The Global Gamble: Washington's Faustian Bid for World Dominance

The Global Gamble lVashington's Faustian Bid for llVorld Dom:inance

PETER GOWAN

VERSO

London· I'lew Yorl:

TO MY SONS

First publishod h~' Verso -t mlH Ii) Peter Gowan 19n9 All rights rusmved The 11I0rai rIghts of the author havu boon

ass(~rt[J[1

3 5 7 " 10 R 6 ~ Z

,

-'". :

, '", .. d

-:i

:.;..-

Verso UK: G )I.·leard Stroet, London \VIF oEG USA: 1110 Vanek Streut. New York. NY tOOH--tliIJ(i wW\\'. vorsohooks.!:ol1l

Vorso IS tim IIllpnnt of Now L(lfl Books ISBN l-U5~l8-1-1174-5 ISBN l-II!i!J/J.J-Z7t-2 (pbk)

British Library Catalugumg in Publica lion Data t\ catalogue rncord for this hook IS available from the Brilish Librar.\' Library of Congress Cataloging-III.Publication Dala A catalog rucord for this book is i1vailable li'DlIl the Lihrary of Congmss Types!!t by 1\·1 Rules Printed and hOllnd ill Groat )]l'il<1111 by Biddlos Ltd \\'\\'\\'.hiddl(!s.co.(lk

Contents

vii LIst or Acronyms and Terms PART I

XIII

THE GLOBALISATION GMdBLE

"

i ntro((uclIon

2

.)

'CaplLal Markets;; Financl,ll Systcl11s and thc Postwar intcnl
,~

Thc Dollar-Wall Strcet Reg-line

'I

The EvoiulJon or the DWSR rrom the 197()s to the

:'i

Power Politics. the DWSR and the Clinton Acil11l11lstrallon

()

The Poliucs and

7

ConclUSIons

PART II

ECUIlOIlIICS

of the Pame of '9H

()()

10:\

12!i

POLITICS IN THE CLOBALISATION PERIOD

H The Gulf War, I rag alld Western Liberalism 9

19~1Os

I-II

The Theory and PractICe or Neo-Liberalism for

Eastern Europe

1~7

10

Nco-Liberalism anel Civil SOCIety

~·IH

II

Thc Post-COl11l11l1l11st Parties

~60

12

The

Enlaq~el11ent

111

the East

or NATO and the Ell

Preface

During thc 19~)Os, AmcrIcan govcrnmcnt and busincss elitcs ha\'c attempted to 'go global" 111 other words, to entrench the United States as the power thaI will control the 1ll'~Jor cconomic and political outcomcs across the globe in thc twenty-lirst cCl1tur\'. This is a comlllonplacc amongstthosc who 1{)lIow such malleI's; but the distinClivc mcthods cmployed in tillS pn~JeCl arc less wldelr recogl1lsecl. ThIS book IS an attempt to \I1vesllgate some of these mel hods, many of them IIlnOv
VIII

PREFACE

nallle of ~Jobalisatlon: this m\'olves till' openlllg of" a state's political l'COIl10 the entry 01" products, companies. Jinanci,il flows and IinanclaJ operaLOrs from the core countries, making- state poliC\' dependelll upon de\'e1opments and (tensions taken III \'Vasilmgton. Nell' \brk and other main capllalisl centres. Tht' two changes reed each \lthel': the shih 1\1 domestic sO(J;li )JOWl']' rdatlulISlllps, known as ne()-Iil)l~ralislll ..<;I.rengthens the CIJnsutuencles );I\UIIJ"lIlf{ g-Iob,disauon. And the jiJrces j;l\,ouring globalisatlOn will J"avour thesl' S;II11C domesllc transf"ormallom. Those states and SOCial svstellls that try to resist thcse transformations will lind themsel\'cs increasinglY shut outli'olll the US market and from liS allied EU market, and sul~jeClcd to hostile eCOIHllll1C slalL'crah. The lIloS1ll1ternallonallv competltl\'C ol" their productlvl' sectors, I"e,mng- such exc\usml1, can tllllS also \)C [\lrnerl mto supporters of ~1\)\)",lli­ sation and neo-liberalism. Both types or change f;wllllr the transnatlOllaJ expansion of US econOllllC and political influence. slllce both proVide openmgs ror US financial operators and the US financmimarl.:ets, as well as for US transnational corporations. Both globalisatlon and neo-liberalism were spreading across the \\\'stern world before the collapse of the SO\'let Bloc but It has l)eell durlllg tile 1990:-; thal Amencan adnlllllsu-auons have actively souglll to radicalise and gener.t1ise these trends, aJ"lJclllatmg Ulell1 in \\'ay.~ whICh would anchor olher polillcal econumles to Amencan political and eCOllOmlC lI11erests. This anchonng process has been pursued both bilaterallv and through reorganISing the program Illes of multilaterai orgalllsauons so thatlhey, too, I)l'collll: IIlstrulllents of the campaign, These changes in the illlernal and transnational linkages of states are consolidated IIItn a new regime, which in turn tends lO make state leaderships want what American state and buslIless elites wanL. On the other SI(k, the pn!Jt:Cl involves ensuring that It is the states themselves that retain CIIIllplete responsibility 1'01' ever)'thmg thal Ileblls their populations. Thus tile benefits or the global transnational order will accrue to the Ul1Ited States, while the risks and costs can he distributed abroad, This IS the I\lalll distincllve rorm or the US's glObal pn~Jecl. TIllS IS the glnl)al gambie. Aher an IIneasy start at the bq~illnlllg or the dec;l(te. the lIIain "Vest European powers have become JUIllor partners III this prolecl, In a rei alJonslllp willch combines subaitern co-operation with sOllle clemL'1l t\ o/" rricllon and competlllOll. The relationshIp between the United States and Japan, on the other hanci, has been much more conI1icttlal. SII1Cl' the national and regional dynamiCs oiJapanese capitalism have been 1;\1' kss in tune with Washinglons globai prqlect than have those orvVestern Europe. The pl'ocesses lIsually ;L~sOclatcd wllh giobalis
I'RH~\(:E

ix

Bllt 111 the IIrsl part of thIs I)ook I argue that the process of glohalis
I'REE·\(:E

The collapse of" the Sm'lcl Bloc prcscllled AmcrIcan c1iICS Wilh a telllpl;!lion remllllsccnt of" Faust"s. A door Sl'l'IIIl~(t 10 swmg- opcn lin til a vlsla "j" hitherto 1Ill1mag-lIlabie cosmopolitan power. Yet within a litLle ell'cade, tlte slgnaLllre or ivlephlslopheies IS already vIsible. The eCollOl1l1C {i)I"Jlluia oj" the 'Was!JmglOn Consensus' is structurally Ilaweci but is simultaneousl\' \'I(al for the dynamism or the American econolllY. States have been restruClured wIlh great poliucal success bUlIl1 ways that will make them, 111 the rutllre, (;\I' less capable of" conlallllllg and managll1){ lhelr own c\Ol1leSllC revolt; American military asccndancy ovel- the glo!)e IS grealer thall lhalllr all\' Slalc in world hIstory. 1)l1L Its panoply or powcr IS of liLLie use 111 the 1;lce or slale breakdowns anc! popular revolt. ThiS book is not an al.lempt to producc a comprehensive treatment of" these transnational
or

I'REF:\(:E

XI

studies in tills boo!;., therefore, have required that I stray across disciplinary boundaries even wherc I have felt ill-eqUIpped to do so. The material in Pan II has clther been published already in the form of arllclcs or has drawn upon earlier published cssays. Chapter 8 first appeared as The Gulf War, Iraq and Western Liberalism' In NI~711 [AP RttlJil~w 187 (j'... lay-::June 19~11). Chapter 9 was pre\'lol1siy published as 'Nco-Liberal Theory anci PractIce for Eastcrn Europe' 11l iVl'll! /.lY( Rellll'll! ~ I:~ (September-Ocwber I 99!J) , Chaptcr I () prcviously appeared as •Liberalism, Ncu-Liberalism and Civil Society' 11l /,(lbO/ll' FO(/(,I· 011 J~flsll'rll Ellro/JI' 53 (SUJlllller 199(). An earlier version of chapter II was published as 'The Post-C01l1JlllllllSt Parlles III the East' III Donald Sassooll, eel., /.oo/{i IIg /,Iji (Ill Tat.ris, 1997). An earlier verSIOn of chapter 12 appcared as 'The DynamiCs of "European Enlargement"', [.((boll r FtJWJ Oil F(I,I"/t'm Ell mjJI' 56 (Spring 1097). I am grateful to these publishers for permiSSion to reproduce this material here. I woul(llike to thank a number of people fiJI" vcry helpfui cnllClsms ofvarious parts of thIS hook, notably the follow111g: Perry Anderson. Roblll Blackburn and other colleagucs on Nl'w Lt!fi RI7J1l'w; Leo Panltch. Gus Fagan and my other colleagues on Labollr Foms Oil HaslrTJI J~·lIrol}('; Laszlo Andor; ami Donald Sassoon. 1 wouid like to thallk l11y colleagues 111 the I-itllllanlllCS Faculty In the UllIverslt)' of North London and in the Schooi of European and Language Studies 111 parllcular for the way 111 which. despite the cIiflicuil1es facing higher cducatton. tlIC\' have managed to preservc all extrel11ely congenial context for both teachlllg and research. lowe a special debt 111 tillS context to Mike Newman. And I would also like to thank Ill\' students at UNL for bel11g a constanL sUlllulus and challenge fl)r 111)' tlunking. I would like to thank Verso, and in parllctliar Sebasllan llmlgen. the cop\'editor Jon I-Iaynes. and Susan Watkins. wl10 madc a final comprehensive (alld extremely thorough) check on the manuscript. li)J· being so dliClent and accommodating. Finally. I woul(\ like ll> thank two people Yen' close to mc. One IS Ill\' li·iend Patrick Cam iller, wltll whom I bave been talking Ii»· a quarter of a celllun' and li·olll whom 1 have learned so much. Anci the other IS my wife. I-Ialva. whose imegnty. sensJtI\,lly and generosity have been an Inspiration as well as a great support.

List of Acronyms and Terms

AFt-CIO

APEC ASEAN

BEMs BIS

BSP CAP CEE CEECs CFE CIA CIS en'IEA CPSU

Comecoll CSCE

CSFR

American Federalloll of Lahour-ColIl-{ress of Ilidustrlal Organisallons. the main American trade unioll redcratioll ASIaIi j"loncl<\n' Fund. a Japanese proposal III ;1l1lU1l1ll 1997 that was not nllplcmcntcd Asia-Pacific Economic Co-opcnILioll. It includcs the USA. Canada and thc main Asian cconomies The ASSOCiallon of SOlllh-East As iii 1\ Nal10llS The Arab Socialist Renaissance Party - the ruling part.\' III I ract and Syria The Big Emerglllg ;Vlarkels. as dcfinecl lw the Clillton aclmlnIstratlOn Bank 1'01- International Settlements - the 'central bank' of ccntral bank~ Bulgarian SOCialist Party The EU's Common Agncullllrai Policy Central and Eastcrn Europe Central and Eastern European Coulltrics Thc Treat\' on COllvenllonal Forces III Europe CClllral Intclligcllcc Agency COlllmonwcalth of Independent Slates The Council 1'01- Mutual Econolllic ASSistance - the SO"let Bloc's ecollomic association COllJIlIUnist Pan" of the Soviet L1111ol1 Allother name for tile CMEA COllference Oil Security and Co-operation· in Europe, no\\' transformed inlo Ihe orl-{a1l1SatlOll /()r Sectlntv ancl Co-operation II) Ell rope Czech ami Slo"ak Federal Republic

xiii

XI\'

DGB

D\NSR EBRD EC

EeB Eli Ex-1m Bank FDI FRG FSU G3 G7 GAlT GDP I-ISP HSWP IeI' IFIs

lIT ICC

IMF lSI LDCs LSE LTCM MAl ;OvIDI' MERCOSUR MIT MNCs NACC NAFTA NATO,

NEe

:\CIHlNYlIIS AND TERlIlS

Germall tr,lele Ullion leder~1I1111l Dollar-Wall Street Rq.\"III1C European Bou"; li,)r RcconstrUctlOll 0111(( l1eveIOplll('l11 Europeall ClIlIll1ll1nlty. 110\\' callcd till: Europcan l:lllon (El!) European Cenlrai Bank. Ji JI'nH:<1 to manage L11l: curo. 111(' E l: 's slIlglc C1I1TellC\' European UnllHl The US gO\"l.'rnllll.'nl\ trade tTcdit 0111(1 credit g-u;lranlet' agencr Foreign direcL ill\,estmell L Federal Republic of CermiUI\' Fonner SO\"lel UnulIl Croup of :1: US:\, Gcrman\", illld Japan Group of 7: USA. Germany. Japan. France, Brilalll. C~llIad;l. ILaiy General Agrcemcnt Oil l~II'ill~ and Trade Cross DomestIc Producl Hungarian Sllualisl P~II"l)" Hunganan Socialist \Vorkers Part\". lhe n~ullc 01" lhe Hunganall CommlllllsL Pan,' Iraqi ComllllllllsL Party IlllernaLiollallinancml insuLlIuol1s {the Ii"IF and WB} In u'a-Jirm trade EU IIlLel"'-go\'crnlllellLal COlllCrcnce for amending lhc Ell's baSIC lrea ltcs International i\.Jonetary Fund Import SUbslIltHlng Illduslnalisatioll Less Developcd CounlrlCs London Scholll or ECOIIOlIllCS amt Poliueal Sncnce Long-Term Capilail\lanagcmcnt The jI,'lultiJalcrai Agreelllclll 011 Im'cstmelll Hungarian Democratic ForullI .-\. li'cc.: lrade area III Lalin Amcrlca 11I\'olnng Brazil. Urugll~l\'. Paraguay alld Argclltina 1'VlassachusselS Instl!lIlc.: of Technoloh'Y Multi-national corporations North Allantlc Co-operauon Council The North i\mencan Frcc Tradc Association. lII\'ol\,lIlg til<' USA, Canada and MeXICO North Allanllc Tn:a!\' Org-~III1Satl()n National ECOIlOIllIC Council. set lip lw Ihe ClinlDJI adnllllIstraUon

,\CRONY;'IS AND TERMS

xv

NOIl-Prlllili:rauoli Treaty Amerlcall Natiollal Sccunt" Coullcil National Salvauon Front or Romalll
USTR

US Tr;lde Represelltatlvc

X\,I

VER VIE Visegr.ICt WB WEU \\TO

;\CRON\~IS

,\NII

TER~IS

VoiUlllar\' Exporl Rcstraillt Vuiulllary Impurt Expanslol\ i'uiaml. Czech Repllhlic. Slovakia, HUI1~al"\' '·\'orlel Ball k Wesl European limon '·Vurid Trade Or~'lnlsalioll. ~uccess()r lO lh(: GATT

= = = = = PART

I =====

The Globalisation Gamble

Introduction

The 1990s have been the decade of g-lobalisallOlI. We see tls cffecb eve1"\'where: III economic. social and (Jolitlcallife, around the world. Yet the more all-pcJ"\'aslvc are these effects, the Illore eiusl\'e IS the alllmal itsell: An enormOlls outpouring- of acaclClllIC Ii lerature has Eliled to pru\'lde an ag-reed vIew of its physlOnom)' or its locallon and some replllable academICS of Rig-In amI Ldt e\'en question ILs very existence. Others. notabl" Ang-Io-Amencanjournalists and polil1clans, II1SISllt IS a nug-hty beast which savag-es all who Elil to respect ItS needs. They asslIre LIS lhat 1IS g"aze, '\)lank and (lHiless as the slIn", I has turned upon the Soviet Bloc, the European SOCIal ;"vlociei, the East Asian Deveiopmelll l'vlodel, bnng-ll1g" them all to thclr knecs. For thesc pundits. g-lobalisatlOn is the hearer or a new planetary CIvilisatIOn, a slllg-le marketplace. a risk SOCletv, a wodd \)e~'ond the security or states. an unstoppable, quasl-nautral force or g-Iobal transfonnauon. Yet. as the East Asian crisis turned into a g-Iohal III ternallonal finanCIal scare, SOllle who nug-ht he thollg-ht to he deep inside the hell\' or this bcast. the big operators on 1I1l~ . g-Iobal !inaneral markets'. wondered whether g-ioiJalisauon mIght be III 1IS death ag-on\,. At the star! or 199H •.loe Ql1Inian. senIOr analyst for the Anwncan IIlVeSllIwnt hallk iVlorg'all Stanley, raised the possibility thaI g-lobalisatlOll Ill,\\' he COllllllg- 10 all clld. He noteel that 'g-lol);t!isatlOll has been the deCISIve econOlIlIC ('n'nt of this decade' and stressed that 'no one has reaped lIIort.' heneflts rrolll g-Iobalisation thall the United States and C01"()()rate America. Thl' g-reater the velOCIty and mobilitv or g-Iohai capitaL the more capllai available to plugthe nation's low level or SOlVI11g-S and hoost the lieJllI(litv of linanClallllarkets. Til short, g-ioiJalisatioll has heen bullish for tile world ("COllOm" III general and Jill' the LllIiled States in particular.' But Quinlan worried that g-o\'crnll1cnLs 111 vanDUS parts of the wodrlll1lght be turn111g- against g-Iobalisauon and illig-in dcc)(ie 1.0 bnng' 11 to an end 111 199H. As he put IL: . the blg-gest nsk 10 lhe world ecollomy next year IS 1I0t slower g-rowth.

THE C;U)\\\I.IS ..\TIOt\'

C""\~IBI.E

but rather an unra\'elling of gioba"1 1I1leniepenciellce - and therefore the enci or gl()balisal1()n.'~ For QUillian. then, ~Iohalisation IS a rather fragile, vulnerable creatul"l~. depellclelll upon the Ilurturing can: or states. Thus, we arc len \\'Itll all a\\'ar('l1t~ss that there ha\'e Indeed been powerful nt'w l(lITes in Ihe mternatIonal political economy of the I 990s, wilH"it we label globalisauon, blll their contours, clynallllcs and GIlISl'S remain obscure: as elusive to our grasp as a black cat III a dark )"(IOIll.:1 ThiS IS yet another attempt to catch thiS Cal called gioiJalisatiol1. or ratiler to catch one of its malll ()q~ans: Us celltral nervous svstem. We will argue that tillS lies 111 the wa\' III whIch IIl1ernatlonal monetary ami (inanctal relations ha\'e been redeSIgned ami managed over lhe last quarter or a century. This new monetary anci !inancial reglllle has been one or the central motors of the II1ter\ocl;.mg mechanisms o/" the Whole c\vnallllc known as globalisal1on. Anclll has been not III the ieasl a spontanco\ls O\llcome of orgamc economic or technolu).{ical processes, but a deeply polillcal result of political chOIces made by slIccessive govern ments oj" one state: the UllIted States. In this sense we are cluser to the iVlorgan Stanley view or globalisatiun as a state-policy-dependent phenomenon tllan to the nOllon of globalisauon as a deep structure favoured by Anglo-American media pundits. To mdicate Ils location 111 JIllernallonal reality we call It a "regllne" although, as we will expiall1, It is not a regIme in the guasl:lul'idical sense III which that term has been used 111 Amencan IIllCrnauonal reiat.tons literaltJre. International lJlonetary ami fillancial relaUons are always the procillClIJ/" both econonllC and above all political chOIces by leading slates. Studies o/" giobalismion which lilil to explore the politICal dimensions o/" the lIlternational monetary regIme that has eXIsted slIlce 197:1 will miss cel1!rai /"caltJres or the dynamiCS o/" giol)alisalion. TIllS inlenl
I 1'\T1H )I)ll( Tl ()N

]Jowers to choose li'om and the olle chosen, whICh has led 1.0 what we call globalisatlon. was t.he oillcome of inlernatlonai political conflicl.~ won by lhe .-\merican g-overnnwl1t. Since the 19iOs. the arran~elllents sellIl motion b)' lilt: Nixoll adminlslralton havl' developed mlO a patterned lI11ernalional regime which has conslantl" reproduced itself, has had very /"ar-reachmg dTects on transnallonal economic, political and sOCIal lire and which has been availahle /"or use lJy SllcceSSlve AIllt:ncan adnlllllstralions 'IS an enormOllsly potent Il1strulllent of tilelr econonHC statecraft. One of the most l'xtraordinary features of the whole stnn' is the way 111 which tllest: great il"wrs of Anwncan power ha\'(~ slIllplv been Ig"norecl in most or the literatures on globalisOlllon, on Illlernauunal regimes and on general de\'elopmcnl.~ III Ihe il1lerl 1 ational political economy." In exploring tilts Dollar-\<\'all Street Regime we need no algebra or geollletn' and almost Illl arithmetic or even statisLtcs. The I)aslc relallonships and concepts can be unc\erstood Wilhout the slightcst (;uniliant), wnh neo-ciasslcal economics. Indeed, for understanding lIlternallonal Illllilelary rs. One of the hlSCm
li

TI-IE (;j,OI\,\I.IS,\TION C:\r.IBI.E

stales . .Iapan. the COlllllnes or the South and 01" the I"Ol'llIer SOVIet Bloc to the regllllC. We also look at how Lhe rcg-lInl' cOl1tributl'cl towards cbanging the US dOlllestlc financiaL eCOl101111C and political systellls. In chapter 5, we tn' to place the DWSR and its effects il1LO the fralllework or the dynamics of international politics as a Whole 111 tile earl\' I 9~l(ls, \Vl' iook at tlH:se Issues, so to speak. from the angle oj" the kac\ stall': thl' United States. And we try to build 111 the elleCls o/" tile So"iet Bloc collapse on how American leaders J()rlllulated their strategic goals and recolllbined t.1leir (actlcs. I argue that tile\' ratlonallv had to, a[\d ciid, recog-lIIse that tilelr ke\' challenge lay III East anel Somh-East Asia. To tackle that challenge and to frustrate future challenges to US global leadership, the\' had to radicalise [he D\VSR al1cl Illay perhaps have used It as an IIlstr1l1l1el1t of economic statecraft 111 East ASIa: the e\'lcience is Clrclll!1sLantJal but slgnilicanl. In chapter 6 we argue that thl' cOI1\'eIlliol1al view or the unI()lding o/" the central drama of the East Asian Crisis in the autumn o/" 1997 - the events 111 South Korea - is 1l1lstakeJ1 JIlsofar as It assumes the cen tral actors 10 ha\'e i)ecll exclusi\'eiy market forces. A criucal roll' was pla\'ed hy the US Treasury. \\'hlch acwd IJ1 qUite new ways (lur1l1~ the Korean cnsls. I twas this Treasury IIltervenllon in SOllth Korea which was I-csponsiblc for the subsequent IndoneSian colJapsl' and willch IIldirectlv :lllcluninLellllonally set in lllotlOn the tngg-ers which turned the East ASian CriSIS into a I4lohal JinanClal criSIS during 1998. :\t the same tlllle, the reason why Ihe US Treasury's action could play thiS triggering role la\' in the effects o/" (welllY veal's o/" US explolLallon oj" the Dollar-Wall StreeL Reg-line Oil the world economy. \Ve concillcie bv cOIlslclenng- wheLher Lhere IS a possihle sOclaldemocratic capitaiisl alternati\'l' strate~y whICh could reverse thl" dVllanllCs of ~Iobalisati()n.

Not(!.\"

I. W. II, \<"IIS: 'Th" Secolld COlIIlIIg " .Joe QtII II lillI , 'lkl'aha;llltlIlS, Ddirlls ami Ihe 1-:1111 .. I' elohalisaIlOIl?', :-'Iorgall Slallle" (;I"lIal E'-'OII01ll\(' ForulII. The {aollal En'"011lICS 'It·al1l. SpeCIal )"""I'-EIIII IsslI'·. ~~ llen·mll .. r 1~1~)7 (MnrgOlIl Slalller,l(: CII_. 1!1!17). :1. I mUsl ,lCklllJwledge Ih" sOllrce of Ihis lIIelaphor III all ,·xn'Iit"III.1IJI,,· hI' Professllr Wagelll:r OIl iI n:n:1I1 cOllli:rI'IIC1: III Berlin, The.lokl' gOl's OIS lillluw'i: ,'COIIOIlIlC hi""r\' l'i chas1I1~ a hlack cal 1II a dark (,("lIlI: eCOllOIIIIl"S IS cha'illlg a hlack cal III " dark roOIll 1,-t"'11 lit .. cal .SII-. Ihere, 1-:<'\lIIOlIlI:lri", IS cila_"1l1!; a hlack.-al III a dark l' allah''i1S III Rohen IIn'lIl1er, 'Till' EnlllOllllrs or (:Iol>al Tllrhuh'lIn' . .\'171' Lip 1/"'/11/' :!~9 (I !19H). 5. A 1Il:~I()r "XI:\'PIIOII 10 Ihis hlilldllt:ss has heell (h,' \\'ork or Susall Slr,II\~'" whll ('onsl:lIllll' SI",~hl I'; ,·dUCII,· liS Oil II", p"li(i('s ..1" illll"rllallllllallllllllcl;lry alld lillam"jal albirs "'I"'Clalll' III III:,. claSSIC S(,.,/h'K /11/1/ Jki(i," I'o/i,:\' (()xfllrd UIlln-rsll\' Press, 1!17l), :\ p,lIh,lm-OIling arl!o de oil Ihe IIf slales III glllhalisawJII IS Leo I'anll.-II, ''1'111" R"le "I' S(;II,·S 11\ l :("IlOltisallOll-. S"nl//i,,' U,:t;W"I' ( I !IW,)_ ~.

,."k

INTROlll'< :TI< IN l;. I tic! n()l \'"1,1.

r 'Ilark,,!.,

10 Sllg,~l"st

thai

ll'lISIOIiS In:1W('.'1l

:111

JII'P""';1111 .. ili'Ti

"r

the ~o;'lb of ~(I\'l:I"lUIIt'llh and Ih(' clYl1atn-

;""t'SUg;'ill'"' Sc,' Ruhl'l'! Bllyer alld Ihlll('l I)rad,,' (",b.). S/II/'" ."Utl/I/s/ .\,,,,1:,,/.1: Tit.' i,illl//' U{(;illhtlli:llrlfl" (RcJllll"ligc·. 1~1~J(i), i, Sail Ill .. I 1llIlIllllgillll: 'Trall"",",,"al Oq'::lIl1salilllls II. W.. rld 1'"liflCs'. \lini,1 i'oiilin, ~:; ('-\I'ril !!17Tt. H.' ..

;11,' ","

7

TIlE

(;(.OIl:\l.IS,\TION (;A~mt.E

states,Japan, till: countries of the SOlllh and of IIII.' ronner Soviet Bloc to the reg-lIllc. \.\'t' also look at how the n'glllle clllHribllteci w\I'ards clI,\II~in~ the US domestic finanCial, .... conOllllc and poJillcal systems. In chapter!), we l1'Y 1O place the DWSR and its effects into till: framework of the (i\'namlcs o{" illlernalJOllal politICs as a whole in the early Im)(ls. We took at these ISSllI:S, so to speak, from the :Ingle of thl: lead slall:: the Linnell States. ,\nd we tn' to build III the erIccts of the SOVIet Bloc collapse Oil how American leaders formulated their strategic g-oals and recombined tllelr tactics. I arg-ue that lhey ralJonally hacl to, and did, recog-llise that theIr ke\' challenge lay ill East and SDuth-East Asia. To tackle 1Ilat challenge amI III li'ustratc (inure cl1allenges LO US global lcaderslllp. they had to radicalise the D\VSR and llIay perhaps have used It as an IIlstrulllent of ecollomic statecraft in East .-\sla: the e\'IC(I.'IICe is CII'Clllllstanllal bUl significallt. In chapter li we arg-ue thal the conventional \'lew or the IIn/i)ldillg oj' tIll: central drama or the East ASIan cnsis JIl lhe autumn of 1997 - lhe events in SOllth Korea - is mistaken lIlsobr as It assumes the cell tral actors to have lJeen exc\usivciy market ('orces, A cntlcai role was pi
NO/I',I

I. W. II. \i.. al.~: 'TIH' Sl'cond C"IIII11g-: !! . .Jo~· QUillian, 'I)C\'alll;\IIOII,;, Lklil'IIS ami Ih,' End or (;lohalisalJoll:' ~Iorgall Slallln' t;lohal ECIlJ III III 1(: For II III , The C)"hal 1'.(,01 II 1111 II'S Team, SpiTla) Y"ar-Eud Is,""'. !!!! Ikn:lIlh.'r 19~1i (1Ilmgan Slallky 8.: Co .• (!)!Iil. :1. I musl ac!;'lIol",,,dge the sOllree or lhis lIlelaphor 11\ all I'Xt'L'1Il'1I1 .I"kl· Ill' Proli',,"r Wag-l'II"!, al a a'celll cunl't:rellce III Berlin. The Joke g-Ul'S as lililows: "OIIlOIllIC hislorv IS ehas1Ilg- a hlack cal III a dark room; "1'0 II 0 III it'S IS clta~lIl~ a hlack CII 'II a dark n,ol1\ Wltl'lI Ih,' ,'OIl 'S\I'I Illl'n', Enlllollwlnrs I~ l:haSII\~ a iliad:. ,'a I II' "
1":li 11,"1/11' '!.!!~I 1IJ;~lor

(I D!)I'\) .

I'XCI'1'1I011 10 litis hlilldllt'ss has h"~'11 Iltl' work "rSllsall Sirallgl', wit" (,Ollsl'lIl111SIIIIl-:ltl h: l'dllC:ll,' II~ 011 Ih,· polillcs or ililerllalloJlallllollelary and lillalln;d .,t1'1I1" ('sp,'nall\' III her c!,ISSIC, S/"dill~ ",,,llJri/i...h /'oli,)' «()xli.rd l'lIl\'ersm' PI'''''' J!lil). :\ l'alh-bn:akillg art.cle Oil lIlt' rolt- "('Slall's III gluhalisalllJl' IS 1."0 P;III1I('h. 'Tltl' Role orS"'h', "' la"halisalll>lI', S,,,.m/i,,/ U,·gl.li,·r(I!l!I!I).

5.:\

I NTIHI(}l'( :rlc IN

7

(). I dn lIol wish 10 ~lIg~l'St that [,'II";IUIlS hctwt"(:u du.' ~nals of gO\'l"nU))t'IlI~ alld the d},l1anlor lIlarl;."" an' 11111 ;1l1 1111pun:1Il\ ,,1>;"<"1 or ill\"\·'Il),!;:lIiul\. s,:l" R"hen 110"'''' allll 1);\I11l:1 D,·ad .. · (.,,,- ... S/II/O :lgIII"'/ ,Hod,,'II: TI,,·l.iml/l oj (;J"/mJi:IJiJ/l1/ IH'>I11I"dgl', )!I!)I'). 7. Sallllwl 1'!llllllllglOll: 'Tral1,II:lllollal Org:lIl1s;llIolIs III World !' .. Iilles·. \I;,"" ['"iili,,,. ~:I H"S

(:\pril ! !I/:\).

===============2==============

'Capital Markets', Financial Systems and the Postwar International Monetary System

Most of the vanous nOllons of what globalisatiol1 is about li)Cus on the growlI1!; mobility of capital across the globe in the 'global capital marl,et; and upon the nnpaCl of tillS llIol)ilil), on nallonai economies. But the term 'capitall1larkl~t IS analvlIcally Itlcoherel1l, because It embraces radically dif1erent phenomena III the lield of1in;lnce, most of WhlC11 havt" Ilothlllg directlr to do WlLh capllal 111 lhe llsual common sense meal1l11g of the te I' III , while at the sallll' tlllll" It excludes a great deal or tile operauons of what capital actually does. So we Ileed to daril)' our 110liollS about 'capnal markets', global or olherwise, 111 order to understand this international phcnomcnon known as globalisalion.

TIII'Slrmlll'f/ Ca/)/I(// Mllrhl'lJ

In COllllllon scnse language we associate the word capllal with Lhl' idel or funds for prOdllCl1VC II1\'CSUlll'lll, for pULLing LOgl'ther machll1es, ra\,' materials ami empioyees to produce scllabic iLCms. TillS is a useful startin!; POlllt for llSll1g the word capitai because it stresses as SOCially bencficial role withlll a capllalist system. One of the central confUSIOns concerning globalisation lies in the WIdespread belief that the so-called 'global capitalmarkels·. 111 which trillions of dollars arc bounCing back ami rorth across the globe, arc in some wav asslslmg the de\'eioplllent or the procitlcuve sector of capitalism. It is because we Im.lgttle that the 'global markets' arc integral to produclloll that we IIl1ag"llle that we have no cholCc hut to accept them. 'ti:t III reality the great bulk (lr what goes 011 in the so-called' global capitalmarkcls' should be Viewed more as a charge Up~Hl thc productive system than as a source of funds 1i:)I' ncll' production. The idea that the current rorl11S or 'capital markcts' arc limctJOnaH), mdispensable inve.~ullent l11echallIsllls is a senolls error. The 'capital market' is both mnch mOH' and much less than the funnel 1'01' produCliw

s

"c:\I'ITAL l\IARKETS' AND INTERN,\TIO:'\!,\I,1I10NEY

lI1\'l:stllll'l1L. It IS Illllch Illtll'C I)ecause lllllciudes all forms of credit, savillgs ;lIld IIlsuranc{:' iL~ well as large, diversified marl,ets 1Il lIties to flllure Il1CUIl1C ami not.lllst credits for producllvc lIl\'eSUllelll. And Il is much less because I'el} large flows of funds Illlo producll\'c IllV{:'Stlllt'1Il do not pass through thc su-calleel 'capllal markets' at all. TIllS confUSIOn about the role of capital marl,ets is linked to another, concernmg mergers and acqUIsitions. Thus, it IS often assumed that when one com pan), buys control of another com pan", some kind of capllai investIlwnt is takmg place, Yet frequeIllir such acqulsluolls of assets may ha\'e lI()thlllg 10 do WIth new real II1Yl'stment at all. lll(tel'cJ, the reverse may be OCClIITlI1g: the acqlllslllon lIlay f)e conct'rlh.'d Wllit rUllllmg down the aClivIllCS or the acquire(1 asset, 111 OHler that the f)U\'er of the asset can eiimll1ale competition and gain g-reater market power. DUrIng the last quarter ur a cenlury this process of' cCllIralisation of capital' has been proceeding apace internatIonally. I t IS called 'Foreign Direct InvestmellL' Inll 111 most cases It SImplY means changing tile ownerslllp of compallles and may ha\'c to do wllh disinvestment 111 prO(llICLlOn rather than Ihl' commItment of new n'sources to expansIOn of proelllction. The nOlJOI1 lhat a great expansIOn of the sIze of 'cilpllal markets' IS a symptoJll of poslllve trends 111 GlpItalist pruduclJon IS as htlse as lI11agllllllg that a vast expansion of L1IC JI1surancc lIl(illstry IS a SIgn that the world IS hecomlllg a safer place, Insurance can operate 111 tile opposite way: the more crllne the bIgger the properly insurance markeL. Similarly, when great fortunes are being made o\'erI1Ighl on "capilal markets', the most usefui rule or thumb for interpretlllg sllch trends IS one wl1Jch says that somethlllg 111 capJ\alism IS functionmg \'er~' badly from a SOCIal pOlllt or \,Iew. \Ye will explore some of llwse terms, startIng w!lh the most. Ob\'lOllS reature of flnanciai S\'stellls, their role 111 suppl~'lI1g credit. Credit lI1\'oil'es lending Jlloney to people on tJle understanding that they will pal' the money back later along wIlh a bonus or 'royalty', llsually III Ihe I(JI"In of a rate of intereSL. 1 There IS nothing necessarily capllalist about credit and large parts of natIonal credit systems arc not I-dated to production at all. 'Workers can put tilelr savll1gs lI1LO a credit co-operat,,'e and draw IO;lI1s from It III hard tllllt'S 111 the hope of paving tlw money back 111 beLler llml'S, The\' pay a ro\'allv fi)r the service but tillS can be small because lite cooperall\'c IS non-prollt-makmg. Such co-operalll'cs serve cOnSllIllplJOIl needs, not produCLiDIl anci the\' are not capltalisl. Building SOCleLlCS COillined 10 tile housing- market pial' a SImilar roie III supplYll1g credit for people to purchase housll1g. A common feature of these kinds of orgalllsations IS tltal the credit-money tltal they Issue is directly del:,,'ed {rom savlIlgs deposited wIthin them, In mher words, their resources come from the past production or I'aiu!: in tiw economy: employees' savll1gs come from wages tilat they have aiready earned 111 pr()dUCll()I1,~

10

TilE (a.oIlAI.IS:\TION (;:\:\1111.1-:

Banks arc different because tile\' arc ahle to CI"I'{J/(! II/'W/JIIJI/I')' in their credit operations. We can sec thiS when we realise that at all)' onc !.lllle, the banks as a whole could be giving overdrafts to everybody in the entlrc eCOIl01ll\'. Thus. rar morc moncy is circulating 111 the economy than the lIloney derived li'olll savlllgs generated by past valuc creation. Pan of the 1lloney IS actual'" what we can call fictitlOllS money - money derived not ('rolll the past bill. from expectations that it will be validated by future productive acu\,llv.:l \ViLhlll capitalism. banks also do not. haw to be operated as private capitalIst compallles. At till' begllllllllg of the 1990s, ('or example, more thall half or the IO() biggest banks III Europe were publicly owned and their /lnanclal criteria for operatmg were, in prinCiple, matters of public choice. And e\'en if they are pnvate, the hanks play such an essential ,md powerful role in thc public ecolHllll)' because of their capaCity 1.0 Issue credit-moncy that am' sellsibie capitalist class will ellSure tllatlhe slale IS constantly IIlterferlllg III their operations (cven though, for idcological reasons, one wants to keep these state funC!.lons 'low prolile') . As Kapstelll puts it: 'Banks are wid how mllch capllai tiley must 1101d, where they can operale, what products tilcI' can sell, anci how much they can lend to anyone lirm.'·1 Thc existence of this fictitious crcdit-mOller is very bcneficial for the whoic economy because of its role in facilitaung the clrculallon or commodities. Withollt It, cconOllllC developmellt would bc far slower. It IS especially impOrlalll to cmployers, enabling thcm to raise largc amounts or muney fiJr equipment which will yield up its full valuc in production onl" ovcr many futUl-e years. If employers could lIlvest only real savlllgs - the muncy denvcd fi-om past value-creation - IIwesting in fixed capllai would be far more costly - too costiy for a lot or inVeSLll1elll. And crcdit has also become a very imponalll means or expanding the sales of goods to consUlllers. This is anothcl: way or saymg that modern economics run on large amounts of debt. So the banks do play an imponant role 111 bOlh cilannelling saVIngs and creating new funds (iictitious mOlley) for producti\'c investment. An entire capitalist economy could be run WIth a finanCIal system consisting eHl1rciy of sllch banks. Uutlllstorically, othcr forms or financial instltUlions havc grown up, cspccially 111 the Anglo-Saxon worid whICh has played such a central role III the illsLoncal dcvelopment of capitalism. First there has been the dcvelo)JllleI1l of shares and bonds as means of raising funds. A cOlllpany can oncr shares for sale and use the funds from the sail' to IIlveSt in the busllless. The sharcs are plcces of papcl- glvmg legal titles to a claim Oil (i.llurc pro(its fhllll the company's activities. Companies or governmenLs can also sell bonds and lISC the funds from, the sale for an infinite variety of purposes. Thcsc bonds arc similarly pieces of paper giving legal titles to a i1xed stream ofi'lilure IIlCClllle to the holder for a fixed period of lime. A speCIal featllre of shares and bonds (known collecltvely 111 England slllce the eiglHecllLh cenlllrr as

'( :,\PIT\I.i>IARKETS· ANf) INTERNATION,\I, ;"IONEY

It

'stocks') IS lhat secondarv markets h;I\'e g-rown up enabling people to buy and sell these pIeces or paper ('ntllling the holder to Ii.llure royallies, Today there arc all kinds or pieCl'S or paper tllat can he bought and sold and that enmit' the holder to some kind or ruture J'Ovall.v or nght. I can buy and sell paper giving- me the ngln to buy or sell a ClIITencv at a certam rale at a certam lillIe 111 lhe ruture, There has Iwen a huge growth III markets for such paper CI;U111S, The generic term ror all such tradal)le pIeces or paper is 'SC:Cllnlles It IS 1I11portalll to recoglllse that while the II1luallssulI1g or a set of shares or bOllds IS a lIIl'allS or raising rUllds that ma" (or mar not) hl' used for producllvl' capllal inveslInenl., the sl'condary markets m thl'se seCllnlles are nol cOlllributing dirl'ctl\' at all to prOdllCU\'l' II1\'estmenl." Instead the people on thl'se markets (such as the Stock lVlarket) are huymg anel selling r/(/I1I1S Oil .IiltllTl' 11(11111' tim/I,d /11 .Iil/IIH' Im)(llIf/Il'" (/ft/lI/i)" Ther are nOI handing over funds ror that product In: actIvIt\,: the\' are dalllllng future royalties from it. These dalllls Oil J'utUIT royalties rrom 1i.ltlllT production ;Ire eIther direct or lIldirect cialllls. A share 111 Ford Motors IS a direct claim on rUlllre value created in Fords, A RUSSIan g'O"ernll1ent bond whIch I hold is an Indirect ciallB on future Russian production orvaltle, I 110icl t.he bond not because I think tile RUSSIan government will produce the valul' blll becausc J 1I11agllle that II will pa" Ille m" royalty by extracting taxes Ii'om the productIve aCUvlIY of others in RUSSIa: no production. no rovalty on my hond, Against this background. we can now rclllrn to t.he phrase 'capllal market', What is mainly (although not unly) rd'erred to b,' this phrase is acwally sl'wnill'S lI/{I/li,'ls, And Wl' thus discover that' capllal market; in t.he sense ora secuntles market ma,' have nothing dircctl~' to do \\'111) suppl~'ing runds for capital investment. It lila), haye to do WIth the opposite process: t.rading in dalIlls to draw profits .Iiml/ .lilt 1m' Im)(lul't/1ll' 1/(/1111'-1'1'1'(/11011, At the same t.une, both bank credits and honds mal' he used Ii))' C
I~

THE eI.OB;\l.ISc\TION eA:-.mLE

and from crcdits In thc form ofJictitious money could be handlcd cntlrely by cOlTlmerClal banKs (which could themselvcs be publici)' owned). Thus, whcn we cxamlne thc growth of the so-callcd 'global capllat markets'; we will find that much of theIr activity is not about the suppl\' of capilal for productive actIvit)'. It IS abollL trading in royalties on futurc production in differelll pans of the world or about businesses enga~lI1g 111 vanous kinds of insurance against risks. And the trend in the orga11lsal1on of the flows of linance has been Illcreasmgly one which privileges the imercsts of rellllers and speculators over the functional requirements of productive investment. ThIS I~lct is revealed through an examination or the tensions between what wc may call the two poles of capitalism, that or money-dealing capllal and that or thc cmploycrs or capHal in the productivc sector.

T/II! Two PO/I'S (!/ (:api/a/ism alld TlII!lr HI'gll/fljioll

Whether tile finanCIal system is organlscd prcdominantly in the form of comlllcrctallJanks or in the form of securities markets, we notice a divlSlOll which is inhercnt in capitalism: the division between money-dealing capital on the one SIde and productive capital on the other. These two enlllles have different Kinds or concerns because of the different circulls of theIr capitals. For the employcr of capital in the productive sector the CllTIlIL runs as follows: capital starts as money (some orwluch IS borrowed from the money-capitalist), whIch is then turned mto plant, raw materials and empioyees III the production process. The capital then emcrges from production as a mass of commodities Ii:)r sale; when the sale is completed capllLlJ reappears III the rorm of money with the extra-surplus extracted from the production process. Olit of lhls extra-surplus, the employer of capital pays back the 1ll0ney-capllalist the sum 1I11uall), advanced, along With royal lies. But from the angle of the mOller-capitalist, the circuit looks different. It stans with a fund of money. TIllS money IS then iocked 11110 a pn~ject for a certall1 tlIne. At the end of that lIllle, the money-capitalist hopes to gct the money back with a royalty. For thc money-capitalist absolutely any pn~Ject whIch will olTer a future royalty IS what capILalislll is all about. If bUYll1g a share in Fords gl\'es a royalty of (-) per cent in a year, while a Ukrailllan glwernmelll bond will give a royalty of 34 per cent and buying a case of Ch{iteau Lafitte to sell it 111 a year will Yield I flO per cent, the problemallc IS the same for the monev-capitalist in each case: in an uncenain future, which of these diflerent . capital markets' will give me the best mix of salety and high Yield? Property that can be used as capital Lhus appears simultaneously in LWO polarised embc;diments: on the one side stand the JI/01/10·-mjJ;/alisl.\" controlling enormous accumulatIons or funds; and on the other SIde stand the 1~lI/j)/Oyl'l:5 I?/" aI/)ila/ managmg Lhe enterpnses. These are two forms of the

'<::\1'1'1':\(, 1IIARKETS' AND INTERNATIONAL

~IONE\,

same thillg-. analogous to God the Father and Cod tile Son. But their polarisatioll IS ver\' lI11ponalll I)ecause Il enables money-capital as the conu'oller ur funds to playa pJannmg- mle in capitalist development. By bell1g dislanceci and relativelv autonomous from the employers or capnal 111 the productive seClOr, the llloney-capllalists can pick and choose what sectors they advancc money captlal to. If a branch has reached 'maturity', barely aclllC\'lllg the averagc rate of prolit. then resources of value from thal sector as well as fictitious money can be advanced to other seclors which seem likely to procluce hIgher rates of return. Through such redeployments. the JinanClal svstem in the hands of the money-capllalisls IS supposed to spur growth. For supporters of capitalism lilis development co-ordinatIOn role or t.he llloney-capllalists IS considered to be one of the most mgel110lls and beautiful aspects of the entire s)'stem. One Illlght sa)' that the relationship between t.he productive sec lor and the linanclal sector is one where the produclIve seclor IS delennmant but the financial sector IS domlllanl. The productive sector is determinant because It produces the stream or value OUl of WillCh the lIloney-capitalists 111 the {inanctal sector ultimatelv gam theIr royalues, directly or IIldirectiy. On the other hand the finanCIal sector IS dommanl because It decides wlw/'(' II1Ilill channel the savmgs /i'olll the past and the new fictillOUS credit-money - who will gel lhe streams of finance and who will no\. The actual power balances between the two sectors are part.ly governed by the buslI1ess cycle. In the boom productive capital IS l1ush with cash and GilL so \0 speak. diclate terms to the monev-capllalisls; bUl III the recession the l1loney-capllalists become ruthless, bullymg tyrants as the employers or productive capital beg for credit to lIcie them (weI'. But power relations between the two are also crUCIally affected by inslltlluonal deSign - by the SOCIal reiallons of prociuction. The Slale. t.hrough a highly charged and poliLlcised process, can and does tilt the balance bC[ween the money-capital pole and the producl!ve-capitaJ pole and between the money-capllal pole and all parts of the credit system. keepmg, for example. money-Capilal out of whole sectors of tile credit system. ifil wallls to. The state also mal;.es cruCIal deCISIOns about the internal strUCture and IIlteractions within the l\loney-capIlal pole Ilself. \"'hat will banks be allowed to e1o, anel what will they be kept out of? Will we have a prIvale securlues market or not? And so 011. And we must also remember l.hatllte slate IS lloLJust designing relations between the two poles or capital; it IS also designing 11.<; own reiallon With lhe finanCIal pole l)ec(IUse It too will wish to use the credit system. Fnllll our analysis or these two poles of capital. another very important distlllclJon emerges, between the tempos and rhYlhms of two kinds of finanCIal flows linked to the lwo difrerent kinds or CIl"Clllts, For the IlHJIlev-capitalist there IS a tendency to seek qUick returns and to keep capHal in as liquid a state as possible. for reasolls of safety. The employer of

1·1

THE GLOBALISATION G:\1\IBLE

capIlal seeks to set up much longer-t.erm circuits, particularly concerningfunds for fixed capital investment, which yield their rull value only o\'el" many years. The tendency for the Iirst group is thus to generate 'hot ilion e\"· /lows, extremely sensitive to even very small changes in their enVlrOlllllent: while the second group tendst.o generate cold, long flows which have 1O he mbusl LO signilican t changes in their envimnmen t.The hOlllows are linked to royalty seeking from either securities trading orfrol1l very short-term ioans. This difference is extremely important: wilen we seek to analvse Il1lCrnallonalll1ovemenL~ o/" funds. Insol~\r as all kinds of money can /low ("reefy IIlternallonally. we would expect to sec "eryradical dirferences between these two kinds or flows: a small change in the exchange rate or one country or in t.he short-term. government-Jixed interest raWs in another can produce sudden, I1l,~jor shifts in l10ws of hot muney, but exert no significant influence on l10ws of fnnds concerned with real, long-term IIwestment III production.'; " The relationship between capital and labour within the productive sector IS, oj" course, an absolUlely lillldame11lal social relationship 111 the j"lInctiollIIlg oj" any actual capllalist system. But the relationship between llIoney-capllal and the producllve sector is another absohllely cen tral SOCIal relationship. Some oj" the sharpest conllicts within capllalist societies have OCCUlTed around these social relationsillps between the IinallClal sector ami the rest or society. At the end or the war, politics ill the AtlallLic world was governed by liJJ"Ces who favoured what the Ileo-liberais call '!inanclal repression' and what Keynes approvingly referred to as 'euthanasia Jor the rentiers', The story oj" the iast quarter of a century has been that of the resurrectioll of the rentiers in a liberatton struggle agalllst 'linanClal repression', This has gone hand in hand WIth the Idea that the approach to the deSign of linancial systems championed by people like Keynes and the US occupation regimes III Genn,\ny and Japan aher the war - 'finanCIal repression' - is an approach alien to genulIle capllalism, apparently of Far Eastem ongm! These dehates concern not only the IIlstitutional-powcl· relations betweell Illone\'-capital and the employers of capllai but also the role of the state and the rorllls or class relationships across the entire societv. But to understand thIS whoie story we must appreciate that these social and institutionai design Issues arc not necessarily resolvable at a purely nallonallevel. It is aClllally
'(:.,\1'1'1',-\1.

~I:\RI\ETS'

..\NIII;\TER"i:\TIONAI.

~«

INEY

15

The transformation oj" the n~lall()ns hetween the mOlley-capital pole and lhe produClin- sector of national capllalisllls has been a celltral fealllre of what has coml'lll be known as 'neo-libl'ralisllI' over the lasL CJuarter ora cellLuI'\', But LillS transformation has been achieved in close connecLion wiLh profound chang-L's III the fidd orillterllallonallllollclary and linancial relations. A~alnst thIS backgTllllllCl, \\'e willl'x:tlllllle lile 111 LernallonallllollC:'tary S\'stl'1lI and how Il relales to illterll;tIHmOli alld national linanClai s\'stems.

'nil' /1I/I'nlrt/If}II(1/ "folll'iar.\' S\,s/l'lIl

The lIeed for an internallOllai 1Il0llCtar\' svstCIlI IS !lol. In IIsdf, sOlllething denved Ihllll capllalislIl. It anses frolll lilt' political as well as economic fact that t.he world IS di\'lded mto separate Slates with scparate ClIrrenCles and from lht' I:ICI tltal ~rollps W!lltlll one Slall' wlsll to do IJlISIIH'sS With (and IIlsldl~) other states, Historically, most or lital lIlternallOl1aJ hllSlIlCSS has been concenleci with lrade 111 ~o()c1s, The problem or inlernaLJOl1al IlltlIlelarv relatlOIlS anses 111 the lirsl place over how two g-roups 111 difli.:renl currency zones can btl\, and sell g'oods. Onl' ObVIOllS wa\' or halldlill~ IhlS problem is to lise ncIther orlhe currencies o{'eacit state but inslead 10 lise a third li)]'lll or Illone\', sa\' g'old, which has an exdl
or

or

II)

THE GLOIl:\I.ISATION

(;:\~II\IJ:

are aiso established bv political agreement among Slall'S. And the Ireatllll'1ll of COUlllneS \"Ilh current account deJicll.~ or surpluses IS also politIcal'" established. Should there I)e an arrangement whereby Slates With current account deficits cut back on their purchases from abroad to get rid oj' theIr deficits? Or should the surpius states be presslIrised to blly more from the ddicit COlll1lnes? Arrangements of either sort call be pllt III place. If the dc1icll countries must a(~just, that will have a depreSSive effect intcrnat.lllllall\', bccause they will Cit back on their international purchases. If lhe opposite approach is USL'd, It. will havc a SlJllllliali\'(: dl'cct on tnterllallonal economic activit)'. WhKl1 approach IS adopted will depend upon IIltern;tlional political ,Ign'emelll between states over the nature or tilt' Illtenlauonal monetary regIme that IS to operate. AmI this agreelllelll will not be one between equais. The bIggest powers, or perhaps even one slllgie I)ig power, can lay down whal the reg-lIlle will be. All the olher slates will be 'regime takers', rather than 'regime makers',;

'nil' Brt!lfo/l Woods R"g/lI//'.Iil/·/II/I'l'IIflfu}//a/ Mo/u'/(I/)' (/1/11 Fil/al/Clal RI'frlflOlIS

The concerns or Keynes and Dexter 'WhIle III theIr dli.n-ts to constJ'llCl a new IIHernauonal monetaf\' systcm for the postwar workl were to CllnstJ'lICl arrangcments whIch would privilege IIlternaLJonai economic dcyciopmelll. ThIS required a predictable and stable internatIOnal monctary regIme that would be nIie-based and would not be mal1lpulal)le by powerful states ((II' mercantilist advantage. They there/c)re )'(!talnecl gold as the anchor of t.he systcm - a monc\, separate from the currcncy of allV natlOIl-state. Ane! tllcr laid dowll that thL' dollar wuuld have ItS price Iixe(1 againsl gold, Other states lhen Iixed theIr currency pnces agamst the dollar and were not allowed to unilaterally change lhat pricc as they pleased. Changes 111 currcncy prices woui(1 he settled co-operauvely between states through a supranatIonal body, Llll' International Monetarv Fund, which would be obliged to acccpt the change 111 a currency's par value only if it was needed to correct 'fundamental disequilibnum' 111 the Slate's currcnt account (mainl\' concerned wILh track). The allll of these arrangemcnts was to ensure tllat econOllllC operators enJoyed stability III the pnces of the mall1 currencics agalllst each olher since all were fixed at a gIven pnce agalllst gold. In practice, the dollar \"
·C:\I'IT:\1.

~I:\RKETS'

AND INTERNATIONAl. MONEY

Ii

Private finance was allowed to transfer flll1cb for the purposes of Iill
IX

TI IE (;1.( lH,\LJSATII >;-,: (;..\\1I\1.l.:

lO exert surticiellL politlcalllJllul'nce In establish thelllsein's as all oIFshon·. prl\'atc lin;JIlnal n'lItre alld acqlllrt'c\ ~ro\\'lJIg slglliliclIlCL' III till' I ~H)()s throl1~b t he so-called Eurodollar alld EUJ'o-\)olld markels, .-\nd the gnJ\l"Lh of I.OJlcieHl and oi" US banks ;lIlcl 11llll11nallollal curlInrcglllatL'CI IIHenl;1l101lal

porations operatillg wllh ()n~shore funds created growing spl'clIlaIIH' prcssure~ agamsi lht' Ihetl"ll Woods sysll'1Il or lixl~d bIll ;lctjusI;lbk t'XCIl;lIlgl' ratcs 111 tile 19fiOs. The Nixon acilllllllSlrallol1 's refusal to an'cpt the BrellOIl Wooris disClplinc of reCJlIlI'\l1g thc US to relll;tlll 1Il surplus was.llIstilh'd by till' arg-ulIlt'lIt that JL~ ele/int was G1l1sc
ill

order

\0 Sl'I/.L'

markcl

sharc from US COl1lpalllCS and challcngc American industrial capllalislll. \"'illl thiS arglllllclH !l sough I In .luslilY I\:'i c:lmpaigll III the e;lrl\" 1970.~ \0 scrap till' cClll.rallllSlllullClIlS of the Brelton \\'ooc.\s rq{IIlH:.~

NO/I's I. Tilt, I,'PII 'royalll' n",'rs IlIll·rl.·'I. !-(rolllld relil. lax"s, lill;lIln,!I 'l'n'ln' "',., ;lIul dinlit-lids. i II' refns III IllII.\I· arlll·lIil·., IlIal 1' .. "'111 ... · IISe-\'IIII"S. Nol all such pr",III<:ll
II,,''''

lalt.'S the :-,can'h of conlpaulI."s aud g'U\'('flllIH.'Jlh

Jr)J' 1)(1~'{~rs

of IJu'Ir Ulrl"nll~" o( .. 11;lrcs 411'

hllllds: 111l' \)IIH"I".' hOI\"(' Iho' sail-I)' III' klll1l1"llIg 11t'1l Ilto'\' elll St-II tllI'l" IIIHI
===============3=============== The DolIar-vVaIl Street Regime

The New Intcntational Monctary System Crcated in the 19705 T/t<: collapse 1// cClilral pillars o/" Ihe BreI/oil \I'(lo(h rq.':-IIII(" ill lire e;lrl"

1970s has Onl'1l IWe'1l prl'sl'llted, /)0111111 the US alld III oliln COlllllnl'S, as some S()rt or defeat for a weakellecl ,-\menGIII capllalisJIl, Ill\'oh'llIg the breakdowll or ils /;l\'ourccl IIllernallollal 1ll()Ilt'tary order alld a slide Inlo a chaOtlC'IHlII-S\'slelll , Bill thL' reality was n::rv differellt. Tlw Nixoll adlllllllslralloll was delerlllllWcl 10 bl"e;d, (lul oj' ;1 sci of IIlStltlllioll.tli~l'd al"l"'lI1gelllellls which limited US r\OIllIIl,lI1l'l' 111 IlllerllatiOIl.tlIJJOllel;11"\' poiHIe; III ()rder 10 eSlablish a IWW regmll' willch would gl\T II lIIoll0cr;tllC powel" oyel" illtel'llaU(lnal 1ll00H:l"ry ,dIlIrs, LiS capnal \\,;IS Indeed IKlng challenged!)\' It.~ c.l()J(;tlist riyals ill (Jroc!llCllllarkc,ts at Ihl' lillie, The breaklip or llw BreltOIl \V()()ds syslem was part or a Sl.ralq..,'Y for reslol"lIlg lhe dominallce of US clpIlais throllgh !tlnllng the Inlerllallollal lllolH'lan S\'Sll'll1 II1l0 a dollar-st.mdarcl regillle, \\'c will nol SII I' \'(:1' lhl' dc/ails oj' Ihe 1I11el"lI'llll1l1al mOIH'I;II'I' LTl.~IS or !lie lall' I ~)(l()S and earh' I Q70s, I ThelT \\'tTl' two cleUSI\T 1lI01lH'II\S III the sLOJ'\', The firs\. was Nixol1's deCISion to cut the link twtweell lhl' dollar and g'lIlrl in :\ugUS( 1971, And lhe second was till' oi! price nsL' 111 tlH' allltllllll 0(' I ~)7:\ auri Ille wav III whll'h lhe finanCl.tI cClIlseqlll'lH'l'S or lh,lI pnn: rise wcn,' handled bl' the Illalll \Veslern P()\I'l'rS,

TIII'/l/llIIp:llmlllJlI

flllIf

'\11'111'1"""1/(1111' /)(Jllrn-\\flll .\/,./,I'I III'P,'IIIlI'

The ,\ugust 1971 deCISIOn to 'dose Ihe g-o!cl Wllldull' lIIeallt lhat the USwas llel I()n~er slll~fel'l til the disnplint: ha\'lng- to liT 10 m;lIlItall1 a (ixed par "aim' urlhe dollar ag-alllsl !-{olrl 01" all\'lllIlIg'l~lsl': lll'olllrl let the dollar lllOW as lite US Tn~aslll'\' Wished and pOlllter! tl)\\',lrrb !II(' l'l'IIlO\, .. i or gold rrOIll

or

f ~J

TILE (;1.01\:\(JS ..HIOS

(;:\\Il~U:

IllIernthers, it IS Olle thlllg 1\l s;lCrifin: Sll\'l'!'l'lgI11Y )I) till' lI1ll:rests or illlerclepenclellce; Jl is gl1lte another when the rcla!.iol1slllp IS one way, Tht' difrerence IS tllat between the EEC and a cololllai empll'e The ract IS lilat acceptallce or a dollar standard Ilccessari\1' Illlplil'S a dCgl'l'L' or aSYllIlllell,\, tn power whtch, ailhough II netarv OHler was de"d and the whole negllLJalJoll lizzled (JUt. The Nixon admil1lstrallon thus g"ined its dollar standard and III tlte lIphe;l\'ais or the early 1~170s lIlCl'easlllg lIulllbers or coulltnes were r01'(L'(\ lu al)anclon attempts to matlltalll I1xeci exchange rales bl'lWeell their currellCles and the dollar. ThiS sUlte(t the US admlnlstratioll because 11 wisIH:r1 to furce a I-evalualion on other states and could now do so throu.!4'h Us own polin' for the dollar. ThiS was all enormousl\' IIIl]Jortanl developmellt, because, Il'r rcasons whlell we will disCI ISS i"lel: LIlt' LIS ~O\'L'I'n111elll COUld, alone amol1g governments, mOl'e the cxchange price of the dollar ag;lll1st OLilCl' CUITenCles hy huge amoul1L<; witholll sullenng the econOllllC cOllsequences that would bce other stateS wlll(:i1 attempted to do the same_

or

The NiXOJl adlllllll~l.rallnIl s ~ecolld :step was to tn' to ensure thaI. Illternallunal finallCial relations should be takt:n out 01' the cOlltrol oj" state central banks and should be Incn.:aslI1giy n~lltrcd UplllJ pl-i\'ate financial operators. It snught to achlc\'c thiS go.allhrough explOltlng US control over IIlternatlOnal oil supplies_ It is still II'ldeh' bclkvecllllat 11ll' sharp and stecp IIllTl'asC III oil prices III 197:~ was cllned mIL h\' lhc Gull' ~Iates as pari oL\Il '1IIl1-lsrael and allll-llS polin' cOJ1llectcdtll Ihc \!J1ll Kippur war, \l't as we now know, the oil prace rises were the rcslli! or us IIlllucncc on the oil states and the\' wcrc ;lIl' ahllllt n'lTding the pl'trod'lllars \\':lS pari of a wIrier (ll-ball' among thl: malll capllalist powers over whelller 10 scrap IlIllTllallon.1I ·finallClal reprcsslOlI' and the system oj 111.lllltallHng cOlllrol "vcr internatlona[ (inanClal ll10vements firmly III thl' ilands or lllc celltral hallks or states, In

TIIF. i;1.( m\l.IS,\TIU:-: L \ \ 1\1 \'F

these debates. willch took place \\'Ilhlll Ilrc I",IF, tlie US \"as ClJlllpktl'lr ISOI;Heel, a~ all other g-o\"t'rlll11L'lIts as WL'1l as rllC 1i\IF stall \\';llltl'd tu ret;1I11 SlI"Jl:t C()IHrols oil pnvale IJlICrllallull;lllillalln;t/IlI()\'Cllll'Jlh,7 But till.' US I{ol lis IVa,' throug-h unilaleral actlOm, SUpplcllll'I1I.l11g' the pl'trociollar 1I11l"l' Willi iL'i own abolilloll 111 197-1 orreslnclIolls Oil liw ilulI" orl"llllds IIllu alld 0\11 of lhe US (known, IIllhc.larg-oll, as lhe alllllilioll or 'GlpllaJ Ctllllrots'), IllS Irue thallhe Nixon adlllIlllslralloll was able to expluil a hreach III Ihl.' Brelton Woods svstCIll that ha{1 alrcady l'Xlstl'd SJlICl' lhl' I ~):i()s: the IJllernalion.II role of lhL' CilY or I.oJldOIl III Ilnannal Irallsacllolls, Bnlalll\ gO\'enlIlH:lll hac! 'I\lowcd lhc Cill' of I.olldon to "Pl'l';lll' as all ' on~sh()n: ccntre for interna\lollai pI'lV
Tile Nix()n stratl"/.,"· In 'Iihcratlll/.( llllernational lin:ll)cial markets was h;lscd lIll till' Idea thaI doing; so w()uld /ihl'/'(I/(' /hl' :\IIII'I'/fIlli .\/111.' /i'lllll .1//((,II/Ilbill,!!: /11 If.'

I'/'{)l/IIIIIII 111/'(tlil/I'.I.I'I'.1

(II/(/ m01l1t! .\/I'/·uK,lwlI 1111' I/(/Iil/mi I}(II(l/'/' (//II/I~

.1·la/I'. ACl'!lrdill~ to Ene HellclIle ... LIS offiCIals uuderstood ill lhe 19iOs thaI a liberalised inlcrnallonai finallClai l1lad;.ct would preserve the pn\'ilq~ccl global Iill,mnal POSilJOll or t he liS and gra~ped also that this would hcip prl'sern' tlle (Iollar s central 1I11ernatlOlIai nIle. I-1dleinl'r SIlIllS IIp the 1'1I11flallWIllai POlllt ahollt the (/\'el'all political and l'C()1l01ll1C slglliliCIIICL' the changl's: 'the baSIS or AIlH::ncIII hegelllOl\\' was helllg shifted froJII line or direct powcr over otiler states to a more market-based or ''strucILlral" 1'0n11 of powe!'. 'I~ n'" shall SlT below holl' these pr(lCL's.~l'S ;lew;IlI\, worked to strengthen the polillcal polI'er ;I1HI l..'COIlOIllIl' (Julin' I'n'ecloln till' liS. l~ul first Wl' 1I111S[ pOlllt 0111 tile slgnificallce orthe nse Orpny"te IIltern,l\JollaJ finance ror IIlternational IIHlIlctar\' relatiolls bl'tween states. ThiS nSl' altered till' hasis UpOIl ",11Icl1 g-()\·el'llllll'lll.~ 1l\;\llItallll'ci till' IIllel'll""llllal slahilitY llr tltt:lr 0\\,1) 1'111'r('lInt:s: 1I11c1t:1' the old Ikclloll \Voods S\'slelll, Ihl' I);ISIS !'t,.. a UIITt'IICY'S stability was c1oseh'w:d Imlh to Its trade balallu' and to the altitude orllll' I;\·IF and or the gO\'l'rnll1enls (central hallks) or I he III a III Cilpllalist powers towards the gO\'l~rllmelll or Ihl' ClHUHI'" 11\ trade bal'lIll.T dillinlllll's. SI.lIes Wllh slIrplll~es 11II lhelr CII]'J'l'1I1
or

or

TIlE

(;J.()B;\I.ISATI()~

(;;\:>11\1.1-:

(in,lIloal Illarkets, Tlnl$, the 111..'\,' IIIlernal1()naIIllOIlL'tar\' arrallgt'll1ClllS gave the llJ1lted Slales goYc)'nJJ}ent Ell' more IIllhll~nCL' over lhl.: nllCl'natlollal monetal'r and linancial reiallolls 0(' the world I han Jl had el~I0\'ed IIllcit:!" lhl' Brelloll Woods rules, It could ('reeh' decide I he price of I he doll;lr. Slall" wuulcl become Illcn::aslllgh' dept' ndell t upon ch:velllpllll':l1lS III Augl (JAml'ncan finanCIal markels ('or managlllg their IIlternallonal 11l00Wlar\, reialiolls, And trcnds In these lin
celltre 01' the riollar area or to raIse hlllds !11 111011 centre. In this way, tile strell~lh or Wall Street has rellllllrcerl the dOll1inance of the dollar ;IS an illlt"l"nallollal c1Irrel1c\".I:1

Tht'/~'({JII(JII/I(

olld Polil/ml Sign Uim II 0' ojDol/o/" Sf'If!,"1I101"tlgt'

Tht" t"COlloIl1IC and poliLJcal SIg"lIiliclIll"e of" IhlS 1Il'1\' reg"lInc Gill he appn:datcd olll\' wilen liT understand the rllle or sCIg"1lI0rag"c 111 ~I\'lnl--\' till: American ~o\'ernment an Ill1ll1ensei\' potellt polillcal IlIstnll1lelJl ill the rorlll or the new reg-lIlle. A, We sa\\" when Wt' IIlltiall\" discllssecllnlerllalloJ\aJ Illonl'\', a state has to aC[[lllre ("unds or internationallv acceptable 1l10lWY III order lCl be ;Ihle ttl pay for goods and services from al)J"oad. To t;\l,e an extreme example. few pl'Opk: WOlllel acccpl pa\,lllcnt frolll Chad ill Chad's own c1Irn:nc\,: II would be IIseless 10 all but a handful Ill' people Oll\Slde Chad. So Chad has to carn (or bOITO\\,) an IIIternalJonal ClIlTellcr. sal" till: c/ollar, he/clre l[ can bu,' anythlll).!; ("rolll al)roa(1. Ul.lt tillS hUg"e COllstralllt IS IIIJI1-exlstentlor the US ullder the ncw, p"st-Bn:uon ',Voods lIJ1ern
or

or

TIlE (;I.()I\,\l.IS,\TI();\; (;;\;>'IIII.E

Ihat, hann,!!; gre;ll lTOlI0!111C cO!1sequences ror Ihl' resl or Ill!' lI'orld while till: US n:111a111S cushiolled rrol1l the conseqllcllcesthal would applY to olher Slall'S,I,'

The Nixon acilllllllstralioll's ,'IClo)"" III 'liberallllg" lhl~ ,-\lIglo-.-\IIIl'ricali pri\';IIt: \),lIIkJllg sYSll'!11S for lI11eI'Il;lllllll,ll operations hold 11)111' kel'l'IlcClS. Firs!. It suddenly catapulted prIvate ballks mto lhe celltre or illtcrna1.l011al finallct', pushing OUI the earlier dominance oj" llie CCIII)";11 hanks atld kd C]1lIc\dr In thc 1I1lern;ILlonal cloll1l1l.lIlce III' the Anglo-AmerlGlII finanCial S\'SleniS aile! AmerIcan linanClai operators. Secondly. Illlpt:ncd lip all t'nllrnl()US holl' ill lhe public stipernSICIIl ililt'rllatlonallill:lndal operalors, Tlllrdlv.IlII1'IC!ttile financlai systems anelexchange I-atcs ur ollwr Slall's, eSIlL"Clilllr C(JUlllnes of the South, lllcreaslllgl\' vulnerable 1O dc\'elopmcnls III the .-\lIlenCall (inrJ.: do bUSiness witll pcopk Iinlll all O\'CI' lhl' wodrl. Funds 1I0\\' (lut f"rOlll and back III to lhosl' t\\'O n'llll'l'S ('1'0111 most ("{I \ II II i'll'S or the world. Bllt thiS docs 1111/ (// aI/mean th,11 all Ihl' lillilnl'1i1llllar);,l'L~ of tile world arc l\llilied III a single, IIltq{rat.ed finallcial markt'l. On till: (011 t rar\'. linallCl,t\ marKets n:mallll'c\ - ;l1Ic1largel\' slill n:l1lalll - rompanllll'llla\iwd, not only between COltlllneS bUl even Wllhlll COlllllnes: we call sec thiS if Wl'

or

or

or

rcalisc titat eVen \\'1 till II Eurolam[ arter the launch or Ihl' cum Iherc will slill hc ,~nhsl"IlII;I1 b:IITIL'r,o; lU thc full Integl'allllll of fillallClal lllarkets, BUl what did happl'1l III till' 19iOs was thaI I,Olldull alld Ncll' \i.II"\;, operators did bq~ill to eSlal)Iisl1 linkag"cs bctwcen their international liIlallCial lIlarkcts and I1allonallin:lIlcial s\'stellls around the world which wen' far slrollg'er than ill Ihl' 191i(Js, The CXP:1I1SIOIi ur thcst' II lIC I'll a lIollai pm'ate Ii (lallnal operal1oIlS call bc appreciated /)\' conlpanll~ thc SIZl' or intern:tllollal ballk loans and bOlld lellclin~ hctwl'l'n I ~17:1 and I~l~)(): hank iO;lIlS rosc froll! S,(() hillioll in I ~17:i 10 wcll O\'lT S:~/J() billioll lw I \)!HJ; dllrlng thc salllC pcnoel bond lending rose almosl lCllli)lcl. froll\ S 19 billion to ow... S 170 hilliuII, TOIl!;. or a g;!ollll{ lin:lnoallll:II'kc!. rathcr thall or the JIlncaSIIl~ JIll1uenu~ or thc Amcrlcan lin:tllCJ;d markct ovcr othcr nalloll:iI linanCial llJarkets, ubscures the powcr dillH:nslon us linanciai dOIllIll;!nCe, Those who belicvl' lhat the ;Jr\il'ClI\'e 'Allll'lIcan' IS l!"l\'lal or e\'l:n redundant should ask thcmselves a Simple qucstion: would Ihe\', theil, hc C]lJItc happy Ihllll an l'COIWJllIC :IIHI polilJcai pnJllt of'ncll' if' thc IIllerllalJonai iillallclal SVSIl'Ill was dO)1lIIJ;ltcC( hy tIll' lllark\'ls and "pl'l-awrs or Cllilla or Iraq, .I"S1 so IOllg as thc\' could oner similar kinds of crcdit or other lillallcial services Oil Similar terms to those on,Vall Street? Btl! III lllakl' 11ll' pOlllt IllllCh llIorc directlY. \n~ GlJ) slIllph' lIole 111;11 hccause thl' ,-\mcrH.:an lill;lllnal lIlarkct:-. h"n: bl'L'1I dOJlllllant \\'Ilhlll lhc hierarchlcai IIctworks or finanCial markets. access to that market. dilTer('nt kinels or linka!!;es I)Cl\Wl'1I natiollal eCllllOllllCS alld th:11 market. and prlCl: m()\,Clllelll~ WJlillJl tilat Illarkct. have had enonllOllS eCl 1l101i1iC {/ lid /J(}{illmf Sl~lIiIiGliln" The stun' SII1Cl' till' I~J7()s has hecl! om' or ).!;roWlng pressure rrom Ihl' \\'all Sirecl celllrl' \0 wcakell thc barncrs to IlS pCllclr:lIJ1l11 IlllO r\OIl1CSliC lill:\IlnOli svstCJll~, This pressure has a lnpk targcl: lirs!. III rl'I11(l\'l' barners 10 tIll,' In'L' !lo\\' 01 funds III t)lIlh c1irccliolls betwcl'1l \\':111 Strel'1 :lIld pn\'atc operators wlllllll the tar),{ct slate: second, lIJ gl\'C full ng'hts 10 Wall Street operalors LD do buslncss WJlhlll tile lillallnal srstl'll1S alld eCOlltlJIIIl'S of Ihe largct stales: am! ltllnl/v. 10 redl'slgll lhl' linanuat S\'Sll'IIIS of larget stales III Iii III with lhc husiness stratq{ll's or Wall Street operators ,lIld or tilelr All Il'J'IGUl cJ i Cll ts (lrallsllatJ ollal rorporallllils. mollt'\' marh:.e I III III LJal I'll nets, etL), or course, Wall Strn:l alld I.olldon ha\'e 1I0t haci a ll1ol]()polv, Tok~'o has ~r()\\'1\ ami SOllll' (If till' hl!!;!-(csl linallcial opl'rat()rs ;Ire .Japallese, Frankfurt, Zunch. Pans. Hong Kong and Singapore arc: all IInpo)'\anl. nut 1I01l!: or 11,,:sl' other Cl'lltrc,~ as rct COilles dose Itl Iwallillg tile ,~II.C or Wall Streel ;lI1d l.ondoll, allcl III liJl
or

or

THE (;IDII:\I.IS ..H\ON (::\1-([11.1-:

unreg-ui,IIl'(l nalun: of thl' London and Wall Stn:et operatDrs, .slll'll rel-{II1a1101l as eXlSleci aIllounted onlv LO-rather \'ag-ue, non-Ieg-a\ g"tllClelines ag-rced bv CCIltl';li ballks III tile Han\;. Ii,,' InltTllatiollal Setllellll'nL~,I' This, 1()~l,thlT \\,tlh s(;lh: a(h'antages, 110t Oil!\, lI1alI1t,\lIH:ci Wall Street's elo11llllance 11111 started a corrosive process or uncil:rmllling the pulllic regulation linanciai opel"llors lIIJI[,illlllhtT s\ales, as l)PI'I~ltors there CSl'OII)L'c\ Illfsilol'e thl'lll~eh't:s Ii. ClllllPl'Il', lillllld "'a\'S arounci local rLiles anel exerted pressures on their g"on:rnIllt'lliS 10 liheralise III order to enaiJie them to cOIllpete ag-ainst Wall Street. ,\s wt' ~;\\\' lls for baJlking SI'stellls if hanks operOlLJllllS an: allowerl to go llllreglliated, Unbridled competition between l1anks leads them III uJlllpcle wllh cach other to the pOlI1tof collapsl" Bllllwcallsc III' till' dll11l1l1anCe of\VOIII Streel III prmHe Illte1"nal\onallinallce, what COIl1PCll 1I011 , what regulalloll ;lnd what IJ)ternatlOnal arrangements ror ballks bcco111J11g 1I1sol\'elH sh()uld he establisiled becanll' C)ueStiullS iar).!;eI\' \1\ tiw hands or Ihl.' AIlH:rican gm'ernmcnt, III alliancl' with the Bnllsll amhonties, If lhe US goverllment dlOSC not to rcgulate, It became extremel\' dinicult (()I. tlw other Jl\;\!l\ cap\l;\lis\ Slates til m',lln\O\m their regulatllP' fr;1Il1c\\'Olks, II' Iht, LIS cleclded to reg-ulate, other banking aUlhonties woulel follow SUIl, bUI the US could still large'" dictall' the form and scope of reg-ulation, Thus a whole challl reafllOn or eJTects ,\I1e1 pn:~sl1res Oil l1anking systems around thc "'lJrlei was lInieashed by the dCClsions taken in 'Vashing-LoII, l.{'t us I1lenUOI1 some or these cham rCOlcllons, First, thl' LIS Fcderal Rl'snn: (ollld largel\' dictate the !cl'eis or international interest rates through 11100'IIIg US domestIc II1terest rates, It could thus determine the costs 0(' credit 1I11cr1l00lionalh', with clIormollsly po\\'crli.t1 clfects (Ill olh,'r CCOI\OIllll'S, ~\'hl'1\ 1J1lernauonai pn\,.lle credit IS chcap, economic operators \\'Ith access to cheap int!:rnational credit stan pn~lecL<; wInch seem viable 1I\ the currellt conditions, Bill if lIS clCClSI()~l" suddenly makc [rt'elil \'cn' expellSlye, rUlHlamen[i1Il,' sound cl1lcrprises may finei themsel\'es gOlllg bankrupt bccause or a sudden contractIOn of ch<:ap credit. And an IIItcrnational IinatlClal S\'stem dClIlIIIl;lll:d by lhc US lillanclillmarket C;l1l s\\'lJ)g wildh', lJ\'ersllpplnng credit at DIll' mOlllelH anel dramatically [ontracl.mg it at another, To make mailers worse, tIll' tempo or the LIS bllsinl'ss Cycil: is IInpossihle 10 predict \\'1111 an:urac\, ,HId the directIOn or us polio' IS equalh' Impossible to prcdiClI)l'C
or

TIlE [)OI.L\R-\\':\1.1. STREET REl;L\IE

inlernalionaliinaJlnaJ ope:rarors, whethc:r, as III Iht' I 97()s, the~' ;lrc the bigUS lllOne:\'-Cl'ntre cOllll11el"Cial h'lliks or wheLher Lhev :II'C the IIIVeslll\cnt banks or Iwdg-e fllnds of the I 991ls, \Vhell tillS happl~JlS, ellDrllloliS compelitive pressures an: piaCl'ri UpOl1 linanCial operators elsewhcre, and they prt:ssurlse theil' go\,crnments to rcl:tx LllL'll' reg-uialllllls, or lind "'aI's of l'\"ading what rq~lIlaLi()ns eXIst. The cry IS oftcn heard III WashlIlglOlI thai for Lechnologlcal or other reasons rq.{ulauon IS IIllpossible, Blll when IL slIits \Vashlllgloll to IIItrll(IIICl: rq-\,lIlatlOll it has hccll showll to 11:1\'1.' he:l'1l ahlt: to acllle\'e it, with n:markahIe ease, This was shown wllh the so-railed Hasle: Accord of 1988, lavlIlg down ),.{11I(lelilH's 1'01' ll\tenlal1onai hanklng SIIPlTvlslon. Thc Hash' :\n:ord was acillevcd I.hrollgh the LIS governlllellL i()rtlllllg all alliance: wllh l.ondon fi.JI' ;lJoint Anglo-Anwrlcall n:glllalOr v rcgllllc, ThiS was e:IIClllgh to ensure that allothcr OECD g-O\,CrIlllll:nts w(lui£! COIlll' tugethl'l to estalllish ;I COllll)lOn rl'~II11C, The rl'sultlllg rq~tllatorl' reglllle has blTll a 'gellticlllcll\ agrecnH.'llt' skcwcd towards scrnng- LIS I11len.'sts ~incl' II g-ivl's all ballks an IIlcenl1\,l' to prIvilegc tht: huying- or g-ovcrnllll'llt bonds, a presslIlg US Iwe:d, gl\ocn ItS g-o\'(:rnIllCll!'s IIlrlchlcdnc:ss, and a diSlllccnu\'l' to knrl to IIlrillstry, TIllS Accord cienlOllstralnlJllsL ho\\' easy It IS for slalcs to rq~lIlalt' illtlTlI,ltional JinanClallllar),els, on olle condition: thatthc rcgu\;lliol1 IS dOIll' II'llh US support. IH TllIrdl\' and "t'ry IIl1pOrlalltl\', liS g-m'crnlllcllIs discon dunllg thc l.atin Aml'rIcan lI11el'llall!lnai linanClal Crisis OIl the st,ln or thl' 19HOs and it ",as a soil ItHlIl "'lIh rl'all" Illajor l'CIlIHIIllIl' and plllilIcal slgllilicancc, We will rl'tllrn to Ihis expericnCl' lall'!'. :\\ thc sallie III Ill' , th~' US ~ll\'(' .. nmclll
lillka~es will! Ilatlollallillan("lal systems, IJrl'akilll!; c!0\\'1l barners to lill' thickelllllg Ill" linkages with clOllle~llC finallClal S\'SlcIllS, these latter would lend to slip ollt of' Lite cOlllrol of' Ihelr dOll1estic slall'S, III a lTISIS WiLhlll a lIallonai finanCIal S\'Slell\, Ihl' ;\lllerll'all Sl;lll' IIsel!' 1'1)\11(\ open LlH: whole capItalist svslelll dll' stale cOilcerlled 10 IWlIlg rC-ell). pneered in the llHcn'sls Amencan capllalislll,l"

could stl'l:nglhen Its ~late

or

or

1/1/' US ([ /If! G/o/1fI1 Mfl //([W'III/'III JUSL as llle slate plays a ce III ra I role III dOlllestlc Illonclan' al1cl finallCial aIr'llrs, "'llether the dOIlH:SlIC l"eJ,!;ll11e IS Ke\'lll'si;\ll III strllt'lllre or IH.'o-lilwl ai, SO the lllalll slates Of Slale piar a Cl'lllral role ill InLern:ll1ollalnlOlleLary and finanCial amurs . The hlet that Lhese COllllllllal political 1I11l'rVellliol1s III these celltral aspeCls or the ll11erlla110ual eCOll()II1Y lelld nol III rl'~lsl.'r III Illllch u/" the literature 011 IIlterllatlOllal CCIIIIOlllU':S IS the result or ideol, >g'Ical blinkers, alllhe more powerrul 1'01" hemg entrellched in the profi.:sslClnal aGldemic divlsioll o[,lahour bctween polillcal SClellce and t'CtliHIJIIKS. TIlt':-'l' blinkers arc evidcnt III lhose delinlllolls oj" glohalisatioll ",filch slIggest 11 IS a purely tcchno-CC0110llllC force llot olll\' scpanllc froJl1 slat<:-polillcal colltroIs but InimICal lo thel1l . Bu\. these blinkers arc n'mforced also Iw the f;ll"l Lhat sll nl',ll'" parcclkd out between Slates, To pul. 11 lIlildly. political IJlIlIICIlCl' III lhese otll lhe new, posL-Nixon reglllJ(: was that lh~' US was ~till (j\'c\'\"hdlllIJlgh' dOllllnallt bUlllOlll was l10t cO\lsLralned bv rules. The Dollar-\Vall Sireet ReglJol...' ha~ been a hlL Iikc the Brlllsh COl1SlItlIUOIl: til{' c!llIllln,1I1l pm\'l'!' has hn'll abi~ to make lip lhL' rules as H weilL along, The liS could dende lht: doll'lr price and IL could also ha\'(~ lhe dcciding Illllllellu' Oil thl' c\'olvlJlg' dVn
thl' USA tl) the colle[\1\'e gioballlllcre"t? Or -;1 third pm'\ihilily - would the US gO\'l:rlllllCllt steer a tlllddle course, and Sl~t up a rlJllq.~tate board the lllalJ) capitalist states III a more or less large (or small) oligarcIw III whirl\ the liS WOllld c()lllpr()llIl~e /IS lIallollal IIIlerest to SIlIlIC eXlel)l for the colleru\'e g-ood of the olig'archv? The atlSI\'lT IS that the Utllted States ,l!;()\'Crnllwll!. has dOlle Its constiLUlIollal duty, It has pili ;-\nll'f1ca first. Thc whole pU1I1I uf the NixUIlIllO\'C.:S to destro\' the Breltoll Woods system and set up the Dollar-Wall Strect Reg'imc /11({,\ 10 {1ll1 flllll'f/mll jinf, Thcre IS a straightforward test titat Gill bc applied to dl'leClthc dirertioll IJ) whICh US polin' has bCl'1l applied, I-las the lIS sought to cstablish rules .\lld Il\stnllllellts ('or thc cllectln.: public managelllent or lI11crnatlOnal moncv and 1l1lCnl
or

I)

Thcrc IS a VCl"\' sll'ong 11IterllallOnai IlItcrcst III IIllerIlallollallllllllctary slabilil\', YetIIlSIl"ad, Ihe D\YSR has Sl'l"Il Illl' prIlT Ill' lhl' m:lln 11Itl:rll;ll/ollai UIITCllC" dnvcll lip and d01\'1\ III wild SWlllgS wIlhoUI hlstllncal prccedcnt. swing-s lliallllakc C\'CII the I~J:10s look likl' all era of'relatlH' IIH>Ill'l;lry COllIn! Thls l'xtraonlillar" \ui;] tj Ii 1\' has bcell the product of (ldiberate US polin' ;lIld Washlllg-ton s rt,rusal to work towards a stable, rlIie-lJasl'd SYStClll, Puhlic IlIauo-n:g-lIlalloIl of lhl' StippI\' or en'dit \\'1111111 the \,'odd l'CIII1om\' to CIlSlIrc some measure or stabililY: Illstead IlIterllatlOll"lllo",s of. rredit ha\'e S\\'llIIg I\'ildll- rrolll O\'lT-SlIppiv to chaotIC cOlltr:IClIOIl III crcle after q'cle, agalll ovcrwllchllill).!;l\' bccallsl' \,Vaslllllg-ton ha~ Wished mallcrs to bc handlerl III lhls wa\" Public lI\icr()-rq~ulaLl
or

~)

:l)

,I)

or

A Illllll\wr Ill' allth() .. ~ Ilan' slIf!;l!;cstcd that tlte subscflllcllt hlSlof\' of l;S illll'J'l1allonai 1111l11ctal".' and JinanClal polin' has hcell 'holll1d b)' thL' J'lIles of' co-operatll'c oligardw wnh thc rest of the (;7, Bllt the c\'lcil'llcL' \llI' thiS IS extremel" weal;, a~ regard~ thc Ill\ nlL'an till' l;S iL~l'\r has ,H\OpICll a colleglale ;Ipproacll, SOIllL' authors havc p01l1tcd to the supposedlr great ~lgl1ilicallce oJ'tllt: I ~)7H BOIlIl SlIllIllllt as an lI\~tancc oJ' co-operau\'c polin'-makmg,:!'1 It \\,;1', hut 111 thL' rorm or Gennan\''s govcrn IlICIl t agrl'clllg to do most or what the liS gm'el'nmcnt w:tnwel, And whatL'\'er co-operative Splt'lt thcre "';IS III Llle Carter acimllllSl.raUOIl yal1lshed undcr Reagan,:!1 The strollgest claim liJI' colleglalltv III 11Igh monelar" poiillcs concerns th..: Plal',
TI-IE DOI.UR-\\';\1.1. STREET REGltllE

This, thelL Imllgs u~ to a fillal question: if" US polin- o\'cr Illlt'rnational IlHllletan ;lIlCi linallCial affairs has g()\'CI'lIc
TIlt' /JW,l,iN

tiS (/

,')/·IFSII,\'ir/llllllg R"gllll(!

We arc no\\' In a posllioll to II01ice 1111: palll.:rn of 1i.lnrLllll1il1g Ill' the DWSR, The (Iollar IS thl' II1lerllational 11101le\' to ",hlch all other convertihle cllrrcncies arc lillJ;.t:rl Iw exchan~t' rates, The :\Illencan govcrnment chooscs Ilot to sl'ck liXl'cj l'xc:llaJ1~l' ratcs wltll the otller malll cnrrcnnes, Sllllt' thal would rCC]L!!re lh!.' US go\'(:rlllllcIlL to gwe lip II.~ USt' or tilL' (Iolbr pnce as:In IIIStrUllIenl for achie\'lng- olher goals, Thereforc, undcr till' rcgllllL'. thc dollar Jll()H~S 111 g-re:ll gnallons up and down ag'alI1sl the olher ClIITl'nCles, lIlIed\' lranslc'l'Il11llg (hell' trading and other l'\1I'I1'Onllll:IJlS, c\ml WIUlln Ihcse macro-swings there IS conSlanl1l1ICro-\'olatilill', Slalcs and eCOllonl1C 0pcI'alors around Lill' world must stnlclllrill\" adilpl Ihl~lr operations \11 tIllS constant macro- alld nllcnl-I'lllalilitv of the dollar or risk \';II'lOlIS kinds uf domestIc cconOl111C imbalance or criSIS, At IIll' same Ilmc_ Ihe Al11l'I'Ic.\11-doll1tnatecl illlcrnilliollajlinilnCI;tlmarkct ;lIlcllt.~ prI\,atc linancl:li operators IIlllTClClto ;Ill eyer-~reatel' extcntll'llh the II1IernallOllal 11l0llctar\, relations of Ihe dollar systel11, The dollar's c\ol11i1I;\IICt' :\S tilt' IIllel'll;ll\ollai LlIlTCIIC\' IlIcal\.' thai st;ltes build IIJl l'un.·lgn exchange reservcs l11alllil' III dollars, Exchan~e rale lllrbulcllct: l11t:ans thaI states wlshJI1~ 10 Iry to mallllain thc siahilit\, of their own ctIlTCIlc\' nccd I;\r~cl' I'l'SCI'\'es lhall Ilefon', Thcse I'l'st'rves aH~ plan'r.lll1 Ihl.' LIS (in.HILlal Illad:cls (such as US TreaslIn' bunds) bccause tlll'll' liqUldill' I11cam the funds can easily bc wllhdrawn for exchange rate stahilisation purposcs, AI lli(' same lIll1L', \Vall Strcel offers litt' most CIII11PClltI\'C tcrllls for l{m'el'IlllIelllS \\,Ishlllg 10 borrow mllller j'OI' \'anOllS purposl's (including- dcfcnding

Til E (;J ,( )1\:\I.IS:UIl IN (::\\II\U:

their CIlITl'IlClCS) and it offers I!t:\\' IIlSI.I'IIIIICIIIS so lhal. !4O\'erllllll'llts alld l'COI\I lillie lI\>l'i',llurs Gill lackle probll'lll~ "f CXCh
or

or

cnses, As 11ll' Wall Slt'eel eCOIlOII1ISl Helin' [.;,aul"man POIIIlS 01lt, national linallC\.r1 cnst's han.' e!l"Il' repealedl\' troubll' ahroac!, the b'lil-ollt IS p:II<1 I'or IlOI I)\' tht' .-\llleJ'lcan laxlhe \Jurro\\,lllg- C. the SI;I\t' Cllllct'l'Iwd III list l'xport 111111 Ihe ((ollar arl'a to lind Ihe rl'sollrt'('S lil!' dl'hl St.T\KIllg', ThiS I'urther strcngthl'lIs Ihe cl'llIralily Ill' till.' doll,,!'. Tlmdly, Ihl' I'ls!;s EKed lw liS lillOlnnal llpn;ll(]\'s are \1'Hich' ('(1\'('J'ed hI' Ih ... IillF, ('lIahlillg thellJ 10 rl'!lIrll \IJ IIIlerllalIPl1al ;ICtl\'lt\' IllO!"\.' ;r~!;n'ssl\'l'k th;1Il evcr. Filially, the \\,l";tl~l'lIl11~ or lile Slates ur tilt: Somh strl'lIgIlll'ns Ihe hOlrgallllllg' power or tIll' Wall Slrl'l'l credil 1l1stllllilons III ;1111; lil!'t'lg·1l t'XCh:lIlg'l' reservl's: il was the CliITelll'\' III wlllch 7(i,H ptT relll or all IlIll'rllatlOIlOlI b;lI1k loalls were dl'IHlIllIlIa!l'CI. III which :l!J.!j per (,l'1I1 or alllllll'rll:ltiollal hOlld issues \I'l're

or

TI-IE (;1 _011 ..\1 .IS.-\T!O!'i

C'-\~III1.E

dcnOllllllatecl, aml.J.-I.:i pcr cent Dfal! ElII"OClIITCI1C\' cicposlts: the dollar alsl) served as tile 1\l\'lllcmg ClIrrCIln' 1'01' ·li,l) pCI' CCllt Dr world trac\e and W,IS one oj' thc Iwo Oll'l'enCICS III H:-; pcr ccnt or all 1()rcl~n ex('l!allge trans,lcliOI1S, Ane! il' IIltra-European transactlOlls were elilllll1atecl frOill tlll's(' ligures, Ille dollar's dOll1l11ance on:r all other transactions III the GlICI-{LlI'ICS ..,1' hstec\ ahove bccoml's ovcrwhclllllng-, - , ~

n", i)\-\-'SI? 11m/IIII'

CIJI1l 11'1I iI!JllfI (

Nollflll o/,U/'g'lll/l's

The nouon thallhere arc regimes 111 international reiauons was lirst pllt 1'111'warcl III the 19iOs bv Rohen Keohane and.loseph Nyc.:!' ;111(1 was g-I\'en IlS classIC dc:lilHlIoll b\' Stephen Kramer 111 19H:t:!K Krasncr eidilll'd reglllll'S as 'pnllClplt:s, ltorms, rllies alld deCIS(()n-ll1ai;.lJl~ procecilln:!'o .Irollnd \\'ll1ch aClOr expeclallons cOl1verge III Ll gl\'en isslle an:a', ThiS concept has become extremel\' mlluelltial III the analYSIS or international reiauol1s ;lI1el III the rllnCll()nlJl~ or multi-lateral or~aI1lSallons. Th<.' notion or re~lIne which IS used here overiaps In some respects with Kr;\sller\ notion iJlll difICrs from it III ccrtall1 fundamcntal respects. The D\VSR is a reglllle III Krasner's sellse III three I·espects. First, It c()rresponcls to the Idea lhal IIllerll;lllolla1 rc1al.lons do not consist simpl\' or states lI11eraclIng with each other In all anarcllic VOId along-side eCOIlOlIllC operators II1teracllng- \\'Ith each olher as atoms III :I wodd markct. There an." paul'I'llccl, structureri regimes ~(l\'erllmg thl'SC lllleractlOlls, The DWSR IS;1 rcgllllL' In thiS sense of an IIlterniltlonal lIleCilalllSm WhICh ,~trllU\lreS ,111(( piltterns IIlleractions. Secondly, the DWSR corresponds to the Iclea ImpliCit in Krasner's nOtion, that the slales pal'liCiPatin~ III these reg-lines ((0 so becausc the\' !ind illll their IIlterest to co-operate III the regJlllc. ThiS IS trlle also of Ihe DWSR. ThlHlIy, Krasner IS preparcci to accept that one slatc, thl: clominant state, IS often the deCISIVC and even unilateral actor III establishing'the regime: it is not to be imagined that It IS established consellsllalh' or III a COIIe~lilll~lShlOlI, ThiS IInpo~e(1 character of a re~lIl1e Gill appl\' also \0 the DWSR. Bllt hcn: thl' agreement enels, Krasner COIlCel\'eS of hiS rq.~lIl1cs as bClIIg qllasi-h:~ai in ci1araclCl', States havl'. III hiS new, come to adopt ,I sel orrlllc:-. or 1l0rll1s or pnnciples or a lixecl set or collective decislOn-llIakill~ procl'dun's. \<:1 ciollar dOllllllance alld the g()\'ernin~ or internatiollal nllTCIlCl' prices bv tile dollar exchange r;lle IS nol it quasI-legal norm or rule: Il IS ojilrl which rq~ularly rcproduces iL~c1r. All statcs thai moun laill all\' degree of cllrrenc\' convertibility partin/mil' III 1111.1);11'1: the price or their ClIlTenC\' will he lixed, direc'Ll)' or indirectly, in reial10ll to the dollar, 'states do have the 0Plloll of eXll from the regime: the\' call make their clllTenCy IIlcolI\'crtihh::, Blil il' tllt.:\·
lltl' 1I'0ricl l'COIlOI11V, And lhl' 1:ICl thal slatl's do parllclpale ill the regIme dDl'S not lIHlicatl' tll~\l lhe\" lind It bellclinal: It slmpl\' IIldkall"S tllal tlley lack I Ill' POI\'!.'I' III do allvlilmg abpUllt, The sallie applies to the other poll' 01' Ihe: regulle: tile AIIHTIGItI JinOlncial marke:!. Slaies and economic opl'ratnrs rio not ha\'e: 10 partIcipate III lhis market. The\' can aVOId placing Ille:lr reserves tlle:re:, Lhc)' can ,l\'Old borl'O\\,llIg thnt', bUL 111 prarltcc illS almost impnssibie I'DI' the:lll to avoId be:lIlg drawil III bl'l'aust' of thell' need for linance: for lhelr economIc acLiI'iLies as a whole. ,-\lId if Liw\' lIeed lo IJOIT()\\' frolll abroad. the most eCIl as the Il\Olll'lan and [inannOll framework Elcing states III theIr attempts to cOllie to grtpS \\'nh a vas I. rallge of issue areas III 111lernatlOnai and domestic polilics and eCl)lHlllllCS, AlHllile atlemptLO coniine re:gllllt'S to 'issue areas' chops realit\' lip in trll'lalis11lg ways: there IS n\J eqUivalence: ()r kllld between all IIlterllallonallegal regime ('or e:nsunng aIr safetv anei a framework rq.\"lllle like the D\VSR. A furtber problem lies 111 the fact that reglmc lheonsts will tend 10 treaL lIISlItlluOIlS like the IMFj\VB as Krasllcr-type regImes, di\'OITlng thelll rrom lhe palll"rtll'ci rq-\"ulanlics of t hc DWSR III whIch they operatl~ and which gIves llIL'alllllg [() the dVllallllcs or t Ill' I r-.I F/WB 's aCll\"1\1l'S, "-\ncl ;1 Ii 11;11 prohil'111 II'HII Ihe ].i.,raslIc)' cidi III lill 11 of reglllle:s IS thatH prl'SlIppOSl'S a se:p;lratiOIi betwel'n reglllles Oil llll' one SIde and hoth stales and lIlarkl'!.~. Yi:t the DWSR IIIdUfles as integral pans of its strllctures both stales and markets,

N,,/(',\

I, Th .. crlSI~ "I" Ihl' Bn'lIoll Woods S\'SI,'III III III<' lal" J~ltiOs alld l'arl\' l\liOs IS II..!I con'reel III Erlll"'1 IIlalll]e1, /),.,./i,,,' "I III/' /)(JJ/tI"'(~lllllad I'rl'SS, I~J~J:\) 011111. ('ruill all lIr1hllclllX pllllli "r IWII', Ill" .1"1011 "'illiamsoll, Th,'/';,ill/,,' ,,/11;11'" ,I/"I/>'ifll)' U,jllrm. I ~Ji 1-19i·1 (!'ids"", I !17i), :!, Sl"" .I"hll \\'illialllslIlI. nu' I';,il/lll' IIf 1""·"I1I/IIIII/II/,I/(JII ..I,,,.\" U,p".m, I (Ii I-i·' (:\l'I"II1, r~li7l, I' :Ii :1, S,',· T.. , /1;111, ()/'rc. T/,,./III/1I,''\/,,,r" ,I. S,·," A, .\, KlIllu!'! alld S, ~\;'"'III'. "Thl' 1'lllillr:oI [('001100111\' or \Iiddl .. Ea,'II"1'II (IiI'. III (:" R. D, l'lIllt"rl,ill :'lId R" SllIhbs. /'u/iliml h"",,/I'\' 11111/ /1,,' CIIIIII!!'I"!!' (;1"/,,,1 (htf,.,. (~I:ll'IlIillall. I ~1!1·1)" :J. S,," \'. H, 0PP"IIIIl'IIIl, '\I'h)" ()il I'l'Ir", (:00 L'p~ TIl<' l'a'l: WI' l'uslH'd Thnn • For"I!!,1I f',,f,,,., :!;, (\\'illll'r I~li(;"ii), Oppelllll'IIII dl':\\,'S "POll NixolI'.- ..\mlla,sad"r III S,lIl1li .-\rahia, "\kill, (i,1' 1,,'1' ""I~hl 11110 II,.. :lllllllllls[ralH>1I , Ihillkin~. Ii. Sl'l' Em' !-I ell," III "I', 'Exl'l:lIllIlIf.: Ih" Cloohali/alloll "r 1'ill:III<:I:l1 ~larkc'I': IInllf.:'"f.: Slales lIacl; In , 1117'/,7/' "r'III"/'II1I1Ill/IIIII'u/iliml FnlllllWr, ~:~ (Spnll~ I~I~':". Tilis arllcl," alld others hI" 1-I,'II"IIIl'r :In' l's"'lIlIal n'adiu).: UII IItl' l'\'C,llIlioll of lillalll'lal III a 1'1:l' I.' Ihll'llll' IItI' la.'1 quarter

IIf a fl'HIUr\',

i. s,"" IIlal'garl'l Ill- Vries, \lllll,"I:II'\" F,,"d" I~Jl'\:,)"

"n".

