03 July 2007

The Market State

"The “Market State” is the latest constitutional order, one that is just emerging in a struggle for primacy with the dominant constitutional order of the 20th century, the nation-state.

"The primary drivers of international politics are economic, yet our habits of thought and our institutions remain powerfully conditioned by the Cold War's focus on interstate relations and the balance of power. The era of the "territorial state" is passing away, and probably has been for a century. "

The Theory of the Modern State
The ongoing development and evolution of the modern state, as presented by Philip Bobbitt, can be traced through the following stages:

1) The Princely States (1494 - 1648)
The princely states, that evolved in Italy during the Renaissance, replaced the previous feudal lords by offering citizens the first significance territorial protection and security in return for granting individual princes territorial power. Under these arrangements, princes hired mercenaries to protected their territories and the trade routes that ran through them. In return, the princes collected taxes and normalized daily commerce and relations within their domains.

2) The Kingly States (1648 - 1776)
The kingly states emerged under the concept of the divine, God-given right to rule enjoyed by kings. During this era, the state continued to fulfill its responsibility to provide security, albeit for greater territorial areas, through the creation of armies and navies. In return, the subjects of the regime enjoyed a kind of participation in the king’s divine status and the glory of his dynasty.

3) The State-Nation (1776 - 1914)
During the late 18th century, a new order arose under the ideas of freedom and democracy that united a population around a common participation in a national, ethno-cultural identity. During this era, we see the rise of imperialism, and the expansion and exploitation of national identity.

4) The Nation State (1914 - 1991)
Toward the turn of the 19th century, the nation state emerged to benefit the people it governed by providing for the economic welfare of it citizens. During this era, communism, fascism, and parliamentarism competed to provide the greatest welfare to its citizenry.

5) The Market State (1991 - )
Emerging during the 1990s in the U.S. and Western Europe with the global economy.

The Virtual Corporation
The virtual corporation is research, development, design, marketing, financing, legal, and other headquarters functions with few or no manufacturing capabilities—a company with a head but no body. It represents the ultimate achievement of corporate downsizing, and the model is spreading rapidly from firm to firm. It is not surprising that the virtual corporation should catch on. Concept or head corporations can design new products for a range of different production facilities.

Strategic alliances between firms (whether or not embodied in formal mergers), such as American and US Airways, Ford and Mazda, or Citicorp and Travellers, are also very profitable. According to the Financial Times, firms that actively pursue strategic alliances are 50 percent more profitable than those that do not.

From the Virtual Corporation to the Virtual State

The newly pruned corporation has facilitated the emergence of the virtual state. Downsizing has become a path to corporate efficiency and productivity gains. Now the national economy is also being downsized—not in dollar output but in productive base. Among the most efficient economies are those that possess limited production capacity at home. The archetype is Hong Kong, whose production facilities even before the transition to Chinese rule were located in southern China. Hong Kong's GDP comprises 83 percent services and about 8 percent manufacturing production. The model of the virtual state suggests that political as well as economic forces push toward downsizing at home and a relocation of production facilities abroad.

In Singapore, for instance, the successors of Lee Kuan Yew keep the country on a tight political rein but still depend economically on the inflow of foreign factors of production, while moving local production to Malaysia and Indonesia as well as China. The virtual state is in this sense a negotiating entity that depends as much on economic access abroad as on economic control at home. Despite its past reliance on domestic production, Korea no longer manufactures everything at home, and Japanese production is increasingly lodged abroad.

In Europe, Switzerland is the leading virtual nation. One example of its new focus on headquarters functions is that roughly 98 percent of Nestlé's production capacity is located elsewhere. Holland now produces most of its goods outside its borders. Britain's foreign direct investment in 1994 was almost as large as that of the United States. Even the United States participates in this trend. A remarkable 20 percent of the production of U.S. corporations now takes place outside the country.

Democratic State vs Market State
"Liberal democracy has traditionally meant a self-governing representative system comprised of individual citizens who enjoy freedom and equality under law and together form a people within a liberal democratic nation-state. Thus, liberal democracy means individual rights, national citizenship, and democratic representation."

"As the traditional politics of interstate rivalries cedes place to the global market, (democratically elected*) governments lose unique attributes of their power. Armies and territory count for less."

Bobbitt: "the democratic, representative, deliberative state is slow-moving and cumbersome just the sort of institution one wants where human rights are at stake or in a society where it is difficult to achieve consensus across many cultural communities but one that is deadly to innovation and the nimble reactions required to take advantage of changes in the marketplace."

