. State ownership of enterprises was high in France, Italy, Norway, Finland, and Austria; state ownership of utilities and telecommunications was the dominant pattern in all countries except the US; domestic industries were protected by high tariffs in Australia, New Zealand, and Iberia; some states resorted to devaluation of their currency; most states limited capital movement across their borders; many states intervened in domestic capital markets to provide cheap credit to domestic industries; and most states employed Keynesian counter-cyclical fiscal and monetary policies to provide economic stability and stimulate long-term growth. These policies appear to have been incredibly successful as economic growth was more than double the magnitude that it had been before, stretching well back into the nineteenth century, or that it would be later. By any measure, the welfare state was in its infancy at the close of World War II. The next three decades saw the rapid growth of the welfare state in almost all countries, but in varying degrees. By the end of the period, countries were grouped into four distinct welfare regimes, driven by the dominant governing authorities—social democrats in the Nordic countries, social democrats and Christian democrats in Continental Europe, secular center and right parties in the Anglo-American countries, and authoritarian regimes succeeded by clientelistic parties in Southern Europe (Ferrera 2005). Total 2  It may seem odd or even contradictory that we use a different typology in this chapter than the political economy typology used in the “crucial types” portion of Part III of the Handbook. The reason for the switch is that the changing role of the state results in convergence on the welfare state typology as Australia and New Zealand converge on the liberal type; Spain and Portugal converge on the Southern European type; Austria, Belgium and, to a lesser extent, the Netherlands converge on the Continental European type; and the Nordic countries become more distinct from the Continental corporatist countries.

824    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens health, education, and welfare spending had grown to over 20 percent of gross domestic product (GDP) in the US and to over double that in Sweden. In these advanced capitalist democracies, by the end of the Golden Age postwar capitalist growth in the mid-1970s, the infrastructural power of the state was at its apex. From this point on, the transformations of these states went in different directions depending on the sphere and the regime type (Thelen 2014). The most massive movement was in the macro economy where Keynesianism was all but abandoned, state enterprises were privatized, capital controls dismantled, hard currency policies adopted, and credit and product markets deregulated. For the most part, state regulation and ownership was replaced by market regulation, but in the European Union and even more so in the Eurozone, a supranational body assumed powers previously reserved for national states. Moreover, hand in hand with privatization, states developed new regulatory capacities in areas that had previously been dominated by public enterprises. Under these conditions the statist model of economic development, as pursued in France and Japan, has failed to produce growth, investment, or employment and reached its limits, as Jonah Levy shows in Chapter 20. These changes in macro-economic intervention were driven by globalization, above all by the undoing of cross-border capital controls and the exponential increase in cross-border capital movements, but neoliberal ideology drove the process further, especially where committed neoliberals exercised power unconstrained by coalition partners or constitutional veto points, as they did in the UK from 1979 to 1997 and in New Zealand from 1984 to 1996. Peter Hall, in Chapter 22, shows us the far from vanishing role of the state in these liberal market regimes. In other areas, the move from state to market was more muted. In industrial relations, union density declined in most countries. This was primarily a result of deindustrialization, but governments also passed legislation to weaken unions in the US, the UK, and New Zealand. Most other indicators of the structure of industrial relations, like wage bargaining and coordination, show remarkable stability. As Herbert Obinger and Peter Starke point out (Chapter 24), the globalization-induced race to the bottom in welfare state generosity that was predicted by neoliberal commentators never materialized. By the turn of the century, welfare state scholars (Castles et al. 2010) had rejected the view that globalization was the motivating force behind welfare state change, rather identifying as the primary causal factors economic forces (transition to the service economy, slowed growth, and increasing women’s employment) and demographic change (decline in fertility, ageing, decline of the male breadwinner model—see O’Connor, Chapter 25). These “domestic” forces did undermine the comprehensive “pay as you go” pension systems characteristic of most European countries and forced changes that might be characterized as retrenchment because they involve increasing qualifying conditions, decreasing benefits, or raising the pension age, and often all three. Otherwise, Obinger and Starke characterize the longer term trend as “restructuring” and a movement toward a “supply-side welfare state,” a term which encompasses the movement toward more social investment, activation, and work and family reconciliation policies (for Latin America and East Asia, see Huber and Niedzwiecki, Chapter 43). The movement toward the supply-side welfare state is uneven across the regime types. The Nordic countries, already the leaders in social investment, activation, and work and family reconciliation and other gender equality policies at the close of the Golden Age, widened their lead. The Continental European countries, after turning to a self-defeating policy

Conclusion   825 of labor force reduction, initially moved slowly toward supply-side policies, but pursued them with more vigor after the European Union identified them as best practices through the mechanism of the Open Method of Coordination in the early 2000s. In Southern Europe, Spain and Portugal moved in the supply-side direction, but started from a very low base, as indicated by low levels of social investment and activation spending and low levels of women’s employment. The liberal welfare states, once leaders in education spending, lost ground in social investment. But, as Julia O’Connor shows for women’s issues in Chapter 25, there were sharp partisan differences in these countries, as right governments rolled back the achievements of left governments in Australia and Canada. By contrast, the New Labour governments in the UK moved strongly toward social investment and activation after 1997, partially reversing the policies of the previous right governments. The movement in spheres other than the welfare state was not simply in the direction of less state and more market. Growing competition among states led to converging corporate tax rates but—contrary to widespread expectations of general cutbacks and marketization—diverging and in some countries positive effects in other areas of tax policy, as Philipp Genschel and Laura Seelkopf relate in Chapter 12. As the state retreated from ownership of enterprises, it stepped in with more regulation (Holzinger and Schmidt, Chapter 26), with the notable, and lamentable, exception of financial markets investigated by Eric Helleiner in Chapter 17. As environmental degradation became increasingly apparent, states in these now post-industrial democracies also stepped in with more regulation, reinforced by international regimes, as shown by Klaus Dingwerth and Helge Jörgens in Chapter 18. Here again efforts were uneven with the Nordic countries introducing the strictest environmental regulations followed by the Continental European countries. In short, we have seen movements towards the development of greater regulatory capacities, which have given rise to the concept of the “regulatory state,” portrayed by Katharina Holzinger and Susanne K. Schmidt in Chapter 26. As immigration increased, most countries, led again by the Nordic countries, responded with increased efforts to absorb immigrants, but not without backlash that fueled support for right-wing anti-immigrant parties, even in the Nordic countries. Thus, state intervention assumed a new scope, but the goals of such intervention and the legal distinctions based on citizenship and residence became contested, as Rainer Bauböck demonstrates in Chapter 27. The same can be said about developments towards the national security state, analyzed by Andreas Busch in Chapter 29. Countries responded to the rise of international terrorism with measures that invaded the civil rights of potential terrorists, but also ordinary citizens, which generated sharp disagreements about the proper scope of state surveillance. As time went on, in the 2010s, the full scope of “security creep” was revealed, with a more or less complete erasing of the border between “potential terrorists” and “ordinary citizens” in the states’ surveillance strategies. Still, since the 1950s, the dominant trend within the advanced capitalist world has been toward the consolidation and diffusion of democracy. As Frank Nullmeier, Steffen Schneider, and Andreas Hepp describe in Chapter 30, the core institutional structures of most democratic states remained unchanged; Greece, Spain, and Portugal entered the club of democracies during the “third wave of democratization” (Huntington 1991) in the 1970s. Major institutional changes occurred only in Belgium, France, and New Zealand. Today, all advanced capitalist states are democratic states. The majoritarian democracies,

826    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens all likewise liberal economies, had to withstand public pressure to reform their winnertake-all electoral systems, with New Zealand the first to give in to these pressures after an experience of radical majoritarian welfare retrenchment (see Starke 2008). Minor institutional reforms went in the direction of consensus democracies, with Switzerland as an outlier. Once the model of consensus democracy, in the last 15 years, the Swiss political system turned to a more competitive mode of governance. However, beneath this remarkable stability of democratic core institutions, steps toward further democratization and the deepening of participation, especially by the increased use of referenda, have occurred together with reforms fostering the autonomy of political elites, administrations, and experts. The rise of semi-independent agencies and the international diffusion of the model of an independent central bank essentially altered the modes of democratic governance. The pivotal role of parties and interest groups as the link between the government and the citizens tended to dissolve; the party system of Italy collapsed and the monopoly of the LDP in Japan has been broken. The once tight bond between the democratic state, civil society, and citizens has been weakened, but no serious rival to the democractic ideal has emerged. Now, the democratic states are challenged by the new political power of international and regional organizations which they had once established and have constantly promoted. Conflicts over the integration of the democratic nation state into a system of multilevel governance are central to current political debates. In Chapter 14 Arjan Schakel, Liesbet Hooghe, and Gary Marks present data showing that the trend toward multilevel governance is a worldwide phenomenon, with shifts of authority from the nation state upward toward international organizations and downward toward regional government. In the post-industrial world, multilevel governance is not limited to Europe, though, according to these authors, “Europe has been the epicenter of this development.” In economic policy, including environmental policy, the shift of the center of policymaking to mostly or entirely the European level has been particularly dramatic. Delegation downward to the regional level has been greatest in the provision of health, education, and welfare services. We also see some tendency toward centralization within federal states and especially towards decentralization within unitary states, as analyzed by Michael Keating in Chapter 28. Some of these federal states are part of larger quasi-federal constructions like the European Union, and in that case such tendencies may well be due to the federal states being sandwiched between a supranational center and subnational states, such as the German Länder, with federal states losing power on both ends, to “above” and “below.”

State Transformations in the Post-Communist World The collapse of communism very clearly caused or accelerated a process of declining state capacities. In some countries, the capacity to promote investment and growth was already on the decline, but the resort to fire-sale privatizations and the resulting concentration of economic ownership in private hands greatly aggravated the situation. The rapid transformation also greatly weakened the state’s capacity to enforce the rule of law and provide for citizen security. A combination of fiscal crisis of the state and layoffs in all areas of the public sector, including the security forces, reduced law enforcement capacities along with the general capacity to provide public services. In short, it is no exaggeration to speak of a crisis of the post-communist state during the transition. The consequences for the population

Conclusion   827 were dire, as manifested, for instance, in the decline in life expectancy. State reconstruction proceeded with different degrees of speed and success, depending on domestic circumstances, on the previous quality of the state apparatus, and on external conditions. Where social forces had been mobilized for the transition or where a post-communist civil society emerged, they were more likely to be involved in reconstruction and in building a political system that was more inclusive and competitive, along with a state that could perform the core functions of providing security and basic services like transportation, education, and health care. The legitimacy of the state and the governing parties became important, and it was based at least in part on how these states performed. Where there was little popular involvement in the transition, elites constructed exclusionary political systems, as outlined by Anna Gryzmała-Busse and Pauline Jones Luong in Chapter 31, and were more concerned with staying in power and enriching themselves than with building capable states. In some of these cases, authoritarian systems persisted, and in most of them hybrid systems emerged, with regular elections but a political process biased towards incumbents. The reconstruction of the state proceeded unevenly, as the Russian case studied by Brian Taylor in Chapter 34 reveals, and the repressive capacity tended to be preserved and strengthened again before the general law enforcement capacity, let alone the capacity to provide social services. In the economy, states generally kept or regained control over key natural resources, which became a main source of revenue for the states and/or the elites controlling them. Even in essentially authoritarian systems, though, revenue from natural resources made it more likely that states would contribute to economic growth and begin to invest in social services, as Pauline Jones Luong relates in Chapter 33 on “developmental states” emerging from the former Soviet Union External conditions did little to promote the building of state capacities, with one notable exception. Those Eastern European countries that were potential EU members received clear directives and aid from the EU on how to build democratic societies and capable states, as Milada Vachudova shows in Chapter 32. This was decisive in the case of countries in Eastern Europe with weak civil societies in which former communists-turned-ethnic-nationalists hung on to power through ethnic appeals, clientelism, and corrupt political practices. Even among the future EU member states, policy legacies—like the character of the previous state apparatus, the development of human resources, and the level of popular organization and mobilization—shaped the infrastructural power that the state could build upon and the quality of democracy. The Chinese case is unique in that the regime remained intact while communism was dismantled in economy and society by the “party-state.” China would seem to be a most pronounced case of state-driven state transformation. Here the scope of state intervention was also narrowed, particularly in the area of social safety nets and social services. Moreover, the transition to capitalism aggravated a pre-existing problem—the tenuous control that the central government in Beijing exercised over regional and local government. With the relaxation of state controls over the economy, local practices began to diverge more and more from the central norms, stimulating the eventual adaptation of central norms to practice, as shown by Kellee Tsai in Chapter 35. The Chinese case highlights another issue in understanding transformations of the state. As the complexity of society and economy increases, demands on the state increase as well, that is, the state has to develop new capacities to replace those capacities that were

828    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens adequate only for the previous social and economic order. Moreover, rapid change creates new problems that demand entirely new capacities. Where social and economic change is as monumental and rapid as it has been in China over the past quarter century, the development of these state capacities is likely to lag behind. Ironically, the state created the conditions for this rapid social and economic change, but once Pandora’s box was opened, the state lost control over the process and was unable to devise responses for many of the new problems. Beijing’s polluted skies offer striking evidence of this dilemma.

State Transformations in the Advanced Regions of the Global South Certain key state characteristics are common throughout much of the Global South, and some socio-economic and international conditions such as poverty, dependence, ethnonational divisions, and late development have challenged all countries in the region, as pointed out by Matthew Lange in Chapter 36. However, diversity and divergent developments also characterize the Global South. State transformations are taking a different course in the advanced parts compared to the “rest” of the Global South, that is, the rather marginalized or poorly developed countries. The key phenomenon in the advanced countries of Latin America and in South Korea and Taiwan in the post-World War II period was the emergence of the “developmental state,” as described by Peter Evans and Patrick Heller in Chapter 37. In Latin America— particularly Brazil, Chile, and Mexico—early roots of this transformation lay in the 1930s, as a reaction to the collapse of raw material export earnings in the Depression. The Argentine state embarked on import substitution industrialization (ISI) in the 1940s. In South Korea and Taiwan, the transformation followed the ouster of the Japanese, the end of the Korean War, and the retreat of the Kuomintang (KMT) from the Chinese mainland to Taiwan. The state became the key actor in the economy, providing investment capital, investing directly, and using its regulatory powers to promote industrialization behind high tariff walls. South Korea and Taiwan were in a better position than Latin America to erect effective developmental states. They could build on a tradition of meritocratic recruitment of state officials, they received massive foreign aid, and they were not hindered by a powerful class of landlords because land reform had been facilitated by the competition with their communist enemies and had led to the downfall of that class. In contrast, in Latin America, the urban developmentalist coalition that had gained control of the state had to contend with a still economically powerful class of landlords. Recruitment to the state apparatus took place predominantly on a clientelistic basis. There was a further crucial difference: the East Asian Tigers had no natural resources to rely on for foreign exchange earnings, so they were forced to develop manufacturing exports to keep industrialization going. Accordingly, they complemented ISI with manufacturing for export markets, which forced their industries to become internationally competitive, whereas inward-looking manufacturing industries in the Latin American countries remained internationally uncompetitive. In the area of social protection, the Latin American and East Asian countries took different routes. Latin American countries followed the Continental European model of

Conclusion   829 building Bismarckian welfare states that extended employment-based benefits, mostly healthcare and pensions, to urban formal-sector employees and sometimes their dependents. In so doing, the states responded to shifting domestic power distributions resulting from industrialization, particularly the growth of the urban working class and the spread of unionization. The East Asian countries, in contrast, invested heavily in primary and secondary education as well as in rural development. Social protection was left to full employment, benefits provided by large firms, and the family. They did not (yet) have to worry much about popular pressure, as unions and left parties were repressed or shunned because of their association (rightly or wrongly) with communism. By investing heavily in education, these states created a human resource base that later made it easier for them to adapt to a changing economic environment in the wake of the ICT revolution, as shown by Evelyne Huber and Sara Niedzwiecki in Chapter 43. The ISI model in Latin America suffered from a chronic balance of payments problem and was ultimately undone by the debt crisis of the 1980s. This crisis gave enormous leverage to the international financial institutions (IFIs), which—in collaboration with the governments of the major economic powers—imposed harsh austerity and prescriptions for liberalization and state rollback on Latin America. Tariffs were slashed, capital controls loosened, restrictions on foreign investment relaxed, state enterprises privatized, and state employees laid off. Governments were forced to reduce economic intervention and make more room for markets. In some countries, the IFIs found ardent domestic supporters, as in Chile and Argentina; in others, there was more resistance, but only governments in the largest economies, like Brazil, could resist effectively and choose their own pace and degree of liberalization. The processes of deindustrialization and state rollback that resulted from the dismantling of the ISI model had profound repercussions in the labor markets. The formal-sector contracted, and unemployment as well as informal employment rose, driving up poverty and inequality. State responses to these developments were initially shaped by the same pressures of IFIs that had imposed liberalization in the first place. The IFI prescriptions dictated narrow targeting of social transfers and services and greater room for private insurance and private social services. Many states went so far as to privatize parts or all of their pension systems. There was domestic resistance against these changes—anti-IMF riots, with looting of stores in the wake of massive price increases, were the most visible manifestations—but in general such resistance was not strong enough to arrest the process. And the further liberalization and deindustrialization proceeded, the weaker the organizational base of opponents became. In short, the general picture throughout—and limited to—the 1990s was one of a reduction of state capacities to guide economic development and to provide a social safety net and social services, mainly as a consequence of loss of access to capital outside of channels that required IFI approval and thus the adoption of IFI prescriptions. The East Asian developmental state, exemplified by the South Korean state, transformed later and in different ways because its model had been more successful and both the leverage of the IFIs and their social policy prescriptions were different by the time the financial crisis hit there, some 15 years after the beginning of the debt crisis in Latin America. The very success of the developmental state strengthened the big conglomerates in South Korea and enabled them to gain access to financing on world capital markets, which reduced the capacity of the state to direct investment into specific sectors and ventures. The financial

830    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens crisis hit in 1997, and the International Monetary Fund (IMF) imposed very stringent austerity programs and the liberalization of capital markets. The immediate impact was similar to the impact of the Latin American debt crisis in terms of bankruptcies of enterprises, a shrinking of formal-sector employment, and growth of the informal sector. However, the recovery came much faster—within a few years rather than a decade—and the changes in the essential features of the development model were less dramatic than they had been in Latin America. Korean industries were already producing in internationally competitive sectors and continued to do so. Moreover, the state response to the crisis was an expansion of the social safety net rather than its contraction. This difference in state response was due to different internal power constellations and external pressures. Successful and rapid industrialization had led to the growth of the working and middle classes in South Korea and to increasingly militant pressures against the authoritarian regime in the 1980s. These pressures were successful in bringing about democratization, and electoral competition was firmly established by the time the financial crisis hit. As noted, the authoritarian regimes had left social protection predominantly to the largest employers and the family, and public expenditures for social transfers and services were low. Pressures from civil society and electoral competition resulted in a gradual expansion of social programs, and the effects of the crisis added to these pressures. The fact that public social expenditures were still comparatively low also meant that they were not high on the target list of the IFIs. Moreover, the backlash particularly against the social policy prescriptions of the IFIs was mounting in other parts of the world, and by the late 1990s, the IFIs had developed a stronger concern for investment in human capital. The onset of the twenty-first century presented new challenges and opportunities for the states in the new industrializing countries (NICs). The growth of the Chinese economy fueled demand for raw materials and other industrial inputs and thus growth of exports from Latin America and East Asia. The fact that they were able to accumulate foreign exchange reserves granted these states independence from the strictures of the IFIs. The increase in government revenue resulting from these exports enabled states in both regions to re-expand the role of the state, particularly in the area of social policy (Rudra 2008; Huber and Stephens 2012). In Latin America, this re-expansion entailed the development of new forms of social protection for people in the informal sector and for their children. States deviated from the Bismarckian employment-based principles of social protection by establishing non-contributory transfers, both for families headed by working-age adults and for the aged. They also linked these transfers to attempts to improve the human capital base of their societies through conditional cash transfers (CCTs). Moreover, they expanded access to publicly financed healthcare.3 In countries with favorable internal power constellations, that is, a record of democracy of some two decades and strong left parties, these programs achieved meaningful coverage of the population; in others, they remained rudimentary. The result of the combination of economic growth and social policy—where it was extensive— was a remarkable decline in poverty and a modest decline in inequality. In contrast, Latin American states by and large missed the opportunity to recover capacities for promoting industrial upgrading.

3  For the effects of these policies on the politics of international organizations, especially the ILO, see Bob Deacon (2013).

Conclusion   831 Structures of authority changed unevenly in the NICs since the 1980s. As noted, South Korea and Taiwan democratized, as did virtually all of the Latin American countries. In unitary countries, democratization transformed authority structures throughout the national territory. However, in federal countries, pockets of outright subnational authoritarianism persisted. Even within formally democratic institutions, traditional patterns of clientelism continued to dominate in many areas. Corruption remained a serious problem, undermining state legitimacy and capacity for uniform enforcement of the law and provision of services. In fact, uneven infrastructural power throughout the national territory characterized many of these states, particularly the larger ones. The experience of infringement on national sovereignty through the external imposition of stringent austerity and liberalization policies stimulated efforts of governments in both regions to gain greater leverage against the IFIs and the development of regional integration as protective umbrellas for theses states. Some of these organizations were subregional, like MERCOSUR 4 and ASEAN,5 and some were cross-regional, like APEC.6 At the same time, the NICs attempted to take a firm stand in negotiations in the World Trade Organization (WTO).7 Working against these attempts to build regional solidarity and to effect changes in power relations in international or global institutions through collective action was a proliferation of bilateral trade agreements that brought particularistic benefits to their signatories. Regional integration could potentially strengthen the position of the NICs in attracting quality foreign investment, that is, foreign direct investment that leads to technology transfer and production for exports. It could further reduce tax competition among states. However, none of these integration agreements goes much beyond market integration, that is, beyond the free movement of goods. In other words, they do not extend to common rules for foreign investment or corporate taxation, let alone to issues like political integration and common labor market policies. At the end of the ISI period, the Andean Pact, founded in 1969,8 had such an ambitious agenda, but this agenda fell victim to the neoliberal turn in Latin America, and it has not been revived in the post-neoliberal phase, though the Pact itself has survived with reduced membership.

State Transformations in the Rest of the Global South As the comparison of East Asia and Latin America shows, the Global South is very diverse, and state transformations in the region vary greatly. East Asia and Latin America, in turn, 4 

MERCOSUR = Mercado Común del Sur or Southern Common Market, an economic and political agreement between Argentina, Brazil, Paraguay, and Uruguay from 1991, with Venezuela actively joining in 2012, and Bolivia presently an acceding member. 5  ASEAN = The Association of Southeast Asian Nations, an economic agreement from 1967 struck by five nations, Indonesia, Malaysia, the Philippines, Singapore, and Thailand, later joined by Brunei, Burma (Myanmar), Cambodia, Laos, and Vietnam. The mandate of ASEAN has been expanding since 1967, with the EU as a model. 6  APEC = Asian-Pacific Economic Cooperation, an organization of 12 nation states, founded in 1989, initiated by Australia, Japan, and the US. It now has 21 member states. The organization is mainly about free trade. 7  WTO = World Trade Organization, Geneva, founded in 1993, building on the 1947 GATT. 8  The Andean Community’s founding members were Bolivia, Chile, Colombia, Ecuador, and Peru. Venezuela joined in 1973, Chile and Venezuela later withdrew.

832    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens only highlight a part of this diversity. Indeed, both regions have among the largest and most powerful states in the Global South, and state transformations have been very different in large parts of Africa and other parts of Asia. According to John W. Meyer and his collaborators (Krücken and Drori 2009), global institutions have helped spread and enforce the Western model of the state throughout the world, a model that largely conforms to the Weberian legal-rational ideal type. One can clearly see this movement toward the Weberian state in Latin America and—especially— East Asia, as the states have increasingly gained control over their territory and monopolized the legitimate use of violence. For this, they have become increasingly bureaucratic and gained a physical presence throughout large parts of their territories. Many of the states in Africa and Asia, however, have not moved much closer to the Weberian model over the past half century and presently contrast starkly with it. Instead, many states conform much more closely to Weber’s patrimonial ideal type, being characterized by personal rule in which rulers make no distinction between personal and public patrimony. Such patrimonialism is commonly decentralized and informal, as central rulers depend on regional rulers for support and delegate power to them. The regions in Africa and Asia that contrast the most with the Weberian model of the state are those regions with the most limited levels of economic and human development. An important reason for their low levels of development is the states themselves. Low levels of state bureaucratization and infrastructural power reduce the state’s organizational capacity and create enormous logistical obstacles to the implementation of development policy. Moreover, as William Reno notes in Chapter 39, several of the states in Africa and Asia are predatory in that they actually impede the ability of people to pursue their wellbeing. This is common in patrimonial states because rulers see the state as their personal domain, and it is most extreme when state rule breaks down, which obstructs any rule of law and often unleashes violence among rival factions, with innocent civilians caught in the middle. The dysfunctions of patrimonial and predatory states hinder economic development and help explain the divergence between liberal theories of economic convergence and the reality of growing global inequality. David Waldner and Ben Smith highlight this clearly in Chapter 38, arguing that natural resources are a boon when states are capable of exploiting them but provide no benefit to populations living under patrimonial or predatory rule. States in the Global South that conform to the patrimonial ideal type most closely have thus experienced state transformations that are very different from those in the East Asian developmental states. Most notably, instead of expanding the state in an effort to direct the economy and expand national wealth, state transformations have focused on controlling national wealth. The Nigerian state, for example, has been content to simply receive rents from foreign oil companies and has largely refrained from trying to manage and expand the national economy. In addition to economic management, patrimonial states have made very limited efforts to provide basic services like education, healthcare, and social insurance. Limited state activity in both economic and social welfare domains, in turn, has restrained state infrastructural power, something that helps explain the growing prevalence of terrorism in Nigeria and the Nigerian state’s inability to subdue Boko Haram. One outcome of the limited ability of states to promote human wellbeing is that non-state actors commonly play an important role offering social services. NGOs are one notable example, as they contribute to education and healthcare in large parts of Africa

Conclusion   833 and Asia. In this way, non-governmental actors take on the role states commonly play elsewhere in the world, even if they cannot possibly provide services on the scale of a well-functioning state. Although neoliberalism has contributed to this situation, the active involvement of NGOs in the provision of public services has historic roots that long precede the advent of neoliberalism, as missionaries were the most common providers of education and healthcare in many countries in the Global South during the colonial period. After independence, many states in Africa and Asia made little effort to offer such services, leaving various NGOs in place and creating an opening for others to offer services to the population. Limited state capacity also has implications for democratization in Africa and Asia. Both Africa and Asia have become increasingly democratic over the past 20 years, but the regions are still dominated by hybrid regimes with different combinations of democracy and authoritarianism. As Grigore Pop-Eleches and Graeme Robertson note in Chapter  42, democratization has stagnated recently, not only because of structural factors like economic underdevelopment, but also because many countries lack states with the necessary capacity to develop stronger democracies. Similar to all other regions of the world, international actors have affected state transformations in Africa and Asia over the past half-century. Most obviously, nearly all countries in Africa and Asia were overseas colonies until the second half of the twentieth century and therefore had little sovereignty until recently. The single greatest transformation of states in Africa and Asia during the last half century has been decolonization. International actors have continued to affect states and their transformations after independence, however. For example, many of the NGOs active in Africa and Asia are international. Moreover, independence usually occurred during the Cold War, and the two superpowers shaped postcolonial states through aid, pressure, and intervention. Since the end of the Cold War, such external interference has changed form but persisted. This is evident in the increasing influence of China in these regions and growing influence of IFIs and multinational corporations, which have curtailed the economic activities of many states over the past quarter century. Although the previous examples demonstrate how international actors transform states by ignoring state sovereignty, they also demonstratively shape states by respecting state sovereignty, as shown by Lora Viola, Duncan Snidal, and Michael Zürn in Chapter 11 and Christopher Daase in Chapter 16. In particular, some states in Africa and Asia do not conform strongly to Weber’s legal-rational ideal type because they lack control over their territory and have nothing close to a monopoly of the legitimate use of coercion. By recognizing and respecting the sovereignty of all states, international actors have supported the claims of African and Asian leaders that they are the sole political authority and helped fix state boundaries over the last 50 years, thereby preventing adjustments of state boundaries. While this situation has protected states from external aggressors, it has also resulted in the international recognition of states that have broken down, with Somalia being a notable example (see Reno, Chapter 39, and Chojnacki and Menzel, Chapter 40). The other side of state collapse, in turn, is the development of new forms of authority to fill the political vacuum, which Sven Chojnacki and Anne Menzel discuss in Chapter 40. In addition to not conforming to Weber’s rational-legal model of the state, many states in Africa and Asia do not conform very closely to the nation state model (see also Lange, Chapter 6; and Keating, Chapter 28, for the OECD world). That is, many countries in the regions are plurinational states with multiple and usually competing national

834    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens communities. As Matthew Lange and Klaus Schlichte describe in Chapter 41, plurinationalism has affected state transformations in a variety of ways over the past half century. In the extreme case, it has contributed to civil war and state breakdown, with Mali and the Central African Republic being recent examples. Plurinationalism has also contributed to ethnicized states whereby one community controls the state and uses it to disproportionately benefit its community. In Africa and Asia, the issue of national unity and the state emerged during the colonial transition and has increased in salience ever since. Because of the difficulty of changing state borders and because of the state leaders’ inability to decentralize state power or their opposition to it, plurinational struggles have occurred in many countries over the past 50 years. As Andreas Wimmer (2013) notes, the nation state model has promoted violence whenever it is pursued, and one clearly sees this in several regions of Africa and Asia. In terms of development and human security, the states discussed in this section highlight the bleaker side of state transformations in the Global South. Alternatively, the previous Section focuses on the more advanced regions of the Global South and shows some of the more positive state transformations in the region. Many states in the Global South, in turn, share characteristics with both extremes. Relative to the other regions of the world analyzed in this Handbook, it is therefore important to recognize the much greater diversity of states and their transformations in the Global South. In addition, as Thomas Risse points out in Chapter 8, fully consolidated states emerged only recently—in the postwar or even postcolonial period, as the culmination of a centuries-long process—and unevenly among the affluent democracies. This suggests that the struggles of the Global South are less exceptional than they might appear 9 and that it is helpful to situate their experiences relative to the actual trajectories of states in the affluent democracies, as opposed to an idealized history.