1lll"I'Irrllrrllltd

,\/"",./,,1')' FilI/(I

1972-78, li,l.

i

(h'II'l'IlallcHlal

'I'll F. (;1.( )I\;\I.IS;\T1( )N (;\1\1111.1-: H. TI"s d"'''I''II. pushed IhrulI~h hI' H,m,leI \\'iboll III I~):'(J wll,'11 11<" lI'a' 1'"·,,,1<-111 or Iii,' IJf "I, ;1Ilt- ID rlal' :\111("(" gon"flIlIU"IIi. \\";a~ \uII1'1ohll'llly \\"jJ,ul1" u'~~lur nJillrilJlllltHI III Ih.· hislu..,. "III,.. ",urld ,11111 ;1111 ... ·" III II,,· ,"h~.. '1I1.·111 ,·\,,,11"11'1\ "I' Ilnllsh ";I)III:lli'III, !l. I'alll \'"Id,,'" lal ..... 'lI·"II,,\\'I,·.lg,·1I 1),,\1 IIIl' n'nrli"g "I' )wll'IlC)"lIa ..s hI' II,,· liS balll" ",;t" iU:C:OIf)J>ilJllt~d hy a n:rt~1111 ;111)011111 t.r c11l'l'rleadillg h~' lilt, L'ullecl Stales gun'raHtH'HI', SCl' (;"I'IIIJII SIIIII h allli Foh II Cllddi nglllll (Lolls), IlIlrI'IIf/lIil/IfI/ OdJ/ t/ lid Ih,' lin"'/"I"".!!: (.'11111111'1," (W"delll'"ll., I\)I'G), '1'1,,· \\'''I'd 'dll'l'rI .."dillg' is;I l'l'l'l1<:III1SI11 1,,1' \\':islli"gl"", '\l'lIn' wk. \(1. s,',· 1'''1''1'''11, \\,h .. pO'"I' IlIH Ihal 1\lill liS gm' .. rlllll'·"1 d",',,;ol1 \\"'111 1"'",,1.1 ,,'hal ;uw of ,Ill' (IS ball];'s thl·IIl~".. h·l" li;1.d a.,k .. ~d ["or. (;m1nJlIIlJ! tI,,· (;/u/mll',:nJlwnl\'; JIII,"'''t/tlll/lftl ,,1111 rh,' ShO,' (Han"'1'C1 lllll\-.· .. 'II\-I'ress. 1~)~)·II. II. S.. 'c,.' l~;llbll'JD. (;m ttT'II"J: IIJ,' (;/Ilha! '·:"ollum.\', 1~, 1,1t·lh'III,'''. 'Explallllllg lilt' (;I"h,Lli/ .• IlO" or Fill,",na1 ~larkt·" ' 1:1, Thi, d",'s HIli 111<"111 Ihal lilt' l'S ('ollllll"ITIal hallk, han' h""11 Ih .. h'\.:V;'·'1 11111'\'11"1""':11 hallks. I'llI' IIllldl "I' Ih .. lll'nlld Ih,' ./ap'llll·S'· hallks '"111 S,JlII,' 01 Illl' Ellrol"';!11 h,IIlb h,,\'(' hel'1I hiV;gl'r. III .. 11Il' 1I11)/1l')' IIlar);"" lIr .. lill'l' ""lIlres 0111'111<- ;>';1'11' YlIl'k alii I 1.olldllll 11 a"" h""11 milch smaller allli Ill" ;\III"rlCall 11I\'('SIII1<'1II hall"s hOI\'<' plal'l'd all IIIIT"aSlllgll' dOli'" lIalll roll' III Jll'lIl'iciillg cii"lIls \\,1111 ;\tT,," 10 IllesI' I'"ols "I' lillalln', 1·1. Tl\(:~l' alld ,,(her ad\'~IIH:ll""':-' d"'n\'Ju~ ("null pOSSl· ... "H II I 11(" lile dlllHlllOllL1 rlIlTl'IH"\" ~In,: kl1()\\,u. Il·l·hl~II-"ll~'. a~ M'JgUIIH'~~l" Fit I ;1 ;:lassl{' di.'"ll"llSSltJll. :-.IT SII ...,;UI Strall~l· • ."/n/rug Ifllfl /l'lli,1I I',,/i,-:>- OIL d"lIar SI'lgl1lurag" afln Ill" c1"sll'lInillll .. r Ilrclloll Wllods, sc ... I'i"r 1:;"'1,, I'ad .. all, ,(",'I'"lilis'lll F,.,J/IItUlY "I """/'1/(/1,,,//,,1 Fil/(II/I'/" 1 1III/flhilill' «(;1'<10111 Hl'hll, I \IHlil, I:" S,'.· ./"1 r\' (:",Ll.I,,1' 1.:IIII'<·III'l' I brns. n", (:II\, It/, (,i'/";"/ r 111;.<'1,\\,,,11, I ~11':ll, Iii, S,·,· FI'll' 11,,1I""lel'. "1'1 ... (;h;Llh'II~" from IIIl' LI,I: .I"P"" , Fill;""",,1 Ri,,' ,lIId III<' (:hanglllJ.,; (;\ .. \),11 On"'l' i" 1'. (;. t;..,.II\' klL), Fillllllt',' 111111 IliuM 1',.lilil'.l: '\/1,,/;1'11. /I,gllll'" '''u/ SIIl/",1 1// l"t'I'''\I·Ht~I'mlll'''' Je", (I-:d\\';lr" Elgar. I\H),l). 1/, Th" so-call,·" lias'" I :11111111111"" or Ill .. BIS dre\\' lip a '[,,"conlal' amung n'llIral hall];' III 1l,· ...·mll.·1' 1!li:, ",hidl \\'as n,,'!S,·e! ill 1!'H:1 alld a~"11i III 1\"". It \\':lS a g"III"'III""', "gn"'111<'111, wilit II E,il .. d 10 "'I"hlish 1'1 .. ·i.-ndcr-"I:lasl-n·sllrl "·'p'lI"ihilillt". "'P"1'\''''''" .. r HU~lnl

,II"

Fi,;,"I",·

,""i

,,1'1,'

hauls (In'r~l";I' ~llhsJ(liarl('!'. :lIul

;ag,,·nul'''. n·:-, .. ·rn·

rei)1tIl'('IIU.'Uh

iliUI Ult';lsun: .... I(,r nHnh:lIl1l~

1'1''' lid , IH. For I'Ill'1h.·1' d,·lails .. r Ih,- I\aslt- ;\""111'11. ".,. ""I',h'llI, (;" ....1'11111:<11,,· (;/"1,,,1 /':"'111""", 1\1. ()II lh,' ""lIlrali(), "llill,IIII'1,,1 rlJr Sial<- !l"ll""" ,,',' .I..rrr,,\' \\,illl'·I'. '1'0\\'1'1' ,,,"I Ihl' <:,,"11.,,1 "I' (;:11'11:11'. Ili"M /',,/illn, ,IIi (Winlcr I~I!I,II. S'T abo S)'I\'Ia :'I1;lxiil'ld, /;"""1'/1111": 1.'''/",1/1: I"','1'1""""w/ Fi {/tI',t',' Will ,\I<'I'1I't1ll 1',,/illf,1 ( ;u,., "'11 1'1I11'J' 1',_1\1' 1'1'1'''' 1')1)(1 I; 'lilt! .l""g"'" \\'uo. Hun"'1 ti,,. .\'u"j/: Slai,' alit! Fillflll."/,, A'on'tllI JIlt/IIUI"lflli.\utlOlI ({:uillillhi.. Llllln. ·rsll~· I'n'~"', I !I~II ) , !!(). Richard ;>.;. Coupe ... Rohert PUlliam, Barn' Ei"hellgn','n. C. Ralldall (h'IlIlIIl~~ ;,,1<1 (~t'rald Ilolth;Ull. Call :ValltJJI.\ .'\g''t'('! }\.\II('.\ IJlI,'J"II(I(Il",al (:(J,fI/"'lUiIOIl (TI14.· I\rn(Jkil1~' 111,111111\(',1. 1~IKq). ~1. Sl'(" l~.dh·ft n. {lulu.lIn ;lIld Nj("h,~Lt!"l 1\ .. \'1)(:. flulI;:,,,.!.! ·/i'.!.!,dhl'J: '/'ltl' ,\(1't,,,·/Ju.,·,·,. SIIWIIU/' (I''''II\''lIIallll. I~IH·II, '1'1\\,,' arv;m' .11,11 Ih .. '111111111" '\l'n' "",fill. h," lIlak,' 11(1 d:lllll rur rIO'

",,,.'11\,

II'

Opt'r;lIlolJ 011 IlIh'fll:llllJllal IIlOII('I~lr\' p. )Ii,,\".

~~. I.

:\1. Ik,der and (:, Ram"'" 1-1"11111111-:. /)1I11",'I'lIlilln: /,',w!uUlg' 1!1I/,"'o/iI1"""'/""": ,,, Ih,' SI,"," (llIslIlIlI,'li,r !t1l"I'II:IIII'":l1 E\'l'II()nll.'s_I~IH'I). ~:\. SlOt' ;\llIln'\\' Wall,'r, \I'"r/d I'm.... ,. I \filM ,1/11111'1' (Han'<"I"r "'Iwalsh .. a!. I'I~I:I), !!.1. I,!... II 1'1' Kallfmall. '1'I111(\:lIl1l'lIlal 1'''''''''IlIS Gllidillg FlIIlIr<' Fill:llll'lal R"glll:11I1l1i address III Ill<' 1111"1'11:111011,,1 Ol'gamS:III1HI or S(,Clirilies (:OIlIlIlIS"OIlS. I.olld,,", ~7 Onoh"r I ~I~I!!, ell.'11 ill PS("III , (;",',·,.,/llIg Ih,' (;to/."//·:""""111". :!;I. S,'" ~1"lhlll S. "hall al\
""rI

"a

:?I 0 .. 1(1)('1' 1!1~)i, :!7. S,·,· R. ).;.·"hall" alld,!. Nrl', /'m,II" tllU/ /nl,.,.r/"lwl/(l"/If<' (LillI.-. IIHlII'Ii &: Co .. ('liiL ~H. S. n. 1\.-;hIH.'r. illit'l'lJrttlmra/ U"?''1mro, ({:4 _fnl'1I l'UIVlTSlL\' 1' .... :-. .... 19~:~'.

================4================

The Evolution of the DWSR fr01TI the 1970s to the 1990s

The US Policy for the Evolution of the DWSR rrom Nixon to 1993 :\rter Nixoll till' stor\, (,f US adnUlllstratHlils alld the nWSR IS a Illl~t\lrl' or l\l'U strallds: lirst, allextr;u)nlillan' s{'ril's orgalllhies both with lhe dollar alld with lI11erllalloll;il pri'-,It<' lillallee. III hoth cases e~ph'J\lIIg,the reg-lIul': ;uHI sl'('oJld. a gro\\,lIlg helier ill lhe cl'lItral illlportanCe or the nWSR lill' LIS illlel'llatiOllal IIIterests alld attl'lllpts to deepell thl' D',,"SR ami radicalise It. Thest' two thelllcs hoth ill\'Ol\'l'rl;t1l approadl or -,\Il\('n('a lirst . but there was 110 COIlSIStellt 1Il;ISter plall \llltil the 1~)!J()s ;11\(( thl' (:Iintoll adlllllllslraLlol1. RatlH:'r, a str;lleglc \'ll'I\' <,1' t ht' l'l'glllll' S rule III a liS II;! lJ< 'Ilal str;l\q,'Y ~'llll.'I,!-~l'd gr;u,luall\', "hell III the Illidsl (II' crises callsl'd I)\' earlier galllbies gOlllg \\'rOllg, :\t l"'l'I'I.' stage, AIlll'I'IGIII arilllllllstraLIOlls Illallilgl'd Illl'Xpel the ('(,sts "I' these blundcrs Olllwards Oil to others and thro\\' IhcIlISl'l\'l'S 11110 Ilell' lacues \\'lllCIt ilad the dli:Cl of deLvelllllg' lhe n:glllle, ()III~' III lhe I ~)!J[)s, alld cspl.'t'laJ]\' IIl1dn the Clilltoll acllllllllstraLl<1I1. did a COllsenSliS Sl'l'llI to elllerge \\,1111111 the ,\merican Clpl(alisL rlass that IlIal'hl: at last lht'\' had disl'ol'lTcci a Illasler plan, comprchellSI\T III scupe aud \\'Ith all the t;l('lll'al illSIl'lllllelllS lil/'Ils UltllIlatI.' clIlllplell' ,O;lllTess. Bllt Ihls too, III tilt' fill'lll plIrslled hI' Ihe ClilltOl1 ;ldllllll .... traIJOn. JlI;I\' also (111'11 \lIIL to he ;lJlolher blullderlng galllhk-. Earll pll;ISL' or tillS slor\' does not end with Iht' world hack ",helT II SI;trtcd. Inslead il IS marked IJI' a COl\stant l'\'(lllIlHlIl nl'tlll' inlllT ioglC ofa nWSR L'xploilt'd III AllIlTICl11 III Ien.:sts. Thl' (:;ll'Icr arllllllllstraliOl1 \\'as atll'IIII)(III)1; III IISt';1 [Il\\' dollar to 1I1;lIlIlalll SOI11l' sort of gro\\,lh ,tralq.,'), n'lIll'ed 011 thl' lIulllstnal ~L'l lUr alld Oil IraclitlOll;ti quasl-l,enll'slall tl'Chlllfllll'S, Ikl\\'l'l.'tl 197:-> aile( I !)7~) the dollar 10Sl on... a qllarter 01' ils ,';11111.' ;lgall1~1 11ll' "L'II ;llld lhl' mark ;IS Ihl' ;Icllllllllst.rauoll sllIlgIll til hoost IIUIPIlI alld l'~pllrl.~ of lhe LIS m
40

THE

(a.un:\US:\TI()~

C:\t\II\I.E

l'vlalters changed oni\' with the Reag-all admlllistralion. The shirt III doll .. r polin' had beg-un before Reagall's eieclioll. \'\'orncd that the dollar s rail might slip Olll of control and worried about rismg inflation comhllwd with mdllslrial overcapacity, Federal Reserve Chalrmall Voicker made his EUl1o\ls tUl'n,Jacking lip IIlterest raIl'S, SWl11glllg towards a strong dollar and a drl\'(' 10 resLOre 11100\(:Y\ role as a stable stanclard orvalue (ratill:r lhall.lllsi as an mllallonary means of nrclllatlOll). These steps wcre taken much further Iw liw Reagan adl11l1l1slration. The central fealllres of the Reaganlle turn III matters of political CCOIlOIll\' were tworold: first, to put money-capital in lhe polic\' saddle ror the lirsl lime in decades; and secoll{llv to extend and exploit the DWSR III the IIlterests of Amenca First. PULLmg Il1oneY-Glpilai 111 lhe saddle 111\'oln;d squeCllllg out lIl11ation (Which eroded royalties on money-capital), taking steps to (kreguJate the banklllg and financial sector. offering IllIge tax Cllts ror tilL' nch which always boost the finanCial sector and renUer aClivllv and pursuing a high dollar policy. Indllstriai growth would he driven prinCIpally bv a great expansion of the derence budg-Cl, running an expanding- budge! deficll and SLIcking III capitai from abn)ad. ThiS aspect or policy !;ssenllallv mealll lhat the US stale was acting as a surrogate export market for the II1dustnal sector. The new domillance or 1l10Ilc\'-capllai and tile anti-inllatlon dI'J\'e was essenuallyan II1Cenl!\'c to cmplovers of capital to begl11 an assault Oil till' power, rights and seCUl'lt)' of their workers to l·cSlOre profitability. Bul Reagan's team also begall to seek to decpen the DWSR, I11lliall\' as a pragmatic set or sollllions to discrete problems. Thus, maml
{:t'lltral European debt cnses of the earh' 19HOs, Volcker did not raise IIItlTest r,lIes and suppurt a 111gh dollar ill order to produce this cnsis. It II early produceci a collapse In the LIS bankll1g- system, but in the course of mallagIIIg the cnSIS, the Reag-anites, who II'tTl' \'ery IIltl'lTsted III hrll1g-lIlg Third \\'orld capllalisllls to hed, learned SOliI{' n:ry (J0werhillessuns, The~' learued an old truth frolll the days of European llupcrialism: the llupcnal power ('ollid take acll',lIltagl' of a cOllnlJ-y's debt ensls to rC()1'J,~,II1Jse its II1ternal SOCIal reialHllIs of' produClHHl III sllch .1 wav as to ElI'our the penetration of liS own capitals into that coun trv, Thus started the use of the D\VSR to opel\ coulltnes' domestic finanCIal regll1l1:s and domestic product markets to ;\nWI'lCOIIl (lpl'rawrs, The secollCl lesson, learnl 1)1' AIllt'l'Ican finanCIal operalors, was that the kinds of long or mediUIll-term syndicated bank loans used IiII' rl'c\'c1illg the petrodollars was too ng-id SIIICe it locked the funds of these hanks tip III the btl'S or thl' bOlT01\'lng COllIlll'lt'S, Thl'l'eiill'l' the\' Slllight \.() shirt towards Illuch safer operations WillI II1terest-beal'lng- capital: lending thwugh honds !i'om which the)' could withdr,lIl' lw tradill~ them on the sccurioes m'lrkels. They also learnt that the\' couid g-CI cI'Isis-ncirlen target CllllIlIl'!l'S to build dOI11t:sllc stock markCL<; and could start til pia\' thest' as " profilahle wal' to earll royailles, But these KlIlcls or operations would require rt'IllDvlIlg the cCll1lrols on Ihe Glpnal accounts or such counlries, Yet anothl'l' rundamelltal ksson from the L"tll1 Amencan ensls was a IT!'\' Important paradox: financial cnsls ill a COUll try 0(' the SOlllh could aClllally boost Wall Stn'l't thrllllg-h capHill l1i~hL. \Vhen a finanCIal cnsls hll a coulltry, lilrl,{l' ('unds would flee not onl" that cOlmtr\, Inll OUlel'S rearlllf{ contagloll and the funds would Ike to tile Anglu-Amencan linannalllexus, hoosl1n~ liqUIdity. iowel'! ng II1terl'st ra tl'S and ha\'lng a generally IwalLl1\' 1111 pac\. And tht' ('illal, and III sOllie wal's most Important lesson was that the \i\,IF/\VB liTre lIot, aner all, a waste or time I'llI' Amencan capllalism, With the establishment of the DWSR, the 11\,11' was elbowed Ollt or the way \w Ihe Ll.S Treaslln' ami Ille US /inancra; market.<; and seemed headed 1(1(' histon<~ proverlllal dusthlll. Reagan C
TilE C;l,()JI .. \I.lS.,\TlC)N

(;'-\~IHI.E

defellrling- llit' IlIlegnl\' or lht' III1l'rll;tllollal finanCial S\'Slt'lIl. llll' 11\1[-" "·;\S ddelldillg a SVSlt'1ll of liS expioll"llllll or the DWSR, Secolld, hy n'SlruclllrIIlg dOIllt'SIll" I'C()nOlllll'~ to 1'1I;lhll' lhelll 1Il pal' oil Ihl'lr dehls. llll' \VB \'·;IS aClaptlllg-thelll lO the sallie liS-centred illlernatIollal system: lhl' l1l'CeSSIl.lt'S or ilS struclure pushed lhelll lowards domestic deflaLlOlI. l'IIITl'J\C\' clt','alualiolt and an export clnn' along wilh IIIcasures 10 ease IJlldgel delinls alld earn foreign ClllTcnlT 11\1 till' t';lpllal accounl by pnyallslng \\'Ilh Iht' help III foreign capilal and allraCllllg IIlwarcl noli's harcl-clIITelHT fUllds throug'll liberalismg- IhL' capllal accoulIl, Thus did US rcllliers gel lheir (khlS paid. U~ 1J){IUslry gOI cheaper IlIIp.,rh or the IIlPUlS IIlTdt'cl for proclll('{IIJII, lIS l'IJlllpalll("S clluid hll\' tip ;\ssels IIlclmling prt\'ausecl Ulilitles III till' cOlllllr\' clIIIU'nll'd, alld lhL' capuai accoullt wlluld be liill'raliscd so lhal local S\IlC~ IIIMkl'ts could he plan'(\. ,-\IIc\ lhe whole wslc'lll couie! Iw mack t'\'l'l\ IIwn' rule-based by the EtCI lhat llcoclasslcal eCOllOllllCS supplies liS wllh hundreds or rules and Ilorms alld allllost all of lhem are Ilewr qUlle Ilperallllg 111 any cOUlll)'\' at all\' 111llt', Su the 1j\'IF and WB could slllIph' pICK and choose wlllrIlC\'er aspect ora dOilleslic eCOIIOIlI\' [he\'wanled lo COllcenlrall' challge upon and could aiwavs point to SOIllC rule or norm of l\('orIassical CCOIHllllics lhal was lIot helll)!; mel! .Just as Ihe Nixon-Ford-( :arLt'r phase left a hang-m'er I'DI' lhl' RI';Ig-alliles, so the Reagan pcrtod lel't a hang-on:r for Bush: thIS 1II1ll' the hugl' doubk dC/iulS Oil lhe balance III' p;l\'lIlell\s ;\Ild lhe ddicll and Ill) 1l\\)Ilt'\' III IIH' klll\' 1'01' exe\'llllg- inlluence oYer lhl' So\wl Bloc reglllll ;I.,> II collapsed, ,'sJwo Clalk hc:cause Ill' the dOllleSl1C spentlau\'c blow-OUI III the hllusillg Sl'Clor (If tht: lillanCial syslelll, ilul tIll' diakcllo 01 pnl!!;H'SS Lhrou).!,h hlulHkL'lllg )!;.llllhks cOllllllued 10 work slnCl' lhe deht cnsls had produced a deq'!opllIenL or lhe DWSR which could he explOited by the US 10 o\'crCOllll' IlS lI'l.'aknesses III IlS efrons to dnmlliaic de\'clopmellls III RUSSl,l alld Eastern Europe, The Il'vlF-World Ball\;. Strul'ltlral ACUIISllllcl1t ,~ub-s\'ste\ll could he illlposerlupoll Lhe reglOll with Lhe dalill Lhat IL was the lIew global c!e\'cIOpml'lll paradigm ;ind lIol an ad hoc dC\,lcc 1(11' ser\'ing ll.s IIIll'rCSlS III thl' l.:\lIll :\lIlericlIl criSIS, Bush showed great si~ilI ill persuadillg- the \Vest EUI'OPC;llIS tf) knuckle IInder LO IMF (US TreaslIr\') lcaders/llp oyer Lhe tl'allsilioll III lhL' East. alld Ihe result was 10 perpeilialt' ,\IIeI sll'l:ngllicll the rcach Ilr Ihe DWSR, gl\'lllg gn:al sl'l>pe lor US lin;\IInal 0pt'r;\lors II) lillk lip with tIn' t'X-lIllllll'lIkLlllir;ls Oflhc regllHI III orgll..'s ol'spl'culau\'c, corrupl and eXlrellll'i\, prolil;liJil' \'(:11lures. through pnr
or

or

S!tII\',CSPl'CIOllh' )..\1\'CIl tlw ran Ih,lI thl' Cort:lIlL roll.' fir the IMF as a pllblic authority IiII' lII'lIl;\~IIlg- Ihe erIi:ns of the regllne Oil CUllJllrtl'S or the Smith alld former E
ur

or

II

The Respollses of Political EeOIl()JllICS to the DWSR

Lip tOIlO\\' we lta\'l'l.'UIICt'lllrall'rl olll\' lIpOIl Ihl' rok oJ'Ihe L'S ill Ihl' f)\VSR. Bill we 11IlISI hndh' SIIITe\' III,' I'CSP(HISl'~ III' (/Il' oilier 111<1111 UHIIPOII('IIIS 01' thl' world l'COIIOII\\' 1<1 IIIIS SYstl.'lll SII1Cl' liS lallllClt ill tlte 1~)7(Js, DlIrtllg the post-war (>l'rtll(l, llll' ('lire 11(' Ihl' \I'orld l'l'OIlOIl\\' was lIla(k lip 01'.1 (;l'I'lllan-{'elltrl'd Western F.lll'llPl' ;lIld.lapall, "Iollg- IhLlI :-JOrlh ,\Illl.'IK'1. The l'e\,I\',11 ur the capilalisms at the 1\1'0 opposile ellds EuraSia had ['01lowed \'l'P' dilTlTell1 pall('),lls rrOlll Ihe :lIlgll' or IIltern;!llllllal p"lilJcal en II WillY, t:erm;lIl\' 's rC\'I\'al was hili It 11f)( III till' de\'l'loplIll'llI or decpelllng-

or

+1

')"I·IE (;(.Olt\I.1S.. \T10N (;:\i\IIll.E

regIOnal links WIlh1l1 Western Europe. Japan's ren\'al took placc largel\' 11\ isolation and throug-h c1ccpcnillg lin!;;s wllh lirst the American and thcll a\so with thc VVcst Europl'an markets. Thus Ihc l110\'C lowards the Dollar-Wall Street system III the 1970s had vcr)' dirrcren t impacts upon thcse two nonAmencan CClltrcs, as we shall sec. NCllhcr thc ica(krs oj' Gcrman capJl;i1isl11 nor thosc olJapan welcolllcd or appro\'cd of ellhcr thc maug-uralJoll or the c\'olution 0[' the DWSR nul' lIr L11C v"nous W4\VS In which till' US has sOIlg-h t 10 cxplOltl\. On thc olher hand. 111 both rcgiolls Ihe D'VSR has 11a(llls supporters and c\'el1 enthUSiasts, especially. or coursc, 111 COUl1tnes Iikc Britalll and Holland with powcrl'ullinancml sectors anc! amongst those most cioselv Illvolvcd With pnv;ttc intcrn
Both Westcrn Ellrope and Japan wcrc, or course, cxtremel" hostile to ami WOITICd hy the IIlternatllJllal mOl1ewry chaos Ill:lugnrated b\' the D\VSR IIJ the early 1970s, The West European responses de\'ciopcd along li.llIr axcs. r-irst a dclcnslvc response to the reglllle 111 the monetary field by building a new regIOnal monctary regimc 111 \,Vestern Europe: the exchange rate mecha III Sl11 , leading towards a full mont!tar\, unlllll. Secondly, a shirt towards a new aeCllllllllallOIl strate!:.''}' which piaccct llloncy-capllai III dOl11l1l;lJlcC over employers or capllal. ThIrdly. an aLlelllpt to explOlllhe DV\'SR Internatiollall)'; and founhi)'. an lllLl'a-Europeall conl1icl o"er the role or renller capitalism wllhm \-"estern European socIety. \~'e will look at each or these stranc\s III turn.

1) 1'111' rt'g/ol/(d J//olIl'lary

rt~!!;IIII(,

Without a defcnslve reg-lOnai response to lile DWSR 111(' development or the Eurupean Commulllty towards a cllstoms ul1lon would havc i)el'1l destroyed by chaotic II1tra-European currency mo"ements wh leh WOll irl ha\'{~ made iliLY could be Ill
Chancellor Kohl responded with the decisIOn [0 malllwin llll' regional arrangt'llIcnls h\' decpcnmg them mIn lidl nHlnelar~' IIll1on, TllI.~ decision has held. ~

2) ','Ii'I-jill(lIIl"I(ti/lIllIIJ 1//111

11'1'

111711 /1'l/(mlii)'

IJllllOill:r-m/lllfll

A number o("\·Vesl European stales sought to mamtain the l\.evnesmn lIlode 01" accumulation III which inrlustnal caplIal's expansion was the celllral target polie\'. Thc Frcnch ;;()nalist govl'rllmen I alll'mpled thiS III the early 19HOs. This efl"ort was frustrated IIO t least hecause 01" the Reagan administration 's economIC statecrart. (tused tht' high dollar and 11Igl1 illlerest rates as a \,'capon agalllst the French proJect.: 1 The failure 01" the French proJl'ct led Iill' Miuerrand go\'crnlllelll to accepllhe scrapplllg or controls on IIltl'rnatlOlIalfinannallllO\'CIllC.,'nts as part of a wlcler stratq.,'")' (the single market anrlthc aChle\'l'nwnt or monetary unIOn). With a polin' framework consisting or Jixeci exch,lIlge rates and fret' 1ll()\'Cl11l'nt or Jinann~, West European gm'l'l'nments except Germanv\ lost most of their cOlltrol O"l'r monetary polin' 10 rhe pnvate IinallClalmarKels or Europe.- I When European governments deciared that . ~I()balisation had mcant that the\' had lost the ahilit\' to steer their domestic eCOnOl1lleS as bel{lrC, thel' aCllI:dl\' lIll'ant lhat their dClerlllll1atiol\ to suhordinatc dOllJestic eCOIlOllllC managclIll'llt to fixcd European exchange rates and rree movement or !inanee was what was tyin~ their hands domestically. ThIS shirt brought abolll a sllnilanty II) dOlllcstlc macroeconollllC pnorluL's bctweell \Vestern Europe alld the LISA: the pnont\' orIo'" II1l1ation, mallltall1l!1~ 1Il()JlC"'S roil: as a lixed standard or\'alue 111 tht' II1tcrcsts moner-capital anrl pushl11g cmpio"L'rs or capital to cngage III labotlr-shcddin~ aCll\'IlY and dO\\'ll\\'ant pressurc Oil wage costs. ThiS was t he real baSIS for the 111
or

or

3) TIll' tlfI"iII/)//II,'x/)IIii( th"jJ\'E"i}?

/J1/I'rn(/II/JIIII/~)'

At the samc time, Westcrn European capllaL bred With dOlllcstlc IOllg-term stagnatloll over thl' last quarter or a centur\'. was ahle to explOIt the POSSIhilitles .,IlL'ITd by the D\VSR to ttlrn outwards beyond the core III search of nl'\\' fields or accumulation. It was thus ahle to live with
or

-I) Til" ('{}lIfTirI1Jl1I'I' "II' mIl' 0('''1'

I"I'JII/I'"

Sl~ri()"

AltlwlIgh the power of lJ\llIH~)'-capll,,1 \\'llhlll thl.: baiallCl' or money-capil"lIsts/l'lllploVl.:rs ul'capll.ll was sharply shifted by llle chall~es descrihl.:d abo\'e, IIlllst gm'CJ'11Illents in Westcrn Europe did not go aiollg- wllh the Idea

or

-IIi

TilE (a,e )11,\I.IS:\T]()?\ (;,\\II\U:

dismamlillg- the l'l\Ure IllstIllIlIC>I1alli'
japan lilllllfi Itselr in a /;\1' more vulnerable position lilr coplllg Willi Ihe IWW moneta!'\' chaos ttl,ll arose 11\ the I 970s, Bccause or its depcndcllce UpO!l the US lIlarket. it EKed one '\ll\l'nClll-IlH!UCC(\ ;!(UustIllL'l\l crISIS "her another. has beL'n sIJl~leClL'cI \0 greal polillcal prcssu/'l' to establish a lIIallaged trade regllllL' Wilh the US and constant al1elllpts \)\' the US to lIl\crfCn: wllil its inlernal sociai n'lations of prodUClllll1. Attempts to di\'ersiJ,' illtn Lhe Wesl Eurupe;tll J1lad~ct met With strong Eli npposl\l(lIl. onl\' partia!h' O\'('ITOIIH: lhrough the lkllish back dllor, The \,er" rkpenclenl'l' oj' the Amcrlcan stall' upon Japanese financial l10ws 11110 New York only rlldled the gmwt h of all aggresslvc Lrellfl in US public Opll1lOll t\l\\'ards.lapan. Ih SUCClllllhlllg to LIS

pressures III Ihe lall' 19HOs 10 lo()sl"Il.lapalll"se dOIlll'sl1c e(,OIHII\IIC policy, the Japallew gU\'('rtlllll'1I11illllld lIsdr Illlkaslllllg 11ll' kiml 411' l'1l0 1'1 11 UlIS huhble ill liS linallClal S\'slelll Ihat Germall gm'erlllllellis had always managed to repudiale, alld Ill(' hllrslllIg or lhl' hubble al Liw stan of Ihl' I 990s plullged I heJapalll'sl' dOlllesllc {'COllOm\' Illto a 101114 SI agll a 111 III rrom whirh II has llol ren l"l' rl'd, '\l'l III Ihe sl'('olld half oj' till' I ~)H()s, .Japallese dill'S did stan to develop a new accumulal.ioll sirateh'"": the deH'loplllellt ora strong rq~i()llallll'I\\'ork 111 1-:asl alld SOlllh-Easl ,\.~Ia ami Ollt' IWI based 011 West Ellrope;lIl-style Ile()IlH'IT;Ullilist rq!;10 II a I track polin', hill ralhl'l' 011 till' ('xport of prudllCliVe capilalllllo thl" rq!;llln to hoost rq.\'I!Hlal growlh - the klll(l or p()lic~' so obviousl\' lacking III Wl'St Europeall polin' l!Jwards Easlel'll alld Easl (:elllral Ellrope or (i.l' that ll\alll'r ill :\Il\cl'lcall polio' lowanb l.allll AIlll'l'Ica, Through this s\I';llcg,\" .Jap;lIlesl' capllai could cope WILli the wild SWlIlgS Ihe dollar: a hi~h dollar gaw scope (i.r tlll'Japallesl' dOIlll"sllc base, while a low dollar ga\'(' scope (ill'lhe rl'gl
or

·lH

American support in the early po.~twar years, no such e\'ollll\on lwei \J{.TIIITectm.lapan\ rqpol1ai hllllcrianci.

TIll' BiJilrml/()J/ (}f /III' S(}lIlft During the long boom III the postwar period the countnes of the South Oil the whole abo experienced lugh rates of ~ro\\,lh: liftv of these countries had average gro\\'Lll ratc:s of I)\'el" ~ pc:r cent per year IlClween 19()O and I ~)75-" Total factor productivity growth was particularly hIgh JI1 the Middle East and Latin America: ':!.:~ and I,H pCI' cent respectively - a beller perforlllance than East Asi;1 whme annual productlvitv growth was only 1.:l per CCIlI. With the start of the Oollar-\-\'a11 Street RegIme and the oil cnSIS, a hifurGIllon I)egan on the hasls of one cnlenon: how well the slate cOl1cerned coped wnh the volatile and often s;l\'age dYnamIcs or thc new Dollar-Wall Street RegIme. With the oil shocks and the onset of slagnation III the COlT, the over\\'liell1llllg m;~JOI'IlY o("coulltnes of" the Sollth expenenced stralll Oil the current accoullt. They couid c1tl)(:r horrow milsslvely abmad ullder Ihe new Dollar-Wall Street Reg-line, or they could make sharp domestic Internal macroeconomic acUustmcnts, ughtcnmg- Iiscai polic"
DlE';R.

th,' US

gOVI'J'}III/I'II/ tml/.\"/11II/I·t/

Ihrough Ihl' wllrld

I'('()IIOIII)' I~\'

Iftl'

Those COllllll"leS whICh tDl)k the bDrro\\'inp; CDllrsc - III tilt, l'vlidrlle East, Lltlll :\JlH'I"ICI alld parts tlf till' SovIet mOC (espcClall" Polalld anril-lllllgary, as ,,'cll as Yllg( Isla\,la) - were thcll trapped ill dcbt CrISt'S alld long slagllatiolls or lincCll veal'S or mon.: as the" were dr;lggcd through the 'structural ac\justIIlt'lll I'lnger oj' the Ii'vJF/\VB, ThClSl' cOlllllru:s w(lIcll undcrtook lI11l'rllal a(li"sIJIlCIlI amI ;l\'(lIded the clt-ht trap \\'crl~ mailli\' III East ASIa alld were able 10 wcather the onset of the Ill'W n:glllle and ClllHinued to grow,S Ot.hers wcl'l~ drag-ge(1 down hI' the DWSR Into a svstclllicall\' l1lctuccci selWs or lillancial IJlo"'-()llts, DUl'lng the I ~17()s, the 1111III Ilel' or finanCIal Cl'lSl'S neycr ruse abO\'e Iiv\:' countl'les pcr year, Bctween 19HO and 19~)5 the IHtmber fell below live pt'r ycar onl" III two vcars (I \IHH and I qH~)) and in SlIlllt' \'ears the llumbcrs rail at IJ\'er tell CllIllllries pCI' war. According [() Ihe IMF, tll'O tlllrds oLdl it~ members have CXPl'rtCllc('(1 ~e\'erc finallClal lTISt'S slncc 1SlHO, SCHlIl' tIlOlT than ollCCY It IS important to underlillc olle poillt ahout tillS cxpenellCl:, Till' ideoll)gl.~ts 01" the D\VSR cLllm that lhl' debt lTIS1S of the LltJl1 ,\nlt'rIcan Coulltncs (anel states in Easterll Eu .. op~) was U//I,\/'r! by tlIe hankruptc), o{' th~lr earlier IIIl(lOrl-SUbslItl1l1ng dc"e1opml'llt strategIes Ill\'oinllg iarge Slate sectors and protectiolllsm, Thlls, they had to cmbran' a IlC\\' stratcgic paradi~m- till' so-called 'fret' lllad;,ct' CJlW, Yct as Dalll Rodnck has ShOWll, lhe dcbt cnsls .uHI the allellri;lllt r10111CSllC fin;lIlLl;d (,!'ISCS 111 tilest' cOllntl'les had bel'll callsed /101 by thclr iIllPllrt-Sllbslltllllllg, slaUst accull1ulation .~lratC)~les - ill llla11lstlTalll tenns thcst' ;\IT IIII/TO/'/WIII/II/(' deyelopmellt dcvlces - but by their govcrnment S failures 01' II/(I(J'UI'(//IIIIIII//' polin' aC\justment to the Illlpact or the uil p1'1cc nsl..:S and the llew mOllClan'-ljllallcml svstem oJ' rhe I 97()s, A~ RodrIck explallls. IIllpo1'l Suhstltlltlng industrlaiisal10ll (lSI) 'hrnught llllpn:Cl'cit:ntcrl CCllllOllllC growth to scores oj' C()Ulltl'leS III Lal1ll America, the ;'\'I icldle East alld Nortll ,-\I'1'1c<1, all(lC\'Cll to some 11l Sub-Saharan Afnca' for two dccades, . when the eC01l0111ICS Dr these samc l'Ollnt1'1cs beg;ll) to bll apart III the sccoml ilalr or the 1!)70s. rill' reaS011S had \'I.:I'\, liWe lei do !l'llh IS/ Im/iot's per s(' or tll(" ('X[e11t ofgol'er11ll1C11t IlltlTvcnlIollS, CoulltrIes that weathcred the slOrl11 \\TIT lhose in which ~o\'ernlllcnls undcrtook the appropnall' 1I/{/t'HI/'('()II(J1I1/1' adjustllleIlIs (in the areas liscal, IlHllletary aBd l'xchang(' rate polin') rapldh' and deClsl\'c!\" 'W Thus, the real pallern 01 rallsalilv III lite t.ran:-;J'orlll'\l!OIlS j'ul\Oll'lllg the adoption or t.llc Dollar-Wall Strect RegIme was as follows: a successful developlllcnt ,I'lm//:!!,:\, E.lcerl suddcll. bl'ge challenges to m;tlTOl'CII110/ll1c /111'111'.1' prodllced by I.he (ll'clH:stratcc\ chaos or till' lIew 1Iltl'rllatioll:tI 1l10ncIar\,-li/JanClal rcgime, Thc macrOL'l'OI)OIllIl' I;lclIcal 1~lilllJ'c led to tl'l'rihle cllITellc~' and linancial cnst~s and t.hese enabled \VashlnglOlI to impose a lie\\, strat.egic modd (Ill lIlesc COllnll'lL"~, ThiS llIodel was [hen dmllll.'d to be a sl1pel'lor Slratl'g-\' to an earlier railed stratcg\" Yer tht' nell' BIOCkl was

or

TilE

(;1.( )1\:\l.l~.\Ttc)N

C \;>.1111 F

llolillllg more than a combination oj ad 110c solutIons to pay oil liS hallks pius a new vlliner
These criscs, Lhell, hiruJ'call:ci llle Soulh 1I1lo two ZOIlCS: Ihe IICW (!ePCIIdcnclcs lhc DWSR and Lhc nl'\\, growLh cenlre 111 Easl alld Soulh-East ASia. Till' new c\epcnriellCics thclIIsel\'cs C()IIl11) Ie, willel! l'l1h:red a path lowards sllual dislIlLegratJoll (mllch oL\/i'ica) alld others which t:l1lerc0sL-19HOs dependennes has beell l)lll' (II' chrolllC finanCial inslabilil\' and !;Iagnalloll. pllnctualed b\· /Ilful growilt ;\/lel rurther finanCIal blow-oms, Since 19HO, serwus Iillan<:tal crises han' bl'l'l1 happl'nlll,l!; Il\ olle COlllllry after anoiller, .\"1'111/1111 ~l1ld arIi.:clIilg lWl) Ihlrds or the Jl1cnlbel'S or lhe 1i\·IF aL least ollce. E,Kh lillie, the Allglo-:\lllcl'lt'all lIledia oj' the DWSR try to enLertain \IS I\"lth.ltll(\' storlt's, rulllll'local colour ;}lld cielaib Ilr lucal 111 com j>e Lcn.n.: , corruplioll or whaLercr Ihal .Il1S1 happellcd 10 caus(' each inciinclllal one or Oycr hall' the coli 11 Lnes or Ihe world to ltll'll oUI to II(' a lJas/.;cl case. BUL aflcr a whilc these stories heg-liI to pall
or

{line!

As il pcn:l'llta~c or l;DP these finanCial cnst's can hc l'xln'1l1c1y cllsll\', cspeciall\, ",llere IhL'\' lake the form or crises ill Ihe hean III' lht' hankillg system: 111 the ArgcllLil1lilll CriSIS 19HO-H~ Lhese cost!; :t1ll()unlcd to Ill> less Lilan :15.:~ per cellI or GDP; In C:hile, 19HI-H:~. ·11 per CCIIl: III Uruglla\ 19HI-S·\, :H.:! per cellt III; Israel 1~)X()-X:\' :\0 J>tT lT1l1 .Iud III i\\cXICI> ) m)4-9=>, I :\.!) PCI' CCil!. J~ Thl' IMF hOls piayeci a ct'lllnd role III disiribllllllg Ilwse Cosh;, dOIll!2; so in Llle aCLlve sernct' or thl' L'III1l'c1 Stalt'S hUL with tlw passive acceptance or lile oLher G:1 Slates.

'1·11E F.\'{)I.l;Tl()N ()FTI1F I,'(/s( Ci'll/ ral (/ lid /':astl'J'JI

[H\'SR

:)\

1-.'11 ro/H'

The rl.'corel ol"thc.:se COlllltrleS ulldn lile DWSR sillce nl!IO IS o\'erwlll'llIlIlIgly the same SIDn' oi" 1!',Ig-eclv as Lllat of Illostllf Latin Amenca 111 the 19HOs, The propagandisls of till' DWSR han; e\'en reasoll to cOllgralllbte I.hClllsehes on in I rOc\Ul;lllg capllaiiSIllll1l0 a nU\lIber of these UIUlltl'll'S, gl\'ClI.llIst how terrible the expenence has l)(:e11 for the bulk. of the populau()n of the regH)!). TCII \'cars arler I Ill' pr()u;ss slancd Olll\' tlllt' COllllln·, I'olalld. has d.l\n:d Ilself bOlck to Ils stallSl1cal GDP per Glplla or 19H9, And Ihe deep gloom across the lInnzon of the enure regioll has I)een lifted onlv by flashes of lightning rrom lillanciall;rlses. exploding III one coulHr\, ,l("ln '\Ilother.

TIll'

A'I'W

Growth em/n'

The Ill'\\, growth (elltre III East ,\I\(I South-East :\sia Inducted Chilla, South Korea. Taiwan and ilHTeaslIlgl\' also the counlnl'S rurtlll'r SOlllh, Thl'\' were unilied 1)1)1 bv lhe fan thai theY ,til sh;lred lhe saml' 111lt'l"nal d('\'l:,iupme11l nlO(lt.:i but br the ElCt thaI theIr lllm\'l'r par1l\·-a{~jllsIC(1 lcnns. If Ii1lS trend had C(llllllllll'd. Ihl' rq~lolI would Ilan' ;1(.Tfl\llllerl for (Jill' lhird oj" wurld olltput b" the H'ar ~11()!). B\· ;\£Iding Japall 10 the agg-rcgate \\'c can see that the cenlrl' or lhl' cntlre worid t:COllOlll\' was, for the lirst Will' JJ1 abuut !jO() veal'S, shirting cllil or Ihl' cOl1trol of the i\IJalluc n:glllll. Similarl\', o\'er Iht: iast decadt: the (k\'l'Jo)llllg- ClJIIlltnes oj" ASia havl' sel'1l theIr share of" \\'od(1 expnns nearl" ciOllble. 1Il abllill Olle lilih of the llliai. Thesl' COUIlU'lt:'S are also [,Ikllll-{ a gro"'lng shart: 01" illdustnai COUIItiT l'Xp0l'ls. a raClor tllal helpcd cushlO\l the llllpan of SUCCl'SSlve n'lTSSII))IS In the ,\tl;II)IIC an'a (\lInllg- \~I~)()_f.l:\. Dnl'lllg.lilc 1~190s tu I~l~li, the n:g-IIJ1\ accoullted fill' SO III t.' two thirds oj" Ill'W global III\'eslIlH.'l1l and ror abollt halfoflht: tOlal g-rowth ofworid GDP growth, Thus il was In':coIJ1Illg IIHTl'aslllgl\' 1111 [>ort,ull as a direCl Stllllulator o'-llw CC
THE (a,OIl ..\I.IS ..\TION (;:\l\lBl.E

And It was achie\'lng these results wllilollt clashing with the internatIOnal logIcs of the Dollar-Wall Street Regime and the Anglo-American reIltll"l' JJlten~sts entrenched withlll that reglllle, Thus Michel Camc\esslls likl'd to stress the wonderful opportullllles ofrcrecl by some of the stock markets or the regIOn to western renller capual: for example, ill Hong Kong, rvlaia\'sla, and Singapore, sLOck market capllalisatJOIl, as a sllare of' CD!>, exceeds that of France, Germany, and haly,l:1 He aiso, of course, would make the spurious cbum that the mllows of' speclilauve Atlantic funds JnlO these seCUrlLles markets III the 1990s were a kind of nct aid for the de"e1opment of' productive capllal in the region, The reality was exactly the reverse; in his Per./acobssoIl LeClllre to the assembled centn\i bankers and government oHicials m Hong Kong (Il!' the !MF /WB meetlllgs tn Septembel' 1997, the Clue/' ExeclItlvc of the Hong Kong rV!oJletary AlIlhol'lty explamed the SlluaLlOIl as follows: 'Milch orAsl
Th,' AlJIl'l'Iw/I Po/ii/wI Ero/lOiIlJ'

The COllSl.l'llCllon of the D\'VSR has had lI11pOrlalll feedback c1Tecls on the US financial system and eCOllOll1\', while endogenous US de\'elopmellts havt' exerted Important and growing e(recL~ upon trends wllhm the DWSR, The Amencan financial system has had one structural feature which has made It very different /'rom almost e"erv other capllalist svstem: the extraordinary {'ragmentation of its banklllg system, Whereas aimost evep' other capnalist svstem tends to have large, naLlonal relail banks dOl11l1latlllg the credit svstel11 and havlIl!{ a ciose liller-relationshIp WJLh the stale at a celllral

level. this has not hcen the paLLern III the Unllecl States.!" In the changlllg economIc condiuons of the last quarter of a cenlllrv, new forces ha\'e clllergedll1 the Amencan tinanClal system, tilling what one might describe as the VOid len lw the fragmelllaLlon of the hanks. And as these new forces have arisen, thev have escaped from the kinds oi" regulation needed to prevent the most dangerous kinds ni"vuinerabilil\" fl"Om hecoming pervasiveYi We can list a Illlmher of the most. SIgnificant changes. First, then~ has becn a dramatic declinc 111 the rolc oi" the cOlllmelTJaI hanks III the supplv of crcdit to the prmluctl\"c sector, wilh the rise of the socalled nlll\.IIal funds. These orgalllsauons oflCred credit to companies 111 the i"orm or honds instead or bank loans. Thc COlli pa Il\' would ISSlIe honds houghl by thc mUlual /"unds. The mutual /"unds can thcn of Tel' sayers a lugher rate o/" interest on their dcposl\.~ Limn the hanks couid. Thl~ depositors would henefit also through the di\'ersilicallol1 o/" the lIlutual runds' holdings o/" bonds and olher securities (paper claims fi)r royalties that can he hought and sold 111 finanCIal market piaces). Thus the suppl\' of moncycapital to Amcrican emplo\'ers callie to he tied In to the rise and [;111 of" prices on the securities markets. And the savings o/" Amcricans oLdl classes came aiso lO be tied 111 to price movcments on these markets. The scale o/" the funcis in thesc Illlltual fllnds has soared until It IS as large, ii" not iarl{et" than the deposits within the entire Amcrican banking SVSlcm. Thc sccond m,!jor trcnd has been the breaking down of thc walls betwecn diLTcrent scctors o/" financc. Thc risc o/" thc l11ulllal /"unds was followed by hanks I)elllg aille LO devciop thell· own mutllal funci opcrations and thus bcconH~ more and more IIlvolved III stock market trading. Thc Amcrlcan Savings and Loans institutions (thc cC)lIIValCIlL o/" l~lIilding Sonctles) were dCI·cgulatecl so that thcy could tradc 111 securitics and start actlnl{ like ("lImll1erClai banks. Anci III these wavs thc enLlre Amcrlcan finanCIal s\,stcm has bccn sucked into tllc vortex o/" till' seCUrities markcls, a /"orll1l1la for 0lWllIllg I hc finallcial SVstCIll to strong spcculatlve pressurcs. The third m'~Jor cllallge has bcen the developmenl o/"a ,"cry large rangc o/" new types of securities. 1'\"lortl{age contracts, ror example. han' become tradabie bILs of paper. So-called .llInk bonds wILh vel"\" 11Igh IIltercst rail'S. used 10 amass hllgc C)lIalltitJes of funds fiJI' hUving out compallles, becamc vcr\, poplilaI'. And a whoie new tlcr or SCCUrltles, called dCrlvatlves, has grown enormously. The\' IIlvolvc trading 11\ SCCUrltlcs whosl~ prices arc dCrlvcd frolll the 1I100'emcnts in priccs in other, primary sccnrities or currenCIes. The l{rl'at hulk 01" derlvaLtves traciing IS IInreguiawci because It takes placc 'ovcr the co \II 1 tel" (OTe) betwecn two IIlsLltuLlons, rather thall through regulated exchanges. Onc IIHp0rLant ellect or the growth of denvatl\'cs trading IS that. It links IOgethcr price movements III onc markct - say. shares or bOllds - WIth price movemcnts In allother - sa\' fi.,rcign l'xchanl{e. Shocks In (JIIC market thereby become milch morc contagious to other m
THE (;U))t\I.IS ..\TI()N (;.-\;-'IBI.F

The lil\lrtlllll;~Jor chang-t' has becn Ill(' rlSC of tile hedg-e funds. The n
the world and the big ,-\mencan institutions hal'e spread their ol1ices across lhe giobe as otlier finanCial markets have been pushed open, Two g-eneral cOllchlslons can be drawil li'olll thIS bner sUlllmary: nrst, lhe securities markets III the United States have become very large ill terms or the \'oiumes or busllless which take piace 111 them III normal 1Illles. This g-Ives them a quality wl1lcll IS l1lg-hlv pnzed by the holders or interest-bearing capital: the marKets are, III Ilormal limes, highly liqllld - in other words, anyone wanting to sell and leave the marKetl'an normally do so very easily, .lust as ,1I1\'Olle \\',lIlLII1g- to bm' can easil\' find a seller. But the sl'cond COIlcluslon is I.hal. the IlIner structure or the whole fillancial svstem has become strategically vcr\, vulnerable to crisis ..-\11 the acculIlulated expenellce oj' credit systems IIncier capitalism ,Pl)(nts to the ract that the American linancial marJ;,l~ts al'e br more \'ulnerable to a hicieous collapse as a result or the disIIltegratioll or the regulaton' order, the increasing celll.raliLV or the seClInLles Il'~lrkets, the huge growth or extremel" nsk\' nl'\\' types or SCClirIlICS and tIll' extraordinary nse LO dOllllllallce wllhlll the whole Sl'stelll or speculative rUIHb. En:1l in the banking sector where stronger reguiatorl' SLlpel"ilSlOn IS supposed to prel'ail. this control seems to ha\'e iargelv brOKen dOWll, Olll~ recent sllrve\'liHlIld that onil' three 0111. or 100 LIS hanks were obserVIng- the rq-\,ulatorv rules hilII'. The question therefore arises as to why the Amencan state has allowed thiS set or developmcnts to occlir anci COlllllllle unt'hl~c1:;,ed, The most str,ug-htforwarci answer as to wlw thiS extraordinary strategIC vulnerability has been allowed to spreaclthrough thl' US linancial system is that lhl' regulators Lhl~msel\'es arc cioseh' linked to the big speculators. The US Treasury Secrelarl' Robert Rublll is himselr a speculator Iw prorcssllln. since he comes li'OI11 the lIIanagelllellt or Goiclman Sachs. GI'l'l'IlSpall al the Fl~r1eral Resern' lIas spcnt hiS wholc lilC plavlIlg the markets when lIot ill g-o\'ernmellt. Federal Reserve Boani members 1ll00'e cOlllilluall" through rCI'oivlIlf{ doors between WashlllgLOn and trading Oil the markets, ThiS explallatHlIl no doubt contains all illlpOrLallt trmh, yet so much IS at Slake lhat one Illlghl expcClthe other arcas or will JiJrmalJon wlthlll lhe AlIlencall state 10 step III and assert control: tl\e PreSidency and Congress. 1'01' example. A second explanation might be that thesl' other IIlstances or g{)\'l'n IIII ell t have themselves becollle dependl'lllllpOIl lhl' linannal operators Ji)r camp,ugll funds: ther have in larf{e measure become the crollles of Wall Strel~1. This IS ractualll' true, As Rothkopr has r1elllonstrawd, Delllocralic Pal'll' Chalrmall Ron Brown pOIl1ll:d out to Clintoll the importance or de\'eloping eCOIlOllllC poliCies that would appeal to Wall Street in OI;der to tap into huge pools or potential campaign runds there.11' TIllS agalll, IIll doubt, has rorce, but there arc other Ill1ll1ensel~' powerrul centres 01' Amencan capltalislll outSide lhe l'inallCiai markets, which wO\lld surel" ca\'il ir the decisl\'e control of the political establishment had been {'{/IJII/ln! Iw specllialin~ linanCt'.

THE <;(.OIHI.ISXnON (;:\;"II\U:

Yet another expianallon mtg-Ill be that all the stratq{ll' sonal groups \\'llhl11 American society have themsei\'es been caplllred I)Y the institutional dynamics or the lin
III

The DWSR and the Dynamics of Domestic Socioeconomic and Ideoiogical Change

TIllS account of the impact of the DWSR on political eCOllomles has at e\'en' stage poiriled towards tile way the reg-line, through the mediation of politIcal economICS, transforms socioeconomIc strtlClIIres wlthlll the states of the world. It docs so I)" g'cncratmg SOCial conllicls within states. conJ1icts which

IIle DWSR ensures do lHlt lake place on a \(~\'eJ plaYlIlg fidd: certain social groups wllh111 a state can exploit the DWSR In crisis situations in order to strenglhen Ihclr dOlllcsl1c, political and SOCial pOSitiOnS, We can prcscnt llw pallcrn \'Cl'\' schemallcall,,: when a linancial crisis occurs, certalll SOCIal groups can g-aln rrOIl1 IivIF/vVB restructurIng proposals. i'\,lone,'-capllal Gill escape to \Vall Street and the restructuring package will tend to sl1'engthen liS (\Ol1ll'SlIC SOCIal positIOn; prI\'alisations or state II1dusLnes to restore slale finances again benclit I hose sectors or the capital class Wnll access to large runds or mone,'. ExporL sectors can henefit from the restrucllll'lng pad;,agl~ as well, amI capllal as a whole lincls ill the EvIl' package a war oj' imposing llS rule o\'er other, suhordinate SOCIal groups. The seclors of domestic capital that are weakened are those cngaged in 1I11[l0rt-sllhslltllllon. while thosc sllpplYll1g stapie products for domestic llIarkets will tend 10 be taken over by rorelgn mllitll1atlfJllals proVIded wnll new ac::ess to domestic assets by the Il'vlF packagc. Nonc or thcse outcomcs IS (lIIiOJllfllll: thc\' depelld UPOIl dOIlll'sllc polillcal strug-gles hetween social groups, political struggles whose (lIllCullle depcnds upon the political struclllre or a stale and the balance or political rOITl'S wnhlll It at the tllne oj' Ihe CriSIS. And despite the I i\'1F/WB eJ'J(JrlS tll impost' a one-sll.e-lits-all standardiscd packag-e. the exact algebr'lIc li,rllls (l1ot to speak or the anthnwlic ones) or these outcomes will \'an' rrolll ol1e stale to another, To take an obvious example. there ha\'e been greal \'anations 111 the aig-ebra or plwausauons 111 the fin'mer Sonct Bloc. And the Impact or the outCOIlW Wllhlll the socletr IS typIcally a ne\\' round of sonal and political conl1in in\'ul\'Illg a backlash ag-alllst thc outcome. That IS wI1\' thc SOCIal and instillltional eng-ineers oj' the rr"IF/WB make great efrorts 10 ensure thai tIl{' package is robust ag-alllst expected backlashes. IS Nevertheless, till' g-elleral trend has becn onc oj' at least parual sllccess ill SOCIal tn1l1sfilrmallon /'01' the alliances o/' domeslIc sonal g'rollps and the 1i\'IF/\,VB, This docs not or course mean sustalncd macroeconomic successl'ilr j'rolll it: new cl'lses arc typlcallv.lust around the next bend 111 the road. BUl whatevcr the government thrown lip by Ihe backlash. II willfilCe a IIl'W sOClai baianct' or 1(lrces 111 lis socIety and one which II will largel\' have to accept ir il Wishes to a\'oid new financial lIlrl11oi} - panICking the markets. Thus a deepelllllg' sonai transrormauon of the Internal SOCIal dYllamics or slates IS produced hy Iht' DWSR, These chang-cs t hen reed hack on to transnatIOnal ICieoiog'lCal life. The deepenlllg' trallsnallonai SOCial GII'II'/is(/Ifl/llIlIg),!;cncrates all IIlcreasing' Inwrnallol1ai com'erg-cnce III the field or idelllob~" whose blg-hest expressIon IS the '\Vashlllg-wll COllsellsus', The ongllls of the consensus at lirsl sight appear to he a I11vster\,. Itls presented as the resuit or a purely IIllellecllla[ learning- ClIITe: how people have learnt that so·called stallst strategIes do no\ work or rio not work as well as 'rrel' market' n'l1l1er stralt'!.{les, Yel this

Til \': (;IHII,\l.Is:\TI< F\ (:,\\1111.1'

explallallClll ()r the U)IISl'IlSI1S call1lot Ill" tnle, Sl1H"l' tile old statisl slratcglt'S seemed LO work heller 111 thl' P;lst lhan lhe Ill'\\' In'l: markcl stralegll's ha\'(' \\'orked illlhc cOlllcmpOrary pcnoc\ (the last quarter ufa l'l'llll1J'\'), :\lId till' Ollly reall\' dVllanllc eCOI\OIllI{'S III thl' recelll pel'lor\ han' IWell thost' or East and SOllLh-Easl Asia, sOllle of which ha\'e had 11Ighh' stallst stratl'glc lIleCllal1lSIIIS, The trllth, course, lies III 1IlrnlIlg' the rclatioll hel\\'eCII thl' Ideal amlt hl' malerialupsicle down: It was nOllilc Washing-loll Cunscnslis Idea thaltallg-ht people to transrorm social relaLlons; It was the malenal I.ransformauolls of sOClai rclal10Jls which produced the power or the Washmglon CnnSl'l\SIIS Idea, And the whole process was dl'l\'(:11 lIol h)' a C)uasl-Iq.{aI reglllle rllil's and norms and prinClp'ies III all ISSlIt: area, hUl by the IIltg-lllY lIlall:rialf(llTt'S of money and finance III the \)\-\'SR, :\s SOOI\ as lllls lransllallollai SOCIII('COnomic regulle slarLeci to cr;Ick so \Oil \\'ollie! Its rdleclIon ill the \Vaslllllgtllll ConseIlslls ,

or

or

Nvlt',l I. Rlllh Kdl\', 'Den\'aul'eS -:\ (;r"I\'lIlg Thn';)t 10 Ihl' 11I1<'rllall(llial FillaJlnal S\'Sll"1II ill J :>'1 ilchie aJld J. \';ne\'C Smuh ("ds,), "'fJllI/gllI).; Ih" (;/"Im/I-.'I'OII/JIII)' (Ol 11', 1\1\1:1), ~, The SpOJllanellUs rallOllaliL\'lill- (;"1'111;111 capltalislII wllllld han' a'qulrl'd a slIIall('r llIark 11111011, Willlolli Ihl' ~leciilerralll"all elllllllnl'S, ;IIHI Willi all l'aslwanl Ilnl'lIlatillll, Bill C('nllalll' was pll"lwei )lolilicallr 11110 Ihe hil{ Ell nHlI"'Iary 111111'", SIlIIIL'lhilll{ which \\'illl'l'qIlIlT a 1II;~I"r a(!illsLIIWlli "lIhl'r hI' GI,rlll:lIlI' (lillallnallraJlsfers) ur h~' Ille !lll'ciill'nalll'all "Ill II It1'1l'S, :1. On Lhis see I. :>'1. D,'slll'r allil C, Randall HI'lInln!!:, 1i"II"r /'/J/iiJr,\: 1-.',\'(111/111<1' /11111' I'o/iryllllll:illg //I 1/11' i'lIIil'll Sll/tl',~ (lnsUIIIIl' Il,,' 11I1l'rliallolial Enllllllllll'S, I \1::;!1), ,\. Under Ihe D\\'SR gtl\'el'l I1111'1 liS "XCI'pl III,' LIS, (;"l'Il1all), ;ulIlJapali Gill ha\'e (111)' 1\\'0 Ill' the lilllnwlIIg three f"allll'<'s: {'oJllrol 0\'1'1' ,'x{'hall~l' rail'S, full lillalll'lallllohilitl' alld illdq"'II' d"nl lIIolwlary )lolic\', On Ihl' g"11l'I'aI pl'llIrlpl"" sel', for "Xatlll'''', Charil's \\"1'"IIl'I, G/II/mli:l'(/ "'illlllln,,1 "'Itril"i.\' (II/{I Fillflllnll/ Crill'" paplT Jill' FurullI Oil D,'hl ami Iknclopllll'llI, :\1I1'I"nlall1, it>-17 I\lar('h I!I!I::;, ,., Th,' hUg<' ,'xpallsloll of Ihl' '1'01'(' 101 1'1'I\'al" (ill;III"L' III 1"'IIS10Jls ,'Ie wlluld 1'l''1ll1n' a

\'cry (arg't·

'.""pansH.HI

uf sL:'~:un(i\..'!'.

Il1ad~l·ls.

would

Ilnd ...·rl1l1l1t· h.HII~·n.rporal(· ~c·4.·'ur litd~agl'~

aud O!,"II hlropl"S c"rl'"ral,' ,,','1,,1' 1<,,' a"<)llIsllIlIll' hI' :\lIll'rrC:II' fillalll'l' <':11'11"1. Ii, Thl' lIala lISl'
I':nl/"""Y, H, ;\ ('nlnal );lelt1l' 1JI lit" ,'apaClII' to lila)", ,,,,il'l rlllllll'SlU' ;uljuSlIII"1l1S IS lilt' dOIllI'SIIl- da" halalll'e of ".rees, It llIa~' b" Ihal Ihl' [asl ;\s.all sl;II", h;1I1 a 1;11' gr"al"r ('''pantl' III 11111'''''' lilt' cosls of a(HlISIIIll'1l1 Oil ill(' workillg class Ihall 1.''''lIl1n,'s Ihat lilil,'d 10 adjll'L !), See Charll's \\'\'plnsz, (;/lIll/Ilivd Fiut/llm" ,\lmJ,dl fllld Fi,I//IIolll Crill',l, pap")' fur (0'0),11111 1111 Dcl1I ami Dl'n:I"plltelll, ;\lIlsICrdalll, 1(>-17 i\ 1:In'h I \1!I::;, 10, Dalli Rolinck, 'ClobalizatlOll, SOCIal CUIIIlin and [<:111101111 .. (;roll'lh', II. The i'lkxican criSIS was also 11l11')'esllllg as Ih .. lirsl big 1110\\"1 JII I 1ll'l\w"1I Ihl' lIS alld \\'''SIel'lI Eo)'op" wiillill Ihl' II'IIF, I\IeXlco Ira, a \'11;11 US pOllilll'al illll'n'" ", II was {"'Il'I'IIIIII,'d 10 stahilise I[ e\'ell if Ih:1I III "all I USIII~ "n,I' $~() hillion or \\'"SI Enl'lll','all 111011<:\' 10 do su, '1'110' \\'"" ElIrop,'ans said Ihl'!'e I\'as 110 l{loh.II 1111'<';)1 rrOlli1 \1l'XI[,o (0, II", 1lltl'nlallOlI;II Jill;lIIn;1i

.,\,11'111 So Ihe l'.'i ,llIIllld pal' ;IIHI lil .. IllS \,",Hlld .~r;1I11 olll\' IIricl~lIIg 1111>IH'" whil" the liS hUll11·d !ill' rllllc1s ,,1,,·ldll·n·. 11111 TI";\'1I1'\' S,..T,·lan· Bt'IISI"1I pnsuacl"d ~li.-l ... 1 Camd"ssIIS"f Ih.· L\IF to allllllllll ... · Jluillich' Ih;1I Ih,. \\'1'\1 Ellrllp"alls 1I','ri' r"llt· ("0111 11111 II Ilg: III" 1II01lL·Y. "I)t prllnclillg 1111 It· IIrlllg:lllg 1111111.'\'. Thi.' 1l11';1111 Ihal ir Iht' Ellropealls pllhlid~' St'1 IIH' record stralgili. Ih,," nlltid lIan' IIpp .. d ~k)(1L"1I 11\'1'1' Lit,. clilf alld could thus lIa\'\' h"eu hl;lIl1"d (i,r a 10Iai .... napsI'. F.. r Ihl' lirSL lIIlI.· III 1:-'IF h"t .. rl', Ih,' IlII1I1U.·S "I' all I~IF board 1II"t:lIl1g I.. ,·n: iliad.· public 1ll.'l"allSl" EUl"llp"au ollil"l;ll, I,·ak.·d Ihelll 10 d,·lIuIIISlralt· Ihal Ih,,~' had talt ,,"ted 1'01' LIIl' lIail·olll (hili lIacl ahSl;1lII l'e11. I:!. :o.lal"llll \\'"Ir. 'Thl' IllS alld OUI.' .. rCapual Flows". !'il/(lIInll/ Ti)/l/'.l, Hi.lUlll· 1!19H. 1:1. ·(;I .. halizalllJlI allel ASia: The Challl'lIges rill' Rt:glllllal C()opl'ral1on :llId Lhe IlIIplit"al1olls ll,r l1ullg KOllg , address h,' IIlich"1 Canulesslls, \lallag11lg Dirt'clur \II' Ihe ltl1"rnallollal 1I101l"larl' FlIlld, al a ("I1111 ...·n·I)(·'· sp,,"slIrt'd hI' Iht' (-[ollg Kllllg ;"loll('wl"\' .-\1I11111r11'· alld Ih .. IMF IIIl 'Fill;lllnal IlIlt'grallllll III :\sla ;IIHI Ihl' Rol,' Ill' llllllg I~IlII!{, Ilollg KOllg, i ~Iarch I !I\Ii. 1·1. 1'''1' .IacubssIlIl 1.,·,,1111'" ull .. \'Iall 11I01l,,'al'Y ("o,opl'raI1OI1 hI' .I"s,·ph Yalll . .II'. Chi,'r Ex,'culln' or I Ill' HOllg Kllllg ;III "U'I;II"\' .\whonl)'. HIIllg 1\lIl1g.:!1 Sl'pllClIIIll"r 1!1!17. ];;. This 1""lItral 1'01<: (i" n'r\, lalg" lIallOllal hallks IS I rill' 1101 0111\' III .Iapall. 1'1';111("(' alld (;"l"lIli11l)" (which has ilbll I."d sl,oll~ L.lld hallks) bIll also III Ihe l'(;. alld III Ih,' (ill"llll:r IIntlsll dOIlIlIl"'IIS Iii .• ' Callada. lIall- al,II,,' ;11111'11:'; II .. · l;i C""lIlri"S appro:\l·I ... , II ... l'S ill liS 1:II'k "I' sl 1'011 I-: lIallllll,,1 h;lId,ill~ l'ili;II" III lis li,I;II'l"Ial '11"111'1111"1'. Iti. II IS, III" ,·ollrs... 11"111' Ihal ""IH' J>i1rlS of Ih .. liS lillilllt"lill SI',h'llI 1','111:1111 slliJj"rl whal UI\.. ()pl ...~lIors would n'~;lJ'd ;IS h'I"IH"UHIS and 1l.~ht t"lHllrul: Ihl' P"\\'f.:rs "I" lilt, St:nll"II"ll'S and Exchallge (:OIlIllIlSSioll an' 1111111,'1",,- Bill 11 .. ·\· rq~llbl" Ih .. acu\'lIi,'s or Ih",,' IIln,lq,t! ill tl .., slock "xchange ",II,' frolll till" ""gh- ul" 1"'r'"l1al I'robilr :1Ilt! 11'" fiJI' IIIl' 11IIrl'''''' Ilrlllllllllll" lllg IIl;lCroeCU)lOJIIIC nsk. Ii. ROlhkopf. 'Ikyollel ,,1011111' ,\Jto'T;II11ilislll·. (COlllldlllll F"rl'l~1I Rl'lallOlls J>aJl,'r. I !I\lH). I H. For ;1 rlelail .. d ami (;Iirll" cUllll'rl'lll'IISI\'" SIII"I""Y 01" Ih .. lac lin IISl'd 1'0 .. all"lIll'lIllg III milk,· Ihl' SOCIal "lIglll""rlllg rohllsl ilg'"I1S1 hacklash, SL·l·.J. Williamsoll (ed.). Til,. l'IIliliml 1"1"11/111111\' ,,/"I,i"""'I/J/t' U,:/il/"I/J (IIISIIIIII" 11I1"rllal"'lIal E.·UIIOIllIC" 1!I\I(i).

,I)

"'I'

================5================

Power Politics, the DWSR and the Clinton Administration

So litr wc havc aLlcmpwd to explalll thc mcchanisms of the Dollar-\Vall Street Regime, to show that It reproduces iL~elf as a polillcai as wcll as an economIc IllCCha1l1S111, stccred by the.JoIlll aCl10ns of US govcrnments through I.hCll' clollar policies and controi of the IivlFjWB and of the US-celllrerl lllternationallinanC1al markets, 'Vc have also u'ied lO tracc III rough olltline some of jL~ effects upon national political economIes and thc social structures oj" states. Wc also sougiltlO 1ll1l11mallr dC11lonstrate, from the war both US dollar polic), and thc US all1lt1cle lO illlernational JinancIaI rcglllauol1 and to thc roles of Lhc lMF jWB havc operated. that the DWSR was run from t he angle of US llauollal interests. But the qllcslloll we must ask is: how are we to understand national Illlerests under cOlltemporary capilalism? How can we arnvc at a general conceptualisallon of the political and eC()n()nllC 111terests of a lcading capitalist state? This is thc issuc whIch we want to address now 111 order to try to provldc a framcwork rO!' understanding the radical aC\1vIsm of the Clinton aciml111stration m Us crforts in the Internatlonai polillcai econOllw.

I

National Intcrests and Intcrnational Chal1engcs

A/fIII/S/II'fllI/ 7111'OI1l'S ()/S/fI/I' II//nl/o/wl/ol FrollOl1l11' 111/1'11'.1'/.1'

jvlainstream econOllllCS and poliLical eCOllom\' tells liS that thc econOlI11C lllterests of capitalist states should produce 1111 internationai polillcal clIlll1il'l whatcver abolll economIcs as such, except (ix transitionai a(!juslllll~nt rriclions, pro\'lcled a state;s polillcal Icaders act in theIr own rational seI(:interesl. These llltercsts an: clelilled as the J()llOWlllg-: (irst, groWing-long-term prospenty {{Ir theIr domestic population through raising dllmesllc productivllY - 111/-{h prociuctivitv in line state does 110t weaken the cin\'e ({II' (jO

POWER POLITICS ANn TIlE CI.INTON :\n"II!\:ISTR,,\TION

Gl

higher prodllcllvitv in others: second, exploiting tile advantages to be derived /i'olll the 1I11ernal1onai dinsl(m or labour by adhenng to free trade; and IllIrdly, 1ll.1II11allllllg- co-operauol1 Wllh olhl~r governlllenis III an eH<.H·t. to manage clTeClivel\' international macroeconOllllC !lows. ',Vilh growing prospent\', t.he statl~'s 0\\,11 revenues will nse, J.{I\'lIlg' It g-reat il1ternalional polillcal power. So, according to IhlS VIC\\', thl~ II1ternaliOllal 1I11eresiS of states arc essellLiallv harmonlOlis with those of other stales, proVided the others retain similar. open rational policies. I Thlls. the mainstream theory slIg),{l'SIS tilat. thl~
These m
or

I'O\\,ER I'OI.lTICS AND THE CI.INTON AmIlNISTR,\TION

63

lhat the malllSlrcam does explain - the mix lure o/" co-operalloll as well as conllicl between the great capllalist economiCS, Neo-lllerCalllilislll would suggest tilat there should be a state of almost perlllanl~nt l~COllOIllIC warI~lre between the mall1 capitalist states, "\et the ckgn:es of tellslons hClweellthem var\, gn.:aLiv through lime and across space. To lIlakl~ sense of the national Interest III eC0110nllCS. we will suggest that these theones suller from a common weakness: they lack any mediation betwcen the 'cconomic' and the 'political', With the cconomic ddined as 'gT()\\,th', 'prosperll\' . jot)S or prnclucu\'ltv, The\' thus tal,e i(lr granted what needs to be lIlvestig,lled: what kinds of social institllllons actually control access to 'growth' etc.? What arc thcir compulsions and how do their COI11pulsions and interests operate III domesllc poliucs to structure the ddimuoll of the nallonal interest? \Ve need a theory which includes thcsc sodalmcdiations between the 'ccollomic' and state political aCllOll on economic maLlcrs. One ob\'lOUS such lllediallOIl IS pro\'1ded by the concept of wIJi/n/Ism as a ,\'O('/(/t ,lysil'lII whICh gi\'es a twist to the heha\'Jour both of the economy al\(I the state, We will not allempt here to I'urnish an altern alive theor~' or the nauonal ll1terests of m/Jilatis/ states: thiS wuulci reqllJre a fllllr fledged theoretical alwrnau\'e to mainstream SOCIal science, We will simpl\' suggest some conceplllal rtlles of thumb that ma\' help to produce a more nuanccd appreciation 01' the extent to which powerful capllalisl states may ddille thel), IlatlllIlal eCOlHlllllC IIlterests III ways that allow for bOlh the co-operalI0Il sought after hv malllstream eCOIlOll1lCS allel I'll), the conllict stressed by Ile( l-merCan tilism.

A HIJI/KIt CIJI/ftf/JI oj' (.'a/Jliatis( SIlIII's' NO(I/Jl/at III

/11;1'1'1'.1'/,1'

il/il'/'iwi/(JI/(I//,'fOI/OIIIII'S

Within a capitalist eCOlHlIll\,. electecl politicians stlrely do want what mainstream economics says that the)' should wallt: ever-iugher procillCtl\'ltV and growth. But stich matters ;\I'e not directly III the gO\'lTnmellt's hands: they are in the hands of p"'vate capital which owns the producl1\'e iabouL Delllocrallcallv eiected politiCIans, therefore. lllust ser\'e llle special needs of the elllpio"crs of capital, because Il IS thIS group which takes the decisions about whether there will be lll\'Cstllll'lll anel growth. Thus lile national interest III eCOIHlmlCS has to be conceived as the national m/Jli(ltis/ interest, IIlS01~lr as the capHalist SOCIal group exerCises sO\'elTlgtll\' oyer economic lil'e. Pn\'ate capHalists do not wmH growth as such: the\' want capital growth and security. And these goals do not have to C()llle from actIOns whose end result is expaneling nationai proelllcllOll. Thev can come from one capitalist concern extending its cuntrolovL'r existlllg proritictHlII III till' sector, If they

11')

THE (;(.OB:\l.ISATION (;,\III11U:

ElCe cOlllpelllllln, tilen one oj" the ways oj" tackling tbat compelilloll IS I hrollgh a drive 10 raise theIr proc\lICtlnlV, lower their unit costs. IlIIprove qualitv ;mcl thlls tn' to sell more lIllItS alld theret)\' altract a laq.(er shart' 0) tht: market. But thcre an' othcr ways of ()\'CI"COllllllg the compc\I\loll: llsmg the sIze of Your capital for strategic aCllOII to clestro" smaller rI\'als or potential rivals or co-optmg your nvals llltO a cartei to control the market. .-\lIcl wILl! 1I10llopolisallllll III a closed eCOI1OIll\', It IS ill' no means obnolls thaI expansIve IIl\'estmelll l'or lllgiler output IS the royal roacl to further progress or capital growth. And if till: market IS alreacly saturated and cOlltrolled, it IS not o)wJOus th,lt very large new investlllents in IICW lL'chnoiogles (the key to rapid and slIstall1ed productivity growth) are rallollal. The eCOllomlC pressures towards l11onojlolisalloll arc verI' strong III advanccd capHalist econOJllles because advanced IIHiustrv Lcnds to havc wrY high capllal-olllput rallos (or. m :Marxist terllllllolol:,,)'. a 11Igh orgalllc composJllOn of capllal). Each extra .£ or capital in\,cstmelH produces onl\' a small cxtra-
POWER POLITICS :\NI) TI·IE CLINTON :\[)ilIINISTR,\TION

65

assured 0(" future capilal ~rowtll. But where new elllrallls chalJen~e these quasI-monopolies successli.illv lilr market share, \'el"\' !{reat problems can arise: new iarge im'estmelllS III fixed capital hecome extremely [-iskv, proLit margins arc Cllt by the new CompeLItIOIl and even the big-g-esl cumpallles can l;lCe the rIsk 0(" bankruptc" - economic collapse, If thIS is a roughl\' accurate picture thell we call explore lis Implications at all IIlterIlatIonal level. The capItals of' the lllall1 capHalisl staleS operate internationallv for a number of ol~lecLIves, First for raw malenals needed in then- production process and not availahle clolllcs(Jcally, Some of these lIlatenab are so \'Hal - eneq-,'Y' aud strale!{ic goods like aIUmJl1IUIl1, bauxite, ('opper ell'. - that they canllot lea\'e malleI'S wholl" to the market: their state is enlisteel LO lise political influence to assure suppl\', Allother need IS 10 cOlltroi II1LernatIonal markets III conditions often of acute competition. I n tile 1;lcc or thiS, as with securIng raw materials, national capIlals will 'rentseck' _lrv to enlist their state In their cause, to heip beat the competItion, Blll lhe lerm 'rent-seeking-' is lIardly an appropriate one since IllS (/ IIt'fI',Bm)" ,I)'SIt'mir f('fjJlII'I'/I//'/I1 III ('()l/(lillOlIJ o/II/O/lOj}()/isllf /11)(/11'-", And tht~~' have another inlerllauonal need: to gain access to eXle1-nal sources or laboUl- - ellher \'en' hi~hlv skilled la\)olll- sources III high-tecil lields - or low-tedl cheap labour 1'01' dOln!{ the labour-intenSive parL'i of their III ternal labour process, The state can also help III Lhese areas. A!{ainst thIS e\omesllc capitalist background we GII\ ask what the ratIonal roil' for the given advanced capitalist stale IS, The state is not, or COllrse, simph' lis eiected politicians: tile\' come and go but tile Slate must remain and Jl IS the task 0(" the lOp CIvil servanls to present thell' polillcal masters with lhe EICls: the systemic facts or the state's silllation and lI11erests within a much long-er lime honzon than lhe electorai cvcle, From thiS angle. Lhe slate mllst allempt to ensure the best possible cOlldillOnS for IlS capitalists to walll to 1m'l'st and Improve proclucllVity and expand Olllplll - the malerial baSIS of' the slate s own resource strength, Since IllS lip to capital whelher Il does lht~se tillll!{S or not. the Slate has an overwhellllIllg IIIlerestlll servingIls most important capHals, And since these operate illlernatIonall\' II must seck LO sene theil' 111 ternallonai interests, [nsol;\I' as lhey send streams or re\'t'nue and prolils back 10 their home hase and lIlsoEir as the\' extend their control over overseas markels, the state will cOIlslder Us lI1ternational pnsllIon stronger: the beller placed ils capIlals arc 11\ wodd markets, the stronger its POSI\IOII and IIlIl11enCe, ThiS might suggest that III generallv stagnant conditIons III the core countnl'S, there will be a war or each against all. If a slate's nplll monopolies are I hrc:alened bv the beilanour or the nHlnopolisllC enterprIses of olher stales, Ihere will be aCllte IIlter-slate rivalrIes, BUllhere tellris to he an 1II1ernal1onal di\'ision of capHal as \\'ell as an illlerllallollal diVISIOn or labour, Not e\'cry advanced capllalist state has a big IIlternauonal car com pan\', Ollh' some do.

Illi

Til E L;( ,OI\,\I,ISArI< IN I ;,\;'.1 III ,E

Thc Brtllsh stall' was prl'pan:d 1Il ~I\,(: lip the slrlll4~1l' 10 llIall1lain ils car companies: II l1<1el ()llll~r lIl\CrllaliOllal challlplfilis (il hoped). sllch ;I~ lis finanCIal sector. military llIr1IlSIl'les. ph;lrlll
or

\)

Eacll Illelllber state can llSt' the Ell's traelL' rcgllne til blurk COllljJl'11110" Imports lllto the Ell from Ihe DutSI(\C. The member stale call usc Lhl' ELI as a \'erv powerfulll'\'er ill IlIlernallllllai riiplomacv cOllcerning the ()q~
~)

:\)

III conciiw)ns of stagnal1ol1 withll1 the core l'collolllies. Lhl' search for II(,W Ojll'lIl11g-S lIUlSlril' the core IS a celllral prl'OCCllpaL1on and the Ell prOVides a vcr\, \'alllable ColleCLI\'e sen'lce ('or IlS 1lll'llllwr slates III thiS task,

»()\\'E]{

l'ol.rnc:s ,\~() TIlE CLINTON ,\()illli\ISTR,\TIOi'\

6i

TIll' NallOl/al !lu,'n',II,1 oFlhl' nO/llll/aul Cal)flalisl Siall' :\g;lllISI this b;lckgJ'Olillcl \I'l' rail nlllsider Ihe IllIert'Sls or Ihl' dOIlIlIl;1I1l capIlalisl siale \\,1111111 Ihl' Illll:rllallllllal syslelll. the UlIlll'd Statl'S, It gaills ellorlllOIlS ad\,:lIltagl's froJJ) ill'lIlg Ihe (ioJllJllalll IIlilitar~'-polillcal slall" as well ;IS froJll beIJIg ;Ihle (() c\olllJllate the lIIechanisms 0(' interllatlonal eCOnomic mallagelllcnt. This gln:s it ('ar greater capacilies til chan){c its IIllcrllational CII\'lrolllllt'1I1 10 its ad\'anlag-c than all\' other state, Till' DWSR IS a celliral exalllple of the prelllilims of do 11 II nalll'l', The whole wodd is its sphere 0(' illllu(,lIce and II wishes 10 assure its COlllllllled dOllllllann: through the UUIllllllL'd strellglh or ilS capllals llltl'l'natlOl1ally, And II has a [;11' wider range of sCLlors t.hall ulher capllalist powers III which II seeks to ellsurc the dOIllIJI:lIICe of ilS capitals, For thc Icadcrs or Ihl' Lillllell SlaleS, a capitaiisl Illap or Ihl' 1\'(II')el looks l'clT diffcrent ('rom a lIalur;tI gcograpil\' map, <,,~uaIlUlil'S or Il'lTIlOl"\' as such han' lillie slglliliclIlCl' except III Il'rlllS Ilf ge()Slralq~y ;Iml Ihl' resulIlllg haslIlg alHlloglsllc IT<)III1TI1lt'IItS, \Vhalcolillts an:, III IIlL' firsl piaCl~, loraliues 11'1111 l'ColloJlllcalh, str;atc.-'!4lc rail' IIlat<:nals (oil ell'.) , TIIl'Sl' lllllSI he lirmly under cmlll-oj ir possibll': a SIIIl' qlla IlOII for l11allll;lIl1l1lg dOIlIlIl
bCtln-CIl the need for tile AlIlcncan state to ensure that liS capllals III kl'~' secLOrs dOIllI1l:Jle the kev gCOCCDIlOl11lC areas ami what L~ goillg Oil III IIll'se areas. But we can sal' one thing: an\' allempl hI' allV power to exclude the US from havlIlg assured .::Illrv for its capitals lI1to tites.:: c.::ntrai pools oj" lahour and markets, iet alollc an alt.::mpt to throw a ring around that area to (levciop it as a reglOnallaullch pad for an assault on US capllals ill k.::y sectors, would produce a savage American response. Thus, the US intercst IS to ensure be),oll(1 serious doubt that the otiler Ill'lln capitaiisl regIons arc securelv, instillluonalll' open to IlS capitals alHl llrat there is 110 I"ISJ;. oj" these rq~ions sudden I)' becoml11g closed to US capItals, p.::rhaps as a transllional step to Ulat reglun acqwrlng gr.::alcr sU'cllgth In tile II1tcrnational di\'lslOn of labour thall tile US has. The US, III such CIiTulllstances, need nol cOllstalltly fear that othcr parts or the world may be growing raster than the US dOlllesLlc economy, as 1l1(:rcantilisL~ would cialll1: afLer all tIllS growth should be a growth for the US companies playing a (leClSIVe roic III these areas. On the other hand .• 1Il\, region whIch exclude th.:: US While Jl was growlllg dvnamlcallv would he
I'e )\\'1-:1{ POI.ITIC:S ;\i'
I)

~) :~)

-ll

:))

TilE CI.INToi'< ;\D\IIi'«STR·\TI()N

ThaI Ihl' LIS go\"enllllelll, acLing ral1on.IlII", should wish LO ensure thal liS capilals III Ils kel' sectors would gain COJltrol III the most dynamic regIOns or markel growth. ThaI 11 would wallllO ensure lhal the most ((VI1<1I11I(" pools of labour and of prociuCl markets sIJouid 1)(' maxilllallv opclled to its capitals. It \\'oldd rean wnh l'xtraorciiIlarv and emcrgenC\' Illl'aSl1n~s to pre"ent Ihe risk of excJusml1 frolll such markets. That II would reqlllre inslllUlJOns 10 be built lhal could ensure slructun.. d dOll1mance over lhe kev geograpillcai areas which were the main centres or internallOJl;L1 surplus-value extraction. It would gear Ils stecl"lng or lhe D\VSR towards aclllevillg thcst' ends, Illlless II harl other more approprIate Inslruments oj" statecraft for dOIl1g" so.

7111' P(ftll'/"I/ o/"IIIIt'l"I/aiwlIlIl Ca/JI/afi.\·tl).)'I/(/Jl/lt:I" 11/ fhl' l:'{//'~)' I C)C)()J

In I ~19:1 whcn CIiIHOI1 came IIlto ()lIice. alhT twent\, years or thc DWSR. Ihl' US's overall share or lhe world GDP was rough 1\' 111 the saml' pOSIlHlIl as II had be ell III 1970. Hut there was a WOITVlIlg new sl'll1plom or wcakness, lIot preselll 111 1970. ThIS S\'111PW111 Iav 111 Ihe US balance of pannenls. There had been a c1efiCIl III Ihe late 1960s and early 1970s. 1"111 the c1eficll at that lime clIuid be expiallll'd hI' non-slructural fact(}rs: tile Vietnam war alld the vel'\' !;u'ge flo\\' IIltD \Ves(crn Europe or US producul't, c'lpllalLO tai,c lip large POSIWillS Wllhlll the EEC market, PtlSllllll1S whIch would genel~lle a hllllre stream of earlllllgs 11l1il the US current accoUI1t. Bllt hI' 199:~ Ihere was a senous structural delicll 111 the current account. And 11 denved bOlh li,()1ll a lrade ddicll and frolll the need to sernce an ever-growIng- US inlernawlI1al debt positioll. Thl' .-\lIIerican Slate had a\lowl'ci liS debt to grow to 70 pCI' cenl or CD», The ClIITcl11 accollnt balalKe IS 1101 a lnnaJ IIIdicaLOr. It (iemonslrates whether a Sl;ILe'S capitals arc earning" more frOI11 the rest the world thall YICe \'ersa:1 The lrade ciefiClt pO 111 led to IIlcreaslIlg US cOl11pelillVe weakness in liS prmlucti\'e sectOI: I r the curren I accoull t IS nOl 111 surplus, I.hen the POSItion or lhe slale's CUITenC\' GIn never be cOlllpietl'ly secure. or course, sClgnlorOlge from ([ollar domll1anCl.' gIves lhe L:S Ell' greater frel'dolll from IhlS pm'll1l'nlS COllstraml than all\' lither slatl'. Bill illS slill a sIgn orwcakllcss, Dill' that could COUIll III it CI"ISIS. And serncing Ihose \\'eakllessl's 111 tire cllrrelll accollnt haei. Il\'the I 990s. come to c\epenclll(Joll lhe co-operatHlIl orall 'all\' (thollg"h Olll' Illcreasing-h' branded in \Vashlllgtoll as an 'adversarv·"). Japall. Tht' Japanese g-overnmclll was helplllg Ihe US TreastlJ'\' "'Ilh a COI1tl1ll1:11 flo\\' o('.Iapanese ('ulICls Illto lIS Treaslln' bonds. li One or Blish s final aCls as PreSIdent had been \'l°l .. gam to try 10 bllih' IheJapalll'Sl" g-o\'crnnleIH mlo weakenlllg llselr III Still the US, thIS 11Il1l" liver competition III the car

or

iO

TIl E (;U)I\AI.IS,\TION (;,\I\IIH.F.