(So a sleek, fast moving, non-democratic, technocratic corporatocracy unconcerned with any "human rights" is apparently what is required to adapt to the global market, instead of the "cumbersome representative democracy"*)

Whereas the nation-state based its legitimacy on a promise to better the material well-being of the nation, the market-state promise to maximize the opportunity of each individual citizen (or rather that is the way hired PR firms and think-tanked propagandists sell it to the public - the real goal is of course to maximize the profits of investors, bankers and global corporations*).

Market Feudalism
"When we call a capitalist society a consumers’ democracy we mean that the power to dispose of the means of production, which belongs to the entrepreneurs and capitalists, can only be acquired by means of the consumers’ ballot, held daily in the marketplace."
Ludwig von Mises

The influence you will have and the amount of "democracy" available to you in a "consumer democracy" is totally dependent on how much capital you have at your disposal and the amount of goods you consume. The means of production is relocated, many times to dictatorships, and owned by foreign oligarchs, far beyond any real democratic control.

The Democracy Deficit
The Trilateral Commission Task Force Report #57:
"When we look at democracy we have to be honest and realize that democracy occurs in nation-states. Democracy occurs essentially when there is a political community. Only when there is a sense of political community will a minority acquiesce in the will of the majority.

If we look at this at the global level, will people really be willing to be continually out-voted by the two-and-a-half billion Chinese and Indians? I think the answer is "no"; and we're kidding ourselves if we think that's going to be the shape of the solution. We've got to get away from the idea that the solution will look like domestic democracy."

(The Trilateral Commission admits that a transition from national democracies to a global democracy would be impossible for trilateral interests, because that would mean that India and China with their huge populations would completely dominate in terms of actual votes. *)

"So democracy occurs in national states and these international institutions are the instruments or the agents of national governments. Since national governments are elected, what's the problem? There are three problems actually.

1. One is not all the members are democratic.

2. Second is the issue of long chains of delegation. People sometimes feel that there is such a distance between those who are elected and those who are running the organizations that the legalistic argument is not enough.

3. Third and perhaps most important, these institutions created in the second half of the twentieth century as the agents of states are, as Gordon Smith put it, actually the agents of parts of states."

Elite Clubs
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." Adam Smith - "The Wealth of Nations"

"What we've developed in the second half of the twentieth century is what Robert Keohane and I have called the "club model" of international organization. Think of GATT and then the WTO: It's a club of trade ministers. Think of the BIS in Basel: It's a club of central bankers. Think of the IMF: It's a club of finance ministers."

"The Council of the European Union, which is one half of the EU's bicameral legislature (the other half being the European Parliament), is made up of national ministers and meets in secret when agreeing legislation. As such, there is no parliamentary scrutiny of the Council's legislative decisions at EU level, and many last-minute negotiations are conducted by diplomats."

"Even (these) economic institutions, such as the World Bank and the World Trade Organization, are tenuous. On the one hand, they may be less devalued by the market state than are international political or security institutions, for they have value as rule-setters for international commerce, but on the other hand, not only are they swamped by private international transactions—what the IMF or World Bank does is more and more overshadowed by private capital flows—but the status of those institutions is itself ambiguous. They, too, are creatures of governments, not of the forces that are coming to drive international politics."

The fundamental problem with the Market State is that it is made up of non-elected hierarchical entities who have a tendency to make decisions in corporate board meetings, exclusive elite clubs and secret organizations rather than through democratic elections.
From the average citizens point of view the Market State is completely undemocratic.

The nation state is reduced to a tool for pacification of the disgruntles lower classes who are losing civil liberties and are forced to either educate themselves to be able to join the elite or have to compete with global slave salaries.

Maastricht: The Protectionism of Free Trade

In 1986, the 12 member states of the European Economic Community signed the Single European Act which committed them to dismantling all legislative barriers to the free movement of goods, services, capital and people between them by 31 December 1992.

The Single Market which created a free trade zone encompassing 340 million people is designed to protect the multinational interests that have long lobbied for its creation and which are now the dominant economic and political force within Europe.

The Treaty on European Union -- commonly known as the Maastricht Treaty after the Dutch town where it was signed in February 1992 by EEC heads of government -- gives those multinational interests the legal powers and administrative apparatus of a full-blown state.

One result has been a spate of take-overs and mergers -- Europe's 1,000 leading firms more than doubled their mergers and acquisitions between 1986 and 1989 -- creating multinational giants whose influence on government, and whose control of trade, is pan-European.