Summary: Multiplicity One conclusion from this discussion is that the title of the section—“The Nature of State Transformations”—is inaccurate, as there seem to be not only multiple transformations, but also multiple natures of transformation. Despite similar international environments, the global spread of technological developments, and the transfer of state models from one place to another, states are transforming in very different ways in different parts of the world. Most notably, different positions within the world system, different domestic conditions, and differences in the states themselves have enormous bearing on the ways in which states transform. In the advanced industrial regions of the world, states are changing in ways that try to maintain the welfare state while preserving their economic competitiveness. In the former communist countries, states have struggled to remake themselves to govern new capitalist economies, rather gradually as in China or radically as in Russia, with welfare programs little more than an after-thought. The newly industrialized countries, in turn, have expanded their welfare states in ways that have actively contributed to their economic 9 

A different issue is whether we should regard “limited statehood” in the contemporary Global South as the norm, the regulative idea, against which we should measure all states today (see Risse, and Zürn and Deitelhoff, Chapter 8 and 10, both this volume).

Conclusion   835 success. Finally, the states in the more marginalized regions of the Global South are transforming in ways that favor neither industrialization nor the development of a welfare state. Rather, they are struggling to build and institutionalize more effective states with greater territorial reach.

3  The Shape of Things to Come David Hume once noted that a doctor cannot forecast the health of patients with any accuracy beyond one or two weeks and that a politician cannot forecast political trends beyond a year or two (Hume 1951: 162). Although the predictive power of doctors has improved over the last couple of centuries, political fortune telling remains fraught with difficulties. It is therefore with great reticence and humility that we end this volume by offering a forecast of state transformations over the next decade or two. Obviously, the following reflections are based on some degree of extrapolation, so their plausibility depends on the assumption of an absence of major disruptions such as a global pandemic, or a collapse of the financial system in crucial parts of the world, or a massive disaffection in the Southern Rim of the EU leading to a ruptured Union, or a slip backwards into authoritarian regimes, or China’s collapse with its consequences for the world economy, or terrorist attacks with weapons of mass destruction, or wars between major powers. Any such disruptions would have unpredictable impacts on states, and the impacts would be different depending on the degree to which states would be affected by such events and on their capacity to cope. The key question that has been asked about the state is whether the state is in the process of becoming obsolete. The answers given in this volume are negative—at least until now. But what about likely future trends? Is “the ultimate revolution” just around the corner, the revolution H. G. Wells had in the title of his 1933 disaster novel, that looked back from the year 2106?10 The driving force, if any, behind the potential obsolescence of the national state, in our days, would be globalization. Since states have originally constructed, and then aided and abetted the process of integration of the global economy, some might argue that states could presumably arrest and even reverse some of it (Kapstein 1994; Weiss 1998). That does not seem very probable, for two reasons. First, some private economic actors, specifically multinational corporations and financial institutions, control more resources than many states. Whereas states might be able to gain control over some of the physical resources owned by these private actors and located in the state’s territory, this would be less likely for human resources. Second, and more crucially, governments in the most powerful countries still believe in the benefits of at least large parts of globalization, and only they could successfully challenge the private actors with global reach. Such scenarios might be a strong protectionist reversal of US policies, or similar encapsulations in the EU’s South. Otherwise, globalization is likely to proceed. But, even if globalization proceeds in full force, the state

10 

In H. G. Wells’ novel, the great disease of 1956, which had been overcome through “[t]‌he conference of scientific and technical workers at Basra in 1965,” resulted in a World State that enforced a complete “physical disinfection of mankind” by 2059—and after that the World State soon withered away.

836    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens will still not wither away. Private actors do not provide the public goods that are necessary not only for societies but for these very actors themselves to function effectively. As regards the states that will be successful in the twenty-first century, our contributors— see especially Levy, Leibfried, and Nullmeier, Chapter 19; Huo and Stephens, Chapter 21; Evans and Heller, Chapter 37; and Huber and Niedzwiecki, Chapter 43—present compelling arguments that it will be those states that invest heavily in human resources. These chapters argue that social investment is essential for success in the knowledge economy of the twentyfirst century, that it also reduces inequality, and that it increases the quality of democracy— and even the World Bank (2006) agrees. High bureaucratic capacity and its obverse, low levels of clientelism and corruption, are prerequisites for successful social investment, but they are not sufficient, as the country has to choose the right policies. A case in point, as Jingjing Huo and John Stephens show in Chapter 21, is the large variation in human capital spending in post-industrial democracies, with the Nordic countries substantially outspending the liberal welfare states, and Continental Europe in between—and these are three groups of countries with substantially the same bureaucratic capacity. Investment in human capital alone, of course, will not be sufficient. Regulation in areas that were previously state monopolies, or re-regulation in areas that were excessively liberalized, such as financial systems, is also crucial. Similarly, effective protection of citizens from purely criminal or terrorist violence will remain at the core of the successful state. Continuing globalization will present more challenges that require supranational or international collaboration for their solution, be it on economic issues (WTO, IMF, OECD,11 EU, G2012), environmental and social issues (ILO,13 WHO,14 World Bank, EU), or in defense (NATO15). Will this generate a trend towards dissolution of the national authority of the state through delegation upwards? More delegation of decision-making power is certainly a possibility and has been the path taken since World War II—and in many instances, such delegation appears to have produced more effective problem-solving. However, decisions taken by supranational or international authorities still need to be enforced vis-à-vis the private actors present on the territory of the national state. The capacity to enforce these decisions, with sanctions if needed, presupposes a territorial presence of the law enforcement apparatus and knowledge of national conditions. So, as Michael Zürn and Nicole Deitelhoff outline in Chapter 10, the trend to a “partial internationalization of the state” will continue, with the state and its external sovereignty remaining in place. Similarly, social services and benefits will have to continue to be provided on a manageable territorial scale. Highly centralized countries have experienced decentralizing tendencies to determine the type of social services or benefits needed in different 11  OECD = Organisation for Economic Co-operation and Development, Geneva. The OECD is the 1961 successor of the Organisation for European Economic Co-operation of 1948 and of the European Recovery Program (ERP), in short of the administration of the Marshall Plan. 12  G20 = Group of 20. A “club regime” of informal meetings of chiefs of 19 member states and the President of the EU. 13  ILO = International Labor Organization, founded in 1919 and located in Geneva. The ILO became the first UN suborganization in 1946. 14  WHO  =  World Health Organization, the United Nations health arm, founded in 1948, and also located in Geneva. 15  NATO = North-Atlantic Treaty Organization, founded in 1949 and located in Brussels since 1967.

Conclusion   837 parts of their territory. Thus, it is most unlikely that authority over these issues and services would be delegated upward from the nation state. There is no doubt that more and more problems will require supra- or international solutions and that efficiency considerations will drive the creation of new layers of authority.16 New supra- or international organizations with sub-regional, regional, cross-regional, and global membership and reach are likely to be created. Still, the decision-making power of these organizations will likely remain delegated authority (with the partial exception of the EU), and such authority will tend to be greater at lower levels of integration. The compliance by the member states of these organizations will be shaped by domestic pressures and the cost/benefit analyses of non-compliance. Incentives provided by states with control over more resources will be essential, which in turn means that such states will continue to carry more weight in the decision-making processes. In other words, the delegation of decision-making power to supra- or international levels is likely to have a differential impact on the authority of strong and weak states, enhancing the authority of strong states and further diminishing the authority of weak states. The vertical stratification of the international system is fostered by the rise of international institutions and challenges the traditional principle of sovereign equality, as Lora Viola, Duncan Snidal, and Michael Zürn show in Chapter 11. The greatest challenge to state authority and capacity seems to come, not from supraor international organizations with delegated decision-making power, but rather from private economic actors—from financial, trading, and manufacturing corporations. The organizational and ownership reach of these private actors is increasingly global and far exceeds the jurisdiction and thus the control and extractive capacity of individual states. Controlling these actors and taxing them would require effective inter-state cooperation through the exchange of information and the harmonization of regulations. Smaller states and particularly states in the Global South may not have an interest in such harmonization, instead opting to lure capital through lax regulation. Moreover, even if these countries wished to cooperate, they often lack the resources to effectively monitor and regulate private multinational actors. The experience with private supranational—often labeled transnational—regulatory bodies is not without risks, since capture by private interests is a real danger, as Walter Mattli shows in Chapter 15. But the efforts to increase inter-state cooperation have increased since 2008. Essentially, then, a more likely trajectory than de jure delegation of decision-making powers by the national state upwards, to supra- and international bodies, is a de facto diminution of state capacity to regulate and tax corporate actors even within the state’s own territory. This of course has fundamental implications for all kinds of state capacity, from fostering growth and innovation to investing in human resources and constructing inclusive and cohesive societies. 16 

It is useful to recall the distinction between the inter-, supra-, and transnational spheres that regularly informs the international relations literature. The inter- and supranational spheres are both about “interstate” relations, i.e. public international law and international politics, but in the supranational case these relations have become so dense that they are not just multi-level, but “quasi-federal” and already a halfway house to “domestic politics," that is to the “intranational sphere"; for that the EU is the preeminent case. The terms are in use in political science and in public international law. In contrast, “transnational” relations refers to “inter-societal” relations, i.e. to private cross-border activities, be they economic, social, or cultural. This term is most often used in the context of private international or economic law. Chapter 15 by Walter Mattli shows that there are interfaces between all of these spheres.

838    Huber, Lange, Leibfried, Levy, Nullmeier, and Stephens States act as “managers” of political authority without the capacity to govern important social and economic processes (Genschel and Zangl 2014). In an ironic twist, just as democracy has supposedly triumphed worldwide and managed to transform the authority structures of states, states are losing important capacities to promote the common good to actors that pursue all sorts of private goods. Democracy risks running dry and empty. Still, with the growth of upward and downward linkages, states remain the central actor to any system of governance, as both subnational and international actors need to work with and through states. And as organizations that focus on solving problems, states will continue to adapt to this changing environment, and their importance will not diminish. Some states will adapt much better than others, however, and they will have more important effects as well. Despite their problems, the advanced capitalist countries possess numerous advantages that will allow their states to adapt more successfully, whereas many of the states in Asia and Africa will continue to struggle. The economic and political gulf separating the Global North and the Global South will therefore likely not only persist but widen. So, the shape of things to come will not be the withering away of the state, nor will it be a world government, particularly not “the Dictatorship of the Air” of H. G. Wells’ (1933) fancy. It is still state authorities who must frame and form the global village at the social, economic, and political level—hopefully, the global experience with state transformations as they are brought to light in this Handbook will help state leaders go about their business a little more wisely.

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Conclusion   839 ——, 2014. Forgotten Foundations of Bretton Woods: International Developments and the Making of the Postwar Order. Ithaca, NY: Cornell University Press. Huber, Evelyne, and Stephens, John D, 2001. Development and Crisis of the Welfare State: Parties and Policies in Global Markets. Chicago, IL: University of Chicago Press. —— ——, 2012. Democracy and the Left: Social Policy and Inequality in Latin America. Chicago, IL: University of Chicago Press. Hume, David, 1951. Theory of Politics, ed by Frederick M Watkins. Edinburgh, UK: Nelson. Huntington, Samuel P, 1991. The Third Wave:  Democratization in the Late Twentieth Century. Norman, OK: University of Oklahoma Press. Kapstein, Ethan B, 1994. Governing the Global Economy:  International Finance and the State. Cambridge, MA: Harvard University Press. Krasner, Stephen D, 1999. Sovereignty:  Organized Hypocrisy. Princeton, NJ:  Princeton University Press. Krücken, Georg, and Drori, Gili S, ed, 2009. World Society. The Writings of John W. Meyer. New York: Oxford University Press. Leibfried, Stephan, and Zürn, Michael, ed, 2005. Transformations of the State? Cambridge, UK: Cambridge University Press. Mann, Michael, 1984:  “The Autonomous Power of the State:  Its Origins, Mechanisms, and Results.” Archives Européennes de sociologie/European Archives of Sociology 25 (2):  185–213 = Chapter 4, States in History, ed John A Hall, 109–136. Oxford, UK: Blackwell 1986. Osterhammel, Jürgen, 2005. Globalization:  A  Short History. Princeton, NJ:  Princeton University Press. Rudra, Nita, 2008. Globalization and the Race to the Bottom in Developing Countries: Who Really Gets Hurt? Cambridge, UK: Cambridge University Press. Skocpol, Theda, 1979. States and Social Revolutions. Cambridge, UK: Cambridge University Press. Starke, Peter, 2008. Radical Welfare State Retrenchment:  A  Comparative Analysis. Basingstoke, UK: Palgrave Macmillan. Thelen, Kathleen A, 2014. Varieties of Liberalization and the New Politics of Social Solidarity. Cambridge, UK: Cambridge University Press. Weber, Max (1978 [1921/1922]), Economy and Society: An Outline of Interpretive Sociology. 2  volumes, ed by Günther Roth and Claus Wittich. Berkeley, CA: University of California Press. Weiss, Linda, 1998. The Myth of the Powerless State: Governing the Economy in a Global Era. Cambridge, UK: Polity. Wells, H[erbert] G[eorge], 1933. The Shape of Things to Come:  The Ultimate Revolution. London, UK: Hutchinson. Wimmer, Andreas, 2013. Waves of War: Nationalism, State Formation, and Ethnic Exclusion in the Modern World. Cambridge, UK: Cambridge University Press. World Bank, 2006. World Development Report. New York: Oxford University Press. Zürn, Michael, and Leibfried, Stephan, 2005. “Reconfiguring the National Constellation.” In Transformations of the State? ed Stephan Leibfried and Michael Zürn, 1–39. Cambridge, UK: Cambridge University Press.

Name Index

All authors of cited works are included in the index. Page entries for first authors lead directly to the citation in the text. Entries for authors listed as et al. in the text citations are in parentheses and refer to the reference bibliographies where the publication appears; the text citation can then be found by searching the first author. ‘Abd al-Rahim, Muddathir, 121 Abbott, Kenneth W., 227, 229, 262, 291, 293, 314–316, 345, 348–349 Abdullah, Ibrahim, 753 Abernethy, David B., 122, 773 Abrams, Philip, 137 Acemoğlu, Daron, 19, 82, 101, 103, 109–110, 128, 656, 716, 722, 781 Acker, Joan, 483, 488 Ackerman, Bruce A., 576 Ackerman, Joseph, 326 Adams, Julia, 137, 139 Adema, Willem, 700n9 Adeney, Katharine, 519, 770 Adler, Emanuel, 309 Admati, Anat, 19 Afonso, Alexandre, 414 Aghion, Philippe, 693n2 Aglietta, Michel, 206 Agrawal, Pradeep, 631 Alavi, Hamza, 124 Alber, Jens, 86, 140 Albert, Mathias, 209, 224n4 Alesina, Alberto, 77, 430, 788–789 Alestalo, Matti, 413 Alexander the Great, 65 Aliyev, Heydar, 597 Al-Jaghoub, Saheer, 247 Allan, James P., 473 Allard, Gayle, 90 Almeida, Paul D., 682 Almond, Gabriel A., 35, 82, 132, 137, 645 Alter, Karen J., 230n8, 263–264, 279 Altman, David, 575 Alvarez, Michael E. (97)

Amable, Bruno, 428 Amarante, Verónica, 802 Amin, Idi, 311, 738 Amin, Samir, 124 Amoore, Louise, 556 Amsden, Alice H., 38, 124, 398, 618 Anan, Kofi, 208, 311, 314–315, 745–746 Anastakis, Dimitri, 449, 452 Anchordoguy, Marie, 397 Andersen, Jørgen J., 716 Anderson, Benedict R. [O’G.], 69n6, 78, 201, 533, 767 Anderson, David M., 739 Anderson, Perry, 138, 171, 361 Andersson, Jan Otto, 413 Anderson, Karen M. (479) Andonova, Liliana B., 604 Andreas, Joel, 664 Andreas, Peter, 551 Angell, Norman, 193 Anria, Santiago, xii, 803 Ansell, Ben, 437 Anter, Andreas, 36, 132n2, 135n10, 136 Antràs, Paul, 438 Arana, Sabino, 536, 538 Arévalo, Julián, 121, (129) Arim, Rodrigo (807) Arjona, Ana M., 754 Arkin, William M., 553, 558, 560 Armingeon, Klaus, 90, 377n6, 470, 566n4, 589–590 Arnone, Marco, 578 Aron, Raymond, 36, 549 Aronowitz, Stanley, 132n1 Arrighi, Giovanni, 703

842   name Index Arts, Bas, 341 Arza, Camila, 803 Aschoff, Nicole 709 Aslaksen, Silje, 716 Athow, Brian (775) Auld, Graeme (299) Autesserre, Séverine, 751 Autor, David, 438 Auty, Richard M., 618, 621, 715, 721, 724, 735 Avant, Deborah D., 752 Avgadic, Sabina, 428 Avineri, Shlomo, 10 Axelrod, Robert M., 309 Ayres, Ian, 288 Baccaro, Lucio, 436 Bach, David, 504 Bache, Ian, 271 Bäck, Hanna, 642 Baev, Pavel K., 639 Bahle, Thomas, 475 Baiocchi, Gianpaolo, 695, 702 Baker, Andrew, 325n5 Bakonyi, Jutta, 752, 754 Balakrishnan, Gopal, 327 Baldwin, Robert, 503, 511 Ball, James, 553 Bang, Peter F., 64–65 Bannon, Alicia L., 315 Barbieri, William, 523 Bardhan, Pranab, 703–706 Barkin, Samuel, 223n3 Barnett, Michael N., 230, 255, 309 Barro, Robert J., 693 Barros, Aluisio J. D. (712) Barrow, Clyde W., 133 Barrows, Sam, 290 Bartels, Larry, 34, 579 Bartelson, Jens, 223n3, 225 Bartley, Tim, 291, 349 Bartolini, Stefano, 89 Barton, John, 44 Baruah, Sanjib, 770 Barzel, Yoram, 135n8, 139 Basedau, Matthias, 720, 739 Bates, Robert H., 721, 739, 742, 747–748, 750–752, (793)

Bauböck, Rainer, xvii, 24, 383, 517, 519, 524, 818, 825 Bauchard, Philippe, 400 Bauer, Michael W., 18, 38, (284), 396 Baum, Richard, 656, 659 Bayart, Jean-François, 123, 123n2, 125, 736, 750–751 Bayne, Nicholas, 329 Bazinet, Ingrid, 492 Beason, Richard, 399 Beattie, Allan, 326 Bechev, Dimitar, 610 Beck, Ulrich, 338 Beer, Samuel H., 429, 432 Beisheim, Marianne, 23n9, 158, 160–161, 163, 206 Beissinger, Mark R., 637, 638n1, 642, 779 Beitz, Charles, 307 Béland, Daniel, 474 Bell, Daniel, 35 Bellamy, Alex J., 207, 316 Benavot, Aaron, 419 Benicio, Maria Helena D’Aquino (712) Benvenisti, Eyal, 228, 296 Benz, Arthur, 153, 155–158, 281 Berger, Suzanne, 38, 42, 401 Berger, Tanja, 491 Bergqvist, Christina, 493n5, 494n6 Bergsten, C. Fred, 332 Berlit, Uwe, 559 Berlusconi, Silvio, 241, 574 Berman, Sheri, 83, 88 Bermeo, Nancy G., 15, 34, 49, 570, 579 Bernauer, Julian, 566, (584) Berne, Michel, 506–507 Besley, Timothy, 694 Best, Richard A., 552 Betts, Alexander, 255, 263 Beznosov, Mikhail (653) Bieber, Florian, 610 Biegoń, Dominika (583) Bieler, Andreas (214) Biermann, Frank, 255, 278, 339–340, 345, (352) Biersteker, Thomas J., 196, 198, 551 Binder, Martin, 207, (217), 232, (236), 261, (268)

name Index   843 Birdsall, Nancy, 721 Birnbaum, Pierre, 396 Bismarck, Otto von, 10, 44n3, 69n5 Black, Julia, 296, 511 Blackburn, Robin, 124 Blair, Tony, 242, 432, 491, 556, 804 Blais, André, 78, 88 Blake, Daniel, 230 Blank, Stephen, 427, 429 Blanke, Bernhard, 132n3 Blanton, Robert, 773 Blatter, Joachim K., 519 Blecher, Marc J., 657 Bleek, Wilhelm, 36, 132n2 Blind, Knut, 291 Block, Fred L., 42 Blyth, Mark M., 430 Boas, Ingrid, 340 Bobbitt, Philip, 239–240, 243, 247–248 Bochsler, Daniel (29) Böckenförde, Ernst-Wolfgang, 36 Bodansky, Daniel, 344–345 Bodin, Jean, 201, 225 Bogedan, Claudia ( 55, 149, 424) Bogliaccini, Juan, 374 Bohne, Eberhard (352) Boix, Carles, 46, 82, 158, 781, 787 Boli, John ( 130, 148, 215) Bolton, John, 315 Bonino, Emma, 491n4 Bonney, Richard, 68 Bonoli, Giuliano, 470, 477 Booth, Anne, 618 Boozer, Michael, 693 Borchorst, Anette, 483 Borger, Julian (560) Bornschier, Simon (29), 571 Bortolotti, Bernardo, 506–507 Börzel, Tanja A. (26), 152n1, 158, 160, 160n3, 161–162, (163), 209, 271–272 Borzutzky, Silvia, 798 Bosniak, Linda, 518 Boswell, Christina, 516 Bosworth, Richard J. B., 82 Botea, Roxana, 746n2 Bouchard, Gérard, 436 Bouchard, Lucien, 537

Bouckaert, Geert, 16 Boucoyannis, Deborah, 2, 11, 67, 772 Bourdieu, Pierre, 66 Boy, Peter, xii Boyer, Robert, 140, 433 Brabandt, Heike (54, 530) Bradbury, Mark, 754 Brady, David, 372–373 Braithwaite, John, 288, 294–295, 510 Braml, Josef, 554 Brancati, Dawn, 278, 771 Branco, Castello, 453 Branović, Željko, 161, 749, 752, 757 Braslavsky, Cecilia, 419 Bratsis, Peter, 132n1 Braun, Dietmar, 341 Bräutigam, Deborah, 6 Bravo-Ortega, Claudio, 413 Bray, Zoë, 542 Brennan, George (73, 582) Bressand, Albert (267) Breuer, Stefan, 40, 135n10 Breuilly, John, 80, 127, 767–768 Brewer, John, 77, 171 Breznitz, Dan, 628 Brittan, Samuel, 429 Broberg, Anders G., 418 Brodie, Bernard, 307 Brodie, Janine, 490 Broeders, Dennis, 551, 553 Brooks-Gunn, Jeanne, 418 Brown, Archie, 621 Brown, Gordon, 330, 491 Brown, Gustav (688) Brown, J. David, 591 Brownlee, Jason, 782–783, 786 Brozus, Lars, 159, 163 Brubaker, Rogers W., 516, 522, 535 Brühl, Tanja, 201n5 Bruijn, Theo de, 346–347 Brunée, Jutta (351) Brunschweiler, Christa N., 716 Brusis, Martin, 604 Bruszt, Laszlo, 605 Buchanan, Allen, 313–314 Buch-Hansen, Hubert, 502, 504 Buckel, Sonja, 134

844   name Index Bühlmann, Marc (29), 565–566 Bull, Benedicte, 262 Bull, Hedley, 196, 199, 221n1, 516 Bullmann, Udo, 542 Bunce, Valerie, 602–603, 606, 638n1, 782, 786 Burawoy, Michael, 134, 697 Burbank, Jane, 78 Búrca, Gráinne de, 226 Burchardt, Hans-Jürgen, 144n21 Burchell, Graham (146) Burchinal, Margaret (423) Burgess, Michael, 541, 576 Burke, Peter, 63 Burley, Anne-Marie, 264 Bursztyn, Marcel, 628 Busby, Gwen (728) Busch, Andreas, xvii, 24, 177, 384, 553, 555, 558, 825 Busch, Per-Olof, 341–342, 350 Busemeyer, Marius R., 249 Bush, George W., 491, 554, 558 Büthe, Tim, 264, 286n1, 288, 292, 294–295, 298 Buzan, Barry (212), 221n1, 223n3, (234), 522, 739 Byers, Michael, 314 Cacace, Mirella (480) Çağlar, Ayşe, 519 Caidi, Nadia, 550 Cain, Bruce E., 569 Calder, Kent E., 401 Caldwell, John C., 694 Call, Charles, T., 158 Callahan, William A., 667 Camara, Dadis, 738 Cameron, David R., 40, 44, 400, 412, 605 Cameron, David W. D., 491 Cammack, Paul A., 330, 780 Campbell, Frances A., 418 Campbell, John L., 238, 243, 247, 433–434 Campe, Sabine (167) Cantillon, Bea, 487–488 Capling, Ann, 449, 453 Capoccia, Giovanni, 82, 84 Caporaso, James A. (27), 194, 269 Cappelli, Ottorino, 641 Caramani, Daniele, 76, 78, 88, 91

Cárdenas, Lázaro, 447 Cardoso, Fernando H., 451, 455, 699, 802–803 Careja, Romana (92), 589–590 Carey, Sabine C., 748 Carey, Sean, 277 Carlin, Wendy, 433 Carneiro, Robert L., 63 Carnes, Matthew, 250 Carothers, Thomas, 590, 642 Carrier, Martin (653) Carroll, Eero (481) Carsberg, Bryan, 502 Carstairs, Andrew M., 78 Cartron, Damian (425) Casa-Zamora, Kevin, 571 Cashore, Benjamin, 291, 347 Castells, Manuel, 697 Castiglioni, Rossana, 798, 802 Castles, Francis G., 17, (30), 89, 140n15, (145), 374, 468, 473, 477, (481), 824 Castles, Stephen, 521 Cave, Martin (512) Cederman, Lars-Erik (688, 778) Ceka, Besir, 611 Centeno, Miguel Angel, 11, 139, 726, 772 Cerny, Philip G., 18, 193, 237–243, 247–248 Chabal, Patrick, 736 Chadwick, Andrew, 576 Chaisty, Paul, 641 Chambers, W. Bradney, 263 Chandra, Kanchan, 706 Chang, Ha-Joon, 379 Chapman, Sandra (283) Charles III, 112 Charrad, Mounira M., 128 Chaudhry, Kiren Aziz, 735 Chayes, Abram, 196, 260 Chayes, Antonia H., 196, 260 Cheibub, José Antonio (97) Chen, Xi, 664–665 Chesterman, Simon, 314 Chibber, Vivek, 142, 685 Chin, Gregory T., 332 Chivers, Christopher J., 640 Chojnacki, Sven, xvii, 25, 153–154, 158, 161, 186–187, 686, 749, 752–753, 757, 833 Chou, Wen-Chi Grace, 804 Chrétien, Jean, 574

name Index   845 Chrisman, Laura, 154 Churchill, Winston, 3 Clapham, Christopher, 750 Clapp, Jennifer, 348 Clark, Duncan, 350 Clark, Ian, 223n3 Clegg, Nick, 491 Clement, Wallace, 430 Clercq, Marc de, 346 Clinton, Bill, 491 Coase, Ronald H., 501 Coatsworth, John H., 101 Cochrane, Peter, 449 Coen, David, 508 Cohen, Benjamin J., 326 Cohen, Elie, 38, 396–397, 401 Cohen, Michael A., 560 Cohen, Raymond, 309 Cohen, Stephen S., 396–397 Colbert, Jean-Baptiste, 393 Coleman, James S., 82 Collier, David, 37, 448, 451, 664, 798 Collier, Paul, 719–720, 724, 735, 751 Collier, Ruth B., 76, 81, 83, 83n8, 448, 781, 798 Conde, Wolney Lisboa (712) Connolly, Sara (284) Connor, Walker, 763 Conrad, Sebastian, 153, 156, 161 Conroy, Richard W. (265) Contractor, Farok J., 628 Cook, Sarah, 667 Cooley, Alexander, 262 Cooper, Andrew F., 330 Cooper, Cindy, 491 Cooper, Frederick, 78 Cooper, Richard N., 193 Cooper, Scott A., 230, 279 Copeland, Brian R., 263 Copelovitch, Mark S., 255 Corner, Paul, 89 Corrigan, Philip, 137 Cortright, David, 259 Cotet, Anca M., 725 Couldry, Nick, 578 Cowhey, Peter F., 227 Cowles, Maria Green, 5 Cox, Gary W., 88 Cox, Robert W., 325n6

Cramer, Christopher, 737 Crenshaw, Martha, 557 Croci, Edoardo, 346 Crone, Patricia, 63n3, 64 Cronin, Bruce, 223n3 Crouch, Colin, 90, 237, 242 Crowder, Michael, 120 Crozier, Michel, 15, 430 Cruces, Guillermo, 803 Cruz-Saco, Maria A., 799–800 Crystal, Alec, 431 Csergo, Zsuzsa, 519 Csizmadia, Péter (425) Culpepper, Pepper D., 8, 435 Cumings, Bruce, 118 Cunningham, Frank, 134 Cuperus, René, 46 Curtice, John, 538 Cusack, Thomas R., 88, 372 Cuthbertson, Keith, 431 Cutler, A. Claire, 347 Czelusta, Jesse, 720, 724 Daase, Christopher, xvii, 24, 46, 177, 194, 207, 211, 264, 310, 738, 745, 817, 833 Dae-Jung, Kim, 803–804 Dahl, Robert A., 35, 81, 134, 781 Dahrendorf, Ralph, 533 Daloz, Jean-Pascal, 736 Dalton, Russell J., 567 Daquila, Phil, xii Darden, Keith, 767–768 Dashti-Gibson, Jaleh (265) Dave, Bhavna, 621 David, Steven R., 737 Davies, William, 432 Davila, Mireya A., 802 Davis, Christina L., 263 Davis, Deborah S., 704 Davis, Graham A., 716 Dawar, Kamala, 297 Dawisha, Karen, 642 Day, Christopher R., 739 Deacon, Bob, 830n3 Debiel, Tobias, 154 de Castro, Vanessa M., 628 de Cuéllar, Javier Pérez, 311 de Gaulle, Charles, 270, 398, 401