IIldustr\,. The result was hUllliliatmg lilr Bush and disqll1ctlllg for US elites. The Japallese had sllllph' hrusheci Bush aSide and had shown sl'lI~awarl'J1l'ss of t.heir role ill ballkrolling the US gm'erlll nell L. We lIIusttherefore look at what lay behllld thiS current aCCOUIIL weakness and sUlllmanse the general sItuation of US capiLalism wllhll1 lhe Wider dynamics or intcrnaLJllnal capIlalislII. A wi10ie American literature has growll up around the thesis or whaL IS called 'cledilllslll' - the Idea that the LIS IS rollowlng III the JilOlsteps or pre-19 I -\ Britain dowll a pnmrose path to C\'lTlasting weakness. While tillS literaLure was much exaggerated, the cOlllparison wllh BriLalll III the earl\' part or the cCI!tun' is nl'\'crtlwlloss instructive. Indeed. the contemporary paLlern or poliucal-econollllc lI11eraCLlons bore slgllilicallt parallels (as well, or course, as dilfercnces) with tlw d\'nanllcs or the IllterllaLlonai systelll at the turn or the century. The ke), unlls 1'01' anal\'sis III hoth cases are the lilllowlIlg: the lead cUlllltr\,. the core competitors. tite new growLh cenLres, the dependclIt support-rcgl!lIls. alld orgallls('d lai>our. The respecuve Iea(l countries were Ilr course the UK and the US. In hOlh cases, the lead coulllries' econOlllles had grown for a whole historical period through Interaclion wnit the rest of the (,1lI-e: Jill' the UK that had ml'allt \"'esterll Europe clilrlnf,{ Llle nllleteellth cenwr\,: for thl' US it had ml'alll v"estern Europe evond the core 10 exploll opporLlIllllcs 111 the hmwrland lill' solving mterllal problcllls III the metropolis. Olle part or the hllllcriand Illav he called depl'ndcllt Supp0rl-reg'lOlls. For Britain, this was. or course, the Empire, above all the Indian empire. Products lOSing compellllveness wllhlll the core cuuld hc dumped in Empire markets, whose IIlterllal sUCIal rela\lUlls of procluClltln couid be restructurl'clto accommodate them. On the e\'l' or the First World War, textiles made up no less Lhan 5) per cent or BnLlsh malluLtl'lurecl exports_ Whereas pre\'lllusiv they had ~onl' to Europe, the\' 1I0\\' wl.:'nl til the Empire. Th~' ASian colonialmarkel. .,bsorbl'd anvtIlIllg up 10 (iO per cellt ur these exp0rLs III the years berore tile First World War. As Eric J-/llbsi>awlll has PUL n. '"_-\sia saved Lancashire" But it did mOlT than that: h\' keeplllgLancashire a(loat IL sustallled demand in the UK market li>r exports frolll

POWER P()LlTICS .-\;''-11> TilE CI.I;\T()N ;\I);>'II:-.'ISTRXrlO;\i

71

the reSI orlile world, thlls easlI1~ leliSIOliS wit hill the cure. En~n Illore imporlalll. Illdia IlIdireClly slislallll'd d\(' 11l1('rtl;tlHlIlal mO\ll'Wry syslCIll or the day. I r the Indian lIlarkl'1 had dosed alld LancashIre had collapsed. lhe pn:sSlires, already g-ro\\'illg- \\,lIhlll the LIK lIlduslrial heartlalld III lhe early l\\'l'lllielh ('clltlln,S ror prllteCliollislll wOlild han' beell ullstoppablc. IF the UK llacl opted fill' protectiollism. Lhe IlIlerllal10llallllClllelary syslelll would Ila\'l' bl'l'11 scrapped. :\11 allalog-ous S\'SIl'1ll has (it-\'(:Ioped ill lhl' COlileXt ()r the core stagllation ()r 11ll' last qllarter of a Cl·l1tlll·~·. Tht' LIS has sOllght to use the ckpl'nclent Supp()rt-regI<1I1s as dlllllplllg g-rollllds for US products through hoth an l'xpml drivl' alld market-sed,jllg FIll. It has used t.he Ii'..IF alld the dYllamics of t he Dollar-Wall Street Regllnt' to opell lip these states, to restructure theIr 1111erllal SOCIal relatiolls OrprOdlll'IHIIl to l'lIsure that lhe~' could absorb t.hese products. 'The rcsulung suhSl<\lIl1al increase III US exports has, in lurll, sustained the lIS dOlllesl1C product market, easlIlg tensiolls ill the c()re. III a Similar palll'l'lI to Llw Brtllsh case, o\'er half ur us exports ill thl~ 1990s \\TIlI to COlllllrtl'S or the South, Ilol leasl l.atlll Al1Iertca. '1l~1 eH'1l ill its OWIl l.atill AlllertC:lII Illnlerlalld, the LIS exported less Ihall did the ELI. Alld both III Ihe earlier pe('(od amI the Cllrrelll OIIl'. Ihe dependellt SIIP]lOJ'lrq~]()ns were \'(~\'\' Illlportalli SOIIlTCS or cheap. \'Ilal IlIpllts 11110 the prod IIct lye processes or the COlT sta tesY There IS. 1)1" C()lIrSe, all IlIIp()rtallt difTerclIl't' IH'I\\,lTII Alllericall alld BI'itish rOlllrol mechalllsllls over the depL'lI(kllt support-regions: Brtllsh dircCl lI11pertal rille IIlcant there was 110 balance or panllclIls COllstrallll !JI1 lhe COIOllll'S SIlICl' their lIlollelary syslem was sterling-. The Bnllsh COllld· hare Ihelll rUlllling permallent dellnts wHh the metr()polis 1I'1lhOUI ha\'ill~ to prodde them \\'nh a market 10 con:r theIr deJiClt-lIldllced debts. For the Lilltled States, IISlll~ 11H' Dollar-Wall Sl.n:el Reglllll', Ihere is a Cllllslallt lIeed 10 pro\'lde the dependellCles II'llh a surticielll expol'l l1Iarlzl~t 10 cover debt SlT\'iClllg t() t.hl' LIS fillanClal sector. On the olller hal1(1. Ihe British h,ld to take direci respollsihility fur mallltallllllg order ill lhelr depelldl'lIC1eS, while Ihl' Ll,s S\'SIl'1II Ihrows Ihal respollsibility 011 10 the legally sO\'crcl~1I dcpclldelll stale. So illS a case, prohably. OrSWlll~S ,lIld rolllldabollts. cyell thOllgh thl' lilllCI.J()1l ()r Iwillg ·markl't of laSl resort' ma\' Sl'l'llI a hl'an' hurdell ()I' the US. BUI as Palllaik has shown ill IllS lIIastl'l'I~' and selllinal Sllldy,lll Ihen' was allolher aClnr III Iht' w()rld eCOllOII\Y ()utslde Ihl' core at the elld ofthl' Illlll'tl't'lllh n:nllln' WllOSl' nde was also 1I1ll'grall() Iltl' dYllamlcs or Ihl' S\'stl'llI as a whole. TIllS olhl'r kind or aClor was made lip or lhl' \lall'S whIch could he called thl' IIl'W growth n:ntrl's. These could ahsorh surplus capllal rrom llle c()re as Wl'1l as surplus Iahuur I()I' the purp()sl's or prurluCII\'t: capttal au.:ullIUialioll. Bl'IWeell IHG!1 and I~)I,! Ihl' hlllk oJ"capllall'xpor\s J"rolllihe core lOol~ the fiJl·m or Brtllsh p()rtli)li() 1I\V('stlllellls. :\ncl dltrlllg- thai period as

TI-IE t;LOIHLlS,\TION (;,\I\IBLE

much as GH per cent of towl Brillsh portfolio IIwestmclll went to the new growth regions. some Jundically wuhm the Bntish Empire, others OlllSldt' ILII This outpouring of funds li'om Bnllsil rentlers to the new growth CCIItres was llself a shift from their earlier destlnatloll !Owanls the mon' backward West European core. The same kind of paltern has occurred 111 the iater penod. though WIll! sIgn iIi cant mociilications. In the /irst place, slagnatlOn 111 the core has not. cll.loyed the safelY vaive of huge labour migrallons outwards. And III the second place the Ol1tJlows of runds from the core for producti\'e in\'eSI1llelH 111 the new growth centres has cOllie not oni)' fnUll renticr.~ 11l the lead [01111try, but from productive capllal in the rest or the core as well. Another parallel is also Important: in both periods, orgalllsed labour and the socialist movement seemed very weak and as a result strategies could he adopted for displaclllg tensions between the core countries not only towards the hinterland htu also on to the worl;."l11g ciass (wnh iabour emigration making tim espeCially easy in the earlier period). Similarly, by the I ~'9()s, II was hoped lhat labour was so pennanentiy weakened by the collapse or tlw Soviet Bloc that tensIOns could largeh' be displaced downwards via so-called nco-liberalism, Of course, there arc 1I11pOnant dilTerences between the two periods as well. The illlernationalisation of linance out of London was more extensIve and deeper 111 the earlier period than it has been III the current penoe\. Bnllsh hanks alone had over H,OOO branches around the worlel. Secondly, the .Junciical eIIlpll'e form of externai expansion is no longer viable: direct controi of populations 111 the South can no longer be sustained by impenal centres: institutions like the Il'vIF, the WTO, bilateral secunt\· Pacts and mult1l1ational companies must be lIsed ill combmalloJl With ,Iundicallv so\'erelgn states wluch a're then reqUired by the imperiai system, as wt:ll as hv lIlternallonai law, to shoulder exclusI\'e responsibility within their terriwl'\' for whatever the resulL~ of interacting WILll the core economies may be. Thirdly, the lIlternallonalisation 111 the earlier period look place in a COIItexl of extraordinary stability of the 111ternallonal monetary and linanClal system of the core, unlike the chaos of the Dollar-Wall Street Regime. Bm the l)1g q .Iestlon for historically-minded American policy-makers 111 the 1990s has been whether there wouid be two 1110re parallcis between the earlier period and the curren t one. First, III the earlier penoel, a challen~l' to Bnllsil power came from withm the core 111 the I()rm or the First World \Var; Britain survived this challenge, but was fatally weakened as a ci0111mant power in monetary and financial relations. COllld a sllnilar kind of challen~e face the US? 13m secondly, Britain 1~lced a dilferelll kind of challenge from the Ilew grO\~,th centres, The counu-ies m thIS group included such dominIOns as Canada, Australia and New Zeaiand as well as other states such as Argentll1a, Japan (/m/IIil' USA, The USA took the exported funds fro111 the

PO\\'ER POLITICS AND TI-II-: (:UNTON A[)lII1NISTR-\TION

core and seIzed cOlltrol from BnLaIll through helplllg It cope with Its challengers III the European core. Could thIS happen again in. of course, a 1I0\'e1 Jilrm? It is not too difl1cult to perceIve actors that could reproduce for the L1niwd States both the kinds of challenge that had faced Britain: the first could be describeci as the monet;]n--linanClal tIll-eat; the second, the Ilew prodIKlJ\'e n~nlre threat. I) TlII'jill(II/(/(//-lIIolIl'iary (halll'lIK!'

ThIS challenge could anse above all {hUll the cOlllblllalloll of the cOllstruction of 111'~ euro With linancial instability within the United States Ilsell~ A serious :\mencan finanCIal crISIS could turn the Dollar-Wall Street Rcgllllc 1I110 lls o]JpoSIlc: there could be a Ilightli-om US Treasur\, bonds. prompting a flight from the dollar feeding back into a realh' serious US IC)l-elgn debt crisis: if somethlllg happened to produce a rlrvlIlg up of US finanCIal markl'L~ rm- foreign borrowers, the latter might dUlllp Ihe Treasury bonds they had been lIsing as a sa/(' haven for their dollar reserves. There could be a double clfect: the costs of servicing thc US debt in the dollar market l(u- Treasury bonds would soar, as Illterest rates silot up; at tlw same lime 111terest rates 111 Europe would EIII as people dUlllped dollars li)r marks (or eums) _The liS has to ser\-ice its debt by bor.-owing in marks and yen, yet has a current accounl de/icil ",nh both t.hese CUITenn- zones. At this point, people beglll to worn- abolllthe medium-lerm flllllre of the ciollar. anci the glg-anue mass or green backs now all oyer the world aher a quarter or a CelllUry or the Dollar-\,Vall Street svstem would gIve the cnsls a new qualit)' as people all oyer the worlel started to nee the dollar o\'erhang: In sllch a situation the dollar could begin to resemble the rouble - a C111TenCy whose /:111 seemed to han: no /loor. ThIS, of course, IS a lIIghtlllare scenano. Imaglllable olli\' III the evellt of a collapse of the Amencan linancial sYstem or Mexican proportions. Yet the sallle results could occur over a longer penod ill a senes of J:urly sllIall, Illcrcmental jolts, And the end result would be the same 111 enher case: American polin--makers would wake lip one day to Elce the Inescapable /;IClthat world leaclersillp had passed e1sl'wlwre _ This trelld could, or course, onl\' occur if there was an ob\'ious alternalive global currency to the dollar. Such all alternative could not be the vent because desplle the ullmatched size oIJapan's financial surpluses, its domestIC finanClai market IS 1;11' too small to support the ven as a world currency and the Japanese eCOnOlllY is rather closed 111 trade leqlls - its exports and IlllportS arc a small proporlloll of its GOP. But the curo could be a \'(:r~' clil~ J'erellt malleI'. It could C]lllCklv establish itselr as a Jl)'~lor international ClllTenCY, backed by large current account surpluses and larg-e capital exports. And if its finanCial markets were III leg-rated. the,- could quickly

7·1

TI·II-: (a.()I\.-\l.lS;\TION (;:\1\11\1.1-:

rival Wall SU'eel as sources or inlernal10Jlai Jinance. v\'crc the Ell thcn to adopt tough IIIterpn~talHlIls or its laws on reciprontY in rights lill' roreign finanCIal Sl'j"\'lces operating within the ELI, it could curtail the operations or LIS banks and other linanClal operators wHhlll the EU lIIHil II!; opera(()rs gamed equal scope m the liS market (which the,' do not han' at present). TIllS prospect IS. (0 put it mildly, all uncolllfortable one ror an\' liS govern III I.' n t. 2) '1'111'11('111/11"(1(/11(1111{' (('lI/n' IlIrf'lll

ThiS IS a seellllllgly less uq~elll threat, hut a Illore dangerous olle. It would arise rrom the snnbiosis of.lapanese capltalislll wnh the growth centre of East and South-East ASia as hoth become the cc':llLl'e of grayity of the global productIOn syslem, making the prolitahiliLY of American capital dependellt upon Its links with the reglOll, while simultaneousl" reoq~alllslllg the IIlternational division of labour III such a way as to place US IIlcIustrv In a subordinate posHlon: the iug-h prestige' pOSitional goods' - the high status products for the IIlterllatlonal wealthv classes - and the fixed capllallO produce them would he East Asian. This LhreaL could matenalise WILli speCIal rorce in the e\'ent thaL a rIng- was thrown around.lapan and the regiun In thc form of a yell-zone cum trade bloc along West European lines. Suddeniy the US could find I1sclr raced with collecLive resIstance to Its efforts (() use lis political muscle to break illlo strong- poslllOns 111 the reg-H)\). The DWSR would be CrIppled Iw tile yen-zone as a source of Ieyerag-e while .lapan, not a debtor coulllry, woul(1 be g-eneraung huge financial resources for productl\'e lIl\,eSUllent. And the nnance Illilllsters or the South and even rrom the US would be queuing in Tokyo for Ill\'estment and finanCial support. while the offices of the 11\,117 and World Bank would be occupied onlY wi th a dWindling" band of eXclllSI\'e US dependenCIes. And the Japanese rq.-\"ional ieaders could be happy to help the United States soi\'e all liS problems or manag-ing Its decline, as the US had been WIth Britain earlier III the cenllln: they could en:n prop up a Dollar-\Vall Street arCa analog·tJlls to the Sterling--City of l.ondon area pmpped up by the LIS in the postwar vears. Both these pOlt:nUaililreats ha\'e been central preoccupations o/" US pulin' IIltelleCLlIals slIIce the late 19HOs, or course, they were nOlthe onl)" topiCS or discuss\OII. The US had huge poliucai n:sources lill' cOlllballllg them alld lilr reshaping- the posL-Cold War worlel ill ways Lhat would ellLrench the US as the donl1nant power throughout the lIext cellLun-. Alld SIIlCt' the US has lhl' lowest lax I,Hes 1Il the advanced capitalist world, IL could take the needed structural measures - a sharp Illcrease 111 the share of taxallon m GDP. to pUI ils state finances 011 a sounder j(lOllllg-. But the ic\'el of poliC\' analysis and debate as the Clinton Adlllllllstrallon came IIlLO onice was quali tauvclr dilTl'rent from t he past: the Issues I () be

1'( I\\'F.I~ 1'( II.ITICS .-\;>\ll TI IE (:UNTON

.-\1l7l":-;ISTR.\TIO~

addressed WlTl' II(J IlllI~er thosl' or illlTcllIClIlaltal"llcal a(\ill~tlllelli \\'ILhlll a 1;1 q!;l'l)' g-II'C n SI ra Iq!;IC l'll \'II"OlIllll'lI I, Fill II laml'1I Iill, 11ISI er or supports \\'Illch Ihl' Ell was Ilulikell' 1(1 acqllllT Q1l1ckl\': il ,~olid polilKal h,ISl' lhat could Iw cOllllled UpOll til an as a smg-Ie polil1cid 111111 III a cnsls: a Ill,~ior militarypolillcal capabilily illllOllonHlIlS rrom the US, somethillg- 011 which therl' werc Il'\\' slg-ns or prog-rcss: a unilied and powerrul finilllClal sector, hutIre"sed 1)\' a 1I11ifil'd politIcal allLiwrJ[\' - SOJllcti1l1lg a IOllg way oiT: a cohercllt and politlcalh' il('ccprabie dlJllll'stll' Eurolall(leclJlltIllllC ami socIal plllic\' framcwork, sOIIll'tilmg- \\'Illch spllulalll'ouS nlarkcl (('rn's 1\'()Ii1d leud 10 uudcrmille: a meaus or exiting Ihe IOllg Europeall slag-lIalloll, sOJlll,tlllng' that thc ECB was hanl'" likeh' (() produce: a llleallS or l"lIding lhl' polillGllI1' dislI1Lcgral1\'l' leIHlellnt's \\'lIhll1 Euwiand polil1cs, 1\'lInl'Ssl'rl 1)\' the growth or Lhl' extremt' Right ,lIld Ihe deep splits Oil sueial polin- alld Ell-WIde cll'II10nalll' IclcIILlt\': pl'l'llaps Illost cripplillg, Ihere was tht' )Jillt'lJ\\'ork or lOrn or shallt'll'd sonill illHI l'l'OIlOllll!' SlnlCllln's III the e;IS/l'I'll pilrt or the l'llIIII1Il'11l illlcl Ihe l'\'ldelll IIIGtpaClI\' III' till' Furoland Slilles to l'H~1l beglll til ol'li:r a COIU:'ITllI, Sl ... IlIUS allswer III tilese problems, Alld linally. \Yest Europeall leaders had such ,lIl elldless ClpaClt\' 10 bIcker aJll()Il~ thelllselvcs Ihal it did 11111 t;Ii;.l' /lweI! Oil thl' part ora US admillislralloll to throw IhclIl JlllO sixl"s ,\lid Se\'ellS, i'.kallwhile, LIS capllai lIot lIlll\' hilt! \'l'n' easl' arn'ss Inlo the EU markel bUllhe eXlsLlI1g ELI polil1cai stnlLlun' \\,ilS all l'XLrcllleiy 1;l\uurahk ()lIt' lill' US opcr;l/ol's SlIltT al liS hean II';IS a (:OIllIlIlSSIOll IIIICOIIIrolled h\' ELf 11I1l'rllal cit'lIlolTallc IlIcchanisllls, lixatcd on <1I1l' problelllatlc - dcrl'gulal1011 10 assIst trallSllatlollal busllless - alld therl'l())'l' l"asily caplurcd b" the II1l1ut'lIce or the LIS Ir;llIsllawlllalclIrpOral1olls, Tht' East anrl SOllth-Easl ASlall reginll sCl'nll'ci al lirst SIght (() Iw less JIlcnill'JIlg- bccausl' or liS political rrag-Illt'lIlalion, Yel then' were LWO sets or powl'rrul alld PO({'1l1lit1l1' cOlllpil'll11'lItilrY SlInallll"tll'Orks IYlllg' thc rl'gHlils ctpllals togcllllT: Ihe IIl'tworks lTlllrJllg 1Ill.1i1palll'sl' hIlSIIIl'~~ and Ihe Ilt'tworks lillki'l1l{ ()\'l'rSl'il~ (:hllll'Sl' bllSIIIl'SS wllh lhl' 1lI,lIl1ialld, ,-\lId till'se I\\,o lIeLworks wcre lTl';1I IIII{ gro\\,llll{ linkages alld l'UlIlp\clllt'lllanl1eS III the Ollt' n'glOlI or I.he world I\'lIh realh' d\'lIallllC aCClIllIUlallllll. Fllnherlllore. the IICIworks wcre lelldillg 10 lea\'l' LIS capllals nul. \Vursl' still, IlIl' llIore advanced l'l'IIIH1IIlICS, pa1'lll'lIbrll' South KorciI, I\'tTl' directly l'atlllg 11110 lIlarkets or core LIS Clplt;liiSI SLTlors, ,-\Ilri [h(' rq,{loII was bl'collllIIg 1-11t"'l'asl1Igl~' org-alllc wllhJapallt'sl' capllalislII, .-\11(1 ill llIost 01 lhl' ('olltltnes tlll'I'l' \\'l~rc barners lit' l'anOIlS kInds to Ihl' liS llclng able Ie) l'slablish liS precillllllllanL lIIJluClIu' \\'1111111 theIr polillcal CCOIlOlllll'S,

76

THF CI.OB..\LlS ..\TI()['\ (;:\1\II\LE

While from the angie ofmaillstream cconOIllICS, the Clinton adlllllll~lra­ lion faced no political-econoIl\v t IIn:"t at all, from t he angle (II nL'o-lllercantilism, threats would be Visible evervwlH:re, But from tiw allgk of our hypothe::ses, the:: din:Cllon of the thre::at for thl' Clilltoll Adnunistration would he from East and South-East A~Ja, And II. was pOlenllall" a verr serious one because rooted III dynanllC capllai acculllulauon which was showmg every sign of moving up the hierarchical internatIOnal diVISIOn of lahour, Of course::, there we::re IIlcenu\'es for US caplL1\islll to swim \\,llh the spontaneolls tide::. SnH.:l' II was making-large absolute g-;lIIlS 111 terms or exports, mtra-structure IIl\'l'stlllents etc. But this was also a kllld Dr danger slIlce the more these absolute gallls loomed large, the III 0 rt' the" wouid make Il diHicul1 1(Ir the _-\mencan stall' to take tough actioll to prevail 0\'('1" the reg-JOllal challengl',

II

The Strategy of the Clinton Administration

Tit" Cli II/Oil lim 11/ (f lid

I/S

G(!llI'ml .'i/(lI/fI'

The:: atlllosphere 111 the Ul1Ile::d States whe::n ClinLOn came mtll pOl\'cr was one suffused with a sense of I-{reat historical drama, a sellse that the Unlled Statcs was EKing a great worlcl-hlstol'Jcal clther/ or, There was the awarcness ofAmenca's gIgantic polI'e::r 111 the militan'tield and in thc IlHlIll'tar\'-IinanClal reglll1e; on the:: other hand. 1I1ere was the challengc of East ASIa and lJncertamty al)ollt Europe::. There was the sense:: thaL tile Unlled Slatcs was about to gl\'e bIrth to an entlrel\' new set or global growth motors throlll-{lt the new information industries and a feeling that these could pia\' the role of the mOLDr car as a 'huge:: pathwa\' to revived Il1tcrnallonal accumulation which the US could hope to domlllate; yet after vcry iaq{c 1I1\'estmcnts III this sector ItS supposed transrormative:: potential for US proc\ucll\,ltr has sllllpir not matcnaliscd. And Ilnally there was the:: tl'lumph over the SOVlct l3\oe and the IIlternaltonal Left; aIHI Yet paradOXICally thal collapsc posl'rl a m'~lor guesLJOn-mark ovcr the means that the US could lise li)!- cXt'rllllg poliltcal lIl11ucncc III the world and consoiidallng that lIl11llenCC throngll inslitutlOns slllliiar to the secllnty zOlles of the Cold ,,,'aI', Tremcndous American IIltcllcctuai encrgy was being dc\'otcd, thereti)J'l', to these strategIc Issues as Clinton came IIllo ortice, As olle polin' IIILe::llcl'ltIal put It, 'cssentially, we have to erect a whole new cOllceptual hasls ror !urelgn policy arter the Cold War.' I:! Others equated the tasks racing Clinton to those that r;\ced Truman in 1945: Clinton, said one writer, is 'prescnt at the cre::auon" of a ne::w epoch 111 worid affaIrs anri 'thc ne::xt half century hangs III thc baiance' .1:1 The Clinton team tl.sclf was not, or course, gomg to spell out publich' how

P()WER POl.ITICS ,\ND TilE CI.JNT()N

,\J)~IINISTRATI()N

77

II COllccptlialisl:d liS strategic problem ami liS stratq,'T anci tacllcs Illr tacklillg Th{' sigm had 10 be I'cad more IIldirectl\', IiII' example, through Clillton\ appClIntnH:nls and inslIllIlional al'l'allgemellls as well as through tis policy statements anrlll1itiatives. Clinton's Lop liJrelgll polin' appollltmenls, like Warrell Christopher (Slate), Alllhony l.ake (Nallonai SecunLY), Madclellle Albl'ight (UN), Lloyd Bensten (Treasury) were ClJI1\'emional. rather passive ligures with links back to Ill(' Caner elays.1-I rvlallV obscrvcrs l\'ol1den:d why Clinton had recein'c\ a rcplltal10n for externai actlviSIll whell Ill' made such pel'sollllCI appolllt1IH.'lItS.I.', Bill lills perception was Ilst:ll' Ill{" product of old thlllkillg whereby fon:ll-{n polier llleal1l whal Ihc SecretOln of Slate or Ihe NS(: chll. . 1' or the Secrelan' of Defelln: die/. It 1J.;'llon:ci lhe IIlstl'llllll:IlIS of economIC statenan, ,'et these were the tnstl'Ulllents \\'hldl Climon placed III the hands of tilL' d\'lla III It' ac tlVlstS. Thl' lIell' team bnmght in LO 1'.'1(:1(1 the levers of eCOIlOllllC statecraft were a disllncLlve group: Robert Rublll, ROil Brown, i'vlicke\' Kantor, Laura T~'s()n, l.arry SlI 111 I1ltTS, .Ie1T Garlen, Ira r\'\agaziner and Robert ReIch (as well as Vice Pl'csiclcnt Al Gore) had distlncLlYe general approaches to the delcnce or.-\.Il11'l'Ican power: Ir'lill' them. it was about 'the eCOIlOn1\', Slllpld'. Allel ther believed that strengthening American capitalism was above all to be taci:..kd Ihro\lgh Ill(ernauonai political action. In line with thiS was their belier ill lhe Importance, even the centrality or slate-polillcai action II) economic afEllrs: a conncllon tll,1l the slIu;ess of a nallolla-I capllalislll was' path rkpemicllt ami the path COllI([ iw huill of inSllllltHlllS bsllIllIll'd h\' Stales . .-\lIci there silOlIid not he barren cOlllller-(JosILlons of nauonal Slates and Illar(;.et forces: the\, should worlz together. help each other, whether in tecll110101--,':'. trade or linance, They were not classical natIOnal proteCtlOlllsts, but the\, were also not free traders. The term used to descrihe the school or thoug-ht represented by thiS team was 'globalists\ promoters or a kind of global nco-mercantilism. The new concept was that CompelltlOIl amongstaLl'S was shifting from the dOll1am of political-military resources and rl'lalIilllS to the lield of control of sophistlcatcd technologIes and till' riollllllatroll of lllarkets." Tht.' nallll'l' of the new game was ,tiso ,!!;I\'l'n a nallle: ',!!;L'Ol'COIHllllICS', Lloyd Bens\eJ1 may have been ofa different gelll'rallOll ami ora dilkrenl hackgrolllld j'rolll tht.' others, l>tll hL' also silared a 'g-lobalisL' Vlel\'. Till' olltlook oj' thIS new team I\',IS expressed 1Il hooks like L\lIl~\ Tvsoll \ "'l1O \- IJtI.\hi 11K IV/Will and bva host or other such works b\' those wllhlll or dose to thl' adlllllllstratioll. ls The ollliook I\'as orten l'xpress~d most hllll\ll\' by Clil1loll's Ilew US Trade RepresentalJ\'(.', iVlicke\' I';.anlOr, who openly argued for a lIew kind oL-\merican Open Door stratq,,'y to ensure thatlhe twentv-lirst cellllll'V will he the 'New Amencan Centur\" As he plll It: 'The days Ihl' Cold War, when we sometimes looked the other war whell our trading II.

or

IH

TI·IE t:l.l)]\:\I.lSATIO:-; (;.\\III1.E

partners Eli led to live lip to thell' obligallllils. an: III·l·r. \!auollal seCllJ"ltl' alld our n;l1ll1l1al t'conOIl1K secunty Clllllol iw .~epar.tlt"(I. . No more sOIlll"thrrlgror IIt)tlllll~. IlO mllrc fn-c riders.' I!I Kalltor's lillkage IIr eXlernal l'l"OJlOJl11l" ()1~Jel'IJ\'l'S alld US Nallorr;11 Se("UJ"lty "';IS rdll"t"ll'c1 III Clinton"s n.'llIlHllding oj" insllllltiolls ill Ihl' con' exeCUtI\'l':.lUst aner Clillton 's lI1aug'urallDlI 1H' created a NatIOnal ECOJloJlJIC Council Il'lthlll the White House aiollg"sldl' the ~alional Sccunt\, (:oullcil. The chOICe or name was deslg"lIed to indicate t.hat Ihe IIl'W hod\' would acc)llire the kind or nodal roll' III LIS gioilai strate!,'")' which the NS(: had played dUring Ihe Cold War. At the sallie tlllle Congrcss Illstnlcted the COIllIlll:rCe Departlllent to set up till' Trade Prolllollon Co-ordillatillg COlllmlttl'e (T(>(;(;) to co-ordinate IIl1leteen LIS g(}\'{~rlllllCJlt agencies In the area "r conlllll'ITial policy, Instructive aisil was till' [;lCl that the head or till' Natloll,1I ECOIIllIllIC Council was to he a n:n' expl'l"lellced hedgc fund speculator. Robert. Ruil\ll, forlller sellinr partner III (;oldlllan Sachs, thc hcdge hllld masqueradillg as an Il1\'cstlllcnl bank.:!o ThiS ga\"l' the Clintoll tealll prlllle links Wllh Wall Strcet. Thc wav tilal the Clinton adllllnlstralloJl ddilled liS approach has hlTII sUlllllled lip I)V SOll1conc who was 1I11L1alh' part or ii, DaVId Rothkopf". He has charal'll'rtscd the Clinton adll11l1lstration' s ne\\' Illtl'l"llalional strateg~' as OIH' of 'ManIC l....len:alltilism' :!I Stanley HolTmall makes a sllllil;u' POIlI!, 1l0\Jllg the ne\\' US aCtiVIsm in world eCOIlOllllC ar!;urs ullder the Clinton adlllll1istratloJl alld its drive to ope)} borders to US goods. capllal and ser\"ices.~~

TIl(' Simllgll" FO("/Is (III ElIsl fllld SOlllh-Jo.'ml .. 1.1'/(/

It has bCl'1l wldch' sllggeslccI throughollt the C1illtoll Presidenn' I)\" mall\' altCJllJ\'c ohscl"\'ers lhal liS erforts III CCOIlII\llK slatecra!"t Ita\'e bcen Illallri\" directed at olle particular gcugrapillcal area: East alld South-East ASI". Rothkopf suggests tit IS was the Ill;UIl l11olI\'c fOI' til e enl1 rc d I"I\'C, S;l\'lllg: 'Collllllercial dipiolllac\', howe\'Cr eldil1l:cl ,lIlel practised, owes liS dc\'dopnll'nts as Illuch to the rise or A~ta 's elllt'rging econOIllles as Il docs to an\" othcr /"actor.' East and South-East ASIa \\"lTC o/" deCISI\'C IlllponanCl' if Ihl' United States 'was to mailltain its CClJ!lOllllC Ic;rdcrsillp :!:\ The (:lintol1 adllllllistratioll Ilcvcr admJUcci CJlllle thiS, or cOllrse. [t claimed IIlstead that Its targct was to bl'cak IIlLo what It Gtlled the 10 Big- Emerg-lIlg i'vlarkets (BEi\'!s): blll SIX or the tcn werc ill Asia: Chllla, Illdoncsia. Korca. Thailalld. i\laJa\'sia and Illdia, or the other (illlr, lite Unlled Statcs alrcadv had two: rv!<:x!Co and Argentina. A I1IIlt.h, Poland, aClllall" Jilllght Ils way on 10 Iht' acilllllmtraW;1I s list. That left only Brazil Olllside Asia as a 1Il'~Jor Iaq-\"e I or Alllencan IIltercst. So i)asically, the list or llE;'\\targ('ts lIlealll ASia. The Clinton aclIlII IIIstl~1I lOll targeted 1.!1 Iri \Iioll to S~ lri llion of ('Oil llllL'lnal oppOrt 1II11lll'S

:s

1'00\,EI~

1'( )I.ITI(:S .-\\!Il

Til E (:L1 :--rrc)i'I . \Il:-'II;"\'ISTR ..HIO'i

79

ill Ihl' world's l'IlH'l"~III~ IlIarkl'lS with S I trillioll III export opporllllllty lar~els, ;\ccordillg to Rothkopl" LIS '1IIIClli).\t'IICC ;lgCIlCIL'S were drawlI 11110 thl' COIIIIIILTcial fray, promiillg allairsls ;\lId Olhcl' !(lrlIIS nraSSISlalln'!il!'lhcsc d!i'r!S':2,1 The BE;\1 stralcgl' was lirst otlltillerl Ill' L1ndersl'lTl'lan' 01" COlllllll'lTC for IlIlerllallollal Trade ,ll'Il (;arll'lI, III a Jalluary I~J~)-! speech to the Foreigll Polin ASSOCIation III Nell' York, Johll Strelllbu, lkplll.\' Director of J>ulicy Ptanlllllg al thl' Statl' Ikpart Illclll , 19H~J-9-1, pOlllled out that allhuugh it appeared ullllslIal for (:lilll(1I1 to dl'lilll' his 'Ii)rcign polin' doCll"llle IIllerlllS of special LIS illterl'sts III a 1illlIL1'ri lIullll)n of key counlnes' Reagan had lar).\l'h' dOlle so 1)1' laq,~l'tlll/-{ Aig-hallisiall, :\n~(Jla, (:"mi>odia and Nicaragua, Slrcllllau pllllltl'd (Jut thai IlIclOlIl"SJ;1 had hel'n singled oUlli,,' spcClal alLen11011. nOI le;ISt hec;llIsc there the LlS was losJllg markl't share 10 IhL'Japallcsl~ alld the Europealls, I-Ie also l'xplallll'd that thl' US drln' Illto IIIr\OllCSIa 'could cOlllplicatl' lIS rclatlllns willi Japan, which "iews Inc\ul\l'sla ;IS 1)'1Il/-{ wllhlll liS sphcrc or illllilelllT Thc key word was to hrln/-{ about l'U1i1U1lI1c allfl polilil'aln)ll\'eq~l'llce' Iwtll'lTIl the l'lll((,d Slates alld the larg-etecI states: III othl'r words lr.lIlsforllllllg the dOllll:SIIC l'COllIlIllICS .1Ilcl polillCs of tllese states to aChll'\'l' ;1 kllld of (;/nd'.l't!lfIltll II,!!,' het\\'l'l'll thell! alld LIS capItalism, As SlrclIlbu PUI Il: 'Clillloll arllllllllstralloll str.ltl'glsts seelll 10 have cOllcluded that dOllll'Stll' IlllpeJ"atl\'es alld IllllTIl.llHlIlal rl'alilleS n'qtlll"l' a IW\\" alld Illorl' subtle HTSIUIl of "dollar diplolllac,'" - greater LIS n:onOllll(' alld polillcal cOll\'ergellCl' willi till' fc\\' COUlltrlCS lhal lllakc up \Octa\"s Big ElIllTglll/-{ i\-\arkets, Success Oil all those diplolllatlc frollis IS as daulltillg a lilreign polin- goal as all" III t he COUll 1.1'\' s Illstor\', hu t success l'Oltid Iearllo a cell t urI' or ullsurpasserl prospl'rI 1\' and SeCllrl ty for the U II i ted States, ... ~" The Clilltoll acilllllllstralHlIl opelll\' callecl 1"111' a partllership Willi LiS husllless til break Into these lIlarkets ;lIld COllIllll'lTl' Sl'lTl'tan' ROil BrowlI c1in:ctl~'llq.{cd LIS clllllpalllcs to sl'ek political help rrOIll the "dllllllistratioll flll /)(Irllm/(/r ((Jlltmdl. III "ddillOll thl' Ex-1m Balik. 01'1<': alld llic' Trade Ik\'l'Iopllll'lIt,-\~ellc\' Wl're geared up lill- prol'1dill/-{ Priority aSslstalice to LIS COll1pallleS Sl'l'ktllg l'lIln' and dOllllll;ltH))) III Illarkl'ts III the BEi\h. Bllt tillS could olll~'lw a III II 11 II' detail. Accordillg \II a sllub' cOlldllned Iw the Dutch Sl'CLHHl III till' Illterlla\lollal aSSoCiatloll or Atlalltlc coullcils (lhl' ci\'iliall 0Plllloll-i"ortlllllg anll ur NATO), tile Clilltoll adlllllllsiralloll's kcy COlln~pt III lis t'xterllallTIIIllIllllC slralcgy was thai COlllpelllltlll amollg stales was shirtill~ rrolll the cClltrality of polillCal-lllilital'\' reSOllrces to lhL' field of COli trol of soplllsuclll'd technologies alld the dOllllIl:tllllll oi" markets. ~I' This \'IeII' closely correspollds [(l ollr hypotheSIS as tll thc ratiollale:":terllal stralq.,'" 1'01' Iht' LlS ill thl' I ~)~J(Js, directed lowards East "lid ~olllh-East _-\Sla, The hlg prohlelll was wllat IIllX of Lll'Ill'S the liS cOllld dcpl()~' to r1l'C1slvl'iV open i1lC regloll lip to L1S lll'gl'lIltlll\',

TarlnuIO/J/wl/.\·

\Ve can outline some optIOns availabie to a slate with the resources oj" Ihe USA li)r hringing tite poob o/" labollr and markets of the regloll pcnnaIH.'lItl\' lInflcr 1111: sway 0(" the US ami liS r:COI1(1)l1C operalllrs. I) ~)

:,3)

-I) S) Ii)

7)

The okl Europe'lIl lin penal powcr approach: direc! military coercion and sllt)ordinatiol1. Bngading the Slates o/" the n:glol1 IIllO a US-led alliance ag'lIllst sOllle externai t.hreat: the claSSIC postwar US approach to gainlllg hegemony o\'er key centres o/" productIOn. Lallnchmg all-rounel economll: warfare ,Igalllst t.he rt:glOn (including oil-war like that used by the Nixon admllllstralion against Its 'allies' ill the carl)' ] 970s). A more radical, ,IClI\'!st stratc).!;K use or the l\lultilatl'rall)r~'\Il1sal1ons, Usin,~ a n1lx or carrots and .~II!:ks III bilatl'ral and regIOnal e('ll1101l1ic statecrafL. SceKlIlg dOlllesllc SOCial linkages III targel states through propag;\IIda, Using the lIlstrulllenl<; il\'ailable through the DWSR for CUITenC\' and finanClai war!;\I'C.

We will bnell)' survcy each of these possible IIlstrulllents III order to gam some InSight into the tactical dilemmas of the Clinton adlllilllstrallon. /) JJirnllll;fiifll)'

nll'ln/JII (lIltf

.wf)()rd;lI(l/wl/

ThiS, or CDllrse, W(\S'not a serious optioll. but 11 I~ IIlstrucliW' to see \I'll\' not. QUlle SII11pl)', despite the enormolls ;ld\"ances III weapolls (echn()l()h~' and the overwhclllllJlg supenorlly of US military CapaCll\', directlllilil.II'\' coercion /i)lInweci by eITecli\'e coloniai sulJOrdinLlllon IS ullllllllkabte III IOC\;I\'\ world. The lirst reason IS lhat as the US milililrv's capaCity \(I kill n~cs lowards !lllll1lty, its capaCity to die sllll~~ IOwards zero. Ami to directl\' ulIlt.rol popu'talJons and deal wllh popular movemenl.<; III the cOlltemporan' wodel requires that militarr forces have a substantial capaCIty to die.:!' The rise or the world's population to political awarl'ness and thclI' acqtllsitHIII or S[)Illl' free lillie rules OUl the old 1Il11ett'clllh-cclllury tactICs Dr the gun-boat ;111(\ coiolllalislIl. The a'ttern
1'( JIITR 1'< J( .ITI<:S .\\'0 Till·: CLINT( IN :\II,\lINISTR·\TI< IN

did 1l0l exisl ill a n:g-HIII CI~JO\'I1l~ llnparallelt'e1 ecollomic aelv,lIlce and f~lCed by 110 significalll dOllleslic social lhn:aL~. \;:1 if bOlh lhcse l
(lS.I"1'i1

US-hi (/f/illll/'/' IIWI/II.I"I .1"/111/" l'xlt!/"II(Jllitrt'(ll .W US I)m/I'r/IOII Ihl' slm,'.I" ffll/l"I'/"II/,r/ ojll'lI 1111'11" I'((JI/IJIIIII"

/1110 (/

/1/ 1'.\'r/UlIIgl'jill"

/0 [IS IJ/J/'mlof\

ThiS IS tile claSSIC tiS laCtiC ol"the Cold \.var pel'locl. Salllul'lI'hlllllllgtOIi has cxphullcd how US laCllCS worl,eel: 'Westerll Europe, Lalin AlIlerica, Easl .\SIn.:lla. II' a cOllmr\" depel1(ll-d 11\1 the lIlIilcd Statcs ("or St'Ulflly prolection. il dealt Wltll thc lI111led Stales on trade and comlllerciallllallcrs,'~!' The cnican 01' the laClK depelldeci upon two condiuolIs: first. the abilil\' or lhl' us til persuade the local dOIllIl1.UlL social groups lhal till'\" Eln·d all l'xtl'l"IIai lhn:at: and secolldl\', IhL' US's abilit\' [!I persuade Llwse S,II11L' g-roups thallhc lIS and onl\' the LIS had the I"l'SOIlITCS [!I COpt' with lhc threat and Ihe will to do So, III \Nestcrn Europe the lhreal was, of" course, the Inlernal-exlernal one or {:OI1lIl1UIllSIll and the d01ll1ll
HO

TI-IE CI.t >1\.\I.lSATI(),'\1

l;_\~IIIU_

TII(/lwIO/III(lJH

\Vc call (H1Lline sOllle OpLJOllS availabie to a slale wnh the l-eSU\I\"l"l'S oj" tht'

l'.sA ror bnn~lIl!; the pools of labour and marla:h oj' lht' rq~I{)1l pL'rtHa1lL'11l1y under tilt' swav of Ihc US alldlls eCOI)()llllt operalllrs. I)

2)

:"))

-I) [j) (i)

7)

The oid Europcan IIllpenal power approach: dircct militarr COelTlOIl amI subordination. Hngading the slalCs of thl' region \\lIn a US-It-d aliialll:l' ag-allisl SOI1lt· externallhreat: the ciasslc postwar US appro,\ch !O g-alllll1g- hcgcll1ol1\· over key celli res of producllon. Launchmg all-roulld eCDllomlC warfare agall1.~t the n:gJOIl (includingoil-war like lhat lIsed lw the Nixon admmislrallon against lis 'allies' in the early 1970s). .-\ l\Iore radical, acLtVlsl stratq~lL usc oi" the lllulLilater'll ol").!;:llHsatlolls. USlllg a /1UX o/" carrols and Slicks III hilaLl'I"al a!ld n~glunal econolllic sta tCG-aft. Secking domestic sociai linkagcs III larget statcs through propaganda. Using the IIlstrlllllenls available I hl"Ough the DWSR fiu· ClIlTCIK\· ami financIal warEln:.

\.ye will brrelly survcy each or thcse possiblc IIlstrlllllCllts 111 DreIer to g-aill some inSight IlllO the tactical dilell1mas of thc Clinton admilllslr'llioll. I) Di"'1"1 lIIiliwry nw,.("/()I/

111111 slI/l(mlil/lIll1J11

ThIS, orcoursc, wa~ nOl a scnous option, l)lll It IS InstruclIve to see wl1\· IIO\' QUIlC slmpl\', (Iespllc the CI10rlll0lIS advanccs in wcapollS let"hl1olol-.~· anel the overwhclllllllg supcrIority 01" US military capacny, dil·CCl mililal"\' cocrciOIl followed b\' dlecl1\'c colomal subordination IS uIHhmkahlc III today's worl lInpose dependent gmups 111 power who will servc US buslI1css IlltercSLS. But such aClivJt~, cannot be cDI~jurcd Ollt oj" lhe 'IIr: it u!;lIaJlv rcgulrcs the eXlslellce of a perccl\'cd dOll1e~lIc threat (tradiltOllally from the Left) whIch thc ~tl\'Cnllllenl 01" lite day IS PCI"CC1\'l'c1 b\" a ~r()lIr \\"Ithin liw do III 11\;1Il I. class as (;tiling to flt'al wJlh. Such preconditIOns

,'{I

1'()\\'E1{ PC II.ITlCS :\,"iD TIlE U .INTOi'< :\/l,\/I'-JISTRArII IN

did lIot exisl in a rq.\"lon el~J()vl1lg unparalleled economIC ad\'ance and I~lced b\' 110 slgniIicallt domestic sOCIal IhreaL~, \i:1 il" b0111 lhese t:IClics are 1I1l;lyailable, there seellls to be all irrcsoh·able dilcllll1l,l: glVl'1I Illat sl.lle S\l\'CIClgIllY has to Ill: accqlled, thc LIS has 1\0 cJWlce hUlto adlll'\'e Its goals I\'IUllll them stales 111f,lI/gll the eXlstil\~ dominallt SOCIal class \\'Ilhlll them, The problem LhllS I)ecnmes one of how lO chang"e the onel1taLJoll of these dOlllinant sonal grollps, 2) fjngru{illg sIal/'s /1//0 (/ US·{/'{{ (/{/;al/u' agalll.l/ Iltal /II I'Xdlflllgl'j;)" (lS.\"('/.1 /(}

us /lroll'fllOlI

SIIIIII'/',\'/I'nwi

11,,.('(//

.If/

Ih" slr/I,'s fllllnTIII'r/II/1I'1I 11t"11' ,'m/WI/IIC

lIS o/II'm;1I1"\

TillS IS lhc claSSIC LIS laCllC III" tilt' Cold "\'ar period. Samuel HIIllllllgton has explal\lCd hoI\' lIS lacllCs worked: 'Weslern Ellrope, l.atin Amenca, Eas[ ASia, and much or Solllh ASia. the i\/iddle East and ;\I'rica rell \\'Ulllll whal was ellphenIlSlIl'aJl\' referred to:lS "the Free \Yorld", and ",hal I\';IS. III fact, a SeclIl'llr ZOIlC, The go"eJ'llllll'nIS \l'lllllll thiS 1.01ll.: /()\II1(1 It III Ihelr 1I11erests: (a) to accept an expliCit or IllIpliclI guarantee iw Washlllglon or tilt, independeIlce of lhelr country and, in SOllll' cast'S, the audlOl'lt\' oj' the go\'ernml'lll: (h) III PCI'Illlt access LO thell' COUll I!'\' to a \'ariel\' or liS go\'L'I'Illl)CIlIal and nOIl·g()\'l:rnIlH'IlI.li org;\lHsatJlllls pllhillng go"rs which thost' org;\Illsallons cOllsldered important. The grl'at 1)IIIk or the [olllllnes or Europe anet the Thll'c\ ''''orld rOlllld the a(l\'alllagl~s or lC\I1Snall(Hlal access to oUlwClgh the costs allemptlllg to stop it. ':!H .-\11(\ as Da\'ld Rllt hkopl' has a((ded, In Lhl' postwar wars' Pax ,.\Illl'l'Icana· Gillie \\'ilh all IIllplicll pnce tag to nations that acccpted the l'S ~L'l'unl" UlJlhrdla. If a COlllllr" depended Oil the L! lilted States 1'01' seellnt\' protecllOIl, II dcalt with tllc Unlle(i Statl's on lrade and [OllllllcI'Cial 1lI'lIll'rs.':!~1 The el1ican' or lhe tactic depended upon two cOlldiuuns: first. the ahility the US til persuade: tIll' local rlomll1ant sOclai groups that Illl"· faced all external threat: and secolldh·, the US's alJilit\' III persu;lde these same grollP~ lh,lI lhl' LIS ,md only the LIS had the r<:sources to COpl' with the thrl'at amI the will to dll so. In \VeSICI'Il Europe t.hL' Lhn.:at was, or UlIlrse, the lI11l'rnal·extcrnal one COllllllllntSIll and the dOJ1l111anl classes or Ihl' I'egloll llL'cded little persuasloll - Oil Ihe contrar\' the\' were III lllallY cases i>egglllg (III' LIS inter\'CtllHIII.:1II The distlllClIye US org,ulIsatlOnalll1orlcl the g-ianl curporalion could thus enter foreIgn laholll' and pror!lIcl markl'ls. spn'acling lirSl to Callaria thcn to Western Eum]Jl' (filcilitaled by the EC's rilles amI redewlopmellt) and IIH~)) 1111 to othcr parts the world, In tbls way. r.lIher Ihalllll the pl'lIll1tive militarist conccpuollS or n:alist lheory. militarr powL'r played a cenlral roie III postwar capitalist power politICS. With the collapse of the SO\'l<.'t Bloc, the Bush adlllllllslratioll had sl.ill Iloperllilallhe linlteri Slall'S roll' as rOl1trolkr OrSl'!'lIl'1t\' ZOlll'S alld wll'kkr

or

or

or

or

or

LH)

0-

TilE (;J,()I\AI.lS..\TI(lN (;:\\1111.1-:

of enormous militar\' rl'S(lllrCeS could remaillapotelltlllstl.llllwllt for strengthenl\lg the position 01' :\lIIencan capllalisl1l \'Is-i\-\,IS liS CCOIlOIIIIC rI\'als. /-lis greal efrort.s,to ensure that a 11111 ted (;erl1lam' remallled III NATO were followed by hIS war agalllstlraq, (Jill' ol'wlwse malll g'Oals was to siloll' tile rest or the capital world that Il had to l\'l'al the lI11l'l'ests or us capllalislll with respecl. But thIS was a 1;llsl~ dawn, \Vitb Ihe collapse 01' Ihe Smwl L11\101l itself, the US's abilitv to make poliucalusl' ofilS extraordinary milit;lr\, SUpl'l'l(lrlt\' was bound to dilllllllsh. It has IlO!, of course. disappeared. The EIl'I thaI lhl' LIS has l1lililarl' resources todar greater than all ofWesterll Europe, Cllllla.Japan alld Rllssla put together is a fUlldamental filct ahout world polillcs. It IS e\'JelelltI\' dell'rmilled to retalll Ille capant\· to lighl and pre\'ail III a war agalllst Iht' combll1ed forces of Russia alld CllIlla.: 1I TIllS IS not. of course, because" wIshes a war wilh these two states, But if these two slates did Ii,rm all alliance 111 hostility to the capllalist world, the US could cash I1l lis strategIC miliwl'\' power politIcally again, by beillg ahle to bnl-:ade lht' rcst of the core Illore linnl}' lIlIder its influence. And tIllS militarY powcr also has anotiler \'en' nnponant function: it can deter Its allies' from mak.inl-{ IIlternauonal political alliances which Illig-hi lhreaten US capitalism, Whcn Germam' ali(I other parts or Western Europe seem cd III the late 1970s to be IIIO\'lIIgtowards a nell' regime of deepenl11g eCOllomlC cll-opcral.1oll wllll IIll' Sm'icl Bloc (in the face of the economic siag-natioll and the clJaollc condilions of the DWSR at the time), the US had been able 10 cut the 1ll00'ClI1ent dead w1lh its battle cry agall1st the 'FinlandisaL1oll' of \Vestern Europe, WILli Its mIssile deplovI11e11ls in Germany and Italr and with Its general olleIlSI\'C III the second Cold War. ThiS, III IlselJ', rules out either oflllC two other triadic centres evell cOlllemplatinl-: mounting a direct challenl-:e to .-\ml'l'ican leadel'sillp or world capitalism. Neither (;erIII a 1l\' 1101' Japan has sho\\'n lilt: slil-:iltest hint or an interest 111 such all advelllllrc. But the problem Ii II' the US has not been stoppll11-: llle olher triadic powers from mounting a direct polil1cai chalknge. The pnlhlem has bl'l'll losiI11-: political leverage to secure its ecolloIllic IIlterests II'lthlll llleir Ill'lI'. post-Cold War hllllcrlands: East Central and EasleJ'1l Europe amI Easl alld South-East Asia. Insolilr as sucll rCl-:lOllS (;\("e Illl exterllal dln'al whose tackling requIres military n:sollrces slleh as oni\' the US call sllppl\', the instrUllH:nls of Cold "Val' diplomacy lose thclr dli('ac\,.:I~ In 199:~ the Clinton arllllllllstratioll did attempt to use thIS Cold War-slvk dipiol11ac\' 11\ East Asia through using a c1oul)Jc-barrelled approach. It SlIlIultaneousl\' raised two threats: first, the supposed danger lo Ihe rq~i{)n Or;\ NOrLh Korean nuclear strik.e; and secondl\', a lower-Ie\'el kind of 'lhreat China's hlll1;;\ll nghls behavlour.: I:\ Both, or cuurse, had an all!l-CUlIlnHlIllsl l1a\'ollrmg. These d(~lllarches were coupled WIlh a clrln.' to brll-:ark- lhl' 11011COllllllUllIst East and South-East Asiall COUllll'les. mcludillg .Iapall. illin a

I'U\\'ER 1'<)( .ITICS .-\NIl THE CI.lNTON .-\IlMINISTR:\TION 1l1'~I()r cln\'e to opell thclr economics to the US "'!lhm thl' so-called Asia Pacific Ecollomic Co-operatioll (APEe), the aUll oj" ",Iueh was both to open lip the economics of the region III ways which t;IHlllrecl US penetratioll and to weakl'n the Impuises towards rl'glollaleconomic co-opcratlon wilhiu ASEAN to thc l'xclusioll of the USA.:H BUI these clTOrlS to use thc old Cold \Var tCChlllqlll'S for l'conomlc ol~jec~ IIVl'S failed. Thc confrontation with North Korea mislircc\ as t.hc US discovered that P\"on,",~'ang couid be pushed 1111.0 actllal military conHict as a result or rcar of an Amcrlcan strike - anrlmilitarv cOlll1iu was actually thc last Llung till" US wanted - whill' the US sll11ultancousiv tiHlIld thaI ot.her states III Llw n~glllll preferrcd Chill/'SI' lllcdiatlllll lil'iitll'I'11 P\'ongyallg and WashiliglOll to lillll1g up behmd US iJiustl'r agamst North Korea. It \\,;IS a diplomatic disastcr and humiliation for the US. As ror the attelllpt to Illobilise poliLlcal support 111 thc l'eglOn Jill' an alliance agalllst Chll1a based on humall nghts rhelOnc, thiS on:rlooKed thc (;Il"l that most of the potl'llLial allied governlllents foulld US rhetoric about human nghts distasteful, at best. .-\J"tt~r decianng early III 199:~ that cOIlLlnull1g US-Chlllesc trade rdalions would depend upon lI11prOvements III Chllla's respect for human right<'" thl' Clinton administration tell compelled to deciare a \"l~ar later thal 'we necd to piace our rclallonshlp into a larger and morc producli\'e framework' than olle centred upon human rlghts.: "; ThiS change or line callle at a lImc when \Vashingtoll needed Pekmg's help o\'cr Nonil Korea. But it also came a/"ter a ycal' In which Washington's European allies had refuscd to follow Washmgwn's lcad on thc human rights card and were eager to gam as Illllch cxtra business in China as possible.:\"'

3) /.(JIIIII"IIill/-i

Of

Ih,.mll'lIl1//-i aI/-fiJI/III! I'("(II/OII,,!" i/llllfttrt' flgrllllsi Ihl! Il'g/()"

(indlldill{!;oil-w(//; lilil' Ihai /lSi'll 'liffit's'ill 1111' I'a,.~\, J 97{)s)

/~\'

1111' Nixon mllllll/lslmillJlI 1I,I.!,WIHi lIs

ThiS letea has been mll'nsl\'clv and publici)' aired wllhm Ihl' UllIted SlaLeS III rclallon toJapan slllce the 1ll!(1-1~)HOs, The senollsness orlills was delllonstratcd lw the way III which a public media campaign to Idenlif~'.lapan as an l'nCIl1\' allCl a threat was cleveiopeci I)\" SOllll' Inlluenllal groups wllhm the llniled Slales. Yet a direct, frontal campaign or economic warfare anrl blockade against the whole rcglOn or agalllst.lapan \\'ollid havl' bcen cnorlIIousl\, costl\" and ('01111 tcr-proci lIC!l\'C. The Eu ropcan I)f)\\,t~rs would probably 1I0t ha\'e cO-lIpl'l"alt'd. The GIlllpaigll could han: destroyed the tlSSUl' or US-led IIltcrnationalll1stitutlolis and could h",'c destabilised the Aml'rIcan economy ILsclL Insteaci, the concept of all-round economic warrare was deplovcd iw the Clintoll adlllllllstralilln as a tilreat, a potclllJality, supported hv the assemhling oj" a ballt~IT of illstl"llllwnlS anrl opt'rau()lIal COllct:ptS. These illstrumelllS included mechalllsllls such as Ihe Sllper-:Hll

1'1,1 11l~1 rumellt

for unilateral trade-war, creater! 111 the Reagan perloel. I hl" of so-callcel allll-c\ulllpinp;
-/) ;\1/ (lff/lll,II (/,1111' /0 c//(/lIgl' t/il' III'(),~'''''IJIII/('S

otfhl' JIIulfilaf('/'rI/lIIg(I/I/.\'(//IO/I,1

Withlll the workings of L1le DWSR, LIS adll1l1ll~tratiolls III the 19:-;Os had cxtracl<.'d gains from CriSis-hit countncs in ICrlllS of opel1l1lg their (inallnal markels to I'n:c Ilows oi' in lcrnational Ilmcis, "penlll~ thclI' finanCIal marl,us to LIS linanclai opcl'awrs, opl'l1lng thclr assel markels ror lmy-ollt by liS (or(JOI~llIOIIS and so Oil, But Illese were pleccmcal g;IIIlS assoCiated With parllcubr CO\IIlU'ICS and Crises, SOllle III' the ga1l1s, pal-ulularl\' III relallon lO till" free llllll' or illlel"nallonal Ii. 111
First, cl1;illgmg the programme of the !]\IF lo C()1ll11l1l It tu till' II1111uall' complete dismantling of conlrols on the capllal accolllltm e\'en' COIIIItr\', jelling Ii.lIlds now inlo and OUl or cOlllltnes free"', The gl'eat polilKal

1'00\,ER I'OI.lTII:S AN)) THE (:I,INTON ..\mll~ISTlt,\TION

trlullIph Oil lills lI'as the c\ecisloll at Ule 1l\'IF/\Vl~ gathenngs III Hong KOIll-{ III 1997 to change tile HvlF :\rllcks ,-\g-I(Tllll'lll to COllllllit the 11\,IF to complcte libt:ralis.ltllll\ III thiS way, Second. adding a lit:\\' prog-ralllJlJ.ltIC p'lcka~e LO thl' World Trade Orga 111 sa lJOIl \ pl'llgr'lIIlllle through an agret:Illt:1lt to liberalise Jin;lIllial sernces with the ululllate ol~ICClJ\'e complell' freedom for iinallcial operators tll enter c\'ery finanCial SYSICIll with the sallie nght.s as \ocal operators (so-called Ilal.lonai treatmelll). The g-reat political triumph hcre \\,.IS, SUPpos(·cll\', the deal adllcn:d in till' Wnrld Trade OrgalJl~atioll III December I!J9i 011 the g]oballibl'ralisatloll or linancial Sl'J'\'IITS,:lH ThJl'(1. changlllg the programllle the OEeD III 1\1'0 11101111 W;IYS: IiI st. making the ending or COil trois on capllai Olen Hillis and Oil the 1Il0n~llIellt or fillallcial ser\'ln~ ()peralors a preconditlOlI for OECD llIemllL'rsll1p; and second. through arlding a package or rules knoll'll as the ivlultilaleral Agn:cllll'llt Oil IIl\'estllWnL UviAl), which would gr;lIIt compicte freedom IiiI' lIldustnai corpllrallolls to IIW"I..' lIlto nall
or

~)

or

~\)

-I)

or

The point about these campaigns was 11111 aClllallv to lear down all the IlIsllIlltiollal barriers cve1'\'\\'here at. Olll' go. As a m;lllel' or !;lCt, the Clillton adlllllllstralHlll would 1I0t lIeccssaril\' have had the s1i).,:htest obll'l'tIOIl to an ;dlv like Chile re-lI11 posllig sOllie clement capllal COil trois, The pOllll was 1(1 llse these chall~es III lhe program Illes or the Illuitilateral orgalllsallolls as what nll~ht bc descrihl'(1 as poliucal clIl-opellcrs to open the liels (II' fI'r/1I111 .1/II'riji,./m(illml ('(III/mlllt'.\: Ihose or Easl and South-East ,-\Sla. It IS IlIIpllrt;\1lI to IIIH!t.-rst;llld the exact poiil1l's Itl\'oln'c\ ill the 1:I
or

agalllsL allolher h,' Ihl' rllk Dj'la\\', IIl1lH'rs;t1la\\'s I)\' ",IHt'1I all will ill' 1)(IlIlId, The radicalis.lIulll pr()~ralllllR' Sl'ClllS 10 co('respolld to Ihis dl'sll'l' SIIll'l' pl'"ple aSSllllle LhaL lhl' 1I111ltiiaLcrai orgalllsallolis \\'ork III a nile-based 11".1\', Bill tlllnll\' and mosL cruciall\'. Iill:se l.\\'O powl'rrul Ideas CO-l'XISt \\'JlIl a realit\, \,'lIlch enure/\' conlradicts them: the lllultilaLl'ral organisauolls arc slIpr.III:lllllllai rorces till' mllst or Lhelr member s(all'S but lint lil!' all. lIol (il!' (hOSt" sUIl'S, above all Lhl' USA. \,'Illch l'OlltrDllhelll, An l)q,~alllsat\()11 used h~' Olll' stall' to govern LlH' globe IS IIOL a supr.Ul;l!!Ollal IllSUllItll1ll or '~illhal gO\'t'l'11.1I1t'l' . The US can block ileillS II dislikl's o(f the agl'ndas oj' Lhe 1j\,IFjWB ;\lld tht' OEeD, IL agn:l'd Lll Lhl' WTO's creatloll fill the cxplinl baSIS Lh'l1 ir \-\T<) rulIIlgs were 'lInhlll" LIl the US, the II l'S g()\'l"'lIll1l'nl.~ \\'ould bl' dlll\' houlld to Ignore lhelll, And thiS le;wes lilt' ""TO as " rrallll'work not of' law bUI or h;lrgallllllg, 111 caSl'S \dll'n~ tlw US Gill sirike a IWlll'r flt'al hilaleralh- o\ll~idl' lilt' /i'ame\\'ork or LIlt: WTO II \I'ill hc do so am/will strikl' slich rlt:als III \'11)10111011 oj' \'VTO pnnl'lpll's, Ali(I as Lhc Dlltch ALlalltlc COlllllIlSSIOII's Slll(\\' olliS Irade policy shows. tlus polin' was m()VIII),4, ulldcr Clinloll. IIllder the ('ode word '1;111' trade", ill the c1ireclIol\ or l1lalla~ecl trade, lISIII~ the g-O\'l'l' III 11),4 prilll'lpk ()r lIle United St.ill'S or reCiprociLY rathel- thall 1l111Itilollcralisl11,:I\J The ('oll('('PI or Ill.mag-cd trade. s\'slem:tllcalll' pursued h\' the l'S t Irlle or tIll' \'\TO tillallclai scrvices agreemellL alld, ulltilthl' Frendl gO\'l'rtlIllClll\ rl'ndJ. on'!' thl' OECD's drarl M:\J Tre"l\' ;IS well. Swart Eizl'llstat. Lllldersl'Cl'elan "I' StaLL' ror Econolllic. llUSllll'SS allel AgnclIlLural :\J];Ill'S, has also underlilled [il(' centralil\' of' thiS co-operau\'c e1Tort. crt'altll~ pressurc llil :\SI;[11 alld Lalln Alllencall'countl'les to t;ll1l1lllllillC,11 Thc IllS11LlllHlIl whICh has plared tlte central roil' In prl'panng the ;..:rllulHl iiII' sllch Lransatlallllc coalitlol1-hllilding- has hCl'1l the so-called Trallsat 1.11 II Ir

1'( )\vFI~ \'< )1.lT](:S ..\~() THE (:I.I:>':"("<)l\! .\\l;\II'1ISTRATIO;-';

1"7

(\usiliess nialll~uc cr:\IH»), proposed OIl Ihl' clIllthlSlOn or till' Lll"lI~lI;I~' RIlIIIHI ill lkCl'llllll'l" HI~I-' hv US CIlIIIlllt'rn' Sen-elan' ROI\ I\roWII .1I\(icstall]ished III a lirslllll'l'll1l!4 III Seville in NO\"l'llllwl" I~I~);), As Assisla"t Secretary or Co III 1lIerce Var~() has noled, hiS r1epartllll'nl ad\'anced the TABD cOllet'pl. because II belie\'l'd Illal '!!;i\'en Ihe enonnOIl.'i [l'OSS-IJl\'esllllenl hy liS and Ellropl'all linlls III each olllL'l''s markels. a sillgk Iransallanlic busilll:ss COIll11 I! 1111 IY aln'adv t'XISll'd lh'l1 could agr('c.llIIIlLh' on cOlllmon sollltillllS which I,'ollid helll'lit both the US alld European ('(,(lIlllllm's.',I:! The T:\l\[) IlIlTIS l'q~lIlarly before Ihl' lWICe-I'L'MI" liS-Eli SlIllIllIll IIIl'etill~S to reed prllpmals 1111 II l hes(' Sll 111 1lI11.~,

5) l \/IIp; a IIIIX (!(mrml" al/l/ .1'111'1,..1'

III

/li/a;,'I'11/ allti "':I.','/I)//u/ ,'('()l/lJllllf s/(/it'fmjl

I\\' cOlllblllmg COllllIlllllUS llIal1oell\TlIIg bCI\\'lTll bilall'ral, 1Il1J';I-rl'glllllal. lI11l'r-rq-\,lllllal alld llIullilatl'r.d 11](1\'('S ill a \'t'r\' Sophlsllt'alt'd \\'.1\' Ihl' ClilllOlI ;lclIl1ilIISll";t11011 has sOUg-ill 10 maXIllllse J1S g;Ulls, ..\[ Ollt' mOI1lt'lll Il sn:ms to IlIUI'l' towards a drll'l' 1'(11" " IlcW eCOlloilliC i\'lollrue doctrIne [(I [ake ul'lT Lllill Allleric.:a, wcakcli i\IERCOSUR alld Ihrcatell to exclude .IaP;1l1 ;111<1 East :\SIallllliltiialcral (lc;d, Such oilers arL' thcll takL'II bark 10 Asia allclllirlll'd 11110 allOliler lhreat oLII)ilateralmOllopoll'uliless ,-\SEAN deals, Alld so Oil, Tilt, Clinton acimllllslrauoll thus used the t~ll'lIr fir Liln'all'lll'd l'Xc\lISlOl1 With skill: it laid l'llOnllCIII'i l'arly L'lllphasls Oil till' suppOSl'dl\' maSSl\'l' StralCg-IC slglliJic
HH

THE CI.OB,\l.IS:\TION

(;:\~IIlI.E

APEC's Bo~or Declarauoll III Ind()lleSla tilL' ColI()\\'lIlg \Tar pledged '1(1 achw\"e Crec and 0PClI trade all
POWER ['( 1l,ITICS Al\'IJ THE CI.Il\'TON :\Di\IINISTlV,1'I0N

OEeD Cocks of l.ihl'l"alisatioll or C;lpilal \lm't'mt'nls and Current lI1\'isiblc OperatlollS .mrl to endurse the 1976 OECD Dedarallllll Oll Interll:LlI()II.I' 111\'l'stlllellt and Mllltlll'l!lllllill EllteqJrlscs as \I'd I as (/1(' OEeD's 'NatlOllal Treatment DCClSl!Ill. :\nothel' Illlportanl dillWlIslOn is the relaxation of restrICtions Oil cross-border trade III linallnal ~LTYices, The liberalisatlon schedule which Kl!rca agn:ed Wllh the OEeD IIlY()l\'l~rl speeding lip liheralisa[]oll mcasun's to ("ompkle most or them hy December 1995 and the rellllher East ASIan countries as wdl hilly Signed lip to libcralisalllln, In the spnng of' I ~)~)7, the Bnush govern 1lll'1I t Oil hehalf of' \Vest Europeall gm'crllll1ents sought to mediate ami pt'rsuade tlH: US go\,ernlllent to 1ll()(lcratc its demands. But IiII' the Clinton adlllllltsfratil))), these countrics were tiw ke~' and the ke\' to ttWIll was openlllg LIp their linanClal sectors. This was the puSitlOIl JI1 April 1997 whell a nl'\\' actor eIllereci the h'lrgamlll,~ arena: the bl~ US hedg-e I'lImls begall tlwlr altac];, (Ill the Th'll finanCIal IlLlrJ;.l'l. BUlthc.: alll1 of ,Ilnl' !;.1I1c!S ()J'auack \\,;IS nOI,p',<;' a qll,lllllt:IlI\'C Dill', IrSIl. b\' 19~)'i lh{' L1SA should have bCc.'1I \\TIl sallslie(l: Korea had btTI)Illl' lhl' USA's lifth iaq~eSll'XpOrL market. The ,1Il1l was a radical restructllrlllg or the SOCial relallolls of productIOn within Korea III order to cllg"lIWl'r all l't'ollomlC (;/ru'hsrhll/IIIIIKor Korean capll.dism and of olhers III the reglo\l \\'1111 the Illlerests or American Gipitalislll. AmI that rel"Jlll~'L·d secking Illtl'l'nal allies \\'Ilhlll Korea and other statl's III the regloll. allks who could help 10 open the lid Oil t heir SOCial reiauons.

90 6) Sl'!'hillg

TlIF (a.! lII.\ 1.1 S;\TI ON (;;\\lIllr

dOliit'S/If

sorw//illlwg.,s

I!I

Irf),!!:r'l

sl(/lt'S

Ihmll!,!,h ,lroj)(f,!.!/II/(/(/

Thl' CIiIltoIl "dlllllllstralloll S lIlel'C'II11i]isl Ira
or

or

or

1'( IWER pOLlTtcS ..\NIl Tt [E CLINTON .\(}\[INtsTR..\T[( IN

7) ll\"l1/g I III'

111,1/1"111111'1/ i.1 (lila i (uM'

tlmJllp,h I hI' f) I \:~'R/i)/" (1/ nt'l/l)'

l/

YI

Ill/

/il/al/nul.tlrnj(lI'I'

By I ~)~Ii, II "'as possible to argul" that tIll' L'i had cilalked lip a slgllilicalll rallge quanlll:lUVl" sucn~sses III Its East aile! South-Easl ASlall campaigns, II ha(1 achu..'\'ed Sllcn~S,"l'S bOlh III !-!:;lll1ll1g new legal rights enlr)' and in ~;lIlllllf!, a greater quallllll' of pro /its from the rq~lolI, h.-I lhe rdatln: \\'ei),!;hl of' US capHais III the regulIl's economy was slillin declinl', Thl" I ~197 allllual report liw AmenclII TPCC (Trade PromotIOn CoClrrIill;lllll,l..f CClIll111itlel') showed a dl'cIilllllg" lIS share of" [ile Asiall LXPOrL Illarkl't. Whik Lilt' LIS had IIl(l"easl'd Its shart' III ('xpuns III j\·kXLCO, .-\q~elllln .. alld Bra/.il. Ihe US's market share in Chili .. , Illdia. ;llld SOlllh Korea (as \l'ell as III Soulh Ah'ica ,111(1 Tllrke'·) har! cll'dilled. Thl~ share or ll>tal L;S exports lltal wellt 10 r\Sla 1I1lTl'ased 1"rolll 15 pl'r celll III 19~)O to ~() per l'l'llI III 199!i, But liS shan: of' wlall'x(>orts to lhl' rq{toll HI Iwellty-lin' kl'y procluclcategorlcs ('ell frolll J:j.:l per relllill 1~)90 to I~.:\ per cenl ill 19!/(l . .Iapan's silarc fl'lI frolll !!O,:l per cClIl to IS pl'!" Cl'lIl ;111([ Lhe Ell's frolll ((l,,1 per cellt Lo J5.i pcr cent. Tllesl' declilles can Ill' c"ptlll1l'd ror the lI10st part IJv lhl' nsl' of" inlra-Aslan I'XpOrls: lhl'lr shaJ'l' rose rroll1 Tl.~ per lT1l1 111 Hl~)() III ;>H.{j pn Cl"1l1 ill I~JWi, ·('I()\\"l'HT. III kl'\' 1I1~1;1I1CL·S. US share loss was clue specificallY to gains IwJapan allrllhe FU, ··Ii Tal)le 5.\, uSing a diITen.:nl ddlll It 1011 o1"i\sla and excludillg illlra-:\slan Irack, ulJderlilll'S hoI\' wl'ak l11l: LIS POSlI101l was, relall\"(' 10 Japan.

or

llr

or

Table 5,1

G7 EXpOrl'i to A'iia in I !)!I(i

":x/lllrllllg mllli/ry

liSA

~!I

.lapan

.J'\

(;lTl1I;IIlI·

III

UK

G

haiy

:1

Fr;UII'I'

,I

(:anilda

q

~lItt·~: :\ ... 1:1 111I'hllha~

(:h;u",

Such

~"IfJ

S')lllh , Jf..IlIg "(lug. Tultd

SlallSlics suggesl

J"cgulll II',IS

1),'n/'III".!!'· r{,L'II/1i

thai I)\"

l'nrl"~I.

I'xl/ll// 1/,(1)1:,'/

·\SE-·\;\. IJltli ... j':1 ki ... 1.1 11 , J ~)~JI) -:- S:F,f) hilJi,,".

I.·.'\:POI I.' H'

l'arh'

19!1i Illl' LIS Cljllpalg-n towards the

hiling-.

Or was It: TIll're IS olle weapoll III thl' locker ol'tlll' US TreaslIr\' whICh we nol vel iunked ;11: liS ability to cxploitt\le l)ol\;Il'-Wall Street RC~lIlle as ;lll 11lSIrllJJll'l1l for l'IIITL'lll'\' and lill:lncial \"arbn', Thl' liSt' Ill' the \)WSR as han~

TilE

(;I.()Il.\l.IS:\TI()~

(;:\:.ml.l-.

stich an IIlslnunelll is easily expiallled, The reglllll's polittcal eCOllOl11lt'S did 1lI11 sufrer from lhe usual kind oi" Thll·d \Yorid vulnerability: dOllll'stlcally poliucally weak slales whose weakness was expresser! as lllg-h hudgl't dl'lit:J!s icading- !II hif.{h bnrro\l'lI1~s and debts Iln internattullal finannal marl,Cls, The rq~I()1I s stales were not IIlciebled in lillS way, Thclr nIilleraiJility 10 tilt, DWSR arose In Ihe lirsl pl;ICl' ;l! ll1e ClllTl'nCV pole Ili" the D\VSR, The\" were lIIainly n~lialll lin expun-led ~ro\\,lh. ThiS made Ihl'lll ,'uillerailk 10 stron).'; 1110\'cmenls III ClIlTenCICS, Since their ClIITenCICS were malllir lied to the dullar and lhe\' exportcd slgnilicillion: IK Pnvate !lows lO .'\SI;l1l ell1erg-in~ lllarkets III lhe 19~)(Js are gl\'en ill Table fl, '2, The erreCls of Ihe squeeze on cxports was 10 calise diflicu\tu:s III "CI'\' importalll pans or their PrIvate sectors and the\' were telllpled til borro\\' ahroad frolll US a11(1 European as well 'ls.Japane.~c I)anks to tide L11elllselvcs O\'l:r the l'xport SCJlIl'CZt', In short, lhc cOlnbllll:(1 clfecls of lhe two poies oi" the DWSR wcre. I)\' I ~197, cnsnanng llll' rq.~\()n's eCOIlOlllles III a trap, US dollar pulitT was lhl: lirst cntIGII preconditio1l for the lTISIS, The Stll"Cl:SS of Iht' LIS gll\'crnll\CIll ;lIld "I' US linallClai operators III persuading a llumber of g-O\'l'rJlllll'IlIS III the reglllll III Opl:11 their IinanClal sectors to mlllJws oi" hOI mOiler \\,;IS the second precolIditlOn, The actual !lows or hot monel' that t!Jen occurred III J 995-D7 were rl:sponding tu the clleels oi"i"alling 1I1terl'sl rales in tIll' US linallClal S\'slelll III the 1111(1c11c uf the US boom: lhn Wl're sl:l:kinJ.,!; hlglll'l' short-term ro\'allll'S III the still rapldl\' gmwmg eco 110 lilies oj" lhe region. Thl'\' \\'lTe the llllnllTltical precondition, AlIlhal was needed hy the spring oi" 1~)~)7 was fi)r SUllll'Olll' 10 pull lhe tngger. That.lob was one for a handl'ul of US hedg-e funds,

P( l\\"EI~ P()LlTICS ..\!\!D TI·II':

Table 5.2

'[i J(a[

IN .-\mIlNISTK·\TJ( IN

Private Financiul Flows to Ac;ian MarkeL.. (billions of US$) J (JC)(I

J C)i) I

I 'N'>

1 W))

~

lIet pm·alt· (;lllIla[ inllml'

Nel f()I'('I~lI direcl III\'estlllellt Nt:t portfolio

(:I.I~T<

lIl\"e.'IIIH'1l1

?-.kt other IIlI'eSlll1l'llt

Nl'l extern a) horro\\'lIIg frolll "nina) r!'l'diloI"S

1 'N-I

1'11)5

1996

1.·1

:~i.7

~:!,·l

rl!/.:i

7:-..J

\IH.H

1()(i.l'I

~).:)

I:).:!

1-1.<)

:;:,.~

·'·l.Ii

:)O.i

(UI

~.X

~I.I)

~~tH

I H.:")

~II.I

I~.\I

1~1.7

·1.:)

11.:1

J~.()

2H.[

:)1:1.1) :!(L! 2S.H

:J.li

10.7

Ill.:!

.. -

: .. [1

:>.0

li.7

H'l

Silurce: III[t'rnauollal .\lollel:II"\' FUll"; lllh:J'llaliollal Fill:1I1CI;d ~laUSlJ("S and \\'flrlel EnJIIUIlIH: UlIllc.IOk dala) );lSeS.

IlIit'II/WII CIII"

;\rll/lll

II! fill'

NIIII-U/, /() 11/1' l~'asl .·\S/((II Fil!al/oal CrisIs

The qllestlllll, or COllI'S!.:, anscs as 10 whL'ther the Clinton adtllllllslrallon was consCiously uSIng I he D\VSR ,IS an IIlstrt Illlel1l of' econOJllIC SI:llecrart againsl the East and SOlllh-East Asian eCOlHlIllICS. \Vhatls certalll IS lhat the dollar\,(,11 exchangL' rate IS 111 the p()lic~· girt of' the LlS Trcasul'\' allel Federal Rco;erve. Sllmmers W:lS dcljbL'rall'(\' oq~atll<;l1\~ .. str\lll~ dollar a~alllst Ihe H'1l and was rullr COllllllllted to It. \'Vhat we: (10 lIot klloll' IS wll\' IlL' wanted lht' dollar to nse agamst the yell. One expiolnalloll IS that he \I',UllL'eI to help out Japanese buslIless and 111 parllcular to help Il exporl l1lon~ to tlw United Stales. Is there anvolle 111 the world who would bL'lic\'e that? Another explanation is that he wanted to prevent all\' 1l100'L'S towards the creation or a n·n-zolle. Hilt tlll'JlpanesL' govl'rlllllent ltarllll'H... .lOll1l'r1 thL' lllo\'l'IlH~ntlill· such a ZOll('. We ;lrL' lI11b Icrt wllh a mYSle!'" o\'cr the source 0(" SII III nil: rs ' polin', unless Ill' was IIlterestecllll sCjlleezlIl~.I:lpan 's dnllar-lillkL'cl hlllteriand l'COIlOlllles III thc regloll. Evervthmg that wc kllow about thL' Clill tOil adlllillIstralllHl's ObSt'SSIOIl wilh the challeng-e or the regIon a[so pOInts III thiS direction. The ClillLUIl adlllllllslralloll was ,Ii.,o, III lht' Illld-I~)9{)s. COIlt'l'nlrallllg II., Call1p,lIg-n to Clift UlIltrols Oil tl\{: capnal acclllllllllpon blst and South-East ASia. Enorlll(lu~ pn:sslIrL's and IndulTIllCl1lS l\'t're ht'1I1g l'xl'rtt'c1 t[1 thiS end. ThL'rL' was no sign or slietl a campalgll directL'd at Chik. Tht' roclls was 011 ASia. And so to" was the roctls Oil lilwralislI1g the ent!'\' or lilrelgn lillancial sernccs. ThiS was directed l'spcCI:dly at Thailand. [1Ic!onesl;1 ;\]1(1 Korea. Thc US g()VCl'lllllt'11I did Ilot, of course, IJrgalllsL' the !lows orllOt ponli,jio ('lInds lI11n the reglOlI. BUI tlle\' were i>ounr\ 10 occllr: lllL' clY!lallllCS or such IllllIlows or runds, linkcd III tile dOll1eSlIC US hUSIIICSS cvelL', arL' wl'1I known. US Treasury Secr('tal'l' Ruhlll is
9-1

THE (;) ,( »)t\I.IS:\TI!)?\' (;,\\IBI.E

loans III Easl and SOlllh-Eas\ ,-\SI~I, 11ll' LIS gll\'l'rlllllL"lIl ah\';\\~ dlll'lng IhL" (:old War thaI while (;l'rlllall illl(l J;lJ>alll'st.' hallks workecl hand in gll)\'c with theil' gOl'erllllll'llts' political stralegws, till' LiS go\'ern melll approach was al"'il\'S di ITerenl."~' Yel L1ll'n: was, 111 fill'[, :1 Sll'llllg e1emenl orgo\'(.'rnllll'11l direcLIoll 10 US hanks ill Ihl' 1~)7()s 111 Iht' US ballks' recycling of pctrodolbrs to UlIlllll"ll'S lilt' South, But, or CIIlIrse, we can ba\'l' Ill' proof III illll'lllH)lJalil\' .1J1c! 01 cu-ol'dinalloll with the ])I'i\'ale sector Oil Ihe part of Ihe (:liIlWIl adlllllllslralioIl, ThiS absel\ce or proof is (oTllIllIlIl to Tlluch worl;. 111 Irvil\g 10 allah'~l' IIH' aClual practict' of lTonOIllIl" statecraft. \'Ve must liSt' I"II'CUlIls(;lIHlalcndl'llI'l', Thus, to lake a EUlIIHlS example, II Illighl appear 11'1111 hilldsig'llI Ihal Paul Vnlcker, head of the liS Federal Resl'1'\'t'. IIlldl'l'Slood :1( thc lillie thaI whclI lie sharply raised US IlltereSI raIl'S III I ~J7~J he would plullge milch of Lalill Amenca II110 a 1ll'~J()r finanCl:li and ctllTl'llCV COSIS. HilI did he Illlllk of Ihal before Ile r.used interest raIl's? .-\lId did hl' r:USl' 1I11l'resl raIl'S II/ lIuit'r 10 (I ('Ii 11711' th(lt n',wlt? He has illSlslec( thaI the pro))lel11 was nol uppermosl III IllS tlunking and thaI lhl: Fed am'W;)\' iackl'd tlil' resources al tht' [ill1(, to make a prior slud" of the IIl1p:U;\ (Illhe II1Icn:s\ ratl' I'Ise IJIl Ihl' rt'~IOII. \-\'e Gum"l .lust take hiS word fil)" It. But CIITUl11stallllal L'\'icicllCL' suggests Ihat we can believe hllll: there were obvioLls othcr dOI11l'stic reasons fil\' r.\lsing IIltlTl'St rates al leas\ to some L'xlenl II) ,qi~): al1(\ if hl' had realised he woulrl CIUSl' a gig;\llllC criSIS In La lJ 11 Amenca he would a\so, slIn'''', iI'I\'c n:alised Ihat Ill' would bnng the US I)anks to Ihe hrillk IOlal collapse. Vnlcker \\'(JItid hardl\' have wanted lIIaL. On the other hand, whell analvsls who lI1a\' he asslIlllcd 10 ha\'l' excellCIl t access 10 US polin'-m:lkers cia1l11 Ihat lhl' Rt'agall tl·,,1\1 c1e1il)l'J"alch' used .. Iligh ((ollar and hIgh JI lle res I rall;S III 19H I-l-i:) "'Ith the '\J1lI of exerLlllg pressllre on 'SOCialist France' we Illav well \'lew Ihal as a cast' of l'conomlc staLccral'l, IIsmg l11olll;ury polic"."o Tht' SOIlICL' IS credihle am! \ lit' plllilicai lI11pllrt;lIlCe Ilf the go.dls all 11' oh\'IlHls: the bilurc the Frl'lIch (liwc I'llI' growth betwcen 19K 1 and 19H:~ was 10 he \'Iewcd 111 vVesteJ'll Europe as Ihe linal dereat "I' l\.evneSlal1JS111."1 Here then we have ;1 [yplcal exal1lplc or thl.' US go\'ernllll'lll11Sing Ihe dollar as a m'~Jor wcapon ill :t Gllllp.llgl1 fill' ,tratt'glc political IIt~Jecll\'es, And tlw slgniliGlnCl' 1'01' the Rl'ag:1I1 :\dlllllllstnlllllll III (Icleatlng the Fn~l\(.'h eXpenll1elll CIIIIIOl he dllll!>Il'ci, C. Randall Henning tile main Wasilll1glon [hll1k-t:lnk of the LIS illll'rnaLlonai flnallCial InSllll\lJOns."~ claiJlls thaI :\menCllI gO\'l'nlnlellls ha\'l' t'rcqUl:lllly IIse<.llh('!r l"!)\)trol oYer Illl.: c1lll\;II' pnce as;\ diplDlllatit' Wl';IPIIIl JI1 dealings wllh vVestl.'rn Europe, POll1l1l1g 11111 Ihal the US is less ntlnerabk to exchange rate shins thall \Veslern Europe. Hennillg wntes: 'Whl'1l clashII\g wllh E.uropean gm'ern11l1.'1l1S oVl.'r l11;llTIICCOIH'IIIIl' polines III' thl' balance of pa,,!l)enls. AIlIl!nCall of'fin:t1s ol'll'lI look "d\'alllage ul' !IllS aSVlll11letn'. [n sc"cral IJIslances, Ihe threat ;J precipitous l'xchall.~l' rale ,\s to

h~\II\;.

c\;11III L"cl

or

or

Dr

or

or

POWER POl.lTlCS AND TIlE (:LlN'n)N ,\mIlNISTI{,\TIl)N

lIIon'llll'llt prnsecl European gO\"l.:rllllll'lIts tu Idlate or c\.lInpell their econtltlllCS 111 accordallce w1lh Anll'nran prefi:n'ncl's:":' The CIl"ClIIIISI')lltial t'\'lell'lIce III the E.lst and South-East c\siall case poillts overwhelJl1l1lgl\, tll\\'ards straLeg"lC deslgll oil till' part 01" the US Treasury, HUl des!gll ror whal exactl\'~ Til weak('11 t11CSe COUIILnes III lIIacroecollol\lic terms, certallll\', and to gellerate lillallCiallnslahililv and CUITl'nC\' nilllel'ahilit\" Blil 10 Sl'l {hclll lip lill' hl'cigl' flllld IillaIlClalll'arrarL'~ The aCLlvilles OrU1l' bIg US hedge Ii.lllds III Iht' East alld SOllth-East Asian CriSIS ilia\, sel'1ll to 1110st or liS 10 hOI\'!: been a holt ('1'1))11 the hlue, L1lllil the 1]"( :j\'! tTISIS or Scptl'lllbn I mlS most pl.'opll' hold pnlhabh' 1ll'\'L'r 11l';II'd or hcdge funds, But Ill!' 1Ile leaders or thl' US Trcaslln' the\' wen' a n'lItral part or thclr e\'ern!a\' fllr 11 11 lire ' Thc\' had been thl' cl'lltral actors ill all the JJl'~lf II' C1I1TClln' and lill;tllualcrisl's of tI\I.' I \J9()s. slIch as thost' or I he Italian lira and the pOlilld 111 19\)~, that olthe rralle alld llll' Ell's b:rhange I{.ate jo.'lcchanislll ill 1999, Lhal or Lhe i\kXIGln peso in 199-1 and a host oj' ol.hers, And when we speak or hedl{l' funds Wl' are not spe
1-I1't/J!/FII/JrI Fil/lfllt'llll 11'U/jilll,"1

'rill' groWlh or hedge fUllds uperatlllg ill lilJ'l'lgn exchallge markets alld l'spL'u
TilE (;L()B:\USXm)N

(;\~II\I,E

(he ball K, You ollly ha(1 tile rigln lO bur francs aL 9,:;0 !O (ill' pound, blll \"Oil didn 'L have t.o buv aL Lhat pnce, Bllt if the pound c10es 1iI11 to, say, Ii li'am's (() the poullrl III three nHlIHlls Llllle, the uptlon covers most of vour losses because It allows you ltl gl'( \'our francs not at 6 to the pound but at 950, So Lhls so-c;lIlcd forward foreIgn exchange den\'atl\'e market prOlc(\S VOIl 10 some ex Len l. The l;.l~Y for the he(lge fund speculaLors belllg able to usc these forwanl markets lies above all 111 the size of the fUllds Lhat Lhe\' can hOITOW relatlvc lO the size of the market. If the specula lOr's funds are big relatl\'e to the market. he call shin markcL pnces with IllS OWII funds then galll a Illultiplil'r ellen OIS other smalier speculators strengthen thaL price shirt by Ic)\IowlIlg It, and as the multiplier cffect proceeds, he GIll withdraw from hIS poslllOn, Laking pmliLs, Usmg the same example orthe li'anc-sterling exchange rate, the spcculator starts 111 the same W'''', except that he (al.;es out huge forward cOlltracl.~ Lo sdl pounds f()J' Frellcll francs at9.!'iO to the pound 1Il olle IlHlnlh's llllW: say forward cOllu'acts lOtallill~ [10 billion':';; for these he must pa,' a ke to a bank, Theil he wails unLil thc month IS ncariy up, Then sucirh:nl\' he starts bOlTomng pounds agam m vel'\' large volullles and throws thelll agalllsl Lhl' exchange rate through sdling them, So big IS IllS Iirst sale or pounds that (he CUITenC\' falls, say :~ per celH againsL the franc. At thiS pOllll other, smaller players see the pound gOll1g down andjolll the trend he has started, dnvllIg It down another :1 per cent. Overlllght he borrows another ,'ast chullk or pounds and sells mlo li'ancs agam. and llIeanwhile the word is gomg anHlllri the market that none other than the mastl'r speculator is III aCllon, so eVe!'\'olle jOllls the trenci and the pound drops another I () per ({'nl. And on the day when the li)rward contract falls due for hlln to sell pounds li)r francs at 9,!j() the pounci III the SpOL market IS down at:; /i'ancs, He takes liP illS li)l'ward C()lIlraCl and makl's a huge profit. iv!eanwhilc Lhere IS a steriinf.{ criSIS elc. etc. The oHiual line of (he Washll1gwll Consensus, of the 11\,1 F ivlanaglllg Director Camciessus and of Stanle>' Fischer (Camdessus's deputy and the ccntral opl'rauonal designer 1I1 the IivlF) IS that the hedge fuml speculaLors arc or litlle signilicance except as tnggers whIch essentiallv rcveal trends already present in the so-called fundamentals or an eCOIIOIll\', The ar14l1mClll IS that no speclllator can englllccr strllctlll'ai shins 111 prices Oil finannal markels becallse Lhel'e are so man\' plavCJ's Oil the~l' Illarkets ami these plavcrs act largely ratIOnally. linkllll-{ their bU)'lIlg amI selling to Lhclr Jlldg-emcnts about the ull(lerlying economy concerned, (Fischer has had 10 become somewhat more nuanced, acknOWledging 'swlllgs III market selltlment [which] , may on occasIOn Iw excessive. and they ma\' SOIllClilllt'S relleCl contagion effects. which ma\' rhemseh'es hl: l:xceSSlye Oil (KCISi()n.')~"; ThiS IS a superfinal ne\\', thaL can be defencled onl\' on rhl' baSIS "I'

POWER POl.lTH:S ,\i'lD TI-IE (:l.INTON A()\IINISTRATICJN

~)7

experience 111 \;u-ge financial l1larkeL~ operating normall\' wilh high Ievds of liCJlIIdilv III large ;I(h'allcerl economies, Btli as.luseph Stiglitz. lhe chief eCOllOllllSl
'I'low 1,\ 1(//'1!;1' ,I'I~I' (III mITl((lIlfI.'.!/f You'n: kidding,

No, 1'11/ SI'I,{(JlIS. If a big buyer climes ill and pushes the market 'I pCI' ccnt thal's all ach'anla~c.

1-1,' stillllfis to gd Ollt (!/lit((I/JOJIIIOII, WI'I// filii'

1t1l:!!,I~ .1'1:1' wOllld ""

{/II

UlIll's,\-III<~ rtghl a"olll tllI'l//arhd. II rfOI'SII 'I

(1(/r'((lIifl.W'

He docsilt ha\'L' 10 gct out (,I' lhal positIOn all al !lIICC, FOJ'l:lgn exchange IS a very psychologlcai markCL You're assuming L11C Illm'kel IS gOlllg lo Illm'c back to equilibrium very gUKkly - mort' quickly thall he can cover hiS POSI1II11l, That's nutlleccssarily thl' case, If\'oll \11m'e Ihe m:lrl;,et -J per cellI, It)!' exampk. YlHI're probably gumg to change tile lllarkt~l pS\'choloh~' (tH' the lIexl I'cw da\'s, [In olher wonIs, when others see a big swing creatcd by a po\\'erf'lIi hedge fund, Ihey follow ILS lead li)r the !leXl few clays. alsu hll\'lIlg, ellabling the hcclg<:: hillel III scllLO liwlll ami takc ILS profits,] So -"Oil 'I'{' say IIg SI:/'

IS

a II ((til/a IIlagt',

It's a huge advantag-e /-J07ll/rllgl'

(/11

III

fi.lreign exchange,

armul/l ilIl!rt'),o/ilmdillg fli Sa/Olllllll

r

That questlOIl really liaS lin direClIlH:alllng, For a compallY like Salolllon there arc no assets direCliv IInderl\,lIlg tlte trading aclIVIL\'. Rather. over lillle, lhl' tracllTs and treasurer build up greater ancl greater amounts or credit l'acilil1cs al lhl' banks, Tht: banks were l'ager to eXlelld these credit lines hecausl' we were Salomon Brothers, ThiS is all example (II' 'lIIother \Va\' III which size was an advantage, By 1990. our departlllent pr~lbahly had $~() billiun III l'n~dit lines, However. no specific assets \I'l're segregated or pledged to !Ill' 1()rclg'JI exchallge aCl!\'ltles,' 111 lllt:llllCllllilg SHO billioll, Lipschutz was rl'fl'rnng' to tile end Ill' t1H~ 19HOs, B\' the Illld-19~)()s, lhe Il'\'(:rage

THE (;(.Ol\:\l.IS:\TI!)N (;:\\1111.1-:

available to the lOp speculatl\"(: operators could hc ten IIllleS that flgllre . .-\11(1 Llpschuu\ iast allswer brings us to the huge linancial strike power that these big lH:dge funds call mobilise Ii-mil the llS hanks. One of the most dramatic revelations from the LTCi'.'l arElir was the wav II revealectll}at tillS rlllld hact more or less unlinllterl access to loans from the biggest of the American banks_ Although lhe aCll\'IlJes of funds Iikc lTCM. Soms s Qualltulll Group and Robertson's Tiger FUlld are \'erv Sl~cretln~ the\' operate I-ight at the vcr\, centre of Wall Street networks. The 1i\·IF has suggested these funds can borrow twent\' tlllles their capital. Sums acllllilled to lilh' tlllles. Bill the LTCl\'1 was revealed to have borrowed ~5() U1llCS liS capllal hase.,-,H The malll l1ec\gl~ funds are supposed to have a cOllll>lI1cd capllal base nf$~W() billion. Let liS assume that their leverage IS 0111" lOll times their capital (and not the ~5() times or r:rCM). That would g"i\'e thelll a collective Ie\'erage or S~\O trillion. or course, they don't all work together: onh' some of the top hedge funds (10. Thus, atlaCKS on ClllTcnCles arc llsually the work or half a dozen ol" the biggest hedge funds operating together. They can mobilise funds far larger than the GDP of nmidle-slzed rlcll OEeD economIcs like. say, Australia. The derivatives markets dwarf all other finallcial sectors and the biggest of these markets is that fOI- foreIgn exchange denvatlves. A 1995 sUldv Iw tile Bank for International Settlements plll the total pnllClpal III forelg"1I eXChange derivatives at SI6 trillion."!1 While daily turnover III the ordinan' foreIgn exchange market was S5~O billion in April 1995, dOli I\' lllrnm'er ill the I{)relgn exchange denvatl\'es market In thatlllonth was S740 billion_ It Il11ght be thought that such a huge market would lIl\'olve a large ;\11(1 diverse collection of operators. Yet tillS IS not so. The centn~s of thIS market are ill tile US, ill London and in Canada alld no less thall 7f) pcr ccnt or business in these celitres is handled. according to an IMF study. by just tell hedge lill1ds. 1jll And these ten compallles work very dosch' IOgether. The greal bulk of theIr busllless is 'o"er the cOIlIlter" rather than within exchange institutions and it is totally unregulated. And they an: very secn:tlve. According to the 1i\'IF. some 1m per cel1t of foreIgn eXChange den\"atl\'c bllslIless IS conducteci between these dealers. And collectlvel\' these companies can llIobilise enormous linanclai reSources, The I!\-IF estimates that 111(' fon~lgn eXChange denvauves hedge funds can mobilise hetwel'll $Ij()() billioll and S I trillion to bel agalllst currencies in speculatin' at tacks. ' >! This is truly staggering lirepower. There IS no doubl whatever t.hat the hedge funds were t.he driving lilrce of the attact.; first on the Thai baht, then on other regiollal cllrrencies alld the Hong Kong ~lOck market. The lirst hedge hllld assault on the baht occurred in l\by 1997. one month after the Clinton adllllIlIstraLJOII lanllched its calllpillgn demanding that Thailand and Indollesla open thclr Iinanclal sectors full\' to US linanclal opcrators. Thailand was the most \'lIlnerahll' targ-et 1{1I-

I'()\\'ER I'Ol.lTICS .. \0I1l TIlE CI.INTON ..\()\IINISTRATION

attack because It was actually the most opcn ecollom\' III the rq~lon, the Ol1e whosc g-cwcnHn(,lIt had adopted a model c10SCSI 10 US dcmands. It was also suffcrlng-fi-om Ihal LypIrai reature oL\merlcall-style opcn fin'IJlClal systemsa larg-l' spcculatl\T buhblc in its property lIlarkelo The central roles of Ihe hedge fUllds ill the triggering- of t.he :\slall cnses of 19~)7 \l'as fully reported at. the tllllt' hy Ille Fil/al/mt! Tilll/'J amI ot.her financial papcrs.';:! 'reI mllch or tht' 1II.UlISlrcam .-\nglo-AlI1crlcan IIlcdia haye t.rcated t his as ir it was thc paranOId populism orivlalaysJaIl PI"1JIIl' ivlilllster 1\-1ahathir, 1\lahathir was sUllpl\' slaLlllg a bel ahow the roll' ur thcse operators. And he \l'as lIot alollc. A dispule amongst the 11\,1 F directors thclI1sel\'es has exploded InlO pUlllie \'ICII' Oil tllis questioll. an llllpreCl'r1elltl~c\ l'\'CIIt. LInder pressure from East alld South-East ASian g-O\'lTlIllH~IIlS. as I\'ell, perhaps, as fellow directors or the 11\'IF, 1\hnagHlg- Dircctor (:amclessus ag-reed to carry out an 1ll\'esugal1on or the hedge Illllds' aCln'Illes 111 tile (TISIS. Hc thcn chose a 1ll'lInStrealll Alllencan eCOlltlllllst for the .Joh, \-"hcn the report came Ill, Camdessus agrced \\'Ilh It. But other IMF directors did nolo The~' considercd the report IIiIsat.isl:lctOl'\' bccause it underplavcd the mle of thesc IIlstiLlltlons III the tTISIS, Thl'~' did not.Just disag-rcc, They inSIsted that Call1fiessus publicl~' record the disagreemcnt III llll' mal11 directors' report ror the autullln 199H \Vashlllg-toll I 1\,1 F confcrence. ThiS IS IInprl'cl~dellLcfl III IMF history, It sug-gl~sls much mon~ thall all analytical disag-rl'eml'lIt: a belief on l.hl' part Dr somc directors that the\' were Elccd with sOllie sort of em'cHlp 011 the Issue, or course onc or the n~asllns for the cxtreme sensit.inty 01' thIS ISSlIl' IS because thc lIS go\'crllllll'lIt mllst han' been \'l'n' well Informed ahou!the aClJ\'lIles or these hcdge funds, The\' would kilO\\, Ihls hl'GlllSt' t.he Federal Rl'serH' would kilO\\, that the hlg US hanks wcre bankrolling the East Asiall operations of these rUllds. US 111 tell igcIIC<.' would also be 111 rOl'llled. The m
9H

available to the lOp spn:ulauve opl~rators could he Len L1nH~s that figure . .'\1\(1 I.lpschuu's lasL answer brings us to the hllge finanCial strike power thalthese big hedge funds can mobilisl' from the US hanks. One of the 1l10SL dramallc rcvelauons frolll the LTC!'"l alTair was the wav i Lre\'l'aled Ihat thiS hllld had more or less unlimited access to loans frolll the biggest oj" Ihe American banks, Although Ihl' acunties of funds like lTCi\'1. SOrDS'S Quantum Gnllip and Robertson's Tiger Fund are vcr)' secreUve Lhe\' operate rig-ht at the \,ery celllre of Wall SII·ecl. Ilctworks. The 1i\·IF has sug),{cstcd tiIesc funds Gill borrow tWCIIl\' lillles their capital. Soros admitted to lift\' tllnes. But the LTC;"I was rl'n:aferl to have borrowed ~5() Limes its capil
1'l)\\,EI~

I'()I.ITICS :\ND TilE CLINTON

:\lI~IlNISTR:\TI()N

attack because It I,'as actualll' the most opell eCOIIOl11\, ill the n'g-iol1, the one whose g-OHTn III ell t had adopted a lIIodd closest to US demands, It was also suf'fi:rillg- frolll t hat typical feature oL-\lllencan-styll' open !inallcial systemsa large speculative bubble ill its properlY markeL. Thc central roles or the iwdgl' runds III the Ingg-enng- or tIll: "-\sIan crises of I ~'~'7 was full\' reported at Ihe time bl' the Fil/al/ofll Ti,l/t'S and other linancial papers,li~ Yet Illllch of the malllSlream Anglo-American media have treated IIIIS as ir itll'as the paraIlllld populiSIll or l\,lalaysl;1II Prulle i"liIllster i\-lahatlllr, j'1'\ahathlr was simpl\' stating- a 1;ICl about the role of these operators, And he was not alont',:\ dispute alllong-stthe IMF directors thl'lIlseln's has exploded 11110 public \'lew on thiS qlll'stHlI1. an unprecedellted e\'cnt. llnder pressure rr01\l East alld South-East ASian governlllellts. as wcll, perhaps, as ldlow directors or thL' 1r.'IF. r.'lallaging- Director Camdl'ssus agreed to carn' olll an 1Jl\'esllgatJoll or Ihe hedge funeis' aCll\'llles m till' cnsls. He then chose a lllalIlSl.realll :\mencall eCOIlOJlJlst for the Joh, \"'IIell till" report came in, Camdesslls agreed With it. But other IMF din:cwrs did nol. Ther conSidered I he report Ull~al1sI;lclOr\' because Jl unrierplaveel t hl' role or t.hese IllSlJtutJOIlS 111 the enSlS, The~' dielllOl.Just disagree, The" I11slstecl Ihat Camdessus publiclv record the disagrecmelll ))) the main dircctors' report Iilr the autumn 199H Wa~hlllg-ton 1i\,IF cOIlf'erl'IlCe, ThiS IS unprecedcllted III Ii'vlF IlIsto1'\'_ It suggests much mort' Lhall ;111 allalvlIcal disagreement: a helier Oil the pan of sOllie din:ctors thai thev were /;lCed wah sOllie sort or cm'lT-up on tilt' Issue, Of course one or the reasons IiII' the extrclIlc sellsitiyity of this Issue is because the LIS ~()\'Crllml'lll must ha\'e been \'(~r\' well inIilrmec\ allolll the ;)clIyillCS or these hedge funds, The\' would kilO\\, lhlS because the Fedcral Reservc wouirll~lIol1' tilat till' hlg liS ballks were bankrol\ing till' East ASian ope)'au()ns or thesl' fUllds, LIS 1111l'lIi~ellt'e would also hl' 1Jlrormed, The main hanks oLllIY state work extremely closely \\'Ith their statl',!i:I Commonly g-m'enllllents gel tilelr icading pn\'ale scU{))- banks hI extellclcrcrlit to a 1'0)'elgn g-o\'ernnlelll or large clllllpan\' III the rurtherance or rorelgn polin' ())~iecti\'l's, And thl' lOp banks can 111 Lllrn gain access 10 1l1telligellcl' lIdClr1I1al1oll rrom tllelr gO\'l')'1l1l1l'nts, 11l1p0rtallt fiJI' assesslllg poliucai and other kinds of risk, Al\lhis is so to speak normal. liS oflirials al\\'a\'s used to argue thaL the llS gm'l'rllml'llI \\'as diITl'I'l'llt rrom others III tillS respect. Such c1alllls ma\'- have earned S01lle rorce dUring the (:old \Var, But aher the damage done b\' the LIS hedge rllllds to Clilltllll 's i\-!eXIClJ polin' III 199-1-9:', 11 IS scarcely nedibk lhat tl1l' liS ~o\'enlllll'lIt wOllld haH' dont' lIothlllg to brlllg sOllie oVl'rsight, at the least, ow'!' what its hedge rllllds wcrc up to, If liS lIItelIig-cllce has, as we kilOII', beell Iarg-e1y s\\'llched .towards ccon(JlllIC alld COIl1Il1CITlal 1Ilielligl.'Ilce we elll doubt that tIlls w()rk IS confined to the slllall challgl' or lIeg'otIaIIOllS Oil bllslness elcais while stt'cnng" dcar of lhl' politicallv absol11tc\\' ct'lltral lield or illll'rllatiollal lillallct', BUI whaten'r the exact relatiollship IwtlH'l'1l the acti\-llY or these runds "

"--".