Larger firms have snapped up smaller ones to gain control of local distribution networks or to get rid of rival brand products. In banking, soft drinks and paints, the top five companies now control 38 per cent, 50 per cent and 25 per cent of their respective markets. Of the 39 companies that dominated the European trade in household appliances in the 1970s, 34 had been swallowed up by 1990, leaving the five largest in control of some 60 per cent of the market.

Kicking away the ladder
"Almost all of today’s rich countries used tariff protection and subsidies to develop their industries. Interestingly, Britain and the USA, the two countries that are supposed to have reached the summit of the world economy through their free-market, free-trade policy, are actually the ones that had most aggressively used protection and subsidies.

Contrary to the popular myth, Britain had been an aggressive user, and in certain areas a pioneer, of activist policies intended to promote its industries.

Particularly between the trade policy reform of its first Prime Minister Robert Walpole in 1721 and its adoption of free trade around 1860, Britain used very dirigiste trade and industrial policies, involving measures very similar to what countries like Japan and Korea later used in order to develop their industries. During this period, it protected its industries a lot more heavily than did France, the supposed dirigiste counterpoint to its free-trade, free-market system.

Given this history, argued Friedrich List, the leading German economist of the mid-19th century, Britain preaching free trade to less advanced countries like Germany and the USA was like someone trying to “kick away the ladder” with which he had climbed to the top."

The transition to the market state will raise enormous issues of legitimacy and accountability, both within states and across them. As the rise of the market state devalues governments, their citizens will accord them less loyalty, a trend probably abetted by the rise of identity politics. At the same time, those citizens may seek to hold their governments accountable for the results of global market forces—witness the election-year debate over outsourcing in the United States in 2004.

If the global economy is a train without a conductor, then who or what is accountable? And if global companies and NGOs are powerful shapers of both national and international society, who selected them for that role? How are they to be held accountable?

Corruption and Conflict of Interest
"The logic of the market state points to dramatic changes in patterns of leadership in government. In the future, it will probably have to be recognized that people will be government officials one year (or day) and private sector executives the next. Indeed, even those labels should cease to be meaningful. But that vision runs smack into procedures for conflict of interest."(As well as breaking all rules of morality, ethics, trust and impartiality and would land you in jail for corruption in a representative democracy.*)

From Nation State to Market State
From a mere three thousand in 1990 the number of multinationals has grown to over 63,000 today (2003). Along with their 821,000 subsidiaries spread all over the world, these multinational corporations directly employ 90 million people . With its $210 billion in revenues, ExxonMobil is ranked number 21 among the world's 100 largest economies, just behind Sweden and above Turkey.

The ten largest companies in the world each has an annual turnover larger than the GNP of 150 of the 185 members of the UN, including countries such as Portugal, Israel, and Malaysia.8 More subjectively, at least 50 NGOs have more legitimacy than 50 UN member nations.

"Four actors—petrodollar investors, Asian central banks, hedge funds, and private equity—are playing an increasingly important role in world financial markets.

"MGI details how the rising influence of the four players is jointly shaping global financial markets. Their combined assets grew from just $3.2 trillion in 2000 to an estimated $8.7 trillion–$9.1 trillion in 2006. The factors fueling their growth will persist for at least another five years and, even under conservative assumptions, all four power brokers will grow in size and influence in the years ahead."

Inequality, Pollution and Undermined Democracy
"While some opponents of free trade are indeed narrow minded isolationists concerned only with the protection of special interests, the reality is far more complex than most free trade advocates admit. Furthermore, the evident failure of command and control economic planning does not itself remove the critical defects of the unregulated market including its tendency to accentuate divisions between rich and poor, neglect the environmental consequences of economic growth, erode the basis of its legitimacy and undermine democratic governance processes."

Corporate Lobby and Think-Tanks
Bobbitt: "In the market-state, there are powerful lobbies with a stake in persuading the public and public officials that there is really nothing to worry about, and a no less powerful media and public interest alliance anxious to detect an alarming new crisis as frequently as possible.

The lobbies depend upon companies whose sale of the dubious substance is threatened, but the media and public-interest groups also (will*) have a material stake in the matter, because the market-state requires that they make their way on the basis of public contributions, which requires an ever-escalating hyperbole to stimulate giving since the idea of a state-owned press or television, while the norm in the nation-states of the past, is becoming a rarity in the market-states of the present."