846   name Index de Gregorio, José, 716 de la Brière, Bénédicte (634) de la Peña, Guillermo, 774 de Melo, Gioia (807) DeSombre, Elizabeth R., 290 Devleeschauwer, Arnaud (793) de Wilde, Jaap (529) De Winter, Lieven, 278 Dehousse, Renaud (284) Deitelhoff, Nicole, xi, xvii, 24, 158, 194, 195n1, 205, 207, 223n3, 231, 256, 259, 264, 306, 339, 344, 348, 817, 834n9, 836 Demeš, Pavol, 606 Denevan, William M., 107 Deng, Xiaoping, 656, 659 Denninger, Erhard, 549–550 Derlien, Hans-Ulrich (353) Derluguian, Georgi M., 638n1 Deudney, Daniel, 308 Deutsch, Karl W., 309 Di John, Jonathan, 722 Diamandouros, P. Nikiforos, 88 Diamond, Larry J., 783 Dickinson, Laura A., 298 Dickovick, James J., 771 Didier, Michel, 403 Dienstbier, Jiří, 603 Dieter, Heribert, 329 Dilling, Olaf, 288 Dimitrova, Antoaneta L., 604, 607 Dinc, I. Serdar, 506 Ding, Xueliang, 458 Dingwerth, Klaus, xvii, 24, 162, 175–176, 194, 207, 339, 510, 818, 825 Dion, Stéphane, 537 Dobbin, Frank (31, 354) Dobrzynska, Agniezka (92) Dodge, Toby, 754 Döhler, Marian, 502–503 Dolenec, Daniela, 603, 609, 611 Dolezal, Martin (29, 267, 582) Dollar, David, 630 Doner, Richard F., 618n1, 622, 629, 722 Donnelly, Jack, 221n1 Donohue, Laura, 556, 559 Dore, Ronald P., 42, 398 Dorff, Robert H., 158 Dorn, David, 438

Dorsch, Pamela, 491 Dostal, Jorg M., 700–701 Dowler, Amelia, xiii n3 Downing, Brian, 139 Downing, Paul B., 346 Downs, George W., 228, 296 Dowty, Alan, 521 Doyle, Michael W., 307 Draibe, Sônia, 800 Drake, Paul, 449 Draude, Anke, 157 Dreher, Sabine (212) Dreier, Horst, 559 Drèze, Jean, 700, 704, 706–707, 706n13 Drezner, Daniel W., 263 Drori, Gili S., 3, 832 D’Souza, Dinesh, 124 D’Souza, Juliet, 512 Duffield, Mark R., 749, 754–757 Duhart, Philippe (688) Dumez, Hervé, 397 Dunning, Thad, 619, 715, 718, 735 Durkheim, Émile, 767 Duyvendaak, Jan Willem (582) Dyer, Geoff, 326 Dyson, Kenneth H. F., 9, 432, 565 Earle, John S. (599) Easter, Gerald M., 591, 596, 643, 645–646 Easterly, William, 101, 771, (589) Easton, David, 132 Ebbinghaus, Bernhard, 89, 473 Eberlein, Burkard, 289 Echeverría Álvarez, Luis, 451 Ecker-Ehrhardt, Matthias (217, 236, 268) Eckersley, Robyn, 350 Eckstein, Harry, 242 Edelman, Marc (687), 698, (713) Eden, Lorraine, 449 Edwards, Erica, xii Efraim, Athena D., 224, 225n7 Egeberg, Morten, 504 Eichengreen, Barry J., 4, 19, 816–817 Eichhorst, Werner, 475 Eisenhower, Dwight D., 429 Eisenstadt, Shmuel N., 105, 736 Eising, Rainer, 271 Ekiert, Grzegorz, 602–604

name Index   847 Eley, Geoff, 83n7, 89 Elias, Norbert, 137, 139–140, 200 Elkins, Zachary, 504, 506 Elliott, John H., 67 Ellis, Stephen, 753 Elster, Jon, 134 Emmenegger, Patrick, 142, 473 Enderlein, Hendrik, 271 Engels, Friedrich, 34n1, 35n2, 193 Engerman, Stanley L., 101–103, 109–110 Englebert, Pierre, 683, 736, 771 Engler, Sarah (92, 581) Epele, Nicolás (807) Epstein, David L., 787 Epstein, Rachel A., 590, 604–605 Erdmann, Gero (742) Erdmann, Stefanie (529) Eriksson, Mikael (794) Ertman, Thomas, 3, 84–85, 139, 171, 361, 642 Esping-Andersen, Gøsta, 45–46, 86, 89n11, 134, 140, 171, 247, 366, 375, 404, 414, 433–434, 436, 467, 470, 475, 484–485, 487–488, 797, 823 Esser, Frank (29) Estévez-Abe, Margarita, 436, 491 Esty, Daniel C., 747 Etchemendy, Sebastián, xvii, 24, 175, 178, 365, 382, 455, 803, 816 Etling, Andreas (387) Evangelista, Matthew, 639 Evangelista, Rinaldo, 422 Evans, Gareth, 314–315 Evans, Mark, 241–243 Evans, Peter B., xvii, 8, 25, 37–38, 40, 125, 136, 157, 175, 181, 256n1, 393, 399, 404, 427, 619–620, 625n13, 626, 628n19, 629–630, 645, 681, 686, 691, 694–695, 730–731, 796, 828, 836 Ewald, François, 18n8, 141 Fabbrini, Sergio, 269 Faist, Thomas, 519 Falk, Richard A., 311 Falke, Josef, 45 Falleti, Tulia G., 143, 658 Falletto, Enzo, 451 Fanthorpe, Richard, 751 Fantini, Marcella (512)

Fardmanesh, Mohsen, 723 Farquhar, Bruce, 297 Farrell, David M. (581) Faude, Benjamin, 263 Favell, Adrian, 517 Fazal, Tanisha M., 3, 16n7, 637 Fearon, James D., 719, 724, 752, 767 Feinstein, Yuval, 69, 78 Feldman, Allan, 501 Ferejohn, John, 572 Ferguson, James, 143, 680–681 Ferguson, Niall, 124, 430 Fernández-i-Marín, Xavier (300, 513) Ferrarini, Tommy, 476 Ferraro, Agustín, 11 Ferrera, Maurizio, 45, 90, 142, 373, 484, 823 Filgueira, Fernando, 797 Findlay, Ronald, 91n12 Finer, Samuel E., 14n6, 61 Fink, Simon, 506 Finnemore, Martha, 230, 255, 306 Fioretos, K. Orfeo, 14, 569 Fisch, Jörg, 78, 88 Fischer, Frank, 576 Fischer-Lescano, Andreas, 134 Fish, M. Steven, 602–603 Fishkin, James S., 576 Fjelstad, Odd-Helge (26) Flannery, Kent V., 105 Flinders, Matthew, 271, (584) Flohr, Annegret, 161 Flora, James (688) Flora, Peter, 3, 37, 86–87, 140, 471, 533 Fluder, Robert, 411 Forbrig, Joerg, 606 Forsthoff, Ernst, 36 Fortin, Jessica, 646–647 Foucault, Michel, 137, 139 Fougner, Tore, 240–241, 250 Fovargue-Davies, Marc (442) Franck, Raphaël, 771, 773 Franck, Thomas M., 202, 314 Franco, Francisco, 90, 447, 567 Frank, André Gunder, 110 Franke, Anja (27) Frankel, Jeffrey A., 715, 723 Fraser, Nancy, 141 Frazier, Mark W., 667

848   name Index Freeman, Gary P., 516, 522 Freeman, Richard, 476 Freitag, Markus, 372, 411 Fridy, Kevin S., 773 Friedberg, Aaron L., 548–549 Friedman, David, 38, 398 Friedman, Milton, 39, 48 Friedman, Rose, 39, 48 Friedman, Thomas L., 40 Frisina, Lorraine (284, 480) Fritz, Verena, 645 Fron, Pauline (709) Frye, Timothy, 591, 597, 604, 645 Fuchs, Susanne, xii Fukuyama, Francis, 40 Gaddafi, Muammar, 752–753, 779 Gaddis, John, 309 Gaffard, Jean-Luc, 403 Gagnon, Alain-G., 541 Gaines, Susan M. (284) Galaich, Glen (777) Galbraith, James (406) Galeotti, Mark, 639 Gallant, Judy A., 312 Gallie, Duncan (478, 496) Galligan, Brian, 449, 453 Gallup, John L., 101–102, 106 Galvan, Dennis, 340 Gamble, Andrew, 15, 44, 380–381, 428 Gamlen, Alan, 524 Gandhi, Jennifer, 783 Ganev, Venelin I., 591, 596, 603, 607–608, 642 Ganghof, Steffen, 43 Gans, Herbert J., 141 Gans-Morse, Jordan, 638 Garay, Candelaria, 457, 803 Gardner, Roy (166) Garicano, Luis (439) Garrett, Geoffrey (31), 42–44, 193, 238, 243, 248, (354) Gauri, Varun, 702n11 Gaviria, Alejandro (114) Gauthier, Anne H., 372, 476 Gawrich, Andrea, 6 Geddes, Barbara, 136, 783 Geertz, Clifford, 65, 137 Gehlbach, Scott (599), 645, 783

Gehring, Thomas, 263, 343, 345 Geis, Anna, 195n1 Geithner, Tim, 329 Gelb, Allan, 715 Gellman, Barton, 550 Gellner, Ernest, 64–65, 68, 136, 139, 201, 533, 767 Gel’man, Vladimir, 641, 647 Genschel, Philipp, xviii, 2n1, 12, 24, (26), 40, 43, 157, 161, (163), 173–174, 193–194, 195n1, 210, 243–244, 249, 255–256, 260, (350), 547, 559, 825, 838 Gerber, Marlène (92, 581) Gerlach, Michael, 397 Gerring, John, 121 Gerschenkron, Alexander, 38, 137, 172, 394, 628, 679 Ghani, Ashraf, 732 Ghysels, Joris, 488 Giddens, Anthony, 19, 46, 200 Gilardi, Fabrizio, 288, 341, 503, 506 Gilbert, Barbara, 19 Gilbert, Felix, 170–171, 361 Gilbert, Neil, 19, 470, 477 Gilmour, Robert, 499 Gilpin, Robert G., 71 Gindin, Sam, 4 Gindulis, Edith (55, 149, 424) Gingrich, Jane R., 14, 437, 473 Ginsborg, Paul, 89 Girardin, Luc (688) Giugni, Marco G. (582) Glaeser, Edward, 430, 499 Glasbergen, Pieter, 347 Glaser, Charles, 306 Glassner, Rainer (164) Glatzer, Miguel, 142 Gleditsch, Kristian S., 79 Gleditsch, Nils Petter, 788, 791 Glick Schiller, Nina, 748 Glyn, Andrew, 431 Goertz, Gary, 279 Goff, Patricia M., 449 Goldblatt, David (214) Golder, Matt, 573 Goldgeier, James M., 519 Goldin, Claudia, 439 Goldsmith, Michael, 269

name Index   849 Goldsmith, Peter Henry, 540 Goldstein, Andrea, 506 Goldstein, Judith L. (50), 161, 314 Goldstone, Jack A. (758, 793) Goldthorpe, John H., 38, 427, 433 Gollac, Michel (425) Gómez-Reino, Margarita (283) González, Felipe, 455 Goodman, Roger, 799 Goodwin, Jeff, 122, 767 Gorbachev, Mikhail, 593, 621, 643, 784 Gordon, Claire (615) Gordon, Colin (146) Gordon, Linda, 141 Gorman, Siobhan, 553 Gorski, Philip S., 8–9, 67, 135n9, 137 Götz, Klaus H., 590 Gough, Ian, 799 Gould, John A., 604, 609 Gourevitch, Peter A., 18–19, 34, 206, 306, 570, 643 Grabbe, Heather, 604–605, 607 Grabosky, Peter N., 288 Graham, Thomas, 640 Gramsci, Antonio, 134 Gran, Brian, 474 Grande, Edgar, 45, 194, (267), 289, (582) Grandin, Nicole, 121 Gray, Christine D., 310, 312 Graz, Jean-Christophe, 296 Greenfeld, Liah, 137 Green Pedersen, Christopher (26) Greenstein, Claire, xii Greenwald, Glenn (560) Greif, Avner, 139 Grimm, Dieter, 549–550 Grimmeisen, Simone (480) Gronau, Jennifer (583) Grote, Rainer, 556 Grotius, Hugo, 221, 225 Gruber, Lloyd, 254 Grzybek, Agniszka, 492 Grzyma ła-Busse, Anna, xviii, 25, 178, 183, 185, 588, 590–591, 593, 596, 602–603, 607, 621, 630, 639n2, 645, 656–657, 782 Gualini, Enrico, 666n5 Gualmini, Elisabetta, 45 Guardia, Laura (807)

Guéhenno, Jean-Marie, 42 Guillén, Ana M., 457 Guiraudon, Virginie, 516 Gulbrandsen, Lars, 349 Gunnarsson, Asa, 489 Gunningham, Neil, 288 Gunther, Richard (93) Gupta, Akhil, 132n1 Gupta, Nandini, 506 Gurr, Ted R., 684, (758), 773 Guttman, Amy, 81 Guy, Brian, 340 Gwiazda, Anna, 596 Haas, Ernst B., 204, 255 Haber, Stephen, 718, 721 Habermas, Jürgen, 77, 194, 196, 202, 695n4, 697n5 Habib, Irfan, 680 Hacker, Jacob S., 8, 42, 432, 434, 467–468, 473, 666, 694 Hadenius, Axel, 642, 782–783, 786 Haftel, Yoram Z., 255 Haftendorn, Helga, 309 Hägerstrand, Torsten, 517 Haggard, Stephan M., 734, 797, 799, 801 Hailbronner, Kay, 519 Halácz, Ivan (530) Hale, Henry E., 602, 639 Hall, John A., xii, xviii, 23, 64, 64n4, 76, 117, 171, 359, 656, 821 Hall, Peter A., xviii, 14, 24, 38–39, 42, 45, 132n2, 172, 175, 197, 206n9, 238, 247, 249, 361–362, 365–366, 381, 393, 396–397, 400, 411–412, 416, 427–428, 431, 436, 566, 824 Hall, Robert E., 109, 110 Hall, Rodney Bruce, 577 Hallin, Daniel C., 571, 578 Hallstein, Walter, 270 Halperin, Morton H. (795) Hammar, Tomas, 519 Hampshire, James, 551, 553 Hancké, Bob, 14 Hanf, Kenneth, 346 Hanley, Seán, 603 Hanrieder, Tine, xviii, 24, 176, 194, 209, 817 Hansen, Berndt, 427

850   name Index Hansen, Mogens, 63 Hanson, Stephen E., 602, 621 Hanushek, Eric A., 693 Hardiman, Niamh, 428, 435 Hardin, Garrett, 501 Hardt, Michael, 132n3 Hardy, Jonathan, 571, 578 Harper, Stephen, 574 Harrison, Joseph, 447 Harriss, John, 706 Hart, Gillian P., 704 Hart, Herbert L. A., 228 Hartmann, Martin, 162 Harvey, David, 137 Hasenclever, Andreas, 254 Hashim, Moshim S., 642, 645 Haubrich, Dirk, 556–557, 559 Haufler, Virginia, 291, (351) Haughton, Timothy, 607 Hauschild, Dörthe, xii Häusermann, Silja (145, 478) Hausmann, Ricardo, 628 Hawkins, Darren G., 205, 229, (234), 254, (283) Hay, Colin, 13, 132nn1–2, 133, 238, 242–243 Hayek, Friedrich, 39 He, Baogang, 664–665 Hechter, Michael, 78–79, 135 Heclo, Hugh, 10, 430 Hedlund, Stefan, 643 Hegel, Georg Wilhelm Friedrich, xii, 10, 737 Heidenheimer, Arnold, 3 Heindl, Waltraud, 520 Helbing, Marc (267, 582) Held, David, 194, 206, 550 Helfer, Laurence R., 263 Helleiner, Eric, xviii, 24, 174, 193–194, 210, 323–324, 326–331, 333, 817, 825 Heller, Patrick, xviii, 25, 175, 181, 393, 404, 619, 625n13, 626, 628n19, 629, 679, 686, (687), 698, 702, 705–706, (710, 713), 796, 828, 836 Hellman, Joel S., 591, 604, 622–623, 639 Hellwig, Martin F., 19 Helpman, Elhanan, 693n2 Hemerijck, Anton, 7, (146), 382, 414, 469, 477, (478, 496) Henderson, David R., 398

Hennessy, Peter, 552, 560 Hennock, E. Peter, 44n3 Hepp, Andreas, xviii, 174, 384, 571, 578, 825 Herb, Michael, 718 Herberg, Martin (300), 345, 348n4 Herbst, Jeffrey, 722, 726, 734, 755 Héritier, Adrienne (26), 158, 346, 377–378, 508 Hernes, Helga, 18, 483, 489, 493 Herrera, Yoshiko M., 590 Herring, Ronald, 708 Hertzman, Clyde, 700 Herz, John H., 307 Hesse, Beate (353) Hesselbein, Gabi, 750, 752 Heupel, Monika, 259 Hey, Ellen (351) Hibbs, Jr., Douglas, 442 Hibou, Beatrice, 445 Higgott, Richard A., 203 Higham, John, 521 Hinrichs, Karl, 474 Hinsley, Francis H., 194, 196 Hintze, Otto, 38, 643 Hirsch, Joachim, 133, 206, 237–241, 243, 248 Hirschl, Ran, 572 Hirschman, Albert O., 81, 447, 628, 734 Hirst, Paul Q., 11, 42 Ho, Alfred, 554 Hobbes, Thomas, 67, 75n1, 201, 205n8, 225, 282, 307, 547 Hobbs, Jason (634) Hobsbawm, Eric, 80, 533 Hoeffler, Anke, 719–720, 724, 735, 751 Hoeglinger, Dominic (267, 582) Hoffmann, Stanley, 205, 271, 394 Holder, Stuart, 508 Hollande, François, 494n8 Holliday, Ian, 799 Hollingsworth, J. Rogers, 140 Holmberg, Sören (636) Holmes, Stephen, 638 Holsti, Kalevi J., 746 Holzgrefe, Jeff L., 310, 312 Holzinger, Katharina, xviii, 24, 341, 383, 577, 825 Hombach, Bodo, 46

name Index   851 Homer-Dixon, Thomas, 308 Hood, Christopher, 288, 499 Hooghe, Liesbet, xix, 16, 24, 180, 209, 255, 264, 269, 271, 273–274, 276, 279–280, (284, 285), 376, 826 Hopkin, Jonathan, 90 Höpner, Martin, 505–507 Horowitz, Donald L., 126–127, 540, 751, 773, 781, 789 Horsfall, Daniel G., 238–239, 247 Hotz-Hart, Beat, 411 Houwing, Hester, 414 Howard, Marc M., 644, 649, 782–783, 786 Howard, Philip N., 576 Howell, Chris, 427, 436 Howitt, Peter, 693n2 Howlett, Michael, 430 Huang, Jing, 657 Huber, Evelyne, xi–xii, xix, 6, 7, 12, 23, 25–26, (31), 42, 83, 89n11, (97), 134, 142n19, 144, (149), 157, 170, 178, 181–182, (252), 366, 374–375, 377n5, 380, (385), 404, 457, 467, 472, 686, 693, 697–698, 701, 797–798, 800, 802–803, 806, (811), 815, 817n1, 823, 824, 829–830, 836 Huber Stephens, Evelyne (713, 795); see also Huber, Evelyne Hucke, Jochen (353) Huff, W. G., 125 Hughes, James R., 604 Hui, Victoria T. B., 2, 139, 656 Hume, David, 835 Humphreys, Macartan, 721, 725 Hunter, Wendy, 703, 802, (812) Huntington, Samuel P. (27), 79–80, 134, 158, (440), 637–638, 767, 781, 825 Huo, Jingjing, xix, 24, 46, 172, 175, 178, 362, 374, 381, 404, 413n2, 415n3, 419, 427, 433, 693, 698, 836 Hurd, Ian, 162, 205, 255 Hurrell, Andrew, 203, 209, 221n1 Hurrelmann, Achim, 2n1, 154, 157, 195n1, 255, 360, 578 Huskey, Eugene, 593, 596 Hussein, Saddam, 311, 754 Huster, Stefan, 550 Hutter, Sven (267, 582)

Iacobucci, Edward, 435 Ibrahim, Anwar, 676 Ickler, Christian (758) Ieda, Osamu 519 Ikenberry, G. John, 132n2, 227, 231n9 Ikime, Obaro, 120 Illéssy, Miklós (425) Immergut, Ellen M., 10, 38, 141, 361, 473 Indridason, Indridi (92) Inglehart, Ronald, 158, 277 Isham, Jonathan, 724 Ismayr, Wolfgang, 566n4 Isuani, Ernesto, 800 Itō, Takatoshi (267) Itzigsohn, José, 774 Iversen, Torben, 88, 91–92, (93), 415n4, 419, 432–433, 436, 439, (441) Iyer, Lakshmi, 125–126, 128 Jabko, Nicolas, 49, 431 Jachtenfuchs, Markus, 12, 271 Jackson, Paul, 749, 757 Jackson, Robert H., 154, 201n7, 676, 733, 746, 750 Jacobs, Lawrence R., 16, 579 Jacobson, David, 519 Jacoby, Wade A. (234, 283), 604 Jaggers, Keith, 665 James, Harold, 324n2, 330 James, Oliver (300) Jänicke, Martin, 341–342, 347 Jannetschek, Hanna (163) Jayasuriya, Laksiri, 769 Jeffery, Charlie, 274 Jellinek, Georg, 157, 194, 516 Jenkins, Brian, 81n6 Jenkins, Peter, 15 Jenkins, Rhys O., 449 Jensen, Carsten, 473, 477 Jensen, Nathan, 717, 722 Jenson, Jane, 416, 428, 483, 488 Jessop, Bob, 37, 133, 134, 140, 193, 206, 237–239, 241, 243–244, 247–248, 477, 500 Jeunemaître, Alain, 397 Jileva, Elena D., 605 Joerges, Christian, 45, 162, 260

852   name Index Johnson, Chalmers A., 38, 393, 396, 398, 427, 430, 618, 618n1, 619–620, 620n3, 622, 622n9, 691 Johnson, Simon (113, 129), 328, (668), 716, 722, (793) Jolly, Seth K., 275 Jones, Charles I., 109–110 Jones, George (300) Jones, Geraint (634) Jones, Erik, 414 Jones Luong, Pauline Jones, xix, 25, 178, 183, 185, 590, 595n5, 597, 603, 619–621, 626, 629–631, 645, 656, 686, 715, 821, 827 Jönsson, Christer (235), 260 Joppke, Christian, 519 Jordan, Andrew (26), 346 Jordana, Jacint, 142, 288, 505 Jörgens, Helge, xix, 24, 175–176, 194, 207, 211, 341–342, 350, 510, 818, 825 Josling, Timothy E. (50) Jost, John T., 134 Jowitt, Ken, 644 Judt, Tony, 88, 568–569, 603 Junisbai, Azamat K., 631 Jupille, Joseph, 294 Jürgens, Ulrich (145) Kaan, Christopher (167) Kaasch, Alexandra (481) Kahanec, Martin, 526 Kahler, Miles, 34, (164), 197, 204–205, 279, (319), 323, 755 Kahn, Jeffrey, 639 Kaiser, André, 566n4 Kaiser, Wolfram, 7 Kalandadze, Katya, 602 Kaldor, Mary, 3, 751 Kalyvas, Stathis N., 7, 139, 568, 757 Kamm, Fabian, 506–507 Kandel, Johannes, 46 Kang, David C., 740 Kang, Miongsei, 806 Kanowski, Peter (353) Kant, Immanuel, 198, 307 Kantola, Johanna, 489, 493n5, 494 Kántor, Zoltan (530) Kaplan, Robert D., 749

Kapstein, Ethan B., 203, 835 Kapur, Devesh, 734 Karl, Terry Lynn, 721–722, 724–725, 735 Kassim, Hussein, 275 Kastendiek, Hans (145) Kasza, Gregory J., 77, 86n10 Kato, Junko, 91 Katz, Lawrence F., 439 Katz, Michael L., 501 Katz, Richard, 400 Katzenstein, Peter J., 38, 44, 157, 197, 206, 361, 410–412, 421, 427, 467, 557–558, 560 Kaufman, Robert R., 797, 799–801 Kaufmann, Daniel, 631n24, (634) Kaufmann, Franz-Xaver, 141 Kaufmann, Otto (478) Kay, Stephen J., 799–800, 803 Keating, Michael, xix, 24, 79, 278, 359, 376, 383–384, 522, 533, 535, 537–538, 541–542, 682, 764, 775, 826, 833–834 Keefe, Tania J., 258 Keefer, Philip, 783 Keeler, John T., 395 Keene, Edward, 221n1 Kelley, Judith, 208, 263, 604–605 Kelly, Andrew S., xix, 23, 68, 79, 116, 675 821 Kelsen, Hans, 36 Kelsey, Jane, 378 Kemp, Tom, 394 Kemp, Walter A., 543 Kennedy, John F., 429 Kenworthy, Lane, 475 Keohane, Robert O., 40, (164), 197, 205–206, 210, 254, 289, 307, 309–310, 312, (317, 319), 325n4 Kersbergen, Kees van, 7, 88–89, 467 Kersten, Jens, 36 Kerstenetsky, Celia, 701 Kestnbaum, Meyer, 139 Kettl, Donald F., 563 Keynes, John Maynard, 427 Khaldun, Ibn, 65 Khan, Genghis, 63n3 Khazanov, Anatoly, 63n3 Kier, Elizabeth, 319 Kim, Hyung-Ki, 396 Kim, Taekyoon (811)

name Index   853 Kindleberger, Charles P., 206, 323, 325, 333 King, Desmond S., 16 King, Gary, 85n9 Kingsbury, Benedict, 298, 345, 353 Kingstone, Peter R., 803 Kis, János, 603 Kiser, Edgar V., 135 Kissinger, Henry A., 307 Kitschelt, Herbert P., 8, 206n9, 428, 568, 603 Kivisto, Peter, 519 Klausen, Jytte, 77 Knieps, Günther, 507–508 Knill, Christoph, 341, (352) Knorr, Klaus E., 309 Kocharian, Robert, 595 Kochenov, Dimitry, 613 Koeberle, Stefan, 630 Kohler-Koch, Beate, 271 Kohli, Atul, 125, 142, 685, 706, 722, 726, 740 Köhne, Anne-Lore, 295, 295n3 Koléda, Gilles, 403 Kolodziejczyk, Darius, 65 Konings, Martijn, 327 Konitzer, Andrew, 611 Konle-Seidl, Regina, 475, (478) Konno, Silvia (712) Konzelmann, Suzanne, 436 Koop, Christel, 510 Koopmans, Ruud (582) Kopstein, Jeffrey, 606 Koremenos, Barbara, 161 Korpi, Walter, 89, 134, 140, 142, 366, 466–467, 473 Korzec, Michael, 656 Kosonen, Pekka (422) Kovalčík, Branislav, 593 Kowall, Tina, 597 Kraay, Aart, 630, (634) Kramer, Ludwig, 344n2 Krasner, Stephen D., 38, 132n2, 136, 152, 152n1, 153, 156, 159, 162, 193, 195, 197–198, 202, 208, 201n10, 222n2, 223n3, 224n5, 254, 306, 817 Krause, Keith, 748–749 Krause, Lawrence B., 125 Kreile, Michael, 430 Krell-Laluhová, Zuzana (582)

Kreuder-Sonnen, Christian, 259 Krieger, Joel, 431 Kriesi, Hanspeter, 6, 19, 264, 411, 569, 571, 579 Krippner, Greta R., 434 Krisch, Nico, 203, 205, 229, 298, (300) Kristensen, Ida (793) Kristensen, Per Hull, 416, 418, 698 Krücken, Georg, 3, 832 Krueger, Anne O., 39 Krugman, Paul R., 241, 399 Kryshtanovskaya, Olga V., 593, 596, 641–642 Kubik, Jan (614) Kudamatsu, Masayuki, 694, 694n3 Kuhnle, Stein (51, 94, 545) Kuhonta, Erik, 144n21 Kumar, Krishan, 69 Kumm, Mathias, 205 Kurlat, Sergio (793) Kurtov, Adzhar, 597 Kuzio, Taras, 638 Kwak, James, 328 Kwon, Huck-Ju, 803–804, (811) Kymlicka, Will, 522, 524, 536 Lachat, Romain (29) Ladaique, Maxime (709) Ladwig, Bernd, 158 Lahav, Gallya, 516 Laitin, David, 719, 724, 767 Lake, David A., 34, 205, (214), 221n1, (234), 259, (266), 279, 323 Lall, Marie, 519 Lamb, Michael (422) Lamont, Michèle, 431 Landucci, Sergio, 78 Lane, Frederic C., 732 Lane, Philip R., 724 Lang, Sabine, 492 Lange, Hans-Jürgen, 552 Lange, Matthew, xii, xix, 3, 8, 20, 23, 25, 68, 79, 101, 103, 108, 123, 125, 128, 178, 185, 359, 656, 675, 683, 686, 691, 750n4, 764, 766–768, 771, 773, 780, 796, 821, 828, 833–834 Lange, Peter (215, 442) Langeat, Matthew, xi