100

TI-IE (a.OIHI.lS:\TION (;'·\MIH.E

and till.: aCLJVllY of the US TreasurY, ther WCI-C both acting tion in thc summcr and autumn or 1997.

III

the same din~c­

No(/!s 1. A useful ,-eSlalelllenl of lhese POSIlIOIIS IS flllllul 11\ K'-II~llIan, 'COIllP"IIlI\'l'\H'SS: :\ Dallge'-OIls OhsesslI>I\', I-iJn'I~1/ AJJill1:\ (1\larch! April I ml-l), !!. The claSSIC SI;llelllenl of lhis posllion IS fOlllld in K,'I\IWlh \\'al17.'s work. :1. The wo,-k or Rohen Gilplll has dOlle much III re\'IH' Ihis lrellt! of lhoughl as a lIIeallS or uIHlerslanding lI11ernallUflal "(OIlOnll(S. His work III Ihis fidd J,"gafl al Ih" sIan of lhl' 1!17IJs wllh 'Tlw ['olillcs of Trallsllallollal El'IlIWlIIlC ReI;lliolls'. 11I1I'I"lIl/lwlIl/l ()1~(/III;III/fJI/, !!:.::\ (1!171), ,I. Ikcalls" lhe ClIIT,,1ll accoUIll comhilws hOLh lrade III goods alld im'lsihles, IIldlldillg Ih,' SIl·,,;UlI of eartllllgs from 1\INC produclHl1l ahroad and d"hL s"r\'IClIIg, II IS llw 1Il0S1 lI.s,,1'1I1 lIldicalor of a slale's basil' ,'COIIOI\IIC rdallllllship wllh lh" r"sl of Lh" world. :'. III lh" dral"l LIS Sellall' Irade hill, III I !lSli, on" of ilS S"ClIOIIS hegall: 'When Lradillg \\'Ilh ad\'l~rsarJ"s, lik" .Iapall Such lallguag" has h"collle slalldanl In Washillgloll. Sl'e C. I\licha,,1 Aho, 'Amenca and Ih" Pacific C"lIlur\,: Trade COllflil'1 or Co-operalloll?' 11111'1"111/11/11/111 :lJJilir.\, 1i9: I (199:\). 6. The mllow "f fllnds didn'l come onl\' from.lapall: Ihe biggest milo\\' aClllallv cam" from Ihe UI, and ""n' large 110ws also came from 1·lollalHl. Bill the Japanese hOllghl a 101 of lhl' TreaslIl"\" dehl, With the lilll of the dollar 11\ lh" I;lle I!)HOs, Ihese m;l\nly pnvale Japanese holders of US dollars saw over S!!OIJ billion WIped olT the \'ahl" of Ihell' holdings as a resuh of Ihis dollar d"l'alllalion ami I)\" Ilw 1!l!lIJs, lh" US ){",'"mll\ellt callle 10 n:ly IIlcreaslIl~l\' IIpOIl Japanese sllll,' lilllds nO\\'IIl~ IIlII1 TreaslIn' bOllds. Thus, Ihe siahility of the "'Slelll call1 .. III depend upon Ih" polilicalclllllnllllllelll of the Japanese ~Ol'enlll1elll 10 LIS slabilit)"_ 011 Ihis, s,," SlIsan Slrange, M/ld ,\Imll)' (1\Ianch"slt:r lIl1I\'ersll\' Press, 1!l!IS). 7, These began with llw CotlSlruclIon of 'European Pllliliral CIl-operallon' alld tht: pn'Il'Cl of lIlollel,u'y "lllOIl both launched al Ihe stan of IhL' 1!IHOs. TIIll,,:;h bUlh wen' lar:;,,(\, abOrll\''', the IlIlpulses hehind thelll relllained, ami gatht:rec1 slrellglh. H. Tlwsl' pressllres wer" championed hyJo Chamherl:lln. Ihe p"lilical lead,'r of th,' \\','sl l\lidlalHls Induslnal bonrgeolsle. !). Ahh/lll~h 1I0W Ilttl'lIectllall), discrediled hI' lh" work of Wah,'r and olhers, tIll' :\lllencan lheOl-), of so-called IWg'emonic slaiJilitv which argu"s lhat the world nl'eds 'lilt' O\l.'r",hdllllllJ..:Iv dOllllnanl slate if Ihere is 10 h" slabilil\' III the world ecollOlll), (and eSlwdally tis 1lI0llelarl' sysI"m), had tlw g'I"l'al IIwnt or [>olllllng 10 the lack of alHlllllallc slahilisers III lite con' ,'COliOlll\,. Tltl'lr queslIon: who will prm·id(.' tlw 'Jlublic goods' of slahililY IS besl answen'c1 Ity sal'lIl!r II IS provided by the depend"nl suppnrl-collnllws of the SOlllh, even lhouJ.:h Ihe J.:omls Ihey provide an' nol r"all), 'puhlic' Slllce lhe~'.are l'1\IO\'"d only b\' Ih,' core ,'(:onollli,,,. On Ihl' lheon', set' \\'aher, I'll"'",. /Iud l\'mM ,\}I/Illi' (I-lan·"sl"r). 10, P_ P;llIIaik. :\n'lIl11l1ll1ll1JlI 1I11d Sillbilily VII/I,'r (;u!Jllllli.\/11 (C1an'ndon Prl'ss, I !l!l7). II. ESllmates Ill' Mallh,,\\' Simon, cHed hI' Palnaik III Palltaik, _'\,-mllllllllIIlJl/ 1I11t1 .'i//lbilil\" f!!. Will l\1a rsh'all , head of Ihe I'nlJ.:r"ss·in' Polin' Jnsllllll", 1\11.1!tillgl/J1/ }'o.\"I, :!I J)en',llIlwr 1!)9!!. 1:1. Rogel't>.lorns, ':\ Ne\\' ForeIgn Policy fill' a New Era', N,o" lillk ·/j·/II".\. ~l lkn'lIlhl'r I !l!l!!. H. Asp"u III Dclcnc" had a 1lI11\"(' ani\'lst, radical aJ.;"nda_ I:'. S"", hll- exalllpl", Anlholl)' I-Ianl,,\", 'The C1illlllll :\ppm:Kh: IdealislII aud I'n\(!elll"(", 'l1I1' I\llIld '/il//III' (February 1!19:\). IIi. Of lhis lisl one parilal dissident was Rohert ReIch: he sharl'd a hcli"r in Slale ac!toll III IlIt"rnallOllalt'Cllllomics and his CDIICel'n 1'01' lahour slanrlards aud protectIon clluld h,' IIsl'!'II!1V IIlslrlllllelllali~ed ill el"!lI101I11C dipllllllacv ",'er lmde ISSIll'S. 1I\ll he lacked SOIlll' or Ihe Amen"aFirsl-III-b'el'ylhiug wal oflhe lIlhers alld drupped (Jill oflh" adllllluslI~llIOII e\·enllla!l\". 17. GiOia IIlal'lnl allllJan Roorl, '1Ilalllt;lIlIlIIg Global DlIlIllll:llln:: The Ullu"d Slaies as a EII\"('p"an and ASlall 1'00\'"r' III Manalllll' \-all LeeulI'en and An[;e \bll'lIla (l'ds.), Sd,·m ....

'"I1M

POWER POLITICS AND THE Cl.INTON

'-\[)~[[N[STRAT[ON

101

:\1111'1'11"1111 fOfr'lglI PolitI' tli th,' TII/,II "llh,' e,."lIlf\' (NI'lherlands AlIalllic <:1)llIIIIISSIOll, 1~'~l(i), IH, S"" Lallra 1l':\lI<1rea '1"'SUlI, 11'/10\ /JtI.\/tillg II'/tom: Tmrl,' emlfliti II/ lIigh·'J;,,:hllo/"b,)' 1",III"lm" ()I1SIIlIlll' Ii II' 1111"1'110111011011 Econlllllles, )9!)~); Ira ;\la/-:azlII"r alld ~Iark j'alinkill, '/1/1' Si/f'l11 \Iill': IlI.Iill,' til .. G/o!l(/IIJII,\II1".I,' /JIlIlIt'I SIII/fllug :llIImal ',1 fllllm' (Villlag" Books, 1!)!JO); ./l'Ifrc\' E. (;"1'1"11, :\ (.'olrll'r'l1rr': :lml'l1f11, ./11/,1111, (;tnUfllty fill/I Ih,' .'ill'llgg/,'I';,,. .'ill/JT"IIIIIIY (New York Tillles I\",)ks, ) ~'!'~). [!l. USIS, ~:\ F,'hrllar\' [!I!Jli: 'KallIOI' sa~'s llS 10 Fi).!h I Farlll TI~ld" B,IITIl'rs," ~Il, Ruhin was [al,'r 10 Iw('ollle Treasllr\' S,'erelar\' - his ('UIT,:111 )loslIiou, ~[. Dane! J ROlhkopL 'lh:l'on
l:'lIgl1g"III"lIi:

)!'UH, ~~,

Slank\' 1·lolllllan, l\lanlll Wighl ;-"lelllonall."CllII'l', I.SE,./llI11' I !'!'H. ROlhkopl'. 'Ikl'olld IIlalllC IIler('alllilisHl', ~.1. ROlhkopr, 'Ikmne! :-'Iallll' ;o.1l'1'I:alllilislll·. ~;l,./Ohll Sln'lIIlall, 'Clinloll s Dollar Dipll1ll1ac\'",I'i!Tr'I,~'1I Polify,97 (WillIeI' E'!',I-!l!i). ~Ii. Ciula IIlarllll ,Ille! .Ian Rm,d, '1I1allltallllng Glohal J)ollllllan(',,: Thl' UlllleIII{/· Nt'llfifOlI.1 flUrl ~:\,

,.a

TIIF (a.OI\:\I.ISSrlON (; ..\"IBI.I·:

II ill It! Trtllil' (Task F(lre .. "II Ih,' FUllln' "I' Trallsal 10111 III' R('(allolls, COllllcil Oil F"n'I~1I Rdalllll". :\prjl. I \I\IX l. ·11. Ihid. ,I~, T"SIIIIIOII\' IlI'lill'" Iii .. I-IoIIS" (:lIl11lHlII,"· "" 1I11"l'Ilalll)ll;1I R"lallolls, SlIhn.IIIIIIUll'" Oil IlIlnllalloliall':~'oll"nll(, I'olio' alld Trad .. , (-""deral N,'ws St'rl'lc". 10 S .. pll'lIIlwr 1\)\17. ·1:\. Se" I{ohl'rl I.c·I' and Pierre \'orl'I, "1'1", N,'''' OEC[) "klllb.. rs alld l.ihn;!li,alloll , ·f},.OI':C/J Oh.'ln"'I; 110. ~W, (April/i\lal' I \J\J/), ,1,1. S,'" Wald"11 [1 .. 110, '[a,1 .. "Ia 1111 Ih .. En' II( till' (;n'al TrallSrOrlll;IIIIIIl /I"I'I,'W"/ IJliI'I'IIII/II>IIIIII'olilimll:'nllllllll\" :,::; ( .. \1111111111 1\1\)HI. 'E·,.ll>id. . ·lIi, IIISIIlIIIl' ii'r 1I11,'rllallllllai ECOllOIIII{,S: 'R"Slnl{'IUI'III)!; ""rl'a's Fillalll'l,,1 S""lor for (;n'al,'r (:oIllP"lllin'II"ss (:\I'Ee ,,"orkill)!; Pap,'r \11;'1·1). ,17, /-'ill/lllolIl Tillln. ~\I Orloher 1\1\17, p. III. ·IH. lIN( T ..\\). \I,JlM 1111'1'.""'1'111 /(111111'1, J!}'Ii (L' N :--:"1\' Yllr\; alllll 1"lIn", 1\1\1/). ,1\1. S,·,' J :\lIdrt·1\' Spilldler, Till' I'"lilin ,,/IJl/o'IIII1I1J1I11I O.,.,lil: I'm'(//I' Fil/llll(,' 1111t! ";JIi'I~1I 1'"li/1' 11/ (;I'I'II/l1II1'l1l1d/"/II1// (Th,' IImokill)!;,s IIISlHIIIIOlI, I!IH,I), :;0, This clallll IS iliad" II\' I. ;\1. llesller alld C. Ralldall 1''''"l1illg" III /)"IIII/' 1'"li/in: I:\'d/{III~" Nl1il' 1'/,fi,)'"ItI"iJlg 111 /111' ('lIli ..d Sill/I'.' (1lIslllllle Ii II' 11I1<'rllallollal El'O II 11 III II'S, I \IX'l). This IlIslI11I1l' IS Iht' 11101111 Ihillk-Iallk of Wall Slrl'cllillallnal il"I1II1II11I1', :1]. ] nrl&fl'sllllg:ly. l't"llilOllile

!'t1ah'(Tah JII\-nh'JlIg: IIH IIH.'taI'Y

pol it,\,.

~l1ch as (hl·~t· (.':'\altl1'Il"~.

(('IHI 10 h" 19-III'r"d III Iii,' lill'r,lIl1r", illelmlill>: III Richard lhldh'lII s ,,11,,'rll'ls,' IIl1ponalli hook, 1..-((I/I()1II11' .'ilf/lo'm/I, 11111 SIIS",II Sirang-l', wilholll IISIllg- Ihl' 1"1'111 Siall'crafl, has illllllllllal"d a l-!;rl'al d .. al ill Iwr IITllilll-:' Oil po[ilics a1l<1 il1l,'l'IlallOllaIIlIOI1<'I', :.~. '1'1,,' IIISlIIlIl(' lill' IlIlerllal;ollal ECOIIOIIIII:'. ;-,:1. (:. Rallclall H"IIIIIIIl-:. 'EIII Opl' S 1>111I"'lal'l' lln""1 alld Ih,' L;IIII ..d SI;IIl",' "'III"I~/l "II/iq', 110, I O~ (Spnn)!; 1!)!lIi). :,.1. I alII grald'lIl 10 !\liclll'1 Ch,,,sllclol'skl' 1'''1' Ihis pn'ClSt· alld II s.. fll I CIIllI"'P" S,'" hi, 'CII"rras lillallcll,r;1S , \/'//111 S/I/' N/lIIII'W, ·10 ( )nllhl'1' I!1!lH). :':l. Tlw specula lor's nJlIIIIl'r-parll' hall\; call n,,,.. r liS P"Sllioll hi' SlIlIlIltalll"""Iy la\;illg 11111 a Ii 11'\\';11'1 I COIlIl'an 10 sell francs !ill' 1"11111(1, in a 1IIIJlllh's IIllIL'. :.ti. St;\II"'Y I'i,,'h,'r, .( :apllal ..\,'COIIIII Lih,'r;,lisall,,1I alld Ihl' RoJ.· "I'll", 1:-'11" pal'"I' 10 s"lIIlnar UII ASia alld Ih,' I~I F ( 1\1 SI'pll'lIlhl'r 1\1!J7) , :,7. Fnllll.!ac\; Schwag"r, Th .. .\'17" ,\[III}II'/ 11';:/11'11.,: (.'1111"1'1:\11111111.1 ;I,;/h .. II/wnw:' 'li'/' 'Iilll/,'/,,' (1'lar)1l'1' Cullills, I ~1!1~). :;H, 11\11', 'lkn,I"plll""i.' alld Prospl'ci.s III EII"'I}:III)!; J\lark,'I.", II';,/'/II I-'illlllll'llli (Jlllit",/; (1:-'11' Wa'hillg"ltlll DC, ;>;0"1' III Ill' I' 1(1\)7), p, :1:\. "'I. Halik for 1IIl"rllali',,"al SI'lIkllll'IIIS. '( :('1111';11 nalll; SlIl'I',,\, or Fo('elgll E~('h;III!{(' ;11111 Ikm';IIII'l'S "('I1'kel '-\"'1\'1\\", :\1;1\' 1\)\11,. (iO, C:Ill'lIraad Vrolijk, 'lll'l'I\'aU\'l' Erre,,!.s Oil 1\ IOlll'l;I 1'1' TrallSlIl1SSlOIi . (\\'orl.illg' I'apl'r "r Ih" Inll.'l'JIallllllal ;\(11111'1011'\' Flllld. \\'1' /!II/ 1~ I. I \I!I/), Ii I, . ;\Iahalhir, SOl'< 's and Ihl' (:lIrn'lIcy 1\larkl'I~·. EfIlI/OIII/,'/, ~7 S"Ill1'lliheJ' 1\1\)7. ti~. Sl'" Ihl' I-'illl/l/l/lli Till/I'.\ li.r Ih,' 1"'1 W(Tk or i\1:1\' I!lUI alii I Ihl' (irsl 1\\'1> "'"(,1,, Of.lllh' 1!1\)7, t,:I, S"". fi,r ,'xalllple, J. AII
n.

================6================

The Politics and Econolnics of the Panic of '98

The ASlall cnsls begall III Thailand al tht' sIan of.I Illy Hlq" Tht' next cOllnIn' to fall was indolll'Sla, But tlte rcallY deClsl\'l' lillanCial cnsis was tltal 0(' South Korea, It was Ihe SOllth KOrl'all (TISIS which l'nded the lelllporary slablisatul\l of indtllil'sia and which linally brouglll cOlllplcle collapse there, .-\11(1 the South I\.ore;1I1 crisis was respolIsihll' li,r plllllg'lIlg tht' whole rq~l(J11 III I () sl 11111 p, Tht' general pallel'lI of Iht' lTISl'S IS casilr slIllIlIlanst'c1, 1-Il'dgL' fUllds ;tHacked currellCles, e\'l'ntllall\' hreaklllg the Thai halll. thell the illclllllesiall rupiah, These Ill'dgt, 1'1111(1 attacks lerllitt' US 111l1lllal runds alld the Tn;ld's hallks as well as olher fillallcial operalors 10 pllll tlll'lr hillds Ollt or the C()lIl1lncs cOllct'nll'cl. ,-\S Ihl' 1"1I1lds PlHII'l'(1 OUl. ClIITe(l('Il'S collapsed rllnher ;tllcilhert' were 1\\'0 Il111llcdial(, el"reClS: IiI'S\. local hanks Ulillclllot conllllllC 10 roll O\'lT Iltelr dull;lr debts throllgh IIl'I'" horrmrlllg becallse the \\'l'StlTII II lsI IlUI10IlS Wl'I't' Illl 1(llIg'l'\" lelldillg: alld secolldl\', as ClilTellClt'S collapsed, till' size of the dollar rid>1 III tenlls of tocal CIIITelln" resources leapt upwards, ThiS
10:\

104

TI-IE (aDBALIS:\TION (;:\1\IBI.E

exchange rate poliC\' and domestic macroeconOllllC conditIOns lO try til . cope. But those states wiuch had SllcClllllbed to the pressllres of thl' lIS government. the Il'vlF and the Wall Street institutions to open tilelr capllai accounts and dOlllestic financial sectors to sOllle extent were allowlllg their economiCs and populations to enter a mortally dangerous trap: the lIl/lows of the hot money and short-term loans arrived like manna from heaven. because they seemed lO enable these states to evade the elTeCls of CI11Tl'nC" Lluctuations and thus to evade bard domestic acUustlllellls through credits from the Angio-Amencan Jillancial centres. But It was not manna: II was ball. ''''hen the financial sectors of the region bll 1I1lo Il they were hooked. trapped in the Sights of the US hedge runds, sitlll1g ducks for iln(lnclal warfare. The hedge funds struck, the lines of credit were wrenched hack illto London and New York and economy after economy was dragged, writhing like a wounded anllllaL 011 to the operating table of the HvlF and the US Treasury. Of course, not all the East ASian eCOnOIl11eS were dragged directl\' ll1to the crisis. Those which hac[ refused to bow to American pressure to dismantle their capital accounl controls escaped the onsiaught I)ecause the hedg-c funds could not hit them. The J;lclOr that turned a state's f;lilure or macroeconomic a(~justlnentl11to a catastrophe was the degl-ee to which the ASian development modcl had been breached br IiberalisalJon of the capital aCCOl1n t. Those COUlllnes which had hl1'gel~' kept then' capllal controls were protected from the /inancmi allacks Wll1Ch rc)lIowed: Chll1a, Taiwan, Vietnam and India. Those that had liheraliscd in the key areas /(HlIld their macroecononllC management failures exploited by dcvastating specuialJve attacks. And even I-lol1g Kong, which could not have heen satd to have had senous macroeconomic problems but did have a liberalised capital account, was to be subjected to susLallled, repealed hedge rund assaults Il)r lllore than a yeac Desplle this. as in the past crises in other parts oj" the SOllth in the I mws. Anglo-American ieaders and propaganda media were quick to polillcallv expiOlt the cnSIS, making the intellectually illiterate claim that failures to manage exchange rate volatilities and cOI~Junctural financial sector instability proved the l)illlkruptcy or the East Asian gmwth 1IIodei anci till' universal validity of the Anglo-Saxoll model of capitalislll.! As throughout the history or tile DWSR, the East Asian crisis was 10 be a case of what I1l1ght be calleclthc teamwork between the spontaneolls dn\'es or the /inancial forces of Wall Street and the political will and ll1genull), of ·Washington. As the cnsis spreacl across the region, the US Treasury and the Federal Reserve were serene about IlS global conscquences. They knew from a wealth of past expenence thatlinanCJal biow-o\lts III coulltnes of' lhe South prOVided a welcome boost ('or the US lin
lIltn the US linancialmarkets. cheapelllng-the costs u("creditthere, boostingtilt' stock marl;.et and \)oosllng domestic growth. And there would he a nch harn'st of assets to he reaped III East Asta when Ihese countries fell lO thetr knees I)efort· the Ji'.'IF. Bill Rubin. LarrY SUllllllcrs and Alan (;reenspan made four analYllcai errors. First thel' railed ("ully 10 grasp the fact that East anrl SOlllh-East Asia was no Itlllger.lust tilt' South: It was a dynamIC and weIght\' component or the worid ecolwm\,. A ekep Crisis there would transform the economic l'quallons of those eCOIHll11leS outSIde the tnad whIch supplied inputs filr the East and South-East Asian hoom. These COIllIllOdity producers would see thclr export prices slulllp. This f;lct in Itself Ileed not llave aiarmed Ruhin. On the contrary, the prospect mar have delig-hted him. Declining rciatlvc pnces of comnwdities ("nllll the South had been nne of the keys to the non-lIll1auOIlal'Y Amencan booll1. But if Rublll was taking thIS VIew of the likelv l;tllll1 commodity prices, he was guilt\' of American-centred thinking and rorgettmg anothel" context UpOII whICh the COllllllodity producers' hilling export prices would Impact: the endellllc structural finanCIal li"ag-ilit\' of these commodity prodUCing coun tries as a result of the pasttl"lumphs of the DWSR. COUll tnt'S like Russia and Brazil mav have been turned successfullv by the DWSR into a l!olle\'-pot lilr \V"II Street linanClai operators blll they were honey-polS preCIse I)" because they were so much wt~akencd I)), debt bunlens. A weakening of" tilclr and many other similar countnes' trade prospecL~ as a resuit urthe East ASIan CI"ISIS could lip thelll o\"e!" the abYss as finanCIal operators saw the threat alld lled. And the lhll'r\ prol)iem that Ruhlll did not rully grasp was that the huge growth orspeculative forces within the US lin(lncwi systt'm Itself" could 0111" be sllstall1abie thnlllgh constant expansion. Like the p\Talllld funds of AlbanIa, such specuiall\'e forces can sustain losses on belt ing ",nh borrowed mone\' on the pan or some players oniy through the bulk or the others hClllg ahic to throw more mone\' on to the table and to make f"resh gains. With multiple finanCIal cnses occurnng sllllultaneously 111 man\" places, the speculative Ii liTes on Wall Street could linrllhat the banks bankrolling them would lose conlidence III contlllued expanSIon, rear collapse and then m()n~ to create it b\' refusing- further lending. AnaivlIcal bilurcs or these kinds were to lead Robert Rublll to approach lhl' :\slan CI"ISIS not.lustWllll serenity but WIth excitement and enthusiasm. As \IT shall sec, the LIS Treasury was to \'leI\' the cnsls as an Illstonc opportunity whIch, if" seized, could translilrm the fUlure or Amencan capllaiism, anchorIIlg Its dOllllllance into the twenty-first centun·. ThIS was the fourth problem Lilat RuhlJl I;lilcci to li)resee: the problem of" Rublll himself as an actor in the criSIS. We ",iUllot l"e\'lew the details or the course of the East Asian crisis.~ We will

1 (1)

THE (;1.( )(HI.IS ..\TION (; ..Ull1l.E

roctls only on the responses oj" tlw Japanese and Amcl'icall governments \0 thc lTISIS and III particular (III the stallCl: or till: US Treasurv towards the deCISive Illoment or the East Asian e\'l'nts: t.he South Korean (inallcial breakdown, We will then look at the slI'UClural reasons fiJI' the trallslt.rnlalloll o/" the ASlall CriSIS IIUO a generalised inLerllauonai linanCial paille III I ~'9H, And we will conclude iw conSidering whether t.he\' 111,1\' he a path away rronl 'globalisauon'

As the Asian cnsis spread across the rcgion rrom Thailand ill .Julv alld August Im,7, the most alkcted states tllrned 10 other states fiJI' help, The US govcrnmcnt rcfuscd to takc allY POSIlI\'C actlllll to stabilisc fillancial s\'stellls and currcnCles and kept the Il'vlF Oil a leash, At the height oi" the Th,lI CrISIS III August, the US govcrnl1lcnt's rcsponsc was to scnd a delegation to Bangkok demanding rurthcr liheraiisalloll oj" Th,u markcts to Improve access rOl' American capi taL: 1 Japan thercforc faced a dcclsl'.'c test, tile biggest political tcst II had faced liH', pcrhaps, fifty \'cars, It could take upon Itselr thc tasl:. or Icading t hc n:glOll oUl. or cnSIS, hut III d011lg so II. would Challenge t.he politIcal authOrity orthc I!vlF aIHlthe centrai stralC).{1C dnH' o/" the US, But if the Japanese gll\'l~rnment remained supinl' and let the Clinton administration dictate e\,ents alld tcrms, the consequenccs fIJI' Japanesc capItalism could be cxtremely gr,l\'c, Its finanCiai systcm, alreadv in serIOllS diniculties, could be dragged down hy Its \'err hca\'\' exposure in thc reglllll and the US wouid bc likel\' to exploit this wcakness lip to the hilt. The Japancsc go\,crnment attemptcd to stcel ItS will to inler\'enl' poliucall", It came I'orward with a proposal that 11. wouid manage an Asian consortium. an ASIan Monctary Fund (At\·IF) to stabilise arrccted countries. This initiative drew strung support 1'1'0111 gm'crnments in the rq~lOn. Partlcuiarly striking was the Chinese go\'ernmelll's support 1'01' the plan, an unmIstakable Slgll that a rcgional coalition bctwcenJapall and CllIna was a distinct possibility, The ThaI rcscue package was the result o/" the work or the Japanese govcrnment in pUlling togcther a coaliuon, But at the last l1HHlll'nt lhe EvIl' and thc LIS entered the scene to (Jutthcir trademarks on It to prc\'cnt an opcn .Japancse challcnge to Il\'IF global contro\. nut still the .Japalll'se gowrnmcnt advanced its A 1\·1 I' proposal, SUggl~Stl1lg that the ruml could ha\'e 5100 billion or (inanclal rcsources. As onc analyst explallled '[US] Trcasurv ol'liClals accurdinglv saw thc Ai\'IF as more than .iust a had Idca: they I,nterprcted it as a threat to Amenca's Illllucnce 111 Asia, Not Slll'pnsmgi\', Wash111gton made considerablc crltH'ts 10 kill Tok\'o' s proposa\. ',I In thiS, tlte Clinton adminIstration was ablc to ell list t.Iw support oj" the \Vcst European govcrnlllcllls. who Joined the campalgIl to exert IIw maxl-

1I1111ll 1111l11l'IICl' Oil East and South-East ASlall g-ow:rnlllcllts to \.llrn a\\'a)' rrOl\l till'Japalll'sc proposal. In all Illtervll'W \\'lIh 1.:lrn' SUlllmers of the US Treasury, hlsililli/(JI/(// hlll('siofeXplaills: '( :ollcerned that Japan was prnpoSllIp,' the lelea [or the ;\i\IFI as a step toward heg-e11loll\' III the reg-lOll, but llnwilIing- 10 bring- such a scnslL1\'e issuc llllo lile opell, liS ,\lId European1inanLlal o/'ficials worked till' phones with South-East ASIan orlil'lals. talking- dOWll the Idea alld hoping- 11 \\'ouid die C]llll'tir ". The \ater Illdoneslan IMF deal did Illclude a substalltlal Alllencan alld \Vest Europeall 11I\'oln.'llIeIlL as a means or conlhal1llg- the./apalll'sc threat. Bv N(l\'l'llIlwr or I~)~)" the will of thl' Japancsc g-ove1'1lllll'nt to (lIfer lhe reg-lOll a path OIl! or the (TISIS whIch would c\'ade the str:tleg-1l' g-nals of the liS g-on~nl1l\l'lIt was broken. The rull St{ll'\' ortlw dralllallc diplomacy surroullding- the j;lilcd'/apallese dt:maI'chl' has n:t to he loie!.l> BlllJap:tn sullc.'red a slllnlllllg- politlc:ti dcl'l'at 1lIlliCll'd by thc US with the support of the Eli, The basis 1'01' Ell support for the US Treasury throug-i1out the crisis is also a SlOry whose details remaill ohscure, but olle with great slg-nilicancl' fill' Ihl' hillin',

The 1i'.,lF's Indulleslan packag-e did, li)r a while, seelll LD \\'ork, In thl' lirsl wCl'k of November l~)\)i, ivlichel Call1dessus rei I confidellt clloug-h to dl'clarl' that the liI.,IF had succeeded ill breakillg lhl' \KIOUS nrclcs oflll1anClal collapse ill till' reglOll, BUl,lust at that 1110 llll'1 II , the lillallCla! problems III SOllth Korea becalllc critical and thl' Japanl'sl' Iinalldal S\'stl'111 was slllluitanl'Ousl\' g-nppeci b\' panIc This \\'as thl' lirst rcall\' crIllcal point III the transltlOll rrOIll a pureh' East ASIan linancial criSIS (() a world fillalll'lal pallic. South K01'l'a·s CCOnOlll\' IS larg-er than those or ThailalHl. IndoneSIa and Maia\'sla plll 109-ether, Thl' evolu t lOll or the Korean lTlSIS In Nm'cllI bel' and I kcemlwr I prod ucerl t.lte sillpwreck or both the Indonl'sIall ami Th'lI econolllies and trIgg-creel the transnllSSIOIl of thl' CrISIS to Ihl' finanCIal centres of the \Vest as well as RUSSIa and Latlll ,\lIIl'rica, But the n'lltr,,1 characters In the l\.orl';1ll drama or latc I\)~)i were 1101 Sl1n pI\' or mall d\' l1ltl'rnat [( lnal and Koreall ba 11 kers, The dellOUl'mellt was produced b\' Rohert Ruhlll alld l.aIT~' SUllllllers ill the liS Trl'aslln' Departlllent. The\' haH' made 110 attelllpt ({) ulIlcl'al the Elct that tlw\' rail till' 1M F oper;luon on Korea.' The\' deCided that the 1M F sh!llIlel hl' used Ilot 11l the ways it had operated III the laslliny \,cars but II lSI l'aci III till' new w:tvs III whIch 1l should operate in the t\\,l'llly-lirsl n'lllllr~', For the liS govl'rllment, Korea was g'Olllg' to he a III'S!. It IS the lwha\'lollr or the Alllencall gU\'l~1'lI1lll'1l1 III the terms 11 reC]lllred

m),

101-\

THE (anll ..\\.IS.\TIO:'>: (;.-\i\III1.1·:

the 1i\·(F to Imposl' UpOIl South Klln:a lhi~tlla~ cau~ed tl1<: 1l1O~l ("IlIlt.ro\,tTs\· <1m on,L!;st those "'ho bad forllll'(! pari 01" \\'hal has bel'n callcel the 'Wa~hlllgl! In Consensus' The reason lilr L1le debate alJOlIl the US g"on:rl1l11eI1l'S role lies III thc facl thatHs polin' f()r dealing WIth the South Korean cnsls was 1101 onl\' no! g-earcd lO slabilising the won and the Korean banking syslCm: 1l was 110t evcn geared to stabilising imernaLJollai linanClai III ad;.Cls , Instead Il made ils gOI"(.'rnlJl,l{ ol~Jccul'e a dnve tn u-ansli)rm the 1I1lcrnai SOlla! rcla LIons of procillc(Jon I\'lti111l Soulh Korea and to risk the del'l)('llIlIgofthe Korean cnsis anclthe ("/111/11111(1/11111 oril1lern(lllonal linanClal pal1lc 111 orrIer 10 achll'\'e Ihal transrormalHJIl. In linanCial crises like thal in Korea, lhe traditIOnal task IIf the Il\,IF IS slInuhalleously 10 stabilise tl1l' exchallgc rale and to lind a way of reassurtng IIlternational linancial markels abDut the soh'encI' of the SOUl1l Korean hank~. Thl~ dllai operilisaLIol1 111 A~la, Iktween (j November and 17 No\'ember lhe Korean government soughL to clefend d1C won. hcl(Jre .Ibandolllllg the strllggic on the lalter (laIc and closmg the forclgn currl'llc\, market for threc clays. On 20 N.o ....ember the g0\,ernmcnt asked the Japanesc government LO persuadc Japanese banks lO roll o"l:r their shon-Ierm lo,lIls to Korea. But the East ASIan cnsls was now pllln~in~Japanese linan{'Jal JIlStltuLlons, deeply cn~aged In the re~JI)n, Il1to criSIS: one or Japall's 1llr clays hiler, So thc Japanese govern lIlen 1 was paraiYse(!. The r{)lIowll1~ da\', 21 Novcmber. the SouLh Korean gOl'ernment annoullced Lhat Il was asking Ihe Il'\'JF for a rescuc package. NegollatJons \l'lIh thl.' I MF then dragged on for a full two \\'(.'eks. 011 J",ronda\' I Dccemt)er the 1l\'IF and Korea h .. d slillnot agreed a (Ieai: thc\'were disagn:ell1g about the gn)\\'lh t,lI'get {(II' the liJJlowlI1g" veal' and at)Out the IMF's demand thal twelve merchant banks siwlIid be dosed. The following (lay US Fe£leral Rl.'.~el""\'l: Chairman Aloin Greenspan S,I1f! thaI the r\.~lan UISIS was likely to accelerate the move {i'Oll1 iarge amOlll1l~ ol"go\,ernl11ellt-directecl l1lvcstmenl to a system that cncDurages more pnl'all' seClor In\'oII'I:IJ1Cnl: thiS was a clear sialemeni that thc US :tUlhorrlles rcquired a radical break

TIlE (';\NIl: OF '!JH

109

\\'lIh J.i,oreas Illodd of caplIalism, Finallv, Oil -I Deccmher, ag-recmclll betwcen SOllth J.i,on:a and tile 11\·IF. lOtallin~ $Si billion, was ;1IH10Il1H'l'ci, Senior ortiCiab III the US Tl'easul'v Depanmcnl Were wd\ aware that the 1i\·IF's Korean programllll' was sOIll(:thin~ differcnt ("1"O\11thc usual IMF operaIlOIlS: sOllletillllf{ II c\\'. ;\s reportc(! hI' tilL' Fil/({I/o(/I 'l'illll'.1 (lie prog'ramlllC was 'a stratch~' carcrully craned Iw the US aJl(1 the IMF that was 1Illended !O pro\'lcl<: Ihl' hllleprlllt 1'01' what LIS ofliClals ha\'l: (onlidL'llliv clamit'd as a "),{elllllllety ~ 1st Ct:lltun' respoJ\sl' to the lir"t ~ 1st Cl'ntury IinanClallTlsIS .... ~ Thc details tilt' stratL'h~' werc workl'd oul 1J" Treasury LInder S(.'(\'c(lr" Larl'" SUlllllll.'l'S III i\Ianil<1 aile! liS TrcaslIrv of!i<.:i.ds ll1alla~ectthl' e~lremt:l)' diniClllt llegol\;lllolls with tile Korean govcrllment frolll a Slllle \\'llhlll thl' S;lIlle llOl~'j \11 Scoul as lhe 11\·11' ril'it:gaIIOll. It secms that the IMF oniclals witlllil the regloll were reach' to scnlc: Oil the hasls uf more k'llIelll lerms \\'Ith till: Korean gm'ernllwlll, Imt tllc\' wert' prevt.'n\ed from d\)ln~ so bv Ihe US Trl'aslIr\' orliCI.ds who had the bacKIIlg' of lMF Mallagill~ Director, Michel Camr!essus,

or

Till' [IS's 'J7of'llly-Fini G'III/II)' SolllluJi/: (hi' San(/I HI'llI/lOll,) o(l\u/('{/1/ (.'(//)/{flli.llll

·li(//l.\'iilnl/lIl~

The Jj"IF programme 1(lr Kore;1 had 2 mall1 pans: I) ~)

Protecting' Ihe Illterl'SlS of Cl'ecliLOrs anci lile slabilitv orthc 1l11t.'rnatiolJai financial S\'stelll, Korean eC()l10111i(.' IlJallag-l·tlll'nl and SOCIal trallsformatlOll,

I) fJmil'rllll/f; 1'1'('(1 il(JIs {/ lid I h,· sl (/bifi'.)'

(~/ till' 1I//('1'IIfIIIO/I(/lji11(111 ('I(/{ ,1),sh'/J1

The tcnLra\e/ellle\l{ III thIS pan of'lhc packagc was, of [llllrSe, the prO\'lsloll or runcis from <..;7 stales ami lll11lLilaLerai organisallolls to western finanCial IIlSlltllllOns willch wcre l'XpoSe{ILO the Korc<1n deht crllnch, Formal\\' thest' rlllld~ wen:, or COllrse, ad\'allu:cl to thl' KOl'c
110 funding' was to he generated by the Kurean g'o\'ernlllt'1ll silarpl\' r;l1slIlg dOllwstic 1Il1~'n:st rales and sllllultallt'ousl\' sharpiv Ilghtel1lll~ dOllleslIc fiscal polin' to slrl'l\~tht'n ils 0\\,11 linanClal posilllm, It h;ld 10 commIt Ilselr to \IIasSI\'e!\, lIlereaslng dOl1leSIIl' 1l1lcresL ralt'S \\'hih~ simultaneously llghtenlll~ ilS fi~GtI polin', SllOn-Ierm IIlteresL rales had to be J';llsed 10 o\'l'I' ~ I per CCIlIa real rale III' l!i per cent- ;lI1el IlIl'H' was III be a Li~ht~~nlllg' or fiscal polin Ill' a huge I,:J per cCllt of' (:OP, Ag-allisl lhlS h,K'-g\'()und, Ihe .-\IIH.'nCIII banks were pn:panng t~J come fill'ward Wllh a nell' In,lIl to tht' Kore;1Il glJ\'l'J'l1 Illen t al pella I rales of i IIleresl bill PI' sufliClen LsIze \0 con:r III{" short.l~tll 111 the IIllernallonal support package, Thus the prulection of western cn:ciitors was to he achie\'cd lhrough the IranSrorm
The slump-generating elements ill Lhl' '"",,IF package should \lot he seell olll\' as an internationally costicss \\'a\' squeezing- debt rl'pil~'1\l(,IIlS out or Korea, The\' 1I'(,l'e eddclJllv deSIgned \0 (,(,l'ate lhe lIecessarv (\OIlJ<;SlIC fi'allll'-

or

work Dr eCllilt IIIIH" InCl~llli\'l'S (ill' Ctllnplelely rcorgalllsing Ihe InslltUtlOns of Korean capilalislll, dl"slro"lIIg Wi1;ll Rober! Wark has called Korea's Asiall DeH'inplllt'llL \lorlel.:\ Fillf/Jlmd Tilllt'l edilonal n,;plallled Ihe general goal Ihl' pad;.agc: 'For Korca thiS lllUSI lIlark l.he clld 01" all era (If dinglslIJe I hal COllI ri hult'd to i Is L'xl.raordi lIari h' SlICCl'ssli.i1 rle\'l'io]>lllell t. Bu t I h is CriSIS has ShOl\'l1 I ital sllcil illllTU'lI110nlSIlI Cllll lUI he CO III bllH:d \\'nh rrl'eciolll 10 borrow ;llIrllarl. Since Ille IaUl'r C\l1 ilardI\' Iw halted, Korea has 110 choln': II IllUSl liblT.disL' S\'Slt'lllallC;tlh-. 'I:: Llndel'lht: 1i\'IF package, lhe chael)l)\s I,'ollld hc llIrned illlll I\'estern-st\-!c COlllpanleS, pLiullg shon-terlll prolils firs!. rd\'Jng UpOll share ISSUl~S alld largel" depending upon Inlernal s;]nngs IiII' thl'lr Ill'\\' lIH'esLlllenlS, ThIlS, as Ihe Filla I' mil Till/I's ("Ol1lIlH'llled: ';\ reduclioll ill Bank lellding will rorcl' Illil' chat'lwlJ 10 tllrll III Glpllal lIIarh.ds, SUI~JcClll1g thel1l 10 IlI\'eSlOr disliplilll' as cClrporalt' transparcnc" illiprou's alld blllil" O\\,lllTS "Ield t'tllllrol. ThIS process will COllll' wllh a Illgll cosl " '1,1 Tlw ,~qllt'l'l.t' W;]S c:IIl'l"lI11v cr;lncd III bll 11l1' cbacb!)ls Yen' hard, TilliS, II Illcludt:d :I sJll'cific hall on puhlic \I'od,s pl"ogralllllll's. SOllll'IIIIII),!; wIlich till' Koreall gll"erlllllclIL has tradillollall~' uscd to Ill'lp Ihe chadJlIls, ma1\\' Ilr wilich havt' beclI engaged ill gO\'Crllllll'lIl-funrkd public works COIISLI'lICI.lUII, The r1nn' Tilt' ceiling Oil foreign o\l'l1l'rship of shares III Koreall Cllllljl'llllt'S was (0 he raised hum ~(i to :J{) pcr cell( as frolll I:J Dl,("t'lIIbt:r 19!17 . .J:lpalle,w produt'ls lI'crt' al.~l) 10 he g1\TII hlgger access 10 Korean III
or

Till' FllillfJ"t, fI/illI' US

(;1J1'1'1'I1I1I1'1I1" Ihlll/'jill'lI "lil l l'lI/y-Fin; (,','/1[111")' SII/If/IIIII

Tile reliet ill 11111.'I'1I:I11Il1lal li11allt"lal lI1arkl'I'; whcll a),!;rl'<.'1l It' II I was finally allllllllllced bel\\'l'l'1I till' IiI-,lF a]J(llhl' SIHlIh Koreall gm'l'l'lIlllt'IlL lasted Icss lhall 1I\'l'llt\'-rollr hOllrs, ""hcll IIlll'l"1LIUOnal operators annall" read Lile agrccmenl. tlll'\' /led hUIII Kon:a III palllC, so 111;1/ Ihl' folJo\\,lIlg da\' till'

11 ~

THE ta.OU:\l.lS:\TION (;:\;'IIBI.E

cuullLr\, was plung-eel IIlW a downward Spill. BIll thIs did nOI surpnse or alarm tile US Treasury. Inclee(\, they IIldicaled when the packag-e was annollncecl thaI. they were not expecting any quick restoration of' cOlllidence. For the next two weeks, as the Korean cnsls deepened as a resuit of the rrvlF programme, Treasurv offiCIals rema1l1eci unbending and confident about the package. On Ei December, the day al'ter the IMF agreement, the won started piullg-ing ag-ain so that by H December Il had Etllen about Hi per cent sInce :~ December. The reason for the fall was very simple al-ithmetic: the Jl'vlF package did not cover Korea's shon-term debt servlcll1g and a new wave of cOlllaglO11 spread across the entire region. On JO December an Ii'vlF ciocument was published showmg that the Korean deai involved closlllg some of Korea \ big commerclai banks anel thIS created new waves of panic. On j I December there were huge losses 1\1 slOck markets across the reg-ion ((; and the paIllc spread to Wall Street and Lo Lllin America. On I ~ December the Korean won fell to 1,891.'10 to the dollar whereas it had been 1.170 10 the dollar at the lime of the Il"IF package nine days earlier. In short, the 1MF stabi1isallon pacl,age was no such thing: it further clestahilisecl the Korean economy. Yet the US government calmly indicated that it was not prepared to changc Wi stance. Trcasury Secretary Rublll stated that Impiemcn tlllg the IMF programme was 'the absollllc key to '. re-establishmg conficience 111 thc finanCIal market.' ThIS agall1 was a new concept: ill the past, IIII' tlIIIIOIIIIC/'/IU?l/1 o./llgn'I!IIII'1I1 on a rescue package was supposed to stabilise all economy III paymeIlls difficulties: lI11plcment
!!;overllmen t, hIli Koreall govern men t officIals saId lhey wel-e unaware or allY such regllest having- heen macle_ I() The 'ITgllest;, III other words, seems 1.0 have come /"rom \Vall Stree!. The /"ollowmg dav the won soared up 16 per celll ag-alllst the dollar, the stock market rose hr nearl\' 5 per celll amI equity markets across the reg-IOn also revlved_ On 16 December, the US Federal Resen'e Open lv\;u-ket Commlltee shifted ils own policy gllldelines by {:tilillg to raIse I11terest rates as US domesuc Illdicators would howe requIred, And OIl 17 Decemher, the Japanese governmelll gave a stnllulus to the Japanese eCollomy with a $15 billion tax cut. The dollar rell sharplv iower agalllstthe v('n, while slOci, markets across the ASIan regIon shot up_ And on 18 Decemher the 1MI' disbursed the second tranche o/" $:15 billion out of its loan package, despite the {:tilure or Somh Korea to Iillly c()mpiv wllh the schedule or reforms in the origInal package_ Yet the cnsls was sill not over. On Monday 22 Decemher aner ~\'loody;s rating agency clowngracted the foreign CllITenn' ceiling for Korean bouds and currencv, the won fell from Fnday\ 1,550 to the dollar to 1,7 I 5, The Tokyo alld New York stock marl;.ets rell. On 2:1 December the World Balik disbursed a Sg billion joan to SOlllh Korea - ils share of tht' Ii,,1 F-Ied rl'SClIl' package, By 2'1 December, US finanCIal markets were gnpped i.w the fear that South Korea would still have to declare a debt moratorIum, The Brill ,\'lrl'l~I.I(}lIm(l1 reported tilat the US governmellt's part o/" lhl' Ji'vl F-Ied package - $5 billion, whICh was supposed to be a back-up SllIll 10 be lISl'd only as a lasl resorl- mightllow be thrown mto lhl' hreach; it aIso reported litat liS banks were discllssmg restnlClunllg theIr ioans to the South Korean prI\'atl' sector, pmnding debt relier, Later that da)" the I1vlF, Ihl' liS and twel\'e other go\'ernments pledged to send a new tranche oj" $ I 0 billion but saId that for a Somh Korean recover\, 1l was cntical that illlernill10nal commerCIal ballks agree a . sign ilicallt' rescheduling for Korean lin
114

TilE (;J.OIl.\I.ISATION (; .. \~IIII.F

go\'erllllll'lll n:solln.:es and to engage the banks III a dellt rl'SCherllllill~ ('xerCISI..' is a SL\lllllJng polio' n~\'ersal Lhat COlJld han.' bl~ JllJplicauons Ii) .. Ihl' ",a\, flltllre lillanoal crises arc tackled ... 'The bClIS, the oniClai Sl~ctor looked a del;lllillw Korea [11 the I;lce, and blinked," s;ud 1\·lorns l:olrisLeJl1. a selIJor ecoll()llll~l wllil the Institute rllr Internal1(1l1al ECOIIOJlJICS. '~I Till' LiS Treastll"'" Ihdf cbllned lhat Its dimh-do"'tI \\';1' 110 stich tll!!lg bl'ClllSL' Lill' extra 1I10[W" allcl tile JllI'ol\'CIlll'lll 0(' the US pr"·,,te batiks III reschedulillg Korean IO;lJls was cmnbJl1l'C! with fUriher l'ondilloll;dilll'S bl'Jllg IllIpl,,,ecl Oil Korea li)r rasler ;lllci deeper n:strllClUr!!lg" of its capitalist s"stl'lll. Bllt Ilobo(h' e1sl~ S;lW matters III that wa\'. The backtracking I>y Ihe US government did prc\'clll Ihe Kore;ul defauh. But H did nllt clle! the wider linancial pallic IlId(JIle~la was iert wllh ;l COIllpicte credit crullch and dh'Cli\'cI\' a complete dcbuh 1111 liS c1d)ls. The whole rq{loJ) Ivas galIoplIlg Jllll) ;1 deep depn:sSIIJlI whIch 111 IlIrn would spread the effects oj" the Asian CriSIS to other parts ()/" the II'orld, parlll'lIJarlv commodity prociUClllg coulltnes like RUSSia which would lind world demand for then' exports slumpl11g and would thus I;lce all exchange rale and finanCIal criSIS 0(" lhelr 011'11. But lhe Illlponalll pOIlll aboutlhis ceI1trai episode IS the (;lLllhat tilt' lIS govcnllllcnl Jlll/g"l III II.W /J((lIIr III Ihl' jmllall' 111111'111'1.1
/-.:/II/'{/II nile

rllnher liS polin' ()1~lecLl\,(,s II'llhll1 Korea. And it was the Amencan lin:lnClalmarkeL's Ieadillg nperalilrs II'llIch l'X',Ttl'd pressure upon the US governl11clll to stabilise the Korean et:(l 110 1\1\'. It was, of course, elllharrasslIlg ror the US Treaslln' 10 he slltll1g dowl1 Will! private bankers to agree the rescheduling of private l()all~ to Korea. BIll liJi" thc US and otlll'r western hanl;.mg C()!I1111ul1nies. n:sdwdlliing the Korean debt with till' US Treasllry was a welcoll1e ..die/". As tht, shock.,' fro III lhe Jinal1C1ai CrIsis worked thl'lI' wa\,s Illrollg-h the Asmn eColloJl)les, the HvlF's prcdiclions aboul the reglol1 's grClll'th prospects for 199H lurned oUI to be wildly oul or line with n:alilles. Deep Slumps gnpped much or the area With the most appalling sulferIng \)elllg expenenced III lmionesla. BUlthe hopes of lhe US g-O\"l~rl1l11entlllal it could reap substal1L1ai I)elle/its fi)r Ils capItals 111 the regIoli as a result or the cnsls did sec III to be COIll"I~ true, The balLle lin' the flllU/"l' character or Korea's relalions of prodllC!Hln as a whoie has cOI1L1nuerilO rag-e ;llId II IS II\' 110 llIeallS clear yet what the linaI outcome orlhat strngg-le will he. fiUI alreadY III Decemi}er 1mli, American capItai was lookillg" ((In\,,,lrrl to making a l;.il1illg In Korea. The Nt7t1 Vorh Tilltl'.I' 01''27 December repon~'d thaI 'Korean (llIllpanles arc looking ripe to li)relgn hu\"ers.' The l,tll :\/If.!.i,/,·.I Till/I'J or'.!.5.1al1l1arv I~)~)K reponl'd. 'US COlllpaIllI..'S Sec Fire Sale 111 Smull KoreOl.' '[he Clilfl/go '1',.il,,/II/· reponed 011 11-' .I01l1nar~' Ihal 'SOIlle US CompanH:s .Jump 11110 A.sia WillI Both Feet', ;\l1d the I\'al/ Sln'I'I./II/lI"I/(l1 reported Coca Cola's purchasL's of CO III pal1les 111 l\.orl'OI :1I1c1 Thailand ullder mill)' allft d"/JI

(1.1 (I

/)(Jlillmlll1wf

UJ

TilE 1'.\Nlt: llF

'~IH

II :l

the headline. '\"'hilL' Some COllnt Thl'll" Losses III ASia, Coca-Cola's Ch,lIfmOln SI;L'S Opportunilles' (Ii February), TIll: ~allls III terms of US (Omp.lIl1eS heillg- able lO lakc C01lll"ol o"cr ASian assels 11:1\'(' been subslanlial. .-\s (-lirol1lll Nonaka, sccrelary-gencral or .Iapan·s ruling Liberal J)l'l1l1'lTaI1C Pan\', PUlil in thc S11In111er of lmJ:-\: 'There IS an III\'asion o/'1{)r~ l'lgn capital, espl'Clally LIS capilal, lllldl'! wa\', .-\ t\'jJl' or clIllIIlIsalillll or Asia has slarled'~~ J)lIl'1ng thl' first live l110nths or 19~J:-\, US ulillpanll's had hough' tip douhll' thl' 1lI1lllbn or :\.~Ian bUSIIll'SSl'S th,,' Ihl'\' had boughl in .111\' prc\'lolls \'l';U·. spending $K billioll III Illtai. Significanll\' lhl' l11alll targel ''';IS the .lapancse fillanual svstl'Ill, rollowcd by SOllth I\.m'l'a .IIHI Thailalld. The purchascs III South I\.orea have abo bccn targTIl'ciespeCially 011 ban\;,lllg ;;llCi linallcc, SCUII-ilICS Dala, a US-based 111011 1111 ... ng a~ellc\', dcscrihed the surge III asset purchases as all 'historiC mOlllelll , European companies, especially thosc or the UK, German\' aile! Holland havl' also IWl'1l \'eiT aCU\'e, Spl~l1dil1g- aboul $-1 hillion, ThIS centralisatlOll or Asi;1I1 capllal III Atlantit.: hands was lI11l'llsif'VlIlg as IIlonlhs passcd, According 10 (;oldlllan SadIs, the pace wa~ 'cL'rt;l1nl~" pKking up' ~:I_-\.~ Paul h.rugman pOllllee! OUl. thl~ f;ICI that the LIS purchases or bUSiness hare heen spread across 1l1.II1Y seClors IIlcludmg those whele the US companil's could not 1)(,' thought to hare a compelllIH' :lcl\'antage shows lhal the lire-sales an' thl' product or weaknl'sses producl'd I)\' the linanual criSIS, :!·I

FWJI/ A,\/11

I"

till' II irln II iJ/-Ir/

It IS wonh Ulldl'riilllllg- the pOIllt lhallhe hlg- LIS ill\"l'stml'lll h;\lll~s weJ"l' E1r J'l'tlIII happy 1I'1Ih the dri\'e b\' RubIl\ and Sumnwrs (sllpp()rLt~d I)\' Ala1l Greenspan al till' Feeleral Reserve), \Vall Strcl't's dislikl' or Rubll1's ag-gresslve linl' had a slll1pll: explanauon: hiS behaviour had crl'aled panic al lhe WI'\' hean or lhe Illternallonallinanclal s\'steJII, was dr;lgglllf.\' the IlHloIll'Sl
I

\(i

TI'II-: (;t.OB:\l.IS:\TION (;,\:-'IIII.E

But III the early months o/" 199H it did JIldeect become dear that East alld South-East Asia were heading fin- a deep eCOlHllJ1lC depreSSIOn. And because the n:~lClJl was the drnamic centre of' the InlernaL1ol1al proclucL1\'C ecunOI11\·. liS depreSSIOn qUickly arfecled L1lOse ecunomles pr()dllCln~ till' ke\' COlllIlwdil\' mputs for tht' \\'odd econOIllY. sllch as oil. The collapse lJ1 oil allel otlwr commodity prices was swift and II was SOOIl rellectl'd in greal r1inintlties for oil-produclIlg states like Venezuela anci Canada and, or course. RUSSIa. Betweell Septelllber I mJ7 and September 199H the price or oil dropped :t\ pCI' cent, that of wheat fell :-\9 pCI' cellt, thai or copper feIl ~~ pn cellt. Tht' malIl lIldicator or COllllllOdit\' rUllIres pnces, the CRB-Bnd~l' Futures Index, wilich covers se"("tlllTn comll\o(\i\tes. fdl I H per lT11I betwl'en September 1997 and September I ~)9H. The oycrwlH:lming propDrtion uf tile exports of'so-called emergmg- markels arc cOl1lllluclity-basec! ami since most of' these emerg-lIlg markets wcrc hcavily mdebtcd and thlls Ihl'lr financial systems and currenCIes were vulnerahic to sharp detl'l'Ioratiolls in th<"lr current account~, the..: crisis spread.~:' The Ru~slall collapsc was the next deCISive phase..: or the (TISIS alld the Il<.'xl big tcst for the US TI-easIlrY. Yet agalll IL put together an IMF packagc and yct agam this was llladequate; III August J99H the rouble collapsed. Thl' US Treasury could have stepped in at the last mlnutc wltl1 some..: sort of cmcrgency rescuc. If' it hact becn able to uncle..:rstand the real siLllallon 11 was in it woul(l certainly havc dOlle so. BUl Rublll agalJl failed to grasp the realit\'. No\\' he..: looked at RUSSia through a ~peculalOr's eye~. Russla's as~ets h~\<1 been OJ bonanza IiII' SIX years but the economy had be..:en a steadily worsenlllg disastcr. sllrlllking without limits and noll' tilly and iargc:l\' IrrelcyallL \I) the world eCOI1OI1H'. \"'hy, he must have reasoned, bother about the rouble col· lapse? But he overlooKed two IitCls. Firs!' tlH: Russian clites were not rootcd capItalists at all. And seconclh'. a quarter or a cClllury of tile Dollar-Wall Streel Regllllc had left I11l1ch of the rest of the worl(\ With fragile and vttlncrablc jinanclal systcms. In Jnst about every financial crisis SIlHT the start of' the 19HOs, the governments which were htl felt that they could not risk repudiating thclI' debts for one very fundamental rcason: their finanCial systellls were only the nerve centres of whole capitalist eCOn()l11le~ with mullIpk link~ Wltlt the imernallonal economy. To ha\'C ~1I11plv repudiated
pure speculation. The oni,' sl~nilican( link between RUSSIa and world product markets was energy and strategic raw llI
Tlil' IlII.uulI/ f)llau/lulU/IIII' Fragilily 1!1/~((Il/olllil"\' H'torlhl'III'" t~\' Two/JI'((If/I'J of' Ihl' f)\'\:'lR

The RUSSIan dd:Il!lt was an enormous Jl1ternatlollal shoc);. because around the worlrltilt're were so mallv economies whose public sectors and banking systems wen' full or internatlonal ({eht, built lip o\'er two decades or 111011('tan' and (inOlnClai volatili,,' amI crisis. And tillS debt was 1\0\,' nil longer locked il1to medium-term bani;. loans as in the old Lalln Amencan cnsis or the eari\, 19HOs. It JlIlW took the ('orm of securities - bonds and stocks - that Litted in neath' wnh the Interests Ill' US renlJers ,lI1d mutual f'u 11 £is, enabling thel1l to escape markets IJ1stantly h~' sellin)!; lip, The qU(','ilion lhe\, 1~\Cl'(1 aher the Russran del;llllt was: sllould Ihe\' sell !lOW? There Illlght be 11\1 c01ltaglDn from RUSSia to Brazil, With Its large public debt funded by short-term bonds, BlIl what if there was a bilure ill Brazil? TillS would dra~ down the whole of l.atin AllIepca and spread furthe1'. Theref01"C, these speclIlati\'e investors had even' I1Icentive to behave prudent'" al)r\ withdraw theil' fllnds, And h\' dOlJ1g so the\' would, Ill' course, pnwokc tht: criSIS that the\' wen' gll.lnling agaillst, These kinds of thollgh ts were suddcniy tranSronlllllg the patterns ur sectlnty prices all (I\,n tilt' worlel

IIH

TilE ,;UH\. \I.ISATIOi'\ (;.. \\11\1.1':

cClltrall'~ linancial illstitutlon, Ihe so-called l.ong Tcrm Capital ;\Janagelllelll (LTCM) hedge fund to its knces, It har! been beulllg Oil what it had aSSlIlIlt'f1 to he a Wlt'horse race: that as a mOlletarr UlllOn ;Ipproaclll'd ill Jallllary J ~)~J9, Lhl' Italiall bOlld market would com'crge with the Gcrman, But the RUSSian dcl~\lIlt sudden I\' Illovcci lhc Italian bOlld market lhl' other 11'01" dcsplte till: approaclullg start of thc Cllro, But the LTC;\-l crisl!; was an aCCldcnt waiting- to happcn, Ali(I the pressure on Latin Amencan lill<\I1C1ai svstcms was also an aCCldcllt prcparcd b\, tlw stead\' strengthelllllg or lies across the world's linanCialmarkets III lIle /"orm or hen monc\" Thc lies of hot mOlle,' wcre themselves a rcllcuion or the basic fact that so mllch or the world eCOlllIIll)' had become too li';1gile alld risky 1'0]' the It>llg-term ClltnllllllllClIl o/" funcis h)' the relltlers or the corl' econonues, There was also a powcr relauonslllp at \\'ork, of course, Cm'el'llllle]lls desperate to roll o"er thclr debts would take whateH'!' the\' were orrercd bv Wall Street: ir thl'Y were lI\fcreci hot 1llCJ1IC\', so bc I\. BII( IhlS power relatiDllslllp was llselr an expl'cssion of fundamental econOllllC wcakness and vUlnerabilitr oulSI(1c the core. \Vall Strcet would not hm'c Ileen so powcrf'ui. ir thcse cconOlllles had 1I0t bl'ell so dependcll\, So we ,In' dl'l\,\:11 hack to the orl~lns or thiS depcndency ami the\' lie in the 1~\Ct that. the g-rowlh paths or mall" or the world's eCOlllllllles III the 19('iOs alld carll' 1970s had been hrokcn by thc nse or LlIC D\VSR, piull!-\,I\I~ ecollolllies IIl\O {TISl~S Which left them wllh chronic weaknesses and vulnerabilitll's, And the same reglllle had led back to the Alllencan econolllv itself. It had been (lIJle to '!Jenclit' {'mill the DWSR bv openin~ lip Latlll ,-\llleriCa and strengthenlllg Its exports to the rcglOlI, fir 1991{ ahout hall' of' US exports were gOll1g to Laun America and Asia, ThiS had been a handy escape rOlltc I'()r the Americul prociuclI\'e sector \~Iccd WILli the cOlllpetll1\'c challcnge or Japan and Western Europe. The D\VSR had orrered a \\'a,' Ollt {'nlln the hard. domesuc task or r;lIslI1g pro(ltlctivitv 1L'\'els and reorganising the linKages between savings and productl\'e In\'estllll'llt III the US l'COnollll', And the D\VSR had another 'hcncliclal' ef'IeCl as well: Il of/creel paths to link lite ordinary Amcrlcan to a speculauve-rellw:T sYstem \\'hosl~ power stretched ever dec per II1to tilc CCOIIOl1l1CS or the woriel. ThiS was reH~aled WILli stark clanly b~' the I\kxlc<m UISIS or I ~)~)'1-95 as Til/II' lIla~aZlne explalllt"d at the L1Il1C: '\-Vhat many AmenGllls discoverecl last week was that \'()r all (lit' helt",;\\' rhetoriC pilling Wall Street agalllst Malll Strect, Wall Su'eet IOllg ago lillerseelecl wah 1\'I;lIn Street. Al risk III [MexlcoJ were not on'" US ballks alJ(i gl
and this suddell shift was what s('ems to h;I\'c brought a

Tillll' ll1a~azil1c was n~lll abollt thc E.lCIS. bUl lhl' ~r()\\'lh o/' powerful spec1Ilatl\'C lilJ'n~s \\'nlllll almnsl cn~r~' scClor oj' lhc L'S ('COIlIJIll\' was ~rl'ally slIlllltlalt'd b\' t.Ile c\'olUl.1lln or the D\-\'SR, :\nd ))\' I ~I~IH the US l'COllO'1l\' "",IS Itll1alccl b\' \'cry lar~l~ and sonal\y all-pcn'asi\'c SPl~Clllatl\'C dislllrllOIlS: lhc slock cxchall~e, despitc lhc ralls III EI9H, rCI1l'lillS t.hc cClltral illllaled bubble, Till' :\IllCriCall 11II1Imarkcl has cOlllllllled, wl,h a coupk olnotabk l11t(TruplHlIIS, lill' lifteen \,ears ami has becolllc absolllleiy central to Al11cl'IcllSlltlll'nl'\' or orriillan' AllI ("I'IC;t liS, Pcrsonal household debl raltos in the LISA i!;I\'l' ne\'l'r IWl'1l hl).{ill'r ami lar~e paris or thc Imd(lle classes have borrowed l!J lI1\'l~st ill thl' hubble. Da\'I(1 LcV\' OrUlC.ler()11Il' Lew Economics Instttllll' 1I1 N('I" 't(lrk g'l\'CS lhe rolloll'lII~ picture or hoI\' an uncontrolled expansloll Ill' Ilctirious credit mOIlC\' and or speculau\'e rorccs III the LIS stock market werc sllslainlllg the US hoom as of the Slan or 1991-\. In lillir or the lastllYc \'cars. consulllption lias l-{ro\l'1l raster than persol\;11 inconH:, ThIS has hecn a kl''.' Elclor 111 \\'11Il'11IIlg prolillll
or

I~()

TilE

(a,< lI'.:\t.lS:\TJ( IN {;:\,\1BI.E

Stock market spcclIlawlll has also dOlle its bit for whal President (:Iinton UJllslclers to iw his g-realest ciomesLlc ;IclIlC\'CIllCllt so (;Ir: gelling Oil top of tlle US hudget ddicit. Capital gams [ax recelp[s to the TreaslIlT are lip rrom $-14 billioJ) 111 199:1 Itl S I 00 billion for 1998: a direr! IIldira[or of the Voillllll'S of speclllati\'(,' trading- 111 US Sl'curllies markcts, gut by the cnd of October I~)~)H till' signs or a mounting Jill;\IlCial cnsls wcre 1l1llluplvlIlg-, .-\ credil crllllch h;Id already starte£! In Illl' l.IS fillallCiai S\'s[elll, InSUllltIoJ)S III debt wcre lIlIt ahl(~ 10 fill(leas\' access to Ill'\\' credit.. II' the credit cruJlch were to spreaeJ 10 i\,I;t1ll Street. demand III tile US eCO\lomy could collapse "cry swifUr, In short. the Amencan people are at the lIll1l' of writing at nsk of he III g swept into the vortex of a crash gc..'llera[ed b\' lhe spcculalivc boom which lhe\, had hoped sig-nalkd a bcller fulure, When the Alllerican Central Bank, till' Federal Resen'e Boanl. lIllcn'cned III late September 199H to save the Long Term Capllal Managl'llIellt FUlld (ITer..,!). It thn'\\' il beam oflightlllto thl: black holt: ;llille Ilean o!'what has (cline to Ill' calknlllT deputy ch;urtllan or the Feci who haci t)(~el\ eng-aged III an oq,ry or recklt:ss spc:cuIaWl1l; that the macroeconomIc poliCies of the rest of tilt: world should be shifted by lowenng lllterest rates to help bail otLl a Ca\'lI1an Islands company, Globalisation had come to tillS, And while we were absorbing this set or llIessages. Greenspan procecclt-d to supply sOllie morc: he did not start 1Il00'L'S to wind down ,Illcl close LTCi\,1. I-Ie ;t!so n.~lectcCI an oner from a bIg mld-wl'Slern spcntlalor. Warren Bllni.~[, to take lhl' prohlem oil his hands bv taking It over. Instead Grecnspan brought all till' 1)lg~est AmerIcan 1J1\'estillcl1l banks LOgether to .I
1Illerl" dl'SIIIIIIl:. And as.losepl1 Suglitz. duef economist at tlw World Bank, poillteri IlUI. llIallY smaller CCOIlOlllles III the world can be rUllled in thiS way, regardkss or theil' so-called TunciallIen lals', their hllldallleillais are nut as fundamental as Ihese hedge I'unds. Mosl 01' tIll' big~est of these speclllatIve orgal1Isauolls arc complell'ly opaqlle ;llHI unregUlated hecallse AI'1I1 Grcellsp.m and liS Treasllr~' SelTl'lar\' Rober! I\\lbm 1I,lYC wallled them kept that W.I\·. ThiS was Greenspan's last lllessage dunn).!; tilt' LTC!'.'I CriSIS; lie c1alll\ed that stich hedge fllnds could lIoI be rq~ulat('cl ht'l.luse if Ihe\, were. tIH:\' would only escape 10 place~ like the Cavmans! i IIstead. he propnsecllo make II", /fIIKt'/,\' or some or these orgalllsauol\s - the linancial systems or COlllltrIeS III Llw SOlllh - llluch lllore l.ransparcn t. As a Fi Jl(lIIflfl( Ti lilt'S edi Lonai remarkcd, thiS will sllllplY makl' l.hem en:n mllre \'uil1l:rable to specUiallVl' attack. II IS p;lIllhrl li,r IlIalllslJ'l";1I11 l.Tl)llllllllsts to ElLe lills bllarn: reality. \Vl: know lilal if a big bank at the hcar! Or.1 lill'lI1cial system goes hust. il call pull down other h.lIlks through liS defaults on debts alld It Gill Col usc panic amongst savers whcn the" see deposils In the bank. helll14 WlPl'c! Olll. Bill a specllbtin: tradcr 011 securlLles lllarkl.".~ or {"relg'lI l'xch;lIlgl.' markets IS surely somctilll1g qUill' diFfereIlt. These npcralOrs are speculaullg III the sense that the" arc mak.ing prolils through helLIIlg on pnn' movcmellts In a market or pnn: diflerences belwcen Iwo markcls. \Ve kllll\\' thaI slIch Spl.'l'UlaLl\T
TIIF CI.OI\,\I.IS:\T1< IN (;:\\IIIU:

LhaL 1l was a raLlonal way to reiaLe Lo Lhese IllLernalllll1allin;tlll'lal markets. And fOllrthl>,. Lhat It \\',IS g-ood, III some way or other. for Ihl' health AmerIcan lHlSlness. These pn)pOSllIOI1S cuulel be 1lI11l1l11;t1ly true only if the SlIlllllllts ur r\mencan lInance engagmg" 111 LhlS speutlallon could, III sOIlle way or other. rIg the markets. ThiS aL lirsL seems improbabk. IL would reqlllre some or all or t.lle rol\owlIIg conditions: t.haL Lhe\' had el1ormO\lS market power. hug-c mohilised runds LhaL could dictate slwrL-run pl"ll:e IIw\'cmellls 1\1 thcsc llIarkCl~; bUl if thl'\' were compeLlIlg against e;lcl1 other Llle\' could C<11J(:e1 out each othel''s attacks: so a second condition could he LhaL Ille\' worked together. either hy carvlIlg up markeL" IIlLO dilfen:11I spheres or hy co-operall\,elv ellter1lIf{ a givcn market; a Lhlrd possibic condiLion aiso eXlsled: th;1l the\' could IIlciivlclually or collecl1\'ely have access to Illslcler IIll'ormaLlI1Il ahlllll hllun' events on Lilest' Illarkets, 1Il1()nnaLIOII lhat could cnal>lc Lhem Lo Will. In LTCM's case, all Lince condiLiolls seeIll to have been mcL. f"irsL. It was abie to mobilise realiy ellorlllOUS SUIIlS. livlF sludies had indicated Lhal hedgc runds cOlliel mohilisc ioans alllOllllUI\~ tn twel\t\· limes theIr capit~.t, But as we ha\'e seell, LTCl\.J could Illobilise 2~)() LImes IL<; capital oj' S2.(j hillion, til oLhcr woreis $650 billion. ThIS is ellough to shake pnces III allv market. Secondly, LTCM turns OUL to he Ille inSLrumenl or a cartel or LIS IIweSU1lel1l ballks, or all (!/ /III' i{JjJ {J11t'.I, pillS the blggesL or L1le Europeall banks, UBS, SlJ cOmpeLlU()ll was nol a sl~lIilicalll problem. Alld thlrdh-, Jl appears Lhat lTCi,,1 Ilad cxcellcnL chanllds 10 Illsider IIlrOrmaliOl1. Congrcssman Leach poillied OUL LhaL [TCM had links with go\'Crlllllellts. Italv s ccntral bank has hecn a big- illvestor III l:rC1\'1 at the Yen' lIlIle Ihat It "'
ur

or

TIll' n:alil\' was Lllat il would Lake a lot nHln' thall a po\\'tT l;tilure at LTC;"'I's COlllpuH:r celltre lO put a SlOp to Its wInJIIllg run at till' GIS(JIO. Bnnglng down the mother or all hedge runds would require actioll hy the nHlllll:r alld Either or all 'ex0f{cllollS shocks', the kind or sIwek, or series of shocks that hIt thc world III I 997-9,s. These shocks wcre nol, actllally. exogcnuus to lIle system that pmc\ucecl operators like the I ],C),;-1. Ther arose frolll the evolution or the IIlner dYnamICs of whal has cOllle to he called glohalisatioll.

(;Io(J(I(i.l'fliw/I

.I'

/)iaft'rllm/ TWHI

The rl'Vdalion thai thl' sUlllmlt or the LIS linanClal S\'stCIlI l'IlIlSlsts of a halldful or spcclllau\'C hedge funcls supplied WIth allllost limllless credits h)' the Amcrican mOllcr-celllre banKs IIldicalCs that glohalisatlOll has worked widr Ollllll a diaiecucal Lishlon o\'el' the last qual"ler or a Cl'ntlll"\'. IL began in thc head" days or thc Nixon adlllllllstralion as a liheratlon or llS l'l'OnOllllC managemcnt frolll the constralllts or slIhorrlin;lllllg till' ,-\lIlerlean ecollomv to the global economy or the Brellon \"'oocls rcgtml', IntcrnatlllIlal fillanclal liheralisat1ol1 did nlClecd Increase thl' Ie\'cragc or IIle American stale o"er inlernaliollalecollollllC amlirs. Bllt tillS expalJ(ll~ct /Jlllii/ml/il'l'tilllll to lIIalupulalt' the wurld CCOIHlIll\' ror US CCOIHIIIlK ;I{h-alllagc has {· ..
I~·I

THF (;1.< )(\:\I.IS;\TIClN (;,-\\11\1.1,:

liS eCOllllm\'\ low level of dOlllestK sa\'lllgs aud kccps [he US c\on1t'sllr booill gllillg. ThiS slructu .. al pauc .. " means thaI AlIlenC:l1I f!:0vcrlll1\CllIs han' 'Il'qlllred a \'It;ll IIlll:re,,1 III llIail1lall)lll~ ;111 IlHt'rn;lIlOlla! p;lIlerll or 1II01ll'tOln- o\1]{1 Jin.lJ1l1;t! relations which is extrelllcly \'olatilt:, unstable ;lI1el crisis-pro lit', bl'CaIlSl' 1l IS these fealures oj" the 1l11l'rnallOllili CC0I101llJl: SYstClll which mallllillll the vast IIlllows of funds mlo New York. And It IS In thIS context that 11'(" can sec lhe II';tV III which L1IC big ltS hed~e funds are lIol an abe ....a\lOll hilt arc rather Iin
NOil's L :\11 exn'plIOII 10 Ihis lrllClIlelll and illilerale Inlllllph;,lislIl which parllall\' san'd II", 1'",. Ii.'ssulilal hOllonr or .-\lIglo·AlIltTIGIIl ,1<'llIrllalislll was 10 II" fOllnd III lhl' "olll',I\' and 1I .....al l'1)lIra~,' .. I' i\brtlll Wolfs \\'nlll\~ III IllI" hl/f/I/I'IIII Tilll,.. allli III llI;lII\', Ihllllgh Ill» all. .. I Ih,' I'/lIlIlIn,,1 'filll/'J', edilon;,b, ~, Iltll ,,:c: Robert Wa,lt- and Frauk \'l'lIl'1'USO. 'The ;\SI;lIl CriSIS: The I'ligll DellI tll"ti.-I \'l'r· SIIS Ih,' \\',111 Slp'cI-Tn:astlr)'-IIIIF COlllplex', N,7I' 1.':/1 11"./,,,, ~~ll (1I1arch/:\pril I ~I~IH); Roil,'''' Wade ;Iud Frauk V"lIero,,'. 'The Galhenllg SllImp ;11111 lh.- lIalll<, O\'i'l' Capllal COli trois' , .\~". i.,Jt ~:II (S,-pll'lIlhl'I'/OC\uiJer 1\1\1:-1); 111'11<'<' CIIIIlII'I-\" 'Th" Kon';1II (:1''''' alld I h.- [lid or "1.;,,,," Ikn'lo(ll1l<'lll. ,\'.7" I,,:/i ~:II ('iep."II,II"r'(k,ol ... r I!I'IH); S,·" al'l' \\'.dd"11

11"./., ..

U",,,,,.

TilE PANIC OF 'HX

11"11,,, 'LISt :hla IlII IIII' I,:", or Ill" (;n',u T ..;,"sfurtn,Ulllll·, fI",,,.;,, 0/"1"','/"1,,11/(11/(/1 1'"liliml /:"'"0/'0"1.\', :,,:\ (~\IIIIIIIIII l'l~l~). :\ \"l'("<' lull dllll'II,I"g), as \\'<'11 as a I;'''lll' ,111<1 "CI"\' ",,'(ul ;tn:hl\'''' uJ' (Jlhe..'!" 1II;I'\'l'Ial oil Itt" ('n"ih ell1 he foulld al N. l{oulJ1ui'!'I \\"(,,.11 ~ .. ,. at

h II p:/ /WW\\'.slt:rJl.ny, 1.\'r111:' -II n Hlhinl. :\. ~licha,,1 Vatikiol", '1',Il·ili .. Dimll' , l-ill" FI/l/n 1/ F"""(I/,J/( 1I,,',n/! (ti NOI"L'"JiH'r I !)!)/) . .1. R,'I(' :\11 llal'lI , ''1')" ...h.,II' ,\lulIl'lan' 1'111111 1', "posal: :\ C'S" SUIIII" "f-"'P,III"'" 1~'·.~'I)II;11 l.eadership ,./11111111/';("1)111111111 Jml"I1/." n/p" .. I, "0. ·Ii.-\, 1\1\17, r" JII.I/,IIII/(Jlwl fllll"."II,., Ikrl'lIIhl''' I!)!)i, 'IuUIl'd III ROll BI.'I":II:'IlIa, 'Whit),,'r Ill!' .J;'I'","',e IlIl)[k'l~ Till' :\SI;1lI econolllJe ITISIS ,11)(1 Ihe 1:01l11l111all01l of ellld "'ar )lolilio III 1IIl' Pacilil: Rilll" , U,7'117I' "J" JIII/'/"IIIIlwIIIII J'IIJiIIWI J" "JlOIII,\', :,::1 (:\ 1111111111 I !)!)K), Ii, Bllt StT linIn' ClllIlIlI).;S, 'TI,.. 1,"1",'all Cnsls alld til" EIIII"f "I~II.," I)"\"I'IUPIIII'III", SI'I' also Wal,),oll Ikllo, 'East :\"a Oil 11Il' En' or Ill!' Crl';Ll TraJl,Ii,rJllalloll", 7, Illler\,wwed Ilil the liS T\' prng,,:ullllll' NI7I'., /111/11", Rllhin was asked IlI'.Iim I.ehrer \\'h\' he had h""11 working ,,' harel 011 Ih" Koreall 1:'11' pro~ralllme, Rnllin replil'd: :Jilll, :\mel'lcall k,nlership II", hel'lI ahsolllle'" n'l II 1',,1 10 Ihis l'fii,rt , , . 111 I"d,,,'", world II", Uniled Slall:s IS feall)' II", 01111' I"flllllln Ihat IS III " p""I;O/l 10 pnn·;,!t- 11", I:illd of 1("IIit-rship Ih;\I " ""I'lh'd h. dl.·al \,'nh .,sues orlhi~ IlIa~llnll(h.' alld lI11pon:lIlCL' to Uti!" nHl1ltry.: ,\.',,1 /It,,,r. I:i.lanuary 1!)9H (http://\\'\\'\\''I'\)s,org/I1\',,"'),O\ll ). X. Fillllll/wl Tillll'.\, 2.1:1l1l1a .... I\)!li;, p. :l. \1. ~Iartlll \1'011', 'S,III1I' {)Id I~IF ;\lnliuIIL' , Fillllll/'ml Till/n, " Ikn'II,ItL'l" 1\'117, p, I H, Ill. ":11'1111 \\'"If, 'S;Wll' ()Id I.\lF ill",linll<, . Il. QIIIIll'c1l11 Ih,' F/I/I/I'I"IIII '/";111"" II \1:1\' I'I\I~, ", 1\), 12. ':\goll)' 'I'ls III for ..\SI"·, FiIl/III1'/IlJ '/'i""'.I, 7 \1;". I !I\)i;, p. 1\1, 1:1. 'I\ol'l'a's Resew'-, Fill/lllmll Till"'." .J 1)"'."I'IIIh('l" 1\1\17, p, 2:'. 1,1. Fillllllnlli 'fiJl//'J.·1 lk'-"lIlh"I" 1\)I)i, p. (i. I:', I-Ial"llll \\,,,1/; 'S:IIIII' [)Id L\lF :lh,(I;nm' IIi. I·IK down :i,:I, ill"I;\\,sta i.·1. IlIIlo'H'Sla 'l.Ii, Singapore 2.:\, I'hilil'l'lIll" .1.'), Thaibll" .I.!) ,wr ('elll, all" Ihere was" 11\'\\. ,,"iI\"I' III pn'ssllI'e ag'lll1st 1111' J-JOII~ KOII~ d"lIal". 17. N, ROllhinl, 'Chl'lmoloh'Y III' (b,' ;\'10111 ensl' (stel"ll,nY",l'dll/-l\I"lIlIhilll). p. :11. This lJI\'ol\,I'd lifting re't\"lnlOIlS 1111 I"on"gll 111\'1"1 lI<ell I alld making II' \)allkill~ 'y,lelll IIIIIn: an'olllltahl" III /IIark .. 1 Ii 11'("< ,,', .·\lIoJlII'r k'T 1\11' C"I>lHlitiIJII was li>l" th ... K"r .. a11 gO\'l'nllllL·1I1 10 ("1Irtail p"h)i( spelldillg - III ollll'l" \\"I",ls public wllrks proll'Cb, IIII' li((-hlll(J{llII" lilt' ("1111'11''''11011 ("oIllllalll'" aroll11d which 111:1111' III' Korea"s .-h;Il'hols an: 11IIilr, IX, The 'lIilse«jIll'IIIl'lIl1apSl' lit IIII' 11I1I01ICSI:III tilla11C1al S\'sl"III, 1(11l0l\"l'1I by tlll'l'ollap-'" of till' SlIkhano r"glllll', ,111>11111 Ill' ""'11 as all UIIIII\('I1<1,,<1 11\'-prllclllt"l III' liS )1111 in' III,,"anls K"n:;1 at Ilti' 1IIIll', I!), N, RllulJilll, 'Chr()l1olu:,.;" fll ill<' .. \"0111 Cr"" (s(('rn.II\'Ll.l'IllI/-llrollhillLl. ~(J, Ruben Rllhin l'x/llallll:d Ih;11 II,,· LIS t"LlIllrihlltlllll wflllid 1:"1111: frllll' a s)ln'lal (HI"I a!llllllllslen'd hI' Ih,' US TreaslIrl' Ihat did IIUI r('«j'lln' (:on:";I"I"'IIII1:o1 :opprol'''1. '21, J-"illllllfltli '/i'1II1'.I, 2,1;11)11;11'\' 1~)!)S, p, :t '2'2, (~II()Il'd ill ,II.. Fil/tlll",d Tillln, '2.1I1Ill' I 'I')X, p. ) Ii. '2:1, TfI"" Walla',., 'L:S 1\111" SXhll "I" :\'1;11' IIU'"11'" , Fil///lII"/'" .J ill/f." ", ./1I11'· 1!)!J,~, '2.1. Sc" 1',,"1 Krl1glllall, 'Fir.'·Sall' I'DI' (hllp:l/I\"\\'\\".sll'rll,I1),II,,'dll;·-lIr,,"hillll. '2;., Sl'l' ~lichal'1 ill. Phillips, 'I'hlllglllg (:OIllIIII ,di1\' I'nn:s Spf"I'"d Till" II II >il III rill" (:1,,10,,1 En 1110 III r", ''',[1 Slri",r'/""n'tll, 2i :\1I~lI.'1 1\)!lX, 21;. Ci/,'l"IiOId Till/n, :llkn'lIIhl"1 P"l;. :11. ['aul Krtlf.\lI1all, 'I'il\' ,\I;IU (;\"<"'''')lan", Fil/llllwrl Tilll/'.I, :\.I<'"l' l!)~)~,)I, 1:-1, :1'2, Willi"l11 Dudl,,\", 'From \,irttllll', III Vinous, Fit/(/I/OIr/ Timl'-', (i ~I"I' I!)"I',(I. IH. :1:1, QlIllled III (;anh :\l<-xall,I<-I', 'Il""k ,\men!."a .JIIIIlS 1''''d~I' FII"d (:",,,,,lIil'S, SIII/d"y Tilll...I, I X (klolH'r 19!IH. :1-I.lhid. 1\

====================7=====================

Conclusions

The 11I
ThIS camp;ugn should 110t hl' seen as being driven by a slllgll' compllision, such as the search (i)r cheap la!)ollr ur thc scarch 1'01' markets, IL IS beLtel' ne\\'ed as an explollalio11 of power O\'er the IIllcrn;!tlonal polillcal ecollOIllY In' the US ami the El.' ill order In extract l'\Try possible useful ad\'autag-e through re-engllleertllg sOLletles outSide Ihc Cllre; or, to put malters the other wav rOUIlc!, In expel as 11lan~' problellls as call Iw expelled ()II!\\'ards h01ll the core SOClctK'S, Financial tTISl'S in the South, depcndellCies Oil US and Eli markets, IlIllented debt i>urch:us, lIlabiliues 1Il steer eCOn011l1eS III the El('e or bell'ildenng changes in the internalional ecollomic l'I1\'II'OllmenL - allthest' Elnors han' hl'ell sCll.ed lIPI)1l I)\' Ihl' ;\tlanllc powers as IllstrUllll'llts ror g-allll1lg- posluons III the c()untries cOllcenH..'d: for s(.'ll.ing cOlltrol or product markets, for bu~'ing local companv assets to ccnLralise capllal IInder AII;\I111C control. for l'XplOltlllg huge pools or ('heap labour (shut oul bv ever-stronger Illlmlgration I)arders rr01l1 ;u:cess t() core econonues), for taking effective control of financIal sySIl'IllS ("or speculatIvc purposes, ~allling 11I~her margillal nclds for the /wnsloll fUllds of till' popUlatlOlls or tile North and for ellgagIng III orglcs of spcculalloll and frequcn tlv COITUpt and crimInal acliVI tIes, i\'Iost of Ilwse aCll\'IUCS are presl'lIled ;IS the "err 0pposlLe: as te;lchlllg the suppllserlly 1~]\Or;IIH ;Ind InUlllllwtelll governmellts of the South how \O!'l1l1 Ihelr aff;ll\'s properly, as Ilelping thelll til pav oIf dehts, as sllppl)'lng them WIlIt aiel Ihrough FDI etc. The pallern of Japanese capJlalist expanslo]\ has h('en different 1lI the J9HOs aile! 1990s SImply because Japanese capllalislll lIas been Ell' 1I1U1'e gellUillely productive as a Ilallonal capllalist system Ihall the capllalisllls of Ihe ,\Lbnllc worlel, ''''hile tIll.' bulk or so-callcel FDrcl~ll Direct )m'eSLIlIl'lIt 111 Eastern Europe or III Ihe South Iw Atlantic capitals has hccl! a maller or laking over cOlllpanles and market shares, .Japanese capllalislll's huge surpluses or \"aJuL' ha\'e iJeen chanllclh:c1 inlo the creatloll of IIL'I" prllcilll'tive assets III E;lst anel SOl1lh-East ASIa and have heen compatihle WIlh \'1..'1'\' rapid rates or growth and sUI)stalltialmclustl'lal dl'velopmenl In rhe reg-lOlL The rapaCious llIercantilism or so much of EU's Iracle p()lil'~' Inwards thc Slauh and towards East CC\llral alld EasLern Europe. ali(I the fin\'e or the US to compensale for competlllvc weakllesses III Ils prorillcti\'e sectors lilnHI~h lakillg- predawn' ach'allta~e of" irs mOlwtarv al\(llillallual"~eclor dOIllIIl,IIlCe, has contrasted "'lUI the.lapanese capacilY to stimulate anel fed comrorlable WIlIt raplcl ~rowth III East and SOlllh-East ASia, BlIt the I'CSUit or tht" COIllbilled (/\'II<1I1I1C ~rowth or Chllla and Ihe rt.'st or Ihl' Easr alld SOllth-East ASIan reg-Ion. III reiau\'e harmony \\'Ilh.lapalll:se rapllalislll, has becn a percel\'cel threat to the fllture clol11inallce of thl' liS o\'er the world l'COIIOIllY. a threat-percepuoll flllll' sharec( Ill' the West Europt.'ans, Tilt.' resldt I\'a,~ ;Ilc ~alllble or the Clillton acilllilllstrallOI1 clllll1inallll~ III Ilw so-called Asian cnsis of 1997, The direct Lar~el or that gamble was the UHllltries of East and Sowh·East A,SI;(, BlIl lis IIldircct hut lllOre iillldalllclltal lar~('1 was (he

THE (;U>B ..\l.1S:\TIOl" C:\\II\\.E

possihili t)' or an emergCIlL reglonai bloc cell Ired econolllicallv III Japan but potl'lIliallv IIlcluding China as well. Therc IS, as Vcl, no concluslvc l'\"Idence tll"t thc Cliutoll acll11lnlstrallfll1 "eLcCt straLCg"\Callv frolll 199;) to lise the cioll;!]' pnce rise. pressure to dismantle controls 011 the capllal account, 1ll110ll'S of hot 1l101H:r and IlnanCl.t! warfare b\' the US hedge funds to brlllg coullLl'Ies 111 Easl and Somh-East ASia to their knees, There is much clrclllllslallllai eVlclence to suggest stratl'gil' planning, But the qlleslloll n:mains 0pCIl. What is not III (\OUbl b that 011CC the ilecige I'1mds had slnKk, the US Trcasllrv laUllched a dramallC' assault aga1l1st tile sOClai relations ofproduclloll III South Korea wnh the aUll of achlevlIlg a GIt'irhsrha/(1IIIg of Korean assets and US capitalism. BlIl the vel")' success or that assauiL was too Illllch rex the sGuTecl tissue of the political cconOllllCS on thc n:st of the periphery to sustain. Thosl' \\'l)IIlHls ml1iCleci by earlier tntllnpils of the DWSR, III RUSSIa and other parIs of Eastern Europe alld in Latin Amenca, had not heait'd sumclentlv to wllhstand the strains from the East ASian c!'isis and the resulting panic or '9:-\ revealed the heart or globalisauoJ1 to be an cxtraordinary hlack hole of rampalll Wall Street speculation. The G7 package of so-called reforms of the IIlternatlOnallinanci.d system IS l1l>lhlllg more than an allempt 10 keep lhl' whoie speculative show Oil thc road. It may be thought that the US go\'ernmelll and the European UlIlOn are sCl'Iousiy cOlmp.ugning to dismantle all controls on capilal accounts and to cOlllpictelv open all economics to the complete freedom of 1!10W'menl or all forms of core capllal at all tlllles, If they wcre allempung to do thIS IL cOllld only 1)(.' describcd as lunacy. Their aims l1a\'e been much l110re linuted, namely to gain till' nghl to open up any economy as the), please alld lo usc multilatcral treatics as a baSIS (i)r Iapng siege to any political eCOlIOI11\' whose government is at'tcmpting to protect assets against capllI],l' b,' pO\\'crrul Atbntlc capitalist groups. The .-\tJanllc powers havc to balance thclI' thll's\ (ill' cOlltrol ol'er markets and assets and pools or labour against tllel], need to p\'eser\'e the stability or at least tile \'iability or stall's and polillcal eCOnOIllIl'S outslcle the core. There arc mall\, 111 the Atianuc \1'OrId and elsewhere who would hope. «)]' thc best or rcasons, that the political fragmclltation lIf the world 11110 a Balkallised patc!Jw()J'k oJ'states couid be ovcrcome lw steps towards gCIltlllle worid government. This wouid, IIldeed, he a desirahle goal. But II wouie! be a grave error to assullle that the CllITelll HI'IF I'VB struclllres are a gellllll1e step III that dil'cctioll. ThL' reality IS that these strlH:lure,~ are less gelllllllely supranational III their fUllctlOning thall thc\' wen' ullder tht' Bn:lton 'Voods regllne and an: far less so than was envisaged Iw Kernes ancl Dexter '''''hile whcll ther negotiated the Bretton Wnoels regllllc dUrIng tIlt' war. Whal is overiuoked by the proponents or de\'cloplllg thcse IIlSlllUliollS further along their current lines IS the J'actlh.ll the pl'lllClpal obstacle to Ihe