(The corporate lobbies frequently operate through think-tanks who produce corporate friendly tailored "scientific" reports presented as objective facts in the corporate media which in turn is dependent on the same corporation who fund the think-tanks for sponsorship and advertisement revenue.*)

Class Structure
Since the earliest days of the industrial revolution the market based economic order has in broad terms divided the national population into three distinct groups:
1) a beneficiary class consisting of industrialists, elite workers and professional middle classes who benefit from the order;
2) a class of dependent workers who have accepted their inferior power and remuneration as a price of avoiding the ranks of;
3) those who are surplus to the industrial system's requirements the market's "disposable people."

"The market state requires people to move freely across borders to work but not necessarily to acquire the benefits of citizenship where they live, perhaps temporarily. "Sojourner rights" would be based on that split, permitting people to work where they needed but not acquire health care, social security, or other specific benefits of citizenship."

Welfare 'Reform'
"In November 2001 a conference assembled at Woodstock, near Oxford. Its subject was ‘Malingering and Illness Deception’. The topic was a familiar one to the insurance industry, but it was now becoming a major political issue as New Labour committed itself to reducing the 2.6 million who were claiming Incapacity Benefit (IB).

The goal was the transformation of the welfare system. The cultural meaning of illness would be redefined; growing numbers of claimants would be declared capable of work and ‘motivated’ into jobs. A new work ethic would transform IB recipients into entrepreneurs helping themselves out of poverty and into self-reliance. Five years later these goals would take a tangible form in New Labour’s 2006 Welfare Reform Bill."

Class and Consumption
"The traditional working class in the UK, formed out of the industrial revolution, has lost its economic role as the engine of wealth creation. Manufactured goods are imported from a periphery of poor, low-wage economies where primitive forms of capital accumulation, backed up by WTO rules and bilateral trade agreements, are creating a global proletariat in conditions of violence and exploitation. The working class, forced to compete with this global proletariat in a flexible labour market, is being caught in a vortex of Victorian-era casualised labour. Migrant labour is used by employers to further deregulate the labour market and drive down wages."

Organ Market
If you lose your job, you can sell your home. If you lose your home, you can sell your possessions. If you lose your possessions, you can prostitute yourself. And if you lose everything else, you can sell one more thing: your organs.

Bobbitt:"If,.., some multinational market is set up, then the wealthy from one country will sop up the health resources of others, as in the example of richer persons buying kidneys and other organs from impoverished donors."

Social Liberalism vs Economic Liberalism
The global rise of liberal market capitalism and its ideology of neo-liberalism dating back to the 1970s was a response to a crisis of profitability. It was a hegemonic project that aimed to:

* discredit the language and knowledge of socialism.
* destroy the influence of the trade unions.
* reduce public owned resources as a share of GDP.
* optimize the social and economic conditions for capital accumulation.

"It is a capitalism that is geared
a) to a free market and therefore requires
b) deregulation and privatisation under the aegis of
c) neoliberalism.

All of which, in turn, means that the state no longer works for the welfare of the people as such but in the interests of business--more specifically, global corporations which are, in their turn, the effective controllers of the market system.
The role of the state now is not so much to engender the welfare of the people as to control those excesses of the market which endanger social cohesion and lead to `rebellion'."

"We are moving from the nation state to what Philip Bobbitt, a one-time adviser to the State Department, calls the market-state (except that Bobbitt uses the term favorably).
If the nation state was the vehicle for industrial capitalism, the market-state is the vehicle for post-industrial capitalism.

Bobbitt goes on to say that whereas the nation state served to look after the welfare of the people, the market-state serves to bring out the maximum potential of the individual. (Thatcher and Reagan, he says admiringly, `laid the groundwork' for the market-state and Bush and Blair are `among the first market-state political leaders'.)

The imperatives of such a global economy are the unfettered expansion of the market world-wide, the free access to energy resources (especially oil), minerals, etc., and a political system that submits to such encroachment.

All of which provide the raison d'être for what Robert Cooper (an adviser to the EU) lauds as`post-modern imperialism'."

Globally Integrated Enterprises and Cheap Life
At Bhopal, Chernobyl, and elsewhere, the lives of persons whose economic worth was negligible were put at risk in order to provide cheap chemicals to agriculture or cheap power to electricity consumers. So long as it is profitable to do so, we can expect multinational corporations to draw the calculus of safety no more expensively than the global possibilities of relocation demand, and we can expect state enterprises to do the same (because even though they cannot relocate, they must compete against the global multinationals).