854   name Index La Porta, Rafael, 645 Lasswell, Harold D., 35, 548–549 Lattimore, Owen, 64 Laube, Lena (54, 530) Laurens, Bernard J. (581) Lavena, Cecilia, 493n5 Lavenex, Sandra (29) Lawrence, Robert, 259 Lederman, Daniel, 716 Lee, Jooha (811) Lee, Kelley, 263 Lee, Melissa, 155, 160 Leftwich, Adrian, 619 Le Galès, Patrick, 11 Le Grand, Julian, 14 Lehmbruch, Gerhard, 38, 410–411, 427 Lehmkuhl, Dirk, 158 Lehmkuhl, Ursula, 153, 158 Lehoucq, Fabrice, 798 Leibfried, Stephan, xi, xii, xiiin6, xix, 1, 2n1, 9, 11, 13, (27, 29, 30), 42, (55), 140n15, 141, (145, 148), 154, 157, 158, (165), 169, 189, 193–196, (214), 238, 241, (266), 269, 359–360, 373, (386), 469, 798, 818n1, 821, 823, (838) Leimgruber, Philipp (92) Leite, Carlos, 715 Lemarchand, René, 752 Lemke, Thomas, 137, 143 Lenschow, Andrea (352) Leonardi, Robert (31, 149, 166) Lenin, Vladimir Ilyich, 35n2, 78 Leruez, Jacques, 427, 429 Levi, Margaret, 77, 132n1, 135, 139, 642, 731 Levi-Faur, David, 142, 153, 287–288, (300), 502–505, 511, (513) Levine, Ross, 101, 771 Levinger, Ben, 275n3 Levitsky, Steven, 642, 646, 664, 782, 787, 802 Levitz, Philip, 590, 608 Levy, Jonah D., xi, xii, xx, 9, 23, 24, 49, 136n11, 157, 169, 172, 175, 178, 361, 374, 381–382, 393, 397, 399, 402, 410, 415–416, 428, 457, 815–816, 822–824, 836 Lewis, Jane (27, 145), 475, 484–485, (838) Lewis, Peter M., 740 Li, Cheng, 657 Li, Tania, 143

Lichtblau, Eric, 558 Lieberman, Evan S., 127, 702n11 Lieberthal, Kenneth G., 656, 659 Liebowitz, Stanley J., 291 Liefferink, Duncan (352) Liese, Andrea, 161 Lieven, Dominic C. B., 67, 69 Lijphart, Arend, 8, 19, 38, 566, 566n3, 571, 577, 770, 781, 789 Lilja, Kari, 416, 418, 698 Limongi, Fernando P. (97), 781, 787, 792 Lin, Wan I., 804 Lindbeck, Assar, 39 Lindberg, Leon N., 276 Lindberg, Staffan I., 782, 786, 792 Lindblom, Charles E., 42 Linder, Anja (634) Lindert, Kathy, 628 Lindert, Peter, 466–467 Linz, Juan J. (31, 73), 82, 90, (777), 783 Lippert, Inge, 507–509 Lipset, Seymour M., 35, 76, 82, 85, 158, 277, 534 Lipson, Charles (165) List, Friedrich, 171, 394 Lister, Michael (28, 146) Little, Richard, 221n1 Lloyd-Sherlock, Peter, 798 Locke, John, 78, 139, 307 Lockhart, Claire, 732 Lødemel, Ivar, 475 Lodge, Martin, 499, 509–510, (512) Lombardo, Emanuela, 491–492, 494 Longstreth, Frank (56) Lopez, George A., 259, (265) López-Alves, Fernando, 139 López-Calva, Luis F., 803 Lopez-de-Silanes, Florencio (651) Lora, Eduardo (114) Lorenz, Edward, 418, (425) Louis XIV, 393 Lovadino, Ana Lucia (712) Loveman, Mara, 140, 143 Lovenduski, Joni, 491 Lowe, Will (758) Lowi, Theodore J., 38 Lü, Xiaobo, 657 Luban, David, 231

name Index   855 Luck, Edward C., 315 Lue, Jen-Der, 803 Luebbert, Gregory M., 83–84, 87, 88, 90 Lundvall, Bengt Åke, 418 Lunt, Neil, 239, 241, 243 Lustig, Nora, 803 Lynch, Allen C., 643–645 Lynch, Gabrielle, 739 Lynch, Julia F., 474 Lynch, Peter (283) Lyon, David, 553 Lyons, Gene, 311 McAdam, Doug, 19 McAllister, Ian (581) McArthur, John D., 427 McBride, Dorothy E., 489, 491 MacCormick, Neil, 281, 537–538, 542 McCullaugh, Marcy E., 631n23 McDermott, Constance L., 349 McDermott, Gerald A., 605 McFaul, Michael, 638, 642, 645 McGlinchey, Eric M., 596 McGowan, Patrick J., 731 McGrew, Anthony (214) McGuire, James W., 694, 700–701, 799, 805 McHale, John, 734 McInnes, Neil, 84, 89 McLaren, Lauren M., 277 McNeill, Desmond, 262 Macey, David, 137 Mach, André, 414 Machiavelli, Niccolò, 67 Madrid, Raúl L., 800, (812) Magnuson, Katherine A., 418 Mah, Insub, 807 Mahon, Rianne, 435 Mahoney, James, xx, 20, 23, 68, 79, 101, 104, 105, 109, (114), 116, 128, (130), 657, 659, 662, 665–666, 675, 821 Maier, Charles S., 1, 76–77, (441) Mainwaring, Scott, 7 Majone, Giandomenico, 19, 269, 288, 503 Majtényi, Balácz (530) Makó, Csaba (425) Malefakis, Edward E., 88 Malesky, Edmund J., 783 Malloy, James M., 798

Maloney, William F., 716 Mamdani, Mahmood, 120, 123, 125, 127, 128, 750, 768 Mancini, Paolo, 571, 578 Manela, Erez, 78, 88 Mann, Michael, 5, 14, 14n6, 62, 67, 68, 70, 80, 135, 136, 139, 171, 179, 450, 520, 645, 659, 708, 767, 769, 821 Manning, Chris, 520 Manow, Philip, xx, 7, 23, 84, 88, 89, 154, 359, 467, 746n1, 822 Mao, Zedong, 13, 654, 656, 663 March, Andrew F., 622 Marcus, Joyce, 64 Mares, Isabella, 43, 250 Margolis, Stephen, 291 Marks, Gary, xx, 16, 24, 180, 209, (215), 255, 264, 271, 274, 276, 279–280, (283, 285), 376, (386, 442), 826 Marsh, David (27, 146) Marshall, Monty, 675 Marshall, Thomas H., 140, 525 Marshall-Silva, Jorge, 723 Martens, Kerstin (29, 165, 214, 266, 386) Martin, Andrew, 443 Martin, Cathie Jo, 54, 443 Martin, David, 85, 88–89, 519 Martin, Lisa L., 309 Martínez-Franzoni, Juliana, 798, 800, 802 Marx, Anthony W., 767 Marx, Karl, 34n1, 35, 65–66, 193 Mas, Arthur, 537 Mason, T. David (775) Massé, Pierre, 36 Massetti, Emanuele, 278 Massoc, Elsa, 49 Mastruzzi, Massimo (634) Matanoc, Aila, 161 Matlock, Jack F., 637 Mattes, Robert, 773 Matthes, Jörg (29) Matthew, Richard A., 308 Matthews, Max W., 314 Mattli, Walter, xx, 24, 179–180, 194, 209–210, 255–256, 264, 284, 286n1, 288, 291–292, 294–296, 298, (300), 346, 376, 605, 837, 837n16 Mau, Steffen, 47, 140n15, 518, 528

856   name Index Maull, Hanns W., 308 Mause, Karsten (387, 514) Mayer, Arno J., 81 Mayer, Florian, 506–507 Mayer, Peter (29, 165, 214, 266, 386) Mayntz, Renate, 37, 153, 158, 346 Mazower, Mark, 70 Mazur, Amy, 489, 492 Meadowcroft, James, 346, 350 Mearsheimer, John J., 254 Médard, Jean-François, 736 Medvedev, Dmitry, 640n3 Megginson, William L., 505–508 Mehler, Andreas (742) Mehlum, Halvor, 716 Meidner, Rudolf, 413 Meinel, Florian, 36 Mellinger, Andrew (114) Melo, Marcus A., 628 Menaldo, Victor, 718, 721 Menem, Carlos Saúl, 455 Meng, Xin, 520 Menkhaus, Ken, 154, 749, 753, 755 Menz, Georg (251) Menzel, Anne, xx, 25, 153–154, 158, 186–187, 686, 833 Mercer, Jonathan, 319 Merkel, Wolfgang (581) Mertens, Daniel, 511 Mesa-Lago, Carmelo, 797–800 Metzler, Mark, 323n1 Meunier, Sophie, 263 Meyer, John W., 77, 116, 137, 199, 832 Meyfeld, Dörthe, xii Meyns, Peter, 629 Migdal, Joel S., 8, 38, 125, 132n2, 135, 135n9, 154, 662, 726, 769 Miliband, Ralph, 37, 133 Mill, John Stuart, 533 Miller, Benjamin, 683 Miller, David, 533 Miller, Greg, 550 Miller, Kenneth P., 575 Miller, Peter, 143, (146), 431 Miller-Johnson, Shari (423) Milliken, Jennifer, 748–749 Milner, Helen V., 40 Milošević, Slobodan, 611, 738

Milward, Alan S., 70 Min, Brian (778) Mitchell, Deborah, 248, 374 Mitchell, Neil J. (758) Mitchell, Ronald B., 343 Mitchell, Timothy, 137, 139 Mitnick, Barry M., 499 Mitrany, David, 277 Miura, Mari (408) Mjøset, Lars, 413–414 Modood, Tariq, 523 Moene, Karl Ove, 716 Mohamedali, Khairunnisa, 740 Mol, Arthur P. J. (352) Molina, Carlos, 802 Möllers, Christoph, 36 Molot, Maureen Appel, 449 Monnet, Jean, 270 Monteiro, Carlos Augusto, 702 Montero, José Ramón, 90 Montesquieu (Charles-Louis de Secondat), 66 Monteux, Cammille A., 771 Moore, Jr., Barrington, 6–7, 83, 87, 90, 133, 206, 781 Moore, Mick (26) Moral, Félix, 535 Moran, Daniel, 340 Moran, Jon, 555 Moran, Jonathan, 134 Moran, Michael, 431, 476, 502 Moravcsik, Andrew M., 45, 205, 230–231, 254, 261, (317) Moreno, Luis Fernández, 541 Morgenthau, Hans J., 196, 201n5, 306–307 Moser, Julia (55, 149, 424) Mosher, James S., 475 Motyl, Alexander J., 64 Mozaffar, Shaheen, 773 Mubarak, Hosni, 779 Mudde, Cas, 571 Müller, Axel (353) Müller, Lisa (581) Mulroney, Brian, 436 Munck, Gerardo L., 783 Münz, Rainer, 526 Murdoch, Rupert, 241 Murphy, Dale D, 290 Murray, Charles A., 39

name Index   857 Musamba, Charity, 629 Mustillo, Thomas (462) Myers, Norman, 308 Myles, John, 140, 379, 430, (478, 496) Nanz, Patrizia, 261 Napoleon I, 67, 78–79 Nassmacher, Karl-Heinz, 571 Nathan, Andrew J., 663 Naujoks, Daniel, 519 Nazarbayev, Nursultan, 630n22 Neary, J. Peter, 723 Negri, Antonio, 132n3 Nelson, Joan M., 800 Nelson, Michael R., 553 Nelson, Moira, 418–419, (423) Netter, Jeffry M., 505, 508 Nettesheim, Martin, 205 Nettl, John P., 201 Newbery, David M., 508 Newman, Abraham L., 504 Newman, Edward, 307 Newsom, Deanna (299) Ngai, Mae, 521 Ni, Anna Ya, 554 Niedermayer, Oskar, 571 Niedzwiecki, Sara, xx, 25, 144, 181–182, (283), 374, 686, 803, 806, 824, 829 Nielson, Daniel L. (214, 234), 255, (266, 283) Nimni, Ephraim J., 539 Ninčić, Djura, 225 Niskanen, William A., 39, 134, 501 Nivola, Pietro S., 382 Niyazov, Saparmurad, 594, 598 Nolan, Brian, 430 Nolan, Patrick, 475 Nölke, Andreas, 296 Nolte, Georg, 203 Nonetti, Raffaella Y. (31, 149, 166) Nonhoff, Martin (583) Norberg-Bohm, Vicki, 346–347 Nordstrom, Timothy (267) Norgaard, Asbjørn, 89n11 Norris, Pippa, 19, 489, 576–578, 580, 773 North, Douglass C., 139–140, 171, 227, 588, 639, 645 Norton, Philip, 502 Noueihed, Lin, 753

Noutcheva, Gergana, 610 Nugent, Jeffrey B., 693 Nullmeier, Frank, xi, xx, 18, 18n8, 24, 141, 169, 174, 384, 578, (582), 825 Nye, Joseph S., 210, 289, 307–308, 310 O’Brien, Richard, 41 O’Connell, Philip J. (443) O’Connor, Julia S., xx, 24, 177–178, 382, 484n1, 489–491, 495, 820, 824–825 O’Donnell, Guillermo A., 37, 451, 642, 782 O’Dwyer, Conor A., 591, 593, 596, 603, 606 O’Halloran, Sharyn (793) O’Leary, Brendan, 770 O’Rourke, Kevin H., 91n12 Obama, Barack, 491 Oberthür, Sebastian, 263 Obinger, Herbert, xxi, 4, 10, 18, 24, (27), 43, 77, 140–141, (145), 177–178, 211n12, 342n1, 359, 377, 382, 414, 416, 469, (481), 505–506, 824, (838) Ocampo, José Antonio, 327 Oesch, Daniel, 570 Offe, Claus, 37, 133–134, 140, 140n16, 241, 381, 445, 638 Ohmae, Kenichi, 42 Öhman, Berndt, 413 Oi, Jean C., 657, 660 Oksenberg, Michael C., 659 Olcott, Martha B., 598 Oliveira Salazar, António de, 447, 451 Olivier de Sardan, Jean-Pierre, 736 Olson, Jr., Mancur, 39, 135n7, 630, 642, 732–733 Olson, Sven, 89n11 Oneal, John R., 206 Oneto, Gilberto, 535 Onganía, Juan Carlos, 453 Onoma, Ato Kwamena, 658 Orban, Viktor, 608–609 Ordaz, Díaz, 453 Orenstein, Mitchell A., 18, 602–603 Orloff, Ann S. (57), 140n15, 141, (151), 483, (497) Ormston, Rachel, 538 Ornston, Darius, 46, 412, 417 Orren, Karen, 76n2, 361 Orwell, George, 548

858   name Index Osiander, Andreas, 223n3 Østergaard-Nielsen, Eva, 524 Osterhammel, Jürgen, 1, 3, 77, 816 Ostrom, Elinor, 20, 162, 695 Outshoorn, Joyce, 489 Overdevest, Christine, 349 Oxhorn, Philip, 771 Ozden, Caglar, 527 Page, Edward, 269 Pagliari, Stefano, 329, 333, (335) Pak, Pog-Yŏng, 19, 817 Palat, Ravi A., 327 Palier, Bruno, 89, 375, (478) Pallares-Barbera, Montserrat, 449 Palme, Joakim, 89, 142, 366, 466, 473, (481) Palmer, Robert R., 76 Panitch, Leo, 4, 327 Papadópulos, Jorge, 797 Paris, Roland, 755 Park, Chan-Ung, 803 Park, Gene (408) Parker, Christine, 288 Parker, Geoffrey, 77 Parris, Kristen, 660 Parsons, Talcott, 66, 132 Passmore, Kevin, 81n6 Patman, Robert G., 550 Patrick, Hugh, 398–399 Pattberg, Phillip, 278, 347 Paul, Thazha V., 340 Paulson, Jr., Henry M., 331 Pauly, Louis W., 194 Paxton, Robert O., 89 Payton, Autumn Lockwood, 230 Pedersen, Susan, 77 Pei, Minxin, 629n20 Pemberton, Hugh, 429 Pempel, T. J., 393, 395, 397, 401, 403, (407) Peng, Ito, 700–701, 799, 801, 803–805 Pérez-Díaz, Víctor, 70 Perón, Juan, 447, 451 Perraton, Jonathan (214) Perry, Matthew, 395 Peterson, John (284) Petring, Alexander (513) Petrova, Tsveta, 606 Pevehouse, Jon, 257

Philip, Hwang (422) Philpott, Daniel, 223n3 Phythian, Mark, 555 Piattoni, Simona, 271, 275 Piepenbrink, Anke (632) Pierson, Christopher (27), 132n2, (145, 838) Pierson, Paul, 8, 10, 14, 42–43, 141, 248, 375, 379, 432, 434, 466, 469–470, 473, 478, 659 Pigou, Arthur C., 501 Pinochet, Augusto, 39, 798, 800 Pizzorno, Alessandro, 427 Plant, Raymond, 14n5 Plato, xiii Plümper, Thomas, 605 Plumptre, Arthur F. W. W., 449 Poe, Marshall T., 643 Pogge, Thomas W., 307 Poggi, Gianfranco, 77, 361 Pogorel, Gérard, 506–507 Polanyi, Karl, 44–45, 48, 171, 324, 428, 697 Pollack, Mark A. (32) Pollard, John, 88 Pollitt, Christopher, 16 Ponce, Aldo F., 803 Pontusson, Jonas G., 15, 46, 49, 247, 404, 413, 415n4, 570, 579 Pop-Eleches, Grigor, xxi, 25, 590, 602, 608–609, 611, 644, 686, 781–782, 833 Popov, Vladimir, 623, 646 Porter, Tony, 325n5, 330, (351) Posner, Daniel N., 773 Potolidis, Panajotis (92, 581) Poulantzas, Nicos, 37, 132n3, 133 Powers, Kathy, 279 Prasad, Monica, 90–91, 430 Preston, Paul, 89 Prestowitz, Clyde V., 397 Pribble, Jennifer E., 800, 802, (808) Price, Adam, 275 Priest, Dana, 553, 558, 560 Pritchett, Lant (728) Przeworski, Adam, 76, 79, 82, 134, 140, 158, 427, 781, 787, 792 Pufendorf, Samuel von, 221 Pugh, Martin, 84 Pugliese, Enrico, 144 Pujol, Jordi, 537

name Index   859 Pungello, Elizabeth P. (423) Pusey, Michael, 454 Putin, Vladimir, 183–184, 593, 595, 595n4, 637–649 Putnam, Robert D., 8, 142, 162 Putterman, Louis G., 119 Quack, Sigrid, 296 Quinn, Dennis P., 373, 411 Raciborski, Jacek, 593 Radnitz, Scott, 597 Ragin, Charles (386, 479) Rainer, Ilia, 771, 773 Rajan, Ragurham, 434 Ramachandran, Vimala, 705 Ramey, Craig T. (423) Ramirez, Alejandro (712) Ramirez, Francisco A. (130, 148, 215) Ramsay, Kristopher W., 721 Ranis, Gustav (50), 618, 693, (710) Rasand, Eric, 259 Rasler, Karen A., 77, 746n2, 752, 754–755, 757 Rauch, James E., 620 Raustiala, Kal, 263, 343, 346 Ravenstein, Ernest G., 517 Ray, Leonard (252) Reagan, Ronald, 39, 42, 242, 362, 381, 428, 431, 451, 502 Redgwell, Catherine, 343 Regan, Aidan, 437 Regini, Marino, 427 Rehn, Gøsta, 413 Reich, Robert, 174 Reinert, Erik S., 240 Reinhard, Wolfgang, 361, 547 Reinhart, Carmen, 435 Reinicke, Wolfgang H., 201n5 Reinold, Theresa, 207 Remick, Elizabeth J., 656 Remington, Thomas F., 590 Rémond, René, 81n6 Renan, J. Ernest, 522 Renders, Marleen, 754 Renga, Simonetta, 491 Renner, Michael, 308 Reno, William, xxi, 25, 124, 125, 160, 176, 186–187, 686, 750–751, 754, 832–833

Renwick, Alan, 573–574 Requejo, Ferran, 541 Reus-Smit, Christian, 199, 199n4, 207 Reuter, Ora J., 789 Rhodes, Martin (28, 146), 158, 373, (440) Rhodes, Rod A. W., 431 Riccucci, Norma M., 493n5 Richardson, Jeremy, 44, 380 Richter, James, 641 Richter, Thomas, 720 Riddell, Peter, 433 Rieger, Elmar, 1, 42, 141, 141n18, 193, 238, 241, 359, 798 Rieth, Lothar (164) Riker, William H., 134 Ringen, Stein, 803 Ripsman, Norrin M., 548 Risen, James, 558 Risse, Thomas, xxi, 16, 20, 23, 23n8, (27), 40, 152n1, 153–154, 159–160, 162, 195, 198–199, 207, 277, 359, 748, 750, 757, 817, 834, 834n9 Ritchie, Bryan K., 622, (633) Rittberger, Berthold, 261 Rittberger, Volker, 201n5, 205, (266) Ritzen, Jozef (776) Rixen, Thomas, 260, 264 Roberts, Cynthia, 639, 645 Roberts, Kenneth M., 802 Robertson, Graeme B., xxi, 25, 686, 782–783, 789, 833 Robinson, James A., 19, 82, 109, 111, (113, 129, 668), 693, 716, 722, 781, (793) Rock, David, 798 Rodrik, Dani, 43, 44, 45, 101, 238, 359, 625–626, 628, 695, 695n4 Roe, Paul, 751 Roeder, Philip G., 16n7, 621n7, 781, 789 Roessler, Philip G., 782–783, 786 Rogoff, Kenneth, 435 Rokkan, Stein, 37, 76, 84, 85, 87, 90, 277, 533 Romano, Cesare P. R., 344 Romero, Frederico (73, 583) Ron, James, 262 Roos, Christof (54, 530) Roosevelt, Franklin D., 323 Rosamond, Ben, 271 Rosanvallon, Pierre, 577

860   name Index Rosberg, Carl G., 676, 733 Rose, Nikolas, 143, 431 Rosecrance, Richard N., 18 Rosefielde, Steven, 643 Rosen, Ori (95) Rosenau, James N., 194, 208 Rosenbluth, Frances, 574, (581) Rosovsky, Henry, 398–399 Ross, Anthony, 550 Ross, Cameron, 641 Ross, Michael L., 618, 716–717, 719–720, 724–725, 735, 752 Rossi-Hansberg, Esteban (439) Rostow, Walt, 158, 735 Rotberg, Robert I., 154, 158, 732, 747–749 Roth, Roland, 206 Rothgang, Heinz, 2n1, 195n1, 360, 476 Rothstein, Bo (636), 645, 698 Rousseau, Jean-Jacques, 67 Rowthorn, Robert, 379 Rüb, Friedbert, 18, 18n8, 141 Rubio-Marín, Ruth, 523 Rudolf, Beate, 158 Rudolph, Karsten, 550 Rudra, Nita, 681, 830 Rueda, David, 142 Rueschemeyer, Dietrich, 7, 8, (51), 76, 83, 90, 133, 133n5, 143, 143n20, (146, 164), 697, 781, 798, (838) Ruggie, John G., 44, 196–197, 206, 323 Ruhm, Christopher (424) Russell, James A., 340 Russett, Bruce M., 206 Rustow, Dankwart A., 158, 781–782 Ruus, Jüri, 591, 593 Sabel, Charles F., 628, 695 Sachs, Jeffrey D., 101, (114), 618, 715, 723, (728) Sainsbury, Diane, 493n5, 494n6 Sala-i Martin, Xavier, 724 Salamey, Imad, 770 Samanni, Markus (636) Sambanis, Nicholas, 773 Samuels, Richard J., 38, 395–398 Samuelson, Paul A., 501 San Martino, Jorge Antonio, 800

Sanader, Ivo, 611 Sand, Peter H., 343 Sandbrook, Dominic, 430 Sandbrook, Richard, 679, 698 Sandholtz, Wayne, 255 Sargent, Daniel J. (441) Sarkozy, Nicolas, 47n4 Sarre, Johanna (163) Sasse, Gwendolyn (615) Sassen, Saskia, 519 Saurer, Edith, 520 Sawer, Marian, 489–490, 494 Sayer, Derek, 137 Sbragia, Alberta M., 269 Scarritt, James R. (777) Scartascini, Carlos, 110 Schäfer, Armin, 15, 437, 579 Schäferhoff, Marco, 159, 161 Schakel, Arjan H., xxi, 24, 154, 180, 194, 209, 211, 255, 277–278, 280, (283), 344n2, 376, (386), 826 Schapper, Andrea, 262 Scharpf, Fritz W., 10, 37–38, 158, (163), 193, 231, 338, 375, 377, 381, 466, 469, 504 Schatzberg, Michael G., 736 Scheeck, Laurent, 263 Scheidel, Walter, 61n1, 64 Scheingold, Stuart A., 276 Scheppele, Kim Lane, 608 Schetter, Conrad (164), 769 Scheve, Ken, 77 Schickler, Eric, 659 Schieder, Theodor, 78–79 Schiff, Maurice, 527 Schimmelfennig, Frank, 604 Schlichte, Klaus, xxi, 25, 38, 135n9, 185, 686, 834 Schmelzle, Cord, 162 Schmid, Achim (480) Schmidt, Manfred G., 86–87 Schmidt, Susanne K., xxi, 24, 377–378, 383, 511, 577, 825 Schmidtke, Henning (583) Schmitt, Carina, 14, (30, 31, 215), 342n1, (353), 377, (387, 388), 471, 477, (480), 505, (514) Schmitt, Carl, 36

name Index   861 Schmitter, Philippe, 38, 269, 276, 408, 425, 444, 573, 782 Schneider, Steffen, xxi, 2n1, 174, 195n1, 360, 378, (582, 583), 825 Schnyder, Gerhard (442) Schoenman, Roger, 592, 596 Schreeb, Katharina (387) Schröder, Gerhard, 242 Schuler, Paul J., 783 Schultz, T. Paul, 618 Schulze, Hagen, 79 Schulze, Isabella (479) Schuppert, G. Folke, 155, 158 Schuster, Philipp, 14, 377–378, (387, 514) Schwanke, Katja (529) Schwartz, Herman, xxi, 24, 175, 178, 331, 365, 382, 444, 445, 450, 454, 816 Schwarz, Peter, 43, 243–244 Schweisfurth, Theodor, 204 Schwindenhammer, Sandra (164) Scott, Bruce, 427 Scott, Colin (282), 509 Scott, James C., 3, 137, 153, 708 Scott, Joanne, 225 Scruggs, Lyle, 372, 380, 472–473 Scully, Ben, 703 Scully, Timothy R., 7 Sedelmeier, Ulrich, 604, 607, 609 Seeleib-Kaiser, Martin (145, 478) Seelkopf, Laura, xxii, 24, 173–174, 193–194, 210, 825 Segal, Adam M., 629 Segalotto, Jean-François (581) Segura-Ubiergo, Alex, 798 Seidman, Harold, 499 Seikel, Daniel (513) Seikkula, Minna, 489 Sejersen, Tanja B., 519 Selee, Andrew D. (777) Sell, Susan K., 264 Šelo Šabić, Senada, 609 Semb, Anne Julie, 311 Sen, Amartya K., 181, 625, 692, 692n1, 694, 695n4, 700, 704, 706 Sender, Herman, 331 Senghaas, Dieter, 196, 206, 210 Serrano, Roberto, 501

Servan-Schreiber, Jean-Jacques, 395 Service, Elman R., 105 Shair-Rosenfield, Sarah, 273, 278, (283) Shambaugh, David L., 332 Shapiro, Carl, 501 Shapiro, Michael J., 132n3 Sharafutdinova, Gulnaz, 641 Sharma, Aradhana, 132n1 Shaver, Sheila (497) Shaw, Jo, 519 Sherlock, Thomas, 639, 645 Shevardnadze, Eduard, 597 Shipan, Charles R. (581) Shirk, Susan L., 656 Shleifer, Andrei, 499, 512, (651) Shonfield, Andrew, 36, 38, 39, 45, 172, 361–362, 365–366, 393, 396, 426, 569 Shue, Vivienne, 657 Shugart, Matthew S., 88 Siaroff, Alan, 90 Siddiqi, Arjumand, 700 Siebenhüner, Bernd, 255, 345 Siegle, Joseph T., 788 Sierra, Jazmin, 629 Siim, Birte, 483 Sikkink, Kathryn, 161 Silva, Cavaco, 455 Silva, Elydia, 805 Silva, Marcello K. (710) Simmons, Beth A., 4, 341, 504, 506 Simon, György, 631 Simpson, Gerry J., 224, 226 Singer, David A., 290 Singh, Prerna, 127 Siniscalco, Domenico, 507, (512) Sisk, Timothy D., 754–755 Sjöberg, Ola, 474 Skidelsky, Robert J. A., 433 Skocpol, Theda, 37, 38, 43, (51, 57), 77, 135, (146, 151, 164), 579, 638, 645, 821, (838) Skowronek, Stephan, 76n2, 361 Slater, Dan, 3, 8, 14, 139, 622, (633), 658, 659n1, 722, 740 Slaughter, Anne-Marie (164), 231n9, 255, 289, 310, (317), 325n5 Slay, Benjamin, 635 Slezkine, Yuri, 621n7