CIJIlstructlOn or gcnuinc organs or global go"ernance lies in the most pu\\'errul states tilemselves, It IS they who have the most to iose from sLlch a ciel'L'loprneJll because at prcsl:nt (he\' ('onl('()1 these llIultilateral organlsalions Ii))" the purpose oi" furthering tllelr own power and illlerests. And the elllirc livlF /WB system IS dcslgncd to shih thc costs thc powcr-plars of thc :\Uantic worlel on to the bulk or humanity, whICh li\'cs In thc South. It IS dispJl'ltlllg ror man" to havc to Elcc thc prospect or rcturnmg managcrlal aUlIIllIIIllV to lIallon staLcs III order to acl\'ance towards a more ~emllnel\' ullilied world. It might be thuught possible to enVIsage a coaliLion or Illediulll-sizcd states bCll1g fllrmeclLO take dOllllllance out of the hands of the Ullucd States government anrl orgalllsc a svslem of global govcrnance which IS at ieasl hased upon a hroader "lIlel of oligarcillc co-operation hetween. sa\'. the largest twcnty countrlcs (largl'st. that IS. III populaLlon terms). This couici bc SCCll as a gcnuinc stcp forward. Em Simply to Slate it I~ to scc ho\\' distantly UlOplan such a programme or rdorm curren Lly is, ctespitc Ihc I;ICL thaL Llll' Atlantic powl'rs could still han"' lhc 1Il11lall\'c WHhl!) such a forum on lIIostlsSllCS. Thc\' arc addicted lIImOlllllalllinp; tlll'lr grip Oil thc wodd cconomv and \\'orlel politics, comc what ilia\,. Rclatlons bctween thc capitalist corc and pertphcry havc undergonc cxtraordinary transformatiolls durml:{ the twcnticth CClllll!,\'. In mall\' ways thc IIptllllallimn or thc relatlollshlp rrlllll the angle or corc CCOlllll11lCS was thaL thc Europl'all emplrcs. \\'Ith the 13rttish rclatiollsillp to India Ill'lnl:{ thc paradigm. Thl~ lI\abilit)' of th\.: corc slatcs to handle thclI' own II1ternal rclauons durtng the twenlleth centlll"v produccd paradOXical results. Thc c(lmbinallon or lWO dcvOlstatll1g European wars anrl new, 1~lr more produclI\'e .-\ml:ncan produclIon tecllllolog-ICS gencl"ated ;\ ncw phase or postwar p;rowth ill the corc. And till' rtsing Al11el'lcan capualislI1 ncedcd to break up thc Europeall emplrcs rathcr than build a ncw CXclUSIVC cmpirc or its own. Bm with thc rl'(urn orstal:{nallon in the ALialltic CCOnOI11ICS. It has heen thc lIl1Itcd Slates which has fell II sci I' (0 be In Ilcl'd of ;1 ('lIllcllonal l'C)lIIyaJenL or Britain's Indian Emplrl': a largc SllIlI'Cl' of cheap IIlplltS I())' US induslI'I' ;lIIcl a vital cil-s1I11:1L10n for cycr larger sharcs of US exports and local markct cOlllrol. and onc that wOllld, in addiuOIL pav Ie))' ils OWII aelmll1lstrallOIl and, likl' nlllc1l"l"lIth-cClltllJ'\' India, pay a handsollw tribute to thc IInpenal power. All thc~l' rcqllll"cmcnis hal'l' becn sought IJ\' tlie LIS lISlIIg tht, DWSR and thc SOCial englllel'rlll).{ aCtlVlllcs of thc [i\,IF /WB dltnng thc 19HOs and I 990s. Japan III thc 19HOs and 19~)Os, Iikc the US at thc cnd of thc war, l\as had no nced lill' sllch an impenal systcm: It clIlIld have sllslalncd continuing and l'xpandin).!; g-rowlh in lis IT).{lOn or thl" worlrl. sorllllg olllll.llnor difliclIltlcs likc a properLv bllbblc in Thailand, CIIITenC\' misalignlllcllls clC. Wl\tlOUl SIgnificant difficult\', Bill It could have cionc so onl" if the LIS had bccn so locked in conllin wuh thc ELI as to have 1ctJapan carn on Wllholtt disruption. Thc deterllllnatIon or SlIcceSSIW US adnlll1lsu"ations SIIICl' tht' ) Q70s Lo put

or

or

TI-IE (;U)\\:\LlS_HION (;_-\1\1111.1-:

Amenca first has (Ierlved from the ratiollai appreclallon of' Ille enorl1lous _pnvilL'!_~es and benefits whIch the LOp capllalist pll\\'l:r gallls /"rol1l iWlIlg Illl top wllhlll an illlernallonal capnalist system, HlII the struggle lill- power between capllalisl slales Gill no iongel- be a zer()-~lIIll gallle, ThIS IS IIl1t because tlw LllIllcd States needs a IlOonllllg.lap'llle~e 01 German l'(OIlOIlI\' I(JI' thl.: pro~pcrlt\' of Ihe :\,l1Iel'lcan pcopk, :\lIIencall kacicrs 1\'0 1I 1<1 lit' happy to ;Icn:pl ... llJlI'er US growth of, sa\" I per Cl'lll plT Year for li\'L' \'L'ar, III eXChange for.Japancse growth oj'-l per ccnt per ycar rill' lin-' "cars, ralhn lhall ha\'l' US growth at:l per cenl III exchange /"or.lap<Jlll'se growth al :; per cenL. The real baSIS fllr 1I1tcl--capHalist co-opcrallon lit'S III LllC IIlcreaslIlg dil~ lintitv the leaders of all three pans of' the triad will ha\'l' III managlllg ,III Increaslllgir Ullrul" world, ThIS IS the truth that il;ls been telllporarih' eclipsed dllnll~ thc lirst pOSI-( :old War phasc bllt remalllS rundalllell(;J1 1'01' any sober plllillcalleaderslup, As thIS cssay has suggested, the United States and the other AtLlIlllC powers seck to strengthen theIr gnp Oil other parts oj' Lhl' ",odd malllll' 1)1' caplllring powcrful SOCIal constitueilCles wIthlll the politicalecoJlolllles COIlcerned, Till'H' IS a baSIS for such social linkages 111 tlte renller Interesls among the dOIlIlIl:tnt social groups outsIde the core, The '-"r/III'//1' fld (/hm,-dl/III or ~l\ch IIllcreSIS has been lite class or prl'daLOJ'I' lIIone\,-cap",disIS lhal was enabled, II'llh ({real help 1'rDI1I tllc western lin.lIluat seclOr, to SCI!.\.' COIltrol ol'tht: RlISSl,l1l stale, BlItthrDlIgilout the world, pO\\'l:rflll rellUl'\' groups can ell./oy greal benelils from the ability to mm'e lim(\s out or theIr stale IIUO Nt'\\' York ur Londoll ,111(1 tllus inslIiatc thelllsel\'es frolU sOClai breakdowlls and de\'e1opmclHs wllhlll their OWIl counlnes. Tlles\.' 1ll0IlC\'-Capllalisls C;II\ also benefit from li\IF/WB reglllles \\'Illch entrench the lInl \-\'ashlllg-wll (:OllsenSlIS Ilostrums al)lJUl del'l'Ioplllellt through deJlatlllll icading IOwanls ciepresslOn, Whate\'er the OlllClJl1Jl' or lhe PalllC of '9)), thiS

IIllernatiollal sOClallll()\'elllcllt is IIItelleCluall\' finished, II is slrnllking- before our eves Illtu a narrow Ideoloh,!' oj" renllers and speculators, Thl'\" rcmain, of course, extrt'llIci\' po",crrul. but Ih~~,' havc lost the cap.1C1I\' to prcscnt themsdn,'s llIl'lll the I'ncl'h'" ;lllcl0lall olthe rClIllers will declille 'Imllabollr will hC~llI to rq~alll Its balance, despite Ihe dl(II'1S of the Wurld gank .wd the lin,uIClal scctors of tIl{' Wl'St ttl slliJ()rdinalc labour to n'lIlIer llllereSh b\" desllu"lIl).{ public well;lre pnmsHln ami introdUCIng the l'UplWllllsllcalh' 1);\Jlll'cl 'sunal sal(.'t,:' llet j"or the dl'Sl'r\'lllg dt:stJlllte under prl\'ate rlllHllll'lllagelllt:lll. Thl' lUll!!; bault: will beglll to rebllild ;1 \IIodiclIlll or public control over economIc lire and the SOCIal wclI;lrc or the mass of the popliialluns "I the world,

JI 1'//1'1'1' (III :lltl'/"IlIIilJll'! Thc Dollar-W;dl Stn~cl RC~llIIC has tended 10 pr()ducc a IInv AllanlIc alliance, shown III anIOn Jill' thc lirst timc in a rcally r1ramauc way during the East ASlall cnSIS, III rclalion lO stratC)-\"lCs ['or or14.11I iSIIlg- lhe 1\'01'1<1 ecollom\' lherc has heell slIrIlOL'nl commOll ground IWl\\,t.>Cll lhl' US, (;('rlllan~', Bntl~ll alld DUlch clj>lIalisllls to desl~11 COllllllOll prugl lI11ellllOIlS of ELI leaders, the l'Ul'O could 1I11derll1llle till' capant" Df rill' US [0 Illallllalll Lhl' DWSR qUill' <jllld,ly" Thc resllit of' thiS (Il'H'IDPllll'lll u)lIiri bl' se\"JOllS trallsallantll: slr;llllS, -,lralllS !llal willlcnd to hc all 1l11' ~reattT if the',' occllr III ('or llll~ IS ;lilll()SI lI11pllssihlt' I() COllll' b,", and aL le"sl ;IS Ell' ;IS lhl' g'cllcral

13~

TilE CI.OB:\l.IS.-\TION (;:\1\IHLE

approaches or Bntlsh. c..;erman illld Dutch ~()\'ernmcllts have I)cen [ClIIcerned, thclr recorels III the 19HOs ;Itld 1990s IOwanls Nonh-South econl}mic Issues ha\'e often I)een worse than that of US ~lI\'(:rlllllenb. AmI ill trade policy, the European Ul1Ion has had an lI1ne;I.~lI1gly stl"llllg emphaSIS 011 nco-mercantilism, acl1lcnng malllacal proportiolls Oil occasion, panly, IlO dOllht, because of the European Commission's deSire to pro\"t' itsdf valuable lO member stales iw responding enlilllsl thcy \\,I.~h to provl(le for or dCIlY to multinallonal COmpanll'S, linanctai sen'lces ctc. and indeed what trade policlcs they Wish 10 purslIc, The EU mOl\' Wish to continue to accept all the lIllernallonai obligations 11 lIas entered into with the US in the WTO, the OECD etc., but II would oppose aLLcmpts to brigade other states into accepting thcse regimcs and 1l wouid opposc attempts to cxclude Slates from the applicatIOn of GATT prlllCiples bccause the\' did not Wish lO subscribe to tillS or that libcralisation program11lc. Secondh', the EU shOUld declarc that lin;mClal in~l1ll1l1!)ns lending II1tcrn;\llonally must be superVISe(1 and protectcd by thcll' home govcrnillents, who shOUld bear thc full COSL~ of bailing them Ol1l. The IMF will pro\'lc\c bndging ioans to sllch governments to help them bailout t1lCir banks. lu:c1gc funds etc. blll their lax-pavers must uitlmatcly lilOt the bill. Thlls, if liS banks or hecige funds are faclllg collapse through a paymenL~ cnsls either at home or al)road they must turn to theil' clomestlc lendcl' of last I'esort for Ilelp, Thcy shOUld no longer cxpect tile poor or In(lollesta or Brazil or RUSSia to liH)l the bill. Thirdly, k:n(lers mllst ullderstand tllal sO\'erclgn gO\'crnlllellls Havc the nghtlO unilater'llly repudiatc debt. Thl.~ IS a nsk that lenders I11I1SII)lIild inlo their calcul:llIOIlS when lending funds al)road. Fourthly, the Ell must lakc steps to iniuate a new system of public EU insurance of loans to other governments Whether made b\' IU, private or public financial inslltlltlollS Oil

IIw hasls or Ell appro\'al or the purposes of thest' luans, Such 10a11 ll1S11rann' opcratll'll" shollirl hl' transparent :lnd rlell1ocrallrall\' aculillHahle, All Dther pl'l\'alC !ending aClI\'ities ahroad would not he con:n'd al allm the evenl ur horrower default. And finally, the Ell woulci 1I'IIII)()mri~y cOlilllllle LO parrlLlpatc III currcl1llivIF/'vVB operatlolls but onI\' on the understanding that all 1i'\,lF/WB clmcliuonalitles woule! he published and on the baSIS that an Intl'rnatIOnal l'IlllJi.'rCllce was ulllvelwrl to ]'{'orgalllse the llltl'l'IlatH)Jl;t! JllO!letan' linanClal ~\~tell1 III linc "'11.11 reCOIJlIIH.'lldaI.JOllS SUcil as those suggested hen:, If such J(il-;IS werL' not adopted bv thL' lither 111;1111 po",ers, tile Ell shullid adopt a pllJic~' Ill' inlernational pllll'alism III the handling or internatlllllal eCOllOJllIC lll;lllageml'nl. Those statl'S whIch dcslI'cel to l'Olllllllle wlthm the Ji\IF fr;l'llell'ork would hc l'n'e to ell) SIl, while other Slale.~ mIght prL'fer to opnate \\'llhlll the EL' rrall1eworl~, :\t t.he salllL' lilllC, dH: EU would seek tl) negotiate agrcL'ments with other Clllllltn<.~s estal)lishlllg rq~illles orlixeci bIll ;t(Hustabk exchangl: rates, Pl'oplls;lIs or lhlS son should he C\lllIllllH:c! wllh the l'e:1SSL'I'Wm oran Ell linaIlCl;t1 ~~'stl'1ll u,:ntl'eci on lJan!;. IIllertnedial1l1ll oj" lin;111CL', strong public regulalHIII anei a prel'el'el1Ce fiJI' public or co-operatl\'L' sa\'ll1g II1sLiwtlllm, Thl' lax s~'slems or member statL'S should he adapted til ensure fhe laxation or /lows or hot mOlH:\, IIllO and Ollt or the Ell ;1Il(\ \0 ensure that speculative trading Ol1 st'Clll'lliL'S marKets was pl:llaliscd through laxallon, Tax ha\'L'11S should Ill: abolished throughout Llll' ELI and Lhl' Eli sholilel work to er;lclicatc IhL'llI Internatlonall\', One wa\' 111 which 1I11s couici be donL' would hl: through ~'nslInng that informalJo)) ;lhoUL persuns Ill' ('lllnpanies m,ullt;ulllllg Iilllds ofTshon: are madc availahle 10 the rele\'ant lax ilUlhortlies witblll tIll' Ell and such persons or cOlllpallies shOUld be lllaclL' liallic: Itlr the pa\'nH:lIl or laxes Oil these rUllds III thclr Ell countr\, or CllIzcnshlp, For some sllch rerol'm prognllllllH: to be earned through would reqUIre a "en' SUbSI;\llllall:xerClsc: orpo]iticll power over rl"llllcr and speculator lIltt'rl~sts lI'iLhll1 the Ell ilself. The spcclllatllrs oflen try til dallll 111011 a rl:asserUoll or jJllblil' nlillro!m'L·r IlltlTn',IIIOl\a]lill;lnCl" IS Icdllllt:a\l\' lI11possibk bl'C,IlISl' or lechlll/hl~lcai cllang-e, But thl:sl' c1alllls hav.... I'orce 1I1l1\' III thl' sense thai 11 IS tL'ChlllcaJl" lI11possiblc fi)r slall·s to prevent crimes, ThiS IS true: mosl or the wor);' or lilc.ludinal SYSlem IS ~'x postlilc[(): first till' UlIllL', lhen Ihc Inn'~­ ligation and proseClllroll. II IS Iht' same III lilt: G1Se Ill' Pl'I\';]tl· IIllernallolial linancl', Rcg-uiators cannol stop companies from sWllchlllg runds around llll' world, Icgalh' or illq.\'aIlv, But lhe,' lIIlISt be abie to lill(1 oUl whal has bL'ell happl'nln~ after lhl' l'\'enl. Irlhl'\' cannot do SIl, thell litiS IS becausL' the top m;lnagl'lllL'nls or the COl1lpanll"~ cOllcerned CIIHHlt thclllsl·l.vl's lind 0111 \\'11;11 their opl'ratJllnal slall have bCl'1l dOIng wlIil lirelr IUlllls, or course, lIIallagl:rial contr()ls are ohen poor - wlllless lbnngs allel m;ul\' other Similar disasters, But if managements can keep reconls or what their COl1lpalllC:s ha\'(' heen lip to, thclI stales can !;.l'CP t.rack Ill' what has IWl'1l happL'nlllJ,{

TIlE (;[.OflAJ.lSATION (;:\1\IIII.E

through thl' usual reql1lrements for 'trallsparenc\,' ther can lIlspeCl Ihe Ilooks. or course, they cannot cio so 100 per cenl: liH:rl' will be a gn',11 deal of fr,Hld and currnpl ion at tile very LOp or the linallCl,d systelli. But SI,lll'S CIII still exnClse great s\\'ar, if tlwv ha\"e the political ",ill to do so" But the problem or Illustenng political will to n:-subordillatl.' IIHIIIl'\"-dealIIlg capllal to puhlic policr goals {"or eCOllomH.: c1cvclopllll'nt lil's al \"(lut III tht' area of strategies ror economic IT'"I"a!. Wh.n gives the pn\';lll' lin;IIlCl,d sector lis SOCIal and polil1cal dOlllmancl' IS abm"e all l'COIlOllllC stagllal\llii. LInder Clllldi110llS or stagnaulllL governments go 11110 liscal definls and puhlic debt mounts. This makes govenllllellls rlepl'JI{lt-nt UpOIl conditions ill hond markets. The pnvatt: Iinanciai operators riemancl c\ellationan' relrenchJJ1t:n t or public Iinanct:s. thus deepenillg the cycle of stagnation and renller dependence. A strateh')' lill" re-llllposing public oreler over eCOlloJllH.: alld SOCIal lile thus (It:pt:nds upon combining such measures wnh an eCl)nomic growth strateh'}'. This bnngs us to a fundamental question which has been ddibel"all'l" aVOlckd throughout this essay. name I" the causes of the long stagnatioll ill the productlun systems or the core over most of the last quartt:r of a Cl~lItun'. vVe willnol I)t:glll a senous exploration of Illat Issm: here. Bllt most ways of explallllll).{ the reaSOllS for the long stagnation would tend to do so Iw suggestlllg thattht:re lIas been some sort of saturation or overproductloll CriSIS II'lIhll1 the l1'1adic eCOllomles. Jr that is the case. thell gl\"t'll the nght linancial and llIonetan' ellnrOlllllent. there should be the possihilit\" for a clvnanllC process oj" catch-lip de\'eiopml'lltlll the Ill'\\' reglolls opt:lleclllp to capitalism ill East Central and Eastern [lImpt:. III other words for Ihese lTollOlllies to pl,lV the role of a catch-up gnlWth Cl'n tre Which had becll played by East alld South-East Asia. If'such a catch-up growth were to take place. II would 1'1Ot. resolve the deeper historical prol)Jt:llIs 01" stagnaullll, butll wOllld slibstanLlallv ease them, During the 1~)~)Os. this polt:llllality ill East Centrai and Eastenl Europt: has been squandered hv till' combined efforts oj" the capi talisllls on both Sides or the Atlall tic to engage III shorlterm predatory WellCs towanls the region. The lllllled States has been obst:ssecl with intt:grating the region into its Dollar-Wall Street Reg-line jill' internauonal monetar\, and linanCiai mal1lpUlatlOIlS, wHholll the slig-hll'st III Len:sl111 the establishment of favourable conditions till" reglollal ell"'elopllll:nl. i\-It:an\\"hile \·Vest European govern1l1ents, IIl1red 111 stagnatioll ali(I illternal SOCIal and polillcal tensiolls, hm'e viewed the reg-lOll haslCall\" as a source of problems and po\ilIcai-econollllc threats: a source CIt" press1Ires jill' t.lIl' rt:structurl11g- ot" industnes 111 \\'estern Europe. a source flt" popuiaLion nl1~ration threaL~ and a sourn: of hlld~etar\' lhreats il' a cllllllln'like Polal\d wcrt' to enter the European UlIHlll. No serIollS International str,llq,'Y for the t:CO\)OI11IC revlvai and for the eCOl101l11C de,"t:loplllcnt or the n:glOll has bt:l'n attempted.

Th{: Ohl'lOllS placc

10 beg-III the search (ilr such a stralq,~!' is ill Wl'stCrII

Eul'O[>{: amollgsl Ihc parLl{:s of Ihl' sllclai dClllocrallc L.eft. For (irtccII years

Europcan sOCIal delllouac\, has bC~~Il a pllliucalllldlit\" \\'ull liS Il'adcrships III Fralll'l'. Ital\', SP,1I11 and Belgium shanng as mLlch 111 ('ollllllon ill the lield oj' dill"Ct lillallClaJ (,(lITllptloll as 111 ;\Ilythlllg clse, ..\s ['or Bhllrs I.aboll!' kadl'Isll'lJ, Il IS houg'ht :111(( p,nd (ill', But the 1\('\\' Cl'!'lIlall Fill,lIKe ~liIlISt{'I', l.alilll\;IIIll:. IS ccn;lIn!\, dilTcl'cl11. He IS a dl'I('l"lllllwd European Keytlesiol1l \\'lth a ~Ir()[\g will ;lIlcl a political ()JJoI\'JlIg III a plliilll'.tI CCIlIlIlIll\' that is allSoillll'I\' cellirai. ThiS r,lIses the possibility Or.1 I\C\'llCSlOlnlslll nOI So IlIl1ch rooted III lIle KC\,llcs or I'cdi,~tribllting- incol1lt' wllhlll a na[lollal economy to boost elTccu\'c demOllld - althoug-h such I'cdisu'il}lltloll \\'ollid bc a good thill~~ III l\sclI- hut III Ihc Kcynes or ideas for OJ'!..('III1SIII)!; Ihe postwar inlernallollal ~'('OIHlI1lY li)l' g-I'flll'th: the Kcvlles who souglll to propose the kind 'linallu,1i l'cprcssioIl' and stallst dcvelopmcnt slr;ltq.,'" ('or the world. placill~ prodUC!l\'l' g-rowth II) the saddle and OI').,(alllslll!-{cllLh'lIlaSla (i)1' the l'entlcra llIudel that is no\\' I'athe\' bIZarrely tlHHtl-{ht of b\' mall\' as an East ,\siall

or

111\'l~llllon,

I lIullk that thIS IS a tIJcol'clical possibility, .IUSI ,IS capllaiisill !
or

or

secunng their ClllTenCleS IS no\. a slgnilic
a bitter plllillcal baule agamst enormolls!\' powerful flnal1C1al illlereSb which haH' thnved lIll Ilw DWSR and \\'h Iell han~ the strong support or the US governlllent. II IS a course thai would wreck the Inlernatlonal stratcgy or American capitalism, challengmg Ils entire idcolohrY. It would reqUIre the German social dcmocrals to build a /mliilf"(Jf mali/IIJII across Eunlpe and one Ihat coule! gl'IHllllelv lin~ popular enthusiasm. And such a clJalillon would, if l1ecessarv. have to he prepared to break Ihe great taboo of tltl' enurc Cold War period: II would ha\'(~ 10 be prepared. if IIccessarv, to ll10bilise pllblic OPlllioll HI Europe a,!!;(llIIsl Llw Amenclll allv. slInpl" III ordn 10 defcnd the slratl'hT)' agalJ1Sl US disrupllon. Ami those who have /(Illoll'ed Ihe Bosnia Crisis c\oselv Kno\\' how Ell' the LIS IS prepared to go when high polillcal stak',~s are lllvolved. So do those whl) h'l\'e rollowed the EasL Asian crisis dosel\', Hut the maJo], Ilnpedimelll 1.0 sllcll a stratehT)' lies not I\'llhin the Ulllted Slales or with tile s()l'I;1i power or renUl'r II1terests. It lies 111 t\\'llllther din~c1I01lS: first. til the decp llallOllalisl suborciillallons 01" the sOCl,1I (il:lllocratic panics or Europe thcll1sch'es. A pian ror Wcst Europeall re\'I\'ai through a Marshall-type plan 1'01' East Central and EasLcrn Europe wuulel Iw YIewed in Parl.s (or London) as a pian to sU'l'ngthen Germany rather than France or the UK. Tlus Wllllid be the lirst sLllmbling hlock. The second would be that tilere is no dlcl'IlI'e Il1S11llllional structure lill' actually pursUll1g such a plan: there IS no eCIlIHlmll' government ror Ellroiand, no I'esponsibll' democratic le;,dersllIj) for uSlllg the euro as an I11stJ'lllllelH of' economic rel'J\'ai and no e;lsy path to aduering appnlpnale Illstilullollal mechalllslIls: gamIng them would require all ELI Inteq,{o"ernmenlal Conference aL whICh 1I1l,\l1lmltv was achil'ved llOt.l"SI to sllpplemenl lh(' l'vlaastrich t Treaty Illll to substan llallv l11odil\' II to Illake the ECB more like the Federal Resene Board of the United Stales: an instlLulJon with the explicit task or se 1'\'111 g SOCIally userlll deH'l()pmelll purposes. Such changes could be aclucved. Bill the record suggests thallhey will n()l bc. The B\;lIr g()n~rnmenl, for olle. would. on its past record, WIsh to pia,' a wrecking roll' sInce Bl,lIr hlllisell" is a pOlssllln.lLl' eJll'm~' llf' what he ellis the ·tax and spcnd' European SOCIal mudd. On the other hand, II could Iw OIrglll'd that Bhllr IS nol realh' allOlchecl to an\, idea whatever, and I11lght ile won O\'er to such a pndcct of' re/()rm. Or alll'rnalJvcJ" the Il1stllutionalmechalllsms could be dl'I'cioped Il1formally through the commltlee or Euroiand finance 111111 isters frolll whIch the Bril1sh government is curren U\' exdudecl. If' thert' is no dJi:clll'e Europeall SOCIal dl'mocrallc rh;dk-n~l' to the globalisalJOI1 drifl. till' lIeXI phase or illlcrllauollal poliliL's will be a turbulent alld IIgh- olle. ThL' lesson or the Easl .-\slall cnsls that will he (Ir.l\l·n 111 many parts or thc world IS thaL the .-\Lianl1c powers are prepared to lise economic SLatecraJ't to I)IOCK capitalist catcll-up development. The asslll11ption or the 1990s lhal ancr lhe collapse or the SO\'lcl Bloc Ihe worid would lInlle under

TH E i ;1.()1I·\I.IS:\TIO:\ I ;"\~II\I.E

American leadership will be shown to have been a ndiculous ilhlSHlll, The 1990s were uilding', could lIave beell achie\'ed under .-\tiaJl II(' leadership, But that opportll11ll)' has becn uLLcri\' squandered as so ol'Len ill l~arlier Illoments of "lcLon', Nothing demonstrates L1le \'apidity of'tilc 'nc\\' thlllkil1g- lIlorc grapillcalh' than thc currelll Gltchphrase or The ThIrd W;I\:' thiS IS slmpl\, a slipwa\' to enal)le European II1telIeCluais, whethcr liberal or sOCIal delllocrallc, to abancion their social liberal or SOCial dcmocratlc \,,,hles, for the sake oj" overcoming their COg-I1IU\'l' dissonancc WILli an Alllcl'lcanisecI Europe, Inso(;\I' as thc), abandon the struggle li.)r cgalitanan and cosmopolitan solutions to nllcrnre radical currents, The\' will draw the conclusion that ~\'larx was right abow captlalislll being ulumatel,' IIlcapable of' proVIding a \"I,lblc frame\\'ork for sustainable hllman soclcty 011 thIS planct.

======PART

II = = = = =

Politics i11 the Globalisation Period

===============8=============== The Gulf War, Iraq and Western Liberalism

The states or tile North Atiantic have, Slllce the days of PalmersLOI1, i"reqllelllly hOIsted the Jlai{ or liberalislll on theIr wav to war. But rarely since I~H5 ha\'l~ the pnnuples oi"nghl, law and.lllstICe been invoked as stron!{j~· as III tilt' Gill 10 arms Ii»' Desert Storm. The popul;lllons of Bntal11 ami AmencOl were l'ncouraged to believe tllat half a million troops and one hundred billion dollars were be1l1g cOlllmllleci to aninllal1\'e actIOn on behalf of lIte rtl-{hls of the people oj" Kuwall and, II1deed, 10 the inallgural10n oj" a new glob:t1 order oljllsLice. In Ihl' first pan of thIS chapter. I In' to lI1Hallgle the disparate strands that make up IhlS langllai{e of rights lIsed Iw western leaders 10 Yllldicate Desen Storm. I then hrillg logether the prInciples of ey:!lual1oll deploved by the liberal ClllTent dOlllinant 111 Briwl1l and Ihe United Statcs today - rti{htsbaser! Illdividuali.ml - wiLh all analvsls or the (;1111' conflict. TIllS enables all t'xploratHIIl oj" the degn.:e 10 \\'illch go. tis aIlCI acl10llS J)) the \\"ar Gill bcjllstiJied in liberai terms, and reycals the severe lilllllations of a convelllHlual rights-based approach. In the second part, I ll1rn to the 'enelllY' - Iraq -111 order to examme the evolution or this state, so many orwilose people have bel'1l killed ))\' the militar\' forces and eC01101ll1l" lJlockades 11(" Bntain anrl lhe US. and to challenge the lIIost llllluenltal. liberal aC('Ollllt of the dcvclopn1elll or Ilwdern Iraq and or its Ba·athlstITi{IIIU':.

Liberalism and the InvaSion of Kuwait

r.·lost versIOns of Anglo-AlIIerIcan liberai aIlCI natllral-ngh IS tJlInking emp)o\, a IIniversalist standard oi"judg-eJ1lclltlO evaluate IIlternal10nal pO)illCS. They repudiate the norlllal1\,l' stallcc Dr the realists. who Illsist, 111 the wonls oj" theIr postwar don~ll. HailS Morg:lIlthau, thallhl' 1l:lllOllal inlerestls 'the OIlC glllding star, OIlL' sl,lI1darcl or thllllgln, Dill' rule or actloll' 111 such matters.' ].II

I-l~

POLITICS 1:-: '1'111-: CU JB:\I.IS:\TION PERIO])

Rig-hls-based liberals readily ackllllwledg-e, or course, lilal lIluch of what stall'S -lI1dtlding- Iileir own - actually rio Ilcars lillIe rciaLioll III lilt' professed Itleal. Inc\ee(1 mam' would ag-ree thai [he polillcal l'ulLure Ill"l shapes 1IIl' eXeCllLIveS or Ihese slales is Ell' closer to the norms or i\'lorg-allthau tllall III lhelr OWll, altlwug-h ther would deplore that EtcL Withlll this selling, the leaders 1ll both tile US and UK sllug-llt tll 1l1Ohilisl' liberal oplI)ton rol\o\\'lJlg the IrMp IIl\'aSIOIl of KUlI'atl b\' appl',ding- lJOI Simply to natlon,ll state interests hut, allO\'<: alL LO g-l'lleral pnllctples, While some 0PIIlIOIl-f()rmers debaterl the issues 1Il the lallguag-c of utili lana illS 111, adopllllg- a universalist welfare cnlcrtOIl for assessmg- lhl' CoslS and bClldits or altl~rllatl\'e polincs, lhe dOnlln,lIlt iang\lage or puhlic debate was that or ng-llls,J\lstlce and 1,11\'. ThiS discollrse was tng-g-ered Pl'lmarilv by the lise the Bush administrallon made of UN Secunl\' Council reSul1l110ns. Thesc were illlerpreteci III an idiom that was III fan metaphorICal: the transfer of' the discourse 1Il<1l serves the dOllwStlC IqJ;al systcm wtlhlJl a liberal-delllocrallc stale to the realm of world poli Ilcs. III the percepllon or millions, illlenlauonal alTall's became a depolillClsed process or crime alld.JudiCl.t\ pUl1lshmcnt. Thls stll~le displacl'lllent transf(l(-med llol only the \Val' people .Iu(I~L'd the polillcai backgroullci 10 the (;ul(, war. but abm'e all how they /Ji'IH'IVI't/ it: namel\', as a crtlllmai act wnh .JlIrtdical Cllllsegw:nces. Thus the compiex iidds of' rorce thal C\lnslllllle g-Inbal polillCS were magicall\' transfilrmeci mto the image or a worid encl(lscd Wll.llin a consl1ttltlonal Slalc ordcr. rUll according- to the liberal theun' or la\\'. The metaphor passed llselr oIl nol as a moral truth flut as Ihe l'xplanalioll oj' actual even ts. ~ Firstl)', the surticicnt and necessary calise or the US attack on Irag was presenled as lhe aCl or a \'illam: Saclclam Husselll, persollil)'illg- llll' Baghdad g()\'erlllllcnl. ThiS aCI"forced' the US to send hal/' a mil\ion lroops ami llS global arsenal 111 response, JIISt as a domestic Crtllle trig-gel'S the slancianl procedures or police response. The Anglo-American blockade and allack was lhus reduced LO the slalus of'a depolillcised, purl'i\,judiclal anion,li-om which all\, polillcal lllotn'es, lllethocls Ill' allllS would be expullg-ed, .JllSt as the), would in tile work o/'a local /aw-enrorccmcnt agency. Desert Storm was to be as llluch a work or naltlrc as the Illlpersonal, blilld Justlce of' the lawor, IllclL-ed, as a storm III lhe desert. TIlus the actual course or evellis was turlled on ItS head: contran' to ,he JudiCial log-IC or Ille Illelaphor, lhe liS adlllllllstration III 1;ICt deCl(lecl it must' prevail' OVl'r Iraq alld Ilwl'IJiJrf' ca1l1palg-llcd to cnlllinalise the Saddam l-Iussell1 re~illle. (jllSI as lhe US tirsl deCided to support the regimes of IsraL'lur Indollesla and fhm ensured lhl' CkCrtllllllalisalioll or lhose couIHril's; aCl1011s in occupYll1g II]' ;ullll:xing.) ThiS process i;1\ul\,ed amhropomorplusing the Ira([I Slate and 1\S politll:aJacinlllllslrativc organisauon into a slllgie person - Saddam Hussein. crll11111ai. And lhe more his human f'ealltres were cllbrgeci. I.lw more other

TIIF (;t 7I.F \\';\I{ ,,\\'D WEsTER!'! I.IIIFRAI.IS:'1 men anciwomen 11\ the 'CrIllllnal' slate were dehumanised. The arllIv or COIlsl'npts became lhe mllrder weapon. the li\'t~s orlllillions of IraqiS the yanOliS limbs and reSOllrcL'S of their Il'ader. I-knce the\' wcre LuI' gamc; or else the)' hecallle collateral, III the sense of standing alongside till' Cl"lminal bystanders in tl1l~ police shoot-nut.: l ThiS ;lIllhrop"morphisllI cn,lhled thl' W(",lvlIIg' tlr powerrul thellle of Ilumall-nghts abuse Into the iq~alist discourse. The W,ll' agalllstlraq became a campaign agalllst a senal killer ami tortun:r, mililarr actHln being presented as a mcre conSl'quellce or the orig'lllal 'crlllle' thl' annexation of Kuwait. FunileJ'lllOn:, the war-making l\sl'lf could bl' ponraveclllot as a Ilelal wa\'e of ]lo\iucal \'lOkIlCl', killill).!; tellS, JllThaps hllllcireds, or thousands - all act ullle,lshlllg tl1<: passlolls of millions across the ).!;Inbe, and bl'al'lllg unkllllwn and unprl'dicl
,I

1-1-\

I'Ol.lTICS I1\: TIlE

(a .<JB:\I./S.\TION PERf()\)

confers not the slightest rll'IlI(I(mlll' iegitnllac)' upon the subsequent aLlaci;.. liN SeclirIty Council resoillllol1S embodY merel" a Hobbcsian, POSlllVisl f<)rm of law as the command of the most powerful - nameiy, tile will of tile five permanent memhers who happened to he tile \,Ictors or 1~)·l!) pIUS a small, Circulating collection (,1' olfle)" states, Even the 'states' democracy' of the UN General Assembir was not n:llectec1 ill the crUCial resolutions or the SeclIrtt)' r.oullcil. lndecci the enure thrllst of tllese rl'~ollluons, as IIlterpreted by the US ancl Brttalll - that there shOuld be no diplomallc negouatlons with Irag - contradicted the overwhdnung m;~loritv or I.ht, General Assembly, who desired a negouated soiuLIon, And In any case, the resolutions did not evcn iegalise the attack in the I'orlllal pnlCedurai sense: thaI WOlllet ha\'e reglllrccl a POSItIVC \'ote by all livc Secllntv Council IlH:Illbel'S, but III fact Chma abstall1ecl. Also the Ch;I1'tcr l'eqlllres partlcs In a conflict to lake sleps toward 1'I:conciliauon - 111 nlher words, 10 nC~Dllale: preCIsely what the Amencans (and the British) resolutely refilsecl to do throughollt. And in the name or 'liberating Kuwait' the British and Americans interpreted the final UN resoiuuon as leglltll1lsing any and all means - not cxactly a liberal,lunsllc maxim, Thus, any pJ'lnClplccl polillcal stance on the war-dn\'c against Iraq cannOI I)c based upon acceptance 0(' UN Security Cnll11cil resolullons, as the cmbodiment or cllher judiCIal ur
"lIP(} Tmtiil/OIH o/Right.1

Liberaltllcorv orfers a numlJl:r or disparate approaches to the c"aluatlon of' po(iucai evcn[_~, ranging from the Hegel-inspIred libcral idealism or Grecll, lhrough the 11ls[oricISIll of Croce, to mililarian \'iewpoll1ts, Blll olle perspecllve dominates all others at prcsenlll1 the US ancl, IIlcreaslllgly, 111 the UK; namely, that or natural-nghLo;, or ((allLian deol1lo1og-lcal theory or n~hls, based on a 1I111vcrsal prlnClplc 0(' .111Slicl~ rather Ul<11l welfare, But thiS approach III lilCl cannales lwo IIIcolllpaliblc traditIOns of p()/illwltillukill),'; on intern;tllOllal relations, traditions thal share a commoll source III tILl' discourse oj' ulllversal rights: one, the old nalural-nghts traditioll, wllH:h predates liberalism, not to men lIOn clemocracy, and has its source in medial'val debates and iLO; hlghcsl e:-.:pn:ssJOn in the IIllCrnallonal-rciatlOns theon or Grouus; anc!two, the modern tradition or Kalllian liberalism, I will bnefl\' examine these III tllrn. GrotillS, a Dutch PrOlestanl wrillllJ:; during the Thll'lV 'ears War alHi.JlIst pnor to [he birth of the modeI'll stale system (marked by the Trl"at\' or Westphalia 111 1I)'H~), was conli'on ling the problem of wlwlher. 111 a huhcrto

THE (:L1I.F WAR ANIl \\'ESTERN I.II1FRAI.JS\1

Catholic Ellropean s\'slelll, Protestant pnll!':cc\olllS had a right (0 exist alld LO Impose' (heir religion UpOIl lhelr sul~JeCls, To rcsoh'c this problem Ill' ItIslsleci 'hal e\'('I'\' st;lIe SilOUid he tn~:Ill'd as a SlI\'CI-Cigll III relatioll to other Slates, as wdl ;IS to tile Papac\' and the Empire. He lhell argued [Ill' a b\\'-f.{t)\,erllcel relation betwcclI thesc sliverelgll entities. {;rotlIlSs thought COIlt'Cnllllg' c\Ollll'SlIC politics \vas, like IlH)St strong nghts-tl!l'onsL<; ol'thc da~'. trenchantly aUlhol"llanall. inslsllll!4 upon the absolute power of thc state o\'er ItS Cllizens. I-k (kllnec\ liherty as dOJllII)Jon in lllatcn;11 thlllgs alld ar~\lecl that man lias a natural rig III to plllllsh wrongs, espeCially "TollgS agaInst liberty (thalls, property), and furthcr, that tillS nght or punishment sllould he Iransfern:(1 (I) the state, Gmtllls also lranslcrred thl' Ilollon orliherlv-as-p:'operty tu the Slate 111 international alElIrs, \'iewlIlg the charaClCl' or st
or

I-It)

POLITICS 1:,\ TIlE (;1.< l]l,\l.lS,\TI()N PEIO()])

tIllS Grollall 0111clllg-hL Lod;,,', aL leasL III lill' Ang-IoAmencan world, derives Ihun Kan 1. H Yet I"'l111 \ Lho\lg-h L Oil 111 ternatlOnal relations was constructcd in sharp polellllC agamst (;rOl1an Ideas. Kanl qllcstloncd Lhc l;rouall eLllIcal baSIS or inLernall<JI1allaw SIll(T It could be llscd to JlIsLil), aCls by sLates whll'h had ilt bl'SI a dublllllS morai roulldatlon. He pOlIllcd out that no government had en:r I)een persuafled lO refralll from an aCLlon Oil accollilt or some nile of internaLional iaw banning- It. Alld, ill the \"ords of Parkinson, 'I"'lllL was particularly hard Oil lhose who conslClercd . the doctrllle of ':jllsL I\'ar" had any beanng on lhe m
TIlt, 11I1'({JIlJII

(/Ild AIIIII'.\'(f//fJII

or K"W(I/(

The lIlvasion of Kuwait on ~ AugusL was carried ulll wllh very little lIIilitan rcsistance or bloodshed. InIliaIIy Lhe h-arl' l-\'0vernmenL said iL would beg-in with
THE (;L'1.1' \\'AR

A~J)

,,'ESTER" 1.l1\nUl.lS;"1

population h()lding' Kuwaiti Cltlzellship, There occulTed first the nJuncling up and 'transp()rtatlOn 10 Iraqi pnson camps or thousands or soldiers and police (estimates vary l>etwel'1l SCW~II and thlrtv thousalld), In addiuol\, III all v IhousalHls or forl'lJ.{n workers were deplll'lcd and dl'tallll'ci III Iraq, Thl'n lhere I\'as Ihl' lise or lOrlllIT ag-alllst, ;mc\ Oil occasions Illl" killinJ.{ or. lllOSl' sllspecterl or ha\,lI1).\' engaged ill acls or arllll'd resistance, 111 its reporl or I~) Dccember I ~)9(), A III 11 eSl\' Illternallollai l'sllIlIated thcse killillgs in the hlll1dn'ds,l I 111 addiuon, sOllle :WIl,O()() Kllwailis - a 111,~iont" or the COlll1tn: s citizens - ('cit IlI1pelled to !lee or to n:mam olllside the C0I1I11rV, along WIlIl large IIlllnl)(TS of othcr pl'rmallent rcslciLonts, his IlOI clear to whal degrce IhlS e~odlls was callsed Iw rear or lhl' Iraqis or j)\, rl'ar or an ..\l1IlTI(;lil attack, KuwalLls iLoa\'ll\g wouid ha\'l' slIfii:n:fl a SIg-llilicallt drop in living stal1dards, (lL~spitc rCCCI\"lIlJ.{ IlHlIlCV from lhl' go\'ernllH'lll 111 exile, Al'eragc incoJlle 111 thc COUIlU'" before thl' 1lll'aSIOl1 was 11Igiler thall that III l he Ul1Iterl Slates, wnh a standard orIivlIl!4' conslclerablv bClll'r II)an thaI of' the Amcnc<\11 nuddle ciasses, lIJan\' CltlZellS emplOYing- SCHanlS and ohl'n not havinJ.{ to work, COlldelllllatlon o(,lraql aggressIOn, variollsh' e~prl'ssl'd, was Issllcd worldWide, ThIS Opposltioll to lhe 1Ill'aSlOn and anlll'X,llJOn m lhl' 1)).1111 conIlaled two qUite different principies: the VlOlalion or stales' righls andllle violation of pcople's rigills, Within a GrDlJan, stall's' nghts perSpl'ClI\'l\ 'lI1nl'xalinll II)\'ol\'cd whaL In' n1lght call the killing or a son'H~lgn slale - IhL' grealesl II~JusLice Lhat cOllld be cOllllllllled \\'ithlll lhl' terms oj'slall's ngills theon', alld all act or slatc municr IIl1prl'Cericlltccl II) postwar illSllIrI', I\.UlI'all. a rullv-l1edged n\(:miJer or the Unlled Nauolls, \\'as, elTl'Cll\'e!\" liqllldaleci. II' SlalCS" nghts arc sacrosanct, lills was a lllHqUei\' hCll10us crillll', Thcre IS no 11t'erllO examme the (;ICLllai details or lhl' l;1I11' cnsls 111 order IO.lUSlil\' Dl'sl'rt Storm \\'llhll1 the tcrms ofstatcs' nghls dOClrllll', Iraq g;I\'l' JIlSl CallSl', \Vha! IS morc, lhl' allaci;. (1) Iraq was iallnched lw all alliann' III' Icgllilllate slaw alllhorllleS (hackcd b\' UN Sl'ClIrlty COllllcil rl'So\IlUIIIIS - a EIC! with 110 bearlllg on this 1\ll'Orl''s glllding pnIlClpll's), Thl' lllllll\'l'S ol'lh(, LIS-lcd coalitlOlI wcrl' 'right' pro\'Jrled we accepl - as we shOUld - the temporal'\' character or the occupatioll or sOIllhl'rn Iraq b\' coalilloll troops; onl\' the introcillCUoll of US lroops mlo Iracp KlIrrlistall wltholll lhe prior alltllonS
I-IH

I'OI.lTICS IN THE

(;1.(

IiHI.ISSnON I'EIW)J)

basIs of prInCIples other than those of states' righls - liJl' example. human nghts or human-wcll;lre princlpics. It IS nevertheless the ,case that states rlg-Ilts doctrine allcl Its jusl war corollar" have no hasls 111 liberal or delllocratlc theon'. Nothmg- III liberaL democratic or SOCIalist politICal philosophy g-IH'S pnIll:tc\' to stall' power or staLe ng-hts as SlIch. These philosophll':s are, in fact. qUllc prepared to COUIltenance the disappearance or L1l1s or that state. II1cluding !ls vlOlelll overthrow and the redrawlIlg- or terri tonal boundanes. Moreover. stales have rarely acquircd theIr supposed I\' sovcrcig-n rights anC! powers bv delllocratlc means. The\' Iw\'C usually gallle(1 them throug-Il recog-nllioll iJ\' the cOlltrar\'. In thc case or Kuwan. s()\'erel~nty WilS aclllel'C(I, above all, due to the streng-th or Bntish military power and political mJlul'l1ce throughout the penod lip to 1961 whcn II1tematlonal recug-IlIt1ol1 was granted. Such recol{l1ition of Slale sovcrelgnty IS, m thcory. a malleI' or international iaw, setllccinot by Simple force but by leg-a I title to tern tor\'. As It happens. Iraq had a very strong chulll, 11\ legal terms. to the terrllon' of !\.ulI'all. I!! But such chullls are 1;11' li'om being dCClslve for liberal de1l\ocrats or SOCIalists. It is significant that rIghtS-based liberalism does not, in hlCt, speak with one vOIce on the key quesllo11 of Iraq's denial of l-il{hlS III Kuwait, although lhel-c IS a common stress on the mfringement of individualliberucs b\' the Iraqi armed forces .u'lCl police. (According- to Amnesty's I1ndil1gs thiS Infringcment applied particularly to the ImprlSOl1l1lent of ii)rmer members of the: Ku\\'alli seclInty forces and to the savage repre.~sl!)I\ against slIspected armed resislCrs or SpICS, with 110 respect accorded to the due process or law. Expressions of CIVIC resistance - such as the refusal to usc lrac)1 number plates on cars - were aiso pUllIshcd. Kuwaitis lleclI\g Im'ariabl), suffered, though theil- we\lilre was probably lIot greatly affected_ On the other hand. Ill(' sufferings of the fleeing or deponed !lOll-KuwaIti seuled populatlOll were often conSiderable.) But what abollt till' IIlJlIStlCC or the alllll'X,lllOlI itself? This did not actually IIlvolvc a loss or CIVIC and polillcai rIghls 1'01' the m'~iority because, being debarred from holding ullzenshlp, they ha<1 no such rights limier the aI-Sa bah regime. Yetll did mcan Joss of statehood lill' the minontv with KuwaIlI citizensillp. ivJan)' strands of individualist IiheralIsm would be S'USPICIOUS or any collective claims to statehood - true, sa\'. or the Is,uah Berlin of Two COllo'lIIS 1!f'I.mal), anel also of Lhe Bertrand Russell or PlJliliallldmk 1:1 And a ''''ilsolllan nOllon of llilLIooal rlgills for all L'tlHHC

1-19

THE (;t1LF W,\R .-\NII WESTERN I.IIIER,\US\1

I4mups l:ntails Sl:rlOIIS difliculul:s dill: to the probh:m oI'Arab national idl:lIII IV, Mill, Oll Ihe other hand, did stl'lHll4lv ddend natioJlai sd/~delern\lnaLJoli tin the I4rollllds of the rlgllt to polillcal parUClpatIOn, 1,1 The dl:C1SIVe prinCiple for most liberal dl:JlI0Crab here IS, surely, llot a liheral prlllciph: orjllstice or rreedolll hut a rlelllocrallc one: t.hat popular selfdeterm1l1ation, The peopic or Kuw;\lt were brtllalI\' and llal4rantly <Jellied (he rIg-Ill to dl'Cldt: for till'lllst:1vt:s ",ll(:tl1t:r lhl:\' \\'Ishl:d to bl: intl:g-ratl:c1 IIllO Iraq. NOlll: or thl' Iraqi govenlllleill's subsequl:llt Justilicauulls for the anllexallon can overncie this ract. That the people or Kuwai 1 had bel:n living under all attl!lcrac'.' II;IS IlO bearIng Oil the maller. Thlls Oil (klllocrallc prtllclples alolle thl' Iraqi f{O\'l'rIlIllCllI should hal'e /)l'L'11 opposl'cL Btu democratic prInCiple, al ieasL on Mill's grounds or polittcal panicipallon, reglllres respect for thL' l-il4hts oLd! the sl'llied pO}Julatlllll Ill' Kuwait, IIIlI Just the llllllont\, granted citizellsllJp (:q p<.:l· rent) or Ihc lim' propol'llOll II'IlIl voung rlghls under the al-Sahahs (.~()lIIe 7 per CCIll) - Ihat IS, bcron' thc aboliLJon or such ng-hts III the I ~,~()s. Irllle IraqIS Ilad organIsed a gellulIleir free r<.:fcrenciul11 of all the p<.:opl<:, ancltius had produccd a vOle 111 favour of fusioll With Iraq, the allllude of liberal democrats migltt hal'c been I'cry dilTnenl. But Llll'\' did no stich thlll:,{, ami there IS l'n... ,' reason to suppose that the great bulk of the sl'lllcd pllpuiaLJon would. III any case, have voted agalllst annexallol1, The iracJI occupatiun or Kuwall therefon' had to be opposed as a malleI' or polillcal prinCiple b\' both liberal c!emocrats and sOClalisls. The Clu<.:stinn then became a programmatic Olll': hoI\' to l'llcilhe occupation, anci what posllIl'e ,HillS to advance III Ihl' struggle for sell~determll1allOIl, But thiS last goal, as we have s<':l:n. has a spcClal twist because or Kuwait's 1I111gue character: the facI that the m;~JI)ril\, IS e1ellled ;Ul\' Civil recol-!;llILJon. It must sure!\' include what I\'L' take ror grantcd III other C
or

150

I'(H.ITI(:S I;" TilE

(a.(

lIIAIJS.\TI( IN I'ERI( H)

concentraLed 11\ lile hands of eig-illeen EUllilies. The manllal work 1\1 tht' Slate, and tlluch of lhe Illanag-erial and professIClllal work, was carned out h,' l1ol1-Kuw,lIIlS, L""pt'L},llh' Pa\estllJlallS who hac! seltlcd ill 1-\lI\\'alllll 1'II·ge IlUlllbel's slllce the 19:-l0s. Yet such people, cie11lcd cItizenshIp hCCIlISl' lite,' lacked a ElIllil\' COllneClIOIl wah the LelTlto!"\' traceable to the I ~J~()s. wcre Cllllrei\' I\'Ili1ollt ci"!C n).!;llf.~. (Il'Splle lilrnullg IhL' m;lJ"n1\' of thL' puplliauol1. Such Issues ,,'olliel h'I\'l' to I)e lI'lcic(1 oIT ill some war ag;ullst lhe 1I~llISllt'l'~ ufthe l1l\'aSlon, parllclllarl\' 111 the colllext or c\'altla[lng thl' US-\!:d lIIilitan allack Oil Iraq and IlS cWlscqucllces. lli 'tel till'" WL're IlI0st.l\, Igllorcd III tilt: mamSln.:am puillie cichate Oil lilt, cnsls, allhough OIl(' AlllCI'1GIII sell,ltOI' qllOLeCt a remark ill lhl' N"II }rl/h Ti,ll/'J t.llat pllhilv encap!'ouiated these COIlcerns, dUI)llIIlg Kuwall 'all oil cOlllpanv with a seal at the Unltcd N'IllO!1S·. I '

,\(/iil'T!I IIg ,\','IFlJt'/I'rllllllflllOlI

\'Ve will 1l0W eX;lIlHlle the llIeallS lhat were available ror el\dill~ the occupallon of KlIwaJ\ a~all1st the vanbttck or liberal theories or imli\'ldllal rt~IHS, The main opllons WC1'C: (I) a Ilcg-llualecl diplomattc SOllltlOIl; (~) popular rcsislance backccl I)\' ex ternal moral and matenal aid: (:~) [radl' amI ot.lJl"I' embargoes; (-l) mililarv aclJOn. A ri~hts-Ilasecl approach could. 11l pnlll'lple. support all\' one or thest' "pU()nS, But It could su pporl IlPlllll\ (.1) on I\' ir tlw; coulel bc shown to be Ihl' snk reOllistic means for freL'lng the jJL'Opie of KlI\\'alL And e\'en Ihcll thIS school would iJave lO be cOlI\'mced that til(: lI1strllll1Cllt chosen ror \\';11' -lilc Sl
The doctrine I havt' called 'slates' nghts theory docs nol Ill.:Cl.:ssaril" 1;IVOllr the diplomatic SOIIlUOIl to ending al\ occupation hecallse, Ill' 1I1\'t'sling slaWS with l.lle £]l1Ol\illC'\ of pl'Isons, thIS doctnne Illay I'a\'our plllll~hlllg all aggl'l'sSOl' state I'm 'killing' a 'brotlll'l'" slal.e, as olle pl1ll1silcs OJ 1l111HIl'J't'l'. Such plll1lshlllent Illa\, be l'etribllll\'e. Dr lIlay be.JlIStilie(1 Oil ~rouJ1(ls of exalllplL' or deterrence. BlIllhls approach IS al varianct' with all hUlllal1lst "anctIl'S or libcl'"liSIll, let ~\Ione SOCIalism, ror II a((opts a lIihilist. or at least all agllostlc. attitude towarc\s the ngills and welfare of real human hClIlgs, whethel' as mciividuals or (Olll III 1111 Itics.

TIl E
Eil

For ng-hls-hased liberals (and IiII' utililanans), a neg-otlaled SUillllOlllllllst

he a prel'l'rrcd llleallS, pro\'lc\('d. ur COl1rst', Ihal slIch a solUllll1l IS possihle alld dol'S llo1 compromlSL' Oil thl' ISSlIL' of' pnllnpll' - c()l1Ipkll' frcedolll I'rolll oct'llpatlllil i'llI' thl' people or KUII',llL There m'l'!' lleg-oU;tl1!'IlS JlIlllledialei\' :Ihl'r thl' JI1\';JSIOIl: ,mr\ the .Iordalllan g-u\'crJ1Illl"llt, :JIIIIlg- ",ilh the PI.() anrl :\Igena, h;II'l' alwa\'s IllSiSIl'cl thaI a Ilcgllll;IIL'c1t'l1d 10 Iht, occllpatHIIl or Kuwait ;Icceplable III Iraq \\';IS possihle, NOIlL' oj' IlleSt' l';III\' diplolll;llIC crl'OrlS lIlack prug-ress, And 11 IS \'110111<1 eSlahlish 11'11\' nol. There SL'L'III III he IlI'll rL'asolls: lirst, because various :\1':111 gO\'{.... IlIlWIlIS prdern:d 10 Sl't' Ir;lfJl pOI\'er dl'Slro\'l~d: secolld, ;ll1d crlll'l;dl\', ht'C;lll~l' lilt, UlllIl'd Stales pill l'JWrlllOUS pressure upon Kill~ Fahd ancl (In'slelclll j"luh,lrak to pn'\'t~1l1 all\' Ilq~()ltalL'd sl'ltielllL'nl. l\aghdad then proposL'd Ihal Ihe L1N should wclde Iht' (lu:upalJol1 or 1\.11\\';\11 and Ihe Israeli ()CCupallOlls 11'1111111 Ihe sallle lerlll.' of ref'l ... l'IlCl', ThIS relllad,able proposai corresponds exact'" to ,I n~IHs-lJascd lilwraluniversalist approach to probie111s orpolillcaijllslllT, It was lIot sll~g('Slill~ that notll1n~ Iw dOllC ahoul Kuwall ulltil the Pa!esIIIlI;lIlS n~lll \II sell~ cietcrlllllJallol1 was tackled: rathel-, 1\ was a call 10 tltl' L'j\; 10 apply a C01ll1ll011 ]>nnClpit- 10 hOlh occupations, Yel nOI 11111\' di<1 lill' LIS ad 1111 IllStratiull hhmt\\' r~Jl.'l'l 11ll' propusal, b\ll 11 olltia\\'l'd Ihl' ICil',1 oj' diplomatic nl',~lltl,lIl()n allllgl'IIll'r. upllng- IIlstcad I'llI' towllllililary hilJrkadc amI sullsequt'tll all-oUI allack. ThIS repudialloll or dipl!llllac'.' dl'll1ullSlrall'd Ihat lhe .-\I\lcrtcan (ami Bnllsh) policY-lllaking e.~t'lhiishillelll \\';lS rar ('ro II I allowlIlg ItS political o Pl'\',1l lOll s, rollllwlllg Ihe Iraq 1Il\·;ISIUII. to Ill' gm'l'nlt'd bv lihl'r;I1, nghls-hasl'd prilluples, ILI(I repe,lll'dh' called 1'01' llcgoll:Jl1(JIlS,I,~ Thl' UN ChaneI' reqlllres thelll. The liS Ul\('r\\' ru\t-(t {luI all\' such diplolll'Il\'. The war party III the US and UK denOlllll'l'd lIl'goua1(()lIS wHh Iraq as 'appeaselllent', bUI Ihls analo),!;\' was Inappropriall', For llll' 1l1'gollalHIIIs Ihal producl'd lill' ~\'lIlllll'h :\gn.'l'llIl'lll opl'lll'd CI.l'choslu\';lkla lip I'ur Gcrman conquest: Il W;IS a cast' or Ill~gol1allllg ror (:erman ,'X/HI//.HOII, The ne,!!;Ol1allllllS o\,er Kuwail wouid ha\'e heell prl'usdv Oil lhl' lerms 1'01' Iraqi ill/lhrlmwfli. SOIlIl' ~l1CC. 11 call be argucd lhallhe IraqI state was righlll' (killed am' gam III polil1ral SlaLus afLl'r

POLlTI(:S IN THE

(;J.{

)1\.\l.lS.·\TI{)1\I PERil)!)

Kuwait. 1L is surd,' true.: tllal the.: cOlllestlill' posllIonal j.!;oods likl' polillc;)1 prc.:sll),;e.: II) Ilw hlL'r;II'Clw Ill' sl;lIc~ IS \llllll"thmg Iilwr;lb should cleplore, But a pl'inuplcri lilx-r;llislll ((l1lcer11l'cl with JUSUCl' 1'01' all human be1l1gs itas 110 1l1teresllll tailonng lis polic\' 10 the apportiollment or such goods 01' their wIthdrawal froIll Ollt! Siale or another, That enl1re approach IS a relic or states' ngllts thlllkm),;. The view tllal i1t1ad.illj.!; Iraq would hal'l" the salutor\, eHect or de Lerrlllg ruture aggression IS uncon\'l1\cing, The most Il would (10 is dcnlOnstrate that aggression Without US approval does not pay, for \I'e have ahllndalll e\'ldence that aggression or anl1exatlon iIIllh US appro\'ai does pa\' (ill the case 01 tile US - Panama, Grenada, and 1Il Ih"l of its allies - ;vJorocco, Israel. Indonesia, Turkl'V anel so on), The I raqi offer was extreJllcl\, eml>;IlT;lsslng to Washlllgton lJeGlllSe the US had I)e<.'n supporting 1II11(.~IiCt'I()r P"le~tllllans. But a prInCipled, righlsl)OIsnl Iilwr,llisll) r~leCls am' reiall\'ls'HlOIl IIrlhe nglll In po\illcal freedolll. That Saddam l-iussclIl had proposcd a .101111 SOIUlIoil 10 Ihe qUl'S11011S III KIIW.ull and Paicsl1nian oppress(()I) s\wllid, thereli)]"!:, han: sll'engthclH'd thc casc for the Baghdad offer, rather thall weak.ened It. Us aCl!tll1

III

SLIIIIS ;11)(\

2) 'Fit"

n's/slallC/.' 111011/'1/1('11;

II Jl)1~ln be argucd that thc US should be condemned li)r ils failure to ncgol1atc, bUl lliat, gwen thiS EliluJ'c, we had no cholCl' hut 10 support till' blOl:kacle andlor all-ollL allack. ThiS logiC assuml'S the eXlstelH:t: ()f 01111' one kind or force III the world: slale mililan'lilrct!, But as the Vietnam War dClllOl1slratcci, tillS IS not thc case. Popular-rcslstancc 11l0\'CIllClllS are illHllher, potentlallv vcry powcrfuL agene\' for achiel'lllg natIOnal frecdom. furt lIel'l\\ore. III ailllost c\'cr\' c011ccl\'abk IIlSlaIlCl'. lillS age11CY IS far preferablc III elhicallel'ms to thc appallillg destrllClI\'Clll'SS or sLalL' military Ii'lI'Ce. The Importance, Illdced thc pnmacy. or popular-reSistance l110velllellls for polillcal freedom is gl\'CII cspcClal emphasis by John SlIlart \\Iillll\ hiS "rllcie '..-\ Fell' \Vords on N011-llltel'\'elltlOll·. \\Tltlell III Ihe S,lllle I'car as 'Oil Libert\' PI POI' 1\·lill. popular resistance II> achlcye liberalloll is superior to eXll'rnallllililary IIltcr\'cntiol1 nol 011 lhl: ulililarian ground thaL Lhe ialler Ill;!\' be 1ll00'e COSIly or may not achicve political frcedom, but hccause a peopk lllLlst 'become frec by their 0\\,11 crforts". In lhlS tIlsLance we lind lIlal Lhe opLllln or external prcssurc and support ror popular resistance was SImply exciucied in line With statcs' rights Idcology - which cxpressiy precludes all agencies other Lhan sLaLes rrom having a icgilllllatc role til international politics. There is lhllS a prcsumption III J:l\'our or state ;IUlOI1. A popular-reSistance 1ll00'ClllcnL in KUW~1I1 did eXist; .me! it had the support or Significant groups wlLhm Iraq for a struggle for sl'\I~deLcrlllinatinn. And

THE CU,!' \\"'-\R ..\ND WI,:STERN I.IHF.RAI.IS;\I

if. ror onc~. slich a 1II0\'L'lll~l\t hac! been ).!;I\'ell polillcal/Illoral support lrolll the ,,,.lest, thcre IS l'n'!"\" reason to expect tl1:11 a powerrul plllillral rOnT could haw Ileen buill. (The Paiesuillan IIliijiltlfl a~all1st Israeli orcupallou IS :1 strikll1~ case in POJl1t: c1esPJlt' Illililan' ~1I1~llI~atlOn, killill~S, tonUIT, dCll'J1LIon wlllWlIt tnal. rl'(lnsal~ agaillst lI\'ilialls, and mass expulsloll. thl' Palestinlall reslstancc, With a poplIJ;rUoll about the size or KuI\'aJl, hecame a powcrful political rorcc, What IS llIorc, It achicved thiS 111 thc Lceth or permancill. renlcIous hostilil\' IOward the 'Lerronst' PLO rrOIT! the world's mOSI powerrul slales, but also 111 Ihe face of Im~jonl\, Isradi hatrcd of the 1ll()\'CmenL) The Iraqi opposition n . :lecled both S:lddam I-Iusseill's fort"ibltannexation of Kuwall and the homblng and invasion or theIr C()lllltr~'. In March and April they showeci that the\' had consIderahle forces 111 Iraq. III lhe contcxt ofa commercial emiJ;rl'g-o targcted on lhc r.'aqi mililal'v alld oil Industrv. thIS OpposlLIon t.:ould. 111 COll.lllIlClioIl wIlh KuwaIti rcslstaIlCl' ami prcssun: from the Arab world ~eIlCl'al1\'. ha\'e gTeatl\, Illcreased thl' IIq~Il!l­ alln~ pn~sslirc on thc Ba~hci"<1 rC}!;lIl1e, HO\\'l'\,er, thc KliwaItI reslsl:lIlce IlHl\'elllelll would ha\'c hacl to (0111'1'0111 two serlOliS obstacl!:s. The lirs[ was the s()nal structure of Kuwall IInrlt-r till' oid al-Sabah rcgime; lIlC sl'cond was Kuwait's uil wealth. The lle(TSSIIIl'S of' popIlbr reslslancc wouid have forced lhe IllO\'emcnl I() cali on the people of KuwallLO .loin a comlllon struggle, TIllS would not han: Iwcn hanl VlS-:t-US the Palt'sLInlans since they tOll face on:lIpaLIOn, but Il would also havl' required a programme or civil nghts alld socialjusLIcc lill' all the sCllkel rcsIdents of KU\\,l'lIlg a probicIll, tillS l'IHrld ha\'c heen IhClr polillcallrllmp: the rnlirecl.ing nf'oil rc\'enues awa\, ('rolll the ,\I1~lo-r\mcncall lill:lllcial Cllnllh 11110 econOllllC dc\'ciopmcnt 1(11' the 1:lltln' Arab reg-ion, IIlcJllding Iraq, 1:,),"ypl, Jordan ancl Syria. ThIS \\'ould, or COllrse. haw reduccd -to pUl 1\ mildl\' - till' CIllh lISlaSIll of the Bush alld i\'I,qor ;ldlllllllstralIOIlS f{lr [Il(' reSlsLlIIce, lll1c\oublecll\' pl'rslladill~ those \It:
I ha\'c ar;,{ul'ci lhat a diplomatic sealelllenl fully saus!\'ll1g nghts-bascd Iilwr.d CI'iterra oljusLIce was pcrli:nlv possihle, Some, howl'vcr, rna\' hold lilal Ir .. ql oners or a nq~oLIated sL'llklllelll - Illllllt:diatclv arter thl' IIW:\SIOIl and tlll'I1

1:'),1

POLITICS \;-; THE CI.OB:\I.IS ..\TION l'I':RIOIl

("o\lowll1g annexauoll - were extracted oilly under the coercive prcssure of cmbargoes alld hlock.acil:, ThIs 11\;1\' be truc. POSSt'SSIO\\ or K\I\\'alll oil (t'''lallll\' conferrcci wealth and powcr til .. 1 lhL' Ba ath 1st rL'g-lIl1e W()lIld haH' preh:rred to relam, Aile! cvcn tllough tilL' regllllc lIself hacl Ilotcngageci III a iOllg IlltcrnaJ propaganda campaign, doublless 111 a 11\' IraqIs had longIlelie\'L'(1 thaI KlIl\'OlIl shottlel \)ciong l\J Iraq - lllt'n:l)\' adding' 1I;1LIOllalislIc support lO the case for anllL'XallOl\. 'leI therc I~ no L'XdIlSI\'J(Y or OpIU)JlS bet\,'een cmbargocs, exphraLOrl' negotiations and suppurL ("or the KuwaitI popular-reslstallce movcmcnt and Iraqi OpposllIon, Butlhc usc orwhal has COIllC to be known Iw thL' \)iankel tL'rllI or 'SallCllol1S reqlllrcs carcrlll scrtlttllY, First, we shoulcillole the peculiar ternllJlol()I..~" 'Sancllons' ill Ihls COil text simply mean measures to enrorce a cOlllmand: lhere call he mililary or non-military t~'Pes of S;IIlCl\OIlS, I-Io\\'e\'(:.-, II'tlhlll puh/ic discourse III Bnlaill dUl'llI14 the Gull' {TISIS a semantic slippage O(c\lIT{.'d: lhe wordsal\ctlon~' came to meall all measures short of' direct military attack on Iraq - IIIcludmg a full-scale blockade or the COIllHI')'. There was undoubtedly sOllie stl'ateglc Juslilicalton 1(lr cOlllllerposlllg 'sanclt()n~' to war': thL' :Inti-war mO\'clllent Wlshe
or

TilE CLI!.!, W.. \I{ :\i\'1l \\'LSTFRi\' I.II1EK-\I.IS,\I

En'lI :l('cording to dasslclljllst·war thclll"\" thl' III1PlJssilJilil\' fir otlwr 1l1l',IIISpuplliar rcsislallCC, el11haq!;oes, Ilq~ollauons - did not pruduce adequale grollnds fur an allacl;. lin Irag, Two fUl"liler cOllditlons were neCl'ssar\': the ;IIl~' Implicaullg 11';1((1 conscnpl soldiel's 111 their governillent S Ulllust act Orill\'aSIOII. ThiS Sl'l'IIlS a dil1iclllt arg'ulIll'lll to slIstalll, g'1\'en Illat the Iracl' slIldil'rs Wl're 110\ volullteer prol'esslollals - IIldeed lllany nskt:cl death Lrnng to l'\,;ldc the dr;II·L. (:\lllt'l'IC;1Il and Hnllsh rorces, Oil thl' otlter h;\IIcI. did l'ulllpnsl' sokl\' prufesslOllal soldiers.) ~II As Lhl' war progn:ssl'r\ and il became clear lliat ilIore destruction was bl'lIIg WI'IJllghl than \",1\ Ilcn·ss;I ... · li,l' lilJt'ralll1,t.: Kll\\'all, effolts IITl'e l11adl' Il\' llIilitary pliblic·rl'lallllils persollllcll0.lUstil\' tillS exccss 1)\" deplo\,lIlg tile concepl or 'collaleral' damage, But 111 Ihl' war's aftermath Ilwas IInpossihle III trcat the LIS ,,';1" efrort as /ial'lllg heell g'o\'cl'llnJ Iw lite 11Il"IIIS-r;lIlflllalil~' or lihl'r;llIllg 1\.1I11'all: il hccallw clear thai Iht' excess c1L'stl'llltlllll \\";\S llr a qllalit:Jtl\'(', ralher Lhan qualllll:lU\'C, 1I;1lul'e. \\\' lIIust n'lIIllHI ()ursl'l\,es ()r what III SI11n the lI1ilitan' (:Iron agallist Iraq t'llIaikd: (a) .-\ IUtal Illilitan' hluckade, (b) BOlllhing- Dr tIll' crUCial lil'e-suppDI't S\'Sll~II1S fur the ~'lHin~ pOjlulatllll1 or 1t';If( - walcr allri L'Ill'q,:\' supplies, sl'll'agc .'iI' .... ll·IllS - ;111 oj' whicil procluced whatllw LIN's c1epllll' ~l'lTelan'·geIleral called ,I 'lle,\1' apllcah-pllc catastrophe 1'01' the people or Iraq" lIl\'oll'lIlg- starl'atloll aud

l!i<-i

f'Ol.lTICS IN TilE

(;(.< )(\,\LlSATION

I'EI{I()[}

t:pldellllCS of killer diseases, (l) Deslructlon of the Htal irngaLIon systellls Oil which IraqI agncultm'e depends, (d) BOlllblllg oj' the couDln's Illcillslnal and transpoJ'lallon Il1frastructun:, dn\'lng- It, e1fectll'ciy. back 1Il1O a prl'IIlclllslnal era, (e) Rdllsai of Baghdad's urfer to WIthdraw rrolll KlII\';tlt. made m'Cr a week belilre tile ground W'l!' startcrl - an oller welcolllerl by some: European NATO slates hut discollnte(1 by the: US, (I) Rqecuoll or lhe SovIet peace proposai, accepted by thL'lraql gon~rnmellt, before llH' grC>lInrl I\'ar was bunched, (g) 'Collate"'11' rLlIlIage: the killing of cl\'ilians, Iwt ()1lJ\' 111 the Baghdad bunker but in the proximIty of bridges an(( other Ilon-Illilitarv II1stallations far to the north of the so-calleci Kuwaiu 'theatre or operations;, (h) Usc of weapolls or mass destruction 111 order to acllll:l'e wholesale extcnllll1atioll of the IracjI conscripts III the KUW,lJl1 theatre: napalm, cluster hombs, and a!Jo\'{,' all the 'l'lIei-alr explOSive' dubbcd in till' US the 'poor mail's nuclear weapDll' (i) The 'lurke\' shout' at the \l;ltia Pass and prosecullon of a war of annihilauon ag,llIlst 1i.l!'C{:s tilat sl'arn'l\' relllrlled lire, It IS simply beyond credibility that 'Illeans' oj' tillS ~on call Ilt' Justilied "'Ilhm an)' form of nghts-Ilasccl liberalism as COllllllellsurate Wllit the end of freeing h,ulI'all, There was also the 'liberatlOll of Kuwall', Only the narrowesl e.;rOllan \'Iell', which lllterpretcd 'lihl'lallon as the relllrl1 prupertv title 10 rhl' Emu' and IllS famil\', could present Ihe defeat oj' IraqI forces as a Iibt'r,nioll for the peoplc ()f Kuwait. The rille of the al-Sabahs and somc eIghteen satellite clans IS dependent upon Lhelr slIppresslllg delllocrallc, consllLllDonal reform. Kuwaw opposiLiotllsts seeking the retllrn to a cOllstilllllOIl 1;11' short of western liberal denHJCl'"Jarch docllmcnted o\'er one Li1011sanct cases or torture, I(}rtl' resulullg 111 (Ie.lll!, BI' laIC Apl'il, US ~O\'ernment liles recorded three hundred anrl liftl' Palestl11l,Il1S IIlISSll1g - feared dead at the hallris of the KuwatlJ go\'ernment.:!1 The:;e aCllons were o\'erll'helIlllllg-iy the work of the seellnt" forces, with the direct partiCipation of' Illembers of the al-Sabah l~lJnil\', An epIdemIC of rape attacks on non-[\.uwalli womcn residents Ileraldcci till' reimposition of a 'helot state' rq~llIle of severe sOClai oppI'esslOn,:!:! And lhl' g-lII'enllllelll announced pians, ~n:1I Ilefore Il had returned to Kuwait, I'llr the expulSIon of abollt half a llIillioll formed\' seuled Aral) rl'~ldelHS or KIII\'all, malll15' Palcst1l1Ians,:!:1 And all this was, of lOllrse, combined with tht' rc-eslablishllIenI of tile grossiy IIH:quitabie CIrcuit of oil capital 1'1'0111 K\II,';lIl mtn the Ang-lo-Amerlcan banklllg- system,

or

TilE (;l'l.F W.. \R ""\!\'D WESTERN I.lIIFR . \IIS~1

Such 1\'Cre Ihe dircct cOllsCqllCIICCS o['lhe llS dCClslon 10 opcrale throll~h lhe ;d-Sabahs ill Kuwall. Their allll SIIlCC laLe :\Ug-liSI ! 990 was 1l0l tlte rcstoraliOIl or Lhe cOllslitultOllal onh:r. r;.ar icss poliLlcal support for dCllIocrac\', bUI raliler rull political bacl~illg-liJr lhlS d\"llasllc alllocrac\", NUL a word was SIJDkcll by the US acllllllllSlr;t\lOIl Oil hcllalr of thl' poliltcal rig-his of nllllK\l\\,;1l11 n:SI(h:Ilt.~. \Vhatls morc. llS spenalli)ITl'~ were lIl11iall\, working WIth lhl' KIII\",lII1S Jl) lhelr sWl'eps through p.lieslIllt;111 clislrtCt.~ alld Wl'n: pn:selll 111 police slallons whill: tnrtlln: was bCIIlg- pr;u:tlsed. ohclI. allegedly, qUill' IJIdisCl"IIJlll1aleiv Oil youllg PalcSlIl1Iall mcn. It was l
1.;111')"(/1 J\JI'f/IIS

\-I'I:WS ;\ ""'/"Ira II CO((ts

I ha\'c bt't'll prepan:cl so br 10 go ;t1onj.{ 1\'llh Ihc ;lssllInpuoll that tilt' AllleriCall (alld Briush) slatcs llIay III Iml/ujJ/t' itan: C(JllsutuICclIl1SlnIlIlL'IIl~ for IIllpl<:mCnl1l1j.{ liberal pnlluplc III the Gulf UISIS" The pn~clomlllaIICL" 01 realist lIlora) preccpts IJ1 tile core CXl'CutIVCS or Ihc~l' statl'S has hlTn Ilotl'd, as hi\~ Ihe cVHlenL facL thal the aclmllllSlratlllllS wcre sLraig-llLfi,rwanlh' pllrSlung slale IIHercsts. Discussion Lhclr behav((HII' has, Ilcverthelcss, 1)L'Ul conlined to the Illcans oj" libcrallllg- the people 0(" Kuwail and has llll'rt'l\" notcd hoI\' their aCUOllS haw (rcpeatedl,,) departcd from prercrrcd liberal norms. gUL mcasurcd agalllsl lhl'st' stalcs actual C()lHllIl"I III thc war thIS anai\'ucal ;\Ilrl c\'aluau\'c framcwork slInpl\' bl"l',lks clown. It IS Ihl'rl'liliT necessan to rC-l'Xal11l11e the filCts o/' Dcsert SlOrm and tr\, tll analYse what IlS rcsult~ ,a\' abolll the goals or the US-led Opl'rallOlI. Thc ccntral puzzlc for mallY haslwen tllc Cllml)lIlation or two c1l'llIl'lItS: (I) A d\'l\'c toward war (,IS opposed to IJlII"SUIl Or.1 lH:'g"OlJated solulton) and sul)sl'qllcllLl\' 10 a crllshll1g mililarv \'lclOr\', IIlcluding the wllOksalc rlcslrlll"lion 01" Civilian lirc-support s\'slt'ms ami m;\mICn;lIllC of Ihe blockadl' aftt'" thl' l'IH) of llOstililles" (~) The I"ailllre or 11ll' US II) prl'SS lIomc liS milil;ln" \"Ir' IOrr 10 thc OCClIP)'lIlg llrBaghdacl and m"LTthro\\' or thc regllilc or. onct' the war \\";I~ ovcr, to support the rehcllions 1Il tile Sill" SOlllh and in lhc Kllrdish Nonl1. Thcsc ciclllents appear inconslstcllt: Iht.' destruction oj" Iraq dllrtn~ Lhc war suggcsts a dn\"c to lopplc the rcglllll:; bchavlour arlcrwards suggests support f(JI' it. The allac);. 011 tile C\\'ilian ml"rastruCllIrt: sccms graluitolls ancl aillliess. Only through a polillcal analvsis or IIltcrests and goals can We makc sellse of lhis secllllIIg In(OnslstcllC\'. UnllL'd SlalL's n"jcclloll of ,I llt'gouOIted S(lItIlH)\l ami or thc optIOn or ecoIIUIIIIC sanctlUIlS pillS support fiJr t"(.' r't\I\';trtl I"CSlstall("(' C<1II11!Jt 1)(' dL'elll(.'d ,III aU:lcIcllt. Nor call LIS dislllissal or the Iraq. 1I'lllldra\\'al urrer ,II1d till' SOnl.:l peace proposai beforc lhc land IVar I)egall" .\Illl'cre deliherate ;ICb or polin", bllt with whal oi~ICCII\'es 1Il IIlllld? One 0(" these Gill bc l'XPITSSl'd

or

us

p(JI.ITles IN Till': (;1.( 1I1AI.ISAI'ION PERIOIJ

crudelY, and raLller Illisleading-h', as the 'oil buor' - a long--Ienn structllral IIIterest; anC! Llle other has to do with g-lobal factors not directly reiated to the Gull' or rvliddle East.

The 'oiljflf/O/" Since the iate 197(b the US has made explicit lis deLcl'llllllaliOn to cxen:1SC overall IIllluence III the Gult', laying- clown the parameters !ill' all poliuc,d i'orces 111 tlw n:gu)J) thrllugh the sll-callcd 'Carter \)olll'llle According til Zhlgmcw BrzezlIlski, the doctrlnc's archllcct, US IIlterests II'crc tllrcc-lilld: lirst, guardianshIp of the oil inclustry 'with all its political, ccntlOlllic and milnary ramiJicaLlolls', secoll(l, I;.eeplllg the lISSR out; and thml. prolecllllg'thc mocierate states 111 the rq{IOJI, which could Ile toppled 1)\' local upheavalS, as happened with Kholllcmi's ascendancy III Irall This lalll'l" threat IS 'perhaps the !lIost eluslvc, and yet potenLlally the most dangerous' to US Illterests, whether the altack 'be /i'om the left or from IslamIC fundamelllalisl1l , . , As the Imnian revoiuuon graphIcally demonstrated, It is Yen' diflicuit 1'01' "Vestern policy-makers to develop an dlecti\'e response OIlCl' ne\\' and powerflll social. religlolls and pilliltcal allitucles g-,lIn widesprl',ld acceptance, the hold oj' a leader oj' government Ileg-Ills to slip. and a cnsls erupl~.'2'1 These three interests form a hlenu'chr or us COllcerns: at the apex IS 'oil'; li'olll tillS denves the commlunelll to the 'lIlo!' US global poliLlcal pmvt:r. Gulf oil prOVides a "cry large IIllern
THE CU.F W..\I~ AND WESTERN

I.IBER'-\I.IS~I

159

\\'odd - with Saudi III 0 lle\', which cements rq{IIlW aher regIme, from Pakistall to i\·\orocco. And the passages of that mOlleY are ulumalcly COIltrolled Iw the powcr whIch def"euds till' Saudis - the USA. If the rcglmc or Sacldam Hussein had cOlltrolled the !low of Illuch of that oil capital. dozens of COUll tnes around thc world would ha\'e had a simple choice bctwecn two world politlco-econolllic authorlucs: on olle slrk, t.he IivlF/WB, the 'offiCIal', Amcrican-controlled Institution govel"lllllg the world ccollomy; on the othcr sldc, Baghdad, the undoubtcdly unollicial but eCJuallv cnicaclOus centre for capital and loans, And would thiS III\'cSlmenl capllal havc I10wcd as readil" through thc Amencan ball king system and the City of l.ondon? \Vho can tell? 01lC certallJl\' IS lhat politicallinanciug Iw a Ba'allllst rcglmc would not cOlllCicie with the fllnding or Islamic thcocratic or (I\'nasllc currcnts. Thc samc E1ctors wOllld applv to the Iraqlconlrolicd markct fIJI' wcstern IIlduslrlal prodllcL~. Directly threatcllll1g to US lIltercsts 111 such a scellarlO would be the Illlpan Oil thc do liar: for Sacidam HusseIn 1IIIght have preferred to dCllOmlnatl' his capital III marks or yen. As the worId's bIggest debtor, with its debt rlellomlllated in dollars, the US economv would ckariy be vulnerahle if a signilicant proportiOll or i\'liddlc East oil revellues were switched to another CUITCnCy. For tht, Lll1lled Stales to COil cede such ]Jolillcal power to Saddam was ullLhlllkable. And linaliy, the control I'll' oil supplies to hoth.lapan anc! the countries of Western Europe has always served the US as a crUCIal polil1cal lever ill relatIOns wllh these states. They arc. aner all, nH)n~ rcliant upon ivliddle East oil than IS the Ullited States, and would undoubtl'dlv IIIcrease theIr IIldepCIIdellce irlheir sources were not under the laller's 'protection; bUlllnder thal or a reg-nlle not itself dependcnl on the US. These oill;\ctors - lhe revenue moll'ket, capllal, and cOlltrol oj' tile 'allies' supplies - make dircct polilical SUZerallllY oycr lhe reg-ion by tlIe Ulllled States essenllai. To shore up liS own political pOSIIIOll1II the (;ull'and tilat of its client reg-lIlles like the Saudis II was necessarv for the US to demonstrate IlS supremacy O\'er Iraq, to repudiatc all diplomallc ciiscussions and nq.~()l1at lOllS, to ban :\rah or \Vest. European regimes from n:suinng the cnsis peacefully, and linaliv to dictate to Baghdad: ellher rlimh dO\\'II h\lllliliatlllgly bcfore your own populal.1oll and the Arab world or we will crush ~·ou. :\ negotiated end to the Iraqi occupatIOn would han' suggested US weakness. The leaturl's of the IraCJI state that thn:atencd US dOllllllancc were quite different frolll those stressed by liberals - the dinawrshlp. the cull. the repressioll, torture and killing of OPPOSlllOl1ists, tlw ust' of chemical weapons ag-alllst till' Kurds In Halal~ia III 19HH. Thc t IU'cat lay prImarily in the Elct thal it was nut a sllciallr weak and subaltern ciiuatol'sillp lied \0 the "Vesl tllrough tltc nature of its rulinl{ class, as was thl.' case WIth both the Shah and the Saudis. and IIlcleeci till' El-,rvpu
IGO

POUTles IN THE l;(,OBAl.ISATION PERIOD

lower nllCldlt: classes makes them easil\, conlrollable I)\' the Wesl. Ba'athlsl Iraq, with liS li:rocIDlls discIplines over the gm'enllllg elite !lsdf, was dillerelll: It sought to base lis power 011 the capacity 10 mobilise politicalh' ils clOllleSllC populal1ol1 bellmd IransfoJ'm<1t1\'l" goais, unlikl" any OIill"r reglIII l' III the Fertile Crescent. 1L was 110t. then:li)n~, dependent on western powers to 1II heen made, , , [EJ ven thc prcss financed and COil trolled Iw the oil slatcs III the regIon and 1Il Europe [covercd] the 1;!I)Ulous oil-wealth or mdi\'lduais: tales of corruption, gambling and squan([enng. The corrcsponding IInprcsslon IS that cven if corrupllon docs occur on some scale 111 Iraq, the surplus has largely been plowed into the counu'y for Il.S developmenl.':!I; Not that the Ba';uhist regllne was seeklllg to stimulate popular movements lD overtllrow the sheikhdoms, But it was thrcaten1l1g to pull thesc regimes wllhm its regIOnal sphere of inlluence as a means of insuring them against subversion from below; none or these ruling groups, illcludill).{ Lhe Saudis, can recl safe in their own societies wlthollt an outslcie protector, Sad dam I-Iusselll could no doubt have livecl qlllle happily wltll Llle sheikhs and even lIle Saudis iJ'1 place, hut only on hIS terms - a potentIal challengc 10 the established role or the US. It thereli)re fi)llo\\'s thaL a crushing US milHan' vlClOry m'er Iraq. with 110 concession to negotiation. was mtcnded to demonstrate ullequl\'ocally to all groups 111 the reglOll who ultimately COI1trolled theIr deslllW and who didnol.