A New Imperialism
In his second essay Robert Cooper (2002) openly advocates a new kind of imperialism. He writes: "What is needed then is a new kind of imperialism, one acceptable to a world of human rights and cosmopolitan values. We can already discern its outline: an imperialism which, like all imperialism, aims to bring order and organisation but which rests today on the voluntary principle."

Cooper distinguishes between two kinds of “new colonialism” that can “save the world”: the “voluntary” imperialism such as the IMF and the World Bank, which “provide help for states wishing to find their way back on to the global economy”, and the “imperialism of neighbours”, when states intervene to sort out “instability in their neighborhood”.

War and the Market State
The current conflict is one of several possible wars of the market-states as they seek to open up societies to trade (by force, pay-offs, bribes or coercion*) in commerce, ideas, and immigration which excite hostility in those groups that want to use law to enforce religious or ethnic orthodoxy (or rather environmental, cultural, social and economic protectionism against big business and neoliberal imperialism*)

Bobbit: "States make war, not brigands; and the "Al Qaeda network" is a sort of virtual state. It has declared war on the U.S. because we appear to frustrate its ambitions to regional hegemony. "

FBI: "Since 1977, when disaffected members of the ecological preservation group Greenpeace formed the Sea Shepherd Conservation Society and attacked commercial fishing operations by cutting drift nets, acts of "eco-terrorism" have occurred around the globe. The FBI defines eco-terrorism as the use or threatened use of violence of a criminal nature against innocent victims or property by an environmentally-oriented, subnational group for environmental-political reasons, or aimed at an audience beyond the target, often of a symbolic nature."

(The fact is that the U.S. needs access to central and middle eastern oil and a demonic foe to legitimate their military presence in the region. So it´s actually the U.S. hegemony that is under threat by diminishing oil and challenged petrodollar, rather than any hegemony of disparate insurgent groups clumped together under the "Al Qaeda" umbrella. And since rebelling "virtual states" like "Al Qaeda" or even environmental organizations like Greenpeace have no formal governments, they are outside the juridical framework of national states and their warriors becomes "illegal combatants" or "terrorists" in the eyes of the Market State* )

Big Brother
"The fundamental rights of people are being eroded right across the board. That erosion is taking place a) directly, through new laws, and b) indirectly, through spin, the media and the distancing of people from democratic practice itself.

a) Of the new laws that undermine civil liberties, we need, of course, to examine those brought in specifically to wage the `war on terrorism'.

So here it might mean examining what the Anti-terrorism Crime and Security Act allows in terms of detention without trial, how the EU's Common Position on Combating Terrorism and other pieces of legislation fail to distinguish between legitimate political solidarity and terrorism.

And, under cover of terrorism, has come legislation which attacks the rights of asylum seekers, sets up new (and militarized) methods of surveillance of our borders, and extends the border areas themselves so as to circumvent legal processes and the human rights of people in those areas.

b) The indirect erosion of rights stems from the massaging of popular opinion by populist declamations made by a peoples' government prior to bringing in popular legislation on behalf of the populace. (If that sounds like spin, you are right.)

Conversely, to keep its remit as the government of all the people, it takes up the more populist issues as represented by the media and gives them voice. The government is becoming more and more responsive to the media and less and less to the population directly. (The media, of course, is owned either by multinational corporations or international businessmen.)

The China Model
“It has two components; The first is to copy successful elements of liberal economic policy by opening up much of the economy to foreign and domestic investment, allowing labor flexibility, keeping the tax and regulatory burden low, and creating a first-class infrastructure through a combination of private sector and state spending.

The second part is to permit the ruling party to retain a firm grip on government, the courts, the army, the internal security apparatus, and the free flow of information. A shorthand way to describe the model is: economic freedom plus political repression.”

(The same repression could just as easily be achieved by outsourcing surveillance, security, military and other control functions to private companies like for example how the Chinese government hired western companies like Microsoft, Google, Yahoo to build their Golden Shield or Blackwater´s activites in Iraq and recent espionage services that I imagine could serve a repressive totalitarian regime just as well as a democratic.*)

(*) My Comments

Robert Cooper : The new liberal imperialism
Philip Bobbit : Get ready for the next long war
UK 2017: Under Surveillance
New Labour, the Market State, and the End of Welfare
Health Policy in the Market State
Maastricht: The Protectionism of Free Trade
The Democracy Deficit in the Global Economy
Democratic deficit in the European Union
Kicking Away the Ladder
The Rise of the Virtual State - Wealth and Power in the Coming Century
The Organ Market

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