862   name Index Slim, Carlos, 241 Smeaton, Donald M., 766 Smith, Adam, 66 Smith, Anthony D., 532, 537, 767 Smith, Benjamin, xxii, 25, 619n2, 686, 721, 726, 751n5, 821, 832 Smith, Gordon B., 639 Smith, Graham, 576 Smith, Martin, 132n1 Smith, Tony, 122 Smouts, Marie-Claude, 348 Snidal, Duncan, xxii, 24, (161), 176, 227–229, 262, (265), 291, 293, (300, 317), 348–349, (350), 833, 837 Sniegs, Monika, xii Snowden, Edward, 553, 559 Snower, Denis J., 39 Snyder, Jack L., 739, 773 Snyder, Richard, 142 Snyder, Timothy, 80 Soares, Fábio V., 805 Soederberg, Susanne, 247, (251) Soifer, Hillel, 136 Sokoloff, Kenneth L., 101–103, 109–111 Sollenberg, Margareta (794) Solnick, Steven L., 621n6, 638n1, 644 Somers, Margaret R., 697 Sommer, Martin (581) Sommerer, Thomas (235, 352) Sørensen, Georg, 142, 201n7, 746, 746n2 Soros, George, 326, 331 Soskice, David, 14, 42, 88, 91, 92, (93), 197, 206n9, 238, 247, 249, 365–366, 411–412, 416, 428, 433, 436, 439, (441), 566 Sōtēropoulos, Sēmētrês A. (93) Soucy, Robert, 81n6 Soysal, Yasemin, 519 Sparrow, James T., 77 Spendzharova, Aneta B., 604, 608 Sperling, Valerie, 639, 645 Spies, Michael (758) Spiro, Peter J., 519 Spolaore, Enrico, 77 Spruyt, Hendrik, 67, 76, 79, 139, 196, 201, 225, 533 Squatrito, Theresa (235) Stahn, Carsten, 315

Stange, Marion, 153, 156, 161 Staniland, Paul, 739–740 Starke, Peter, xxii, 24, (30, 85), 140, (149), 177–178, (215), 342n1, 359, 382, 416, (424), 471, 478, (480), 574, 824, 826 Stavreski, Zoran (634) Stasavage, David, 77 Steen, Anton, 591, 593 Steensland, Brian, 430 Steffek, Jens, 194, 195n1, 260 Stein, Ernesto (114) Steinberg, Richard H., 44, (150) Steinmetz, George, 132n1, 137n12, 138, 141 Steinmo, Sven, 38, 43, 46, 238 Stepan, Alfred C., 7, 37, 68, 71, 82, 132n2, 639, 770 Stephens, John D., xi, xii, xxii, 6, 7, 12, 24, (31), 42, 46, 83, 89n11, (97), 134, 140, 142n19, (149), 172, 175, 178, (215), 247, 366, 374–375, 377n5, 380–381, (385, 386), 404, 410, 413n2, 415nn3–4, 416, 418–419, (423), 427, 433, (442, 462), 467, 472, (479), 693, 697–698, (713, 795), 797–798, 800, 803, 806, (808, 811), 823, 830, 836 Stevens, Paul, 723 Stewart, Frances, 693, (710, 712) Stewart, Richard B., 298, (300) Stigler, George, 38, 502 Stiglitz, Joseph E., 15, 45, 48, 326, 680, (728) Stirton, Lindsay, 509 Stokes, Susan Carol, 781 Stollberg-Rilinger, Barbara, 65 Stone, Randall W., 228 Stone Sweet, Alec, 255, 572 Stoner-Weiss, Kathryn, 590, 642, 645 Strand, Håvard (794) Strang, David, 225, 341 Strange, Susan, 40, 200–201, 331 Strauss-Kahn, Dominique, 332 Streeck, Wolfgang, 15, 206n9, 238, 338, 437, 511, 579, 658, 667 Stromseth, Jane E., 314 Stuart, Douglas T., 18–19 Stuvøy, Kirsti, 752, 754 Subotić, Jelena, 605, 611 Subramanian, Arvind (114), 721, 724

name Index   863 Suck, André, 346 Suganami, Hidemi, 224 Sugiyama, Natasha B., 802 Suleiman, Ezra N., 396 Suri, Tavneet (710) Surko, Pamela T. (758) Surrey, Michael, 430 Svensson, Eva-Maria, 489 Swank, Duane, 43, 238, 240, 443, 473 Swank, Gabriel T., 264 Taagepera, Rein, 65 Tallberg, Jonas G., 225, 260 Tamas, Kristof, 526 Tamir, Yael, 536 Tanner, Martin (95) Tarlton, Charles D., 540 Tarrow, Sidney G. 19, (30), 269, 569, 666 Tatham, Michaël, 277 Taylor, Brian D., xxii, 25, 183–184, 642, 645–646, 746n2, 827 Taylor, Charles, 738, 752–753 Taylor, Marcus, 241–242, 247 Taylor, Rosemary C. R., 38 Taylor-Gooby, Peter, 373 Teets, Jessica C., 665 Teichman, Judith A. (687), 698, (713), 799 Teitelbaum, Emmanuel, 783 Teorell, Jan, 623, 645, 782–783, 786 Terlinden, Ulf (164) Ter-Minassian, Teresa, 277 Tesón, Fernando R., 314 Thakur, Ramesh, 307, 314 Thatcher, Margaret, 15, 39, 42–44, 242, 247, 362, 379, 381, 428, 431–434, 451, 502 Thatcher, Mark (28), 503 Thauer, Christian, 161 Thelen, Kathleen A., 20, 42, 49n5, (56), 427, 657–659, 665–667, 824 Therborn, Göran, 133 Thies, Cameron G., 139 Thies, Michael F., 574 Thomas, George M., 116, (130, 148, 215) Thompson, Alexander, 229, 255 Thompson, Andrew (284) Thompson, Dennis, 81 Thompson, Grahame, 11, 42

Thompson, William R., 77, 746n2, 752, 754–755, 757 Thomson, Janice E., 67, 196, 199n4, 201 Thorp, Rosemary, 453 Thränhardt, Dietrich, 527 Thucydides, 66, 547 Thun, Eric, 629 Tierney, Michael J. (214, 234), 255, (266) Tierney, Stephen, 544 Tilly, Charles, 2–3, 11, 19, (30), 37, 67, 76–77, 136, 139, 170, 200, 533, 547, 569, 588, 641, 656, 697n6, 732–733, 740, 746–747, 746n2, 755, 767, 772, 781 Tilton, Mark, 397–398 Tittor, Anne (145) Tocqueville, Alexis de, 20, 537 Tommasi, Mariano (114) Tompson, William, 641, 645–646 Tönnies, Ferdinand, 767 Tornell, Aaron, 724 Törnquist, Olle, 697 Torpey, John, 520–521 Tortella, Gabriel C., 449 Torvik, Ragnar, 716, 724, (728) Traub, Stefan (31, 387, 388, 514) Travers, Toni (300) Trebbi, Francesco (114) Trebilcock, Michael (442) Treisman, Daniel, 591 Trezise, Philip H., 398–399 Trickey, Heather, 475 Trigger, Bruce, 63, 66 Troper, Michel, 281 Trubek, David M., 469, 475 Trubek, Louise G., 469 Trudeau, Pierre, 537 Trumbull, Gunnar, 430 Tsai, Kellee S., xxii, 25, 184–185, 629, 658–659, 667, 685, 703, 827 Tsang, Steve, 664–665 Tsebelis, George, 10, 361 Tsui, Kevin K., 717, 725 Tsunekawa, Keiichi, 397 Tsygankov, Andrei P., 644 Tuchman Mathews, Jessica, 308 Tuck, Richard, 76n1 Tucker, Joshua A., 602, 611

864   name Index Tudjman, Franjo, 611 Tulchin, Joseph S. (777) Tullock, Gordon, 39 Tully, James, 541 Tumbletey, Joan, 89 Tyagi, Amelia W., 434 Tyler, Tom R., 135 Tyson, Laura D’Andrea, 407, 409 Ulfelder, Jay, 717 Ulfstein, Geir, 344 Ullman, Richard H., 308 Ullman-Margalit, Edna, 312 Underhill, Geoffrey R. D. (214) Unger, Alan N. (758) Unger, Brigitte (423) Urwin, Derek W. (51, 94), 533, (545) Utas, Mats, 751, 755, 757 Uusitalo, Hannu, 413 Vabulas, Felicity, 228 Vacca, Giuseppe, 132n3 Vachudova, Milada Anna, xxii, 25, 183–185, 588, 590, 593, 602–608, 611, 613, (614), 782, 827 Valentino-DeVries, Jennifer, 553 Valeyre, Antoine, 420 Valiente, Celia, 491 Vandaele, Kurt, 414 Vandenbroucke, Frank, 488 van der Westhuizen, Janis, 247 van Gorp, Johan (129), 212 van Hooren, Franca (481) van Lancker, Wim, 488 van Oorschot, Wim, 485 Vargas, Getúlio, 798 Varshney, Ashutosh, 697n5 Vartianen, Juhana (422) Vattel, Emer de, 221, 225 Vatter, Adrian, 566, 566n5 Verba, Sidney, 35, 132, 137 Verdier, Thierry, 716, (727) Verkuilen, Jay, 783 Verloo, Mieke, 494 Vernon, Raymond, 37, 193 Vertovec, Steven, 523 Vibert, Frank, 577

Victor, David G., 263, 343 Victora, Cesar Gomes (712) Vigorito, Andrea (807) Viola, Lora Anne, xxii, 24, 176, 194, 208–209, 221n1, 256, 833, 837 Vishny, Robert (651) Visser, Jelle, 89, 372, 414, (423, 440), 486 Vizi, Balácz (530) Vleminckx, Koen, 488 Vogel, David, 290–291 Vogel, Ezra F., 395 Vogel, Steven K., 44, 287, 380, 402–403, 431, 445 Voigt, Rüdiger, 158 Volk, Stephanie, xii Volkov, Vadim, 637, 639, 645–646 Voltaire (François-Marie Arouet), 66 vom Hau, Matthias, xxii, (114, 130), 144, 157, 774, 815 Vu, Tuong, 132n1, 139nn13–14, 143 Wacquant, Loïc, 141, 433 Wacziarg, Romain (793) Wade, Robert H., 38, 124, 327–328, 618–619, 618n1, 620n3, 622, 691 Wæver, Ole (529), 739 Wagler, Julia (265) Wagner, Alexander F. (95) Wagner, Richard E., 502 Waldfogel, Jane, 418, (424) Waldner, David, xxii, 25, 139n14, 619n2, 686, 719, 722, 726, 751n5, 821, 832 Walker, James (166) Wallace, Helen, 5, 12 Wallander, Celeste A. (319) Wallensteen, Peter (794) Wallerstein, Immanuel M., 4, 138, 221n1, 327 Wallerstein, Michael, 140, 427 Wallis, John J. (148) Walliser, Jan (634) Walter(-Drop), Gregor (165, 212) Wälti, Sonja (283) Waltz, Kenneth N., 36, 197, 202, 221, 223, 254, 306–307, 309, 746 Wang, Feng, 704 Wang, Shaoguang, 657, 704 Wantchekon, Leonard, 717, 722

name Index   865 Ward, Michael D., 79 Warner, Andrew M., 715, 723 Warnke, Kevin (267) Warren, Alex, 753 Warren, Elizabeth, 434 Warren, Mark E., 664–665, 697n5 Watanuki, Jōji (27, 440) Waterbury, Myra, 519 Watson, Adam, 221n1 Watson, Sara, 90 Wattellier, Jeremie J., 554 Watts, Ronald L., 280 Way, Lucan, 591, 596, 642, 646, 781–782, 787 Weber, Cynthia, 196, 198, 223n3 Weber, Eugen J., 767 Weber, Max, 8, 15, 38, 61–62, 69, 105, 135n9, 136, 141n18, 155–156, 170, 547, 639, 736, 763, 821, 832–834 Wedeman, Andrew H., 667 Weidmann, Jens, 715 Weidmann, Nils (688) Weidner, Helmut, 341–342 Weiler, Reto, xii Weinberg, Jonathan, 557 Weingast, Barry R. (148), 171, 227, 588 Weinmann, Nico (145) Weinstein, David E., 399 Weinstein, Jeremy M., 735 Weinstein, Michael M. (795) Weinthal, Erika, 619–620, 626, 715 Weir, Margaret, 43, 141 Weiss, Linda, 44, 193, 835 Weiss, Thomas G., 314 Weisstanner, David (92, 581) Weldes, Jutta, 306 Wells, H. G., 815, 835, 835n1, 838 Welzel, Christian, 158 Wendt, Claus (480) Werkner, Ines-Jacqueline, 552 Werner, Benjamin (513) Werner, Jörg, 209, 292 Wessels, Bernhard (581) Wessels, Holger (422) Wessendorf, Susanne, 523 Westra, Joel H., 229 Wettestad, Jørgen, 343 Weyland, Kurt Gerhard, 812

Wheeler, Nicholas J., 310 Whelan, Christopher T. (443) White, Gregory W., 340 White, Stephen, 593, 641–642 Whitelaw, Ken, 347 Whiting, Susan H., 657 Whitlam, Gough, 453 Wickham, Gary, 132n3 Wiegand, Irina, 557 Wiener, Jonathan B., 344 Wiesel, John (165, 758) Wiesner, Achim (582) Wigger, Angela, 502, 504 Wijnbergen, Sweder van, 723 Wilensky, Harold L., 140, 466–467, 471 Wilkinson, Richard G., 694 Wilkinson, Steven, 8 Willerton, John P., 641 Williams, Glen, 430 Williams, Michael C., 225 Williams, Patrick, 154 Williamson, John, 40, 172 Wilson, Harold, 429 Wilson, John D., 244 Wilson, Woodrow, 78 Wimmer, Andreas, 69, 77, 78, 79, 80, 116, 136, (688), 748, 764, 767, 769, 771, 773, 834 Wincott, Daniel, 274 Windwehr, Jana (27) Winter, Gerd (300) Winter, Ralph (442) Winter, Wolfgang, xiiin6 Wise, David, 19 Wissel, Jens, 132n3 Wittenberg, Jason, 608 Wöhl, Stefanie, 132n3 Wolchik, Sharon L., 602, 606, 782, 786 Wolf, Dieter, xi, xii, 152n1 Wolf, Joseph J., 308 Wolf, Klaus D., 162, (164) Wolf, Martin, 326 Woll, Cornelia, 49 Wong, Joseph, 700–701, 799, 801, 804–805 Woo-Cumings, Meredith, 38, 124, 395, 618, 618n1, 621–622 Wood, Lesley J., 569 Woodley, James A. (633)

866   name Index Woodruff, David, 639 Woodward, Alison E., 493n5 Woolcock, Michael, 142, (728, 776) Woolley, John, 433 Wright, Erik O., 133 Wright, Gavin, 720, 724 Wright, Henry T., 105 Wright, Tony, 44 Wucherpfennig, Julian, 684 Wüest, Bruno (267, 582) Wurzel, Rüdiger K. W. (352) Yadav, Yogendra (31, 73), 697n7, (777) Yakovlev, Andrei A., 596 Yamamura, Kozo (407) Yang, Dali L., 657 Yang, Jae-Jin, 806 Yared, Pierre (793) Yashar, Deborah J., 106, 683, 697n7, 774 Yates, Douglas A., 722 Yeltsin, Boris, 593, 595n4, 637, 639–643, 648 Yi, Ilchong (811) Young, Alasdair R. (33) Young, Crawford, 125, 656 Young, Robert, 154 Yurchak, Alexei, 621 Zacher, Mark W., 258 Zangl, Bernhard, xxiii, 2n1, 24, (26), 40, 157, 161, (163), 176, 194, 195n1, 207, 209, (212), 232, 255–256, 259–260, 264, (265), 314, (350), 547, 559, 817, 838

Zartman, I. William, 747 Zeitlin, Jonathan, 349 Zenawi, Miles, 770 Zenko, Micah, 560 Ziblatt, Daniel, xxiii, 23, 76, 81n4, 84, 92n14, 121, (129), 154, 359, 746n1, 771, 781, 822 Žilović, Marko, 609 Zimmer, Kirstin, 597 Zimmermann, Hubert (335) Zimmermann, Jochen, 209, 292 Zimmermann, Klaus F., 526 Zinn, Amalia (50) Zintl, Reinhard (163) Zito, Anthony R. (352) Zolberg, Aristide, 518, 521 Zubek, Radoslaw, 590 Zuberi, Dan, 694 Zucco, Jr., Cesar, 802 Zürn, Michael, xi, xxiii, 2n1, 9, 11, 13, 24, 154, 158, 162, 176, 193–196, 202–203, 205, 207, 209, (212), 221n1, 223n3, 229–232, (234), 256, 258–261, 264, 278–279, (283), 296, 306, 314, 339, 344, 348, 360, 817, 818n1, 821, 833, 834n9, 836–837 Zysman, John, 38, 45, 172, 174, 361, 377, 383, 396–398, (406), 426–427

Index of Subjects

Numbers in bold refer to tables and figures affluent democracies, 12, 22–24, 37–39, 48, 169, 177, 182, 185, 357–385, 393, 403, 834 compared: comparative political economy typologies, 361–375, 363–364, 367–373, 566, 566n3; cross-national variation, 358, 361–375, 363–364, 367–373 and democracy: democratic governance, 359; democratic quality, 565, 572; unequal democracies, 579; see also democracy and ethnicity: ethnic diversity, 774; territorial and ethnic cohesion, 359–360 and labor market &economy: female labor market participation, 90, 363–364, 379, 403–404, 416, 418, 465, 469, 482–495, 485; GDP, 43, 82, 87, 102, 185, 359; labor market indicators, 363–364; macro-economic indicators, 370–371 and policy spheres: environmental risk and policy, 339, 342, 347; tax policies, 174, 238, 243–246, 245–246, 250; welfare states, 359, 366, 367–369, 382 and state structure: access to political power, 19; decentralization, 269–282; “despotic” vs. “infrastructural” power, 14, 14n6, 170–171, 179, 180, 183; forms of state intervention, 380–385; governance, 179–180; group partnering, 179–180; import substitution industrialization model (ISI), 365; independent administrative bodies, 577–578; institutional dimensions of modern statehood, 195–196, 572–578; national sovereignty, 360; policy convergence, 470, 474; political science

typologies, 361; TRUDI ideal-type modern state, 13n4, 158–159, 196–198, 200–206, 360–361, 375, 384, 818n1 and trajectories: contested state authority, 179, 430; developmental trajectories, 237–251; European integration, 13, 45, 180, 269–282, 360, 376, 383, 400, 468–469, 525, 527, 543, 551, 604; neoliberal turn, 375–380; piecemeal reform, 569–572; post-war stabilization, 568–569; state transformations, 357–385, 363–364, 367–373, 565–580, 823–826 see also capitalism, advanced; OECD Afghan Taliban, 551, 737, 748 Afghanistan, 118, 120, 156, 676, 747–749, 754, 786, 818 Africa history: colonial legacy, 656, 733–734, 750; European scramble for Africa, 78; imperialism, 78; slavery, 117, 118, 683 regions: French West Africa, 120; sub-Saharan Africa, 119–122, 154, 674–678, 682, 694n3, 731, 750, 753, 764, 773, 782, 819 and state development: democratic transition and resource wealth, 717; development of territorial states, 78; developmental trajectories, 125; multiparty elections, 739; post-colonial conflict and violence, 126–127; predatory states, 732–734, 736; state formation and transformation, 116–128 see also colonialism/colonization; Global South; and individual countries agrarian sector, 6, 366, 470 electoral role of farmers, 84, 85n9, 88

868   Index of Subjects agrarian society, 37, 63–65, 66, 75, 88, 105, 139 agriculture and labor issues: coerced labor, 102; female labor, 820; slavery, 117; subsistence, 722 parameters: ecological influences, 102; effect of disease on, 102–103, 106 policy: EU policy, 272, 276; international regulation, 286 polity: agro-literate polities, 64–65, 67 and production issues: export-oriented, 382; genetically modified food, 253, 263; high value crops, 103, 460; plantations, 112, 117 Albania, 610 Algeria, xiiin5 American Revolution, 76, 99, 521 American Telephone & Telegraph (AT&T), 504 anarchy, 2, 4, 161, 162, 202, 306, 307, 749, 756 Ancien Régime (ruling forces before 1789): 88, 91 Angola, 122, 232, 717, 722, 731, 752 antidumping provisions, 44 Argentina, 37, 100, 105, 110–113, 357, 365, 455–458, 460–461, 831n4 economy: automobile industry, 449; “capitanes de la industria”, 451; Roca-Runciman Pact (1930), 448 politics & state: democratic institutions, 102; democratization, 785, 799; populism, 447–448, 451; semi-sovereign status, 446–447, 460 trade system: import substitution industrialization (ISI), 453; inward and outward foreign direct investment, 456; liberalized trade, 446; percentage share of imports and exports in GDP, 456; trade liberalization, 454–456; transition from ISI model to open economy, 445–461 welfare & education: literacy rates, 102; public education, 800; welfare state, 797–798, 800, 802, 803, 805 arms control, 258 Asia conflicts: peace and war, 68; post-colonial conflict and violence, 126–127

economies & trade: financial crises (1990s), 39, 45, 181, 182, 294, 324, 400, 830; import substitution industrialization (ISI), 20, 22, 175, 182, 829; international financial pressure, 181; “tiger” economies, 38, 618, 622, 629, 699, 703, 829 history: colonial legacy, 656, 750; imperialism, 78 state & democracy: productivist welfare, 181–182; public spending, 175, 181; regional governance development, 278; state formation and transformation, 116–128, 180–182; statist models, 393; transition to democracy, 180, 182; welfare state and social protection, 798–799, 800–801, 803–804 see also colonialism/colonization; Global South; and individual countries Asian Development Bank, 278 Association of Southeast Asian Nations (ASEAN), 831, 831n5 atrocity crimes, 12, 127, 187, 310, 523, 738 see also crimes against humanity; genocide; war crimes Australia, xiiin5,; 78, 427–428 economy & trade system: automobile industry, 449; inward and outward foreign direct investment, 456; percentage share of imports and exports in GDP, 456; trade liberalization, 454–456; transition from ISI model to open economy, 445–461 politics & state: Labor Party, 453, 490; semi-sovereign status, 446–447, 460; unitary national identity, 449 welfare & education: gender equality policy, 489–490; immigration control, 518; social spending, 458–459; welfare state, 453, 457 Austria, 86, 87, 203, 282, 361, 377, 381, 410, 412, 416, 474, 486, 517, 572, 823 economy: Austro-Keynesianism, 414; coordinated market economy, 566; corporatism, 412, 414; demand stimulation, 414; unionization, 414 politics & state: consociational democracy, 575; education, 526; federalism, 540, 822 South Tyrol question, 543

Index of Subjects    869 Austro-Hungarian Empire, 69, 78, 78n3, 88, 534, 768 authoritarian regimes, 1, 6, 7, 13, 19, 36, 158, 278, 549, 590, 602, 627 economies: association with oil wealth, 717–719, 735; link with import substitution industrialization, 451 politics: control of the public sphere, 14; electoral autocracy, 8; elite networks and coalitions, 740; political competition, 783, 791; regime typology, 783; state autonomy from civil society, 9, 626; transition to democracy, 21, 572n9, 782, 784–787, 785 resurgence, 25 autocracies, 8, 9, 160, 183, 250, 590, 597–598, 619, 643–644, 780, 789 Azerbaijan, 594–595, 597, 620, 623–625, 627, 631n23, 632 Aztec Empire, 104–105, 107, 108 Bali, 65 Balkan states EU accession, 184, 603, 609–612 transition to democracy, 184 see also individual countries Balkan wars (1990s), 80 Baltic states, 543, 623 see also individual countries Bangladesh, 250, 311, 340, 738, 768, 786 Bank for International Settlements (BIS), 323, 324, 325, 329, 330 Bank of England, 429, 433 behavioral norms, 198 behavioralism, 33, 36, 38 Belarus, xiiin5, 594, 595n6, 596, 597, 621–624, 627, 632 Belgium, 81, 85, 87, 375, 380, 381, 517 economy: coordinated market economy, 566; corporatism, 410, 414, 416; industrialization, 88, 118 politics & state: constitutional reform, 544; democracy, 566, 770, 826; education, 526; federalism, 566, 576–577; plurinationalism, 359, 383 Bhutan, 674, 786 bicameralism, 10, 822

Boer War, 67 Bolivia, 79, 100, 104–106, 109, 112, 278, 785, 803, 831nn4, 8 democratic institutions, 102 Transparency International corruption score, 110 Bosnia and Herzegovina, 541 Botswana, 8, 629, 676, 678, 716, 722, 786 Brazil, xiiin5, 37, 99, 100, 623, 684 economy & trade: automobile industry, 449; GDP, 799; import substitution industrialization (ISI), 453; inward and outward foreign direct investment, 456; National Bank for Economic and Social Development (BNDES), 447, 449, 451, 455; percentage share of imports and exports in GDP, 456; trade liberalization, 454–456; transition from ISI model to open economy, 445–461 politics & state: development and state transformation, 699, 701–703; civil society actors, 702–703; semi-sovereign status, 446–447, 460 welfare state: conditional cash transfer (CCT) programs, 628, 701, 830; social protection, 798; social rights recognition, 628; welfare state, 802–803 Bretton Woods institutions, 206, 231, 323, 427, 445, 569, 570, 817 see also International Monetary Fund; World Bank BRICS countries (Brazil, Russia, India, China, South Africa), 5, 818 British Empire, 68, 78, 122–123, 126, 449 see also colonialism/colonization; Great Britain British Rail, 508 Bulgaria, 47n4, 79, 184, 603, 605, 609 state reform, 606–608, 612, 613 Transparency International corruption score, 607 bureaucratic capacity, 13, 15–17, 37, 101, 123–125, 619–620, 692, 702–703, 823, 836 see also elites; governance Burma (Myanmar), 119, 121, 122, 127, 232, 683, 766, 769, 786, 831n5 see also Myanmar

870   Index of Subjects businesses comparative advantage, 178, 365, 396, 416 and state: bargaining power, 502; capital mobility, 41, 240, 502; corporate taxation, 43; exit options, 42, 240; national champions, 174; “regime shopping”, 41 types of: consortia, 291; multinational corporations (MNCs), 193, 243, 628, 835; transnational corporations (TNCs), 142, 449, 450–451 Calvinism, 9, 67, 137 Cambodia, 786, 831n5 Khmer Rouge, 311 Canada, 78, 99, 100, 105, 108 economy: automobile industry, 449, 452, 455; GDP, 102, 454–455; natural resources, 438; neoliberal reform, 435–436 politics & state: bi-cultural national identity, 449; federalism, 428, 454, 540; multicultural state, 523, 540; multinational state, 535; “National Policy” (1871–1940), 449; political system, 574–575; Québec, 435, 447, 448, 450, 535, 536–542, 544; semi-sovereign status, 446–447, 460 trade system: inward and outward foreign direct investment, 456; percentage share of imports and exports in GDP, 456; protectionist policy, 449–450; trade liberalization, 454–456; transition from ISI model to open economy, 445–461 welfare & education: gender equality policy, 490; literacy rates, 102; social spending, 458–459; welfare state, 430, 436, 454 capital accumulation, 138, 447, 693, 707 movement: flight, 40–41, 328; flows and mobility, 42, 43, 142, 239, 276, 378, 421, 468, 816, 820 capitalism characteristics: advanced, 375; free-market, 40, 243, 393, 602, 603; industrial, 35, 781 modern, 76, 172; liberal, 71, 366; neoliberal, 45, 49, 375; organized, 445

and economic development, 7 global dynamics of, 138 and political system: concessions capitalism, 643; regulatory, 287, 511; state intervention, 14, 171–172; welfare, 45, 171, 366, 374, 375; welfare state domestication of, 237 political types: authoritarian, 71; communist, 704, 827; crony, 40, 400, 641; egalitarian, 49n5; oligarchic, 45 post-war, 172, 411 varieties of, 14, 49, 49n5, 206n9, 240, 247, 365–366, 374, 416, 428 Cartagena Protocol on Biosafety (2001), 263 caste segregation, 7, 65, 695, 697n7, 705, 706 Catholicism, 80, 84, 85, 88, 89, 91–92 Cayman Islands, 41, 174 Central African Republic, 676, 834 Central America, 105, 693, 741, 790 Central Europe, 69, 82, 183, 278, 520 see also East Central Europe; post-communist countries; and individual countries Chicago School, 39 chiefdoms, 63, 105, 106, 108, 119, 120–121 Chile, xiiin5, 37, 39, 102, 105, 109, 110, 247, 357, 445, 460, 676, 698, 828, 829, 831n8 economy: growth and GDP, 678, 685 politics & state: democratization, 785, 797, 799; Socialist Party, 802; welfare state, 796–798, 800, 803, 805–807 China, xiiin5, 19, 25, 64, 70, 454, 684–685 economy: agricultural collectives, 654, 694; authoritarian capitalism, 71, 664–665, 704; capitalist class, 654; collective enterprises, 184, 660; economic liberalization, 654; economic reform, 621n6; economic resilience, 327; economic rise, 5, 21, 654–655; hukou system, 520; industrialization, 17; market orientation, 14; private enterprise, 184, 659–662; property rights, 184, 655 history: Cultural Revolution (1966–1976), 656; development and state transformation, 699, 703–707; early state-building, 118, 656, 657; Great Famine (1958–1961), 704;