US global !)OWI',. IlIlen'sls ThiS docs not explain, however, why the US admilllstration repudiated both the offer to withdraw !i'om Kuwall ten days I>e/i)rc the ground war started and the su))sequclll Soviet peace plan, ill favour of bombmg InlCjI l(lI'Ces 111 the KuwaitI theatre and a ground campaign - a response in no way demanded hy the lIllt'rests set Ollt above, To understand US ;tllllS we I11I1SI. then, apprec'lillc a fllrther nlctor fuelling the Blish adlllllllSlration's desire ror a crusiling l11ilitan \,ICtOJ-Y: the need for a 'demonstratlon war' l.et liS note lWO repeated themes of Preslcklll Bush: the New ''''orld Order and the

THE (;UI.F WAR AND WESTERN L1BERALlSi\1

161

Vietnam syndrome. Both sig-nalleci giobal motlvatiolls fi)r the Will". And as I"ar as the Vietnam s>'Jlclrome was conccrned, thc US had tn demonstrate thallt lI"as 110 Illl1g-er jllsi a IIlIclear super-state with reel of clay whell It came to fig-llIlllg- a cOJl\'ellllonai war ag-alllst an ellemy in the SOlllh. It had to show thc lI"ill ancl the militar\" capaCity 1111 IIII' p:ro/llu/ (IS 11"./1 rJ.\ /11 11i(' fill" to pn:vail ;1g-aIllst a suhstallual C01l\'Cllllullall
1'( )I.ITI(:S

I~

TI·II': (;1.( mAI.IS'\"11< IN PERIOI)

SlIppDrllllg Il1ell" '1("(1()1l. COlllrl (Iedal"e S'ldrl'llll 1-llISSI'IIl"S p()lin' ,m 111l.J1IsIIJiah!t- Illislake. alld Dill' direClI\' resplillsihk tilr Ihc allal'k, \\'ilI1ll1l1 Ihe rCIlIO\'al and discrcriiLlng- of Saddam h)' frlll!1 1'1t'lIl1'lIls Arab POIiLlt"S lIlal' I'ct polanse arollnd lhc stance takcll Oil Dcsert Storm, III addilJoll, lilt, success/"ul !llana~emellt of dOIllCSllC public 0PIllIOIl III the \Vest requires Iile disappcarance o/" the' i\lonsl er o/" Bag-Ilclad' \b I() destmy til(: BailllllsI re~llllC willi liS hundreds or thOlISilllds 101 lu a dcgn:c not rq~lstered )lI" \\'t;stern public 0PIJlIOIl. An IslamIC rt:glllle III Baghdad - alld (lIlC WIth cielllOCratIC iq~iul1latIon III thc country. glvel1 the Ill'~l(lJ'ItanaIl statlls o/" the Shi
I ()~\ lion al Ihc IIIlH' or wrIting IS whcthcr Ilw US IS rcach' 10 make that comlllllmelll.· lllerl'h,' prodUCIng a dc ('a("\() splitllllg or 1.. ;1'1' WIth Kllrdislan 'proteClecl' ()\' Tud;.e\· alld lhl'lr 0\\,11 Illililan- 1()J"(:l"s (I\'hik llIaillt,lIlllllg th~: rie .lure 1II11l\' or iraq, Ll'hall()ll-sl\"Ie), (lr whether till' Bush admllllslrallull will draw bad. III the bcl' or such a dangerous. open-elided COIllIllIlllIl'nl. Not one lIS political ol~Jccl.l\'e bears ,1Il\' posIl!\'e rei;lIlOlI 10 liberal criteria oljuslIcc or freedol1l, Thl" aIm or dl'II10llSIr,Illllg AIlH'rll:;m domlllancl' III the i..;uJr\\,otlld be d""sed as wiJrJlIl' II/~IIISI bl" ng-hls-bawclthc:on. Thl" sam!..' 1\'Oilid apply to Lh~' aJlll or assl'rulIg US world le'lnh or Iraq; ;mcllhL' linchplll or thell' polilrcal stralq.,'!' III Ille regioll- proll'ClIng the Saudi reglllll' - IS .. goaithalllt"n~ssaril\' elllails till' suppressIOn of lil)l'ral allrl (lellloCI",I\IC rigllt.'i, Thl're IS only olle cOllc1l1slon 10 be dr,11I'1l J'rol\l thIS analYSIS - a nT" clisqllletlllg nIle fur rrghts-hascd liberalism, II IS lhal the enure halllell'or!;. wlIhm whICh lilJl'ral discollrse sllllalc~ IIll' ,-\llIenCall ;lIlilCI;, on Iraq rlOl'S \'10lencl' 1O realit),: 1\ subsUl\ll's Al\llTIGl1I Iwha\'lolll" IIl1der lhe calegor\' or all lIISlrlllllL'llt- alheit olle alllong olher possible II1stnlllll'lIls - or libl'raljllslicL' rollowlJlg thc 11I\'aSIOIl or Kuwall h,' Iraq, \(~I AmerIcan stall' power has ilcl'n and is belllg useci to support alld to flirt her IlIjusllcc ;1I1!! cOl1linulJlf,{ opprL'sSiOlI II) Ihl" rl'~iO\I. We arl' Ihus obliged to arlopl ,I rOiclically dillen'lll (ramework ('or analYSIIIg" Lhl' <':lIlf ensls floll\ lllal 1"tll! \\IIKII \\'C hl'gall: a framework lil1' c\'aluatlllg Ihe 1I~llISII(l'S of the Ira(]I rq:O;II\1l~, \JUI also lill' c\'aluaung those oj' the Ell' l1Ion: !>ol\'crhri lillllcci Slates and ils allies, Thllse \l'hll prcsent the US war drl\,c as a rorcc for liberal valul's and a m()\'c IowaI'd restlll':1111111 ofjllstice 111 11ll" <';lIlf are cOlllpliclI m Ihl' l'arnaf,{e a\Hi destruction IIToUglH by Desert Siorm to i>llllrcss a rcgloll;d 1'l'~IIlIl' oj" o(lprcssl
II

Understanding Modern Ir:lC]

\Vestl'rn liiler,'lI pUblic opInIon lias sml!:o;lll III underslalld the lIIodern iracjI Slale throll~h olle IIllerprl'laUOIl aho\'(.' all !II hers: lhal II[Samlr aI-Khalil ill hIS book nil' Hr1mUir 0/1'('(/), ( 19H9) and in a \lumber or recelll arlldes,~H Althollgh Khalil's Imllk has Ill'L'lI IIsert to iegrlllll;lIl~e Ihe \,'ar ;lg,llllS1 Iraq. II \\',IS or course 1I11~'lIdC(lliH' III) SlIcil pllrpose. hl'lIlg;1 Sl'J'lrllls ,1I1e! impurtalll rdlcc\lllJ\ Oil Issues 1\'l'\llJc\,ond Ihl' 1~1Il" or Irilq: Il IS Illc work 01 ,I huillallt" ex-i\la .. xlsL SICkCIICd b~' IllS expl'rlcllces Iile Ba'alll amI seeking beller hllurc Ii,,' IllS people, ArtIcles ,,'\"Illell 1Il respousl' to rcceJlt C\,L'lIlS show Khalil to ha\'L' bccll shockcd h\' thl' slaughler pl'rpetr;lll'd Iw lIS-led IlllTC', N~~\'crthell'ss, Khalil's

or

,I

POLITICS IN

TIII~

t;l.OIHLlSATION PERIOl)

stud\' IS deeply rooted in the tradillon of classical Anglo-American liberalism, Khalil organises hiS history of" modern Iraq around two S()cJ()polilica'l paradigms: one IS the Illonarchist reglllle of British lIllles, and the other IS 'wtalitanan' Ba'atJlls111, elcscrihecl esselllially as 'Stalinist Ill) account 0(" its political strllctllres, This mociel IS comhmcd wnh anolher: [hat ollrac1itll>llali,ml versus l11u
Till' !HOllardi), (/Ild IlIIjJmwl DI'Jlgll

Khalil present.~ a very hlVolirabie evaluation of the Hashemite Illllllarchv Imposed on IraC] by the Bnllsh at the start of the 19~()s. F;usal, he san, was 'prepared lO do vinually anythmg 111 the elTon to encourage. , . [lIle Iraqis] to change rilelllscives and lhen society, except to use force' There IS, howel'er, a slippage here: n;illlcly, the implication that lhe monarchy adhered lO the liberal prinCIple of restrictmg tile lise of force to the protection of indio. vlelual, or at least traditional, nghls, though sU'lclly spcal,ing Khalil oniy ciaims an absence of forced modl'nIHII/IUII. COml1l1l111ent to hlslOncal Os, the monarchy was cngagcci WIth lhe Bnllsh III lighllllg olle re\'olt after another, Let LIS lake a.~ our source not sOllie leftist anll-imperialist but Lhe cOllsen';\U\'C, anu-n;\w)\1alist Elie Kedoune. He wntes that 'The Nonll as" whole had to be coerced h\' the Royal Air Force' II1LO submlSSIOI\,:11 a more or less

THE (;UI.F \\,AR .. \;-.1D WESTERN

LlIIERAl.IS~1

UIIHllltlOllS las/;.: 'Bomlmlg- .' lllllillhe \'CIT e\'c orilldqJ<.:ndcnce alone ,~llb. . ciued tlwlIl [till' Kurds]. ':I:! III I ~):~ I the Kurdish leader Sheikh Mahlllud slaned allother rebellion. The BnLlsh decided that the Iraqi army ilself' should tackle Lllls so Ihalllll1lg-hl he 'blooded' herore independence. !-Io\\'l:\"er, their aClUlII \\'as LlIlsllcn:ssJ'IlI, so Ihe RAF had lo illlen'l'IH: ,:::: Tllls paltern oj" n'\'D1t amI bombll\~ \\'as repl'llduceci in lhe SIll:! Soulh - !l1lL' n:hellioll aner ,mother 11;1\'11114 III Ill' pill lIo11 was "put down WillI the help or indisrnlllillate aL'nal bomblllg-" :1;, The rcgll11c responded III tillS II1sllrgellce I)" tilrcihlr expelling .sllllIlal II II; 's 0\1'11 1'L'~()urce'" flllllcss alld L'ngagelllL'1l1 Wllh IIH: world. The Bnllsh III Iraq were IIlOdcl"lmcrs Illll"": thall coilllllsers, despite actlllg Otlt or scll~illtL'rest.':I:-; Keciuune ~.luclge . . lllClll or lhl' Bnush roit: III ivlesopolanlla IS dirferellt: 'WhL'n WL' cOllslder thc

or

I (it)

1'< Jl.1TICS IN 'I'll E C1.011 ..\I.lSXI'I()!'\ l'UHt HI

long cxpcncnfl' or Bl'llall1 ill the gO\'l'l"lll11CIlI or Easlel'll l'llIllllneS, and Sel besIde iL the 1l1lseJ'able polilY "'11Iell she bcslowcd Oil Lhl' populallol1s or l'vlcsopotalllJa, \It' arc sClzed wiLh r"di.1I wonder. II IS as Ihough Illdia and Eh,)'P1 had nC\'el' cxisted, as though Lord COnlwallis. MUllro alld 1\klcall',.Ioilll and Hell('l' I.awrence, i\'liIl1el' alld Croml'r had allclllplcd III "ain 10 IJrlIlg ordcr"JlIsLICL' alld seclIlHy to Lhc Fa~l. as Lhough Burk\.' aJld :\ bcaula\', BCIILh;1I11 and .lames i\lill had Ilen:r adcln,'ssccl Lhelr JJ\\cIligl'IIl'l' to till' prohk'IIIS i\l\(\ prospects or ol'lt:lltai gu\,erlllllelll. \\'e ClIl !le\'er (t'ast' to mane! how. III Iht' cllCl. all this was discardecl , . , [in] MeSOpOlal11ia.':I~1 As lill' Khalil's \'ie", Ihal tIlt' Bnush-forllled dill'S were agellts or 1l10derlllsatioll, LhlS IS noL shared i)\' thl' British thelllselws after the Second World War, A report JiUIIl Chancel'" III Ba!-{hdad to Lhc Easlern DepanlllL'lll of the ForClgll Office Oil Hi ./111\' I~I'I!) dcclares: '[l'" iLh Lhc olel gang III pO\\'cr tIt IS coulltn' (';11 1110 t hUlw to progrl's~ rcr\, l;u,,',JlI Irb\' '1ll0cieJ'JHsaullll Khalilllleans CCOIlOIIIIl' dL'\'elopmclll, the hillallee-sheet outsldL' Ihe oil industr~', or course. was nol IIllpn:ssi\'l:. In Iw Ell' Ihl' most impol'lam scctor, agriculturc, the BrItish achll~\'c(l thc remarkable ICill or rcgrcsslOn: Iraq s producl!\'lt\' dcclined li'ol1\ ~7[) kg pCI' acrc III 19~O to all an:rage of ~:1H kg per acre between I ~)fj;) and 19fjH: l I To turn IIU\\, rrom the actil'illes 01 Ihe poliLical rcgllll!: to changcs III sonctl' IIncicr tllc monal'dll', Khalil ell'scribcs ;t lilol'Oughll' lradillollal world or III en, an!;ll'nl IIISlIlllWlIlS - likc \'IeIT\' England berfJre tlte LOtalilarJ;ln Tlldors set 10 wurk. But this is a flagrant misrepresclltauon, al least Wit II regard 10 the mall1 mSLiLllliolls cOllcerned With thc rcproduclHlIJ or dailv lilC and the mamlellancc or sUClal oreler. For thesc wcre bralld Ill'\\' mcchaIIlsms - modcl'll struCllIl'eS built 011 the ruins or Ottoman SOL'let\', Economic ali(I soual change ullclcr Olloman rille hac! hl'cn graduaJlv nor!mg trihal strllclures, Bnllsh polin lm'oll'eci a COlJ.~rll)(Js dfort to n'\'('I','l' th\', trcnd. In Lite \\'()J'{ls or the .t\Cllllll1lstr;IIHHI Report of thc RC\'Clllle Board III Baghdad fill' thc pennd ~~ l\.farcll III :~ I Deccmber 191 H: 'St'lIlecl agriculllll'l' and extendcd cl\'jlisatioll have tended to disinlegratc thc trihe and 10 \\'eal~eJl thc inl1ucllce or the Sheikhs, To restorc alld continue the power or Ihe trihal Sheikhs is 110t thl' teast IJltcresUllg .. I' the problems III land adlllll1istralloll whIch thc BagllClilc! wib\,L't presellts.' The solmioll chosen I)\' the lkilISh was III Ll'ealc an almOSlt'Jlllrd\' Ilew SOl'1aJ stnll'tllH' bv distril>lltlll,!!; hllge estates - the IllggcsL III thl' 1'.licidlc East- HI trib.t! hCilcis who clcnHlllstralt'd thclI' politlcil loyaltv to Londoll, Thus. at a stroke, a IIC\\' ruling ciass or ~OH'nlllll'lll sl1l'ikhs was established. 111 Lhc words of l\,l;l]or Pulk)', reporting to the ci\'il cOInllllssloner 1JI Ba~hdad on (i AUg-lISl 19~(): ·i·...lall\' or thCIll \\'l'n' small IIICII or lit) account lIlltil \\'t' m.uk Ihclll powcrful and nch,' Thc Civil C:omIllISSlOl1l'r or thatlll\\e, \Vilsol\. wrote later: 'Thc Shaikhs wen' 111 IIlllsl l:i1Sl'S c1inTt\" dept'ndent Ull thc l:1\,j'1 .t
'IIII'. (;L:I.F \\'.-\1{ A:'\'1l \\'ESTER:,\, I.II1ER-\I.IS:-'1

1(;7

rdaLHlIl.~hip Ilelweell Ilw sheikhs and ordillan' members of Iht'lr I rihe or peasallts: I-Ilell" real organic relatlllllsiup was wllh tht, British, ()I\ the baSIS or Ihl~ IIl'W ialldo\\,llIlIg class, the ikllish sOllght III reilllpose alld sln:lIglhl'll trihal iclelllilles and C\i\'lSIOIIS al t'Vl'l"\' le\'el. Thc\' set lip a new iegal S\'slel1l, coc\ilieci III till' Trihai (:\"IIllIlIal and Ci\'il Displltes Rl'glllatlol1, \\'I\lch relllall1ed 111 piatT tllllillhc n'\'Ohllltlil Ill' I~l:-)I';' Also, r;llhl'r thall allow /11:/1 hllgbear or illdinrlll;distliheralislll, lite st;\ll', I. l possess I;Lx-lc\\"Ing powers allfl Ihe rcsponsibililY I( Ir acllllllllsiralion alld police, thl~SC \\"t'r~' IranSrl:lTL'd pnvausL'd - 11110 the hands 01" the IW\\, ruling class, Ami to cap II all. mecha11ISIIlS were eSlablishl'd under willch IilC rural lIIass(~s Wl're lil'd 111 st.'llll-serldoll1 to thl' l'SI;lIl'S.-I:1 To repeal: all Ihls was a nl'\\', modern lI11pl'naJ lIl\'t'IIIH)II, And, as ItllOllll Shll\\'S, as rhl' 11I01101Irll\' decan'd III rht' postwar Veal'S, II ~tro\"(: to sU'l'lIgl11l'n alld rllrr her eillrelldl rrihal cli\'ISrolls.-I,1 Thus we havc a cOlllplex picture: lilt' ueauon or 11I7/1li)l\llClaliOllal illsl.I(uUOIlS or landow!1erslllp III orrh:r 10 1'11117 11' d\'i Ilg" !.radi lional ;UII hOi'll\' relatiolls, n;slllllllg II) eCOIH Hllll'all\' and s[)C1all\' rq~n'ssrH' cOllseqllcllces, IIlldertakell Illl" Ihorollg"hh' 1l1()(1l'1"1l lI11penalisl polilicd purposcs - namelY, ro en'aLl' a ruling- dass depelHlclllllPOIl Bnllsh mililan po\\'cr 'lIlci therd/H'c ("ollllllilled to IInpl'rrai in leresis 11l 11ll' rq.{HHI.-'" ThIS IISl' oj" impcnai powcr to el](~l't eXlcn~ln' SOCIal t'1l!-{llIet'l"Ing (1)1' n;trrOl\, slralt'g'IC ('mls IS h('\'IJllci Ihl' l'I)mpn'hensloll or a libeul po(illcal Ilwor\' like tlial oj Khalil. hlind as II IS 10 llll' 1I1ll'ITeblechll'SS or Sl;\lC and class IlIlcrcsts, alld COllll~nl as II IS to redllCt, complex 11ISloricai proCl'SS 10 a sll"ugglc hel\\,cel\ 'Iraditloll; ami 'lilt' modcrn,

1'"r/i{fIllI'II/(/nWI (/111/ (:III'IUIIiI

Khalil sces onl\' \'lrlUt: III till' Brillsh-lIllposeci parliamcllran S\'sll'1II III Iraq, (:()I1Sl'quclllh', Ii II' hllll lis abolitlOll III I ~1:lK W;IS a Ialllelllahk clc\'(:loplllelll. ili Ag;\lIlSI rllt' charge th;1I parlianlt'llr was IIIdlt:UII:Ii, hl' declares tilal. nil Ihl' CDlltrar\', 'the Iraqi parliamcllt bc(/,rL' I~J·ll was asroillshlllgh' ribranr as a nlL'cilalllsm li)1" drawillg oul incli\'ldllais J"rolll IIIClr COlIIlllllIlIllL'S'"li He dm~s 1101. however, spl'1I otll wllat IhlS \'ibrant Illt'Ch:lllislll was, Nl'\'t'nhekss, a Bnllsh oHidal reporll'rI ro I.Ollrioll 11\ I ~)~.s Oil ('xacrl\, 110\\' thl' ,'i\'Srl'1ll worked: lltc gll\t'rlllllcllt"s pnl\'lllnal gOHTIlllrs ~\CI('d;)~ dl'Clioll ~lgl'1I1S 1\'llil the lask or (Ira\\'lIlg up lists til' rliose wllo had to Ill" l'll-ded lilld or lh,,~l' ",Iio could df) Ihc eiecllng:ll' The Report 011 Ille AdlllllllSll'aI!OIl Iraq lill' I~l~.s admillcd thai elections alld rcprCSt'nralll'c gn\'cl"llllll'1l! wert' a IlHlckery, Kedouric lhus of"li:rs LIlt' Ii IlloWlIlg slIn ph: .I11dgelllt'llt Oil lite \'i hr;lIll Illl'Chall]SIll: ,[ E]IcClloIIS /0 Ihl' chambel" or (Il'plllle,~ alld appollltllll'lllS 10 till' S(,II,ilt' \\'tTL' an addi!Jollal 1\'l°apOIl in lilt' hands oJ"lill' ~()I'Crnlllelll Whl'rc\\'lIh rhl' hellt'r to COlIlI'O\ tht' Ull\lIlr\,.',I',1 For Khalil. Ihell. Ill(' Kingdom Ill" Iraq was parliallH'lllansllI III polilics pillS

or

16K

POLITiCS IN THE (;tDIHI.IS.-UION PERIOD

traclillollal GI'JIII'IIIJr/w/i III the \'illage - III short. a world h"(~e oj" the rootlessness and vIOlence of Illociern mass soclel'\'. Here IS hiS Idyll: 'In King- F;\IsaJ's lime a pcasal\l Ilad IllS tribe. IllS rcli~l()n. IllS sect. IllS \'illa~e. and IllS all('glance to lhe sheik whose lands he liIlcd. His en tJre worid was constnlClcci li'om these clements. ",0 There is no IIlcntlon here or oppression. or the (;ICl that the pea~anls or the ~reat eSlates were redllCt:r.\ to liule more Ih'\I1 ell.atels; the monopoly of coerCln: ({)rce )'(;sl(les a pnorl wltll the staLe. Allcl although the landowners controlled staLe admIllISLraL1oll, the sui~Jeclloll of their peasants occurred in the private sphere or clVi! SOCiety and is therefore of no ethical slA'nilicallce to a liberal champion or indiVIdual freedom. It is II1strucllVe to cOllnterpose to Khalil's Idyll the \I1slght or a British military man. all RAF pilot who Was husy r:ollu'ihll1lllg III I)I~ own IVa" 10 \Vila' Khalil calls thc peas
Gm'crllll\cnt IS not,

miluon

to

PersIa. allcllllalll Illllst 011 that aeeOll11l consider III a fresh Iiglll what VOll

do wIlh your d:1I1ll I()I' water-rlghls against Muhallled Derwlsh ... It IS Ihis g-rossh' personal elelllent III the all-pervading arllVIUcs or govcrnmen( whICh el'okes from

the ulleduGued peopic th.1l quality which we arc too apt to disnllss as IIISI!1CCI'ltI', but willeh is, III reality, lIothing but (he ll1e\'itable cOlllprollllse of a Ill' slIlIple mall chased by the bogey ofinsccllrny. For all Eng-lishm;1II with a dear COlIsClCllce Ihere arc fel\' oeGI.~Iuns when. III I;ICII1I:; an acqllallll.lIlCe, he IS le/llpll'd (0 express \'ICII'S at vanallce Willi IllS trill' olles. tilll (he IraC1i bcl()re an omClal, ur C\"CIl anolher of IllS own kind. IS 111 dOllb1. He IIlIISI prnpllralc, '\!lcl spt:ak raIl' wor(\s. His posItion IS IIllSlal)le. There IS 110 permancnce. He knOlI's Ihal the lilct
Here. then, was a sel-up tbat lack~d the tcc/ll1lcal sophistication or the laler Ba 'alhist political-police appal~lluses, Imt which !lad sometlling 1;\1' more COSIeffecuve: a so(wl dictatorship over tile mass Dr IraqiS \w a l;tll(l{)wning class thal dircctlr conl1~ollcd theil' emire mcans of survival. in addition to tite government machinery and local admlnlstratloll. ThiS power was 'ail-pervasive', cven cl1lt'ring thclr dwellings. And it was a world unregulated hv law: when'

TilE GUI.F WAR AND

\"I':s-nJ~N

I.mElt\I.ISlIl

169

those belo\\' had 110 recoursc to leg'al 1'1I1l' 10 challcnge abusc!; or POWCI', cven III lWll-poliw,:al sphcres. But Ihe 'lllalitv or e\,l'r)'(b~' sodal relationships, Illcilldinf.: that between rulers anel ruled, IS nowhere consIdered by Khalil. Whal 1l\.llters to hUll IS tllat lil(' lllon.IITh,' dispiawri liberal "illues br rel'lIslIlg to IIlter\'ellC on the peasants; behalrbv ill)olisillllg the great estall'S, Tills Jwrspecti\,e blinds hlln to thl' burnlllg sense or in.lustice that fuelled lhe n:\'oit ag-;ullsl (ill' /andlords aud (/Ie lIlotlan:h" III tIll.: J 9:'lS n:\UhHIIIIl,

,on"

POII-Hi'lIO/lIll11llfllJ'

L'I,II"fIlJ(//

Khalil IS not a n:aLllOllar\" Yet there IS 110 escaplllg IllS vIew lhal the re\'oll!lIoll or 19[)X \\'a,~ a disaster, fir hiS Idemi/icatloll or thl' source or that disasll'r: the l'1l1l'\' or the Illass or Irilqis on (IJ the polillcal slagl', IHlrs(lIlg through the II1tegumentlll' rl\ling-cl;lss pOWl'r - or, 11\ Khalil's gloss, 'the erupllon of lhe tlnclille:n:llliall'd ;al'uclllreil>ss m;lss illl!) polillcs' '.~ He ([l'l'I;tres lhat 'The parliallientary form of governmellt was the ollly IIIslIUllIollal lllt:chal1lSIll Illat mi~ht have prOVIded a coun t~>r\'ailin~ measure to the emeq~ell('e or the masses as ;1 /I lI'n' , ,:.:1 Thus Khalil betra\,s whal other liheral \\'rtlcrs likl' Kornhauser. lISlIlg mass-society theory bllt seeking lu I'emalll wllhill a liberaltI/'II/OIT/II,,: (j'allle or ref(~ren('e, prel'er to obscure: Ilamel\', a stnmg hias agalllsl popular clelllOl:racr and a deSIre for IIlSlItullollS that will bJock. ('ragmellt ,\\lel control popular polillcal in\'oin:melll.'·1 Whell Khalil speakS ofthc mass Ilelllg'struClul'eless he should nallle til(: real controlling structures over lite 1lI.ISS of people (,IS oppllsni to thl' parliament III whIch thl' people were llot lIl\'olved); the IIlSLtltlliOIlS or lanc\lordis\ll, sheikhh' cOlllrollJr cl\'il adlllllllstrallOll, tribalist legal coen:ioll and so rorth, Furthermore, lle should register lhe abSl'IllT orany structures for 11l\'olvillg lhe people in C\\'illik, far less 1'01' chanlll'liing theIr l'llergl~':-' 111 tilL' public sphere - no InclllSI\t' iocal governmentlllSlIllltlons. 110 legal induslnai-reiallons organisatiolls, no well'are-statc (I)' erluciliollal EteilillCS, 110 C\\'ic, cullllr,d or IelslIn: cClltn:s, The nllly iarge ll1ilerlted ci\'lC IIlSlll11[\(ln wlIclllllg the wJHlle poplilation was tile: army, \0\,11<11 lile old reglllle hlld hequeathcd W,IS a conl'usl\lg selol' poliucal idcntllil'S, Emerglllg rrolll an artifiCIal (BrItish) constrllcllon, Jl /()lIo\\'ed that post-l'e\,ollltion;IP' Iraq was a gl'opolillcal concept to 11'1\1(:11 people leIl 110 allachlllenL or loyallY, Khalil reglslers tillS ran ))tll f;lils to grasp liS slgnil'icance: 'Ir
I/O hCqllCSI WlTe loyaltlt"s III 111<.' Arab llalloJl - liISlel"l.'d h\' l11e IJllelligl'llISI:I, allel Jalel" polilJCalh' expressed J)\, the Baalh Pari\' - anrl CIlIllllllllllelll III (0111IIIUIlISIlI. f"stered br the Iraqi COllllllUllisl Pan\' (ICP), Slall's Ih~ll Jack popllbr ioy;i1I\' lind lleXllTJll<.:)\, diHicull (() Jllstillll(, \\'Jlhlll 1llCIllSl' In's poJilJCai r1inSlOJl alld OppUSlllllI1. Witho\ll lo\,all" 10 Ihl' wbllk. sllch c1insltlll Ihrl'all'llS t\) destroy lhe whole. a problem ).!;reall\' l'xaccrhalerl whell l'XlslIlIg loyal til's altUl).!; tribal, cthlJlc, n:ligious alld class linl's arc as lll\'nacl and COIllplex as Ilwr were III Ir;lq, Thl' problelll was lltH Ihal thl' llIasses were lIndilTerl'llllatl'ci ancl ;llllorp)1011s in Ihl'lr loyahll'S, bUI qUilt: Ihl' rCH'I"Sl', \'\'hilt: tht' old rulillg c1assl's Wl're cnppkci hI' litc rc\'olll UfJll , slIccccdillg Illilitan' rq.{llIleS bctwecll I WiH ancl I ~Hil) provcd lllG\pahie o/" C;IIT\'lllg lhrough lhe prt»).!;rallllllc or )JOSJll\'C SOl'lallrallsrormaLlOll dl'lllandl'd '111 all SIdes III the popular l1l()\,eIllCIlL: namely, thorollghgOlng lalld re/"orm. naU()IlalisaWlll or the oil IIldustr\" and p)anIled eUlllOllliC dt'\'elopllll'Ilt, \\'1111 Illl' ;l\1Il or impro\'ln~ Ihl' lot of llll' m;lss or pcopk allc\ prt)mo\lng soualjllslIt'L'
U/'f,;lOlIflf

elJlr/lir/,1

The flllld;lI11clllal rihs III till: Slale h:!\'t' ileell those 1Il\'olnll!{ lhl' Kurdisll North and the Shla Solltil, Neither problem or politlCl1 IIllq~r"tllllI W:IS SC("lollsiy addressed by gO\'el·nlllent.~ III thiS pel'lml. The Kurdish question lIl\'ul\'ed a COlllbllli\ljon or ethnIC, sOC1ai and tribal conflicts, The Kurels, ('ompnslllg ~:~ per ceIll o/" Iraq's pOpUlaUlIiI. were spli I hetween urilall tTl Hres ami \'i lIa~l's spread through 1lI01111laIllOUS COllntr\', \'lTV much ullder Ihe COIJlI'O) 01 Jandlord tdbal dlle/s, From thiS lalLer sector callie the kadcrsillp Ihe Kurdish natlonalisl 11l0yenH:m'. headed by i.... 'lllla 1\'[lIsta[;1 Barani, a p(J\\'(Tflil Janelowner, ThiS leaderShIp, lilrealel1ed hv Qasselll 's land rci()rm al lill' start or lhe 19()()s, and demanding llalloIl;lI aULOllOllW ror I he Kurds - wh icll Qasselll refused - lallncilecl ;111 lIprisin!{, Thl' rq~lllle, sllppurted Iw lllL' 11~)(]l COlllllHIIIISl Panv, S()IIK!1l to (Tush the upnslIlg mililarik hilt the war <.'UIIIIIIlied lhrou!{)wlltlhe I ~JI)Os, wnh B~u-l.al1l gallung 1ll;llenal SllPPUr! and Irallllllg ii·om the Shah or [raIl alld [sraeL"(; The other, Illl)re lllodenl, natlonaliSI mOW-lllell!. hased in lhl' lIrball centres of' IraqI KlIrdislall alllong- t.hl' 1I11ddle classes ami intelligCI1l:';)~l, and ullder the k;tdl'rsllIp olTalaballl, allirs\ refllsl'd 10 SlIPPoJ'l tIll' Barzalll n:\'olt. Btll C\'l'IlLllall\' II did so, \\'hik opelling links with the Ba 'ath Pany in till' hope II/" a better c1ealli'llIll Baghdad shoulcllht, 1;lller ()\'t:rthrnw Qasselll,'o, (Thl' Ha';lthtsts did gain power fur a f'ew IlHllllhs ill ) 963, but the Jighllllg dragged on lItllilthey returned to power III 19bH.) The prohlt:nls of thl' nlI~1l comillunities of so uti WI' II Ir;tg at the tllll<.' o/" lhl' 19fJH rl'\'o\uI\(Jll wen: pntll'lpalh' I)}(JSL' of sonal oppresslol)' pm'(T'" and backwardnl'ss, But 1lI additlOll Iher ft.·\t excluded frolll Il alii lila) puhlic life

or

TI IE

Cl'l.F

\\',\1{

..\1"1) \\TSTERN I.II\ER.\I,IS;\1

171

through Ille donllllallCl' o/" Ihe SUIIIIIS I"rolll Ihe Ba~itdad regull\. III 19!)H bUlh Illt'-Ba '01111, Party 'lIlci Ihe 1I11lCh stronger COIIIIllllllist Pany wcre predOlllll1.llllh' Shra III l'IIIIIPOSllll)lL alii I Ihe latter 11) particular ullllillanricd enorllloliS suppurt .\IIlOllg Ilw Shl .. pOj)lIbtHIIl, But 11ll" splil hctWl'l'll till' ICP alld Ihe Ba.nh over Ihe IS~lIl' oL\rah natlOllal unity lIl\'ojn:d IeI' support for lilt' all(l-;\)asserlte Qassl'1II reglllle; "'hile. Ii,,' /Is part, lill: natlonali,,1 Ba'alh souglll Ille o\'enhrow oj' thaI ITglllIl' ;me! partiCIpated 11\ blood~' repression agalllsl lep allell1pl.~ 10 (leli'-lId il againsl Ihe I~Hi:\ Lllup, Whell thl' Ba'ath H'\'IWei.1/ had lost Il11KII of ils Sill" hOISt'. !\kanll'!li/C Ihl' (:OIllIl1IIllI~1 Pan~'­ OHT\\,lwllllUlgh' Ihe m'!I()r polillcal pal'(\' III Iraq aJ'lt"I' 111L' 1~):l:-l renllllllOIl splil. \\'llh till' mon' radied wlllg attempting a Chl' (;lIn,lra-SII'Ic g'lH:rri\la war agalnsl tltl' mililan' gonTllIlll'lI \.~ Ill' Ba~lIdad. n:lIlred III thL' rtHT "allel's
no '(/111/,\11/ 11/ II,,'

I CJ7(J.I: ...·;Itllt·-nllifrlillp: 111111 I~':iiifll/

Khalil is not hlilld I() t he SOCIal transformation achll'\Td b\~ the Ba' ath Party sllln' It.~ seiZlIre or power III 19(iS, I-1l' ack!\I)wlerigt·s thaI Ihl' rl'glllll' clra1lI;tllcalk IIllJderlllsl·d Irarp SOCll't\". leci h\' Ib (hwl' :1g-:III1S1 illill.'r;ICY amI /"ur fret' edllGIIIOn I'llI' all - a revoluw)1I thaI prurillt'l'd. according to Khalil

l'Ol.lTICS IN THE Cl.OIIALlS:\TIOi\: PERIOn

himself. one or the best-educated II1telli!{elllSlaS III till' Arab world. I-Ie als() credits the reg-line with givlI1g women the rig-Ill to careers and participation in public life; thus by the end of the 1970s women formed '46 per cent oLdl teachers. 29 per cent of all doctors. ·Ill per cent or all c1el1l1sts ami 70 per cent of all pharl1lacists',GI Of evcn greatcr Importance. however, was the ract that thiS Ha ,II iHSl reg-line linalh' carnec\ L1lrough the land reform promised bv thc revoillllol1, utterly trr land reform and, above all, encouraged b\' the Shah of Iran (who, IIlCicienlally. oITcred no such nghL~ to his own Kurdish populauon) that he could gam a Ell' beller deal hy wagmg war agall1s1 the Ba'atilist ).!;overnll1cnl. In 19i3. KiSSinger, preOtTUpled by the task or isohll1ng Svria in the peace process. gavt: further substantial assIstance to the Kurds 111 order to bog down the Baghdad regime 111 a costly war. The tactic worked, costing the laner two billion dollars a year un til Saclclam Hussein persuaded the Shah to end tlus aid in 1975. (One week aner the Shah had informcd hUll of this, Barz;t11l offered uncolldittonal surrender and went illto exile 111 the USA wtlCl'e he dicd.) or course, the Ba'ath could havc easily saLlsfied lhe Kurds if it llad ofrered them full sell~detcrmlllation and control or the northern oil fields. But all states 111 the modern world are extrcmely grudging and (:tUUOllS when seCt·sSIOI1 and vital economic interests are at stake. In the SOllth. the Dawah denounced the Ba'athlst government \lot because It was SUIlIll-dominated but l)ec;llIse it was atheistic, because liS leader, Ivlichel Al1aq. was a Chnsllan, and because It was allied with the CommullIsl Paris and lhe USSR.li:! The Dawah rUlllll11alCc! against such isslles as the secular Ba'mhists· tolerance of alcohul consumption, even In the hoi), cities or N,~jaf and Kerbala. The regime hit 1);lCk with savage

TI-II-: GlIJ _I' WAR AND WESTERN

l.IBERALlS~1

li3

repressIOn combllled Wllh ;1 lll'~Jor programme or public spending on the Silla shrliH's ,uiH on socIal clevclopment. The polic\' St:t:Il1S to have had some success ulltil il was seeminglY !hrealelll'(i by the fslallllC rt:\'olutloll III Ir'lll. li:1 Tht: reglIllc's approach to thc diflinllL n:lauonsi1lp between Isiam and seculansm was a good deal more sophlsuGlted in mailers of prlllclplc and )Jolin' than thm of mam' governments (;tnng similar problems: namely, recog-muon of the cullllral celltrality of Islam and or the requirements of rt:liglous pracl1et:. comilllleri wnh a resolute defence or the secular framework III' public life. At it:ast formally. the n:glIlle sough I 10 t:xtend tolerance to the significant Chrisuan mllloriLY.

Clliliml/('(/ Pllrllnjlfl/wi/

1111(/

RI.'jm~~.\1IJ1I

The leadership worked successfully to subordinate the armed forces to the Ba'ath Party itsell~ thereby ending the role of the o/'licer corps as the sovereign state authority. Poliocal deciSIOn-making was cOllcl'ntrawd in the hands or the part\' and its ieaclershlp. Some lla\'c Vlewl'c! the part" as mereh' an emply (;I(ade behlJ1d willch tile poliucs or clan and tribe have prevailed. It is certalllIy the case that clan Iissures are prcsclll with ill the HOI 'ath, as llIdcecl tilcy wcre Wllhlll the Communist Parry; thesc are pal'll\' an expression or lhe currents thai permeate tite organisatlOll. hut testi!'y also to the prcscnce of nl'polISll1 and rtvairy slIch as IS round III am' ruling party. U Itimatd" such ElclOrs must post: a threat to the pany's OWIl Slal)ilil\' and Iq{lumac\'. anrl arc. therefore. a symptom of crisis. The Ba;aLlllsl regime committed nsdf to the prlllClple or popular soverelgnt), and to a conSlIL1I1101lal. represcl\lauve state. but declared Ihat the need ror a state of cmergcnc\' made the IlllroduCllllll or such a dcmonacy Illlpossihll'. Il cOllsequcllth' \,esled supreme alltllont\' 111 a Rt:\'uiullollarv Command Council (Ree) on the basis of a pro\'islOllal cunstillllloll: a body able 10 ruie bv dccree and vcto go\'enllllClll dCClslons. AfLer the civil war wnh the Kmds in 197:1. the government organised eiectiolls anc! cstablished ,I parliamcIII. Bllt lhc emergency insLllllllons remaillccl 111 place. as clicllhe Ret:. (\Ve 1lI1ghlnoic lhal Eb'YI)( has abu been ruled I)\' decrec under a Slate or emergency more or less conlinuollsl\' slllce bel'ore I ~lli7. thougit under Sadal and MIlI)arak IslamiC Shal'lfl law has also been IIllrOdliCed, ulllikc 111 Iraq.) Although the part\' had lhus made ccrtalll of retailllllg Its absollllC POS1l101l or power, it had OIL tile samc time made eHi)r!.>; 10 lIIvol\'c olhcr parlies. For much or the 19iOs. ror example, the COllltlHlIIISl I~an\' was 111 Lhe govcrnmcllt; aL v
li·1

P()l.IT!!:'"

!~'

TilE (;l.oIHl.I .... \TI!)X PERI! >I)

trade Ullions, for dr;I\\'IIIg- people Illto public lifc; allotller has hlTIl tilt' local militias, 'Yet. III thesc realms, 100. the party l~xelTlsccl cOlltrol. sen'IT\\restricLillg- tlll'tr deg-rcl' of dJl~Cll\T political ;IIIWII1JI1W, TIllS slilling- pan,· presellce was espeCially ('\'ielcllt III the politKal police and rcprcsslH' app;lralliS, \I'1l1t'1l tllrc\\' ,I blanket ofsurvcillancc Ul"l'r till' ell 111'1.' pOPliiallOll. Thl' lirs( t;lsk or tlle,e ()r~;IlIiSatloIIS was to crusil thosc heliL'\'t'd lO Ill' \\'lllllll!.\ aClln:l" to overthrow the reglllle, l'"lcthorls 11;I\'c 1Il\'anahh'lwl'1I hrlltal and \'ictims oftcn Illllrclerl'ci. Fill' IIlSlOlnCC, those COlllllllllllSIS wllo COI1t1ll1ll'd LhL' gllerrilla war ill thc SOllth aftcr the Ba'alh GlillC LU po",er could lIot expcrt to lcavc pnson alive, Since IllOSt. org-anlsatlons arc permcated wllh famil\' and cian links, the brutality was onclI directed at rciall\'eS, Thl' secollcl task of the repn:ssl\,c apparatlls was 10 act as a tll.,l of Jllllillcal coercIOn ag-alllst othcl panics or 11I()\'C IIll' IliS, Thll!'i. While seekillg- III C;~I()1e the COll1llHIIlISt Pan\' leaders illto a llllllL'ci front alld parllCipalioll III govcrnlllent, Ihe \'l').;l1llC \\'()uid applv pressure Iw perseC\llIlI~ ,\llel SCHlIt'llIncs cn:n killing Commllnist militants OIl Lhe basl' uj' thc party, The Ie :1'. Icg;lIiserl lw the n:gllne or Saddam H II SSC III , prohahlv sulTerec1 more killings from liS Ilands aJ'ter I ~1l)H Lhan Il had sufrered III Ihe decadl' 19fjH 10 I ~1l)H. With the cxception of the pCJ'lod imlllccliatclv aner 19{),t

n(l 'a/hi.'lI!

/11

tht' J 9S0s: Sar/d(/II/

I-1I1.Ht'/I1

Bv the ble ISliUs, lhl' It. alll hact a J'ol'\llIdahk adlle\'clllcnl of SI;ltl'-huildillg' behind them and hacllargciy stabilised the new InSIJlUlIOllal slrUCIIIIT. ;\s a rcsult of SOCial rcrorms, eg-alitanall poliCIes and a tllOroughgoing Illoderlllslllg rhwc - all helpcd greatly b\' the 1111rl-sl'\'CnUes oil-price increasesthe" Idl strong cnough 10 clfl eicctiolls and establish a pariialllent. We can, Iherci()n:, reasonably aSSlIllIe that tht' party h;ld achieyed a cJeg(,(T or popular support desplle the ;lhsl'lICl' of lh:c part\' (OlllpetJlHlIl. The plcturc. of course, looks vcry dirfl'relll toda\'; alld till' rot sl:l III IOllg hci,m: Ihl' US-led allack oj'.Ianuarv 19~)1. What \\'l'lll W('(IlIg? Tht' shorr answer IS the Iraq-Iran war, started by thl' HOI ;Hhlst governmellt. As \l'dl ;,." IllfliCll1lg a dreadfUl loll III human sufTcrlllg Oil thc iraqi pcopil'. II ('('opened the C1dl war Will! thc '"urdish lIallfJll;lIis[~ and g-elleraled a IIlf1l'C brutal swil' or politics - Olle that resultl'(I. for examplc, III lhc Iraqi arlll\"s gassing or clvilialls III Halal~p ami thc slaughter of thousallds lIHIH' Kurds anl'r the War was over, At thc elld of hostililles lhl' Iraqi stale was hecllll1g of llle deep fisslIl'es III the SI;Hl' whICh Jill' Ba;ath had spent the I 971ls seekillg to close, It is arguable thai the tng-gel' for tillS disast(,()lIs chain of cYl'nls 1I';lS the

replaccmcnt In I \179 or Ba kr 1)\' Saddam l-IUSSl~11I as pn~slclclll. This movc was 'certaihl~' reslstcd wlIllill the Ba;athist 1t';ldcrshlp, though nothing is known aboul lhl' disag-rcCn1l:lll. alld thl'rcfore whcther or 1101 thc appoint~ JIIl'lll represellted a policy turn (perhaps doubtful, slllce cxperts agrce that Sadd'lln I-1Il,"Sl'lll had bCl'1I the dl'lnllg' Jill'n' or the rq!;nlll' IJlI'''\I~hout the i!17(b), On(' IIcg';1I I1'(' d'kct (II' tillS cliallg'l' III leadership was lhc rapid growth OLI pl'rsorlalitv cull. Such culls 1I1l'\'Ilahh' aILcr lhl' dcus\un-making' Illechanisms a l'l:gllllC, replaclIlg' collectlvc part\' hodies wnh thc alllllOrll~' of one mall, thl'rcl)\' conccntratlllg power III absolute fashion, As a cOllseq lIence. the rcg-llne' s p()lic~'-lllak illg clpaclLles lila\, ha\'e bCl'1l wl'akl'lIcd, altlHlngh S;I(ldalll l-illSSl'lIl\ ,'cn S\lr\'I\"tl slIl_mests a n:sourcl'fllhll's~ .llId l'lllll Ill. 11 HI that IS l'\'ldc.:lIL'L' III lhe nllilrar\', ~ol\\,llhSLIlldillg IIIlS clc\'clOPIlIl'lll, till' dCClSiOIl til wage war agalllst IrOlI1 "',IS Ilol IIll'I'{'1\- Ihl' whun of thc prcslclclll. hUI appears to have had hUlh pan\' and popular ~UppOl'l.l)'1 III pOllll or i:lCl. thc II't'akllcsscs ill Ba'athism tilal led dirccLh' 10 thc allack Oil Iran wcre ilS nationalist J(ll'oiugy and peLl\,-bollrgeOis roots, I'al"lors pl'l.:sellt. I'rolll the SL,lrt or lhe rcg-lInc, DUring the I ~)7(Js thc\' did not Cripple IlS progrcssivc, lllodet'lllSlIlg prolCCl. tllOlIgh ll;)tlllllalisllllI'ill ccrl.lInl\, ha\'c helped to pn:\'Cllt a clcmOlTOlllC sClIlcllll'nt wllh lhc Kllrds, I-Iowcn' .., lhl' chang-I' III c~tcrllaj l'll\'lrOtlll1l'lllllroughl ahulII Il\' llll' hlalllIc rl'\'oIUUOII foclised nl'l\' prcssures lIpllll tile Ha'athlst pn~lt'cl :nns lIlost \'ull1Crahk pllllll. The Ba'lth Party 111 Iraq, like lhat III S\'l'la, had llS rOllls nCllhcl' III thc lIrhall capltalisl classes nor III IlIl' im\usLrlai worKing c1ass_ bllt III lilt' large llllddic class 01' illtellecluals. slalc Clllp!O\'Cl'S, arlis,lIls and sm;!llnH.:rchallts - VCry lI11]Jll rta 11 I str.lla III lhc Fertilc Crl'scellt. On till' \dwk Ihl'sC g-roups did 110l stalld III all alltagollistic relall(lIlShtp to the 1I'1lrklllg' class, For thiS n:a;;oll Balalll IS rlllll'.lllSli!icclln Illcllldillg- lill' Ba';llh Pan,' ;llong "'IIi! the (:OIlIlIlIlIllSI Part\' .\lllOIlg- the !'l'\'Olllllllllan rlll'Cl'S Ill' lllodCl'l1 Iraq, The split betwccll lilese IWu groups ullrler Qassl'lll r1l:nn'd, as we S:II\" ('1'I1111 11ll'lr lack lI('comlllon g-rO\lllrilll1 the 1I
or

or

I'OI.lTICS IN TI-IE taDBAI.ISATION PERIOD

also helped to sustain a paLlenl of state-dependent iJldusu·tal developmeill. The Iraqi state was not portrayed as a means of emancipawll1 for the country's working- populauon. but as the resource and authority best able t.o construct a strong [raq. capable ofleading- the Arab nation. There IS nothll1gunllsua[. or course, about such statIst politiCS: most of wday's IInpenalist powers went through .lust sllch a phase. Neyerthciess, 111 a regu'J\1 [ike the Gulf. where the world's strongest supeq)ower has Important II1terests, thiS pr~jeCl was fraught wHh great nsks.

RI'Sj){)IISI' (II 1111' 1/"{1I11(/1I HI'lIO/I/(/lJ1/

In [rail. the Shah's drive to d0ll1111ate the Gulf had produced a mi[itan· build-up and growlI1g hostility to Iraq. ThiS had caused the Ba-ath to devciop Its own military strength in the [970s, funded by Its oil revenues. The subsequent I~lll of the Shah 111 the IslamiC revolution transformed the po[itical equation in the regIOn and presented the Ba'athistleadcrsll1p With an irresistible temptation. The centre of Lhat equation had been the protection of Amen can interests in Saudi A.rabta and the Gu[f. [raq. s[nH out of this secunty structure, had been on the defensive regionally and impelled to concentrate upon ItS domestic programmes. The Iranian revoiullon did not.lust remove America's regional policeman; It created a state claiming leadership of the Islamic worid and therefore posed a mortal threat to the Saudi order. Thus the opportunity arose li)l· the Iraqi regllne to become the military linchpm of Amenca's new security system in the Gu[f, a mit' whIch the SOCIal weakness of Saudi Arabia prevented It li·om pla)1I1lg. There also eXisted. of course, a powerful domesuc lI1cenUve for the Ba'athisls to intervene militari[y in tile regIOn: for clearly the Islamic revolution posed a direct tiueat because of the re[iglolls appeal of Shia Iran to the people of southern Iraq. A military victory wou[d serve declslveiy to hillel Iraqi Shias into a coml11on political identity WIth the rest of Iraq. The Ba'athist leaclersillp. politically sophisticated and keen to expiOl( lhlS regional development, could also spot a further set of incentives. By becomIllg the sword defending the mterests of the West in the GulI~ it would escape the panah status given It during the I 970s, and thereby gam access LO the metropolitan centres or\Nestern capitalism: loans, new technologies. IIIvestment expertise, training and so forth. as well as entry into the world oj" legitimate intenlatlOnal diplomacy - sOl11ethlllg soieiy III the gift of (he Atlantic states. Only Ol~e question remained: would it work? The Americans assured Baghdad that It would: that the Iral1lan armed forces were III chaos anri a qUick war would presel1l few nsks. But this turned nut 10 be nonsense. Eight years of atroCIOus suffenng were the resuIL. By 1982 Saddam Husse111 had

THE (;VU: \\'..\i{ .. \1\:1) WESTERN \.II1ER,\L1SlIl

177

realised that IllS plan for a qlllck VICLOr\, had het'll a dclllSlIlI1 and hc sought to' exiriGlle hiS rq~lIllc frolll thc wal' throug-h a ncgotiated scUlemClll. However. the Iraman govcrnJllent made the rellloval of Sad dam Hussein the preconditlllJ1 for peace, whIch pro\'okcd 111 turll ;1Il cver IlHlfC brlltallraqi llIilitary respollsc ;Igainst the l1lorc P()\\TfJ'lIl state, JIlcluding the lISl: or pOlson gas Oil Ii'ollt-linc Iralliall troops. By till' tlllle a nq~()llated peace was ill place. III 19H1'l, It was ablllHlalltlv clear that tilt' dCClslOn to attack Iran had l1een a gravc political ami military IlIlSGliclllatioll. A million people had died. oil wealth had been sqll;\J1dered. alld the go\'errlmelH harl lost cOlltrol or Kurdis[an. ECOIIOlIllC rL'C()\'L'I'\' had the recollstruclIon or a d;lIl1agl~d and o\'{:rhllrdencrl st;ill' alld sIlCl;1I fabnr - not lO Illl'lltlOll the rep;lIr oJ'siJatthe Ba" Iran as liS slIrrog-atc power Jll the rl')~I()1l ;1II(1 thus cOllicl Illlt risk thl' break-up or Iraq.

or

or

I began thiS Sectam with a pllJemlCalcng;lg-ellll'11l \\'llh Samlr ,II-Khalil. (T1lIClsmg 111 paruclliar the rcdlll'lI\'t: lIallln: or IllS conceptual frallll'work and Ihe limllalions lhls Imposes 011 IllS analysis oflllodern Iraq alld the Ba'athisl

178

I'Ol.lTICS IN TI-IE Gl.()l\:\I.ISATION PERIOIl

reg-lIlIC - limJlatlons at Llle hean of thc liberal tradition withll1 whICh hc works. I hopc subscqtlcnLiv III havc showll thatlraqs rcccllt hlstor\" iwarlllg directly on tile events that leel to dcfeat III two immcnsely damaging wars tilat radically changcd the !--{eopolitical map of the Gulf regIOn. was an II1lilllleiy more complex narrative than Khalil allows. Notwithstanding this cnticlsm, Re/illblir (!/I'i'arrepresents an honest and important rcflectlon on Iraqi politics, a reflection unrestricted by narrow stratt'/--\"Ic concerns anci possessll1g greater I11slgl11than tile aLlcnule rnJlll that or thc Marxist Left: Ilamcly. radicai ianci rcform, nallonalisatlon of industry. thc cncouragcmcnt of cooperallve rarmlIlg, and statc-lcd cconomlc dcvelopment. The Baghdad regime, what is more, stood for a secular public lifc WHhol1t takil1~ " negative stance 011 Islam; It evcn [IJrmally recog11lsed thc national idenLllY of the Kurds. NotWithstanding this progressiVism, it has also bcell an extn:meiy repressive regimc, USIl1!--{ polillcai police as HS malll Illstnllllelll of control. It [ina]]), Imposcd on lis pcople a mis~lIidcd effort to bccomc the nnpenalist guardian in the GulC berore leading thcm llllO the Kuwait catastrophe. The lcadel's or the h'aqi Commu1l1st Pany havc responded to this experience by calling the Ba -alhist regime 'fascist;. This. however. docs linie but cxpialll the problems away. For Ba'athis111 was not a coulltcrl'e\'OlutlOn agamst (it:mocrac), and the labour mm'cment; It was an altcrnallve to military rule, and in its SOCIOeconomic poliCIes a krt-orll:'ntl'd regllllc with which the oniClal CommUlllst Party coopcratcd through 1l1ost of the 1970s. Khalil, fiJI' his pan, has responded ill anothcr way: he sccs the Ba"-;lIh as the product of a ddiciclll and degradccl Arab poliucal culturc, and ronsl'quentiy as a totalitanan movement analogous to Stalinism. His solution has been to rqcct that model in I~l\'our of thc the()rellCai cuiture of AngioAmerican Cold \Var liberalism, and to denounce all goal-oncnted activist regll11eS seeking to transform social conditions. His SoiUllOll m short IS: liberal-democratic constitutionalism now, whatcvcI' the son 011 correlates ane! consequenccs. But this stance IS Hot acceptable to the Left, elllailin~ as it does a caplll1iatlO1I befl)n: social il~justice and thc e\'asioll or political chOICe and strategy. It drives Khalil, ultimatdy, to the belief that AllIenc;tn military strength could constitute a liberai rims ,'X III(/d,ill(/ - a wild illusioll. The Ba;ath came to powcr as a lim' organised party, by way ofa military coup. It' sought to sink popular roots through gn'atly expanding th~ pany, and was acutely aware or the need to cxtend the base or its political support, reaching Ol1L to thc rep for thIS purposc. Bm when the cXll'l1rled

TIlE CL'I.F \\'AR

.-\:-.:n \\'FSTF,Rx

I.IBER'\I.IS~I

179

state oj' clllcrgenc\' ended 1\l the nlld I ~)7()s, the Ba' at h leadership, awash \\;i'ih Ilugi: oil pro/its and aware oj' its Wide popular support, turncd incrcasingl\' towards a dc raclO one-part\' C\iClawrshlp, eschewing Lhe need /"01' pluralist IllslituLioll-building, ThIS was a ralai Uti'll, vet onc easy to accom~ plish, not onl\' because tIll' usc or polin' apparatllses to carve lip pulitical SP;ICl' was l'Ilortlessl" sllllple, but also because there was no other political model availahle, This IS where Khalil's rerl'rcnn' to Stalinism is \'ery much to the pOint. The part\'leadership, Including Aflaq and Saddam Hussein, werL' nol simpl\' corrupt ad\'cnUtrers, Indecd, the\' were passionately COIHmilled to Lhe Ba'athist calise; the\' also sought \0 O\'ercome Lhc failings 01 the carlicr HOI' atll and or Nasser, and werc looklllg for models, not leasL ill Eastern Europe and III Cuba, 1'01' a wa\, rorward, The\' round nothing Lhere to urge thclII agalllst the coursc of onc-pany dicLatorshlp, II' thdr middleclass nationalism mack thc rcglOnal IInpcJ'lalist temptaUol1 IrreslsLible, the Stalinist cxperience made thdr domcstic coursc equallv so, Their Cl'lc tique or Nasserism did not extend bevolld LhL' nCL'd 1'01' a powerful hegemonic part\', The lesson rrOIl! Easlern Europe was thaL a one-party dictatorship was assisLed, 111 ils rormaLin' phase, Il\' the deplo\'lIlL'II! 0/ poliucal police, The Left's answer to Ihls SLalilllst expenencl" does not COIlSISL of pilling sOCieLY agall1sL tile staLe: iL invol\'es building popular, pluralistIC statc II1SlltuUons Wllh so\'cn~lgn powL'rs over Lhe execlItive, The sO\'lTelgl!L\' or such popular InsLitutions must lie prcClscl\' III their pluralism and be underwritLen Iwa ban on political vwlenel' as a meLhod oj' resoi\'lng disputes amongst elected parties, This dues nO! preclude thl' tl'lIlporan' concelllratiol1 01 great powers \\'ILh11l lhe execllli\'L', including thl' nght \0 rull~ Iw decree; bUL J\ does l~ll\ail thc UlllmaLL' suhordinallon or all parties and agenCIes to Lhl' will or the e1l'ctL'd assemblv, The political cullllre or twelllieth-cl'nlllJ'\' Iraq has bel'1l shaped more by Bntish-lInpenalist SOCIal cngll1eerlllg than b)' Lhl' people or that country, excluded 1'(11' deCides rrom till: polillcal system. The Ba aLhlst P("(~tect has its den\,atton more III the poliLical Lraditions or Lhl' North, hoth 111 II.~ natIOnalist and in II.~ SOCialist values, and has nOLhll1g in comlllOIl with the polillcal culture of such Arab neighbours as Saudi Arabia or the Enuratc of thc alSabahs, And tlS crllIcal weaknesses owe Ell' I1lt1re to the cleliclenclL's 0/ Stalillism alld to the external tcmptatHlIls of thc Anll:rlcan-collsLrllcted Illcentlve s\'stel1l In the Gull' than to the snpposl'dlY closed discursl\'e 1lI11\'l'rse or some putative oq~aJllc 'Arab culture This laLter IS, III ract, nothing Illore tilan another 1lI\'1l11Cai westcn) nmstrucLIIll1 IIsl'rul ror explaining away Lhc disastrolls, rlcstrllCII\'C consequences of..\nglo-AllIcl'ican militan' IIlL('I'\'cnttoll 111 the Arab world - tocla\', as well as yesterday and II In II liTO\\',

Il-lO

I'O\.lTIC-; 1:\

Tin: ';1.01\:\I.IS:\TIO~ l'ERIOIl ( :/JllrllI.\lfll/

Desen Stonll was justified berore a liberal-ciemo(Ta!Jc puhlic ill the West the l.m~\\arlL), of war was the price not ofjllslIce but. rather, of (\cl"t:nding oppresswe rC)~'l1les and therehy htllillin)!; lI11perlal design 111 the Gulf and lhe wleIer Arab world. ThiS .lll(lgl'Il1CIH calls in question Ihe problem-soh'lIlg framework Will! whICh \\'l' ))l'gan. To estahlish the 1Il\";tSIO)) o/" KuwalL as till' central prollielll. and Lhl'll to slIbsume the Briush and Amencan stalCs ullcler Ille category o\" possible IIlSLrlll1lelllS O/"jusLlce, is Lo presuJlle lhat the SOCIal order disrupted by tile IIlvasiol1 embodied a millllllal pnnclpie orjusLice. Yt·t 1111 such order did eXist prior to the II1\'aSlOn; II1SLeacl Lhere was opprCSSlill1 and incquity, III whiCh the West - and, above all, the USA - had a pnmary Slake. It is therefore behm'cn UpOIl all\' liberal polillcs lhal takes lis \'ailies seriousl\' to l(icllIii\·the we.,tern powers as Ilw cellLral ohslacle III the p"rslIlI or popular I11LereSlS ;lIic! dcmocratlc goals III the reglull. ThiS in Lurn r;lIses rUllciamen tal qllesLJolls about the lI11erllaLlollal order o\'er whIch Ihe western powers preSide. Throl1~ho\lI thIS ch;lpler I have lI\

IXl sicte of wh;t[ I Ila\'(~ tCi"Illl:(1 .~[alt"s· rrgills' theor\,. aspect oj' this theon' preselllS us with a Wtlr/cl or inde)lendellt nation-states that an' oniy related exterllallv. Such Juridical sovcreignty precludes lhl' possibilit\" tllal SOIlll" Slales Illight pCllelratc the IIltcrnal CU,1Il0IllH,' ,lIld poliucalliJ'e oj' ot\wrs. ThiS possihilil\', or what coule! be called 'statl's' rrgills IlIIperialislll·. wlluld Sl'elll a cOlltradic\.I1I1l III lerms wHhin till' l'rallll'\\'c 'rk or the tllcor\'. Ncverthelcss, Ii,., IlIlIIdrcds or millicHIS or people III the South tillS SCL'lIanO IS all 1111' real: the legai son~rl'lgllt\" or their slatcs sllS t'asilv wllh a SIlWll10Il III Which lIIost eUlll0ll11C, sOCIal. and illdl'l'd polilical, relal10nshlps III t.hclr daily livt"s arc go\'crnedl)\" cClltres Dr power - "prl\'atc' and· pUlllie - iocated 111 thl' North.'i', Tbc Iraqi rcvolutlon or 19!iH was Impelled bv Ihc aspiration lU throw off the voke or sOCIal oppresslllll COllstI"lICI('(1 by thL' Bnllsh and their subalt.L'rn coliaburalClI S l'arl\' III the IWl'nlll,."lh U'llttll'V. And It Inlto ttle pn~ll'ct of lhl~ HOI alll Pan" LO lr
Th(~·coglfitlvL'

IlllrlllaUn~

18~

POl.rm:s 1:-': THE CI.OI\,\l.lS,\TI()N PERIOIJ

NO/I'" ill /)r/i'IIr., ,,/liI,' .\',11,,,,,,,1/,,,,,,,,,, \Kllllp!'. I~I:.:'!). p, ~'I~, 1Il"laplwrs aI'''. or COllrsl' "lJl11lll(J1l11' 11,,'<1 III polillral discollrsl', \\,h"ll a 1-:°\'<'1'11lIIelll perrorllls all IlIJ"SlIn" I,'{' r"'''llIl'llll\' call il a 'TIIII<': h\ll Ihis IS 11,11 111",11.1 lill'rall\': In' know w,' art' \ISIlI~ a Illelaphor. ThllS, III sal' Iha\ Ihe \\'"sl',s polic)' 011 Third \\'"rlel dl'hl IS 'cnmJJlal" hecallse 1\ leads III lIlilliolls Ill' dealhs III Ihl' SOllih 1I11"II'S II IS grossl\' 111l1"SI. (>olilicall)' alld 1II0I~.II\' wroll~, We do 11111 \ISl' IIll' w"nlli,,'rall\' alJ(l "nler Ihe arn'" "11<1 "X,'ClIllIIlI or 10.11' ClIll{less\ls ,md Ih,' ollll'r "fJil'lals Ill' Ih,' IltlF ,\lid Wmld Balik. :1, Til,' prr~l"cll{)1I "I' S;\(ldam I-IlIsS"11I as a JIIolISlrOllS Cnllllllal ('o\lld al". rl's\llt III all assLJlllpLJon Ihal Ihe US mililar\' lI'as an\lalll' I""ug lIsl'd 1111 IlL'halr "I' Ihl' Ira(l' I'l'opl" agalJlsl liS gO\'l'J'Jlllle1l1, Th., 1111111111 Ihat heGllISl' III a 11\' IraqIS "PP"'" Ih"lr go\','rnIl1l'11I Ihel' lI'ill therd'JI'!: cond()JIl' Ihe killillg ,,1'11111,11011 "I' Ih,'lr Idlo\\, rlll\lIlJ'\"\I,'n a\ld Ihl' cI.'slrllCIJOIl "I' IlwH' SOCIal IlIli'aslrllCllln: lie, al Ihe SlIlInT III Ih., 1101\011 Ihal.\'''"'''' d"I1\,,,I([ ..
I. Ha,,,

\loq~l'lIIh'\\I,

~, Lq~;.1

SL'~IIIUIJ,; IUl1\,crsillbt ";L"Il4.'J';Jlit~·. ". III I;KI, a tlJ4.'fJl'Y pn'lllts"'ivd Upull lht.: JUS(U,:c: 0(' t.:XIS111Ig'

IIllernallolial rdallolls alld 10 Il,' apl'li.,d olllt' \\'ltlllll all ,'XISIII'g sIal,', '\S II ... ,,,. lIal'l'\' pnlllls 1II1l: 'RaIds d,"'s han: a hn!.'r di,sCIISSll1ll "I' illlcrllalll",,01 r .. lallOlls, ",hidl he (011eell'es 1\1 Ihe sp.ril "I' a pilI''' l!llh ('L'lllllr), lih"rallik .. (;I;U\slollt:, .1111 "\'ell 1I\;,kilig l'<1I1"'''S'O\lS I" :,!Oth cCIIIIII'\' ideas Ihe ,'Xlelll or cllciJillg II» I\'.,h \\'oodro", Wil"'II, II, lIarl'l' , '/1/1.' l,i/1I'1'II1 '/1m,,), "jju,,/u,' (Oxfilnl UlIIl'el'sil), 1'1'1;", I~Ii:\), 1', I:\(), Thlls Ra",l, lIIa",'s nil" eeSSIOIlS 10 stales' rlghls Iheory "lid "I'ell 1lI Ih .. le~alisl JlIl'lap"o", 1\Tllin~: 'TIll' hasl<' pnllclple "I' Ihe la\\" or nalJollS IS" 1>I'11Il'll'le of "qllalil\'. III(kp"llIle"l pt:o»\t'S orgalllsl'd a" Slall'S ha"e cenalJl 1'1I11r1allll:nlal "qllal I'Ighls, This prJ1Il:lph' .s allalllglllls 11ll' ['qlla[ nghls or (lliZellS III a conslllllllOlla\ rl"~IIJIl'" RawLs, ..I '/'''''''1'.'' "(./II"lm' (Oxrord lJlIJ\','rslII' Press, I ~)i~). p, :Iiil.

,u

'0

IH:~

Til E (;( 'l.F \\'.-\R AND \\"I':STERN l.IIIER:\I.IS\I

II, S,'" IhL' ,'IIIIII",ll 11.'1",,./ 'Ir:lqiKII\\,:l1I , D"("'11Ih •.'1' I!I!IO, II "'a' I1I1jlo"ihk 10 ""rif\' riH' -II":\(II ~(}n.'nlll1t·IH s('aled oil KuwaJl ("1'11111 \\'t.·~tL'rl' .l0llrllalists un du.' gn"",,I, of 1I1ililal'l' "'ClInll' 111 Ih,' 1;1(,l' of all 1111111111"111 alli,,,1 allacl... Thlls .-\lIIl1esll' relied II(lOll 1,'slllllOll\' I'rolll (ll'opl" \l'ho had Id'i Kll\\'all. Thi,s I"d 10 IlIan:llr:I!"Il:S, IHlIahl)' Ihl' alh'g:lIllln Ihal Ihl" IraqiS had dl'lilll'r:lIl'1l' kilk" hllndreds of hahi," hI' 1'['1110\'1111,: IhL'11' Incllh:lI11I", TillS Sl II 1'\', n'p,'alt'llI\' IIst'd hI' I'n',,,lt'lll Blish III .ilist il'" lI'al' (l1'l'pal"lIinIlS, Illl'lIl'" 11111 to Ill' 1:lls,': 11 I,'a,- sIlI'Jlli,'d hI' an a).';l'l1 I of Ihl" al-Sahah I'\'glllll', Ih .. pl'l'l'iOt" ~tl('h f~g'IIJ'l"s:

fukr ... oj' KII\\,;1I1. J~. Ira'i ," h'g;aJ d;lIln 10 I,II\\';UI d,:nn'd front IIH' 1t'ITIIIWy'.I\ nlll"gralu,.1 "Htl Iht, pl"onJin." 1I1'1I:"l'a IlIlIh'l' th .. (lillllllall EII'I"I'<', Thl' l 1110111:111, 11"1',,1' 1'l','ogll"L'ci ilt'll"h proWCllllll' of 1,,",',llt aJl(I'll'lIllt'1' did Ih,' 11':"1' 1I101l:IIThl' St,t "I' hI' Ihl' Bt'llish aher iI.l' di'IIl"1I1ilalll""1 "I' thl' bllJlIJ'l', (Till' IIl'lIish, IlInd"lllall)" Ihl'l:al""L'rlll, lake Ih,' \\'ho'" of 11:lSra prlll'lIln' 0111 of Iraq lilli"" Ihe Irall' gO\'l'rllllll'lll ap(lnll'('d Ihe In'all' "Ilsllnllg ""Ii'['ll",' Ilrllish ('olllrlli 01',',. Iraq, as II:llll1a 1I:lIalll ('xJllalllS III Th,' Olt! S",.wl CI'/I.,,'., 1111111111' /{17,,,III/;O/lllf\' ,\/0;,,'1111'11/,' oIlm,!: .-1 S/I"I,' !r,1I1.1 Old 1.'111./ ... 1111111 (.'01/1111<'1"1'/111 CII/I\/" till/I ill elll""I1/11I\I', /I"',,lhili.1 1/1/11 Fm' 0fJi"'" (1'1'11\1'''1011 UIII\"-'-"l" I'ress, 1\17H), 1', IH\I, Th" Urtlish "Iso Ihn';tI"II"d 10 I"ke 111ll';'II11li,h ;tn'a ;111<1 :'"(,,,"1 11111 Ill' Irill( lilli"" Killg F:lls:l1 ).:1':11111'11 111'11:1111 1'<,"1,.01 or till' "il Ihl"I~·.1 In 1~I:iS lht' (\.11\\";ulI l.q.~I..,bll\"t: (:olllU."illlnanlIlHllL~h· apIH"\'l'd~, n'(llIl'~l it,)' Kll\\";tIl'S

or

n.·lIlte~r~IlIUIi

"r

\nth Iraq:

III

,Iu'

j"UIlOWlIlg-

year Ilu' Bnli-.h

slIppn'ssl'd ;)11

;u"uu·d

IIpnsin~

which

had thi, as tI, "hj"':!I1"'_ I::, S"t: V, (-(eld, S, :'II"1')!;""h,,ssl'r :1I1l1 Thlllllas ~al,:l'I, "(Is., I'hil"w/"II', Jloralily tI"d JIII,T'III(/lII/I/! :lfpun (Oxl'lIrd lill,,','rSlII' I'r,'ss, 1\/7-1), This n.II"('\lolI, ""ld,,"111' rI"S1~IIl'd 10 pn'wIII lilt, "lIlhonlall\'" li),"I';1I ,'It'll' 1111 la'\' ISSII",', as 1I11"1'('I"'II'd hI' Ih,' I'dill.r, Ill' I'hilo.\ll/,hy 111111 I',,"'i,. .-Ijffl/'-,I, IIICIIlCI.-_ ;)11 arllch- 1111 litiS I"pic: 'Th,' 1'1'111('11'1,' ,d' Nallllllal Sl'lfIkll'1"IIIIIt:1I10Il' h\' S, Fn'lIl'h :11111 A, (;l1ll11all. I-I. Thl' un'n\I'IH'lllllll~~I~' dlJllllll:ull fOf1l1 01 lIillloll;1I n)Il"('III1I~"l'''' 111 lilt" :\rah \\'or1d IIlrllll~hll\l1 lit" l\\'I'IIII1'lli (".'111111"1' IIa,' 1""'11 Ilial "I' ('all-.-\,.a(, lIal11 IlIalislII. Til" "XISI"III"<' "I' all .\rab lIatinn \\'~IS a Iwli(,:f ..,han'd h)' a spectrUl1I ul oplluon sln'ldllll~ hU11i Killg F.II Sil I of Iraq 10 III" COI\IIlIlIIlISI IlIll'llI:lIlOlIal litroughlllll III" I!I~Us allli II IIlel"d .. d IIIl' :\rahislS III lh .. (Intish Foret~n omn', Ilo\\'I'\"l'r, lh,' I\mish c"nn'l'Il It,,' oil and Itll ~"Il(l1Ili1i('a( st:nmll' (lit" 1'0111" to Illelia) h-d 11":111 III all al1llll'I IIIIH(It" (,,,Iic), III IIIl' (;,,1(" 1'1'1,:11111, lIall",11' ,'slal>lisllilll-( or l'oSl .. nllg stal .. , 1"",'eI 1I(l01l Irihal-d"'I;""C lelellllli,'s, KlI\\'ali III1e1el' lit .. al-Sahahs IS a ":"" lit POIII\. 1;>, !'n'eI l-Iallid:II', :ll'II"i" Il'i/l","1 SIIII{/IJ.\ (("'lg'"I1, 1~17-1). pp, ,1:\ I, ,1:\,1. J II.

TII;:-. Ir;ult.'·ofJ" \rlluld

lJol ~JllIplr

he

hl'I\\"t.TII su4"UJl'("ofUJllllI"

nght:-. ;u)(1 CI\"jl-puliuLd

I'lghl>, hili lilli' hl'III"'1'1I tI", "I\'il-polili('al nglll' "I' II", tIl;~)"rily "I' 1i.1I\\,:1I1 , "'III"eI )1l1('1I1a11011 ami 11\1' 1II1I10nll'_ [,ilt .. rali'1II, p:trllclliarh' 111 11t,,-'I' ("O\'lIlS ho,lilt- I" Iltl' 1'lIl1n: llIll"'" Ill' 1'"11 .. 1'111',, 1I:tllllllal lI'ill, "'''IIIe1 slln'ly "'(,Igh lit" nl'il-('Illilll'al ngltls "flit .. II II 11-1\ II lI'a II I ,,,III .. d (l11(llllallllll Ill' KII\\".1I1 1',,1'\' It "a\'i I\', II t, l"l,' .. e'lIlIl-( 10 I\llll' 111:11 Ih,' II!:II"I' "'ori; "I' lilll'r:d Ih"lIl'I' Ill' tI", lasl II\'Il Ikc:tlks, .I1lhIl Ra\\'ls s :1 'fh,.,./"r OIJ"I/I(I', sllllpll' elo,'s Iwl add,."" lit" ISSII" of 1\111\' II) ("'fille a clI'il-I'"lil1('al ,'0,,11111111 ill", :\s 111"\;111 lIaITI' oltwrl'.-" 'TI,,' odd Illillg ahout R;\\\'1s ~ 1n'tllIlIl'llt or 111l' lJ'It:!'>IIOIl huw a p~IIII1·III.lr ."OIIlJUlllllty IS In Ill' dC'filll'cI rill' ,hI,: plIrpu."Il'S oJ"~, ,heor!' IJf.JIlSllft· l!'i Ih,ll Itt' dut·" lIul di~ru!'o~ It . . . Raw I." , , , 111:1\' b .. Ii.,1'<' 11t'1I It" (';111 d"dgl' Ih,' qll"S!"'" IIII\\' Ih.' 1'<'"11111'11111' " III I,.. ddill .. d, Bill 11 !'Ot.'l"IlI!-o 10 111t..'

that (Iu~ IS

;til

arhilrar\' l"IJ\'l~ \\'hit'li (';1111101 he rlt·fL·odl·(1 WIlIUJI Ihl' ll1t.~(Jn""

11:11"1'\', PI" I ~H-~\I, I I. (.!IIIII",II)\' Ralph St:I1""11 Iliall, 'Iraq :\ltcl 1'''\\,,\11. :\ 1·lisllll'l' SIlI'P"',wd', II 11 II ","!!;ra pit , ;\;"\\' York, Oelllh,'\' 1\1\10, IH, '1'1", :\1I,,'nC:11I r,-:),'cllI>\I 1111,,,11'.. <1 a rlassi(' l'eplan'lIll'lIl ll[ (J"lili";11 )lrtlll"lpl,' \\,1111 1t:).::t1 lIu'I~,phlJr h~' 11lSlS1111g: Oil

Ih,·

Hlt·;\

Ihat two sl~p;lrall' cases' Were

11l\'(lln,d,

1\1,.1- S, \Iill, ',\ 1'''11' "'IIHI, llll Nlll\-II1IeJ'\",·"III'''·,J S_ ~Iill. /);'1."..-/,"/111/, 11,111 /)i.II'llJIH," "/II. III (\'t'w York I H7:11. I'P, ~:\H-Ii:\. ~IJ. TIll' ~lIIIH:onSl"t(lIl'lIf1ali!'ol ar~lIlllClll -Ih~ll '"0\1 stulllldjlldgc,· :1I1 :lC:11I11I ",,,111111( ft:gard L(J I " n''''''I('1<'I\I','S - has hl'l'lI lal').';"'" clisl'J'l'dil,'d .1I11/1l1g Iihl'l'al,'lhi[':t1 phil .. " II'I ":I'S C'llllc"nll'd \\'1I1t (lllhlit' poliC\', S,'" Rlll,,'n F.. (:Illlclill, j'hi/III"f,hr 1I111! 1'IIh1i,. /'"Ii'1', (l 'IItI','r,"\' Ilr Chicago 1'1'1"', I~IH:\), R:tll'ls clispl:tI,~ ;11. 11I1.-II"r,,,-II'nslll' IITllal1011 111 cli'"\1"III~ :1I111-COll""I(IIl'III1:t1islII 111 .-1 Till'lll"r ,,/}II.\I,(,',

I'Ol.lTICS IN T/-IE CI.( lIt\l.lS,\TION PERIOD ~1. See IIIl' arlld,' hI' R"hcn BI"rl; III 11ll' Im/,jl,·'I1/,."I. ~I \I.II.,-h I~J~Il.)1. 10; alld Iht' arll' des hI' Rc ,herl Fisk aJl!I [{"h"r! Block III Ih,' ""I,·/,,·IIt/I'/II. ~i :\pril I !J!J I. 1" I. S,·,· also \licha,·1 SimlllCllb 11,111,' (;""I'dill". I!J Aprill~)~I\. p. II. ~~. Set· II,,· ()h.I,·/'l"·': ~H .-\pril I!J~JI. ~:I. Th .. )\ulI'a'll gm·I.TllfllL·1I1 has SUbSl''1"''IIII)' dL'clarl'd a n·ducllull 'II Ihl' 1IIIIIIhl.·r "I ,\rahs (lIIalllll' I'al('slllllalls) II \\'ill expl'1. I'a,,"sllllialls ha\'(' IimllL'd a largl' propnr!ltll' or IIIl' lIlaIlav;enal al\(I professulIlalllllddlt' clasS(" III )\u\\'all. III II,,· pllhlic as 1\"l·1I as III<' pI"I\'aIL' s,·,·· lor. aIlclll",,' CIIIIIIII "asil~' hI' rt'pla('ed. ~.1. ZhiglllL'\\' IIrz,·l.Il1ski. ',\fl"r Ihl' (:arll'r [)lInrlllc': (;"lIsll'alq!;1C Slak," allel Tllr!mklll Clossen .... In 11ll' t;lIW. I J. R. Silldl');,r alld.J. E. l'"ll·r.",II ... ds .• C""\1·'''''''''/.' III Ih,' (;IIIt: :lmh. 1I''if1l1l1ll1 lIlId (;IIIIIfl/ 11II,·I",·.,/., (Rolillcrlg'·. I!)HH). pp. ~, :1. ~:,. This IS not I" dell}' IIll' 11Ilpo .. laIlct.' of slIch 1l1ll'llIa11lJlIS for dOllll'stlC IIl;U.TIII· .. OIl"IlIl<" lII;lIlaV;t.'III,,"1 III \\'"stl'rt, E"rop" nr.Japall. :\Ild allY pO\\'l'r ahl,' 10 "01111'01 ",<:il IInnllaIH""

,·,,1.'

call exert a ~lgllifi('al1t llalhlt'llf(~ Oil, fur t'x~lInpll\ allt:IIlI'CS tn hal'lnOllls(' ,,'cuBOIIII(' polin(:~

.l1l1l1l1g Ihl' 1I11'lIIhl'rs Europr:,

or Ih,'

EC III prl'panllg II,,· lI'al' Illward, 1Il0lH'I:try 1111111"

1\1

\\,,·,1"1"1'

°1'1"1' nuarl"ollhus ~I\"l'~ puliticill le\"{'rage' U\'er utlh·" g,CJ\"(·rI1IHeul~.

~( •. Set· Ihl' 11\1"1'1',,,11' wllh Samih Farsollll \1\ Middl,. I~·(/.\I N,t",,-!. Ill). ltiH (/alllian-F"hrllan' I ~)~) I ). Pl'. :)-1 •. '2i. S"" (;,·l)rgl'.Jolr". Ma,-.mlll '''JlIII,\' (:lla\' 1\l!lI), '2H. Samir al·Khalil. lI,jlllhlil" ,,/"I·j·IIT ()-Jul.-hillS"". l~lH!J); "'e also his anick III th .. N\lU1. II April I !l!l I (puhlished ill I.ih,:mlul/I. I H April I ~l~l I ), '2~l, Khalil, N\1m. II :\pril I~)!)l. There IS afillall), a rllrlhl·r slipl'av;": Kh.lli!'s hl'IlI'·I"II r1S11r "~paraLJOII or the person or F;nsal I from his polilical r",,: III 1<'. alld cOII""I""lIt e,'aslon 01 a fal" ilia I accoulIl of what F;usal's re/-:"11l' did. 1Il 1'a\'our of all ""I"II'\' \1\1<, whal F:llsal's Slip' posed p"rsollal inclill:lllOIlS ;lIlclIllO!l\'<:S \\'l·n~. IInl Khalil's read .. rs cOllld 1I0t hl' "xpl,,:ted III SpOI this ali(I wOllld lak,' his remarks to 1Il,'all Ihal the 1Il0llard\\' 11,'1/ polil;,.," '<~I'/III'·. dl·,'is,\"(" h' tOlltl'lllh:d h)' Ihl' !Intish. had a progn'",,·e. IIlllciel'lllSlIlg prol'·"!. :\\1. Frail Hazelton. '!r;"1 10 I!Hi:r. 111 C:\RDRI. SlIddrllll., /r,"J.' 11""11/11/11111 ",. U(',/("/IIJII' (I.olldoll J !)H~J). p. :1. :11. EliI' I-\edouI"I", TI,,' 0111/1/(/111 HOIl.II' lj,,..\/(I/I """ 0/1".,. ;\IiIJdI,··J~'II.I/'''''1 .'i/ll/li,·., (Ul\I"l'!"SIII' Press of Nel" EIl/-:lalld). p. ~:,(i. :I~ Ibid. 1', ~:;H. :1:1. Sl'e th ..
IH!1

TilE (:t'LI-" \\'.. \f~ .. \i'1ll WESTERN I.II1EIUUS\1

·1:1. 1'0 :\71/:I·iOli/I:\9~:11. qUIII .. d III 1'';lr(luk-Slllgll'1I alld Slugiell, p. :!Ili. As the latter (,x)lIaIl!>'JIIl' p,~lic.)' of holsl"I"IIIl,: Ihl' IHl\l'l'rs (lr Ihl' ~hai"hs ull\Illllll'd IhnlllglHllI1 Ihl' Illalld,lI,· allrl mOIl'IITh\' pL·nIH!.,. alld larg" l"nrl(lwlI"rsh'l> l><.'cal1l" I Ill' '"1'1011 has,' IIr II,,· f(,lflll'" . . III Ih .. 1'1'0\'111<"1" "I' 1,111 and ..\111 •• 1''' . . . ,,,nlt· "I' 111l' la,"!':I"1 I'l'Il'all' ,·Slal,·.' 11\ Ilw "Iiddl .. LISI calliI' 10 h,' I""al"d, nlllSlil' In·al .. d Ill' Ih" ,II'IIk .. (If a pl'lI 1,,'111'''''11 Ell:, "lid I!J:!:, This pro",'" n',lIh"d III Ih .. [i.'l"IlIaIIOIl of "II11I"1"III1S )lI"I\'''Il' ,·slal"~.· (Ihid., p. :11 I. III tlw <:0111111"\' as ,\ whol ... 1'1)!;11I ",,·II .. rs Iwld H:,!).OO(l acre.' - "h"UI IlJi,O{JO acn-s p"r p"r".>lI_ III 1!t:)H ~.·JH!J·illdi,·idlials "\'·\II·d :>;, )1"1' C<'lll oLllllalld . .J.1. Sl'I.· 1I;lIalll. TIll' Old .'illnlll UIl.I."" I/Ild ,11"/I,,'olll/llll/lII"\" ..IJ"",·II11·/II.\ '" h,II/. J1p. 1:1-1 ~H. -F,... b III Ih,' PfI'C",' IIallll" "I' II,,'''' III"""·~IS. ;1I)(;-il1ll',· ... ;,[;'1 ;lIulll>h ","d III Slr.. ss lIil; Illhers 1'01111 III Ihe stral"glc t1all)!;ers or 1"al'llI)!; ;\Ioslil alld I'irkllk 11111 "I' IInllSh ('111111'111. s,·,· Manall K"III. Oil 111111 I;/II!" ... ·. IJl'ili.lh 1'lIlir:. ,11111 ,\I"w/Jll/II/ll/(1I/ Oil I lJO()-1 '/2(). (!llaCllliilall, HI7(i), espl'nall\' ch. H; "lid. 1111 Ih .. "ralc-gll: dillll'lISIon . .Inhn Dan'·1l1. 1111/(/111. 1::1:)111 1111,[ III,' ,Hi,[,[I,' 1:'11.1/. 1111/11'11111 I'olic~' 1I11t1lh" .. I/it'rIll(l/h "llli,,; I'IIS-I'I,:?,:? (i\I"l'Il1illall, I!JKI ).l'sp"l'I:llh' eh. 9. ·I(i. S .. ,· Kh;IIi1. N\lm, 11 .-\1' ri I I !J!J I. J\haiil. U,/Jtlh/i,' ,,/h'lll. p. Ili:1. ·11t Dispalch by Randlliph. :!I !II;\\' I!I:!H. H!IIJI.:.U:I.:!I. 'fllllt,·c! Iw K,·dolll'll'. Chili/Will 1/111111'

n.

lh:\lfllI.

p.

·I:~H.

·I!J. l\"dOIlI'l<:, (.'hllllllllll lIml.I,' li'l:llllll, 1" ·I'\H: , .. ,' also lIal:llll. '111,' O/rl Sonlll (;[1/\\1'1 (llItlIIt,' U,1mllli/lI/l,ul' M"""III,'lIiI "lIm", pp, I IJ~-·1. 50. Khalil, :-;YRII, 11 .-\pril I!J!JI. :'1. ..\. I). :l1'ld),,";dd, /:,,,/,1111/',,, /:,... i/,· (I~".-Ill·"'-I; 1!1:lli). I'p. ;,·I-:I,i. I~<,dllllfll" ,"'lll';>III'JI Ilr the allllll(l,' Ill' Ih .. Ira'll ,Ial<' IInder II,,· [Intish Illwal'ds Iht· I'"plliall"" "I' Ihal cOIIIII('\ ,s .111 lOll lillllili;Il'/i'olll alii,·" In,;lIII1"1I1 oj' Ira'flodal'; 'ITlhey 11'1'1'1' Ih.- 1.:'11"'1'111111'1\1 III 11.' ,-,;"h,'" and ImIIlHII ..s, power, Ih" olhers w,'n, Ih .. sllitjl'l'IS II'ho I1lllst 111' proslrall' III Ilh"dielln·. Th .. p1'lll'lamalluns 10 Ihl' Irihl's 111 1'<'l'olt an' charaC"'l'Islll' alld ",·\·,·;lIilll.:: Th,' ~Il' "1'11leXIS Illenl clt'sln'!" III spare YOll. ("Ol1ll· Ilu~n.'rurl· wllh all spf.'l'd III tilt: linin· . . I)f Iltt' J.,!;0\'t'l'lllllntl ~llId rill .. ·.. rour Ohl'cI;('Ul"L'; olJH:n\'IS(' lllL' gun'nUUl,,1l wiJJ puJu.... h ~'UB. ;"1(1 \"UIII'S will 1)1' Ih,' r .. spollsihiliIY.· UtIlllwlII !l,,/I.I/·I;·r.I/lJII. 1" ~Iil. :,~. KII;dil. n'1m/JIir o/J-;·fI/·. p. :!·II. :';1. (hid .. p. :!:;.1. :H. It IS 11111 clear 1'1'0111 Ih,' hook whl'lhtT Khalil is hillls .. lraw:ln, "I' Ih,' ,,,urn's "I' lIIa,,-',,(')"Ir Ihl'orr III Ihl' polilics Ill' 111l' EIII'llP";11I "tlllIlIer-rt"'"hll"lII af.:alllsi d,·IlI"I ...a,,\,: llalll,·I\·. Ih .. \fnliJlgs of l;l,I'ila,' I .. · Hort ~lIld 01" C:lIho)i('" alll~-J;l)t_'J'al ("(I'-po.-all."") jrOJH Jlu' d.1\'s ur Pin ;\!OJlU 10 III ..· clt-n('tI-I;lsnsl~ of Ih,' I!J:!Os. "s lI'ell ;IS ·anslo .... .,I"· liherals' IIi' lilt' ... 1111111'1'-....·,·,,111111111 slIt'h as Ol'll'~a )' (;as,,·1. Uililllall.'h· Ih .. Slllll,(,('S go had; to Bllrk,' alld lit- ~1a"ln·. A d;ISSII' t:Olll"lIlpllr'II'~' slal"I1"'"1 llf IlIl'sl' .... actlOlla1'\' IlllSlli,,"s IS to hl' I(IIIIHI ill 1.I'''l1al'll SchapIro's

or

'JiJifllilllllllllHIII.

whil"h

ltasll'l it

good wurd

10 s~ly

Ii)!"

cll"IlHHTiU'::y

anti set',

Nal.l!'olll

as

DIIt.' (II' il~

011tl'tlIlH-'.

;)!i. Khalil. U,II11Mi, "ll-;'I/I~ p. (:!/). :lli. br.,d itat! slartl'd Sl1ppllrtlll)!; 1111' 1\;ll'Ial11 I",,,kr,itip III Ih,' I~I:,U,. 11;11111111-; Kllrds III sabolag .. 1l'c!IIlI'll1es "I a haw lIt'ar Ibllll..tl. Rafa .. 1 Eit'"I. lal .. r Isr;",li (:hi..l tlr Sian, l'\'<,\1 pa,,1 " dalld,'slllll' "ISII III lIarl.;lIIi's lilt'''''s III KlIrdislan. lIy 111<' IIl1d I!liiO, Isr;,,·1 h"t! h''COIIIl' "Il<' of lIarlani's l11alll pr"ps. This :1I111 llilwr delails 11"'1'1' r"\'t'alt'd h\' \It-llaciwlIl Ikgl11 0\1 111l' Isra,·li 110111,' S'·I'\·II'l-. :!~l Sq>ll'llIlwr 1~IHO (BBC Su 111 111 an' Ill' \\'"dd Br";,,lra'I'. ;\[J·: .... li;,:II. I (11'1111", .. I!JHIJ, 1'11,,<1 j"l'aln"k .'i,."", .. '11111/. l.olllloll 1!IHH.j1. :!.J:;J :)1. Oil Ihis aud olIn'" "'I""'IS ,,1'111 .. IahlTlllIhin,' polill(" "I' !\lIrclisl;lIl. 1I'I'llIl'l1 1'1'1111\ " 1'''''11"" S\'1ll1);tlht'llI: to Ih .. Ir;up CI' ami Ittl,lill' I"wal'ds Ih,' lIa alit, ".,. P.. It·r Sll1gl,·II. ·TIt,· Kllnls', JII C,\RDRI. StlI/dfllll\ Imq (1.01111011 I!IH~J). :IH. Mam' Ill' Ihl' mililal11.' frllm Ihis 11'111).; III' Ih" pan\' ".ltSl·qlll·1H11' .1"" led II,,· l'al'''"lIlall 1110\"'1111'111 III Jorelall. "'1"'1'1,,111' Ih .. I'DFI.I'. 011 Ih" hislol'\' Ill' Ih,' h;lI!, (:llllll1llllllsl 1';11'1", clldulling Us 1'001."\ til duo Shea S(Jufh ...,t'e B:Il~llU:.'" IIIUIUIlIlt"IU;!I h"u,.k. :rlt,- (J/,' Sonlll (,IIIH/" flllt! til" n,'"/uIIlHlflrl' Il/m.ml,·III.1 "llm'l. :l!J. S"" Dilip Him. '/'III' I."I/W.I' IiiII' (RII\I[ll-di-:t' &- I\"~;"I 1'01111. I!IH!I). fl. :!.J. ()II lit,· Ilklllll~r oj' Ihl' SllIa t:lIIT""J. SI"- Ih,' ,'C'rr I11l'1Irmalll'l' "1'11.-1,· h\' Halllla 1\;\1"111: 'Iraq's Ulldl'rl,:I'OIIIHI Shi'il,· ~ltll"-III'·IIt.': Ch"ranl·",sll!'S. LlIIS"S ;mel I'ro.'p"I·IS . ,l1itl,[I,·I·.'flli/m'1'I1Il1 (..\1111111111 I!IHI).

186

1'< JI.ITI< ~'i IN TilE (;I.OI\,\I.lS;\,),IO;\ I'ERIO()

lilL Ketlllllflt·. Uallla'lII /1",1.1,' \;.,../""./,. ~liU. Ii I. Khalil, 1':YRB. I I :\pril I!I!) I. (j~. Him, I . IIi,,., p. 'i.1.

.,,,g.,/

(;:I.llIi
,\lor/I'I'II

Hi.f[OI"\'

I'h""he

~Iarr's

aCCllll.1I III her chapl"r "II illl' Irall-Iraq war III 1'. :-'1:11'1', '11/.'

"llmll (\\'esI\·.I:W I!)~ii).

(iii, For an ill;,slrall')f1 Ill' hoI\' •he,,' '"t'challSllls 0l'"rale III ("('bllnns IW{\W'I'1l Ih .. \\'"slerll )lowers and Easlcn. Ellrope I"lla\', set' [,,'1,,1' l;(I\~'Ill. '\\''''1\'1"11 En>lllllllIC Diplll'II,Il'\' :11111 lh,' Nell' E;ISIl'1"\I E\II"ol'e , ,\''''' [,:(i /1"'111" Iii'! (l1I11'/;\llg"'l I!I!IOI.

==~===========9===============

The Theory and Practice of NeoLiberalism for Eastern Europe

Easlern Europe's market I"or policy Ideas, smldenly open cd In 19H9, was swif"Lh' caplured hv :In Anglo-Anwncan produl"l \\'lIh a liberal hralld llallH', ThIs polin' eg\llvall'llt 01" niSI foocl swiftly L'l"l'ctccl barl"ll'fs to olher Ill'W l'jllr,lIlts and estahlished a \'lrLUallllOllopolV on polic\' adnCl~ III most largcl sta les III the regloll, \Vh i Ie S()llll' lTllles \'H'W II
IXX

POI.lTf(:S IN THE (;U)I\.-\I.lS ..\TION PERIl)JI

were SlliJscqllellli\' publisiu:cI !n' ivllT. I-Ie is wleich' credited with ('oulldinga lIell' di~nplil1e. The Eco11omIC Theon' the Transitlo1\, SiJlcc I-Ian'arc\aJlel l.SE prokssors would !n,,' it and cn:lI scllil. rell' polin' lIl(dkctuals III the Clt-J't';llcci East COll!e! havl' thc scll~cOJlli(lcJlu,' to CIOllbl IlS sl'Ielllilic cn:dclluals,' III truth, Sachs has IICWT presellted Ills policr as cHileI' a (001];.11 or ,IS a Ill'\\' thcorY, Bllt likc all rig-orulls poli(\' hiS c\Ol:S UJIlta11l a more or less expliut model oj" the hehanour or n:!<.'\'ant actl)r~ aJld oj" till' ways III whKh tilt'\' \\'illlllicractlll ~I\'l'n cUl1texts. raced With ~I\'CII ('Ollstl"IIIHs aJld IIlCl'JlII\T\, We wililirsttry to claril)' what Sachs\ polio'model hOis actually hCl'n, Wc will tlll'1l try to eX:lmll1e the exteJlt to w\llCll the m,lIn n:lc\'ant actors Identified III Ihc lIlociei have heha\'ed in the \Vav the theon' predicteel. And ill lhe lig-ht ortllat expenence wc will attempt to elraw some (IJJldUSIOllS ahoul lhl' rca! rdallolls!up hl'IWl'C!\ western polic\' .lI\d the lcicas propag-'\ll'd Iw Sachs and hiS ('ollowers alH! sug-g-est an aiternau\'l' model rllr understanding whal has happened, Sachs's policy has had vanous names: shock treatmelll. radical EconomIc RdiJl'm, l3ig Bang-, thc ':l Zatsias' or Shock Thcrap" (ST), Sachs himself' h;ls not hl'CIl happy wnh anv or these namcs hut has COllie to accept the latler and \\'c will ro II ()\\' hllll Ii1 tillS,

or

I

Shock Thcmpy

S;tc!ISS nlOrlcl has lhe characteristic problelll-solvlng' f(>rlll /'ami!i;l\' III polin' ,lIlalYsIs; It sa\'s, irVllll want to achleyc O\ltCOIlll' A. then YOII musl gel aelor;{ to product: OUlput Y, which will then IIlteract with liS L:Jl\'lrOlllllcnt III stich a way as to achte\'e outcome A, The model makes asslIJllpl.IOJlS aboul the bC!la\'iOur and moUvalions or the releyant actors. abmil how tile" will respond to given negallye or positivc IIlcentives and alJllut the COlltcxt III which the\' aCL We c\'aillatl' the model by .Iud~lIlg whether It really will achll'\'l' (llilCome A ami. if so, whcther II will achlevc It al il'ast cos!. Sachs f(ll'Illulatecl hiS modei to sol\'(.' olle big- prol>ll'l11; how shou!d till' enUre cx'( :omlllUIllSl rq{loll or Eastern Europc and lhe l'SSR be reorganIscd III Older to achievl:. III Sachs\ words, 'a recO\'cl'\' human rreedolll ami a ciel1lClcratlcallv bascd rise Ii1 living- standards· :! .-\ vel'\' hroad speC\rLlIll of Opil1l0ll, al least 11l till' \-\'e:-.t. would accept thIS problelll-ddillitloll ami desired olltCOl1le, Yet 1110111\' would he SllSPI('I(lIIS of" a CClIlcerteel. western-directed pian /'or reg-l
or

NEO·I.II1E1C\l.ISl\1 FOR

E:\STEI~N

El'ROI'E

I H~)

that IS.. ILm\' creecl has won, , . il IS the Idea thai we are alll'lllharked 011 a ji)lIr.-il:\' Illlo all lIncerlalll rUl\lre and han: to work b\' tnal and error wnilln IIlsllllllHl\lS whIch make II possible 10 bring aboul dl'lIl~e Without l>illorisill'cl. ':, Dalm,:nciorrs r~WlllOll urtill' wlwk Idea lira \,'c'st ...'!' II system is all Illlplied \\'arlllllg agallisl soual ellglllcel'1ng to adlle\'l' a (11I'Cl:(\ c1ecollo;:cl1\,lsaLHlIl. Sachs dekn(ls SUdl :.;rand planlllllH (In the groll\ld~ Ihal the wurld IS ~()\'erlled b\' svstl'lllS (Communism and capllalisml \\'\JOSl' m'llll structural i'l'alllrl's Ill' SOCloeconOllllC and pO\\'l'r relallonshlps are perkllly llllrtl'rsl'IIHLtbll': howl'n:r \'"nahle 111 del"il tlllT nl'H,rtlH'less h'I\'C. so 1.0 speak. till' same b"slc gelletlc codes, But DahrL'll(\od"s second concern IS thL' pnmac\' or rl'specllng thl' eXlst1Il~ tisslIl' of sOC1ai instilUtions and tn streng-then SOCIal inslIllIlIonalisation by llltroduun,l.{ openness: the rree circulal10ll Ill' ideas and the hllilding or COllsensus through debate, negotiation and compronllse, ThIS ;Ipproach would place llle de\'eloPJllL'/H ora iq~al ,~tatL' anel polilicalliberalislll aho\'(: schemes ror systemic challge: the latter should g-rll,," out or the' Opl'1I souel" or 'CI\'il sOCletv' Sachs re.Jecls thIS, saYll1g thal ir the states or Ihe rl'~Ion adopted DahrcnriolTs approach 'Dr open expenmenlaLHlll, I duubt that Ihe trallSiilrmallflll w{)uic( he possihll' al all, at least Wllhollt cosIl\' a1ld dangerous wrong turns' TilliS, \\'11011 nllglll be calleel Sachs's 1Il\'l'rled Lel\llllSIII IS IllClll' Ihall a matler style: It relates 10 the enllre lllL'Lhoc\o\(Jh'Y of IllS llIodl'l: Itl' I~ ;\ strollg- belie\'er that hl' - or at ieast the \Vesl - can plall III sllch a way as III ellabk Lhl' peoples Ill' Ihe a'guJIl to a\'lllCl coslh' \\Tong tU ... I\ ;lIld he sllllllltaneollsl\' hdic\'L's thai krL 10 tlIl'lI' own col\l'[l\H' l'rrorl.~ tlle~' wOllld take wrong tllrns or IIlciee(1 mIght not opt iilr ills goals at.111. The corollap'oJlhl'sl' news IS that the polic\' he advocates will entail a sl'qUl'IlCe or en'lIts III whICh lIlslIttllton;11 cOllsolidatioll and democratic slabilisatlon brIllg lip lhl' rear.

or

/) Palh fllill Out/JIll 01 0 UI'g1l1l/0/1.111/·1

Sachs's pulin' has had as its (J1~le[1 IIDI IlIdivldual slatl's hUI Ihl' entire post-COllllllulllSt region oj' Eastenl Europe, He ad\'anced IllS ideas in lillC With the nl'WS Dj' Ihe Amencan and Bnllsh go\'enlll1elll~ a~ to how III trallsJill' III EaSl(:rll EUr()pl~ as a reg-lOll. And he Cllll11lerp\l~ed illS rC:';lollal goals wllll all altCl'nall\'l' solutloll which dovctailL'd Willi 11ll' French gll\'l'\,nIllL'lIt's gl'lIeral apprnacii. We \\'ill SlIll1lllanSl' Ille regional polin' ",llIdl Sachs opposed \)e(l!'l' llIrllltlg !II illS alternative:

I) ~)

EIH:OllJ'OIglllg tile l(lJ'lller C1'vIEA reglOll. IIlclllcling Ihe USSR, 10 remain lill ked lTOIlIlI1lICall\', J.t'a\'Jll~ 11H' l'\'011l1l011 or SOCioeClllIllllllC rorn's III l'arh ,'(lIuJIn' II> the

190

3)

-I)

l'OI.lTI(:S I", TilE (;J,C)\\AI.lS:\TI(';-; I'ER\(lI'

Interplay of forces Wilhlll lhe cOlin try conccrned, WIlholll lISllIg wcstern pressure to Impose a particular s\'ste1l1, jI,'Iaking the emphasis or wcstern polio' (hat of ecollOllllC rl'\w;Jllll the reglOll as a whole, uSlIlg, I'DI' eXOllllpk, a rcgulIlai (il'n:lopllll"lll hallk (II' tilal purpose. Rt.:Jecling a peSpl'CL1\'C o/" hrlllglltg some ex-Commulllst ('oulltnes IIllo lhe EC in the shon or mediulll tcrlll. Instead, ofrcnng a pall-European Confe(leraL1on elllbraullg both the EC and the East. Illcluding till' USSR.

The allernative, Amencan approach, orwillch Sachs was a passIOnate acl\'Ocale, involved: 1) 2)

:I)

4)

S)

G)

7)

Breaking lip the Comecon reg)(m and above all, brcal;.ing Easl Ct~lllral European counlrtes from the lISSR. l\·laking a root and br.IJlch switch to ;1 panlcular rorm fir GlpllalisllllslltuuonaJ slruclllrc 111 c;lcl1 state a precondition (i))' 1)orlllalislIlg n:latHIJl!> With that stale. Thcrerorc imposlIlg a 11Ith-and-spokes structure Oil dlc rdauolIslllj1 between lIlc \-Vcst alld East Central Europe," with each largel SI;lle III the n:glOlI relatIng- 10 till' t>l))er~ pnnupall\' VIa lis rel.IIIIlIlSlllP \\'llh lhe western hub. Starung the process or reglOnai transformation III the states Wll)) the most politIcally sympathetIc governmcnts alld thcll llslIlg both Ilegalwc and posluve incentivcs to ex tcnclthe rcquired mix of (lomestlc policies across the regIOn as a Whole, The ell tIre process would he carnecl ('orward hI' the C;lp;lClt~' alld will of wcstern stales to' pro\'lde, 111 till: IlJaIIl via their Illuitilateral organls;llions, Ille necessary positive lIH'elltin:s Ii.)r co-opcral1\'c gm'ernlllcl11s and constrall1l<; for 1I1Ko-OplTall\'e gOH:rllIllen ts. The reVival Ill' eco 110 111 Il.: aCL!nty 11l to-operative targcl slales would lake tite form of trade-Icci gmwLl\ din-ned toward \-'·'eslern FuroPl', COJl1pensatlng for Comecolls collapsc. Co-operative states would gall1 full access LO the market of the EC (partly through radically changillg some of its ke\' IllstilUUonal pillars, such as ils tracle regime and CoJ\llllOIl Agncullllral Policy), I'en' sUhSlanltai economic aSslstanCl~ anc1e\'elllllal mCll1\)crSlllp (If a greadl' enlarged EC.

Sachs's 1990 anicie outlilled thiS entllT ;Ipproach with cogel1C\', He dallllni lhat keeplllg ihe Comecon rC~\o1l together I\'ould be SlIh-opllIllal: lill' 'East Europcan commun marl,t't ril;(( somc su~gl'Sl as a precurstlr to IlIleg-r;llloll II'lLh (ht: '",'l'st would slmpl\' hc a poor mall s club' He Iherl'li'lc llrg-l'ri liS

"'E<)-l.IBERAl.IS~(

FOR

E:\STFR~

EllROPF

191

hn:ak-llp alld III elTcCl lhe start of a compl'lilivc race I)\' East European stalt· ... iO'prcrare lhelllselvcs lilr din'C1 CHIp' Illlll thc \Vcst Europcan markctSC("(lIIc1h·. Ill' n:Jl'Cled Iltlxcd ur h\'hnd forms o/" SIJnOl'COI\01ltIC sysll'lll 011 Ihl' grollnds lhal Markel SocialislI\ had pwn'd 10 he unworkable: the East Europl';lI1 slales 'mUSI rqcCl Ideas aholll a 'lhlrd war· 'and 'go stralghl 1\)(' a II'l'slcrn-slylc markel l'COIHlIllY' I; I-Ie urged radical rcform III lhe H: 10 ;tlTOllllllocbte an export surge li'oll\ l;ugCI Slates al\d calleel Ill(' alt IIllpl t'Lccil'ltted dq~rL'L' of fundilt!:\" for l"IHIIH.'rali\'e Slall'S from WeSIc.'rll SOlll"Cl'~. espcClally /"ro1l1 (;cnllam'_ Sach.~ was able to (Joinl out lhal IllS model was alrL'adv Iwing applied h~' two stall'S III the rq..(loll. III I Q90: YUI-(osla\'ia anrl Poland: ;IS Sachs, who had bCl'1\ adnslltg Iltc Yugosla\' !:\"()\'crlllllcllllIl EIWI ami had Ihclt lrallsfi.'rn.'d tn Poland. l'XpIaIIlCd: 'Poland will hrIng ill Ihe lirsl cOlllpn:IlL'ItSI\'C markct-onl'ltlce! rcforms III Eastern Europe. YUg"OSI;I\'J:l will undertake a simil;tr p rogr;lIII Illl' , ,-; The -\Il1t'l'lcan approach as arllculalccl Iw S;ldlS was, of ('ourSl', adopt cd I)\' llle (:7. s lIS kc\' l'lelllCIII-lhe fra,!{llll'lllatloll of tht' COllll'C()1I \l'g-lIl1l ;lIld ils rcplan'lllCll1 IJ\' 11IIh.... lI1rl-spokc reialHll1S helwl'l'lI Isol;ttl'd eastern states alld IIH' Wc:st. has su\)sC:f)uelllly bec:n Jarg-eiv naturalised 111 weSlcrn public alld ac:tc\elllll' discourse. Dcbate about ST h;IS t1H..'rl'l}\' been reduced to cosl-Ill'Ileli I ;I/ulnls o/' whl'lher lhe spokes sh[lIlld al'CCpl I\'CSll'l'll comlilllJl1alitl' or allelllpt ;tll Isoiallolllsl polin', or 11'1' S0111e possible halhva\' 110use belwel'lI the two, Thl' fragmcnt;tUOIl oj' tile Comecon reg-lOll ma\' sccm as nalliral as, sav, lhl' hostililY of S('rbs_ Croats allrl Bosllian i\IIISlillls 111 the 1~)~I()s or IIll' h[)slilil\' or-,ilt, Fn!l1ch lowards the Gcrmans 111 IIll' laIC 19-1Os, BUllO belicve lhal is III I,!-!; 11 on' till' capacllY of the \Vesl 10 shape oUICuml'S, ThiS capsurpllon IIl'thc slall'S UlIlCl:rIlCd 1Il\0 lhc Wt:S1Cl'1I l'COIHlIlW, IIISlIlIllHIJlalisl'd III lhl' \'anolls Illliltiiatl'r;d org-aillsallolls and l'spt:Clall\' the Ell. The elld prodlKI \\'()lIld ht: a IIllificllllllI I If Europe ill a slllgk (reforllll"d) Eli market. TIllS wOllld

POLITICS 11\ THE G\.()IHLlSATIO:-i PERIOD

generate, 011 a democracy.

rq~J(lllai

2)

scale, the desired otllcome of prosperolls capitalist

TllI'l\n' Ollljllli olSlwf/; TllI'm/,.\'

11/ /~(/rh

Slul,'

If ST's pn~JeCleci olltcome 111 each state IS democral1cally-based increased linng stanclards and Ii'eeclom, lhe output of Sachs's policr is IllSl1tllll()naL'1l Saclls has often named It as a 'market eC(JIlomY' or 'capitalism' Yet closer examlllallon reveals that specilic state-lIlsllllllionai fortns are the central output goais I)r ST at tl)\:' level or a smgle COlIl1U'\', not c\pllalism as s\lch. He ptllS 1ll.IUers as follows: '.-\t the base oL1i1 oj' thiS transliJl'lll.lliol1 [is] .. , thl' idea. lhat the post-CommullIst world have the potential to gToW more rapidh' than tile develop [ed)" world ;111(1 tlH:rebv to narrow the gap III livlllg standards, if they Ilarmonise their economic IllSlItU\lons and .10m tilelr l'COllllmles to the ~Iobal economic system, 'I~ E\,l'n on the occaSl!lllS whcn Sachs sa)'s hiS goal is simply' capitalism'. I:I we disco\'cr tllat he means the very partIcular IIlslitulIonal matnx which excludes ll10st capltalisms throughout history from Cjualih'lIlg as capitalist at all. Sachs tells us that 'the Jllalll precepts of capitalism [are] opell trade. currenc\' cOIl\'cnibilil)', and the private sector as the engll1e of grOll'lh.' 1·1 By tillS strange formula, \Vesl<.'rn Europe was not obe\,lng capitalist precepts before 195H (no convcrtibility) anel the USA was not /(l\lowing capllalist precept!i III the lughi\' protected Illtl..'rwar period. Thesc are thus the precepts not or capitalism but of Sachs, anel two oul of his three precepL~ could in theory he applied withoUl a capitalist economy at all: they arc to do with the l~xlernal economic reiallons iiI' states. His deSired output IS I"urtller revealed t)\' thl' six' con: n:forms' that hc tells us Illust he aChll'\'erl: '( I) open IIlternallonaltracle: (~) CUITellC\, COIlvertibilit\,; (:') pn\'al<.' ()\\,nerslup as the mall1 t.:ngllle of l'COnOIllIC growth; ('J) corporate ownershl p as the dOll1l11ant organ isationai form for large elllel-pnses; (5) openness to foreign II1\'estment; and (li) membership ofkc\' international economic Illstilutions, mcJuding the EvlF, thL' ""oriel Hank. and the CATT . .' I" Thus, lillll' of his SIX plant;,s (llumbers I, ~. :i amI 6) an: ahout cllangmg a target slate·s extl'rnal polillco-ecollollllC relalloJ\s and one (numher 4) is abollt a parucular form 01" capllalist O\\'nershlp: the lilJ'llI willch enal)ies companll:s to he bought .11)(1 sold easily. Ollly Ilumber :~ refers to what would normall), be mealll by capitalism. ]11 short, the output of Sachss model is a vcr" specilic polillcaleconomy: a stale as open as illS possihle for it to be to the Ii liTes of illlernatlonai economic operators: a statL' wllh a globalised institutional struclllre, tilr()lI~h which till' rl'sources of wllat he calls 'the globalm:llllstream econolllY can 11011'

!':F(),IJI\ER:\I.IS~1

FUR L\STERN HllU)I'E

It IS tIllS out(llltwlllCh la\'s thc baSIS for the cicslred outcomc: 'In effect, by n:/ollllllg Ih~' res\. of thc ~lobalcc()nOlllv. thc\' [i,t" the cOllntl'leS concerned] are ahle to IlllpOl'l SOIllC o/" the prospcrit}' rrom L1w rest of the world. l\.~uall}' Ihroll~h tht.' unponalloll of Ilew tcchnologH.:s, organlsall(lnal patLcrlls and financc\'; Or agalll, whcn the targct statt'S arc 'opcned Wide to lIltcrnatlOllal trade' anel tl) mternallonal capital. the\' will gam 'thc Ill'W (ecllllo1og'll's, llIalla~cnai talcnt, oq{;lllisational lllethods and linanda! capIlal nccdcclw ()\'CI'COllle llle dismal CCOllOlllIC legan' o/" the past ..10 ycars', Ii (:reatlll~ the /"ree tradc rcg-nne and the ng-lll lllstitlltIOlial and eCOllomlC cOl1dillOIlS to allract f()rclgll dircct lIl\'estIncllt (foDI) arc the core Oltlput goals for ~encratil1g Ihe cieslred oulCOIlle: prosperous capIIa!ist democraCies, To:..:'ell1el', thc\' will product' (he crtiClcncles for gr()\vlh, Sachss thCllll' has 1)L'en repeatcd tIrelessl\' Iw American diplomats and thc ortinals of the InternaLIonal Finalloallnstitllllons. As the US Ambassador to l-Illu~ap' pUI It: 'I have orten becn askeel wi1\' there Isn't a new I'vlarshall Plan to help (:l'Illral allel Easlcrn Europe, Wcll, thcre is - II IS IH'rc - and Il IS call cd prI\'ate ('orl'lgn II1vcstmclll FO('t'Ig'1l III\'CStIlll'1l1 crealcs .Jobs, en hances prociuclint\', g'ellcratcs economIc growth, and r;Hses the stalldard or \inng', It bnngs ncw lcchnolol-,'1'. ncw management lechl1Iqm:s, new markcts. ncll' products, and bellcr ways o/" doin~ hllslIless, 'IS Anolher ST cIllllllS1ast,.1ohll l.lowl, has been parlIculari\' lTlllGll oj' those (on the l.eft) who Ltilw grasp the lillk betwt'ell ST amllile realitv of global capIlal. All Slates must crcate open II1StltllllOIlS thai can lap into thc huge, mobile capIlal rcsourccs 111 thc WOrlel ccon011lY: 'The worid ill which chOIces arc marie a hundred lImes a da\' as 10 which econom\, millions or billiolls of dollars arc 11I\'ested III, the world H\ \\'11Ich L'OI1l11lOciilles such as cars alld cOlllputers and pialles arc PUI lugether 11l olle local.Ion froll1 pans madc III a lhousand; lhe worlel in which J'IVers of data flow to and fro across "borders" hca.-ln~ IIlformatiOll Ihat a wilderncss of KGBs couid Hot analyst', or even raplure - thaI IS the world imo whIch Ihe RUSSian reformcrs harilO strll~~le to Illsert llll:lr coulllr\,.'I\' Failure \0 adapt 10 lhc rcality ofgiolJalisatioll will lead, 11\ Liov(\'s vicw, to disastcr. 'The Worid,' hc S,I\'S 'would nol lolcrate a "special" RUSSIa if spcdalness mcant all Illlcon\'crtihll' CUITl'nc\', an unrerorllled industnal s(rUl'Lurc al1rl a hostile lIl\'l'SllllClll dimatl' , ' ,'~o The \'lSIOn or tapplll~ I1lto the rcsources oJ' global capIlalislll to Il\oclenlist' the eC011011lY was a powcrJ'ul lIlolJVC li)r Eastern supporters of ST, as Yt~g-or C;aidar illustratt'r1 in an IIlter\'iew wHh thc 1~'((JIIIJJIII,~llIl carly 199~ . .JllSL after lie had laKell ch,lq;e of the RUSSIan l'ClIllOIIH', WIll'11 thc 1:'f(}IIIJ/II/.I'1 asked hllll whcther tilt' RUSSIan peoplc would accept the likcl\' 'econollllC shocks' of 'all extraorclil1arih' dinicult transIlion', he seell\ed llnaware that thcI' were refcrnn~ to thc slump which illS policy would calise and lhollg-Ill that thl' siwek would he the flooel of foDI lhal

19-1

POI.ITICS IN TilE CJ.OII ..\I.IS.-\TI(}~ PERlol1

wlIuici l'lIglllr RussIa, He therer()n~ n~sp!)lldt"d b\' sa\'lng: 'II IS hard 10 rel'l threateneli hv a possihilit\' Ihal, sa\", Germany or France will buy up Ihc ellllrt' CtJlllltlT "We arc aiso dilfereIlL fro III East Eurupeans, We don 'I han: so Illllch xcnophobla, Tht' SOCIal anrl polillcal prohlems (onne-clcd with foreign II lI'csl III l'll I are casler here th'IIl, lill' Illstance, III Pllbllcl, whICh IS pn:ot"cupll'd \,'llh Ils relationshIp "'JIll (;erm:lm', That IS \\'11\" I Ihlll);: Ihal o\lr opelllllg ;\Ilc! IIl1egratioll JIll!> the western world IS a illSlOrIl'al alld SOCIOpOlitical chance lill' thl' West and for Russia also,' Buttil(' really ingenIOus aspect orSachs's wod;. has bet'll the \\';1\'111 \\"Illch ill: has.l"stilied the sudden openlllg or targct economIes 10 glllbaicapilal as tlw necessan' lirst steps III g"on:rnnwllt polin' ror what \\"l' would IlOl"Illalll' thlllk oj' ;IS clI)Ilalislll, Hc .Iustilies a suddcn sWl\ch to l"ret' Ir;HIe; cad\' l'I>Il\'ertihilit\, IS .Justilied as a means to anchor world prices In Ihe dOlllesllc context and as a springboard to eCOllomlC J't~vl\'al through tr.all': and FDI is indispensable lill' prtVallsallon and restructuring, All westerll autlWrtlles han: .l(lIl,,:d Sachs III IIlsisung- on these aspects or hIS polin', The role of FDI IS parLIcularlr stressed, Th LIS thl' .lOll I t study br Ihe 1[1.,1 F, the World Ball k, Ihl' OEeD and the EBRD oj" the SOVIet econOIll\', carried Ollt al till' hehcst or Ilw (;7 in 19~)O-91, pUlIltccl Ollt Ihat rorelgll din..'cl IIl\'estIlH'nt would he 'crucial III the transillon' ~I The OEeD concurs 111 liS own stud\' t.hat.llls 'crUCial to the process or transition to a market ecollomy' ,~~ It also adds Ihat. 'the pn\'atisalloll pmcess must extl'llslvciv reI\' on FDI'"~::C:rl'ating Ihe IIlstllllllonal cOllclitiom for FDI is thus lIot olllv tIll' omega of ST: II IS Ihe alpha as \l'e11.

3) TIlt' hi')' S/lOd. Tlwm/,." ,ir/on

It is preCIsely because' Sachss !-{oal is an IIISUlllll
~H

1·1 ,I IIER,\I.JS;"I Fe ll{ E.,\STFR'" ELil{( )PE

19!1

IIlSlllllliollS, 10 allm,' eastern workers I(l (lo\\" westwards . .-\11 tht's(' gwe western ~(i'v("rlllllenls Irl'lllendous haq~allllll~ power,:'!' The power polillt.:al elelllent III his pulin' is rrallkly at.:kllll\\'ledged hy Sachs: 'the prohlelll or n,rorm IS lIIostl" poliucal rather than sOCIal or e\'ell et.:ollomit.:' ~H Thl' t;lsk IS to dlaIl~t' all {'Ilure s()cial/instJlllllOn;t1 order anel power allci conl1in wili Ill: ai>sollll<:iv celli ral to the prot.:{~ss, ThiS cCIltralil\' OrWl'SIl'I'n powL'r ha~ pro\'o!;.('d sharp dt'hatl' ;Illlongst ST SliPPOrlt'I'S on..- lilt' pnTlse arllnliauon o""q.~atl\'e alld POSIU\'l' II!l:CIlU\'CS. a dl'hall' largelv l"l'l\(n~d on difTl'l'In~ appn'uallOlls or tht' lI\otl\'ational ractors g()\'Crlll1l~ lhl" bl'lla\'IOUr or East Europeall governmellts, SOllle sa\' the 0111\' elTl~Cll\"l' lIlCl'llIi\'cs are negallve, l'xc1uslollarv OIll'S,:.!~1 Sachs IlllllSell" disa~rel's. IIIslsllng that olin' a goverlllllent has publicly COllll11illL'd itselr III STand Iallncheci till' program\\le. It wililt,l\'e thL' ",ill to rolio\\' through bill Inadequate \\lcans, ,-\1 tllls POIIll Iht' West mllsl prunde large runds 10 help Iht' gon:rlllllt'11I with l'l"onOIllIC and polillcal cnsls lIIallagl'IIH'llt. ST thlls reqllln:s lilal WCSllTII gCl\'lTIIIIICIIIS will pro\'lde grants [ill' targel Slall'S' foreign exchangl' rl'scrn's, lIIone\' (lI' suual :-'l'cunt\' pa\"lllCIIIS, '( :allccllauoll 0(' lIIost or the debl owed to \Yeslcrn gOVlTllIllellls (In([ banks', IOllg-tl'rlll rien:lOplllellt finance fur which 'CralH ,lid IS again nt'eded, So lOO is rree 1ll00'ellJelll or labour westwards, They 1ll1lSI aiso throw UPl'1I Illl'lr markets to till' [·:asl. Failurc b\' wcstern gm'erlllllcllts to clelin'r 011 thiS POIIII, says Sachs, \I·ill lead tocnllllllality, polillcal eXlrl'llllSlII, cl\'il \Inrest. hypnillllallon, cilplIaJ flight.
1%

POLITICS IN THE l;Um,\\.ISSI"IC)N PER1Ul)

lakc these remarks al face '·alue. Sachs IS mort: plausibly ImpJYlll)!; here lhat ·the EU and Germany will respond in the ways reqlured bv his policy because Amel'ica will eHccl1velv exert the reqUlred pressure UpOll them to do so. In other words, for Sachs. the USA will play th(' role assIgned to Il 111 hegemOl1lc stability theor,,: 111 ilS own hegemolllc Illll'reslS, it will force till' West European slales to be lrlle to theil' own long-term II1lerest III acllle\'IIIg' a glol)alised world economy, As 1~lr as economIc operators are Cllllcernecl, llle same paltl'l'll emerges: the need for ralher brulal coercion of slate enlel'prise managements and employees III lhe East while we can expecl large flows of moner and technolo b'}' II1to the target economy from western TNCs once the rt)!;ht kind of lllslltullonal framcwork IS 111 place. The mOl\\'allonal ractors In the behavIOur of western TNCs are left unexplored.

4) TI/I' 11I11'r/ol'liiJlg Wlll'lds (!{Ilil' NrJfll!lIol Po/h)'

(~)'rll'

ST has been popuianseci by Sachs, the Il'vIF and olhers as the three '-Isations', now 1;\Jlliliar to every schoolchild in Eastern Europe: liberalisalloll. stabilis
-I) 5)

The liberalising/stabilismg shocJ,. The international shock. Privatisation an'd FDI. Trade-led growth. Political/instiltllionai consolidation and growth.

'Ve will examlllc each

or these lI11erlocl;.ing wheels m

turn.

1) Till' t/oJllI!sll(, fibaafi.HII!{/stabilislIIg shoc"

The domesuc shock of'ST is a double one: first, the sudden liberalisation of pnces and slashing or state subsidies, coupled WIth the impOSItion or wage COli trois and second, it \'en' uglu monetaI''' ,mel credit squeeze. Sachs follows nco-c1asslcai orthodoxy III \,lewlIIg the sudden ImpOSltlOIl 01' decontrolled pnces, cumbmecl With wage controls, as belll){ a creau\'(.: process to pronde a more alloc
i'lEO-I.lBER:\I.lS1-1 FOR

E.\STER~

EUROPE

197

light 1Il0lletar\" polk)' does ila\T a depress;lIlt enl'ct, hilt It IS dcslg-m."d al)()vc hat l'llICrpnses are Ii lITl'd III n'Slructllre h\" la\"lllg- ull workers ratlter tilall I)OlTO\\'IIl)!; tl1(~lr wa\" out or dil"/iclIIUcs. All IIl1ereslIng featurc of thc polin' c\"l:le is thc 1~ICL lilal the libcralisatHIIl/stahilisation shock IS to occlIr before lhc de\'elopllWllt or either a dOllll'SlIC g-roup or Illollcv-capllalisls - peoplc who ha\'c acclllllulated large qllalllities or IllOIH:\' to be uscd as capltal- 01- a dOI11eSllC s\'stem of" linancial markets, TillIS statc l'llterpnses will IlI)t be able to respond to the .~h()ck by comhllling ·do\\,lIsII.IIII.( orthe worl;. fi)l"Cl' wnb hOITo\\'lI1g f()r illn."slIncnt III lIew plan!.. All thell" restructunng d'li,rLS will thcreJi:lI'C bl' cOllcentrated upon olle producllon factor: labour and ItS pnce. Although Sachs says lillie about this there IS tillls a cClltral SOCIal cliI11cnsioll 10 thc libcralisatloll shock: a sudden, dramallC weakcning of the SOCIal powcr of the lllciuslnal workll1g class: thl' ('11(1 of staLC subsIdics while wages ;Il"l' controlled involves a hlI-ge Ell1 in liVIng standards; PrICC dccontrol decpellS tillS JiIlI and thc stan oj" llIlcmplo\,l11cnt cOllsolidates the shih III thc cntlre balance of SOCIal power.
2J nll'slwdl IlIiI'/"II(/ilfJlla/ illlt'p;mllOli oI111I' ulIw'ls/alt' Simultalleous wllh the domcstic shock, tiwre should be the (Ioullie actIOII to til' thl' eC0110IlW III to the giobal eCOllon1\" through two steps: the radical libnalisatIllll oj" trade and the makin14 oj" the CUrreIlCI' con\'ertible. Thc kc\' JllstilicaUoll or L1le trade liheralisattoll IS to ensure COlllpcttttOt1 rrOI11 western cOlllpallies III dOlllcstlc product m stabilise t he local CUITeIlCIl'S .

.'J

i'/'I1I([IIS{//It)/1,

1-1)/ {/ml rrsll"llC"iIlI"lIlK

:\11 absnlutch' l)aSIC compoJlcnt oj" ST IS tht' transfer of Slate t'Iltt'rpnses IIltll pnvatl' hands_ Yet cUrIousl\, ellUtlgh. LlllS IS the ISSllt: 011 whIch Sachs has hcen most \"aglIt'. or only olle tilIng IS hl' cOI1\'I11cecl: that handing cllterprIses ovcr ttl the peopie who work In them as managers or workers would he absolutely wrong. But e\'en llIl this issue Ile changcs his ImIlcl as to \l'1t\' 11 would he \l'nmg. III hIS book on Poland he sal's at ()ne poiIlt t.hat

191-1

I'Ol.lTICS IN TI-IE (;[.OII:\LlS:\TION PEIW JlI

handing oWllcrship over lO managers and workers WOllld he 'sll'alillg' ,',' Al o!lll'r limes Ill' lJas s;lId that halldillg O\\'lIerslllp 10 the workers 'pillS workers at excessive J'Isk', presullla hh' hccause I he\' would Iwar hIli respollsihilit\, ror the ellterpnse.:H At other limes. IH' sa\,s il would PUI the enterprise at nsk f'rol1l lhe workers becausc llll'\' would pa,' lill'llIsl'i\'L'S 100 milch IIIsleari or im'esting,:I:l His clinching aq~umeill. hO\\'l'\'cr, IS lilat worker-owned compallll's would not be trusled hy capilalmarkets. BUI IIIlS on Iv hegs the questIOn as to lile rorm or the banklllg wslem III lhe larget co 1111 t 1'\'.

I n his 19~)() anicle. 'What is to he Done?', Sachs urged th.lt 'lhl' Iinns shouid he sold ror cash;, through aucuons.: 11i with a hoard of'western lill'lIlClai adnsers and legal experts checking on the deais, He sl'emerillnaware or the ethical dirIiculLles ",nh thiS proposal: that those 111 the targel state \\'Ith the casl! to buy a sleel mill would be very rew III number and wnhollt qlleslion (i)rlller or current crooks at the head or (v[alia pyramids, I-Ie hiler dropped this idea on the gnHlI1ds that n would he 100 slo\\' a process. And II1steaci or soinllg the prol)\cm or where the lIIo11ev-capnal would cOllie rrom to huy the ellterpnses, he wrappl'd lhl~ process up III a mystcry: I O-~W per cent or lhe shares would go to the workers. 'another f'racLIon' or lIwnerslup nghls woulci ~o 10 households. Ther would not get I hl' enlerpnse shares btl! would I-{ctlllln trusts III 'invesllllent runds', These pnvate 'im'estllleill Funds in turn would own tht' shares of' tile IIIduslnal enterprises'. appolllt the directors and ll1ol111or perrormancc,:I; There would hl~ len l.lI twel1t\' such funds. I-Ie assures us thai lTILlClSIlI on the lincs that ron:i~ners would end up J'llllnlllg the Funds and lhclr l'lItcrpnsl's IS blse. bUI he docs not explain how or why it is (;llse. Nor dol'S he address the bet that ST reql1lres pnvatisallOn III the Illidsl or l'Ccesslon and thaI therefore L1ll' assets will go at rl'ry iow pnces. Another m.qor Issue IS whether the Slate en !erpnses should he n~slruc­ tured \,Ia a state IIldusu-ial poliCY bcrore the\' are p.-ivalised ur \\'hellIl'r thc,' should I)e sold to the pnvale sector jirst and restructured by the 1I1'W pnvate owner, Sachs tackles L1lls by saylllg thai the target slall~ will lael;. lhe expertise to do It. while his nebulous Ill\'cstlllent f'unds will 1I,In' such experLlse. TillS will be the case presumably because lhe 11l\'t'SLllIl'I11 runds will bc private alld onlv lhl' salaried employees or lhl' prirall' sector P()SS{~Ss what it lakcs, ,I) Tmch-ftotl Krowlh

As ",nh Il'Vlf Structural .-\cliustmelll Program Illes. the largel CCOIllJIIIY'S l'l'()IHlIlllC recovery IS desig-llcd to (k\'c1op abovl' all thnlllg-h t.. adl~-kd g-rowtlL rather lhall a slrong- domesllc recoven', A large I1lm' or imports will bc needed to relool induslnl~s and dynamic exporl gro\\,lh will roll ow,

NEO-l.lHEIt,\l.IS:-.t FOR E:\STERN EPROI'F

5) /J()/i/lml Ii /IS/Ii /I i 101101 (lJ1I,wlit/o/ /011 It Il;{s' i11'cn ~\'ideh' understood and accepted hy the slIpp0rLers or S1' that the consolidation or a dcnlOcral.lC reg-IIl1l' hring-s lip the rear or the ST process as its Iinal olltcollle. The other sIde or tillS COIll is Ihal during the proccss or ST the rille is polillcai cnsis llIanag-clllcnt by the eXlxllti\"e, bhlllling- and hiocklllg- popular pn'ssun,'s ror a halt In or rcversal of ST.

n

A Balance Shcct of Shock Thcl'apy in Prncticc

Sachs has rig-hlh- c1aJllleclthall110st g-o\'l.'nIllJeIlL~ IJI POSl-CoJllJllunist Easlern Europe have to sOJlle dcg-ret: tned to lock themselves 1lllO tile hub-and-spokes structurcs ofST and ha\'c Iried to coml)))ll' Ihe clcmands of the Internal10nal FinanclallllstJlul)(lns and the EC/EU Wilh the often (011lliclJng c\omes\Jc pressun:s UpOIl lhem. SlIml' g-OH')")IJIICnts han: drirted. wnhoul an\" cohercllt policy, and onl\" a \'en' rew. like Ill{" Romalllall g-O\'l'rl1nwnt, ha\'e cOllscloush' soug-hl a clilTerent road to a difTert.'nt form or capitalism. We will arg-lIl' live lllaJJ1 cilarg-t's ag-alJlst the polin': I)

~) :~)

·1)

!l)

That IlS macro insl.rtllllents or reg-wnal frag-lllt.'ntaWln and dOIlll'SlIC shock chang-e han: beell immense'" coslh- III the short and 1lH..'dillm I('rm. ST's free trade-led poliCl' iiII' economic n'\wal was Iargel\' miscolIcelved. Its nllcro polines li)r sustailled l'COIlOIlIlC re\'l \'a I ha\'e also Il'nded III weaken rather than streJlgt hen longer-term rl'\'lval. Thc practICe or ST OJl the part o/" western actors has sharply divl'rged from thc theon' III that they hayt' c1amag-l~d the East Europcan states. In terms of its own cnlena o/" success ST has bt'eJl a Etilllre.

We will also sllg-gest that the eleml'nts of an alLernatIve strateg-v con la III l'd In the positions of hoth Ihe Corbache\' g-oHTnment III I ~19() alld lhe French proposals a1 that tIllIe would han' been 1;u' less costly and would haw offered lilr beller prospects for the !inure: keeplllg- Ihe Comecon reg-wJl uillted in its own reform pnl.lt'ct. den~l()pnlg new trade and pa~'­ menl arrang-eJllt'lIls ror that region, and remoYIIlg- Cold \Var trade barriers III East-West trade, while IelLlIlg each go"ernlllt'11l 1ll00'l: rorward experiIllentally al its Il\\"n pact'. Tht' Wl'Slern powers had Iht' capanty to structure sllch an alternaLJ\'('. but the donlJnaJII western powers had no IIllcreSI III pursuing II.

200

POUTICS IN THE Gl.OIlAl.lSATION PERIOD

1)

1'111' j)o/lhlt' j)1'IJrt'.HITlI'

Slwc/i

The lI11plcmemation orST has brought a savage ({Dubie depressive shock to the entire region. Part of tillS has been the result or the ST model's IllSIStence on breaking up the Comecon area, rather than mall1t
;\iEO-l.lIIER,\I,IS~1

~Ol

FOR E.. \STERN ELq{ol'E

COllllllench:d, den>lC betwecn onc firlh and olle CJuarter or lhell- enlire text 10 ,thiS lopiC'l~ Sachs's sccond line or defl-nce lias been til cl ,II III that Commllnism was LO blaml' lilr tile SlUlllp.-I:1 He S'I\',~ lh;lt there 1\'tTe CfiSCS 111 a number or these L'COIlOlllll'S bcl<m: ST staned, This IS true, But the OEeD stllci,,' s charge is thal ST made a bad SllllalJOn calaslrophic: (;olllulka, a dd<"IHlcl- of the IMF. calcuiates lilal till' a\'erag'l' fall or GDP clurlng- what he calls lhe contractIOn phasc or tile transitioll was about -10 IK'I' cent-+! ThiS fig-ure slg-lIaIs a dl'\'aSlaLJng- realit\, in hUlllan sullerlng- I<)r lIlosL people III Ihe regioll, En~1l1l1 1~)~IX oniy olle counln'III IIle enure regHl1I ha(1 relurlll:cI to llS I9H~) k\'l~l or CDI' plT capilaL 'let 1'01' Sachs, such Issues arc a deLailllol worlhy or seno'is analYSIS, The j';('()//ollll.lltrlcd \0 JlIstil" Sachss VIC\\, in the case or Russia by making Ihe bllid chum Ihal COml1ll1ll1Sll1 causecI wo Illuch supply 1'01' c\l'mandle\'els ami 100 lIIuch c1l'mand fill' slIpplv len:ls! 'Till' tr;lI1silioll from the r,llio11111g or ccntral planlllllg to the allocatlo1l or g-oocls hI' the markel was boul1dlO rCCJllIre sllcll a sharp rail 111 rcal wages: qlleucs, in eflCcL rc/1eCl excess dcmand causc(( hy prIces that an: LOO low ill relatIOII to wages. 'r. And ha\,lIlg l'xplall1edthal goods had been too much in demand, Il wellt on 10 explain lilal goods hact also heen LOll Illuch in suppt\': nllt cnoug-t) people w;Jllted them! The !-:O\'erllillellt, il s;lId, sllOuld 1101 pro\'ldc credils III cnlerprlses. bL'cause 10 do so 'will hum' the productIon or unwanlcd g-oocls ,iti

Table 9_1

Indicators of Slump

NI'fII (;/)/'

l'oland 1-1 ling-an' (:SFR (:,ech Rep, Sl<J\';,kia

1989

1990

1991

1992

l!193

(),~

- / , ') -

-1I1.~

l.() -:l.(J

-I

-O,~

-lUi -,\.:1

'L5

-0"1

-15,~1

-

1994 5

-')

-11,5 -7

II

-7

-I

.'"

'IItllI.\ll'/tll/)/'{Jflllf//(J1I

Poland I-Iungan' r:SFR

1989

1990

1!191

19!J2

1993

1994

-0,:;

-~-I.~

-i),I)

:t~)

-1,0 0,1

-!l.~

-~I,:l

-~1.7

:),li -I

N/:\ 1\/,\

" -.).:1

-~·LI

-IIJ..! - )lUi-

-

Czech Rep, Slovakia SOUII'l~"': B~tllk

H.

SdllllWtiil1g.

-1-1 'From Pb"

10

'brkL":,

"n A",/iii,.

"~·II"'It·I.\rlltl}lIi ..

rOl' l~ecolI ... II·IU·'IOII and f)("\'l'IUP"H'IIc' '/;""U(;Oll N'/Hlrt (1~lq·1 t.

lUI.

-:')3

()

-IO.ti

-1

'.!

{I!m:~):

Ellropt:illl

1'( JI.ITICS IN TilE

(~L()I\:\I.ISATI()N

PERIOIJ

There IS line argllmenl thaI sOllie. like (;ollllllka, han' soughl 10 Illounl fil!' Ihe vie\\' thai the ST slulIlp simph' rewa led Ihe waSIl' IIl1Cll'r (:()llInllllIlSnl. ThiS arglllllent hq~tns bv savlIlg Ihal Iw nll'asllring- the inpuls and OUIPUIS or some Easl European ellterprises at woriel pIKes, 11ll'\' were aCluall\, slIhlraCl1I1g- \'aillt' from mjJulS. So Ihe inlroduClioll or world prices would drin: tlwsL' sectors \() the wall: hellce the ST slump. Ihoug-h Inggert'd b\' price lilwralisatioll. was caused by the economic IITal.ionality or COl1llllUlllSnl. For lills to have IJecii Ihe calise or the slulllp. the ralls III produ("\HlIl would have occurred in till: "alue-sublractillg sectors. Yl'l Ihl' prOdllClH)1l nills were across the hoard and ill the Hllnganan case we lind tital sectors identified Iw I-Jan' ,md Hughes as the IllOSI. eHiClcnt wen: III mall\' cast's hit harder Ihall the bIg \';lIlIe sU/)lracLOrs, as Table 9.~ indicales.' 17 lndeed, J-lan' and Hughes Idenlilied alcoholic he\'erages as onc 0(' the big-gest \'"llIe sllhlraclors. vet It was the onh' sector to CIIllIinlll' to g-ro\\' dUring- thl' slump! Table !).2 The Relationship Between Falls in Output :md Industrial Competitiveness In Hungary, 1987-HI!II (1 !IS7 = 1(0) f"rIII s/n'

Fur. shoes

nf{(; mll"ill~'

COlli pellll\'l' ,-all killg'~

1't:rtTllla).{l' OUIJllll rail:;

:;\J,1'l

"lSI

2nd

:llh

2~1.!1

:Ird

-1-1.2

Elecll'ical ellgilH't'nng

:;111 121h I !'Hh

2:lnl

Hlh 121h I-Itl!

~I~.:~

Ruhher

ClothingPrecIsion IIlslrtllllenls

Building m;lll'rials FOlld indllstl"l' :\/1 indllslries

(ilh 21ld lasl

:\9.~

:\(i,·1

211flla.~1

I I,!)

29,-1

:t\

~nl('S:

I) DR(:

~ lllll1l<'sll(" R"SCllIITl' ellSlS,

!.!) CUI11J>,·tllh'c..'lIl'.sS ranking as Illl~aSlll'l·d hy ,,;tltll' aclch·d al \\'nrld pnn'."

Ji-!-o.!'>

lahotlr

rll~b

and dep ... -·

,.,,,111111 "s" pl'rn'lllag" uflmrld pn .... Ill' 1II1II1slr\,. :1) Th" p,',n'"lagl'!;t1l ill IIUIPIlI III I!IDI t"rum 1!IHi h-r,·I,. !iOllln's:.J.(:, [II-ada, I. Sillgh alld A, '1I11"IIk, 'Finlls AII";II ;IIHI Finll' "clrifl: I hml-\'"""'" hHh,,'"' alld rlu- ECUIIOIIlIL" TnlllSltiUIl', I:'{HII'J"II E"ro/Jr"tI, /·:(lIIIOlll1n. (Jauuary-Fehruary. I~J~H). ~IIHI C. Illlght'~ ;,uIII P. 1·lan~ .• ( :OlllIH'lllin'lll ' SS and hulllsinal Rl·,Larllctllnl1g 111 {:I.t'rhtlslo\'akia. HlIlIg:U\' :11,,1 Pubnd·. (:OIUWI\\1IJ1I {I[th"/':"'tJ/Jnlll (,i",rtJtIlJlrtif'.\: 1~'1l1011l'(J1l J:'fOUIJIIIY, ."pl'ciall'4Iili(ut, ltf'. '.! ( I ~)~Il J.

III am' case, I.I1IS arg-UIlWllt IS theoretically lIluddled, As SChlllll:dillg has pOlllle(\ OUl;'1i prrce liberalisalloll is ahollt alterrng rl'lall\'l' PrlCCS and thus falls III some sectors would be cOlllpellsatcd bv rrses III others whost" prorlucts would 'at the same lillle leap upwards III relali\'e \'allle, Alld the o\'crall valLIe or outpUl should n:lllam till: same or Ilearlv the saml' as before. on Olll' condition: that hICLOI- pnces n:allv did mmT Ik-xibh' III lint' with rl'latlvl'

~E()-I.Il\ER;\I.IS\I

pncl'S

Oil

FOR [':,\STERN El'[{OI'E

the world markel. The shirt to lI'orlrl-rdalin' prices would thcll

ql1l('kl\'11)ll\~l"'rrolll a lIo-change OUlplll Ic\'cP!1 to a surge or growth as Ihe

supposedl\' morl' allllcativl'lv effiCll'llt distribluioll or ractors III the wurld markct was reflected III a redistriblltioll or b('\ors III lhe eCOllom\', SOllie I;\,IF l'COIlOIllIStS sl'lzed Oil the ISSlle or factor pnce flexibility ill 199~, c1aillllllg lhal the depression was causeci h\' the f;lilure lU IIllrociuce world prices rully 1'01' lal)our, The\' lhlls salri wages harinot SUlik low l'lIough and rasl el1ough, III short, the dcpressioll was caused 1101 hy ST bllt Iw Ihe !;,ilure to IllIpll'lllcnt It rull\' Oil Ihe wages fnllll. Sachs could hardly aclopl thiS argullll'lIt sllln~ II would ImplY lital ST has 1101 becll trkd, parllotlarlv as wages have pICked tip a bll III most cOlllllrie; SlllCl' 19!1~, But III all\' case, Il IS llnsustamable, Real wages III Polalld fell ~\:Hi pCI' ccnl frolll the bCgllllllllg or 199() to the el1d or 199~, In Czechosloyakia 111 the sanll' penncllhl'v rcll ~ 15 per Cl'll! alld in I-itlllgar" by I-I per ccuL. In all cases Ihe Ellis were iWaVIL'SI III Ihe crucial Iirsl phase of' Ihe depressioll, Thl' /,'('(}/IIJIII/sl l10ted that anl'r six lIIoulhs of ST 11l Russia, real wages had dropped to only ,10 per ccnt 0[' Iheir m'erage 1'01' I ~'9I.c'lI B\' a 11\' stal1dards lhese ligures sholl' extraonlinar" d()\l'I1wanl flexihilitv, As Sclllll1eding COIIImCllls, 'In a lnyial Sl'nst'. all economIC cnses can he related 10 a (\ownward rig-ieli l)' of' real wages 111 a neoclassical fi'amcwork, The negall\'l' im paC! or aJl possible disturbanccs on Ihe profitabililY or producllon Cllltid always be C01l1pellsatl~d by a ['urt her declille 111 t.he realll'ag-e .',>1 :\1 Ihe dOIlll'SlIC il'n:lthese slulllps \\'l're, 111 facI, Ihe direct Cll1lSl'qucnce or two aspens or the ST shock: the collapse of erJiXlI\'C demand - emphaSised sLl'llllg-iy fw Korll:u - aud Ihl' credit crullch 10 Impose a hard budget COIlstralllL UpOIl enterprises, ThiS credil crunch was l'xaCerbaled by the absence or any \'iable co-ordinating IIIl'chanislil 1'01' redeploYIng raCIors or produclion: the old plalllllllg mechallislll was deslnl~'e([ alld a capitalist mechallism - \'iabk IinallCialmarkels ali(I a finanCial s\'stelll - diel lIotl'xisl. \'\'hal COIICl:nIS LIS here is 1101 tile COl1l1l1lling- debate as to till' n:lalivt' wClght or the t\\'o f;l('lors, IHII Simply Ihe ul1delliable /;1('( that the deprcsslOn was a core reatllre of the ('nllre ST programllll', ST supportcrs han' advanced a ilosl or other arg-ulllelll.~ to .Iustif\, the depreSSion dfl'C! of the Illorlel. Thl'\' havc clalllled Ihal. ComnH1I1ist induslnai goods wcre wOl'lhlcss; Ihal thcre was a IIced fiJI' a growth In sernces; Ihal the goods Wel'l' 110 longer 'l1ccessan'> Theworthlcss' argllllll'1I1 has heclI nICely expn'sscd Il\' (;anon :\sh with his remark Ihat relurnlI1g Ihe reglOll 10 capitalism IS like transi'ol'1lI111g a fish soup hack 1I1to the aqllartlllll f'rolll willch II was madl',c,~ But tillS aq~lI11H:IH secms I() be hasl'd more Oil allil-Comllllillism thall hard C'\'Idcllre, \Vhal the c\'Ic\ellcl' shows is thaI when Ihe EC lowered ils Cold War balTlers III 19~)()-~' I to lInports rrom the Visegrad COl1l1tnl'S, the laller's exports surged as follows: lakmg I ~)Xq as 11111, Polalld's exports 10 tht' Fe J'()Sl' 10 ~OH,~ in

20-1

l'OI.lTleS IN TilE (;U)l\ALlS:\TION I'FRIO!)

cmrellll1S ciollars III 1992. CI.l:chosio"akia'sJlImpl:(1 III 2i)O, alld HlIn~;II'\"s to 17H,1), These ~allls were nul conJilled to tradillllll;1I export secturs (whIch were III <\nr cast: more diversified than typIcal JIlICldle-llIC()llle t'OUlIt.1'I' exports), but applied right across the board. As Richard Pones says: 'Thc explOSIve grOl\,th of Centrai and East Europeall exports to I lit: \Vest in 1990-92 docs conclusively refute those who cl
Till'

{-lilli/till

Costs I~/ tilt' Sill JII/I

The h um
NF()·I.II\EI~:\I.IS/'I

FOR (·: ..\STERN El'ROI'F

ralCS. It COIllIllt:IIIS Ihat thl' Easl Ellrupeall health cnM~ 'has IlO 11IstOrlcll'IJrC:ce..'clcI1IS· :-,~ III RIISSla Ihe \lulllber or Illllrcters roSe..' Iw -I~ per celli 111 1~19~ and a further ~7 pCI' (Till III 19~):\.:'H Bctwl'cn I 9H~J alld 199 I hUllllcldcs III Hungary lIlt:rl'ascc\ \w -1:\ pt:r ccnt. In 199:1 thl' Sll1C1cic ratl' had IIlcrcased from IlS I mN Icyel by I :t', per cellI III Poland, by 130 Iwr cCllt in ROlllallla and bv I i):\ pl'r Cl' Ilt III RUSSI a. "!' The problcm or po"erlY and mailllllnuoll has becollle very sel-iolls 111 lIlall\' cOlll1lnes. A sllldy III RIISSla by Coskomstal ane! Ihe \'''orld Bank defined thc pu"crty linc as tile IIlCOl1lC nceded LO m;lIll!alll f'ood consumplioll sIIITiCll'1l1 10 mallllalll a normal boely weighl at all a\'l~ragc Icvel or ani\'IlY - ~11l ;l\Islcrc ctl'lil1ltioll iw weslt:rll slandards. Thc slud" showed that 11) 111~)~:>', per Cl'nl of llll' Russian poplllalllll1 fell belm\' IhlS Iinc. while the figure 1'01' cililclrL'1I lIlIckr liheen was a llorril)'lIlg -Hi--17 pl"\' lTIll. :\ Slll(\" C;\I'IWC\ Ollt by CARE ami lilt' LIS Celllrt' liJl' Disease (:()\llrollll 19~1~ fDlmd Ilial 1111 avcrage RU~SI'1Il penslOlls were below witat the Wurld Bank e~lI­ lIlalL'C\ to he til<.' Illllllllla\ 1I11tntiollai suppor! Ie\'el ['or a person li\'lllg alollt''';u USing UNICEF's cidillllion or mild lllalnllu'llIon (I~'ss than ~,30() (alont's) lhe perCl:lllag'c Dr Poland's popllla\loll sU('('\'Ing slIdl Illallllltntioll 1I';t.~ lIL'gligihle III I ~).,)~l bill had reached 17.9 per cent III 19~J~, If WL' define lhe poven\' line as -10 per (elll or the an.· ..age wa~e 111 19H9 ali(I the l~xtrellle pm'ert\, line as ~-I per cent of the 19H9 a\'LTage wage, then hy I ~J9~ those III extreille po"cn), amolllllecl to hL'tweell 15 per cenl and 26 per rent III Poianci, Blllgana, ROlllallla, Russia, Ukrall1e alld Albania; those 111 pm'erty wen' an eXIra ~H to ;\H per renl. Lilc-threatenmg diseases have IIIcrt'ased sllarpl~' III Russia. TyphOId and parat),pholclmcrt'
Whal Sachs callL'd II\~ cOllceptllall)reakliJrollgll of Ihr()\\'Il1g targel eClllWlIIlL'S open to all allllost clllllplett'iy frec trade reg"ne \V,IS .JlIstified in the lirsl place to addn'ss the pro\)ielll of oligopolies III the East responding 10 pnce liberalisaLIon by r;uslIlg prices while redUCIng OIllPUI. BlIlll was also deSIgned to preparc !1)C way for lrade-ied recovcry. Thcse goals neatly dovclailed \\'1\11 the uililllale go.1I or C\'ea till g open door eCOlHHllles III tlie regHlIl Ii,,' tr.lc\t: and lin' FDI. .-\s H LlIrned Ollt. _~(;(te elHcrprrses \,'("I'C Ilotthe III a III culpnls 11\ ralslll~ pnn.'s. The Illost aggrcssl\'e price lIlC\'eaSl"S wcre III thc seryict' seCIOI' and wl're earncd out by pri\'atc ellterpdst's,I;~ BUI III ,Ill\' l';I.~t' lhe dew that the Visegracl t'cullOlllll'S \\'~'re heavily

~()(i

)'( )L1TH :..; I i\: Til F (;U mAI.ISArH );-..' I'FlW >II

1ll01ll'polis('d S(''(.'II1S 10 1)(' 1~lht:, There was lIoL, (1(" (nurst', perko cnlllpt'lllioll, bill thL'\' \\'e.:rl' rtllig-hll" as 1ll00H)polisL'd as Ihl' fr .... e lllar\;.('1 III Illl' LISA, accordillg' L(I Ihl' lilldillg-s of Alice.: Amsden alld lit'r colk'll!;lIl'S, F.\'cn CZl'choslol'akla, paruculariv SIlIg'Il'cI O\ll as lllol1opolised, has had lillie lIlort' COIICl'lIlr,llllIll Lhall Lhl' US,\, Thlls III 19~)() IhL' larg't'si 100 Cl.lThllsl(lvak CO III p.lI ill'S al'l.:(llllllcd for ~() per relll ofindllstna( emplll\,IlIl'lIt whill' III till' US Ihe.: figure was ~,U-l pl'l' Ll'lIl,ld III Poland, thl' de.:g;ree 0(" CllllcelllrallOIl was Oil a par \\'111\ the USA, ,!"nel gil'en the faCt thaI small l'COnOl\lll'S, 1;11' lllore tra(k-dependenl than Ihe USA, could be eXlwcH'rI to haH' III~hl'r levels of cOllu:nLratioll ill Key sectm-s, AmsdeJl's vie\\' is thaL Lilt' rcal prohlem for IlIl1ch of I1ldllStl'" III tht' reglClIl was t(H) much li';I!.~llll'llt;III()11. ratllt'r thall IIlO litLie, All1sdell c.'1 al. t'lke ~l'l'tlns when: East Cl'Il1r.t1 Etlrllpl'aJl l'l"l>IlOlllll'S han: had grlll\'1 h pot('11 IJal .md delllotlstrates thl' 1l\'l-rfragllll'llIatloll prllhlems, III dl'lL'rgL'IlIS, HO per n'llt of rill' market IS cOlltrollt-d b,' 1\1'0 cOlllpallies III the UK alld 1)\' thrL't: ill C.;el'lII
or

Sachs IS \\'ell aWare this, saving- that 'the g-m))tlinlls III Polalld arc stnall players 111 the European marKer.'i'. Thert: arc also loIS ofalterllatil't, ",aI's preVl'llllllg- iJ\ono])ol\' pncl' nsl'S WtL!lOullhrll\\,lIlg open lht' (Ioor ('llllrl'II' til imports - 1l1O,t 1li>\'IOliSil' through regulator" ImdiL'" Bllt hl' IgIlO/'l'S slIch possibili Ill'S, Thl' trade rL'glmes cstablished in 1!190-91 11\ (hL' Visl'g-rild regll))) an' pn'selllcd bv Sachs as IWlllg Oil ilH: ''''est Europeall model. Bllt titl'I' 11'('('(: \'I.·IT different: quotas were aholished, olht:r NOJl-Tarilf Ibrnl'rs \\'tTl' 11111 ~'stah­ lishecl. ,111I1.dlllllpillg tllstrulllents and safl'g-uard IIhlrUIllt:llls \\'~-n' 1101 crealed, export prlllllOlIolllllslrtlllWIlIS were Iwt sel III pbcc, InSlt' .. d ,I Ollt"club trade regllllc conSisting o('vcn-Iow tarin:o; "'OIS IlItrlldllCl.'d,lili Tht: I'csuh \,'as a predictablL' L'Xport bOllanza Illto lite reg'llJlI b\' Wcst European ClllllpallJt~S whICh, as Giles l'"lt:rnlt of the Philip I\'[orns Institute warned 11\ 1991, 'could do Irreparabie harm' .Iii The assault Oil domest lC producers was l'specialll' rlevastallng III the consullIer goods sectors, Ikl\\'t'l'lI 19H9 ami \ 9~) I COllSUIlIer guods Imports into 1-lulIg-an' llL'arJ~' doubled alld III PO\;tIH\. III the lirsl CI~htlll()nlhs 1991 ilione, the\' \'lise !"rOIlI IH,~ per cenlLO ,~l.t} pCI' Ct'llt ortolallmpllrts, The track fig-lin· ... of'llll' larg'l't t'OI1I\tries rill lIot IH:cl"ssaril\' accuratel\' rl'llect l'1'(,lllS. TIlliS ",hilt- (:I.l'choslo\'ill'

or

or

:--"Et 1-I.II\Fll:\I.IS~1 F< IR 1'..\ .... 1"1-:1(" El QUIl'I.

:.!07

~(;HISIKS

slI()\,' a lilt'!'!' ':! Ill'!' n'lll !-{ro"'llI III IlIlpurlS 1'1'0111 Fr;LII<..T III 1~J~) I, lltc Frcllch'fig-tlres sho\\' a nsl' or I HO per celll. Dtlring lilt' I ~J~J(ls, thl' lradillollal ELI (klinl III lradl' wllh lite rq~lol\ lurllcd llliu a surplus, SYSlelllalJC siudies havt' flol ht't'll puhlished Yt'l Oil IIll' l'XIt'llI to which Ihest' Weslern t'''pons im'o[\'l'ri Ihe dlllllpll1!-{ llr products ill Ihl' Easl. BUI thcre is ample anl'l"(lol'll t'\'ldl'lIn: or IIIIS,I;'~ The overall "alllt: 01' illlports 10 \'isl'grad cuulllries rust' III Ihl' lirsl hall' or I ~I~J:; bv 7 per CCIII as compared Willi lhe C'IITCSpolIClillg ]llT II ld ill 199~, This was Ihl' hlghl'SI IllIpOI'1 sllrg-l' SIllCl' lhl' 1I11c1-1 ~IHOs, IlllporJs to i-iulIg-ary IIllTt'ased Iw () per lT1l1. III Ihe Czcch and Slm'ak Repuhlics h,' [8-~~ per Cl'1I1 and 10 Poland b\' :.!7 pl'r CCII t. ThiS l':.port hOIl.IIl/;) ,,'as Ihe restlll or llIort' Ihall lll'lrkl'l h,nTS, It was SIJ"OllgJ\' SlIhSH]isl'll b~ \I'l'_~Il'rll gO\'t'nlllll'llIs lhrollgh l"p0rl cn'dil._ ;lIld crcdil gllar:lllln:s III I]Wlr U\\,II n'lmrtlllg linlls, These SlIpports \\'l'It' pn'sl'nlt'Cl :IS ;\id li)r IIll' 1,lr!-{el CllIlllll'lt'S (II'I he ("xP0rl d\'l\'t', Illrit'l'd. ;ICC( lJ"Clillg- [() S.ll·hs \'IrllIalk all Wt'SI('J'll :\id to RUSSia has ht:clI III slIch c:-;poJ'l suhsidies. Thl'" t'II"hk c:-;p .. rll'rs lU 1ll,Ike nsk-rrt't' bn~aklhroughs IIItll larget markets whilt- Iea\"lllg Ihe (,()lIlllr\' cClIIl'ernl'd hllrdened with ('xlra rlebt. :\11 lI11j>urtant dillll'IISIOll or lill.~ t'rj'ort h"s bel'n atlelllpts b\' \Vesl European stall'S LII .~l'llt' lilt" lJIar!:.t'IS III thl' Fortllt'l' 'sO\WI Llnloll prt:l"loLlsh' slIpplit'd h)' 1-:asl (:CIII!~tI Ell ('I Jpl', Alltholl\' SOIOIllOJl, Ii Irlller Pa'sldt:11I or the Nt'W 'I'll'!:. Federal Rncl \"['. cakulalt:r1 that Wt:SltTn ('xp0rt credils Were enahlillg ahout Sol billioll oj' Easl Cl~lll.ral European expon trade to the USSR reg-lIJ11 10 he din~nt'd to w('siern supplicr-,.li~1

:\ parllcularl\' (Iallla~jllg dimensioll or Ihest' poliCH" for Polanci ,IIHI I-Iullg'ln· has In'ell tilelr lI11paCl Oil 'Igricllllllrc. AI :t IlIlll' ",hell lhe IFls were clt'lllallciing' all elld to agnculillrai slIhslcIit·s III 111l' '·begr.ld C(JIIIIlJ'lt'S, the hrcak-llp or (' .. lIt'Cun' I;II-ms alld \'l"'~' large wage rcrlucllolIS hnnglllg I;tllillg I(Hld clt'III,UlIl. Iht' full force or heal'il\- SUhSlclist'CJ ELI ;lgnnIilllral exports was dumped III lht· Visq~rad markels. Till' ELi's so-cllkd hlllll,llll!;m,11l J(Hld ,lid pl'OgralllllH' Jill' Polalld III I !)H~J-~)() had prepared Ihe wal' hI' dC"I;lhilislllg delll,ulfl t'llIldillOIiS for pl"lsalll suppliers, Thl' n'sull has hl't'll Ih,lI Ihe IlIOSI lI11purt'lIll prt\'ale hllSllll'SS group III Ihe reg-lOll, whell COIIIlIlllIllSIII {'lldt'd, Iltt' Polish jJt'asallln', has IIt'uIIlIC lilt' 1\l0~1 po\\'erl'tll SOCIal group \1\ Itlc cOUlllrr oppost'c1 10 ST and 10 lilt' ELI, Meanwhile,;ls 1;11- as easier II largl'1 stales wcre ('ollcCl'llecl. cnill'l.~ on Ihclr pan 10 cnga!-!;l' III direct exporl prolllolion wcre hallllect by lht: \-\lorld Balll"ill By I ~I~) I Ihe Viscgracl g-()\'l'nllllI'IlIS \\'t:rl' tlncll'r IIIOIIlllJlIg prt:ssure to n"'crst' lhelr Opt'll door polin', and III gelleral. larins ilnc! lI11porl surchargt's wcrt' llllPOSl'Ct. In Poland Prt'slrll'1I1 LtTh W.tll· ... a publici\' accllscd Wl'Slt'l'lltTS or In'lIlg 10 nllll Polish IIHluslr\,./1

20H

POUTles IN TH E (a_OBAl.IS,\TION (,ERIOD Cmlll/IiK Mar!;I'1 ,IIT/'n iollir.'/:'[i

The noLlOII of trade-led re\'I\,
~F.O-l.Il\EIl-\l.ISM

. ', ...

Table 93

FOR L.-\ST1·.RN EUROPE

Sectors of Export Strength In E:u'ly 1990s

,'-

,Ii,'cl()r

1.

POland. I-lungal'\' POI;lIId, I-IIIIII-:'U"\', CSFR i'"I,llld, J-IUIl!-::U'Y, CSF({ I-lunga)'\'

F()()(l/a~l'Irllltlln'

') Textiles/dutlllng :l. Inm ;\lId 'led -I. Chenllcals :i. C:uai

l'obml CSFR

(i. Fuel S'>lll'l,e: C

\I"'I'-OI"I''1l1a alld \'_ Rolli. '1IIelIISI.-ial COIIIIII'I\" \\'uh Rl',ljJH·rt 10 J.:,I~ll·rll rlJ! PPl": Thl' Imp;'L'I IIi Illl'

Prolefllolu'lll

:\:\'lIl"IalluH :\;..:-n.·t·IIH'JU.,

Con.-lu(Jt.'(1 \nlll tJu.' EC (III du' EXPtJll~ or

Puland, C/lThl1,III\";.ltia and

l·hIHr.:~U·\· .

Th4' lli"M J:t'WIflIllY,

17:~ ,I~I~I·I).

The tra(k~ aspeCis of the Europe Agn:elllellLs came 1\1 to l(lITe on an mtCl'I111 baSIS III March 1992. By the secol1(1 half of the Year, East Central Eumpean expOrls to tile ELI were 1I\ decline and (Illnllg- 19~U these e:\p0rls slumped In an alarm1l1g wav. In the Jirst half or 199:\ the COIlli>lIwd "aim' or exp(Jn_~ (i-Oil) all till' East Central an(1 East European Ullllll1WS 1<:11 hI' I:~ pCI' cenl III dullar terJlls as compared Witil thl' lirst hall' or 199~. The dedilll' alleCled exports to the \'Vest, to transillonal economies and tu LDCs. ThIS reversed the earlier pattern or a cOIIIltcr-iJatanclllg- of dcclilH:s to the Ci\'IEA area \\'Ith nses to thl' EU,'·I The over;llI result was a trade dclicll Or SOllie S7.~ I)illinn III the lirsl half of 199:~, compared with a deficit ofSI.:i billion in thl' same perlml III 1l)l)2. Alli1ollg-h the CZl.:ch Republic's Irade (lcJiut wOI'sl'ned as liS IIIlP0riS gTe\>' bl' ~ I per cent, Ib exporL<; g-rew hv 1:\ per cent. By cOlltrast Polish export!i rell Il\' 7 per lTIH and HlIllg:maIl exports I"ell hI' over ~g per U'llt. The bll 11\ I-lllnganan exports was especially strong- III II1dustrial consumer goods (down :~O per cent), 111 foocistllfb (down 17 per cent) ami III agriCUltural procillC[s (do\\,II f)~) per cellt) ,'" The dollar I'altle or e:\p0rLS of dOlillllg, lextiles and footwear c1cC\ined by 4H per cem 1Il Hungar\'. III lrull ali(I steei proclllCIS, Hllng-arian exports declined hI' ~() pel- cenl. TilliS Iradillon:11 expon sectors 11'1.:1'1: loslI1).: t!lell- jl(Jslu(ln hut lIell' m
~IO

POLITICS IN TIlE t;U)J\.-\I.IS:\TION

I'EI~IOJ)

cannot he the ClIlIre answer, hccause Polish exports had already dropped substanually III 199~, wilen the (;erlllall CClJlIOlIl\' was nuL \'l~tlll recessi()II, The UN ECE Bill/dill stressed that III I mJ~ and H)9g EU "l1porlin~ countries resoJ'lcc\ ll10re frcqucntly tll the ust' anLJ-c,11 ('Ollleni reqUlrt:IlH~11l of GO per cent. Althollgh thiS threshold IS lhe lllalll form or rule, two other sets or cldin1Uolls are aisll applied to SOlI1L' prodllcts:

or

a) b)

products onglll<1tlllg 111 all AssoClatecI COlllltry are t.hose ",holl" obtained III that cOlin tr\'. products onginatlll~ 11l an ASSOCiated countr\, can he [hose' obtaincd lJl the ASSOCIated country III lhe m;lllu/ilClllle of wille 11 products (nol wholly ohtallled ill UlC countr)' ancl not obtamed III the Ell) an~ used'. pnwldcd thallhc saul products Ila\'e undergolle ·SlIf'liUc..'lll working or processlIlg' The hasIC ddilllllllll or 'slIfliclelll working' /111- (IllS purpose is a cllange ill cllstoms heading-s at thc four-dig-Il levei of the HarmOlllscc\ System, differing from thai 111 which all the 11011ongll1atlllg matenab an" classified. Thcse 1;'lIlds or al'rangt.:lIlcllts

;-';EO-l.ll\Elt·\I.IS~1

FUR EASTERN El:ROI'E

211

elllhracl' these CUH\Ollll('~ III a CtJlldillOIl of tradl' depcllclellcr towards I he' cu. Ii''lcklllg- the cle\,l:loplllCII t of the c1inslull or bbollr ill [he target sl;lIe IIHo EU l'eC(lII re IlIl' II ts. The lI'a~1C reslIlt of these polilicu-CUJlHl11llC IIlleraCl iOI1S has beell thalthe dIlIllCS\lC depressiH' shocks p()\iccci lw the 1M F alld dL'siglled tt) lay thL' hasls for lI.~umpLJI)II.iS }i'/ tht' jmlifl,'., tilt' IFfs balli' b"I'11 IIlII"wll/'IIIl/llgly dili"'II'd ai n'dllwlg dlllIU'S/lf tll'III1I/III pn's.IIII"S, si(/lu/!lllg 0111 III/lf/lm", 100tJl'I"IIlg wagl's {(lid r,'durllIg govl'rI/11/1'111 dl'finl.1 'hmuglt slll'lI/lillg mil.

fir

Fism! (;n.m IIml IMF {J(}tin

The ST slulllp plullged most g()\'ernll1eIll~ 111 !.hL' reglOlI IlIlu a cieep liscal cnsls. ThiS IS a lIormal br-prudueL or slump. though lIIa(k (;1 .. worse b\' thl' bel 1hal ST did not pnorillse a transformation or tax S\'SI~IlIS and a Sl1'ell~lh­ elllll~ of adllllllistralive apparalus(:'s. Thus a fall ill IIldustnal production whICh appro;ldles flO per celltli)r thl' rl'l:{HHI
I'Ol.J"nr:s IN TI-IE (:l.UIHLlSArION PERIOD

to combat II1l1ation. This has heen the polin' or the IMF cturll1g the hlstoncally almost unprecedented slulllp that has devastated the li"es or hundreds or milliolls or people during- the last. five \'Cars. Illsorar as thl' polin' has been rollowed bv target gm'l"rnlllellts Il has (Iccpelleci Ihl' slulllp and caused long-term damage to the sOCiai and adnHnlstrallH' as well as economic IIlrrastruClure or the reg-IOn. There has, however, heen one 1l1;~lor exception to tillS rllle, an excepLHlIl whICh goes rar to explain the countq's beg-innlllgs or a return to some growth: that exception IS Polilnd .. Here alone has the Ii\·IF supported reall\' 1ll;~I()r western IinanCial support, 111 the fi)rlll or a callcellatlOn or hair or Poland's debt 10 both pul>lic and prmlle cn:c1itors. TillS has trans)"orlllcd the finanCial pOSition or tIll: government anri has also cn:atccl the baSIS ror stronger confidence III the future on the part oj' plwal!: capitaL (Hung-an has had hea\,ler per capita debt.~ and has not dd'aulted, unlike Puiand, Bulgaria and RUSSia; yet it has Ilot eve II gamed debt relil:f. Illuch iess i()I-gin:lless.)liO But even III Poland, reC()Ven' has still been undermined b\' 11Il' IMF's eLl"I\"e in the early 19~IOs to make the light a~alllst IIltlalion lhrou14h go\'ernment spending ClitS the centrepiece uf policy. I ts catchphrase has been that there IS no trade-orr between JinanCiai stabilisallon and growth. But III an Eastern Europe whose recovery has had to be domestic-consumption-led the causality has J10wecl in a diametrically opposile clireClion rrom the IMF's polic,,: wilhout growth there couic\ be no finanCial stabilisalI<m. P"IF policy fill" finanCial stabilisation tended to de(:pell recession amI tlllls further destabilised Jinances. GOll\lIlka has tned to explam thiS siump-deepenlllg polin' bv the ract that the Il'vIF's Illission is supposedly the world-Wide light ag-amsl ml1allon. HI I n other words, econOllllC recovery in lhe region is not pan of the IrvIF'sJoll. TIllS does not cxpialll why the Ij\'IF was opposed to plugging deficlls by PoliSh-style debt n:cluctlon or the recent j\·!exlcan-style transrer or macro· economic support rUJl{k GOll1ulka. very milch an \l\IF 1I1Slflel- Oil liS East European operations, explains the IMF's thmking on tIllS. He IS wonh quoting at length: 'The Illlpact or foreign assistance can be slIbstanLJal, evell vllal, only on a few occasions, especially when Il IS 111 the f()I'm of grants and debt reductions. However, large grants, irnot linked to perli)rlllance, reduce the financial discipline of local economic agenL~, and l11a\' have all Impact 011 tranSltloll econOlllles similar to tllat of a soft IHldgel COl\st.ralllt on state ellterprlses _ Most or til esc econOlllles are already hea\'ily indebted, 'lIIci thiS gives them lillie room for cOlltracllllg Ilew debt. A rill' l1lore Important rorelgn impact may cOllle li'om the mllow of\·Vestern private Il1vestment anrl know-how. However, internal reform ef/()rts rather Ihan external finanCial assistallce seem needed li)r this inllow to la);.e place.'li~ GOJlllllka, though slightlv evasive, does ackllowiedge that dellt reduclions and grants call make a vltai impacl.llut hiS baSIC pOllltlwlies hiS ()wn earlier

NI·:O,I.JBERAUS:\1 FOR F,.-\STERN ElIIWI'F. sll~gesLJon

that the IMF was simpl\' lixaLed on IIlllallolJ: helping governdde the slump would not put sunicienL pressure on them to push through to thc end the lllstitutional cngllleering to gam FDI, and lhls FDI would be the real lcvcr or reco\,cn·. Thc meanlllg or thiS IS dear: the I i\·IF was using the slump as an IIlSlrllmenl ror fapl(1 social engmeenlJ~' at a nllcro ieveilo creale: lhc desired goal or a slate opell 1O FDI. The 1l\,IF's domeslic lIeo-lib .... ral agenda could have heen dispiaced debt cancellation or lllacroecollOllllC grants. Sachs IUlI1sdr has nicely summansed tile resulting policy III the case or Russia: 'the SUIllS [transrerreelli'OlIl westel'll public bodies] have been derisory "Virtually all western "aid" has come in the rorm or export credits to Russian enterprises, wllb short periods or repaymcnt, rather than in the rorm or grants and IDng-lcnn loans [() the RUSSian budge I , , , Ovcrall support rrolll wcsLern gO\'ernlllcnts 1"01' tile RUSSIan bl1c1~Tt, \'Ilall" needed J(lI' slabilisalllJlI, has het'll essentIallv nil, In 199·1, there was essentially a cOlllpletc mllapsc [on II1ternal1onai assistance from govern men ts Oil behaH' or RUSSian rci/lnn', H:1 Sachs has not slIpp0\'led this polin'. His ST model presupposes massl\'e del)l cancellations and granls for macroecon0l11lC assIstance as well as Jill' more political purposes, I-Ie predicts till' catastrophic consl'qllenccs in Illany paris 01" lhl' regJOn hom western Elilure to delinT tbls aspect or lhl' polin', (:ven warning or CIvil war, Yel he docs not acknowkclge llle obvious ('orollar)': tilal hiS ST model was built on sanel as regards hiS assumptions ahout the driving rorces within western govcrnments and IFls. His cx pOSl allcmpts to shift blame on 10 people like Gomulka, li:>l' thmkinp; like 'bureaucrats' prc-occupied by W~lstc, cannot absolvc him or 'hure;lunatic' IIltelleclual. errors III not graspmg the politicai dnvt's govcrning Illl' western powers and the IFls Ihe\' control. lIIell"ts

At the ievcl or IlIlCro-economlc reSlr\ll:LUnng, the ST lllodd amI the IFls han' shared a common approach, The rl'struClllnng shollld not he carned out Ilv governlllent llldustrial poliCIes, It should IH' lerllo 'market. SIgnals' and 'market forccs" allel espeCially 10 weSlern markct furn.:s enlering through FDI. The lask or target governmellls IS snnplY lO depress wages, to Impose hard-bUdget constraints upon state cnlerpnses and lo prtVallse for cash, Market Signals and forccs will do the rest. Puhlic sector lIltervenlionIsm wouiel certalll h' be necessal'Y, bll[ it would lake ll!e ronn of the ',Vorld Bank and tile IMF l'XCrllllg the necessan'll'verage to r.:nslIn: this approach was rullowed,

214

POLITICS Ii" THE (;(.()I\:\I.IS,\TI()N PERIOn

Till' PI'/IJ/(/()'

or

Marhl'(

!-III"(('S

It is now generallY rn:o)..{llIscd that tile 1ll,Irkcl slg'llals of slulllp ClllldillOIlS were thoroughh· distortccl ami could gin' no glllciance as to which t:lllt:rprises could survive and prosper III normal market conditions. R. \,inlr(J\'a's study or the C:SFR COlllirms tillS: she shows that there was a sign ilicalll downward restructul'lI1)..{ 'toward sllllple energy and matcrial-dcmanding production proccsses, which are becollllllg 1I111ch more ac\valllagC()!lS to export, espeCially due to the rapid c\eyallle necessary to sh u t clowll e\'en III rlustnes with a promismg demand' _~:, Brada SUIllS up thc Hunganan cxperience tl" pOllltlllg oul that the "(11'<1maLIc losses or otllplllllleal\, as a maLler or ract. the quasi-disappearal)(;e or whole II1duslncs. To gl\,(~ JlIst one examph:: III the consumer c\eclr
NFl ),J .IBER:\I.IS7'.1 Fe lj{ F.-\STER:--i EliRI WE

lIlc!ustnes and eillcrpnses, In additloll, credit ('(melillolls wuuld be eased alld t-he:hudp;et would ~o heavilv IIIto cI('liell, The !{()"ernmcnts or Poland, !'!uJl14arv alld t:!sewherc thererore llIrncd towards all II1duslrial policy which would 111\'01,,1..' helpll1~ stale cntcrpriscs to restructurc, Bill the IFls opposecJ such <:ITons, Thus while III a COlllllr" like the Fedel'al Republic of Cenllall\' gm'ernllll'lIt subSidies to Indllstp' arc II\,L'J':~ pl'1' cellt (11' (;[JP, the IMF alld \VB lla\'e campal!{lH'cl \'I140l'ouslv alld dfi.'clI\·ely agaulsL such subSidies III tile Visegraci COllntnes. They dr()pped 1'1'0111 :-J.'i per ccnt or CDt> to ~.,I per celli 1\1 I-Iungan I)\' El~)( while III Poland they were reduced tn a mere ~.4 per cent or budget expenditures by 1991 and 111 Czechoslo\'akla to ~ pCI' cent or GDt> ill the same year.H!1 These results were achieved by tl1reatelllllg to wllllhoiclli\·IF or 'VB loans. Thc \VB has also blol'kcd !{()"cnllIlCIllS rrom rl'.~lrUl'lllnng SI;Ill'-nWlIl,d L'llltTpnses berore pnVallS11I!{ them. Saclls has claimed that thiS was unrealIslll' because ~()"ertlmcllts lackcd the resources 111 pcrsollllellu do thiS, But the 'VB lOok 110 chanccs alld ban lied them from appl"111~ what reSOlll'CCS the\' had. It explamed Lhat 'Such phYSical restrucllInng IS bcst donc Iw pn\'ale owners.'!I(J It tl\ererorc required the Iillannal Capal'ltll's of Polalld's Industrial Develo(lllll'lll Agcl\n' be prohibited. Tlw \VB's agrecment With t he Polish gO\'tTllllll'lll Oil this mallcr l'XplaIllS: '11> ..\·s l'XIStlllg lillallnal pOrlfolio will be trallslCrrcd to lillallnal llISLllulions, Loans ttl enterpnsl's will bc sold or Lransrcrrcd to finanCIal Cllllllcs capable or malla!{111g credit nsks ... IDA's eC]ull\, 111\'esLmcllls 111 entcrprises will ht: transferred to CCJUltv holding' cntities, such as IIIdcpelldellt companics, [Jl'1vate funds, priv
POLITICS IN TI-IE (aDlI:\L(S:\TION PERIOD

Romal1la lhe \VB's a{UUSlmenl loan has i)een made rondiuonai UpOIl Romama -s ~overnmen L pn\'alising the Romanian Developlllent Bank ami a second stale bank."-I Another lield oj" eCOnOIl1IC policy where western public t)Ociies have hCl'n decisive has 1)een 111 seekin).'; to end significalll subSidies ltl
4) Hhlt'fII GOlWl'l1II1i'1I1 SlI/mdil's jiJI' llh/l'l'II Purr/ws/' ojEoJI Ellmjwoll Al'.I"I'ls

\·Vestern public i)odies have pllslled for the sl,'ift opelllllg of slate assels III the East to FDI and fi.>r full nghts ror Ji»)"elgll cOlllpallles to partiupall' III priVaLtSallonY:> Eastern governments which failed to lake slIch measures COlllclllot cxpect the western IIlstitutions, espeCially the ll'vlF and the Eli, 10 ease excluslOllary embargoes on their panicipallol1 In the western product or capitalmad.ets. Thus, the If'vlF and WB loans to Romania were hlockc(1 \)ec;{use ils pl'lvausalion schellll' limited parllCipalloll hy f()I'l'I~n lI1VcSlors, Western politicai pressure was llsed to gain the only two major deals conciudeci between Romal1la and western lllultinallonals,!I!i Equalh'

NEO-l.lI~[R:\l.lS~1

~17

FOR EASTERN El!({OPE

Important has heen Jl'vIF pressure li)l" governments to sell state assets, IIlcluding tht~ public utiliues, to western compallles 1Il order to reduce liscai de/icils. Such western pn:ssure Oil the ;ISSl'! suppiv Side has bl'l'll combmed wllh wcstern state subSidies at all sta~es III the process o/" pnvausll1l-( lO western nlllltm operatlOIl at the start ol'January 199(l.~JH Its nallle IS an acrollvlll for' Polancl, 1-llII1~ary: Assistan!.:!.: fill' Restl'uClunng EC()nOllllcs'y~J PI-IARE has been sul~Jeu to a torren\. or CrItICism largciy Ilecause thl: EU has soug-IIL to disSIIIlUlatl: IlS purpose. The EU has presented it as both it partnership with target guvernments - recIpient-driven - and as a means of transfernng funds rur people III the East. ''''hen it was set up, lls main pnunlll's werc s.ud to he transflTnng funds and other forms of ;ucl to assist agrIculture, CIl\'ll'llI1mental protection. till' restructunng of industry and small businesses anri cd UGItionai dcvclupment. Sin!.:c PHARE lIas not 111 fact beclI ahout thesl' things the CritICism has been inentablc. Table 9.·1

CEECS l;'ar 1990 I ~)!) I

I!J!J2 I ~n):l 19!)·1

PHARE and other Western GrnlltAid l to CEEC (Millions of EClI)

I'H:\RE ( :/JlIIl/l1l/l'd

500 77:> 1.015.:; J,IJ.lO s:~:;

1~)9:i~

Total

(;~·I

1)1111/

Cm II I.\'

171

9[iO 1.120 1,120 1.120

~S3.9 ~1;~:1.9

·1·1:1.1; ·I~l~~

770

NOles: I) Excluding ddll H.-titlc1ion. l;!!·1 Mraliis Fnl "I 51=0.H Ern.~) I'n~I('('I"" ill Et: blld);(·1.

C'OI1\'l· ....:d

rn~lll

5

10

liN ErulIIJl1lu: (:ollllJlISSIIJU for E1Irope: FnJllol1l1(" 1\1I1I['1I1l Emllp('. I'll\. .1:, (l!I~):I). p. ~J.! ;IIHt EC (:11"'111"'"111. allll EC Ill,,!);,')

SOlnn's: (III'

IIII' I!J!H,

()/lirilll./","wd "IIII"/,I/,/1!"'
(.;'I/II/I/I/I'lio'l

(i I'd" liar"

t!J!H).

21~

!'OI,ITI(:S IN THE (;I.flll;\US .. \TION PERI< HI

PHARE policy-mal,lll!-\' powers are lIot shared I)etween the COIllIllUlllt\, and the reCIpIent country's guvernlllent: the\' lie exc!tlsIVe!V with tlle Comlllunity, although L1le reguiauon setting lip PI-IARE docs say ·accoullt should be tal,en, IIller a{ia, of the prefen:nces and wishes expressed h,' the reClpu:nt cOllllu-ies concerned',lolJ The Elf Commission has claimed thaI rill' target governments do. nevertheless. cOlllroi 1lllplemelltaUoll. clung tilt' I~lctthal PHARE units ilre III all the reClpl(:nt cOlllllries n:\(:valll ministries. and PI-IARE ll1one), IS ll) iarge pan disbursed b)' these llllllS, Bllt according to the EU's COlin or Auditors the purpose or tlus c\ecentraiisalloll IS lIot til gl\'c controi to the target governments' ollicmls SlIlce 'almost none' 0(" Ihe leading personnel ill these managementlllllls are nallonats or the reciplcllt COllnU-les: tlleyare Ii-olll western Europe. appointed b,' EU bodies and work under the supervision of" the C0Il1111ISSlOll and o/" EC/EU DelegaLlolls,llJ1 The real crfect or thiS administrallve cil:centralisallon has been LO make Il impossible even for the Court of Auditors to trace how PHARE nlOne\' has actually been spent, since the C01l1miSSIOIl has gwen advances to these l1Iallagemenlllllits in the rCClplcllt coulltnes and has beell unahle to supply the Coun with informatlOll 011 how thiS money has been spent. Thlls, although the Conn's rcporL~ can be taken to be the most reliable source on PHARE. it aiso IS III the dark about much of the programme_ Thus, one or the I)lggest eariy PHARE pn~Jects was 50 million l:culilr pestlCidl:s /"or Polanc!. The .. \uditors were unabie to trace wllere thIS actualll' weill thollgh the Court diel establish thaI SlIml' at least was r('-exported to the EU, J!)~ Also III the agnclIltllrai lield, at the stan o/" I mlO ,I pn~)ect was sl,lrted to supply loans for pnvatc farmers in Poland and Hungary, but tWII WOlrs iater nu loans had been granted, The Polish fund was, In 1990, gmte large160 million ecu. But as hue asJanllary I mt~ the CommiSSIOn was still unable [0 gn'e the Court inli)J'InallOn abolll the fund's aClI\'IlIes eH'n though 11 had prollllscd a first report on It would be published III 1991. 111 :: The same pattern applicd to another bIg PHARE pn~Jet"l: to pro\'ICk loan lilciliul's fill' small and medium-slzc(1 t)\lsinesses III Poland and 1-lulIgar\" But at the end of the second year of tillS pn~ject no
NE()·UBER,\l.lS"1 FOR I':"\STERN El'ROI'E

deait with I1\'. III the words of thl' ELI Auditors, ensuring- thallhcre was 'praclii'alh- ITu -lllvolvt"ll1ellt ()j" Lhe cdllcallllIlal aULhol'llleS of the recqllcnt cuulltn' 10,; On the ot her hand Il seemed to fannlr WeSll'rn rellt-seeking: it handed the IInplcllIenl;ttioll of Tcmpus to a ]Jlwatc ()q~anisauon, the ElIrnpean Co-operation FUlld (E< :1'), which has IlselJ' becl1 dl','oted to Ihe hllSlllCSS of ecluca!lOl1al cxchanges alld has bel'1l hlcldill!-( J'or Tcmpus excllang"c m oncy. Pones's rl'adiIH:sS to r'lIsc thl' Issue of deja" IS also curious. Thus li'om the sIan or PI-L-\RE III 1~)9(), lhl' gO\'l'nlll1Cllls of Poiancl, l-lung-an', Bulgaria, CZl'choslovaKla and lile GDR had made cllnrollllH:ntalllllprovcmenL lI\easun:s a prlol'lty. Thc EC COlllmlsslon agn:ed. BUI 11\ Poland, al'ler thn:e full \'ca'-,~ of thc gm'(TnllWIlI's making thiS sector a PrIOrIlY, the Commissioll had carl'lcd thruugh IHI slllglc pil()t III\'estlllCII! pnl./ect thai would directly IllIpro"e en\'lronlllCllla1 conditions. The Hungarian govcrnmelll had produced proposals 1'01' slime :200 prIority pn~Jects 1'01' tackling l'll\'lronmclltal problellls, but the CUillllllSSIOIl did nol sl'\lTI a sill),{le one or lill'sc, whill' It did fund till' COllstrucllOll of a wildlih: park and ('yen supplied a cl'llll'al manageillenl buildin/4 for it.. 1117 Pn~jects- regarded as urgel'\l by reClpll~nt Slales, such as the construction oj" sewa),{t' purilicallllli planls 111 hlghh' ]JolhUl'd areas Stich as Ihc Black .sea. the Baiue. \fars;!\\, ,mel Northerll Blldapest were n.:jectl'cl by the CllllllllisSllIll. lIlH IIl.Januar~' 199-1, the European Parliamenl cnllnsed lhe (:Olllllllsslon\ bck oraCliOll onel1Vil'Onllll'lllal isslIes and 1\.'; failurt, (() back reClplcnt g'm'enlnll~IH prupusais such as LlHlSl' 1'01' the Dallutll: BaslII, Black S(~a and the Ballic Sea. It crlUClserltile j~lct thal PHARE rllnris were lIsed only for studies and it urg-ed the CommiSSIOn III lise ioeal consllhanls morc orren for PH:\RE. Ill!, Yel WIU1111 an ST rralllework, most or these CI'IlICiSmS can be disnllssed, pl'O\'ldecl the purpose or programmes like PHARE are devoled III aiding pl'I\'
p()l.rrrCS IN THE t;1.0IHUSATION PERIOI)

and transferred vast qual1t111es of economic inli.)rtn;uiol1 westwards. The charg-e was made repeatedly that East European consultants were neyer used and should h'l\·e been. Yet It IS surely not obvious that sucil eastern consultants wouid have Known the kinds of profitable opportunities that western multinationals would have been arter in the region. And cven if the\' did have an IIlkling or thiS, ther might not have been sVlllpathetlc. The Slovak llllllIstr)' of pnvallsation criticised these PHARE comultancies on its mdustnes lilr not corresponding to Its specific needs. II I But this crillCIsm again would be beside the rOlllt rrom an ST perspective slllce the specilic needs to be met wouid be those of potential western 1Il\'eSlOrs. And tlleIr needs depended upon their global strateg-ies, not on what, rrom an ST point of \'leW, were narrowiv natIonal perspecl1ves. From thiS newpo1I1t, the onl" CrItiCism of such studies would h;1\'e been ir they were used not to rurther western FDI but to undermine East European elllcrprises that posed a competitive threat 111 western marKets. But because or PHARE's lack or transparency It IS dilIicuit to gain inli)J·matiol1 011 thiS frO/H. One such case became a scandal: the CommissIOn's spending of just under 950,000 ecu on a stlldy or how to restructure the Czechoslovak iron and sted 1I1ciustnes. ll :! The sum was not even mclmiecl in the programmc for PI-IARE aid to Czechoslovakia. This was one oj" a lltllnl)er or such con tracts ror amoun ts of between HO(),OOO and 950,000 ecu not directly covered by any parlJcuiar programme. Studies of thiS son were very obviousiy of great political senSillVil.), when the CommullItv was engaged 111 protection meaSUl-es agamst a competitivc threat rrOlll the Czechoslovakian steel industry. I 1:1 The Commission has, III bct, IIlcreasingly sought to mOlJ\"aw PI-IARE as a support prog-ramme for FDI rather than pretending- illS ai>outl.ransicrnng runds II1to the hands or East Europeans. In the words of A. Mayhew, the Director of the Comnllssion's Dil·eclOrate General for Externai Reiallol1s: 'The countries ofCentral-Easlern Europe have critiCIsed the (PI-L~RE] progr;imllle for prOViding too much technicai ass/stance, too Illan\' studies. if YOU wanl ... we are now trying to move mllch more into thc area of ill\'('slmenl. a11(\ away from studies whICh do not lead Lo an)' investment.' 11-1 PI--IARE has also been lile prinCIpal funcier of the Pnvatlsation AgenCies set up as government bodies III Eastenl Europe. II :, The PI-IARE COIllmltments here have been detailed and thorough: thus In Poland and Hungan they have I/1cludec\ paying for offiCIal cars and orIicial l.'((UIPment and, 111 the Hungarian case, for a financial adviser. I Iii The fact lhal targ-et governments do not always appreciate this Aid produces ndicule on the part of sllpponers or ST. As was the case with Its atLItude towards western export cn:di t 'aid', the Polish governlllent 111 199,1 rdused to touch an EU grant fund deSigned to match the amollnt ormol1ev IIl\'ested bv EU cnmpal1Ics in privaused Polish companies. Under the tUie 'Looking

NEO-l.I[H:R:\l.ISill FOR

E:\STE[~N

EUROPE

at gin horses', the EroJlolJIlsf poured scorll on tills r~Jectioll of '(i'ee money' b\"a,g()\'t~nl1ne1H 'rul1l11ng a budget deficit or more than S~\bn', For tlw ErollOIllHf the advantage or giving the Ell company a rent that could enable It to beat a Polis[l (or American) compelltor was evidently 1.00 obvIOUS to warrant Jllstification. II i Table 9.5

PHARE Pro!,'Tammes by Sector (Millions of Ecu) 1990 (;1

1992 C

/''''-

:\gTlt:/Rural DCI'e1opmcnl Et:OllOIllIC Rcsi r/ Pri\'! Jinant:c En\'lronlllcni I-hllnan Rcsources: 1 I nn'asl ('nclIl rc Humanitanan ;ud 1\-1isccllant"tllIS TOlal

/1t'1"

I)~

III,/,

('1'111

1'1'111

(('III

[ :\(i.O

2i.·[

27,UI

i 1.9

Hi7

IH.S

il!UI

22.li 2(l.Ii i.·[ 6.1 I,U H,Ii

-1-1:).2

22.9 11.9 2 1.:1 2.·1 i ·1.9

Hi·Ui 59. X 2211.\1

IH.5

!!Il.:>

202.1

~2.7

11.0

·lIi.~)

102.5 :Hl.H I:Hl.2 (iIi':' ·12.9 ·IHi

100

,)-0 _I Cl.:)

·IHH.'I 21.:) ,\-1(>.7 252.1 2.2!)O.:1

Notes: I) (::.:. (:OIlIlIHIIlll'lltS. ~) p; l'aplll'IlIS. :n This r()\",~r!'o ami puhlic "dlllllllSlralJOIl, Sour",': EC COllrt "{':\\Ie1il",., R"porls,

100

l'ducatltJIl alld Ir~lIIl1l1g.

~XH.X

IL7

:).:1 1110

llw .',ona)

SlOl'lor

5) TIlt' Th('{Jry (lnd Pmrfl((' (!(FJ)j

It is no exag-gerallon to say that FDI has been offered Lo the peoples ol'the regIOn as a deus ex macilma bringing a unl\'e('sal pallacea for all theIr ills. FDI was presented both [)y 5T theorists anel the wcstcrn Illultilaterallllsliunions as both the key means for restructuring state enterpnses in the East and as the lever for brmglll)!; dvnanllc growth and prospcnt)' to the target coulIlry. The first or thcse chums risks beconllng cIrcular: FDI was to be Ihe key means of pnvatis
POLITICS IN THE l;1.01l ..\I.ISATION PERIOD

these economics were almost pre-industrial. TIlt: second chulll. Oil the olhe)" hanel. docs have an imponalll qllalilic
That Li\(: Key vanabie ancctin~ the sIze of FOl nows IS till' larl-{ct statcs inslltl1tlOnal and policy li·amework. That 1'01 is a growth mOLDr capable of generating llallonal prospeJ'ltv. That FDI willmodenllse procillcllon systems. m other words lhatll will be production seeking and it will upgrade technological potclIlml. That WJlhout such Jlows, the LranSJlIOIl to a Illmkrn eCOllOIll\' capable of competmg In the ncw world of giobalised capitalism will he r1illiclIlt, if notllllpossible.

These proposlUollS arc unfortunately eJliler false, or grossly olle-slded. 1) JnslltllillJn(l/ anti jJo/it)'j;·'lI/W7lIOIiIS alld Fl)J.flo7lls

Ul1Ivcrsal experience slIgg-csts that an IMF-approved iIlSlllllllOIl;t1 and policv framework docs not 1I1 llself generale substantial IlOh'S or FDI. UNCTAI)'s very thorougl) work on lhls sul~ject clues not lreal institullonai 01· polic\' orthodoxy as a signilicant 1;\Ctor, as Table 10.6 shows. Indeed, thc factors which would attract really large FDI !lows are pn~clsel\' the 1;lctors whIch the ST experlcnce of depressIOn-led lransformalloll III a frap;l11l'nlcd reglllll,ll context would IUl(ienl1Jne. Table 9.6 I. 2. ~l.

4. !i. !l.

7.

Host Cowllry Economic Factors Stimulating FDI

1·lost counlry eCUl\omlC !.!,TfI\\,lh. espcClal'" V;rowth O\lISlnpPIlIf.( population gro\\,lh. Size oj" lhe domestic market. Degrees of regllmal illleg-I~IlI(lI1.

High profit rales. I·Jigh skilled-11M cost labuur. Improl'ed inti·asu·uctllre. Exchange rales.

ThIS general expenence of FDI has been amp!\' proved in the case of till" enure Ea'st Central and East European regioll. The whole region has attracted very small flows of FDI, wllholllmacroeconollllC Significance. And as the structural transformation deepened III bUlh the Czech Republic and

NEO-LlBER:\l.lS~1

FOR E..\STEI{N EUROPE

I-Illll~ar" III 199:1 FDI acmall" !dl IIlstead of growing. On the other hand Chill;!, which has nol at all followed IMF prescnpuollS and has failedln do such alkgedly vilai tillngs as ciaril\'ing propenv ng-Ills and guaranteeing contracts, has allraCLed masslvc amounts of FDI. III 1992 alol\e China aLtracted more FDI than the whole or the Sm'leL Bloc attracted hetween 1989 a III I I !nl;). The foll()\\'lIlg year CllIlla's inllO\\' or FDJ doubled over the previOliS \'l'ar~

Table 9.7

I'DI Flows into the Visegrad COllntries, 1990-93 Inet inflows ill millions of US dollars)

CSFR Czech Rqmhlic SIOI';lk Rcpllblic Poland 1-I11llgan' ~"cnlCJralld\l1ll Itcms: Chlila :\11 East Ellrope & NIS I ~)H9-~):\

I C)f)()

1 C)Cn

11)92

I ~)~)

59'1

IO:d 9}tl

HH

0--

~)

I

I

IC)C)3

561

71

100

i 17

2H'1

I-l:i~)

1-171

85() 120()

II,JOIl

2!l.~)()1J

II,O()(J

SUllrce: n(; fur En ..IIIOIIlIC and Fill;(lInal Affairs. COllllBISSIOIl of lht' Ee. /:""rojJr'tIlJ I:'nmmll)". SlIppkIlWII1:\. ,u •. :\ (\I;,,..-h 19!J'1), allli. Ii.,. Chilla. 1I~(:r..\\). lli,r1d /,,,'..,1,,,,,,,1 1."1",,./, ((;"n"'01 anrl :--: .. \\, \i uk. J !J!H). fl. 1:1.

Chllla's 1I1SlI1Ulionai strtlcLure IS, Or course, cxacLly thc kind or 'tillrd way' market socialism that Sachs Sl't out to discredit back III 1990. And internatiollal experiellcc le;t\·cs lillie douhl tllat ir lht' Comecon rcgll.1Il had rcmalllcd llllegrated, ir the ST slulllp had been aVOIded and ir an adequate trade proteCtloll regime had been 111 place, I'DI in the regIon would, by llOW, have been severai tllnes higher Ihan it has been. 2) N)/ 1I1It! growth: illt' mll.ml dinT/lOll

Thc GlliSai rehllionshlp between FDI and growth rum In thc oppnslLe direcLIon frolll the propaganda or.ST supporters. The prccondition for FDI on a iarge scale IS c\omeslIc eCOllOllllC growlh. nol lhe 01 hlT \\'<1)' round. There arc, or course, other killds or internallonailinant:laillows Lhat do not depend upon growth: the vast speculauvl' llows or hot nlOlle~' engaged in GISlllO capitalism. This IS undoublcdly Ihe llloSt ch'namic aspen or the loose lahe! "glohalisallon'; ancl Il call dovetail fJl:rll:ctl\' wllh broken-dowll econot11les whIch are open to speculall\'c !lows. The debL-laden goverumenls or sllch economics, desperall': ror new rUlldillg, Gill hc dnven to bund

POLITICS IN THE GLOIt\I.IS;\TION PERI()lJ

ISSLICS with vcry high IIllercst ratcs and "cry short redcmption ralcs, SlIcl) c(:on01l1leS Gill bc extremelv attractlvc for global finance, TheIr ,'crY shaklncss involves offering high YIelds to US pension funds and high-rolling" Invcstmelll banks, These operalOrs have been making their prcscncc kit til tllC Viscgrad cOllntrics, III I ~l~n the Polish stock m;lrkt:t soared H:nli.)lcL 111 Januarr I !19·1 thc 1~(,()l/lIlIIl.\/, belieYlI1g tilt' surgc to n:llect economIc fllnciamC11laIs, (kvoted an ediwnal lO what It called the 'brcatlHaking' stock market boom and added: 'ThIS expansion IS no onc-day wonder: It reflects a fundamental and remarkably rapId cliang"e.' IIH But the risc was Uul so rapid as the crash of tIlt: following- mOllth, when westcrn hanks walked awa\' from the market with SOllle $~:)O million or speculaun: profits. 3) FIJI (IS I/wdu'i ml)/um or II'r!illlllogll'(J/ /lJ)brrfl(/illg~

The ST "ISlon of FDI hnng-1l1g new, llIo(lcrn technoi(Jh~' llito productIon processes 1I1 East Europcan economIcs presupposcs thai FDI IS lllalllh· producLIon seeking. Yet thiS lias not been tflle. EmpIrIcal studies of FDIIIl the I(Jrmer SovIet Bloc have confirmed the preYJousiy known causes of large Hows: in f()[,[Iler COlllmUl1lst countries FDI is pnncipallv 'market seeking II~I Statistical allaivsis by the OECD Secretariat has confirmed thiS for [ast Central and Eastcrn Europc,l~1J The bulk of the now into the Visegraci countries has gone illlo food. Cigarettes, chocolatc, soft dnnks and alcohol sectors, consumer dllrables and cars as well as into the sen'ice sector.I!!1 DespIte the overall collapsc III pllrchasll1g power, there has been a rapId soclai diHcfeIltiation producing a tic\\, market among what Anthonv Robinson has called 'the growing class or new-rich traders, entrepreneurs and prolcssionai people' .I!!~ FDI III the m
Thc car mclustry is, of course, Important. and new investment has taken place m tlllS seClor. But the Skoda expcI'Iencc illustrates somc painli.ll realIlles, First. progress in ST was Irrelc"
NE()-LI[\ERALlS~1

FOR E,\STI':RN EUROPE

Sectoral Distribuuon of JOll1t Ventures at End of 1992 (per cent distribution) CSr:U

Sl'rtlll

1']"1111;11"\' :\)..;I'IC., f( ,fl'SII'\', fisillllg Olhe]" Sl'('()llcla]"Y

Tc.-illlOio!,'" 1/llellSI\',' Olhe]" Tel'llar\' Tr;l(k HOlcls, n:slallralHs HlIslIl ess-re l;lled sen'lCes lnfraslnlClIIl'l' Ollwr SIJurn': tiN ECE.ljtJou·tl in

L""'lh' {~all

/-lUI/Wily

I'lJfrlllll

i.!i I.:'

'I.:l 'LO

It).7

-[G.O 193

7·U) 19.0

1Ii,:\

:!ti.7

;,)5,(;

().[. 1

:)~.:l

~

19.7

l:l.H

.).-&.)

:\.9

:v,

D,:I

0.-1 :\~.O

I.:! i)

~.I

0.9

:\.:!