Index of Subjects    871 Mandarin system, 65; Mandate of Heaven, 65; Opium Wars (1839-1842, 1856-1860), 656; Warring States period (475–221 BC), 656 People’s Liberation Army, 656 politics & state: adaptive institutions, 184, 655, 658–668, 666; authoritarian embeddedness, 704; Communist Party, 21, 184, 621n6, 654–658, 663–664; despotic vs. instrumental power, 658–659; elite competition, 656–657; elite politics, 663–664; formal despotism, 184–185, 658; social protection and welfare, 798; state transformation, 184, 654–668, 827–828; state-owned enterprises (SOEs), 654 population size, 231 trade system: foreign direct investment (FDI), 654; foreign economic policy, 332; US dollar reserves, 331 citizenship, 68, 139, 383, 484 basic types: ius domicilii, 520; ius sanguinis, 516, 519, 520, 523; ius soli, 516, 519, 523 consequences: benefit entitlement, 467; membership boundaries, 519; participatory, 81; rights and obligations, 518–519, 534, 543, 807 level: denizenship, 519; European Union policy, 524–527; Heimatrecht, 520; hukou system, 520; local, 520; quasi-citizenship, 519; transnational, 524 scope: dual, 519, 543; multiple, 527, 528 shared, 171 state regulation, 516–528, 825 civil liberty and civil rights, 171, 314, 359, 457, 549, 556, 565 institutionalization, 81 effects of securitization, 177, 310, 552, 818, 825 Western democratic, 519 civil rights movement, 569, 820–821 civil servants, 39, 373, 396, 431, 593, 797 see also bureaucrats civil society, 7–9, 39, 136, 143, 180–181, 183, 261–264, 376, 490–491, 494, 567–568, 570–571, 606, 620, 695–699

see also non-governmental organizations; political sphere; public–private partnerships; public sphere; state-society relations civil war, 3, 7, 122, 139, 186, 187, 719–720, 724–725, 747–748, 765, 769 civility, 140 class-analytic political theory, 131, 132–134, 133, 138, 142 class consciousness, 69 class power, 6–7, 83–84, 133 class structure, 141 history: constellations, 6–7, 10; democracy development, 781 structural features: institutionalized class relations, 133; post-war erosion, 470; reproduction, 138; social coalitions, 83–84 class struggle and conflict, 35, 79, 132–134, 133, 428 clientelism, 8, 10, 181, 568, 571, 610, 697, 703, 708, 802, 821, 827, 831, 836 Coase theorem, 501 Cold War, 4, 89, 229, 258, 360, 568 threat pattern: existential threat, 306; nuclear threat and deterrence, 70, 307, 549; threat defusion, 309 trajectory: bipolar world order, 5, 816, 818; end of C. W., xi, 5, 18, 40, 46, 172, 549, 573, 737, 784 see also communism; post-communist countries; Soviet Union Colombia, 100, 105, 278, 445, 748, 752, 785 colonialism/colonization, 1, 78 development relationship: d.r., pre- and post-colonial, 105–109, 128: colonialism hypothesis, 108–109; geography hypothesis, 106–107; indigenous persistence hypothesis, 107 history: disease environment and settlement patterns, 102–103, 106, 109, 120; frontiers on wheels, 516; independence wars, 99; introduction of disease, 117–118; legacy in the Global South, 22, 750; penal colonies, 117; post-colonial state legacies, 123–128; post-colonial violence, 766; preparation for independence, 122–123; slavery,

872   Index of Subjects colonialism/colonization (Cont.) 117, 118, 683; “state death”, 3; wars of independence, 122; Western European state model, 3, 78, 79, 116, 118, 534, 821 identities: elite actors, 112; colonizer identity, 109, 111–112; effects on indigenous identity, 126–127, 683, 766 New World: overview, 99–113: British colonization, 108, 110, 111–113; effects of European settlement on N.W., 100, 109–112; geographic variations in the N.W., 100–104, 109; indigenous populations, 99, 100, 104–109; levels of European settlement, 109–111; plantocracy, 117; Portuguese colonization, 99; slavery, 117; Spanish colonization, 99, 103, 104, 108, 110–113 rule, forms of: concessionaire rule, 120; extractive institutions, 109–110, 111; indigenous collaboration, 120; indigenous institutions, 119–123; indirect/direct rule, 119–126, 750; institutional interaction, 99, 104–105, 111–112, 119–120, 122; restrictive institutions, 104 Where? Africa and Asia, 116–128; Caribbean settlement, 99, 112; see above, keyword New World Who? Belgian colonialism, 127; British colonialism, 118, 120–123, 125–126; Japanese colonialism, 118, 124–125, 674, 675, 722 see also decolonization communism, 13–14, 19, 21, 25, 89, 90, 182–185 breakdown: collapse of, 39, 40–42, 587; dismantling and democratic transition, 45 see also China; post-communist countries; Soviet Union; totalitarianism community-based organizations (CBOs), 696n5 Community of Independent States (CIS), 279, 626–627 community self-rule, 270, 274, 277–278 comparative politics studies, 9, 256n1, 780–781, 783

aspects: cross-national variation, 12, 173; macro variables, 160; methodological nationalism, 5, 274, 533, 748 comparative dimensions: across policy, 188; across space, 188; across time, 187–188 type-making: typologies, 46, 49, 154, 170–172, 188, 361–362, 365–367, 373–375, 467–468, 566, 657–658, 823; varieties of capitalism school, 14, 49, 206n9, 238, 247, 248, 249, 566 competition state thesis, 18, 172–173, 206, 210, 237–251 consequences: decline of the welfare state, 238; effects of competition on the welfare state, 248–250; inter-state competition, 242–250; neoliberal convergence, 238, 244, 247–248 methodological aspects: causal mechanisms, 240–243; competitive constraints, 242–250; definition, 239–240; structural determinism, 238, 242–243 taxation case study, 243–248, 245–246, 250 Congress of Vienna (1815), 76 consociationalism, 384–385, 540–541, 568, 570, 686, 763, 768, 770–772, 774 Consumers International (CI), 295–296 coordinated market economies (CMEs), 365–366, 377, 411, 412, 566, 580 corporate social responsibility (CSR) standards, 291 corporatism/corporatist state model, 14, 19, 38, 362, 375, 381, 410–422, 445–461, 570, 657 Costa Rica, 110, 111, 679 economy: GDP, 102 politics, state & welfare: healthcare, 802; IADB government effectiveness score, 102; pensions system, 800; welfare state, 796, 797, 802, 806 Council of Europe, 543 crimes against humanity, 207, 738 Croatia, xiiin5, 184, 605, 609–611 Cuba, 78, 278 culturalist political theory, 131, 133, 137–138 focus: cultural representations and practices, 133, 140; identity effects, 133;

Index of Subjects    873 rituals and social practices, 133, 138; social discipline, 139–140 view of state: state as ideological construct, 137, 143; state–society boundary, 133; state transformation, 143; theater state, 65, 137 Cyprus, 12, 15, 41, 542, 612 Czech Republic, 280, 357, 486 Czechoslovakia, 78n3, 79, 603 Darfur, 176 decentralization, 2, 7, 8, 123, 269–282, 376, 576–577, 595, 770–771 see also devolution; federalism decolonization, 3, 153, 638, 724, 737, 746, 818, 833 right to self-determination principle, 201–202, 207, 733 deindustrialization, 6, 819, 821, 824, 829 democracy effects of: correlation of d. with life expectancy, 694; effects of d. on health outcomes, 694; effects of oil wealth on d., 717–718 politics of: collective self-rule, 77, 88; consensus, 8, 204–205, 209, 226, 566, 570, 826; direct, 575–576, 578; fragmentation of political representation, 89–90, 384, 571, 578, 797; institutionalized, 80, 572, 773, 774; parliamentary accountability, 76, 80, 88, 565; promotion of, 18 transition to, 19, 21, 45, 81, 82, 90, 180, 182, 184, 494, 572n9, 640, 654, 655, 717, 782, 784–787, 785, 791, 799 see also affluent democracies; democratic procedures; democratic regime/system; democratization democratic procedures elections: election monitoring, 208, 263; elections, 9, 19, 80, 208, 384, 519, 565, 571, 572, 580, 602, 697, 782, 786; participation, 9, 81, 574, 576; suffrage extension, 19, 76, 77, 80, 88, 90, 565, 568 types and switches in types: alternative vote system, 575; constitutional reform, 19, 273, 544; electoral formulas, 88; electoral reform, 80–81, 573–575;

first-past-the-post system, 574; majoritarian system, 436, 566, 573–574; mixed system, 573, 574; proportional representation, 78, 88, 436, 566, 573–574, 595 voting, forms and mechanics: absentee ballots, 519; e-democracy, 576; referenda, 9, 19, 573, 574, 575; representation quotas, 19; secret voting, 76, 81; single non-transferable vote, 573 democratic regime/system, 1, 6, 17, 20, 183, 565, 568 liberal/illiberal: illiberal democracy, 7, 19, 605, 612; liberal democracy, 14, 19, 185, 549, 572, 602, 603, 608, 612, 781; liberal Machiavellianism, 69 parties: christian democratic, 45–46, 85, 89–90, 171, 366, 367, 368, 373–375, 467–468, 823, 824; social democratic, 45–46, 85, 89, 171, 366, 367, 368, 373–375, 404–405, 467–468, 698, 708, 823, 824 systems: hybrid, 19, 602, 784–791; majoritarian vs. consensus, 8, 19, 566, 570; parliamentary, 76, 80, 88, 183, 361, 566, 569, 575, 577, 593, 716, 822; presidential, 10, 361, 822; semi-presidential, 361, 566; Westminster system, 436, 574 Democratic Republic of Congo, 153, 156, 186, 676, 678, 683, 722, 731, 733, 735, 737 democratization development: diffusion and convergence, 4, 33, 79, 82, 83, 172–173, 826; extension of rights after war, 67, 77; global, 19; Global South, 686, 779–793; multiple pathways, 83; national trajectories, 80, 83; suffrage extension, 19, 76, 77, 80, 88, 565, 568, 569; third wave, 79, 590, 638, 780, 786–787, 826; uneven, 76, 81–83 factors: effects of income distribution and inequality, 82, 101–102; party politics, 76, 78–79, 83, 84, 570–575, 578; political struggle, 781–782; religious factors, 84–85, 88, 91–92; self-enforcing, 7; structural conditions, 780–781

874   Index of Subjects Denmark, 71, 80, 85, 243, 280, 347, 412, 474, 573 economy: agriculture, 414; coordinated market economy, 566; demand management, 414; ICT development, 416 politics: corporatism, 410; democracy, 81, 92, 570, 575; flexicurity, 247 dependency theory, 110, 451, 679–680 despotic vs. infrastructural power, 14, 14n6, 170–171, 179, 180, 183, 189, 645, 821 Deutsche Bank, 326 developing/developmental states effects of: direct vs. indirect colonial rule, 125–126; geography, 100–104; resource wealth, 618–632; transnational environmental governance, 350; systemic vulnerability, 622 human development, 691–709 pathways: developmental trajectories, 124, 125–126, 181; embeddedness of development, 695–696, 698, 707–708; post-colonial legacies, 123–128; pre-colonial/post-colonial relationship, 105–106, 128 politics & state: bureaucratic elites, 622n9, 696; civil society, 181, 695–699, 700–701; collective goals, 696; low wage manufacturing exports, 5; public spending, 181; state capability and governance, 693–696, 699–709; state-led development, 124–125, 625–626, 628–629; state–society relations, 8, 181 see also Asia; Global South; Latin America; post-communist countries developmental state model, 124–125, 381, 393, 686, 691–709 devolution, 7, 376, 383, 427, 537, 540–541, 576–577 see also federalism differentiation theory, 224, 224n4 diplomacy, 12, 276, 289, 322, 457 disease, 102–103, 106, 107, 109, 117–118 disease control measures, 257, 258, 259–260, 289 drug cartels, 41 drug smuggling/trafficking, 47n4, 551, 731, 736

eagle, xiii East African Community (EAC), 279 East Central Europe, 183, 588, 589, 592, 596, 604, 610 Eastern Europe, 21, 25, 79, 81, 88, 183–185, 188, 278, 358n2, 486, 523, 535, 538, 602–613, 644, 646, 784, 827 East Timor, 187, 207 ecological interdependence, 339, 343–344, 349 ecological zones, 100, 101–102 economic activity, 2, 75, 243, 427, 433, 504, 610, 748, 820 see also economic growth and development; economic integration; financial markets; global markets; globalization; markets; trade Economic Community of West African States (ECOWAS), 312 economic crises and state transformation, 37, 324–330, 427, 801 see also financial crisis; Great Depression economic growth and development, 17, 43, 185 democracy: correlation of GDP with democracy, 82; democratic impetus of economic growth and development, 82 economics: Fordist growth model, 6, 140, 206, 241, 247, 250, 327; global production, 174, 460; new growth theory, 693n2; stagflation, 38, 241, 430, 453 effects of: geography, 100–104; resource abundance, 714–726; social capital and synergy, 142 environment: disease environment factors, 102–103, 106, 109; temperate/tropical state comparisons, 102 state-led, 124–125, 618 economic integration, 21, 238, 240, 243, 247–249, 275, 325, 466, 551, 816 see also financial markets; global markets; globalization; markets; trade economic liberalism, 323 economic shock, 37, 427, 801 see also financial crisis Ecuador, 100, 105, 278

Index of Subjects    875 democratic institutions, 102 Transparency International corruption score, 110 education, 5, 6, 14, 17, 378, 416, 418–420, 433, 438, 625, 693 lifelong learning, 487 see also knowledge economy Egypt, 121, 153, 340, 779 El Salvador, 105 elites types: bureaucratic, 10, 593, 620, 622n9, 696; economic, 17, 102, 112, 135, 139, 142, 592, 685, 707; financial, 326, 327–328; industrial, 181, 619, 620, 626, 695, 696, 699; mercantilist, 111; political, 3, 8, 20, 64, 69, 71, 78, 89, 118, 207, 549, 567, 574, 591, 593, 683, 699, 801, 826 modalities: competition, 3, 8, 588–589, 592–598, 603–604, 656–657; indigenous/local, 78, 733, 750, 755; interests, 140–141, 755; military-police complex, 548; networks and coalitions, 740; unconstrained, 183, 591 state, 3, 6, 180, 182, 362, 460, 540, 750, 751 see also governance embedded authority, 256n1 embedded state, 209–210, 253–264, 270, 709, 816, 817 contrast with sovereign state, 261 see also governance employers’ associations, 7, 579 enabling state, 19, 477 “end of history” thesis, 40 English School, 221n1 entrepreneurs, 6, 35, 377, 486, 660–661, 730, 733 see also innovation environmental change aspects of: climate change, 175, 194, 278, 308, 339–340, 343, 345, 349; CO2 emissions (greenhouse gases), 231, 349–350; global warming, 71, 175, 338, 349, 818; loss of biodiversity, 175; ozone depletion, 175; water stress, 340 nexus: direct and indirect consequences, 339–340; ecological interdependence, 339, 343–344, 349

environmental degradation, 41, 308, 310, 501 environmental policy and governance, 175–176, 278, 338–350, 826 actors: bureaucratic rule-making networks, 345–346; non-state and transnational actors, 346–347; role of the state, 346 instruments: certification schemes, 349; forest management, 346–347; international environmental law, 342–346; Kyoto Protocol, 231, 344, 345; multilateral agreements, 343; voluntary programs, 346 trends: diffusion and harmonization, 341–342; environmentalization of the state, 350; governance turn, 346; internationalization of environmental politics, 340–346; privatization of environmental politics, 346–349 environmental protection, 17, 44, 172, 290, 308, 341, 342, 346–347, 350, 399, 549 environmental sustainability standards, 291, 348 Estonia, 357, 517, 623 Ethiopia, 118–120, 674, 683, 770, 786n5 ethnic cleansing, 70, 207, 359, 603 ethnic conflict, 7, 21, 80, 126–127, 185–186, 739, 751, 763–775, 765 ethnic diversity, 682–684, 763–775 ethnicity, 7, 537 and the state: effects on state transformation, 763–775; institutionalization of, 126–127 see also minorities; race; racial division ethno-nationalism, 7, 80, 185–186, 621n7, 763–764, 768–774 eunuchs, 65 European Central Bank (ECB), 16, 49, 435, 578, 580 European Coal and Steel Community (ECSC), 282 European Commission, 264, 275, 296, 297, 431, 452, 487, 494, 503, 525, 526, 609, 610 European Common Market (1957), 12, 396, 400 European Community, 466 European/continental statism, 36, 38, 172

876   Index of Subjects European Court of Human Rights, 263 European Court of Justice (ECJ), 263, 264, 281, 383, 504, 525 European Economic Community (EEC), 269, 275, 524, 569, 819 European Fiscal Compact, 579 European Free Trade Association, 466 European Monetary System (EMS), 400, 401 European Monetary Union (EMU), 45, 360, 435, 511 European Parliament, 261, 297–298, 580 European Stability Mechanism (ESM), 511, 579 European Union (EU), xiiin5, 4, 16–17, 40, 70–71, 174, 179, 204–205, 269 characteristics: elections, 572; intergovernmentalism, 543; lack of democratic legitimacy, 77, 261, 572; multilevel governance, 269–282, 376; post-national polity, 77; qualified-majority voting (QMV) system, 175, 376; regulatory state exemplar, 500, 503–508; unanimity principle, 10 entry/exit: accession process, 184, 543, 604–607, 610; enlargement, 184, 468, 602–613; exit procedure, 281 institutions/actors: Committee of the Regions, 277; Expert Group in Gender Equality, Social Inclusion, Health, and Long-term Care, 493; member states, 17, 281, 360, 526; referenda, 573; regional government, 271–275, 277, 280, 542–543, 577, 826 instruments: acquis communautaire, 525n2, 543n1, 606, 607, 609, 612, 613; directives, 260, 281, 296; four freedoms (single market), 47n4, 504, 524–525; free movement, 524–527; Open Method of Coordination, 469, 825; Single European Act (1986), 431, 573; standards setting 295–296; Women’s Charter (2010), 487 policies: agricultural policy, 275; Common Agricultural Policy (CAP), 395; competition policy, 41, 45, 264, 378; currency integration, 12, 13, 90; gender mainstreaming policy, 492–493;

promotion of democracy, 184; trade policy, 45; Schengen zone, 47, 524, 525, 527 politics of: domestic intervention, 209; evolution of authority, 271–274, 272–273; integration, 13, 45, 180, 269–282, 360, 376, 377, 383, 400, 468–469, 525, 527, 543, 551, 572, 604; interest group pressure, 264; leverage, 604–606, 609–613; liberalizing agenda, 45, 504; Lisbon strategy, 487; policy competence, 209, 271–274, 272–273, 276; social and political integration, 12–13, 15, 180 treaties: Amsterdam Treaty (1997), 492, 494, 525; Lisbon Treaty (2007), 573; Maastricht Treaty (1992), 157, 503, 525, 543, 573; Treaty of Rome (1957), 524 Euroskepticism, 538 Eurozone, 12–13, 331, 332, 573, 580 budget deficit crisis, 41, 395, 578, 579 exchange rates, 323, 331 external shocks, 43, 82–83 failed states, 7, 21, 153, 154, 155, 156, 158–159, 162, 186, 207, 676, 686, 732, 737 see also fragile states; state breakdown/ failure fair trade standards, 291 family models: adult worker model, 484–487; dual earner/dual carer model, 476, 484–487 position: role in social protection, 17; structure, 7; work-family balance/ reconciliation, 177–178, 373, 380, 382, 416, 469, 487–488 support measures: childcare provision, 18, 178, 373, 382, 416, 484; early childhood education and care (ECEC), 418; family policy, 475–477; parental leave, 382 see also welfare state; women fascism, 81n6, 84, 89 federalism, 7, 10–11, 273, 280, 467, 540–542, 576–577, 641, 770, 822 feudal warriors, 65 feudalism, 65, 77, 516, 641 financial capital, 6, 240

Index of Subjects    877 financial crisis (2007–2008), 16, 19, 34, 45, 210, 322–334, 460, 511, 559 development: central banks’ response to f.c., 329; financial bailouts, 327, 428, 436; housing market boom and bust, 434–435; neoliberal economics, 326–328; neoliberal hegemony, 242, 328; Troika (ECB, EU, IMF) management of f.c., 16 and the state: austerity measures, 174, 327, 478, 579; challenge to theories of the state, 47–49; effects on state policy, 332; effects on welfare policy, 478–479; intergovernmental problem-solving and cooperation, 77, 328–334; state transformation, 578–580 financial markets, 19, 39, 206, 376, 816, 819, 825 features: bond markets, 15, 41, 174; international/global, 43, 174, 293–294, 324, 326–328, 332–333, 378, 384, 414, 453, 511, 572, 580, 591, 816; local, 332 reform: deregulation, 374, 434, 445; liberalization, 454, 799, 816 see also financial crisis; global markets financial regulation and reform, 286, 294, 298, 326–328, 332–333, 591 Basel: 1988 Basel Accord, 324; 2010–2011 Basel Accord, 511; Basel Committee on Banking Supervision, 289–290 International Financial Reporting Standards (IFRS), 294 Financial Stability Board (FSB), 329, 332–333 Financial Stability Forum (FSF), 329, 330 Finland, 79, 86, 280, 377, 476, 486, 489, 568, 823 economy: corporatism, 410, 412, 413; ICT development, 416 politics & state: gender equality policy, 489; state-led industrialization, 413 flexicurity, 247 foreign direct investment (FDI), 4, 243, 430, 452, 455, 456, 625, 631, 654, 816, 831 Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan, 349 Forest Stewardship Council (FSC), 347–349, 510

fragile states, 154, 156, 158, 162, 644, 746 see also state breakdown/failure; failed states France, xiiin5 history: civil unrest (1968), 15; French Revolution (1789-1799), 76, 87–88; “immunity” to fascism, 81n6 politics & state: Constitution 1946, Fourth Republic), 281; dirigisme, 393, 395, 399, 400, 401, 402; interventionist economic planning, 426; privatization, 506–507; reform, 402–404; Socialist Party, 492; statist model, 48, 175, 393–405; unemployment rate, 402 welfare state: gender equality policy, 492; social spending and welfare state, 381, 401, 402; state of providence, 18n8; universal citizenship rights, 492 free-rider/collective action problem, 133, 135, 135n7, 501 tragedy of the commons, 162 Freedom House, 186, 626n17, 731, 783, 784 functionalism, 67, 270, 275, 277, 767 see also neofunctionalism Fund for Peace Failed States Index, 676 G7/G8/G20, 202, 260, 324, 328–329, 572, 580 game theory, 135n8, 139 gender issues and government policy, 7, 18 gender equality: inequality, equality and, 373, 382, 465, 475, 482–495; mainstreaming and outcome equality, 382, 492–493 social norms and policy change, 177 see also family; women; women-friendly state General Agreement on Tariffs and Trade (GATT, 1947)), 206, 257, 258, 259, 360, 376, 819 genocide, 127, 136, 207, 313, 359, 683, 747, 752, 767 geopolitics, 5, 12, 62 aspects of: expanded state role in g., 48; g. interaction with economic sphere, 13, 395; shifts and shocks in g., 18 EU membership benefits, 594 see also military interventions; security; terrorism; war/warfare

878   Index of Subjects German National Standards Institute (DIN), 294 Germany, xiiin5, 45, 71, 85n9 economy & society: central bank independence, 411; electricity sector, 508; export-led growth, 430; guest workers, 523; industrial relations system, 42; liberal economic order, 426; telecommunications sector, 508 politics & state: anti-terror database, 553; citizenship and immigration policy, 523; corporatism, 411; ethnicity-based nationhood, 523; German Basic Law (1949), 281; Green Party, 492; privatization, 507; security response to 9/11 attacks, 555; SPD Party, 492; state as moral project, 70 reunification (1990), 523 welfare state: gender equality policy, 492; pension system, 411n1; social expenditure, 471; welfare state, 42, 44n3, 411 global health politics, 259 global institutions, 3, 271, 292, 298, 333, 680, 681, 831, 832 see also international institutions; international organizations global markets economy: capital markets, 4, 294, 378, 453–454, 820, 830; competition, 11, 325, 328; global production chains, 4, 174, 460; integration, 4, 446, 461; profit opportunities, 241 state: effects on states/state system, 174–175, 193–212; shocks and inequalities, 206; standard setting, 179–180, 290–299; welfare state competitive disadvantage, 238 see also globalization; markets; trade Global North, 26, 157, 158, 260, 375, 838 see also affluent democracies Global South, 23, 25–26, 154, 673–687 conflicts: civil wars, 187, 679, 683; ethnic conflict and war, 185–186, 683–684, 684, 763–775, 765; humanitarian and military intervention, 186–187; secessionist movements, 187; terrorist

networks, 187; violence and instability, 185–187 economy & society: effects of globalization, 681–682; ethnic and national diversity, 682–684, 686, 763–775, 789; GDP, 185, 677, 678, 714; informal workers, 6; linguistic diversity, 682–683, 764; social and ethnic cleavages 25; socio-economic development, 787–789, 788 history: colonial origin, 674–675, 680, 683; effects of 9/11 terrorist attacks, 187; effects of Cold War collapse, 186–187, 784; late development and emerging powers, 684–685; legacy of colonialism, 22, 185; Western/European paradigms and bias, 152, 154–155, 157, 162 institutional and functional failure, 749–752 international politics: foreign aid, 680; role of international organizations, 16, 260; US foreign aid, 186 politics & states: democratization, 686, 779–793; dysfunctional states, 186, 187; limited sovereignty, 186; natural resources and rentier states, 686, 714–726; political institutions, 674; Polity IV democracy scores, 675; predatory states, 186, 187, 618, 686, 714, 730–742; regime change, 784–787, 785; representative democracy, 697; state-building, 789–791; state diversity, 674; state failure and collapse, 186, 187; state transformation, 185–187, 674–676, 763–775, 828–834; World Bank governance indicators, 676 theories: deficit theory, 158–159, 162; dependency theory, 679–682 welfare: poverty, 185, 677–679, 677, 682, 684, 687, 751, 780, 800, 803, 828, 831; social welfare provision, 144; welfare state emergence, 796–807 globalization dimensions: economic, xi, 4, 15, 40, 142, 240, 249, 250, 293, 468–469, 477, 573, 681; financial, 41–43, 174, 293–294, 324, 326–328, 332–333, 378, 384, 414,

Index of Subjects    879 453, 511, 572, 580, 591, 816; transborder flows, 193, 210n10 and formal coping: international regulatory cooperation, 500; transnational regulatory institutions, 286–299 and national states: countered by domestic politics, 43; effects on migration/ immigration, 47, 47n4; effects on national economic systems, 40–41, 375–376; effects on states/state system, 1, 2, 15, 34, 40–42, 157, 172, 173, 188, 193–212, 681, 816–818, 835–836; effects on the welfare state, 240; trade openness and industrial policy, 41, 142, 370–371, 377, 412, 681 see also global institutions; international institutions; international organizations gold standard 323, 324 governance actors: actor constellations, 160–162; non-state actors, 24, 142, 152, 154, 158, 161–162, 179, 209, 233, 259, 262–264, 347, 666, 748–749, 756, 833; public-private partnerships, 14, 46, 142, 161, 262–263, 347, 467, 477 characteristics: distributed gov., 5; economies of scale of gov., 274–275, 277; etymological roots of “to govern”, xiiin4; expression of community, 270, 274, 277–278; general-purpose vs. task-specific gov., 279–280; gov. with and without government, 748–749; joint/hybrid gov., 180, 287, 298; modes of gov., 157; multilevel gov., 16–17, 142, 154, 180, 209–210, 269–282; privatization of gov., 286–287, 291–299, 297, 346–349; trust and legitimacy of gov., 152, 162, 279 global, 4–5, 157, 162, 226, 253–264, 289 institutions & regulation: global gov. institutions, 256–258, 263, 269–282, 510–512; international gov. challenges, 173, 179; limited statehood and gov., 159–163, 160; regional, 271–275, 277, 280, 826; rule-making processes, 142, 154, 286–299, 343–346, 748–749; state capacity, 15, 131, 133, 134–138,

180, 645–646, 771–772, 788, 790; transnational gov., 162, 180, 286–299, 348–349 World Bank gov. indicators, 623, 646–648, 648, 676, 694–695 see also international institutions; international organizations; transnational organizations and actors governmentality, 137, 139 Great Britain economy & society: class conflict, 428; demand-led growth, 433; nationalization of industry, 429; “winter of discontent” (1978/79), 15 history: early capitalist system, 111–112; national efficiency movement (early 20th century), 67; pioneer industrialization, 171; Poor Law (1834), 432; Social Contract (1974), 427; World War II coalition government, 3 politics & state: House of Lords, 81n5, 553, 556, 567, 572n9; Keynesian era, 428–430; National Health Service (1948), 429, 432, 476, 507; neoliberal era, 430–435; new public management, 210n11, 381–382, 431; party politics, 84, 436; welfare state development, 429 see also colonialism/colonization; United Kingdom Great Depression (1930s), 34, 323–325, 327, 329–332, 447, 459 great powers, 62, 69, 202–203, 222, 226, 230, 275, 395 Greece, 12, 15, 64, 79, 86–87, 156, 246, 277, 280, 358n2, 359, 362n4, 368, 375, 484, 565–566, 607, 612, 730 Guatemala, 105, 110, 785 Guinea, 187, 676, 731, 738, 739, 741 Haiti, 676, 731, 785 Hanseatic League, 225 healthcare, 14, 374, 378, 434, 476, 625 High-Level Panel on Threats, Challenges and Change (2003-2004), 305, 314 “high” vs. “low” politics, 12–13 Hinduism, 65

880   Index of Subjects historical institutionalism, 38, 655, 658–659 analysis of colonialism, 123, 128 method: neo-Weberian perspective, 131, 133, 135–136; path dependence thesis, 10–11, 43, 507; weaknesses and draw-backs of, 48–49 and state: democratization and reform, 80–85; political choice and state activity, 45–46; role of the state, 33–34; state persistence thesis, 42–44, 175–176; state redeployment, 44–45, 173, 381; state transformation thesis, 44–47 HIV/AIDS, 262, 702n11, 709, 820 Holy Roman Empire, 198, 225 human capital, 6, 415, 417, 418, 487, 527–528, 625, 625n13, 693, 698, 716, 836 literacy, 46, 102, 418, 420, 419 see also knowledge economy; social investment state; women-friendly state human rights aspects of: devaluation of citizenship, 519; guarantees, 565 foreign intervention: military intervention, 18, 46; responsibility to protect doctrine (R2P), 12, 18, 46, 176, 207, 305–317, 738, 745, 817 human rights abuse/violation, 186, 207–208, 232, 310–314 human rights law, 204, 520 Human Rights Watch, 176 human security agenda, 305–307, 316–317, 745, 755, 834 aspects of: collective security, 257, 315; effects on idea of sovereignty, 310–314 see also humanitarian interventions; military interventions humanitarian interventions law: emerging legal norms, 314–316; legal reform, 311–314; legality and legitimacy tension/gap, 310–314 process: collective responsibility, 314–315; exceptions to non-intervention principle, 312; neoliberal reform as precondition for hum. int., 39; peacekeeping and state-building missions, 754–755; responsibility to protect doctrine (R2P), 12, 18, 46,

176, 187, 207, 305–317, 738, 745, 817; role of international institutions and organizations, 176, 232; selective interventions, 232, 313 see also developing/developmental states; military interventions humanitarian security, 308 Hungary, 78n3, 79, 229, 277, 357, 486, 540, 543, 588, 589, 590–591, 598, 603, 608–609, 612, 613 hunter-gatherers, 63, 99, 105, 106, 108 Iceland, 525, 559, 579 immigrants, 734 history: New World colonial, 103 labor market: guest workers, 520, 523; low-paid labor, 437 law: illegal, 554; voting rights, 19 society: cultural diversity, 527; education levels, 734; multiculturalism and integration, 523–524; nativist hostility to, 521, 825 see also citizenship; immigration immigration process: barriers to admission, 71; barriers to citizenship, 383; border controls, 47n4, 518, 521, 524, 526, 551, 559; external and internal filters, 518 politics & state: asylum seekers, 383, 518, 524, 556; government policies, 383, 521–522; illegal, 15, 47, 47n4, 551, 554; nation-building, 522–524; repressive state responses, 47 see also citizenship; immigrants; migration; national borders; race imperialism, 3, 69, 78, 86–87, 116, 118, 159, 176, 203 import substitution industrialization (ISI), 20, 22, 175, 182, 365, 382, 399, 445–461, 624– 625, 797, 816, 828–829 and the state: corporatist associations, 445; link with authoritarianism, 451 “natural”/automatic, 448 Inca Empire, 104–105, 106, 108 Independent Commission on Disarmament and Security Issues (Palme Commission), 309

Index of Subjects    881 Independent International Commission on Kosovo, 311, 312–313 India, xiiin5, 65, 68, 78, 349, 527, 684–685 history: British rule, 120, 121, 125–127, 680; pre-colonial, 119; princely states, 121, 125–126; zamindar officials, 122 present: development and state transformation, 699, 703–707; party politics and patronage, 705–706; state nation model, 71 Indonesia, 78, 278, 623 industrial conglomerates chaebol (South Korea), 366, 685 keiretsu (Japan), 366, 397, 399 industrial relations, 24, 42, 89, 90, 142, 143, 365, 411, 824 see also labor; labor movement; trade unions industrial revolution, 82, 87, 171 industrialization economy: capital/labor conflict, 91, 140, 450; export-oriented, 142, 829; Fordist production, 6, 140, 206, 241, 247, 250, 327; technological advance, 118 environmental: costs, 17, 175; risks, 338 history: late developers, 171–172, 394, 447–448; structural prerequisites, 141; West–East progression, 88 politics & state: democratic impetus, 82; effects on politics, 35; infant industry protection, 41, 174, 188, 396, 398; state support, 394–395, 413, 451, 460, 679, 684–685; state transformation and stabilization of i., 6 welfare: i. effects on social protection, 17; health and safety issues, 17; risk of unemployment, 17, 819 inequality society: educational ineq., 693, 705; effects of geography on ineq., 101–102; effects of ineq. on longevity, 694; and gender, 382, 482–483, 487–488, 492–495; global ineq., 832; poverty and ineq., 48, 366, 367, 373, 474, 693–694, 699, 800, 803, 829; resource ineq., 202, 203, 223–227, 228, 718; social ineq., 436;

socio-economic ineq., 82, 203, 223, 225, 397–398, 411, 420, 434, 460, 469, 477, 493–494, 604, 626, 654, 701–702, 704–705 politics: institutionalized ineq., 200, 202–204, 209, 222–223, 227–228, 231; legal ineq., 202, 223, 313; negative effects of ineq. on governance institutions, 694; political ineq., 223, 228, 230–233 states: ineq. between states, 24, 202, 221, 226 information and communications technology (ICT), 291, 415n4, 416–417, 502, 550, 553, 576, 819–820 see also innovation; knowledge economy; new technology innovation advantage: comparative, 416; competitive, 46 aspects of: discretionary learning, 418; influence of work patterns, 418; free-market creative destruction, 439; incremental vs. radical i., 412, 416, 417, 422; product i., 411 knowledge: knowledge-intensive, 416, 418, 422, 438–439; technological, 158, 347, 362, 374, 381, 415, 816, 819 politics: promotion of i., 239, 417; public policies, 172 see also new technology; social investment state institutional change and reform, 20–21, 184, 233, 453, 490, 554–557, 572–578, 655, 657– 668, 826 intellectual property rights, 44, 228, 229, 259, 264 Inter-American Development Bank (IADB), 102, 278 intergovernmentalism, 270–271, 275, 543 International Accounting Standards Board (IASB), 209, 292, 294, 297–298 International Adult Literacy Survey (IALS), 418, 420 International Atomic Energy Agency (IAEA), 230 International Civil Aviation Organization (ICAO), 557

882   Index of Subjects International Commission on Intervention and State Sovereignty (ICISS), 305, 314 International Criminal Court (ICC), 176, 205, 231, 253, 259 International Criminal Tribunal for the former Yugoslavia (ICTU), 610 International Electrotechnical Commission (IEC) 292, 293–297 international economy, see capital; capitalism; economic growth and development; financial markets; global markets; globalization; markets; trade International Finance Corporation (IFC), 348 international financial institutions (IFIs), 4, 5, 15, 39, 174, 325–326, 330, 580, 625, 820, 829–830 see also European Union; International Monetary Fund; World Bank international governmental organizations (IGOs), 279n4, 289–290, 293 international institutions characteristics: consent and consensus principle, 208–209, 229–232, 258, 279; delegated authority, 205, 205n8, 837; delegation to national bureaucracies, 16; increasing authority of, 229–233; influence of powerful states, 197, 224, 226–230, 232–233, 253, 313–314; promotion of Western state model, 3 effects on: equality/inequality, 200, 202–204, 209, 222–223, 227–228, 231; states/state system, 34, 40–42, 172, 193–212, 221–233, 253–264, 279, 330, 360, 376, 680, 816–817, 837 law: rule setting processes, 142, 154, 226–232, 286–299, 343–346, 748–749; soft law, 176, 343, 344 see also international financial institutions; international organizations; non-governmental organizations; supranational organizations; transnational organizations and actors International Labour Organization (ILO), 257, 262, 290, 494, 830n3, 836n13 international law, 2, 204–205, 221, 224, 225, 228, 230, 298, 311–314, 342–346

International Monetary Fund (IMF), 4, 16, 39, 174, 186, 203, 209, 224, 429, 569, 579, 680, 681, 816 International Organization for Standardization (ISO), 292, 293–297, 346, 348 international organizations (IOs), 4–5 characteristics: competence to intervene, 258–261; definition, 279n4; dependence on state support, 260–261; expansion of, 572; governance functions, 256–258, 263, 269–282; issue area growth, 257; legitimacy, 313–314; membership growth, 257; operative capacity, 260; state instruments, 254–258; super-majority policy decisions, 279 effects on: states/state system, 34, 40–42, 172, 193–212, 221–233, 253–264; institutionalization of inequality, 226 environment: civil society participation, 261–262, 263–264; relationship with non-state actors, 262–263 International Panel for Climate Change, 209 international relations discipline, 9, 12, 23n9, 34, 66, 142, 223, 271 international sphere global institutions, 3–4 and the state: constitutive role in state formation, 2–5; impact on state development, 5; dissemination of state role models, 3–4; state survival function, 5 see also sovereign states system intervention state, 75, 76, 86, 88, 92, 360 see also social investment state; welfare state; women-friendly state Iran, 118, 316, 674, 719n1, 782, 786 Iraq, 46, 229, 310–311, 312, 676, 718, 720, 738, 739, 749, 752, 754, 818 Ireland, xiiin5, 12, 41, 62, 249–250, 427–428, 430, 435, 438, 579 Sinn Féin, 534 ISI, see import substitution industrialization Islam, 65, 551, 554 Islamic militias, 753 Islamic politics, 65

Index of Subjects    883 Israel, 527, 683 Italy, 8, 12, 45, 47n4, 63, 89, 281, 491, 506, 573, 574, 577 Japan, xiiin5, 3, 71 economy & society: coordinated market economy, 411, 566; economic crises, 618n1; economic stagnation, 400, 403–404; employment maintenance, 381, 401; export-led growth, 395, 399, 430; keiretsu (conglomerates), 366, 397, 399; unemployment rate, 403; zombie companies, 403 history: colonial empire, 118, 124–125, 674, 675, 722; Meiji Revolution, 10, 395 politics & state: Liberal Democratic Party (LDP), 398, 401, 573, 826; Ministry of Finance (MOF), 396, 403; Ministry of International Trade and Industry (MITI), 175, 396, 398–399, 403; party patronage, 570; plan-rational system, 622; reform, 402–404; sovereign debt, 404; state-building, 118; statist model, 38, 175, 393–405; welfare state, 86n10, 381, 404 Japan Financial Services Agency, 298 JVC (company), 291 Kazakhstan, 594–597, 623–625, 627, 631, 631n23, 632 Keynesian economics, 15, 17, 172, 257, 361, 426, 428–430, 501, 573 aspects of: demand management/stimulus, 36, 40–41, 43, 45, 174, 241, 362, 381; supply-side, 421–422 see also liberal market economies; liberal state model; neoliberalism Keynesian Welfare National State (KWNS), 239 knowledge economy, 6, 402, 469, 698 by sectors: knowledge-intensive industry, 415–416, 418, 421, 437, 438 knowledge-intensive service economy, 415, 421 Korean War, 828 Kosovo, 77, 207, 310, 312, 610–611, 738, 749, 754

Kuwait, 717, 718 Kyoto Protocol, see environmental policy and governance under “instruments” Kyrgyzstan, 589, 594, 597–598, 624, 632 labor characteristics: dual-earner model, 177; gender division, 177; migration, 4, 470, 516–528; mobility, 41; recommodification, 237; training schemes, 172, 443; work incentives, 239 conflict: bargaining power, 142; capital/ labor conflict, 91, 140, 450; exploitative institutions, 104 forms: coerced, 102, 108, 111; indentured, 117; informal working, 6, 182 and state: employment protection legislation (EPL), 473; rights, 44 see also labor markets; labor movement; trade unions; wage bargaining labor markets gender: female entry/participation, 90, 363–364, 379, 403–404, 416, 418, 465, 469, 482–495, 485, 820; gender equality policy, 482–495; male breadwinner model, 379, 450, 468, 475, 484–487, 820 policy: active labor market policy (ALMP), 242, 363–364, 366, 380, 413, 418, 467, 474–475, 477, 803; corporatist l.ms., 362; flexibilization, 528, 804; job creation/ promotion, 18, 46, 174, 438–439; passive vs. active, 18; regulation, 473, 477 split: dual, 90, 473; segmentation, 90 labor movement, 15, 39, 91, 362, 457, 797–799, 806 as an organization: militancy, 68–69; women’s participation, 490 politics & state: communist/socialist conflict, 84, 92; corporatism, 568; role in welfare state building, 181, 366 land aspects of: ownership, 6–7; privatization, 704; tenure, 349 redistribution: distribution, 6; grants, 104; reform, 181, 797–799, 828 land-grabbing, 657, 706

884   Index of Subjects Latin America economy: “Chilean model”, 39; debt crisis (1980s), 5, 39, 457, 799, 816, 829–830; import substitution industrialization (ISI), 20, 22, 175, 182, 382, 399, 445–461, 797, 829; transition from ISI model to open economy, 445–461; transition to open economies, 22, 180 politics & state: indigenous community self-rule, 278; national independence, 78; welfare state and social protection, 181–182, 797–798, 799–800, 802–803 see also colonialism/colonization; Global South; South America; and individual countries Latvia, 517, 623 law, see rule of law League of Nations (1920-1946), 201 Lebanon, 770–771 lesbian, gay, bisexual, and transgender (LGBT) rights, 606 Lesotho, 260, 681, 786 liberal market economies (LMEs), 1, 172, 175, 247, 365–366, 377, 411, 412, 420, 580 see also liberal state model liberal state model, 13, 362, 381, 426–439 history: Keynesian era, 428–430; neoliberal era, 430–435 and today’s state: anti-state ideology, 467; arm’s length economic management, 172, 365, 381, 427; new public management, 210n11, 381–382, 431; role of the state, 428, 430, 436; state intervention, 426–428, 429 liberalism, 70, 681 characteristics: embedded, 197, 204, 206; free-rider/collective action problem, 133, 135, 135n7, 162, 325; social contract, 133, 134, 139, 281 and state: consent to state power, 133, 135; distrust of the state, 134; theory of the state, 131, 133, 134–135; threatened by preventive security doctrine, 549–550, 559; tolerance of diversity, 539 liberalization dimensions: capital, 42; economic, 44–45, 322, 375–380, 451, 607, 654–668, 829;

financial, 174, 453, 799, 819, 830; market, 431, 452, 505, 511; trade, 142, 257, 264, 453–456, 466, 502, 799; unilateral, 240 and public: infrastructure services, 504, 506–509; public goods provision and regulation, 501–508 varieties of, 49n5 see also privatization liberation movements, 207 Liberia, 186, 187, 312 Libya, 46, 176, 187, 207, 314, 738 Liechtenstein, 41, 231, 575 Lithuania, 623 Lutheran church, 85, 88 Macedonia, 540, 610 Malaysia, 8, 121, 250, 278, 675, 786, 831n5 Maldives, 339, 350 Mali, 21, 46, 187 Malta, 526 managerial state, 157 Marine Stewardship Council (MSC), 348–349 market-making, 44, 338, 504 markets aspects: creative destruction, 439; domestic, 4, 6, 41, 243, 259, 365, 412, 446, 461; integration, 12, 22, 242, 271, 289, 819, 831; pre-modern, 64–65 and state: deregulation, 193, 374, 380, 415, 445; myth of self-regulation, 45; regulation and policing of, 45, 172; regulatory institutions, 286–299 Marxism, 33, 500 aspects of: class conflict, 35, 132–134; colonial analysis, 124; “red international”, 80; workers’ movements, 84 kinds of: neo-Marxism, 37; structuralist, 134, 140 and state: view of the state, 34–36, 132–133; withering away of the state, 35–36n2 mass media, 7, 338 Mayan people, 105 mediatization, 571, 578 mercenaries, 67, 196 Mercosur (1991), 263, 279, 455, 831n4

Index of Subjects    885 Mexico, xiiin5, 47, 103, 104, 105, 106, 107, 108, 110, 357, 685, 736, 749, 828 economy & society: automobile industry, 449; drug-related crime, 749; Monterrey grupos (business group), 451; regional economic success, 461 politics & state: Nacional Financiera (Nafinsa), 447, 449; Partido Revolucionario Institucional (PRI), 448, 450, 453, 455; populism, 447–448; semi-sovereign status, 446–447, 460; social spending, 458–459 trade system: inward and outward foreign direct investment, 456; percentage share of imports and exports in GDP, 456; trade liberalization, 454–456; transition from ISI model to open economy, 445–461 Microsoft, 291 migration, 47, 47n4, 516–528, 818 aspects of: emigration control, 520–521; human capital, 527–528; nation-building, 522–524; passports, 521, 557 EU: European free movement, 524–527; Schengen Agreement (1985), 383 see also citizenship; national borders Millennium Summit (2005), 315 military interventions, 37, 46 aspects of: peacekeeping and peace enforcement, 258, 310; preventive war, 310–311; regime change, 46, 187, 207, 311, 739; retroactive justification, 311 law: legality and legitimacy tension, 310, 311; responsibility to protect doctrine (R2P), 12, 18, 46, 176, 187, 207, 305–317, 738, 745, 817 minorities, 9, 277–278 rights, 19, 210, 543, 610 modern states, 19, 23, 75–92, 105, 107, 132, 138–140, 153, 157–159, 193–212, 255–256, 359, 516, 520, 547, 746, 817, 821–822 modernization theory, 6, 22, 33, 134, 154, 157 aspects of: colonial analysis, 124; democratic impetus of economic development, 82; diffusion processes, 35;

importance of technological innovation in development, 158 and state: state formation, 138–139, 532; view of the state, 35–36 as a theoretical undertaking: new/ neo-modernization theory, 82, 110; teleological view, 75, 81, 158 Monaco, 174 monarchy kinds of: constitutional, 565, 567; parliamentary, 567; republican, 742 Divine Right doctrine, 75n1 money laundering, 41, 732 Mongolia, 118, 674, 786, 792 Mozambique, 122 Mughal empire, 119 multiculturalism, 523–524, 540 multinational corporations (MNCs), 193, 243, 628, 835 Musica people, 105 Myanmar, 232, 683, 786, 831n5 see also Burma (Myanmar) Namibia, xiiin5 Napoleonic Wars (1803-1815), 82, 88, 118, 203 national borders effects: division of communities, 683; effects of EU integration on n. bs., 383; flow of goods and people, 47, 47n4; policy spillover across n.bs., 376 territorial aspects: border controls, 47n4, 518, 521, 524, 526, 551, 559; porousness, 47; territorial integrity, 4, 551 see also citizenship; immigration; migration national consciousness/identity, 69, 196, 201, 277, 516 nationalism, 68, 69n6, 71, 78, 88, 739 aspects of: anti-colonial, 79; community construction, 533; imagined communities, 201, 522, 537; national identity, 201; new regionalism, 542 trajectory: byproduct of modernization, 767–768; conceptions of nationhood, 532–534; nationalist demands and state responses, 537–542

886   Index of Subjects national security state, 18, 19, 384, 547–560 processes: building homeland security/new security architecture, 552; international cooperation, 557–558; post-9/11 developments, 550–560; threat to liberal democracy, 549–550 types: garrison state, 548–549; preemptive/ preventive state, 549–550 nationhood, 523, 527, 532–544 nation state or national state, see the state NATO, see North-Atlantic Treaty Organization natural law, 225 natural monopolies, 378, 500–502, 504, 509 natural resources minerals, 103–104 resource curse/rentier theory, 619, 626, 714–726, 734–735 Nazi regime, 70, 81, 155, 523, 767 neocorporatism, 427–428, 436, 437, 439, 467 neofunctionalism, 255, 270–271, 275, 277 neoliberalism, 14, 15, 21, 172, 199n4, 240, 430–435, 500, 685, 833 aspects of: colonial analysis, 124; cultural hegemony, 241–242, 572; geopolitical challenge to neol., 48; laissez-faire, 326, 362; prescriptive and normative challenges to, 47–48; Washington Consensus, 4, 40, 45, 46, 172, 182, 621 and capitalism: critique of crony capitalism, 40; global logic of capital, 330 and state: critique of statism, 38–40; effects on Global South states, 681–682; role of the state, 33–34, 430–435; state retreat and decline thesis, 33–49, 172, 381 neo-realism, 199n4 role of the state, 36 Nepal, 118, 674, 786 Netherlands, xiiin5, 79, 85, 87, 92, 111, 137, 206, 373, 476, 485, 486, 570, 571, 575 economy & society: coordinated market economy, 566; Dutch miracle, 414; industrialization, 88, 118; multiculturalism, 523 politics & state: consociationalism, 770; corporatism, 410, 412, 414, 416, 418; democracy, 81; welfare state, 823n2

New Public Management, 210n11, 381–382, 431, 571–572 new technology, 34, 40, 172, 291, 557 challenge to state intervention, 41 innovation: role of innovation in development, 158; technological change/advance, 158, 378, 448, 502, 553, 819–820 see also innovation New Zealand, 78, 117, 378, 574 economy & society: inward and outward foreign direct investment, 456; percentage share of imports and exports in GDP, 456; trade liberalization, 454–456; transition from ISI model to open economy, 445–461 politics & state: bi-cultural national identity, 449; semi-sovereign status, 446–447, 460; social spending, 458–459 Nicaragua, 102, 278, 785 Nigeria, 120, 121, 125, 126, 340, 717, 721–723, 734, 736, 741, 764, 770–771, 832 non-governmental organizations (NGOs), 16, 40, 179, 208, 696n5, 817, 833 activities: regulatory, 511; standards setting, 291 definition, 4n2 Nordic countries, 174, 175, 178, 374–375, 381, 404, 416, 418, 419, 489, 824–825 see also social investment state North American Free Trade Agreement (NAFTA, 1992/1994), 240, 263, 452, 455, 538, 542 North Atlantic Treaty Organization (NATO), xiiin5, 309, 310, 312, 314, 360, 376, 738, 836 North Korea, 13 Northern Ireland, 540, 541, 543, 555, 577, 764 Norway, 79, 86, 87, 92, 228, 245, 247, 363, 367, 368, 370, 377, 414, 416–417, 419, 485, 566, 570, 573, 575, 823 economy & society: oil resources, 418, 722, 735 politics & state: active industrial policy, 413; corporatism, 410, 412; credit socialism, 413; gender equality policy, 489, 494 nuclear power, 230, 396, 569, 576 nuclear weapons, 259, 307

Index of Subjects    887 OECD (Organisation for Economic Co-operation and Development) countries, xi, 15, 19, 158, 174, 178–180, 504–512 see also affluent democracies and individual countries OECD Gender Initiative (2010 ff.), 486 oil rents, 714, 718, 724, 726 oil shocks (1970s), 38, 308, 465 OPEC (Organization of the Petroleum Exporting Countries), 38, 721 Organization for African Unity, 769 organizational materialism, 135 organized crime, 310 Ottawa Landmine Convention (1997), 231 Ottoman Empire, 69, 78, 79, 88, 119, 768 Pakistan, 156, 316, 676, 768, 786, 818 Palestine, 77, 122, 683 Paraguay, 100, 105 path dependence, 10–11, 34, 43, 127–128, 141, 228, 507, 523, 734 Peace of Westphalia (1648), 198, 210, 746 pension systems, 379–380, 457, 466, 472, 797–803, 824 aspects of: multi-pillar, 473–474; old age, 141, 437, 450, 473–474; pay-as-you-go (PAYGO), 174, 379, 824; reform, 474, 477, 701, 800, 802–803, 805, 829 types of: Beveridgean, 474; Bismarckian, 474 People’s Health Movement (PHM), 264 Peru, 100, 104, 105, 106, 110 Philippines, 78, 278 Phoenicia, xiii Pipil people, 105 pirates/piracy, 196, 732 Plaid Cymru, 538, 539 Plaza Accord (1985), 400 pluralism, 33, 134 view of the state, 34–36 plurinational states, 360, 532–544 aspects of: multinational states, 535; nation-building projects, 522 and nationalism: internal nationalism, 383–384, 536–539; nationalist demands and state responses, 537–542 see also nationalism; plurinationalism

plurinationalism, 764, 770–771, 834 Poland, xiiin5, 78n3, 79, 85, 91n13, 183, 277, 280, 357, 593, 596, 603 political community, 19–20, 193, 201, 524, 532, 536–537, 815 political evolution and history forms of government: city-states, 63–65, 76–77, 821; empires, 63–65, 66, 68–70, 78–80, 99, 104–105, 119, 122, 203, 467, 516, 768 cyclical theory, 65 see also historical institutionalism; modernization theory; state-building; state formation Political Instability Task Force (PITF), 747, 748 political sphere mechanisms: collective action, 38, 665, 697, 709; consensus, 8, 469, 556; decision-making, 19, 568; interest groups, 7, 16, 38, 88, 410, 445–446, 567–568, 605–606, 611, 725, 826 results: exclusion, 68–69, 773; polarization, 84, 89, 91, 558, 573, 751; protest, 15, 207, 260, 569, 579, 654, 665, 702, 738, 753, 779, 801; radicalization, 84, 89, 91 structures, 2, 7, 20, 25, 269 political systems, 7–9, 19, 36, 132, 171, 202, 206–207, 436, 489, 557, 566n5, 666, 680 see also individual regime types population transfer, 70, 118 Portugal, xiiin5, 78, 82, 86–88, 358n2, 565, 566, 572, 823n2, 825–826 Carnation Revolution (1974), 451 economy & society: inward and outward foreign direct investment, 456; percentage share of imports and exports in GDP, 456; population loss through emigration, 461; trade liberalization, 454–456; transition from ISI model to open economy, 445–461 politics & state: semi-sovereign status, 446–447, 460; social spending, 458–459 post-communist countries, 21, 23, 25, 182–185 democracy: democratic deficit, 626; democratization, 183; elite competition, 588–589, 591–598, 603–604; elite

888   Index of Subjects post-communist countries (Cont.) ideological deficit, 621–622; Hungarian democratic reversal, 608–609 economy & society: adoption of neoliberalism, 39–40; civil society, 183, 627; economic constraints, 624–625; economic growth, 630–631; natural resource wealth, 618–632; “seven families” business group, 451 EU: EU Cooperation and Verification Mechanism (CVM), 608, 610; EU leverage, 604–606, 609–613 indices: Human Development Index, 624; World Bank governance indicators, 623, 631, 632 politics & state: bureaucratic constraints, 622–624; bureaucratic embeddedness, 620, 625, 626; inherited structures and legacy, 184–185, 588, 602, 619, 621, 623, 624; institutions, 590–599; need for state interventionism, 625–626, 628–629; political trajectories, 603–605; power sharing, 183, 185; state development and transformation, 587–599, 602–612, 618–632, 826–828; winner-take-all states, 183–184 see also individual countries postmodern state, 22 poverty aspects of: escaping, 18; inequality and, 48, 366, 367, 373, 474, 693–694, 699, 800, 803, 829; intergenerational transmission, 487, 488; risk, 469–470; subsistence agriculture, 722 fighting: alleviation, 468, 475, 626; prevention, 18; reduction, 17, 628, 630–631, 694, 701, 704, 706n13; transfer payments, 18 kind of: absolute, 678; relative, 22, 678; child, 482, 487; old age, 473, 474 world regions: Global South, 185, 677–679, 677, 682, 674, 687, 751, 780, 800, 803, 828, 831; New World indigenous populations, 106–107 power relations, 12, 34–35, 226, 831 aspects of: asymmetrical, 222; distribution and configuration, 6–7, 81; false

consciousness, 134, 135; social classes, 133 in politics: hegemony, 134, 135; impact of political institutions, 38; incorporation of subordinate groups, 19; power struggle and competition, 66, 77, 81, 117 power resources theory, 134, 140, 140n17, 232, 366, 467 pre-colonial states, 99–113, 119–120 predatory states, 125, 186, 187, 618, 667, 686, 714, 730–742 Princeton Project on National Security, 231n9 private military companies (PMCs), 752 privatization, 142, 158, 240, 455, 568, 591, 596–597, 606, 621, 623, 704, 824, 827 regulatory, 287, 293–294, 296–298, 297, 346–349 state enterprises, 377–378, 415, 431–432, 501–509, 577 product market regulation, 370–371, 378, 412–413 production regimes, 7, 365, 411, 823 property rights, 45, 109, 138–140, 171, 183–184, 501, 589, 591–593, 596, 639, 642–643,645–647, 655, 661 public choice theory, 39, 134 public goods theory, 274–277, 500–503 public–private partnerships, 46, 142, 161, 262, 571 see also governance; non-governmental organizations public spending, 45, 46, 175, 241, 242, 366, 418, 437, 439, 458–59, 725 public sphere, 2, 7, 14, 261, 565, 578, 696n5, 697 Puerto Rico, 78 quasi-markets, 14 quasi-states, 154, 201, 201n7, 733–734, 746, 747, 750–751 race, 7, 90, 141, 155, 239, 492, 494, 522, 536, 683 racial division, 126, 127, 359, 428, 683 racial discrimination, 7, 127, 428, 519 regime change, 20–21, 46, 187, 207, 311, 523, 565–567, 598, 603, 658–659, 741, 747, 784–787, 785, 791

Index of Subjects    889 Regional Assistance Mission for the Solomon Islands (RAMSI), 161 regulatory ideas, 198 regulatory state, 19, 286–299, 383, 499–512 aspects of: liberalization and privatization of public goods provision, 501–508; market competition, 290, 291; market regulation, 500–501; “race to the top”, 290; welfare gains and losses, 508 levels: European Union exemplar, 503–508; global governance institutions, 510–512; privatized rule-making, 286–287, 291–299, 297 rule-making issues: accountability issues, 509–510; consumer participation, 296–297; equity concerns, 509; principal-agent problems, 503; regulatory capture, 296n8, 297, 502; rule-making dimensions, 288–292, 289 religion development of world religions, 65 effects on state-building, 84–85, 88, 91–92 religious conflict, 21, 80, 84, 524 rent-seeking, 40, 183, 383, 588–589, 591, 593, 603, 612, 618, 630, 724, 730, 732, 734–736, 740, 771, 774 representative government, 3, 697n6 republicanism, 64, 84–85, 88, 91, 565 revolution, 20–21, 68–69, 185, 237, 523, 567, 638, 753, 779 Rhine River Commission, 257 ritual, 65, 133, 137, 138 Roma people, 535 Roman Empire, 64–65, 116 Romania, 47n4, 526, 588, 598, 603, 605, 606–609, 612 rule of law, 154, 159, 171, 549, 550, 554, 565, 603, 606, 610–613, 642, 646, 676, 755 institutional aspects: institutionalization and the constitutional state, 196; judicial review, 10, 19, 361, 572, 822 Russia, xiiin5, 25, 67, 70, 155, 171–172, 316, 394, 517, 540, 631n23, 827, 835 economy & society: crony capitalism, 641; GDP, 647; mineral resources, 623 state & politics: authoritarian turn, 641–643; communist legacies, 644; corruption, 183–184; despotic capacity,

183–184, 645; elites, 592, 593, 595; measures of stateness, 645–649; “sham federalism”, 641; state capacity, 645–649; state transformation, 637–649; state weakness, 620, 638–639, 640, 642–644, 646–647; state-building under Vladimir Putin, 639–644; winner-take-all state, 183–184, 593, 594, 598; World Bank governance indicators, 646–648, 648 see also Soviet Union Russian Empire, 78, 88 Rwanda, 127, 682, 683, 751, 752, 754, 769, 772, 790 Saudi Arabia, 674 Scandinavia, 42, 84, 88, 91, 402, 483–484 knowledge-intensive production, 693 welfare state, 89 Schumpeterian workfare state, 22, 477 Scotland, 79, 280, 524, 534, 536, 538, 541, 577 Scottish National Party, 538, 539 secessionist movements, 79, 187, 540 secularization, 89, 470 securitizing state, 18n8, 47 security approaches: preventive, 177; proactive vs. reactive policy, 310 aspects of: identification of threat, 177; information and communications technology (ICT), 550, 553; risk and danger, 310–311; surveillance, 14, 16, 177, 384, 551, 559, 825; threats to, 11, 177, 194, 308, 309–310, 339–340 kinds of: conceptual change, 306–310; economic, 308; environmental, 308, 338–350; human, 306, 307; humanitarian, 308; issue areas, 306, 307–308; military, 307; national, 18–19, 306, 307, 384; referent objects, 306, 307; societal, 307 and politics & state: anti-terrorism measures, 47; architecture, 547–560; effects on civil liberties, 177, 310; effects on sovereignty rights, 310–316; reinterpretation of sovereignty, 305–317; state expansion and advance, 176, 177, 384 scope: geographical scope, 306, 308–309; global, 308–309; international, 309;

890   Index of Subjects security (Cont.) internal/external distinction, 547, 550, 551; transboundary risk, 339 see also national security state; terrorism security community, 308 security economy, 551–552 Serbia, 69, 79, 184, 534, 605–606, 609–611, 738–739 service economies, 6, 379, 415, 418–420, 469, 824 shadow states, 124 Shekel, xiii ship of state, xiii, xiiin6 Sierra Leone, 121, 187, 312, 738, 748, 751, 753, 786 Singapore, 19, 124, 125, 247, 250, 394, 618, 674, 676, 678, 674, 685, 786, 831n5 Slovakia, 184, 277, 280, 357, 589, 598, 605–606 Slovenia, 357, 517 social capital, 142, 162 social insurance state, 44n3 social investment state, 19, 22, 404–405, 410–422, 477, 487–488, 693 see also women-friendly state social movements, 15, 569–570, 579, 697n6, 821 social norms, 18 social policy research, 10 social protection, 17, 44n3, 175, 178, 366 aspects of: Global South, 686–687; public support for, 42; “race to the bottom”, 41, 172, 468 see also welfare state social revolution, 37, 70 social rights, 472 Social Science Research Council, 37 social security state, 18, 18n8 social structure, 9, 21, 780–782 aspects of: class cleavage, 6–7; inegalitarian, 701; power configuration/ distribution, 6–7 see also class structure Society for Worldwide Interbank Financial Telecommunication (SWIFT), 558 Somalia, 163, 202, 674 economy & society: foreign aid, 186, 737; linguistic diversity, 682

politics & state: failed state, 21, 153–156, 676, 683, 737, 747–748, 752–754, 833; quasi-state provinces, 159; Siad Barre regime, 748, 752, 754; state-building, 755 Sony Corporation, 291 South Africa, xiiin5, 78, 629 caste/race segregation, 7 politics & state: African National Congress (ANC), 702, 709; development and state transformation, 699, 701–703 South African Development Community (SADC), 279 South America, 100, 504 economy: GDP, 102 history: colonization, 103, 108, 110; developmental differences, 102 see also colonialism/colonization; Global South; and individual countries South Korea, 5, 38, 181, 357, 362, 365, 528, 618, 622n9, 628n19, 674, 796, 818, 828, 830, 831 economy: chaebol (conglomerates), 366, 685; coordinated market economy, 411; GDP, 678, 799 politics & state: development and state transformation, 691, 699–701, 708; social protection and welfare, 798–801, 803–805; statist model, 393–395; sovereign debt, 49, 174, 323, 374, 820 sovereign states system aspects of: anarchy, 202, 209, 307; communitarian bonds, 211–212; competitive advantage, 77; functional equivalence of states, 223–226; global constellations, 5; interdependence, 210, 256–258; normative change, 306; policy convergence, 211; victory of nation state principle, 78, 80, 82, 91 beyond the nation state: internationalization of state authority, 254–256; supranational authority and governance, 258–261 effects on s.s.s.: effects of globalization/ internationalization, 173, 193–212,222–223, 226–233, 253–264; effects of European integration, 45, 269–282; institutionalized inequality of

Index of Subjects    891 states, 202–204, 208–209, 221–233, 348; legal pluralism, 205, 210; plural authorities, 209–210 interaction: institutionalized cooperation, 227–228; mutual recognition among states, 61, 153, 194, 196–197, 200–202, 211; strategic bargaining, 270–271 sovereignty aspects of: capacity to govern, 49, 200, 201, 207; constitutional limitation, 281; forfeiture of sovereignty, 305; internal/ external authority, 201n5; limited authority, 210–211; loss and gain of sovereignty, 17; national security, 306, 307, 317; normative and instrumental autonomy, 197; normative change, 306; organized hypocrisy (Krasner), 197, 208; right and responsibility, 12, 207–208, 211, 305; social and economic independence, 194; subordination of s. to security issues, 306–307, 310–317 characteristics of: domestic s., 156, 157, 162, 198; external recognition, 61, 153, 194, 196–197, 200–202, 211; final authority, 194, 196–197, 200, 280, 344; internal recognition and legitimacy, 201, 430; monopoly of the use of force, 2, 4, 21, 41, 61, 62, 105, 136, 153, 155–156, 162, 170, 194–197, 200, 547, 639, 745, 749–750, 754, 833; principle of non-intervention, 205, 208, 211, 222, 224, 225, 306, 310–314, 316, 317; principle of self-determination, 201–202, 207; security, intervention, and responsibility principles, 305–317, 745, 817; s. as the external side of statehood, 193–212; s. as regulative idea, 195, 197–200, 211, 306; tax-raising capacity, 171, 200; traditional sovereign statehood, 194–195, 344, 348, 817; TRUDI ideal-type modern state ( Territorial, RUle of law, Democratic governance, Interventionist), 13n4, 158–159, 196–198, 200–206, 360–361, 375, 384, 818n1 and formal equality, 194, 197, 202–204: effects of internationalization on s., 222–223, 226–233;

functional, legal, and political strands, 221–233 kinds of: conditional s., 195, 200–202, 211–212; interdependence s., 210n10; internal/external s., 201n5; legal s., 152–153, 196, 198; stratified s., 208–209; conceptual change, 207–211; reinterpretation of s., 305–317 supra- and internationalization of: effects of European integration on s., 45, 269–282; pooled sovereignty, 17, 24, 271, 360; role of international institutions, 253–264, 376; role of international rules and norms, 202, 204–205, 222–223, 258 Soviet Union, 18, 21, 80, 155, 182, 360, 413, 517, 549, 587, 592, 594, 621, 622, 624, 629–630, 637, 740 see also post-communist countries and individual countries, Russia Spain, 12, 78 economy & trade system: automobile industry, 449, 452, 460; inward and outward foreign direct investment, 456; percentage share of imports and exports in GDP, 456; trade liberalization, 454–456; transition from ISI model to open economy, 446 federation: Andalucia, 541; Basque country, 79, 452, 524, 535, 536, 538, 539, 541, 542; Catalonia, 79, 452, 524, 535, 536, 537–538, 539, 541; federalism, 540; regional autonomy, 541 history: democratic transition, 90; dictatorship, 90; early mercantilist system, 111–112 politics & state: gender equality policy, 491–492; Instituto Nacional de Industria (INI), 450, 451, 455; Partido Popular (PP), 492; Partido Socialista Obrero Español (PSOE), 491–492; semi-sovereign status, 446–447, 460; social spending, 458–459 see also colonialism/colonization Sri Lanka, 679, 683, 769, 786 state, the aspects of: agency, 5, 9–11, 37; capacity and policy choice, 131, 133, 134, 136,

892   Index of Subjects state, the (Cont.) 171, 180; coherent governance and “suturing”, 11; conceptions of state and nation, 532–535; development stages, 22; diffusion of authority, 41; economic intervention, 13–14, 24, 37–38, 41, 170, 399, 829; end/death of the state, 1, 5, 42, 76–77; ideology, 14–15, 133, 136; isomorphism, 3; legitimacy, 8–9, 135, 136, 430; legitimate coercion, 2, 61, 136, 170; national and political identity, 19–20, 62, 79–80; normative appeal, 77; output legitimacy, 133, 135; territorial reach, 133, 136, 137, 835 characteristics of: arena of strategic action, 133, 134; autonomy, 8, 9, 35, 37, 133, 136; bureaucratic capacity, 13, 15–17, 37, 101, 123–125, 619–620, 692, 702–703, 823, 836; bureaucratic competence, 133, 136, 552; collective self-rule, 77, 88; constitutive role of international sphere, 2–5; embedded state, 209–210, 253–264, 270, 709, 816, 817; embedded autonomy of s., 136, 256n1, 399, 645; formal organization of s., 133; political independence, 4; right of self-defense, 4, 257, 310; territorial integrity, 4, 551, 770 kinds of: ideal-types of s., 18, 61, 153, 155; TRUDI ideal-type, 13n4, 158–59, 196–98, 200–06, 360–55, 375, 384, 818n1; definitions of s., 61–62 see also sovereign states system; sovereignty; state breakdown/failure; state-building; state formation; state power; state transformation; statehood; theories of the state state breakdown/failure, 2, 6, 11, 15, 186, 745–757 state-building, 2, 75–92 environment for: disciplined populations, 9, 139–140; elite consensus, 3, 8; religious factors, 84–85, 88, 91–92 core: bureaucracies and s.-b., 8, 16, 38, 67, 101, 113, 170, 448, 696, 731–732; center–periphery cleavage, 277; defensive s.-b., 122; revolutionary s.-b., 20, 122, 638; tax and revenue raising for, 3, 6, 135, 138, 238, 457, 646, 676, 725,

746, 750, 754, 772; warfare and, 2–3, 11, 139, 171 marriage alliances, 67 state formation aspects of: capacity for independence, 201; capital accumulation, 138, 447, 707; composite forms, 67; emulation of nation-state model, 79, 288; imposition of nation-state system, 3, 4, 79, 122; institutional interaction, 99, 104–105; protection pacts, 139; right of secession, 79, 769; right to self-determination, 201–202, 207; segment/breakaway states, 16n7; uneven development, 78–80 theory: bellicist tradition, 67, 139; formation models (consolidation, unification, secession), 79–80; theories of, 138–141; typologizing, 170–171, 188; world systems theory, 138, 221n1, 679–680 state-owned enterprises (SOEs), 14, 377, 415, 431, 448, 454, 504–508, 654 state power aspects of: bureaucratic administration of s.p., 2, 170; constraining factors to s.p., 42–43, 45; enabling factors to s.p., 46–47; ethnic communalization of s.p., 772–774; fragmentation of s.p., 143; s.p. links with economic liberalization, 44–45; perfomative ritual and display of s.p., 65, 137, 138; s.p. and social discipline, 139–140; societal control over s.p. and intervention, 14–15; surveillance of and by, 14, 16, 18, 139, 551, 559 citizen’s perspective: citizen consent and compliance, 131, 133, 134–135; obedience vs. protection trade-off, 75–76n1 force: domination and pacification, 2–3; instrument of repression, 14, 136, 642; law and order, 15, 133, 646; legitimate coercion, 2, 61, 62, 105, 170; war-making capacity, 2–3, 77 types of: coercive, 37, 63, 134, 157, 170, 201, 528, 645–646, 658–659, 665, 724; “despotic” vs. “infrastructural”

Index of Subjects    893 power, 14, 14n6, 170–171, 179, 180, 183; friendly, 14; power “through” vs. “over” society, 14n6 state–society relations, 8–10, 13–20, 131, 133, 157, 567, 695–696 perspectives on: neo-Weberian, 136; state in society perspective, 135 types of: clientelism, 8, 10, 568; partnerships, 180–181 state transformation approaches: determinants of, 2–13; dimensions of, 13–20; extent and intensity of change, 20–22, 172; multiplicity of transformations, 834–835; equifinality (multiple paths to the same type of s.t.), 12 aspects of: 21st century developments, 835–838; enabling factors, 44; imitation, 67; institutional pathways of s.t., 9, 128; international developments of s.t., 170; international pressures on s.t., 40–42; organic vs. imitative development of s.t., 68; plurality of response to s.t., 173; policies of leftist states vis-à-vis s.t., 45–46; role of industrial development in s.t., 6; role of violence and war for s.t., 2–3, 11, 67–70, 170; state structure factors in s.t., 9–11 theory: bellicist tradition, 67, 139; Darwinian model, 66–67; class-analytic theories of s.t., 142; comparative perspectives on s.t., 169–189; culturalist theory of s.t., 143; liberal state theories of s.t., 142; path-dependent s.t., 10–11, 43, 127–128; state advance thesis, 177–178; state decline/retreat thesis, 33–49, 172–175, 381; state persistence thesis, 42–44, 175–176; state redeployment, 44–45, 173; stickiness of s.t., 43, 169, 173, 275, 769; theories of s.t., 33–49, 142–143; virtuous/vicious circles of s.t., 11, 12, 111 variation across: policy, 173–178; region, 22; space, 178–87; time 170–173 variation in type of change: gradual and piecemeal, 20–21; radical and revolutionary, 21 statehood

approaches to s.: agency vs. structure, 637–638, 640; deficit theory, 158–159, 162; dimensions of, 195–196, 198, 637; measures of, 645–648; TRUDI ideal-type modern state (Territorial, RUle of law, Democratic governance, Interventionist), 13n4, 158–159, 196–198, 200–206, 360–361, 375, 384, 818n1; varieties and degrees of statehood, 155–156, 156; Western/ European paradigms and biases, 152, 154–155, 157, 159, 162 aspects of s.: authority, 155; effects of globalization/internationalization on s., 193–212; institutionalized rule, 155; monopoly of the use of force, 2, 4, 21, 41, 61, 62, 105, 136, 153, 155–156, 162, 170, 194–197, 200, 547, 639, 745, 749–750, 754, 833; myth and reality of s., 152–153, 195, 197–200; shadow of hierarchy, 152, 154, 157, 158, 160, 161, 381; territorial borders, 196, 516–528; territorial reach, 133, 136, 137, 170, 835 limits of s.: limited s., 152–163, 195, 198–199, 748–749; governance under limited s., 159–162, 160; Westphalian myth, 195, 198 stateless societies/nations, 62–63, 524, 534–535, 537–538 statist model, 24, 174, 393–405 aspects of: crisis of and challenges to s.m., 400–401; origins of s.m., 394–395; “third way” state-led development, 393 modus operandi of: elite recruitment and training, 396; embedded vs. top-down, 399; foundations and operation, 395–398; ideal-type, 393; impact on growth and development, 398–399; industrial policy framework, 396–398; markets, 175, 361–362, 375; social investment, 404–405 range of: French and Japanese reform, 402–405; Nordic countries, 404 Sudan, 121, 187, 232, 253, 674, 683, 733, 738–739, 769 supranational organizations, 4–5, 12, 16, 24, 208, 258–261, 269–282

894   Index of Subjects Sweden, 43, 79, 80–81, 85–87, 92, 172, 260, 361, 380, 402, 485–486, 523, 526, 566, 573, 824 economy: ICT development, 416 politics & state: active labor market policy, 413, 426; corporatism, 410; gender equality policy, 489, 494; social expenditure, 471 Switzerland, 47n4, 68, 69, 377, 411 Syria, 207, 314, 738 Tajikistan, 594–595, 624, 627, 632 Taiwan, 5, 38, 77, 181, 628n19 economy: GDP, 799 politics & state: development and state transformation, 674, 691, 699–701; developmental elite, 618n1, 622n9; statist model, 394 tax arbitrage, 243–244 tax evasion, 41, 43, 511 tax havens, 41, 174 taxation, 6, 63n2, 91, 135, 174, 238, 243–246, 245–246, 250, 501, 825, 831 technocratic state, 36, 619, 626, 628, 630 telecommunications aspects of: competition, 362; innovation, 416; state monopolies, 377, 823 reform of: deregulation and reregulation, 431; privatization and liberalization, 239, 241, 378, 505–509, 577 terrorism development of: 9/11 attacks, 18–19, 177, 187, 550–551; t. enabled by new technologies, 41; funding of, 558; home-grown, 551n1; international, 825; transnational, 194, 310 fighting: by border control, 551; domestic policies to combat, 47; “enhanced” interrogation methods, 47, 177, 554; military response to t., 46, 47; pre-emptive war, 177; state securitization responses, 177, 384, 550–560, 825; war on terror, 177, 554, 558, 754

Thailand, 3, 118, 278, 674–675, 766, 786, 831n5 theories of the state, 3, 4, 6, 22, 33–49, 131–144, 157–159 approaches: class-analytic tradition, 131, 132–134, 133; culturalist tradition, 131, 133, 137–138; liberal tradition, 131, 133, 134–135; neo-Weberian tradition, 131, 133, 135–136 perspectives on state theory: contrast of instrumentalism/structuralism distinction, 133; Western/European paradigms and bias, 152, 154–155, 157 third-way policies and reform, 46 totalitarianism, 13–14, 80, 89, 182–185, 193, 375, 566 trade aspects of: benefits of scale, 275, 280, 412; effects of globalization on t., 41, 142, 370–371, 377–378, 412, 460, 681; international t., 4, 44, 206, 239, 257, 263–264, 275, 289, 293, 816; levels of international integration of t., 42; liberalization of t., 142, 257, 264, 453–456, 466, 502, 799; monopolistic t., 111; openness of t., 41, 142, 370–371, 377, 412, 681, 816; pre-modern t., 64; international production chains, 4, 460, 816 regulation of barriers: free trade agreements, 44, 240, 435, 452, 454–455, 538; import quotas, 260, 448, 449, 452; non-tariff barriers (NTB), 293, 377; regulatory institutions, 286–299; tariffs, 257, 290, 394, 448–449, 452–454, 816, 823, 829 trade unions, 5, 7, 15, 17, 38, 68–69, 89, 90, 172, 241, 296n9, 362, 366, 380–382, 413, 427–428, 431, 435, 437, 579, 804 see also corporatism/corporatist state model; neocorporatism; wage bargaining trading state, 18 Transformations of the State Collaborative Research Center (TranState, 2003-2014), xi, xii, xvii-xxiii, 23n9

Index of Subjects    895 transnational corporations (TNCs), 142, 449, 450–451, 460, 817 transnational flows and exchange, 193, 194 transnational organizations (TNOs) and actors, 16, 40, 193–194, 200, 202, 208, 226 definition, 4n2 see also multinational corporations; non-governmental organizations transnational regulation, 286–299 transnational society, 202, 208, 279 Transparency International corruption scores, 110, 607 Tunisia, 779 Turkey, 118, 357n1, 445, 674, 769 Turkmenistan, 594, 598, 620, 622, 624–625, 627, 631, 632, 742 Tyre, xiii Uganda, 311, 731, 738–740, 752, 769, 786 Ukraine, 263, 589, 590, 596–598, 613, 624, 627, 632 unemployment kind of: effects of technological advance, 469; structural, 413; youth, 90 state activities: corporatist intervention, 38; state policy, 18, 48, 379, 413–414, 418–420, 427, 433, 474–475, 803–804; surveillance and discipline, 18, 177 see also welfare state United Kingdom (UK), xiiin5 economy & society: civil society movements, 491; economic performance, 38; financial and ideological power, 231 politics & state: Better Regulation Taskforce, 502; devolution, 541, 577; liberalization and privatization, 502–503, 507; multinational state, 535; single-equality bodies, 494 terrorism: Antiterrorism, Crime and Security Act (2001), 555; DNA data collection, 553; security response to 9/11 attacks, 555–556; Terrorism Act (2000), 555, 559 United Nations (UN), xiiin5, 4, 176, 201, 202, 207, 209, 257, 569

aspects of: membership, 77; peacekeeping and peace enforcement, 258; responsibility to protect doctrine (R2P), 12, 18, 46, 176, 207, 305–317, 738, 745, 817 institutions: Food and Agriculture Organization (FAO), 348–349; General Assembly, 224, 305; Group of Experts on International Standards of Accounting and Reporting (GEISAR), 294; Intergovernmental Working Group on International Standards of Accounting and Reporting (IWGEISAR), 294 instruments: Agenda for Peace, 745; Charter, 221, 310, 311; Global Compact, 262 see also further UN institutions below United Nations Conference on Environment and Development (UNCED, 1992), 343 United Nations Conference on the Human Environment (UNCHE, 1972), 342–343 United Nations Conference on Women (1975), 489 United Nations Conference on Women (1995), 492 United Nations Convention on Biological Diversity (UNCDB, 1992), 344 United Nations Convention on the Elimination of all Forms of Discrimination against Women (CEDAW, 1979 ff.), 495 United Nations Decade for Women (1976–1985), 489 United Nations Development Programme (UNDP), 527 United Nations Educational, Scientific and Cultural Organization (UNESCO), 279 United Nations Environment Programme (UNEP), 345, 348 United Nations Framework Convention on Climate Change (UNFCCC, 1992), 344 United Nations Human Development Index, 186, 731 United Nations Human Rights Commission, 738 United Nations Security Council, 205, 209, 222, 228, 230, 232, 305, 312, 313, 316

896   Index of Subjects United States of America (USA), xiiin5, 5, 15, 47 economy & society: Civil Rights Movement, 820–821; civil society movements, 491; Cold War military investment, 429; economic performance, 38; GDP, 102; multinational corporations, 427; social and racial segregation, 7, 428 international politics: hegemony, 70–71; humanitarian missions, 176; (international) financial dependence, 329–330, 331; military interventions, 46; promotion of neoliberalism, 40 politics & state: Democratic Party, 90; Environmental Protection Agency, 290; Federal Reserve Bank, 433, 577; financial and ideological power, 231; immigration control, 521; interest group lobbying, 436; “night watchman state”, 91n12, 429; political representation, 90–91; regulatory agencies, 499; Republican Party, 554; Securities and Exchange Commission (SEC), 298; Sherman Act (1890), 499; space program, 429; taxation, 91; Treasury bills, 331 terrorism: 9/11 attacks, 18–19, 177, 187, 384, 550–551; Aviation and Security Act (2001), 558; Central Intelligence Agency (CIA), 548, 550, 554; Department of Homeland Security, 552; Guantánamo Bay, 554; National Security Agency (NSA), 48, 177, 548, 550, 553; Patriot Act (2001), 177, 384, 554; use of torture, 554; war on terror, 554, 558, 754 welfare: literacy rates, 102; G.I. Bill of Rights, 67, 429; equal opportunity ideology, 428, 491; housing market boom and bust, 434–435; Patient Protection and Affordable Care Act (2010), 476; social expenditure, 471; social security system, 43; workfare policy, 432 Universal Postal Union, 257, 290 Uruguay, 37, 100, 105, 110, 111, 112, 113 economy & society: GDP, 799; literacy rates, 102

politics & state: democratic institutions, 102; social protection and welfare, 797–798 USSR, see Soviet Union Uzbekistan, 594, 595n6, 596, 620–625, 627, 632 varieties of capitalism (VoC) studies, 14, 49, 206n9, 238, 247, 248, 249, 365–366, 374, 416, 428, 566 Venezuela, 79, 100, 278, 316, 718, 720, 722, 725, 785 venture capital, 178, 417, 432 Vienna Conference (1815), 203 virtual state, 18 wage bargaining, 49, 174, 378, 379, 410–411, 412–413, 427, 429, 436–437, 448, 450, 824 see also corporatism/corporatist state model Wales, 275n3, 539 war/warfare aspects of: casus belli, 311; European bellicosity, 68 kinds of: asymmetric, ix, 3; insurgency and guerrilla warfare, 3, 122, 719, 724, 752, 753; inter-state vs. intra-state, 80; preventive, 310–311; proxy, 739; response to terrorism, 47; siege warfare, 77; universal conscription/ levée en masse, 77, 139 and state: determinant of welfare state expansion, 3; domestic consensus and state-building function, 2–3, 11, 139, 171; state failure/collapse, 751–754; state formation and transformation, 2–3, 11, 67–70, 139, 170, 171 see also civil war; military interventions war crime, 176, 207, 738 Washington Consensus, see neoliberalism weak states, 154, 161, 198, 221–222, 224, 228, 610, 619, 637, 641–644, 647, 681, 714–715, 719, 722, 724, 726, 733, 792, 837 wealth aspects of: accumulation, 101, 117, 647; distribution of, 21, 82; emigration

Index of Subjects    897 restriction, 520–521; nexus with power and prestige, 81; societal, 196, 307 and welfare state: global inequality, 202; nexus with welfare, 82; redistribution, 197 weapons of mass destruction, 77, 310, 311, 835 welfare capitalism, 45, 171, 366, 374–375, 484 welfare state, xi, 2, 5, 17, 85–91, 140–141, 171, 823–824 aspects of: bureaucratic surveillance, 451; class power, 134, 140; corporatism, 86, 172; crisis, 241; domestic challenges, 469; emergence in Global South, 796–807; equality of opportunity vs. outcome, 46; institutional barriers to change, 467; institutionalized class relations, 140; patriarchal nature of, 483; privatization of services, 237, 457; public-private mix, 467, 477; race, class, and gender assumptions, 141; reform, 43; social goals, 465; social liberalism, 430; transformation and the supply-side model, 465–478 branches: family policy, 475–477; G.I. Bills, 67; occupational insurance 90; social assistance, 450; social insurance, 10, 85–86, 89–90, 141, 239, 415, 468, 474, 476, 796, 797, 799; social services, 473; transfer programs, 457, 473; unemployment benefits, 18, 239, 249, 380, 402, 429, 433, 435, 454, 466, 472, 474–475, 477; workfare, 432, 475 comparisons: comparative research, 466–467; policy diffusion and learning, 342n1 functions: commodifying effects, 140n16; (alleged) dependency trap, 239; domestic compensation function (compensation thesis), 44, 238, 249, 421, 468; “enabling” function, 470, 475; functionalized for competitive development, 237; gender equality goal, 465, 475; legitimation effects, 141; redistributive policies, 134; social anaesthesia, 402, 404, 405; social investment goal, 465; (alleged) welfare dependency, 142

growth: expansion, 3, 6, 7, 239, 430, 466–468, 470, 476, 797; extension of benefits after war, 67, 77; popular support for, 42 indicators: affluent country welfare indicators, 368–369; OECD net income replacement rates, 466, 472; OECD social expenditure ratios, 471; social insurance and democracy indices, 86; social insurance and GDP indices, 87 types: active, 46, 382; Beveridgean, 474; Bismarckian, 450, 457, 460, 474, 797, 829, 830; ideal-types, 467–468, 484, 485; Keynesian Welfare National State (KWNS), 239; means testing, 239, 366, 468; Nordic state models, 416, 430; Northern/Southern European contrast, 88–92; productivist, 181; social security state vs. securitizing state, 18n8 effects of . . . on w.s.: demographic effects, 469; effects of economic globalization, 142, 240, 468–470; effects of ethnic fragmentation, 467; effects of European integration, 468–470; effects of government overload, 241; effects of inter-state competition, 248–250 Westphalian state model, 153, 156, 197–198, 203, 208, 275 women inequality: gender inequality, 382, 482–483, 487–488, 492–495; inequality and poverty, 373; socio-economic developments in the Global South, 805 labor market: labor market participation, 90, 363–364, 379, 403–404, 416, 418, 465, 469, 482–495, 485, 820; labor policy, 177 politics: legal rights, 18; political representation, 18, 19; second-wave feminism and women’s movement, 489, 569, 805; suffrage, 67, 81n5 roles: care work role, 468, 484; changing roles, 18; incomplete revolution, 488–489 see also 18, 482–495 aspects of: social investment, 487–488; state feminism, 483, 489–493

898   Index of Subjects women (cont.) implementation: gender budget analysis (GBA), 493 gender impact assessment (GIA), 492–493; gender mainstreaming, 492–493 workers’ movement, see labor movement; trade unions World Bank, 4, 39, 102, 174, 186, 203, 208, 209, 224, 228–229, 527, 569, 623, 680, 681, 694, 817 World Commission on Dams (WCD), 348 World Health Organization (WHO) general framework: International Health Regulations, 258, 259–260 instruments: Framework Convention on Tobacco Control, 260; Global Fund to Fight AIDS, Tuberculosis and Malaria, 262 world polity theory, 137, 199

world society, 199, 202, 211–212, 309 World Summit on Sustainable Development (WSSD, 2002), 348 world systems theory, 138, 221n1, 679–680 World Trade Organization (WTO), 179, 348, 360, 681 instruments: Agreement on Technical Barriers to Trade, 293; prohibition of subsidies, 41 World War I, 42, 69–70, 80, 82 World War II, 3, 4, 19, 70, 80 Yemen, 156, 676, 753, 818 Yugoslavia, 21, 78n3, 79, 360, 517, 589, 603, 610, 751 Zimbabwe, 316, 676, 731, 786