10,7

:!O,(i

[).~

H,I

1".).-q

7,li

X.~

:!.O

U)

I'.J Hlld.:!,,'\' allcll~. ',Chaun.

r""I~f(J"'JIJ"n f~rl:IIIIU;:'I'

II' Erl.\i tlml C"lIlml

lliq!;o. I ~I~J;H.

ple(ig-ed to retam Skoda's 21,000 workers, ThIS was a serious package lix subslantlal lechnoioglCal upg-racling ancl li)r rcally sig-nilican( tcchlloiogicai transfer: not a mere bid to caplllrc Skoda's CXIStlllg markct. In return the Czech govcrnmclll g-avc VW trade proteCtlOll. ensuring 1l it ll1onopolv POSItlllll III thl' Czechoslovak market (as well as a two-veal' tax 11OIir"I~' and till' wd (lllH-oll or Skoda·s debts). The WB's am liate, the International Finance Corporation. wIlIch IS supposed to offer IOw-lllterCS( loans to Thll'ri \"Iorld enlerprises, also stepperl 111 With a swcetener liJr VW in the lill'm cilcap III on e\'. BUl' III I ~)9,1-9'1 VW I'enq~l'd Oil IL~ prollllses.l~'1 Its Investment plan was reduceci frolll DM7.1 I)illioll to hall' that: DlVI:U\ billion. There would be no Czech en~lI1e pianl. and no commitment to ·1:;0,000 cars bv thc vear 20(HJ. Emplovees have beell cut In IS,OOO and morc rl'cluncianCles will lilllow. And VV\' turnccl increasll1~l\' to IIsm!-\, ILo; West German parts suppliers ralher than Czecl1 subsldianes, brlng-ing more than fil'teen such firms 111 to n~plal'e thell' Czech l'ompell!ors. V"hCll comp.tllies are ullable to compete In woricllllarkets. slIch cuthacks Gill I)e necessary. Blll the IllterCSlln~ lesson orSkocla IS thall! could compele prolilal)h', \\'l1lcl1 l!S Cl'rman parellt rould 11(>1. As the J~'tlJJ/IJIIII.I'I'S suhslclian, BII.HIII'SS Cl'lIlml J~/lml)t:, explains, 'Ill I ~m~ Skuda was VW's star per/imller, the on Iv profi l;lble operalll)]l at a lllne when the conccrn' was racking up world-WIde losses DI',,12.:1 billion. \lW PreslClent Ferdinand Piech described Skoda as the "loveliest daugiller" of'the company, adding that It was the only diVISIOn capable llJ1(lerClllUnHJapanesc competition. 'I~:I

or

or

or

or

]'( )I.ITI<:s IN 'I'll E (;1.< >B:\ 1.1 S:\T I 0:-" PERI<)I)

Ne\'ertheiess the stratq.~ir Ilcl'ds ofVW LOok precedenn' O\'{')" those of the l :zl'rh l'COIlOIl1Y ;lIlel ill November I 99:t VW rleclCled to share the pam" 1;lCecl b\' V\\, Genuall\' \\'lIh Skoda, The Czedl PfIIllL' \'Iilllsll'r 'has !ned «() put a PIlSIlI\'C Spill" on these resul!s by saving thai Skoda did belll:lil frolll l1\ana~eIlH:nt cxpertlse. BlItthe Economy !vlilllstl'r Dlouh\' IS 'h:ss san~IIJ11l" and slales: 'Let's hope thatllotJlIng Illore like thIS happl'm III the future.' 1:!li The Skoda expenellce or the Ilcgatil'e extcrllalilles li'()JlJ lIlscniJlg lead sectors of a target COUllllYs production apparallls inlo the (fllerJlallollal sLrall.'!..'" of a western TNC is flot unHlue. CKJ) Praha, lhl' JJ1lcl'Ilationalh' !illllOUS ilea\'\' ellgineenng- group aL the hean of Czech IIldustry, produces Ir;IIlIS, iocollloti\'es, comprcssors, diescl cng-mes, c1ec( ... cal generators, motors and transformers, II has produced al)lI\1( olle third or the world's trallls anrl allhollg-h II \\'a"~ de'lit .. dCI'aslaullg- blol\' ill' tilt' collapse or (he COlllecon reglOll, ·10 per celll 0)" ils saics still gil (0 exports ami half of Illese slill go 10 thc former Sm'let U(II01l. CKD managcl1Ielll nS of mediulll and larg-l' firms III bOlh Hungary and Poland hal'e gone to foreign bllyersl~tI alld Ihe pn\,ate in\'eslment funds ninlllng Jarge alld mcdiulll linllS 1\1 the CZl'ch Republic arl' (\ollllllated by weSlerll capJlal. Yet tIllS IS Ilot Ihe whole story as 1;\1' as FDI IS ('I)Jl('l'l'lleci. If the FDI !lnws to Ihe rq.~J()n have hCCll slllall. (hl' assets thc\'

~'H

)·l.IBERALlSM FOR E. \STER;-'; El q:1 WE

have been able til hilI' haH' heen n'!'\' eXIl'llsin:, III the rase or Hungary and PolallrL .111 parucuLlr, Wl'stern companll's have LIl',:!;L'ly hel'll able to lake Illl'Il pICk or lhl' ;aSSl'I~ thel' Wish tn aCCJu11'1' ;llId the\' hal'~' boug-itt \'cry extenSll'l'ly, By the ~'llct or I !l!I;i, somc !'l:"l,()()O l'lltnpl'lsl's had hel~ll acqUIred by wl'sll:rn cOmpallll'S, [II telecol11s, power gelleLlllolI eqlllpmenl, chenllCOlis, gl;lss. cel11el1t and ph;lrlll;lc('ulicals. the JIlld-\\,l'stern IllllltinatH)llals have foughl each other to gall! COlltrol or Slratq~1C ~eClors at 1Il111lmal cusl and without short-term plam; 1i.>I· signiliGlI1t new il\\'l~stment hut \\'Ilh a \'lew to strcngthelllng thclr global power ill till' long t['I"I11, :\,'eragl' purchase prices h;wl' bel'lI mill lllJ;tl , as UNCTAD has llotin:d,I:IU In terms of tht' a\'erage amllullts of'1I101ll'\' 111 1llI'L'steci forclglI equ!l\- cap"al, wllile dl'I'dopecl countries an'raged Sl H millioll and den:loplllg COlllllrr allilialC:s al'l'ragl'r1 .)., milli()Il, thc (:enlral and East Europcall COlllll('\' an:r
(:/"lirilisallll/l

lion/ls J..'ml/fllli/(" XII//(I/WIi.l'1II (

John Uovcl has sought to c1cl'elld the ST nlOdei alld 10 repudiat(, Ihc KI/lds of cnllCISIll of FDI as :1 pallan.';! sug~cSIl'd above: Il\' rlaillll11g that such ("1'11ICism IS Ilased UpOIl l'COlltlllllC llaLHlIlali:;Ill, He goes 011 to explalll that insofar as there is a I1l'lI' world order it derIves 'rrulll tile r1ealilllot or Cullll11Ullism hut or l'[()1l01llIC lIallollalism 'I:I:! He.: 1I1IIS Uq.{l'S us to rorgct ;ahOlllllle lhcm 111 \'anou~ plan's, He thcn Incs (0 ridicule .lonathall SIL'(:k or the (;,ul/(Iia /I because It1 Steele s importa11t book, 1~'fl'n/(/ll?uHI(f, lhlS g-loh"li.,('(llI'orld 'exls\'~ 01111' Sr)~'(·I,.,dl\', iLlL ,dl', Llovd IS here lIIuddling lWo \'crl' different ph<'l\olllena: ~I()halised /)mrlur//()/I,1I1 the scnsL' or largc TNCs producil1~ throughoul thc \\'orid ",ilh all llllcgraleclillternal diVISIon orIabollr spannlllg' man\' cOlin tries, 1:1:1 and globai /m}((ul'l 1I1fIr/:I'I.,. Pmrllll'llOli is globallr Illlt'gralcd \\'Uh111 companIes oniv 111 a lillllle(1 sector or the world eCOIIOI1l\', Ih(Jllgh all IIll}lOrlalllollC, II parllalh' eXIsts III cars and 111 eleclronics. tholl)2,'11 l'lTn 111 Soulh-East

"Ol.lTICS IN '('1·1 I:: (;LOIIAI.ISXrION PERIOD

ASIa, cm- pnJcillctlon has not been lI1ternallol1alised (whik l·lcctrol1lLs has). Olllslcie these sectors, giolJalised production IS marg'lllai. Further. research Oil SHch productIol1 slIggests that it. has 110t been a gro\\,lIlg ("callIre of ecollOIlHC reialllllls. The best IIldicator or the ,l{rowlh or global pro(\ucllon IS thc growlh Dr intra-linn trade (1FT) . . mcl' by ddil1Hioll Ille !()rmer reqllm:s 1FT. "ct the GECD's research Oil 1FT demonstrates 111;1\, cOIllr;u-y to Lio"d 's ideoluh~' of globalisallon, I FT docs not seem to han' grown dUring the 19HOs. The OECo's rescarch on 1FT SIIOWS tllat. at kast for US and.lapanese TNCs. 1FT stagnatcd dUring the 19HOs. I:\.1 And C\'(:II if II had bcen gro\\,lIlg. Lloyd's casc that nationalism was pla\'cd Ollt wOlild require hllll to demonstrate monopolisatIOn and nearh' IIlS11rlH(llllllahk balTiers to elltr" 011 a global scale to suggest that naliOllalist eC0l101l1lC amblllons were utopian. On the other hand, what does exist across most sectors arc II/(:rl'(/SIII.~~)· globalist'li !not/lI(t mar/wIs. Yet to paraphrasc Lioyd, 'these eXist only spectrall\' if at all' 111 IllS wnung, ror if he had understood theIr eXIstence he would have nollcecl the feverish rlSC of economIc nationalism. most especially III the USA, the EU
NEO-I.IIIERALlS~1

TIll'

Illil'IlII'111JI1

FOR EASTERN ElIROI'E

o(Pllblir (/ml Pmwll' Ilh/l'm

O/J/>IlII/oIIS

There IS ,III UIlCiIlIIl\' COIIICldCIlce III tllC \Va\' III Which the I~IF/WB aCLi\'ltlcs ha\'e combincd \\'Itll those of the I\HJI'C predator\' TNCs ttl weaken the capacIIY or East European states to bargam dfcctivcl\, with, ,lDd bl' able to absorb 1'01' lI;tllonai a«\'anlage, bene/ils frolll FDI whilt: lllilllmlslllg- the possible damage, Not Dill\' h .. ~ tht' \VB opposed a J);ltu)Il,II JIlICI'I)CCOlllJlllic stratq.,"· 1Il\'()h'lIlg laq~ctccl llldwilrtai policr and expol'l pnlllHlllol1. It has sought to \\'eal,ell the lIIost cil'lIlelllar\' /'ol'lns or cnsis lIIanagcmelll Industnai policy sucil as arc llorlll,lI praclIce in thc \Vest III III 111 or rCCl'SSHII1S, whcll large swatiles or important cmnpanies arc put into 'intensl\'e care' I>~' thc banks. Instcad, the WB lIas lIq~cd DraCOI";!1I bankrllptn laws alld all .ISSel-Slnpplllg. labllur-shedding approach to rCSlrllCllII'Illg, It has lakclI IlS lead from lhe Signals of collapsed markets and reCllllI'ed aCliun as follows: 'Typically, thc restrllctlll'lng pl;lIIs will in\'olve clOSIIll,{ loss-makll1g productioll units, car\'ln~ Ollt llol1-esscnllai aClInUes, di\'l'slIng I1nl1-procluCll\'C or IIlHler-ut ilised assets and sheddillg cxcess labour, 'I::, Both thl' Ii\,IF and \VB havc showll nOl tile slightest cunCt:rn for protcctmg the educational in[i'astructures and public R&D blHlgets ,IS \I'd I as olher infrastrllctllres for ensuring- a rlllUrC capaci t\' to at)sorb and dirrusc nc\\' techll()togles throllghDllt the eU)IWlll\', Year aftcr year lH.:alth ,lI1rl crillcOilIon spcllcling III the \,iscg-ra(1 COllllll'les has bCl'1l n:duce(l.t:'s III SI()\'akia. ror l'xaIII p\e, 111 1~)9:) l'ducatlon spl'nding was rcduceci 1)\' :l() per cent. In I-I ungar\' III Lile spl'lng- or I 99!'J. lllC JivIF rCCluired the go"crnlllclltlO charge ret'S 1'01' hi~her cduciliun as a condition 1'01' pro\'lding nt'\\' 10ans,l:;~1 .-\galllsl tillS haci;gToullcill'c han: scell cataStropl!K declilles III n,,..,!) hudgcts atT(I~S the n:glOlI,

Cardinal goals or ST havc bccn, according lo Sachs, tiw OIclllc\'ement or dClllocrac\' and freedolll. Althollgh Sachs Illillself has not cmphaslsed lhe building or' Civil SOCK't\", thiS has been a constant thclllc oj' ST supporters, Yet thest' ~().ns 11a\'l: been treatt'd as cnds and not Illc;\I)s, ,-\S ends, thl'\' have hl't'll disclIrst\'l~I" \'ery Importallt iJCGllISe the\' have beL'1I IIsed as core .JUSlific.lllOl\s of the Illeans or ST. I-Iowc\'cr Ihl' liberal prlllciple that ends silollid g'oH:rJ) 1111'
POLITICS Ii'! TilE (;l.oIHLlSATION PERIOD

0"

TIII~ has becil the substancl" JIlw:h western t:()lJ{liuollalitv dipl()ll1an, It has lx-en applied also in the fllllding crrllrl.~ Ji))- vanolls pro-\\"l'sttTIl polilJr.d parties in Eastern Elln)j)e.:. parUllIJar]\, sooal rklllOCfallc parllcs_ But It has bcell at tile vcr\' Iwart or thL' whole opcrational priorlllt'S ofST: to Sllbonlinatl' the will of electorates and p.lriialllcilts to the onTnclillg PI"IOI"IO' of rapid s\-stellllC trallsfol"lllatioll 10 caplI.dislll and thc d()\\'lIgTading of (OnSlltUllonal c!('\'duplllelll. social .11Ic! political consensus-building, anrl n's[>('("t fill' 1l1l1l1l1ml eCtlllOlHlC and sOCIal ~o'iclant\', InSOUCiance on those Issues, as S,IChs has ll10rc or less ackntlwlcdg-ccL led to catastrophe III Yug-osia\'la, The tensIOns or ST plawd a cClltral role 111 the cicstrucllOll ufCze.:choslo\'akia (whosc pnpulallons were.: licl1lcd a vote Oil the.: Issue), BlIt these features or thc c1riye havc been most L'vldell I III t he polin' towards RIISSla and the Former SOl'jet Union,

nil' Civil (/1/1/ {hi' (;1"/111111111111

till' NI'lII (.'((jJl{o/i,/

(;filII

The \Vest has lIq.{ed that those who mallag-ed to accIIll\ulate llHll\e\--Capllal uncler Comlllunism should rorm the core o/" the llew donll..'sl1C capllalis( class, These people ha\'l' he.:1.'1l III ,I III I\" illeg-ai currenc" speculators allrl black marketcers as well as corrupt IIll'lIlbers o/"slate admilllslraliolls, l'speuall\" 111 the import-export sectors, Sudl people have shown l'lItreprelll'urIal spml, albeit o/" a crImulal kind, l.ord Howl', appoillled ad\'lser !ll the Ukralll1.111 gOVl'rllment ll\ 1991, was gUlll' li-ank Oil IhlS POll!!. I-Ie.: urged Ihl' IH:cd for the
NECl"1.IIIER-\I.IS~J

FOH F.-\STER:>: El'ROI'E

East till\) the ~Illlplc 1101\011 of eliding- slate IlIlerren:lIce, slate ('ullding and SlaH',Conll'ol. SOUl'l\' II seelllS would he tl\'il IInl\' if there was no political Illlerl'en'lll't', The respect Ji) .. popular sO\'l'n'I,~lll\', Ihe builrling of links Ill'tween public polic\' ami \'oll:r prdt"n:Ill't's, Ilr responding pDsillvcly 10 l'xpr(',~,'illlllS IIJ pllhlic prllll.:,~1 or ,'ilrib' ;ICllIlll I)\' clt',.;pt'ral,' elllplo\'lTS, Jill'IllS 110 pan .,1' tillS p""gTamllll', Sll'< Iltg public protest agalllsi rorl1l~ of pnvatisa. 1It1ll ranl\lH,:d III I.lle \Vest or agalllst lIltTeaslllgly ullpopular examples of predawn' westerll buy,ollts arc \0 hL' Igllored, The Polish sOClohlglst \Vllldzilllierl. Wesolowski has capl.lIred the ST sup· porters hostilitv til del1locrl' lhat electorai \'cnlicts III ];,\'0111' oj' lile post,COI1l111Ullisl p'lrl1l'S shlluirl nlll Iw ;lnTptl'd (001; ;1 more "('[I\'lst rllrlll III ;til eXlrallrdill;tr\, pll'ce III tIlL' S;\Il1l' .Il1l1rllal b\' ~Iichad 19-1lalldl. Ht' dn:I
PO l.I TI< :S IN TI-I E. (;[.OB:\U.s.\TION I'Elm III

strallled politics emerg-mg III till: r~g-]()n. Th~ post-COI11IllUl1lst partIes l1a\'e WOn support from electorates because, alLllO\I~h LlH:I1lSc!\,cs COI1lIll11tcd 10 fllrlh~r pn\'
COllSilllllwl/{t1il), \~'rslI.\' Shock TllI'rtIjJJ III

RIIS.I/tl

The most din:ct and brtllaltcst of the n.-lallons\lIp bctwcen liberal prlllClpll' and ST oCCllrrl'd in RUSSIa /Jl EHJ3. The YellslIl go\'crnmelll cicnn:d liS authority from parliamentary elections III 1990, dUring the Gorbachc\' period, The RUSSian Parliament ciecte(\ at thal tlllle had thcn itself eiectl'el Yellsm as Russian president and II) the autullln or 1991 II \'otcd hUll cmergCllc), POWCI'S li.,r a veal' 11l oJ'Cter lO give hUll a Ii'ee haml with eCOllomlC lransf'onnauot1, By the ;tlllllmn or \ 99~. Wlltl real wages down to -10 jJlT cent of their levels as of Ihe start of'Jalluary 1992, the m;~JonlY 111 Pariiamen t began LO SWll)~ agall1st the GaidaI' economic reforms, By the spring of' 1999 Yeitsin was on a colliSion course With lhe c1epul1cs, Jonalhan Steele's important l)o(JJ;. on the Gorbache\' and Yeltsm years has carefully anal)'secl the constitutional and democratic dimcnslons or these CVClltS. J-le, Steele reminds us that Ihe Jlsequences of Gmdar's ST pr()~rall1ll1e dunng- 1992. From lhc spnng or I ~'~):1 YeitslII embarl;.ed upon a drive to 110m tilc COIlstitutlon 111 order to crush his erstwhile supporters wilhm the RUSSian Parliament. The Pariialllent;s powcrs were not, ill ElCl, vcry extenSive, Unlike till' French parliament thc Ru.~.~lal1 one c"\lld 11I)t ,'ote 011 thl' g()\'crnment's programme or pass a vole of no confidence 1I1 the prlllle IllIl1ISter. And unlike the US Senate, the Parliament could not approve IIldivlduai Illllllsters. On the other hand, the RUSSian Prcsident did Ilot have the power to dissolve Parjialllcnl allcl the laltcr did have substantial powcr III b\ldgetary malleI'S -like the US Congress. Faced wllh oppnslllon to hiS economic pro!{ramlllc frDm the Parliament

NEO-I.II\ER ..\I.ISLII FOR F ..\STERN H;({OI'I':

Ydtstll (il'u«cd to /lout the COIISlllllllotl I>r annllllllclIlg the dissolution of tlw Parlialll~IlL an aU expressl" prohibIled 111 the COlIsullIt!on. ''''hen lhe j'\'IPs sought 10 n'sist lhlS IIIlCOlIstJlUllon,,1 aClln' occupnllg tilt, Parliamelll building, YeltsllI n:sponde(l h\' slIIToulIding and cUllIIIg otT the building alld tIllS led lo the ill:Juclgeci bill constllllllonallv Iq~iLiITlale effort by the Parli'lllll"llt to <;11'1 p Yd tSIll of power. Yc 11.~111 responded ttl til L" march on a radio SlaLlon wnh .1 lI1ilitan' assaulL 011 the Parlialllellt lluildillg, lhe arresL Parlialllcnl"s leaciers, ;lIlel lhl' c1oslI1g clown oj" Russia's sllpremc COllrt, wh tclI had prupcrl\' opposed hiS aLtempt LO \'loble the CIIJlSlIllJUon. VclLsin also Ilnposed ccnsOrSlll)) and closed dowll hosLile newspapers. i\'JPs who had paniClp.lled in the oCCUp.1l101l uflhe Parliamcllt building were Lhrown Olll Ilf their !lats WIUlIn tlllTC davs or YeiLsIIl 's viclOn, \Vestl~I'll governments and ST supp0l'[ers bad,c(1 YeltslIl's floullng the COllSIItUtlOJl. The kadel'S or Pal'li;tlllelH were branrtcd I1\' John Lloyd .mel oLhers a~ lhe Old Guard. (\i:sPIlC the I;lll lhat llone had stich good cn'c\clIllals i'or thal litil' as ex-CPSU Politburo member Ydtslll. Lioyd says thal '\'C/tSIIl was liKed wnh the altt'rnal1\'c 01 SlIITL' Il
or

or

or

or

I'()urrcs IN TilE laJ)!Hl.ISSrrO" I'ERIOD

parliament. Introducc a nc\\' constitution. 0111(1 call l'IcCliollS, , :\her all. thl' COllslItlltllHl harl 'become a weapon Ihat Parliallll'llt exploits lTllicalh' t(1 I)10el, rl'ro\'Ill' 1,1" ThiS YlL'W was hacked Iw all aculJllp;IIl\'lllg art Iele wlncil cxplalJll'(\: 'i'\'lr, \i:][SIIl'S diklllllla IS tllat, to cOllllIllH' \\'1111 econO\lllC rcror11l, 11(' has got to g-et nd or the present pariialllellt. willch IS blllcklllg hlln at c\'en' lurn, ,t:,o By Elr the must astollishing aspcct or the enLlre l'xperlence oi" ST over the iast ll\,c \'l'ars IS the cXlralll'dinan' resilience or cll'lllOCratlC cOlllmitlllent throughout the t.'llun: ex-Collllllllllist reglOll, The populatlolls or the regloll hm'c not Oil I" suffcred atrocious hardships hut ha\'c elccted glln~rnllll~IlL~ on political platforms lhat ha\'e subsequently bcen hlockcd, 111 Hlllll-{arv, Poland and Slm'akia, h)' western pl'essure, AUclllpts al ultra-nationalist backlashes In' the Chnstiall Nallollals In Pulancl, the Republicans 111 the (:I.l~ch Republic, IhL' Slo\'ak NatlOllalist Part\' 01' L1ll' CI.lll'ka hrcak-away IhJllI thL' M DF h,l\'c all hl'en rcpudiated hr thc ciCCo torates or the rcgll>Jl, In gencral. tlle extremc Right has IWl'n !;u' weaker c1l'ClOralll'lI1 Eastern Europc dUring- the I 990s thall III westcrn Flll'OPl',.Il1Sl as the Far Ril-{ht h'IS ){alllcd far lIIore support III Wl'S! Germ
~E()-l.IllLlnl.lS:-'1

FOR L\STERf',; l-:t'I{(WE

L)~l

-

..... ,!J

ST supporters have cert;lIni\" bcell I)Olh disJl1:1\'l'd and l'lllbarrassl'r\ bv Illl' \'IC(lIrICS' tlfl he cx-( :o/llll)tlfllSl P:ll'Ill'S III lhl" n:glOll. Tilt"\" llaH' also, rather oddl\', blTl1 slIrpnsed lhal t(IlISl' dl'cianllg" Lhl'lllscln:s Liberals, 1I0W Illl'xlricahi\' Hlclltilied \\'lIh ST. haH' been Oil the rl'lrl'al III mosl COlllllrlCS,l:d \(:t (lcSplll' tht' n:~ilil'IICL' til Ille (ll'llIocra[Jc process III Lts(crll Ellrope, the Illl'ssa~t' or lhe elt:('\oral "II'Wries of the ex-ColllIlHlIlISl part It'S pro\'ldes all111lpnnalll challenge to the Wl'Sl.lliS a warnillg lhalthe eieclOralcs ui'llH: regioll rqeCl L11l' drin: for ST ;tS impll'nH:llted by lhl' western powers o\'er the last (in,' years, Voters III L11l' regioll wcre IIllIl
III

ConclUSIOns

I-Io\\'e\'l~r 11 was IIllrodllccd ctpltalisllI \"as boulld tlll'Ollll' as a 1111 ora sllUd;, to the pc:oples of Easlerll EUl'ope, IlhlSIOIIS ahout capltalislll wnl' \'err Widespread, \\'Ilrkers diclllOl rl';t\isl' tllal 1\ Wlmld elll;til a radical £Imp III Ihl'lr li\,111~ stalldards, a great Illlell~i(icatl()1l or Ihe work process ami cilrollll' illsecul'lty, as wcll as dCSlillltlll1l ror a Illlllonl\', There IS a dangcr or hlanllllg ST li,r capitalism as such, There wcre alsll wlelesprcad illuslolls aholll whaL killd oi' capllalislll was Oil Ihc 11Iarl;'et li'ol\l the \Vcst. il.1;1ll\' East European Illtt:lIeClllals, IOJlg disillusiolled With dialectiCS, walltl'd Swcdish-styk social dcmocratlc clPIl;tlislll, not apprcClatlllg' Ihat ir the (:OlllllllllIlSt \I'orld at)allcloJled stall' SOCialism I'lIr posl-w.tr SOCIal rll'llllltTalll" r;qmalislll, Ihat ,"cn' clmin' Wlltliel rlcSlrm l"tll' possihilitv or 1'l:alislIlg Il: \\'Ill!olll (:UlllnHlIIISIll II wO\lld hl' t;ll;'l'll oil' Illl' IllCIlIt. It couid alsu he said that o('(il'l.tl OIJ 111 Illil , at Il'ast til lilt' \,isq~rad Slatl'S, contillucd, eiesplle 1ll0Ull111lg popular OppOStlHIII III Poland and I-Iungan', to he 1'l:soitllci\' ultllllllLled III lhl' ST COllrsl' and til;tl tillS was not Dill\' ellll' 10 WeSll'l'1I Slruclltlal pll\\,lT alld pressure, While IhlS is hOlh lrtll' alld II II portal II , illS also 1I11pllrlalll 10 SlT why thiS COllllllillllClll Iw Ihese POSI-COllllllllIlISI t:lil.l's has hCl'1I so sirollg', III Ihl' Viscgrad slates Ihl' Idea "I' rapid, SVSICIll.llic changc has bCl.'1l discursl\'l'h' packaged as a qillcl;. . elltr\' II110 Eul'opc' III thiS ro,'1ll II has hCl'1l Ule le~ltl­ nlallll~ discourse lill- the Il'allSrOrmallOI\ lowards C
23(1

POI.lTI(:S IN THE (a.()IIAI.IS ..\TI()N PERU)\)

poliCies and COlldi11011S entailt:d In' ST would have requirerl an alternative means of le~lll1llatJll!{ 1Ill' socialtransform
ElIfi/lUlil1lg

t/w OrllfOlIlI' o./SIrO(/i TIll-rap),

The costs oJ"ST have been [;\1. III excess ofwi1at was, from an c:cnnOI1lIC pOInt of VICW, nccessarr- The most damaging cost and at the same time most fundamental fealure of ST was the deCISIOn lO encourage the fraglllclltill IOn of the Comecon n.:glllll and to rep·lace it with a hub-and-spokc IIlteraCllOIl between Isolated, shallc:rcel economics and glganl1call\' powerflll \\'c:stcrn forccs, From IhlS, all else rollowed, ST slIpponers lend \0 Ignore IhlS go\'ernlllg IcatLlre of the polic\' alld Itl\'lte LIS to compare (\oll1es\lc natIOnal policy creles oj" tile fragnlellls. On lillS baSIS, lISlJ1g growth rates as the kev Criterion, POland seems to emerge best and HungaJ")" amongst the East Central European COllnU'les, \\'orst. ''1'e arc supposed to conclude that ST =: Poland = Success. ThIS is a spec lOllS line of argumcnt. It aSSUllles that I-ILllIgar~' didn t folio\\' ST while Poland did. In reality both liberalised prices, reduced wagc:s, freed trade, Both gOt stllck over prival1sation. Yet two \'ery iarge differences between them stancJ out: Poland's debt, uniquei\', was hal\'e(l; Hungarv's was not even si~nilicantly resclleclulecl: Htlngary attracted al)otll half 01" llH' entire reglOn's foDl, Poland Cared much worsc. The only conclUSions we can draw arc that debt cancellation may bc vcry imponant from a macroeconomic pOlin or \'iew, while FDI may he Irrelevant or worse . ..-\.~ ror Ihe vibrallc~' o\" the pn\·ate sector in Poland, thiS rests lInca~il\' IH:xtlD till' country's expon performance, 60 per cent of WiliCh was bClllg achie\,L'll 111 19~J.t bv Il~ mllch discnnllllated agall1st state enterprises. A more rele\,ant and more stark contrast \\'oulel he bet\\,cl·n both Hung;)r\', the CZL'ch Republic ami Poland on the OIlC Side and ROlllalHi\ on the other. The Roman 1,111 case ma)' be taken as a paradigm oLII1 .. Iternallve, nauonal capitalist stratC),,"Y of U,lIlsli:>rmallOI1 counterpose({ 10 the ST cvcle of

Nl·:O-l.IBER:\l.ISI-I FOR EASTERN EUROPE

'f)Pl'IlIIlg- to glob;llism

237

Tlw IIIiescu regllllC rqected a swcepillg libcralis;\bankruptcies anci larg-e lav-otTs of" workers, soug-hl to mallltain the bIg IIldusln;11 l'nterpnses ~ TI'e Japalll'se Finannal Scn'lt"cs group, NOlllura. iliadI..' lhl' rollo\\'JIlf{ cOl11parall\'l' .Il1cigcllIent un the ROJllaniali CCOI!OIll\" ~ 199-1 pcrformance: 'Rumania, little notlccd by thc \Vest, delivcrcd las\. rcar prohably Ille most lin preSSl\'C pl-rfonnallt"c III EaslCrn Europe.' 1:,:1 TillS (Illes not Illean that the Romanl,1I1 l'xpencncl' should hc erected as somc son or SlIpel"lor stl'r lhe Czecll RCplIl)lic. \ct attl'mpts to Itailthls or that COli II try as a succcss 011 lIw hasls O(UIITCIll f,{nJlI'th tables arc a f;\cilc war to .Judge the OlltcOIllC or ST. 1;,·1 Thc rcal testis the oIle proposed t)y Saclls: will ST proVlclc higher liVing standards than those which pn:\'ailerl 111 1~':-l9. as well as dell1olTac\' and i"reedolll! We do nOl, uj" course, kIlOW, yet. llut what \\'e can do IS work outll'hal wmdd be neccssary in order to achieve such iug-her livlllg standards. Il\·IF calculatllll\s are tha\. evcn In the most promising coulltn' lIf the rq.{IOII, Pobllcl, li\,lIlf{ standards \\'illllOl n ..'lurll to their 19.'m levels lIlllil lht' veal' ~(J I 0
pi:ic:es,

;1~OIdcd

POl.lTICS IN THE CLOB:\I.IS:\TION PERIOD r()u~hl\" the rate o/" growth of the ASIan NICs and somewhat lower thall China's g-rnwth rate III the HIHOs alld I 99()s. The\' thell assume () per C(,lll gTt,wlh per ann lIlll belween ~OO I and ~O()5 and g-ro\I'lh rates o/" -1.5 pcr ('t'1I1 frolll 20(H) to 20 I 0. 1:;:' These g-rowth targ-ets thell pronde exporl g-rowth targ-ets, on tile assllmption lhat domestic demand will remalll depressed ill thl' Visegrad states during most of the next twentv years. The\' ass1lme a g-rowth in exp0rls or almost twice lhe expected (j per cent alln1lal rate of gTlI\\·th or world trade: III other words, a growth of exports of ai10111 I ~ per cellt per year. Sucll export growth would have to be m g-oocis seCLnrs Will! 10'" capllaloutpul ratios - i.e. sectors that do nOl reCJUlre large lIew capllal im't'Sllllents. Given the countnes' debl probh:ms .m(1 Iikeh' repayment arrallg-emenls, the resulting balance of paymellts gap tilat would have to he filled In' all milo\\' of western capltai is unrealistIcally larg-e. This means 'exports \\'ill be I-eqlllred to generate even lugher volumes oj' foreign excll,lllgt' than assumed allove. Thus if capital markets pius aIel cannol meet the challenge, goods markets will need 10 be open.' ):,1; These are Immensely depressll1g calcuiations. They ImplY lhat even itlr a country growing- like Polalld for the foreseeable flllllre, Lhe popuiatlUll will have to wall for the best part of twenty years sunpl\' to return to their livIIlg' sLanciards under a Commul1lst system that had been III a long cnsis. And tillS makes unrealisllc aSSUlllp110nS that the West European economies will llOI enter theIr next recession in 1997 or ] 99H, that globai GISIllO capitalism will not expiocie, tilat shocks of otller kinds and bUSlllcss cycles will not hll Poland. ThIS IS about as bad as when capitalism was last III Polancl, I)clwccn the wars, and the economy did not !{ro\I' overall at all between 191:) ami 1939. It IS a stark contrast with what Sachs likes to call 'the forty ruinous years of CUIll IllUlllSIl1 , , whell the livlll~ standards of the Polish people were trans!i.mneci liJl' the beller, As for the COUll tries still without growth after liw veal'S, like Hungar\', not to speak of BulgarIa or countnes further E,ISI, the prospect is 1~lr worse. Of course, e"ellls may turn out very dilTerent: these clllllltnes Illa\, embark upon the kind or growth path that we have seen in Chllla or Soutil Korea. But the enllre weig-ht of western pressure has been geared HI pre\'ellilng the region from /'(I\loWlIlg the strmeg-Ies pursued in those countnl~S. As to the /:tte of ciemocrac" anc! freedom - Sachs's other cntcna of successful oulcome -It wouid probablv be unwise to speculate, l~\'ell if",e could be prellv certain that if the EU counLnl~S were sul~iected to the slIl"j"enngs livcd through III Eastern Europe, democrac\' couid hardlv he expcCll'd \II sur\'ln'.

NEO-l.IBER\I.IS~1

FOR EASTERN EUROPF.

'fiJ10(trI/s r/ll .-\ l/"fYilmf n'l'lJr),

on Ihll''''' IJl'hrnl/{l/Ir

Sachs's ll10del displavs llnex.pccted aSVllllllelnes. He gets lllost of the econOJlllCS wrong but is rather stroJlg- OJl the \rays or uSlIlg political power to engllleer sOCIal challgt~ m the East: ami hIS ull(krSlanding- or how to handle East European politics slls alongsIde a woefullililure of the ll10del to gel the behaYlour of western actors nghl. On the eCOllom1t" SIde tile model produced a slump whIch Sachs dicillOL predicL a chrollic liscal cnsls that Sachs c1aIIlH:d he was there to overcome; an milia! l'xpOn performance that demonstrated cOlllpellU\,e potential in state eJllerpnses Sachs belie\'ed to be hopeless, all Import bonanza that c1.:mag-ecl the eCOnOlllleS Instead or spurnng- rec()"erv: an l11\'esLll1t~llt coliapse instead oLlII lJ1\,eslInent surg-e. a d01l1t~stlL conSlllllptiOn-led n:c()very IIlstead of export-led gro\\'th; a lnckle or FDI instead of a noncl. Yet the EU)llollll(':s Professor's s\'stel11 or constramls and ll1cenliYes 1'01' eastern go\'ernments to draw tht~ll1 1I1ln ST and to malllpulate their polin' wstelllS was a remarkable success, al icast for the initial stag-es of the prograllllllc. But western actors n:fl.1sed all the roles Sachs assig-IH'd tlIem except those ill\"()!YlIlg th e i mposIllOII or cOllstrai n ts alld pn~ssllre - WillI Oil e Slgll ilicallt excepLloll which the model gl\'es us no resources to cxplalll: the Polish debt canccllal1on. Otherwise, debt cancellation was olT the menu, macroecolIomic grants were olT. radical opel1l11g of the Ell market was olT; Oil the olher lIalld western state subSIdies for exports werc 111, arbitrary protectlOIIISt actlOlls were In, subSIdies ror FDI by tlll"ir own lirms were in, Sachs see1l1s gelllllllely perplex.ed allci upset b\' all tillS. In an anKle this year he compia111s that' 1101. OIl!Y the RUSSian ecollom\' bUI also Russlall democrac\, lias been put recklessl\' at nsk lw western lIt~glel"L' \:',; He calls US polin' lo\\'a)"(\s RUSSIa the greatest forclglI polin' disaster Illr decades. Sachs's diagllosls or thIS IS that the (;7 suff'er fr01l1 1I1tellcCluai problems: the\' lack vision, or. morc cruclly, Ihe" are pla111 stupid. l.ike a conductor in li'olll or an amaleur orchest.ra, Sachs has been r.uslng- hIS batoll repeated I\' III Ii-OIll or lilt" (;7 vet when lIe bnngs Il dll\\'II the\' cOllllll1lally lIlt. the wrong II Ole. I t does not seem to occur ttl Sachs that thc\' llIa\' be plaVlIlg reasonably well. IJlII. to a diIT<'·renl score, or a lIumber of dilTen'lI1 scores. Tq'ing- LO read these scores requires an anaivlIcal approach which n.;Jects tht' belief of Saciis 111- 19-1Iat.ielT that the weslern powers are drIven b~' (;od-like Idcals and accepts tiial the\' are humall, all too human and gm'erned bv a will to powcr. Sachs's ST g-oal oj" "g-iobalised' open door states III Eastern Europe does IlIdeed then ser\'e theIr JJlIerl~sts because It enables Ihl'lr eCOIlOIllIC operators IU pCIll'tratl' tlIt' reg-J()1l dlonlessl" with their products and (lw1l' capllal, while the macrut'cono1l11c COIISl'qUt'Ill'CS of this OpClll11~ are policed hv thl'lr IFls. Dl'mocraLIc politll's call also scrve these g-oals since the,' arc 11lorc permeahle thall mall\" other lilrms oj" stalt~ alld can

l'OLrnCS IN THE CI.OIHLlSATION PERIOI)

II1sutuuonalise values hanll()JlISIll~ them with the \-Vest. Insof~lr as the results or pursuing these ol~Jectives arc prosperItv ror all. so milch the better: but thIS IS a I>onlls, not the bottom line, At the same tllne, these regime goals shared by Saclls anc! western gm'ernments have not been the exclUSIve goals or western powers 111 Eastern Europe III the 1990s, Another central preoccupatIon oj" the EC ~overn­ menL~ has been the way III which the internauonai diVls]()\1 orIabour is III be reor~al1lsed in Europe as a whole, The USA has also been preoccupIed WIlIl these problems from irs own angle or interests and III addition Il has been trYI11~ to reorgal1lse the political balance of power across the elltire continent. It is also I~lsclllaung to note the f~lilure of Sachs to understand the roles of the IMF, He accuses Us oHicials of being stupid bureaucrats ror I~lilin~ to disburse adequate runds to target funds l1exibly enough, blll the llV1F can only be as l1exible as the leading powers within Jl allow - and. as the MeXican crisis or tile win tel' of 1994--95 showed, the Amencan government can enc()ura~e it to be cxtraordinarv flexible when perceIved vital intercsL~ are at stake, Further, the task of the rrvlF is above all that of guarding what intc~nty then: is in the global financial and currency systems, rather than pr()duclll~ sustainable growth III cJ'lsls-riclden penphenes, In the immensely strall1ed and unstablc II1ternational financial condiuons or the 1990s, thc II1centl\'e systcms open to the IMF have been overwhelmingly negallve ones, For Sachs to expect !iWeepll1g debt relief for Eastern Europe when the main western powers arc uSll1g thc debt burdens of scorcs of states throu~llOut tile world as thcll' malll IIlstrumentlor mall1tall1l11~ a semblance or diSCIpline and hierarchy III international allalrs IS very naivc, The vel'y successes of Sach 's own prqject I{)r globalised capllalism could hardlv have been achieved in Lalln America wllholll'those debt burdens ,Kung as powerlitl negative II1ccnllVCS, Sachs's plan, as outlincd in January 1990, correspondeci Closely to Amencan thmking on Europe at thill time, The Bush admll1lSlration leared thal the collapse or Comlllunism in Eastern Europe could lead to the development or structures across the whoie con tinent in the economic and sccunty Liclds, embracing both ['vlosc()w and the EU and leading to thc margmalisation or us power lJ1 Europe as NATO wILllered, This was exacliv the vision whIch Presldelll MiLLerranci had unveiled to the worid 111 his New Year\ E\'e address two weeks herore Sachs's arucle was published: a European conredenluon rrom the AtlantIC to the Urals. Such a schellle would have enabled the French to have kept the East Central Europeans at ann's length while pursuing iL<; plans for strengthel1lng the EU, It would also appeal to ChancellOl' Kohl, overwhelmingly preoccupied with cnsurIn~ a strong r~lationship Willi lvloscow as he struggled for German unilicalloll, The Deutsche Bank presidcnt had aiready OllllillCd an ambItious plan {()r rebuilding the East as a uniiicd regJOB, a plan which could have broll~ht

NEO-l.IBER:\LJS1I1 FOR EASTERN El'IUWE

2-11

great s\,llergH.:s between Russian and l;erman economic strength. President M iUeJ'l' give a prIvileged role /ill' capilal based Wilhlll the Eli, It has deIended Lhe Integrity oj' the CAP ami iL~ u'ade protecuon regime and has worked to ensure that Ihe new diviSion of ial)our III the Easl will be en~irel\' g-overned by Wesl European economic operators and !.llelr IIltercsts: the combination of a tough u'acie policy and strong supports Jill' the export chwe and Ii)r West European FDI have ensllrt.:cI thiS. And tL has reSisted an\" hoslages to i"ortllIW III the form of umctabied COlllllltLlllents to the enlry or (he Vist.:grad eCOIlOlllles.

POLITICS IN THE

(;1.( lH,\I.IS:\TION

PERIO\l

From lIll' E.ll's POll1t or VIl:\\" the policy has bt'en a relllarkabk success, so Poland, lhe Czech Republic and l-hlIlg-ap' are lirml\'lockeci iuto Ell asn:l1clanC\', The rc:slof lhc rq.{IOll still, gwcJI RllSSI,1Il wcakIlcss, has lIowhere elsc 10 go, It is lruc thatlhe Viseg-racl states an: III a II'cakn condit lOll f(JI' clllcrill!-{ the EU than lhe\' wen: III I ~J}\9 amI c.lUlr! I1m'c bCCI1 if theIr rq,{lon had 1101 l)Cell shaLlcrccl. But their accessIOn to the Ell is lIot a pnortty e\'CI1 fCII' C;cI'Illan\,: what COllnL~ IS lilell' bClIlg firmly WilllIIl the spherc 0(" Ell dOIHlllallce, The task IIDW l(lI' tht: USA IS LO ensure that till: EU's new LlSI Central European sphcre IS brollg-ht linnl\' under o\'crall U.s lcacit:rslJlp, This goal IS to \)e achlc\,ctlllln\ugh N;\TO's eastward t:XPOIIlSHIll, Sachs's \'ISIOn IS stuck ill a one-sIded preoccupation with n:g-lIlle g-oals, pn:occupIed With Important, hut partial, lSSUl'S lila: IIllhuon, budgct cll'liclls and so forth, It (Ioes not oCCllr to him, for cxamplc, to ask thc qucsl10n as to wilat Impact billions or doliars-lI'onh or l!;ranls lill' liscai stabilb;lliO\l would have 011 RUSSia's military capabilities, Russian stahili~ali()11 IS Important. hill so tOo, frum an American POl1lt OfVIt>W, is scaling clown RUSSIan powcr, \Vhat n:maills li\,lllg \"ltJlIll Sachs's plan IS liS Idcologlcal and s\'IlliJolic role, The Idea that economic nallonalism IS dcad and lhal we li,'c III a (OSillOpolitan glohaliscd planet IS \'cn' pnwcrrlll and c"cn II\SPll'IlIg, Anci lhe nOll!lll Ihill growth in Poiand has bcen PI'Oc1t1CCc\ by thc Poles puwng II
or

Ism, Nolt',I' I, It ~lltlllhi be ,ai{\' huwl'n:r, 111;1\ 1',."rl'sSOl Alil... AlIISlkn .. I' :-'11'1', 10gl'lhcr wuh .lal'..t~ l\odlano\\'lcz of \\'arsa,,' and I.ancc '1;11'101' of Iht' Ncw School. hal'<' prOVided a dallla,l{JlI,l{ challenge h. II .. s ('OIl'~'JlSII' ","il the,,' hflok 'I'll,' MIII/:d ,1(.-.. /\ Ih ,IIHld. (11','1'\'''1'11 LI. II ""hll\'

Prl'ss, HIll'I) , dr,owlug uU EasL ASlaJl CXPl'lll'IlCl' lu challl'llg,' ST unhodoxI', ~,.lellre\' Sachs, UIIIII'I:lllIl/([iIlK Siwe/; nll'm/'.\' (SOCial Xlarkct FOlllldaufllI, ]\)!),I). p, ~:., :1, Ralph Dahr<'lIdurf, /I'.'I"'rl/(1I/ "" Iltt' /i"."I"/""/1l1 1,,,,,,/,,, «(:hallll.'\: \\'i"tI"s, I!I!I(I), 'I.JeI'li'q' Sachs, P"IIII/I[\./1I1II/) /II 1II",I/f/I'''1'1 /:'((IIIII/II.r (1111'1' I'H:SS, 1!19:1), p, ,J. 5, ..\tlll:ncall polin' III l~I!lll-!I~ u.tI\lIlllcd 10 bl'lll." 1IIl' 111:111111'\1:111[" "I' a XIOSl'OIH','IlII'"d eCtlllOIllIC space III Ih" SO\'l"t rC~1011 ('xc.:pllill' II", lialti.: Repuhlics, I;, .1 t:11...:\, S,Il'II" 'Whall,' 10 h~ Doll",' /:'1'/11/("",,', I:ljanllarl' 19'111, i, Ibid, p, '1;"., Sildl~ lIotc:d Ihat the \'ugosla\' OIllCOIII" would dilk,. ('rolll I'olaud's I"r rll~oslil\'J:I 1I'01lid m:llntalJl, III Iargc 1II~';tSUI'C. lIS sdl~11I'.lIag-t'IIIt'1I1 approach 10 ('"rporal" ~U\'~f"',Uh:-l: .

NEO·l.IHElt\US\1 FOR E,\STER:-.' El."lO"E X, F'-"IIl:O'( ;,''-fllall prupo,,," 10 k<"<'pllll" l'SSR :111(1 1-:",1"1"11 Ellropl' li,,~,'r1 \"I;) a Ii"" !rad" r('gill'\' 1I":i'~ r<:l.-n,'rI; Fr.. llI'h iekas for all EIIRD which w(Jllld "" Mag" 11\ lar!-:'~ public IIlli'a"Inl< IlIn' pn~Jl"I'ls "I11hranll;': II", L;SSR :uIII Ea,,,,'rll Ellr"p" h'er .. "llIasl'lIl;J1l'(1. AIIII Ih" Fr"lldl 111111"" of a I';"I-I-:ur"p"all ""llli~dl"r;IIIUII "'III,,'a"lflg hnrh Ih .. Fe alld Ih .. wh"l" or II", Fa" I,'as r"plIdiall'(1. l'ol;IIld, alld Ii,,' a ,h"rI whil .. YlIgos];rna, h"Clllle Ihe IlaMshil's (If Ihl" ah .. nlal" .. appro;" h. !l, Richar
n)JJ1JUI)II \'ll]g~JI'IS;JlJPJ) ur

ST.

lUDell !;I\"OllrL'll

h,' rhl" Fnm"',".\I.

IU\'I)ln's I1Ull\dliJI.~

nut·

pili amI OIl("'"Ill' "lid sll'lIching P""IIIISClIlIIISI\, h"IW(,,'n rll\' 1110 as "ad I SIlIIS 1<,,' ,,\'alu:Hillg ST, ThIS prupagandislll' \'ulgarrsalloll " "x""'plili,'d III lIS 'un"'I' Ill' E:"I Ellro!l':;U} t"C.:Ul)(lIIIH.',o; (If:. Dt,'("l',uJwr I ~'p.J. p. ~:>. II. Sachs IS pI'IlII"d hl'r";,, Wl'llillg 'Ih,' d,'wlnplllg II'odd' hUI Ihis l1\ust b";1 III1Spl'llll: the n"J1"~1 shtlw, 11<' llI"allS Ih .. ,1"\',,101',,<1 world, S,' .. {!,/tI",.,'IIIl/{lill~ SllOd; T""Il//IY, p, I !I, I':!, Ihi,l .. p, 1;-" I :1, Sachs IIS"S Ih" dllill 111;11 his goal is c'plt:,lislil as slieh til dalOll Ihat Ill' IS I'lJlilically nellIral a' h"I\\'l't'11 all 1';1)')"''''' or capitalism, 1I'11<'111<'r SWl'dish, SOllih Kon':m or Chileall, Y"I his 'p'Tili," rd'lIl" 'Udl ,,,,U[I',,li!,', I ,I..Ie1fn'\' S;lchs, '( :ollSoIi
[I Ihll~ a\'tHd~ sa\'llll-!;

who l"ol1~idl'rs

II

III hI' ITlln,,1, hilI 1\',' ;,n' 1.. 1'1 III 'lIfl.'r 1(,;11 Ihl' OECD JI,,,,II' h"Ii,'n's Ihi, 1<> II" Iht' (as,', ~:L Ihid, Th" OE(:I) dll""1 I cxplalll 11ll' hllTl' "I' Iht' IIIUSI hen' ex('('pi 10 S:I\' Ihal lill ClglI ('(1\11 1':11 ill'S will he n'ulr,,1 ';11 rl'sll'lll'llll'lllg IIIl' SI:tI"'!l\\'tI('t! illtlllSl,'Il's , This, :1' "'" han' W"", I,' IlL'LUI,'" llrl' "'"rill 11:111" I» 1',,1:11111 'llIeI 1IIIIIgal'l II'I.llle1 11111 alllll\' 11IdllSll'\' IIl1ll1,Qrll'S III n'Sll'llClIIH' hd"re pI'I\'aIlSall!l11. ~,1. S;lchs, l'u/flJIII\/IIIJI/J, p, XIII. ~;'" Illi" .. 1" i, ~(i, ThulIgh he CIII'llllISI" c111\\,lIpla\'s IlwllI III 1,'l/tI,.nilll/t!iug SlIod; '/1/1'/tI/l.l', I-It- ;.Isu e"'h,,ws pllhli,' disl'II"Jflll "I' Ih,' ta,'I,o .. r ('lllldilillllalill' c1I."plll' Ih,' J':r('\ Ihal Ilti, '11 liSt 11;1\'" hl.,," pan of hj!,! d~ljJy \(od~iHg (lIl'e II) ill~ l'OflSlll(;UIl"~' \H,d.:. ar .ru' '1"g-IfH •. ':!i, Johll Uonl ai,,, n'l'''gllISl'S 1111' pow, ... of Ih,' G7 Slal,'s bill h" rallt"r p,lI"(lollsly ralls 11t"11I 'rI", world' alit! proCl,,'tls 10 .alk aholll whal 'lilt' l\'Orid' will "I' will "01 Inl,'rall.', Sl'l' his 'J-llJl\' III ;\bk,,:t 1\lark<'1 ' ':!X, Sachs, /'0111111/\/11111/', p, XIII. ,:!~I, Slall"!:"I' (;ollllllk" Itas laq':l.'ly 'l,hs('l'il",<1 10 Ihi' I''''''', pll""I1l~ 0111 Ihat "'I"terll macro· eClHI(Jlnlt" SlLpport (II' (h_~ht t"1'(liU:\I(J11

would l..·IH'::U\1r;l~L"

11 Hh:"ol'lplilil' ;"IH)U~ Ll1 ~l:' ~1.'\l'rn-

sllllil"r In lit" ,,,I'I blldg"l COl\Slratllls ""I""l'(\ by Slall' "I\tl.'rpnSl" IIl1(l
1Il""b

I'OLITICS IN THE (;!.OI\:\\.IS.\TION PERIOD

:\:1. Sadl'. ['''/1//11/\/11111/'. (I. :l~. :\.1. 11,' do,·.'11

i "Xplalll IlIi, ,ell'a or risk. Sc,' '\\'hallS 10 I,,· \)"11,·;'. p. :1:). Sarhs. J''''IIIII/\)I1I11/I. p. :'1:1. :lIi. Sach,. '\\'ho,1 Is 1(1 Ill' Dillie,'. p. :!(i. :Ii. Sachs, 1'''/111/1/\)11111/'. p. IN. :IX. 'Bi" (Ian\-:. IIi" ,\d\'l'IIII1I'l' . LrIllIlIllIl.I/. :!:I Ikn'lllhl'r "J~!).

:\9. ()E( ;l); IlIiq..'·'f(lf'lIg 1~·lII'·'J...rpnK l\/IlII,'I"

~Ii.

I':, flJlCJlIIl.',\.

·10. 'hid. ·11 . .I,·(hl'r Sad IS. 'Reply IO.I~II' ..\.10111\', Lnlllflllllf., ,,/ 1'lIllI'lIl1g, "01. :!Ii (19\):\ I. ·I:!. Sc,' Palrlck .\. ,\I """dill , 'Th" Assoualloll :\~n'ell'l'II" Lkl\\""'u II", EC all' I C"llIl'al Ellrop": Tradl' l.ihl'I'~llisalioll CO'lMlIlIllllllal Fa iI 11 1''''' III J FI"J11I11I1IP; aurl J ~1. C. R"llo (locls,), '/'/(/(/". I'flllII"IIH I/lUl .. ldjllHIIIOlI ill C.·lIIml (//((II~"'/{'I'II 1':" ....",. (ltiiA &; E\IIU), 1~1!'~). ·1:1. Tla' /:'H/lltllIlI,1 has Ii.Jlowl'd SIIII, cI;UIIIIIII-: Ihal ,,·hil,· :,lIlh" P'I'I-CO'IIII1II11"I\'('o'\O'"I'" slIf/i:n'" dl'''p n'Cl',sIIJIIS ... 1'dllcll or Ihis h:ll'dship was. 1I00""'·l'l'. 11\1' Il'p;an or {:"IIIIIII1I1ISII' , (,lilll ..... 1101 Ihl' p,""chlC! III' caplialblll's al"l'l\'al.' :1 [)"cl'lIIber I\I!I·I, p. :!·I. :-:0011" ha" "I ,.ollrSl'. slIl-\l-:."I,·1I Ihal Ihl' ,11I11IP lI'a, CIII'l'd h,' "':Ip'lalislII' ~llTI\';JI·. Olh"I' ulllialh '<'lIl-:hl 10 clem' Ihl' ",,"Il'nl''' "I' SllllllpS 011 Llll' grounds Ihal Ihl' ,1:lLl'I,cal illllic;uors ""'n' wrllllp;. ·I-/. (;"lIllllka. 'I'll" IJ'i'/I'lil 1I'(wrl.' /'lI JIll Il\' 1<11g,,'en /tu' WOII(\"I'II1P; iflhl' J~"OIIII/lll.\1 was slIlIpl)' clnH'1I Il\' halrl'cI of 1hl' ({IIS'I:1I1 "C"IHUII),. ·1Ii. Ihid. ·li. Their slud\' "._" ror tl." EIII·"!lI'.1II C(lIIJIIIISSlOII. Sl'" ~;. lIugh," ;11111 I'. Han', 'Clllllpellll""I1l!SS ami Incluslnal R"SlrllClIIrtllg III l:'"cllosl""akia, I'hlllgan alld p..land'. III (,'' 1111111,1,\11111 (1'11r,' I~'II ro/'t'(l/1 ('/I/llIlIlIlIlli,·.\: /:lIr"/'t'tI'l [';(ll/lllm\,. SpL'eml Edilioll, 1It1· ~. I !l!! I . •),'1. ~I\' c/i'nISSloll her"
"S

'I)

NEO-l.II1ER·\l.IS~1 FOR EASTERN EUROPE

~'15

Ii'l. Ciled hI' (;ill" OIkrnll. 1:·IHi,.,." /:flr0l"', p. III. 70. ~'i,:,. :\4ISdl'll. 'I'l", .l/'Ir/:I'I MO'I\ 11.\ ,\1"1 (Jr. TIll' OECD 'Ilpporl"d lite ,·,Iablisllllh·nl 01' ,'\(,,1/" n .... )illllSlII~lIln· :11111 jjll:IJlI"Illg. na ["'I'"1"1 {:r"di, :\g"'''''''' (EI:\s). pIH"idL'd 11,,·\, \\"()lIld

1',,11,),,'

Ill!' OECD .-\rral1g'·lIll·1\I 011 (;lIi
Thl'

ou:n

l.'\plallll.'d Ihal 'Thi, \,·"uld 1'111 IIt"1I1 "II all "']11011 ""'illig \\"111. OEen COIIIllI"l<'S amI Ilwn'("ure Up! di.~ll)n Ir:.ull', Bill Ihl~ IS I;,ls,' '111l'L' \,;11 lull, 111~!lur Wl'Sh'11l f"UUlrll'!'t dUll" ,lu·k 10 lit,·,,,, gllJddilles. III' ID!I-I \~,ru.us Fasl EUroP";1I1 (:<'"II1IWS 11:111 SCI "I' ECA, hilI, thl.' OEeD l'Xpl:III1S lan'llIl"all\'. Ihey h,,\"(' 11111 1,1'1'11 abl,' 10 work IWl"all'" 'flllldillg has 111'('11 n·,trlcted'. ( )H :n, l"hgmilllK I:II/"'~III!: MI/I}:I'I/':'",,"IIII'" '"'" 0,,'1""'1"1//11;/11111/ "/"r/lljIHg .'i\,\;I'I" (( lH:n. 1'~~11). il. (:itL'ci lJ~'.Iall ,\dalll. 'The TLIIISIIIOII In ;, ,\lark"l Enlll,lIl1\' III I'llla"d'. /.(III""i'~w.l"'I,.,(((t O//:.llIllIlIlIn. IH. (l!l!l-I) p.lil:\. i~. For '.1 Ih01"
or

/-:11'-"1"'''" '·.fII'''''''''·'',:1 I ::\

(Sprllll-\ I!I!U). Ibit! .. p, H!I. Hli.J C. IIr:llb, I. Sillg" alld A. ·Iill'ok. 'Fiflll., ,\lIoal ,,,,II Fir",s _'\drill: l'/IIII'-::lI"Iall IlId"st!"r :"Id Ihe Fe III1'HII\( '1'''"lSlIi'''I', Eml"1/{ J:llmlll"llul:'mlllll!I/r:\, (,1;11 ,":11'\"-1'.·1 ,I'U" ..... I!}!I·I). Hi. \'illl.-o\'a, 'Th,' (;elll:l "I RVCl"'IlllI'. ~H. BI':III" vI :d., 'J:inn,; ,\1\0:11 :11111 Finm Adrift'. ,'i!I. :\",,1I :11111 I!<-I"ol'lll'. III Fill""<"I:l1 Tillll'S SlIn·,·\· Ill' R"'II:lIl1a, /-i"flaunal Timn. ~~) ~Ia.\' l~H':r. p. ~t-•. ~~!). For a lIsehd stunl)};!r\, of \\'l';o,It'rn gll\t'rllllll:n1s SI~UII·t .., un da':-.e ISS"l'S. SlOl' (lE(:1), J"i.'f.,'Hlilllg /:'r""rglll!; ,lIur/:d /:'mlllll)lI.:1 lIIio II,,· Ili''I"IlIIlu,"ul 'J;m/illg S\'.\I.-II) (OE(:I). I !I!I·I). !lli. S,-,· Vi"g'lll:, ~lar.,II. '1'1'1\':11""111111: ,\ Complicall'd Pr".!:I'"".IIIl·· III Fill:IIIC1,,1 Tillll'S Sur\,\.·y HI" 1{,,,t\~\1I\~\. Fillu" ..utf Tirw·.\. ~:, ~lay I ~1~E"l. p. :~.l. !Ii. 1'01" a rlllll'r :I"al),slS or hlJlh I'I'IARE :tllel TA(;IS. sel' I'l'I"I" (;lIl\"all, '1.", I'm)!;I':II":ts £I" :t\"lIda PI'I:\RE ,. T:\(;IS .I" la U""lII Ell 1"1I(11'a , III [("mill .I,. len>l".1I1l1/ (~I;"lri,I), 1111. i:IH. (F,·llI'Ilal"\" I ~IW. !IS. SI't' 1'J-1:\RE Ih'glllaillHI No. :1!IOfi/H!I, O/lil'll/I Ilwnwl I.::;:). ~:I Il l·Cl'IIlI,,·, I!IH!) ,,"11 Ihl.' allll.'llClillg Rq,:"I:lIltlll No. ~@H/!HJ, O/jinllll,,·,;nrlI(I.~:)i, ~I S"pl"llIher 1!)!HI. '1'/. BIII)!;;'''':I, {:,,',·lIo.,I(lI·;";ia. \'lIg",la,'I;I ;wd E;"I (;, ...,"""'. 1\'I'r" wcllld"tI II. "'URE 11\ Sq)Il'lIIh... I ~)!}(l. East (;l'I'III;\II\' C":I"'d III Ill" :I parllnp:1I11 :li''''1" el'l"III:1I1 IIl1ilic:llIlJlI. PIIARE alii III YlIgllslal'la was SIISI"'l1d,·d III I!)!II (Ihllugh hlllll:lIlIl:ll"l:1II alll 1:011 II II I",d 10 11"'"1:1-1·1 ...... "':-,,\"111:1 allClllI ~1;IITdlllll:l). ",1,:lllla :tllrllhl.' 1\:1 II il' "OlIo )Illllt'd II,,· progr:tlllllll' al !lit· (,lid IIi" 1!I!11 (Sl'L' (;,l\l\It'il l~t·glll:II."" ~Il, :iSIII1/!lI, ()/li."If//,/,,,,,.,/II/I.::",i. ~H 1lt-...:lllhL'1' ~:),

i.

f'Ol.rncs IN THE CUlIl.-\l.(S:\TIO!\' PERIOD I ~I~II); SII>n·lII'I.If)IlI{·d ill :\IIl-:IISI I !)!I~ ("'t" COllllcil Rq~lll:JllolI ;\!". :!:\:H ~J:!. U/lir((/l/""f/Ifll II :\lIgH'" I!I~I:!). lOll. :\melt: :1, para)!;raph :! or 11Il' I'I·I,\RE Rq.~lIlallOIl. 101. Set: lltt: (:0111'1 "r.\lI(lil",,' Rl'porl Lllth~' 0ffin"I.!,,,,,..,,,1 "I tl"'/-:I/IIJ/,mll I:umlllfllli/"'I, I" Ikct:l1Ibt:r I!I'J:!, p. :!I'I. IO:!. COlin uf Alldilor,; AlIlIlIal Rt:plln Il.r I!I!)(J, ()/Jiolll.J"llnUlI. I:; ikn:mlll'r I!J!II, p. 177. I'J-!:\RE p~'slicidl' ;L1d 10 :\Ihallla ,,'a, dt:cbn'c\ Il\' ,1)(' ElIroJl"'II} l'arii'III1l"11I III \I;trdl '~)!I·I 11:\\,,· m"-17. lilT,. ),ones LII C. Randalll'lelllllllg "1 "I. (ecls.). 1117'1t l ll/l{ Ih"fllm/Jmll CIlIOIl (InSIlItII<' Ii,,' I III "rllalJIIllal Et:OIIOIIII{·'. April 1\1'1·1). I (Hi. ,\lIlli(lIrs' RCpOII. OfJirllllJIIIlIlIll1 (::II)!I, Iii Norellll",r I \I!):~, I'. I~) I. 107. COlin ,,1':\lIdilol" Rcporl Oil I!)!):!. Ojjit'wljolln/llI, IIi No\'elllh"r I!)!l:l. p' liG. IOH. [hid. Iml. l'ariiallH'1l1 adoplt:d OJ n·,,,llIIlon oil Illt.',e IS\U,', lIn III .!alLllar" ['III·!. S",· O/litJrll jOIlI'llIlICll[, 1·1 Fehnl"r\' I!HH alld Ihe lIlIl/l'iill ojllsr /':llm/'(lJ11 /.iII/Oil, I/:!-I!/!J·I. 110. COllrt or .-\utiitlll'; Report 011 I!I!II. O//ioll!.fmtrJwl. Fi Ikn'lIIllt'r l!i!I:!. p. :! Iii. Ill.lhid., p. :!IH. II:!. I'n~Il'CI~ fill' It:ss Ihall I lIIillion I'CII Gill .... oid lilt: filII clcaralLce prll("t·dllrt·S alld Ih .. sllldy had Ilot beCIl ask{·d Jill' hl" thc CzedlOsl",·.. k ;Hllh"rlties. lIllI Ihis ,11I(1l" was canwdllln Wlth"nul il tiIlilllClllg a~n_'('nlt:ni \\'Hh (ht., leClpJl'1l1 gO\'erlllllcIH, \\'Ilhuill ;\l'1\' pnur CUJllllllllI1enl .. I' flillds alld Wlllrolli all al-:n:.:d I'rograll1l11'·. 11:1. [hid., p. :!I:•. I J.I. A. \\ayhew, ':\",,"1111.'111 Ill' lilt: I'I·\:\RE I'rllgralllllll." frlllll Ih .. (;01111111"111"" l'lllill "I' Vic\\" III Ellropean CUlirt of Alldilors. OrO/U'nIl"'" wllh 111,' Cllllllirl/'.' 0/ (,',."Iml flllil 1:·".lkm fllml'" - .. \'UI'.I.IIIII·nl o/h,/llJIl"/fI/ :1111 (COIIIIIIIS"Oll "I' Iht: Emllp"all C"llIl1lllllllH'.', EI!)·l J, p.I·IH. II:,. The US ~O\'enll\lt:11\ hOI., also, hO\\'L"n~r, pla\'L:lI a role: 1\ L'lIIL"r~"d Ih"l Ill\' liS w;" pa\" lIIg it salOlI')' of OI'CI" SiO,OOO a ),ear to Ihe Iwad of Ilr.· J.("",·rrllllcII' ag!:IICI' dealing 1\'11], pn\,allS:1\1011 JI1 I'lullgar\" 1\1 acldilinl\ '0 his I"q~lIlar salar\'. l~lLI Ihi., arrang"IIl"1l1 'l"-",",.II,,d ,\'1,,'11 II hec:ullL' puhlit: ;md Ihe l't:rSIIIl u'llcerrwcliost his.loh. [Hi. 111 HIH·I HOpcr C"lIt of Ill<' Polish I'I'j'-;llJsallllll :\genc,' s "pel"allllg c.pllalwas IIIIIded Ill' EU gl-;IIlL,. Sce illc /:"IIII()/II/.I'/, Ii Sepal'lIIher l!i~J.I. 117./:'(1111/1111/11. 17 Sept,·mhe .. I!J'H, p. ·17. [IH. EnOl/mini. H.lallllan· 1!1!J.l, p. Ill. II!I. 011 [his p01l1l 1(1I' ciel't:lopllig COlllllrles s,,," L'N( ~r:\I): W"rld 11II't'SlIIIL'III Ikpo .... 1'l!J.I (L! III led :O-:allo"" Iq!I·I). p. ~n. I !!(). 'The III"Y 'I' ol~jt:l'II\'l' I,ll' I'DI III (:"IIll"al allel LLSIl'rll ElIl'llp" I,'as "111011');"1'''' Of(:1) Workillg Papt:I' No. ·1:1: /l1"rkl'1 ..\ccess-FD[iTrac!e Lillkages III Easle .... EIlI"OI'" (Pans. I'I!J.I). p.5. I:!!. Ill' III" '1 1111 Iller III' I!I!):!. III n;lailillg ..'"III<' 1I111e1,· ""!I"r \\'t'slerll linlls had II Ill",· " illio lhc regloll. III Hungar), tile)' had hI' Ihell Glptllrecl :!(J per celli of 1111: .. eJ:lil lIIar);('1. Sec Johll Thornhill. 'E. Europe Elluct:s lh.: 1I"ld', hUllllnal TiUII'I, I~I (Jcl"her I!I'I:!. )1.:1. \ ~~ . .-\11111011\' H"h·III~'.n. ''-\11 .\In,,oIlH· T:lS);', /'JIIIlIII'III1 'Fimn. I :1.101111"11"\' I !/!J:!. [!!:l. UNGI:·\D, m"M 1"",'.1'1111/·,,1 /('1wrl. [\1\/·1, p. 111l/. 12·!. This IJI('OJ'lnaliOIl on Skuda IS drawlI 1'1'0111 lhoall Calhn·alh. 'T"!-:"llll'" FIII·,·,·<' 1';" 11)(11111'.1\ em/mll:"",/", (/I\;In:h 19W,), Pl" i-ln. 1:!5.1hid. 1:!(i.Ihid., p. H. I:!i. 1><'\'11\ Donc', 'Shod, .. fllH' FI·el.' !llarl:"I', Fillllllmil 'fill/,·I. ~.tllJl{' 1!)tF,. p.I\. 12H. See UNCL\I). 1\;"", luv,..llm/,II/Ii'1J11/1. [!)9·I, p. IlIIi. 129. or lht: sl~ly·lin· corporall"lls PI"II"III.,,·d Iw Ihe /llilllsll"\' or I'rrY;\lIsatlllll III Puland hI' 1 L:!~i.

'0

"""II'.

t"EO,UBERAl.ISM FOR I':,\STERN EUROPE .JUIle.: 1~'~l:L ()Ill~' lIlIll'h'l'" \n'IT

hUliglll 11)' Ptlli~h Col1c.:c.'fIlS. Sl'l' f',-ivflf'.\UII"tt ill /'nlrllld (·Inl'liniSlrY of Plwallsalloll,JIlIIl' )!l~I:I). I:HI. L:'CI':\Il, Ili,,.,d /r""'I/m..,,/ !I.'/",,,,, )\I\J.J, 1'- HHi. I:ll. (,,,'<:'/':\/), Iii,,.,.! /111,,'1/1""1// N'/,IIrI, I!lY·' (l'llll<'d ~a"(lII', 1~1!).f1. p. WII. I :I:!, 1.lon\. •HIII\' 10 ;o.1;lk(" a :>'lark"t 1:1:1. Ihi,i. 1:1-1. OEe\) '1'(; .. 1" P"lin b'lll"', /'I(",·Firlll T,,,,/,' ,OECI). )'"n" I!I!I:\). The "Illy rdi"hl" data '"' IJ'T, ;)[, ....... Iiug III til<' OECIl, al'l'll' 10 III .. l 's ;uld.!al'''"' 1:1:;. Richard Park"r. 'C1inlollollllcS fur [he East'. Joim:tgll Poli.y" 110. \J.I (Spring I!I9'1) p. tiO. 1:lIi. l'1I11"d NaIll"" IllcllISlnal lp II Il' 11 I ()q~al1l""11'II. hU/I/\lry O",d"/,IIII'111 (;/(,//(/[

n"I't·"

U,'/mn.

I~J~J:!/~):~ (\'il'lIllil).

l:r,. \l'lIrld lIald; l!nl:1 E(I(''''1'n,,, ali
10

(,olalld. '111111,

.. d ill :\111,,1"11. Th,' .II,,,.!;,., M,·d.,,/I ,\I'lIrh, p' 1:!·1. I:IX. Ex'-':pl )[1 Ih\, (:ted, R"pllhlic. wh"n' gov .. rllllll:1I1 Ill'alth 'pt'lIt1ill).; 1''''" II. IH!I:\ ','S ~1 r"sult 1)1 ils dl"n"'HllI Itl pn\';lllse hc..:ahh In~llran('t". Fur an L'n1hUSl;ISIIC ~Irlldt' nil Ihl' pri\"alisa~ SlT Ih .. 1,·fOWI/II/I/. ~H ~lal' I!J!J.I, p. ·)X. 1:1\1. I'n,,1I' ~lill"H:r lIorn appcal,'ct pI ...." 1.. 11' III (:h"l1l" .. I1,,,·, K"hl "'HI Vralllbh 10 Suppo ... hilll III n·Stsll,,).; IhlS n'ljIlJrl'IlH'III, bUI II",,· n.'sp"IHkc! II\' ell-III;IIHli"h Ihal h~ 1'11111' Illlpkl1H:nt II. i'llI. SlIl'h ... ",n·)lb 'nT" abo r;(lIl1l1ali'I"
"I.,,,

~lIl\"\\'iLy.

j·ll. /-:"'"1111,,\1. '1.1ul\· I!I\I·I, PI" :21-~~. ·I:!. \\'. W"sohoWski. 'TI.l' NaIll ... .' or S"nal Ti,'s alld Ihl' FlIlllre 01 I'lIstnllllllllllllSI S"Ut'I\': Polalld Aftl'r Solidartl\" ill.lohll :\. I·bll, eel., (:;"il.'i"nd.\', Th/'"ry, l1i.,;"rr. (.'IIIII/"m.I"I/, j

H :;UI)))) J{1~t· lillJ\''':''~II\' Prt·" .... I ~)q:;). j.l:l. "\III1l' :\Pl'kiJalllll, 'Thl' F;dl alld

I~isl' ,,1' Ihl' C""IIIIIIIII"I" (;,".'S' Who s Rlllll1ll1l!; (:l'lIIral Enrop"·. l'IlIngll :Ijjil//J i:Ui (No"l'lIlbl'r-Dl'n'lIIiJl'1 I !1!J·)), PJI. i-I :1. 1.J.1. ~li .. haellgn,I1IL'lr, '01) Ci"il StHWLY·. Joinngll :lfJilin (\1;ll"cll-:\pril I!I!I:;). I-F•. IOlliltll;11I Sll,,'k, /-.',,'''11111.'1/\\111 (F"b,·r. I~l!).j). 1·l(i.·lhid. Thl.' fml/Ollll_1I I\',IS 111"1'.. hllll"SI, st:tllllg Ih"l il \I:IISII1 had 1101 LOIlIi·oUII·d Ih .. his, .. ;Ihili,,' 10 press lIlI 11'1111 1111- n'fllrllls RUSSia ParJiallH'ul 'Iillk \\'ollid h""" rt'lIIalller! Ill'",t- ... ' Sl',' Ihl' 1':nHl/J/IlHi. ~) Ocloh.... I ~l!l:\. p. I:,. i·I;. 1.101'<1. ·\i.:lf'lll ~ )1:.11' I.inllg" Ihllg,'IIHIsI,., Fi)IIIIII"d lIm,'I. ;',j;.IIU:IIT )!I!I:I. 1·IH.I':flJ//lJl/J/.I/, 'I (kwhl'r I~I!I:I. p. IC•. i ·19, fml/lIllll'/, 1 :-'la,·. I !I~J::. 1" 1·1. l:.n. Ibi,l..p. ·11. 1,,1. Th.· h"d 11I(;1~IIIl:d 111:11 the SIICh"d-;1 liIWf;,h ,wllid Will III I'"bllllla \\'oilid lUll I,,· ahlt- to '1111""1>11 what II 'il\\' itS 1111' tnlllllph;tIIll .. SlwrL'"hll polint's or it> ST l!;I>wrlllll .. 1I1 (S'T tlu- 1':011/011"". I') Non""I".'" I!I!H. 1" ,,·1). \l.\ Illis gOIlTIIIIl"llt w;" ahl .. III Illarshalllllh':, I'"r ,:.,,11 orlhL' \'lll'· III .\J;lH:h I!I!I" d"tlIOIiS. II pH'dinl.'c1ll1allll<' IIllllganall .. Il'ClU'IIS " ... uld hl' a ClIIIll'.,1 hl'I\\'''''1I lI.s Ii,nlllnt", III Ihl' "'illig" IkIlICKI~IIS alld Ihl' Frcl' I klll"n~I". \<."1 [I", \;>1111).: J)"l1Ionab a.-hi"",," ill").:lIil;'·;1I11 1,·.SlIit.' all,llhl.' S"naliSl, ;"h,,"'ed all "'·l'ral1l1l"J"rIlY. );l:!, \'irglllia \);Irsh alld )\"\'111 D"II", ·l;lI"xpn·I,·d j)q~n... "I' Slahili,,··, Filll/l/n,,1 Ti/JII'I. ~,. i\Jay J ~.~I;). p. :tL I CI:\' 1.!"t1I,·d illi,!. 1,,·1. En'lI 11111"" li ... ik an' Ih.' alll.'lIlJlb hI' Ih,. [·:"OWI/I/.,/ III hold lip I'anolls East EuropL'an l-cOIIOllllcs as h"I"~ slJundl' .. (h:lIl \\'t:S[c:1"1I Dill'S on Ihl' hasls of th(· SIZe ld" Ihelr IHl(l~{'l

or

ur

1,'".,,,,,,,".,/

cil'linb' I"". J \1. (:. Rollo ilnd J Slern, '(;'o\\'lh alld Tradl' I'r"'ln-n, lor Cenlr:" ami Ea'll'rn Ellrope·. '11", iliuM r:mlllllll.1· I,>: :; (I !I!I:!). Tllt'lr "il)rlliallolls sho\\' Illal 'f!;rowlh 11\'1"1' till' whole 1!IHH-:20Itl p"n,"1 i., IIl1lik"'\" ("WIIIIII'I.- .. Ihl' opl 1111 I'll(' ."·,·IIi1n".lo k;l(llll a lIIalor illlprLI\"(~­ '11~111 ll' the n .. ~ah\·L:' li\'1I1g :"I1_\u\'\",nt~ uf E.lsle~ u rH1"t,pl'

I:'(i.lhid. ):;;. S;r.-hs, 'CIII"oliciallll!-: Cap,talislIl. p. (iO.

=============10=============

Neo-Liberalism and Civil Society

Across East Centrai Europe 111 the late 19HOs, young intelleclUais were SIlUIIgdown at theIr desks to write ess.n's on clvi[ socIety. [n [9~J [ III the Soviet U1l101l, desks were being cleared for the same PllJ-pose: to win a Suros sciwiarshlp to the \,Vest by showlI1g where YOU stood Oil ch'i[ society. Alumlll came Il)r a diet of sel1111lars In places like Oxrord to [earn abollL our w()lIeierrui lIlsti tllllons (although, naLllrall)" one wouidn't hrag). The en tire experience was a refreshing one for all concerlled, Not least for the teachers. Aner aiL Ihese students seemed to be[ieve in it all, at a tlllle whell mam' or the iecLllrers were llot at all sure what to lhlllk, boml)antcd as the,' were by the stl'idellt assaults on their [ibel'al values, on I11stiulll0nS or ch'il societ\'like theIr own [iberaluniversities, the BBC, the lug-her cl\'il sen'lce WIth llS ethIC of public serVIce, the locai authorities, the seriolls press, the well;lre sernces, the teachers, the health service, and u-ade unioIlIslll, Go\'erlllllellt lw disCUSSIOlI was ndicttled as the talk shop or the challel'lllg classes. In short the ven' Idea or the liberal dcmocratIc state was ulleler assault. And the a!tack was being waged WIth all the most sophisticatcd techniqucs or mass suggestion. not least by savagmg liberalism in the language or liberalism Itself. The authontanan populists werc iaYlIlg II1to CIvil society in the colours or s()callee! nco-liberalism.

Ubl'nils \'1.'I:WS NI'O-libaals

For decades western liberals had seen a strong- Civil society as an lI11eg-rai elemenlll'llhin the state aCllllg- as a countcrvailing IlJlTe to the powcr ora secrellve slale executive and to market rorces in the deterll1l1lallon or public plllic\'. Civil socIety lIlvolved a nctwork of aSSOClallollS and IIlstitulions, many or them supported by public funcis. whICh exerted democratic pressures, calling both slate cxecutivc bodies and big huslI1css to accoull L ~-JR

NEO-I.IBER:\I.ISM AND CIVIl. SOCIETY

And cIvil souet\' was underpllllled by a strong welfare Slate, provicl ,lhrnug-h IlS education svstelll, public health systems, public houslIlg other local serVIces a Illll1illllllll basis for citizcnshlp, The role of civil s ety was a polillcal one wlthll1 the liberal democratic view of the statl: ensure that public polin' was g-overned by WICie diSCUSSIOn and public p sure by the CllJzens Liuollgh a Illvnad or civil associations and illstillllil Civil S017/'/.), W(lS lIIilxml 10 /III' sialt' (IS (/ {f/lo-gmwrn/'(! !ib(~ml d('/IIoC/w)', w bemg always III tension with the Slate execuuve anet With 'the unaccepti face or ca pllalismIn the 1970s. tile attack was rather crude: the cn weill up that the s was too weak because of democratic on:rload. All the pressures from I society (then called special interests) were making western count -ungovernable' In the EIHOs the target and the alln remamed the same, the discurslVe tactics changed I HO per cent. Neo-liheralism was born 'the IIlcIivlcluaJ' was belllg crushed by a rapacIous state, The crusade launched ag-ainst 'the Slate' to rree the lIldiVlduaI. the ecollomy and UI Tom Cobblev. Traditional liberal suspicion or the state eXl'clIlive has bel'1l replaced by ulitv towards thl' weIJ~lre Slate, The threat now camc rrom thc Inlalld Re\'ci hehllld which stood the slnistel- rorccs or local goverl1melll SOCIal sen departmenL~. teachers and the (:ll cals in the Direct l.abour Departmellt the trade ulllon barons amongst the cleaners III the health serYIce, Libl were IOlrilO SLOp WOIT}'lllg abolll cl\'illiberues ancl rail\' around to sharpell sword of the state against the miliCI'S. Those who ol~JeClecl were clubbed chaLLering classes. the cOllsensus mongers or worse. The nco-liberals also took up the language or civil society to lurn the eral concept on lis hea(t. Insteacl or belllg a network of associations institutions for ll1\'1gilaung state eXeCUll\'es and market forces and art lating collective interests and concerns, it was til hecollle a 1IllXUlrc or bUSiness charitable roulldations and sclf~help institutiollS for the desen poor on olle Side; and archipelagos or unaccollntable quangus 1'01' mal mg- a depoliticised, privatised, publicly passl\'e lIIc1i\'lclual consllmer 011 other. The IIlstllulIons of thiS nco-liberal civil society are above all Iher ensure that the poplllalloll stops pnonllsll1g the public welfare. SLOpS II lI1g for cnllecti\'C snllllions to socictv's problems, In the name or fret SOCICty (or till' -incli\'lclual') from the (welrare) sl
250

1'( )1.ITI(:S IN TIlE (;/.( )ft\l.IS ..\TI():-'; I'ERIOn

The Suros scholars and their less /"Ul"lunate aspirant colle'lglles in Easlern Europe would have gathered lilLie or Jlotillllg or Stich palllflll debalL's frolll the tranquil prose of on<: of the most prolllln<:nt propon<:l1lS of a Civil SOCiet\' for Eastern Europ<: III lhe 1~mos, Tilllotlw GarrDIl Ash. The clashes between the liberals and the nco-liberal sonal <:ngllle<:rs wcre surely 11l11lor difTerences when we wcre faced wllll a Illollstrous COlllmlllllSI IOI;I1ilan.ll\Ism in the East. All\, fo)"m o/" CI\·jJ sonety was sUJ"eh' better I han th.ll. In the wntlllgs of (;anon Ash on East C<:lltral Europe In I he I ~)H()s, developm<:n L~ III the East were indeed illll'rpretec! as b<:lIlg dnv<:11 Iw the clash between 'totalitanalllsm', seekll1g, in Ash·s wOlTis, 'to rule over all alOllllsed society' and a Civil society wiuch ellli>udi(:d tll<: idea of' SOCial selJ~orgal1lsa­ tion; in the iiwlll of l1<:t\\'orks or alllOnOIlHlllS SOCIal groups and 1110\·eIllL·nts which togelher would /())"Ill. as Ash puts Il a strong Civil soucty, neil 111 IIHermcdiate lavers oj" free and l"rani;. OIssoCialioll' , Thcse themes WCIT dl'\TIoped by GarLon Asll III hIS earlier book. nil' UII'J oj" ;1!lill'mly, illld wcrc III turn de\"lved from the wrillngs of Adam J\·lichnik. or comsc, the p.\I·adigJII orslIch social selJ~()rgal1lsallOJI was Soli(larnosc 111 Poland, especially IL~ 1Illeiiectuai networks. BlIL With the disappearance of 'ConllllullIsttotalilarianislII the discllsslon about Civil sO(le1l' 11\ the East has become altogether more complicated, not to say deliGllc . .\11(1 lIle neo-Iibcral SOCIal eng-lIIcers havc sci HI I\'ork m·L'r there. ivlcanwhile. balk II) Oxfurd, l;'JI"IOIl .-\.,h·~ c11I)rI.~ han: bcel) slrcllJ..:lhelleci by a new addition at St. Antony's - Michael IgnaudT. We will tn' to trace how these Ideas on CIvil society Ilave eyolved.

Ciuit SO(/('t.l'

M(lr/1

1: h~/i"(l.l/l"IIdll/"l' oj" Litll'raf DI'lIIfi(,I"fII)'

In 1~190 Ralph D.lllren(lorfproduced a shon hook olllhc tralls(l.lrlllallOIlS III [astern E.urupe III 19H9: nl~fll't:I/(}II.\ fill Ihl' RI1. Jo(II//(I1I III l~III0ln'~ was a Ellrl\· classical western liberal slatemellt on what Civil sOCIety should Il\ean for post-Communist s()clClIes, Interestmglv, l;anon Asl) endorsl'(1 Dahrellflod"s booJ, as a claSSIC. Dallrendorr sees thc civil SOClct)' as a network of institutions and relatlol\ships II1tegral to the liberai Slate, which he prcrers to call, following- ".ar! Poppel; the Op<:n Societv. I-Ie titus cndorses the ideas or go\'cnlllll.'llt Iw open discusslull. II\crclllc\llal polic" makill~ III WIIlCII each SICP Jill·w
NEO-I.IIIFR,\I.IS~1

.-\1'11) (;1\'11. SOCIETY

(-I is pn)pos;tls are close to those of 1-labenllas Ii,,' tr\'m~ 10 acll1cn~ an ulldisIl"H'tecl l'OIllJllllIlICIlIVC public space. And Iht~" n'SlalC Charles Lindblom's classIC \'IeII' o/" besl policy as Ihe polic\" of"' muddling Ihrough' via the impacl of a hOSI o/" special groups and ouliooks upon llllual ideas, altenng and evcII 'distortlllg' purc COl\CCpL~ to liL these into thc particularities of a complex soclet~· whICh an: beyond the grasp of a sll1gk 'sClelllilic-rational' bralll. DahrellcIorf theref()rc n:pucliales the Icmptal101lS offered by the lIeo-liberal Social Eng-mcers: tile planners with Ltlelr systems ..-\s hc puts it: 'Thc coullines of East-Celltral Europe have not shed Iheir CUl11l11UIlISt system in order 10 cmbracc the capllalist SVsIC1l1 - whalc\"er that IS. The), have shed a closed system III order to crl'atc an open sOClcty,' Therc IS no 'correCI path', JUS! expenment and tnal and error Iw a large and diversc lIlter-sul~jcctive clvi I SOCleIY, :\nrl D,dln~Ild()rf IS p"rllclliarly worried thaI the leaders o/" thc new Eastern Europe will he sold a second-hand westl'rn mucid or holl' Ihe~1 should l'ngllll'l'l" thl'lI' new states, 'Thl' CO 111 111011 lang\la~l' we speak wday IS not the Jang"uage or the Wesl, now adopted by the East. IllS an llltrlllsically ull1versal lang-uag-e which belongs to Ilobody 111 parllcuiar and therc1"ore to evcrYbodv ,. Ir an\' creed has \\'on in the events o/" last vear, illS the Idea that we are all emiJarked on a JOUJ'JH:Y Illlo an uncl'rtain l'ulUre and have to work h~' tnal and error witilill institutions which make it possible to hnng" aboul chang"e without bloodshed,'

Till' Nt'IJ-i.ibl'ral RiPIIJi(' E\"t~n the busiest or the nco-liberal piannl'rs could nOllel tillS pass. Dl'Splll' a grul'lIing schedule which had ll1\"o\veci working over Yug-oslaVlOl's (i.:ekral gO\'enllllCl1t III 19H9, thl'lI S01"l11lg- olll Poland hdore tackling" the biggest ht'an- eng"llll't'nng,loh or all ill Russia in 199~.Jelrn.'\' Sachs /lew 111 to LSE to repl\', .-\s Sachs puts It: 'I conslcler ProJ"essor Dahrell
I'OI.JTICS IN TilE (;\.( m·\I.ISATION PERIOD

capJlalist labour markct (and ullcmp]ovmcllt): thcn with pn\'atlSaliOIl a hourg-coisle (capitalists); thcll (wnil 1<)l'clgn dircct im'cstlllclll and all cxport boom) cconomic growth; and thClI, but only thcll can tllcrc bc illstlluuonal stabilisation - 1.(:, a stablc libcr;d dcmocracy ami civil SOCIety. What. YOII 1ll.I\' ;Isk, talcs pcopic O\'cr in the Illcantlme? Sachs has two alls\\'crs: lirst, let us n:rlllCC thc meantime to an absoiute IlIl1limUIll by sweeplllg aSide every obstaclc and resistancc to gelling tile capllalist system establishcd. And seconeil\", put wcstern mOllcy 1ll to imbter the supportcrs or caplLalism and bu\' oIl oppDncnts or 1I1lclermille them.

Ch,i/ S(}('I('/)' Mad; 2: Buildillg (/ Mit/lilt' C/a.H In IllS more rccelll ",riling, Timoth\' GarLon Ash has engaged in a conceptual slippage. He ","bllics awOl\, froIll DahreJ1clorr in the direction or Sachs, Ash clalllls to be agaillst Sachs-stYle tc:/(:oio h,)'. He s.\\'s ·wc don"t know wil:\( the transillon is to and he argues that those who pretcnd to kilOII', 'cnd lip. ortcn quite cruddy. awarding place marks in the race to deJllocran': 'The Czechs arc in the lead, Poland is lag-glllg slig-h tly, Likrame IS hrin).{ing- lip the rear.

'H_I

But there seems to he an C\',ISIOn Ilcre. The neo-liheral t~'kol()g'ISIS do nOI makl: absolute predicllons about the fllllll'e. Thl:\' know that thel' face l:lIl'mies who could derail theil' plans and lUrn the ol~lecls of their plannmg III other directions. \Vhat the planners do have is cnleria or assessment as 10 the progl'esslOn or regrcssl(m in the countnes concerncd. And so. IIlckeel, do liberals like Dahrclldorr: hiS cntcna must be the cOl1solidalloll or opell SOCleliCS With strong- CIvil networks checking l:xeClIU\'c power anrI IlllLrammelled market rorces. Anel so, It turns out III the same arllcie, docs Asl1- 01' rather Ash gives liS two, rather difTerellt benchmarks - one \'aguc and one very clear. The first OIlC IS not only vaguc Inn evaslvc. He declares thal lhose sOclellcs in which t:lvil SOCICtv was dcvelopcd ami there werl: Cll-llll'lllS of a 1111c1c11l" class .lIlel ,I market ecollomy have made dramal1cally beLLer prog-ress' while olhl:rs III the fCJrmcr USSR arc hrlllglllg up the rcar. Yet tillS IS rathel' opaque: after all. the Czech Republic could scarcel" be said to havc had elements or a market economy in Ash's Sl:nse berore 19H9. It is also \lot clear what Sachs IS J'ef'crrlllg to in suggesllng that RUSSia, sa\', had a smaller Illlcidk class presumahly IIltelligentsla IS III some sense rl'icrreci to - proportiolla[(:l\' than, say Poland or CzeChoslovakia, And the refercnce to cI\'il society is unspecificci. Yet. later III lhe same piece, Ash adopts a dilTen:llt and altogether clearer cO(lccptlon or the cl'lterion for Judglllg' success. He Slates: tht.' sOClai dimenSIOn or tr'lIls1l1O\l IS a nq~lene(1 IIl1rc1 dinwnslOll [between economIC

NEO·l.I BER,\I.fS~1 :\NIl (;1\ '11. son ETY

and political dimensIOns], and that IS ofLen where the differences belweell success and Etillire are LO be soug-IH. , -' Blltl10w the social dimensiqll is no iong-er the nctworks of civil sOClelV, but some tiling- allOg-etl1{~r more solid: a clpllalist clas~, a bourg-eolsle, As he plllS 1l: 'There is real U'lllh III the ivlarxist lahel for liberal delllocracy: "bollrg-cols delllocracy" , ThiS IS exal'lh' Sachs's POll1t: lirst we musl eng-lIlccr a hourg-eolsie, then the IIlslltllllonal frills of civil society etc. can I)l' added. Ash does not say this. Hc clues not endorsc tllc usc of the statc executlvc to forg-e this bourg-eoisic 011 the anvil or slwck therap\'. Bill Ilc cndorses SacllS 's sequence: Iirst a cap· italist dass. thell thc rest.

Civil 8orlt!/)' Mati! 3: Adlllllm/I'I'I,tljimlJ tIll' Ilht

The dclicac\' allCt g-ood tastc wnh which Ash pICks his way round these Isslies conlrasts wllh the tactlessness or Micil.wllgn
25-~

POLITICS 1:-1 THE CLUII.\I.ISATIO:-lI'ERIUJ)

Ignalidf elahorales .IS lilllows: 'Thls Illcans funding lIIciepen(lcllt medi;\; mallllall1ing lICS not sllllpl\' \\'llh gOVlTllnH.'lIts and rcglllles hut with tilclr 0ppOSlllUnS; providing ;11(1 ancl assIstance to strengthenmg lIll' kl'v IIlSlItulions of cIvil .mciely, lhe CUllrLs . .Iudicl;UT and police; r1evciopillg c!lantabk and voluntarY assOClalJons so lhal lhe popuiallon ceases to loo\;. Lo the Slale and begllls 1O look to ItS own stl'('ll~ths \Ve III list, he.: savs, sian '\\'lth LlIC se;ln:h liH' p;lrtllcrs outsidc tile stalc. tile.: kadilll!; parlles. and till' I)ureaucrac\,· IgmllieH's n:lllarl.:. hel-e Lhat the popuiatioll should be encouragecil101 to lOOk to the state but to Its ()WII slrengtll" ma\' alarm SllIlIe readers. It could sound like an authorltanan populist call to arms agallist thc magistrate and hiS sword. BtIllhls IS to 1l1lSIIlHlcrst,lI1ri Ignallef('s IIl'o-liberal co
Till' ;\ 1I(l1y! /Cat \ il/"u/l /1/

These Ilcwilderlng discurSive shihs on the lhcme oj' Civil sOCiety el'lI1CC two su-ilung characLenslics. BOlil Garton A.~h and IlSnatidT display a J'lllndicccl weanness in tllelr attitucies towards the currcnt slluaUon III Eastern Europe. And secondl)" nClther thcm proVIdes a scrap of allah'sis of
or

or

SE()·I.[IIER.-\I.[S~1

tissues of Ltvil aSSllUaL1llllS arc l;'tsks,'or the fUlllrc,

III

:\ND CI\'II. SOCIETY

Ihesc cOlllllnes o\'cr thc last Iivc y(:ars. Thesc

TIlt' F"II' ()/U/,al E.'IJiIIlK CiT/if ,\'IJI'It'III'J

If therl' IS Dill' COUlltlT wht'rc Civil SOCletV COliid h;I\'c been saul to havc clllcrg-ed 111 East CClIlrai Europc 1Il Ihc 19HOs Jl \\'as sllldy in Poland, with the rise or Sulidarnosc III I 9l-\O-H I , We mav kaYe aSldc I1l this COlltt:Xt wllt,thcr thc C\'elllS of I q::;q III Polalld wcre a Inlllllph 1'01' (Ivil society' m'cr Ihe statc, But without C)lIeSlioll, thc leaders or thl' Ill:\\' govcrnmcllt of ivlazowlecki came to power 011 the baSIS of thclr source III Solidarnosc, the baslIoll or indepell(1l'1l1 CI\'il Iletworks III Polalld, '~'h"l thcn IlapP(,IIl'd was govern cd Iw Shock Therap\', dnvcn by the Cul1cCPllOIlS wIlle/) .Je/ln.'I' Sachs has populanscd, The L\'I f and lillir SllCCCSSl\'C !41)\'L'rnlllcllls clail11l11g allcgl;lI1cc to Ille Sulidarnos( lradillon dro\'c Ihls shock trcallncnt hllml', Thl..' networks of sOCIetal IIllercsts were not COlJsuIted and wcrc 1I0t drawn 1IllD processes or intcr-llIstiwtIOnal hargallllll~, cunsensus-building an(1 cUlllpronllse, They WL'rt: r"ilro;Jdcd, The lirst group 10 prOIl'st \\'ere I.hc mainstay or Poland's pn\'atc scclor: thL' private pcasanlrv, B\' the sumlller of 1990 the\' werc ail'cad\' having to take III thc strccls lJ1 ;1 \';tlll attcmptlO dcfcnrllhcu IIlS\I(U110llS and llllt'J'cSIS a~alllsl thc dnvc for Shoc];. TIlL'rap\', Bill till' cCIllr;d cOllllin willch has dnH:ll Polish polil1cs has IJecn that b('t\\'cl'n the IIHlllstnal COlT Sliliclarnosc ami Illl' IlelJ-liiJcrais III thL' l-{0\"LTll\lll'nl, baCKed iH' IhL' Jntcrnational finanCIal InslllLllIons. The svndicalist wmg of SoIidarnllsc wanted to Illallltain an(l slrell~then tllC cOlltrll1 of slale cnlerpnscs hI' Ihelr sdf'Ill"IlacJ;.ward Uhalllc "';IS lIIuch Illgher, "."1 at the S,IIIlC lllllC polillcaI dllllklllg hcgan to cvoh'c \\'1l11ll1 the syndicalist core ofSlllidant\, alld wilhin till' l'lecLOrOlll's, III \Ill' Slllllllll'r DC 19~'~ 111 POlotllCI. Solidanty Illll\'cd ag-'lInst

or

POLrru:s IN TilE G\.Olnl.lS..\TION PERI(J\l

Lhe vcry g-ovcrnlllcilt It had spawnecl and f()rlllcd an alliallce WillI thc exCo III IllUIl isL SOCialist Pan" and ilS alliec\ Pcasant Pl1S were helow ",hill the World Balik estll1l'11L'rI to be the 111111imal ntllIiIllt>llai sllpporL levei I()I' a person livinl-{ alone, Using UNICEF's definition the proportloll of Poland's populatiol1 slIl1<:Tinl-{ such l11all1l1Lntioll was nl'gligible 111 19K9 btu hac! reached 17.9 per celli 111 H)~I~, Similar

NEt )·I.IBEll\I.IS1I1 :\Nlll WII. SOCIETY

proiliellls. as well as prohlems of health. hOllsing ancllife expectancy can be fmllld in other COlllltn~'S Ill" Eastern Ellrope. It IS frankh' dist;lsleful to n~arl westerll cliscuSShlllS .1I)(Hlt tllc pr(III\ellls (lfS(ICIetles III Eastern Europe which Ignore these problems. Yet II IS agalllst this background tbat we can assess the proposals li.u· the fllt.llH' frolll IgnallelT. \,Vc Illight expect hllll lO make SOl1le sU){,f.{estJolls as to hoI\' ecoll(Jl1lleS sll;Il((:J"ec! by lin: Wesl's shock lherap\' polin' could be helped, Sure'" :Vlichael I~llalldl, so nH)\'e(\ in the 19HOs hy the 'power of lhe powerless (1\ Easlern Europe might he moved b\' the plight of the po\'en)'stnckell Ihere no\\', The allSlI'er secllls \(I Ill' that lI'e.JllS[ dOll't know \\'hat eIther his or Ganoll Ash's re'KlIOll nH)!;lll he because if t!l<:\, haw noticed [hc eastern slump, the po\'en\', ;lIld the tattered sociai tissue ieft III theIr wake, they make no refel·· ence to It. Instead Ignaliellleaves \'aglle the exact sOllrce or lile j"uture 1lH.'nace he WIshes liS 1,0 bunch a pn:\'ellll\'l' slril,t, agalllSt. Mich .. cl [gn
POl.lTICS IN THE (VlII ..\I.IS,\Tlo?\l PERlon

policc - it .~lgll"l for exporlll1g til [;Isterll Ellrope thl' 1l1;l1lllals 011 the desks discreet offices in Latll1 Amcncall capltOlls aCCOJlllllUdatlng the st'lllon c111t:b of the CIA? The meOllllng IS Imriear. It should have heel! c1arilil'd. Thl' European Union and the rest oj" the western alliallce IS, 111 I;u:t, takillg oren action on these matters: nOl.JlIst by Ignauerrs funding- agcnts. but also throug-h the Pact for Stability. ThIS puts presslII"e on the states or the n'gmIl to sIgn bInding illternationai iegai trealles renouncing ch\lms to do wllh ctlllllC minorities or territOrial disputes and granung adeqllatl' righls to theIr minorities. Yel therc IS a curious overslghllll all this, Disputes 1I1\'oi\'lIlg the Illeilliler staws of the EU are excludl'c! from this treaty-making process, )ct if m_' look more closch', most of the ;U:U\,l' claillls or tillS sort at presellt 111 Ellrope are clallllS lll\'olvlIlg EU members with dalllls ag;ll11s1 rOrillCr Communist countries: Gl'rman\' lIas all active clallll agalllst the Cl.ech Repllblic over the Sudeten Germans. Italy has blocked ASSOCIation Agreement negotiations between the Ell and Siovelll
Tlw Pa.HlIIg J\Jrlllll!1I1 o/iHot//(lar Alall

IgllauclT points to the fact thal Wl' III \-"estern Europe ha\'e had a blesscc\ creature whom he calls 'modular man': after Ernest Gellner. llldi\'lcluais with bolted-on altaCllmelllS of a VarlelY or kinds. many of them trallSICIlt and drl\'en Iw proEllle energIeS ratlwr [hall br l"undamentalistlc\eologu.:s. ThiS IS smeiy true. But fIX how long and why? Ignauc!Tsliggesls that IhlS IS a delilllIlg feature of capitalism or at least western capitalism. I-Ie (alks abollt 'the gelll\ls or capllalist civil soclet\, Yet surely III European terms modular mall IS largely a postwar product. It ,\'as hardly a dOllllllallt lcatllre oj" inter-Irar Ellwpe. It is I1(H a lCatllre or capllalism but or a panicular capItalism ror a bnef pel'joel of tIme. The panicuianty was the postwar boom, the welEtre state and 'a civil soclelY whIch did really operale to sOllie degree as Dahrendorr wOllld WIsh: liberal corptmllist negOtlatlOlls with autl!orItaU\'e CI\'IC associations. And there was another [ICW!": the \Vest's upper classes

~E()-I.IBEI{;\l.IS~1 _\~Il

CIVIl. SOCIETY

were on tllelr i)est bclta\'lllur a\HI labour iWIle!ited I>;ISI-.'

III

comparison wIth its

--..

.-\re Wt'. III thc Wcst, still ill Ihls OIg-e Ilr 'modular man' or 1L IS passll\~~ The hllom has elided. With the end oj" the SOVIet Bloc. the upper classes 110 IOllg-cr havc a spur to selJ~cIisClplille . .-\ncl Ihc idcolog-ical fuel prOYlclcd 1(lr thc partIes of the Rig-Ill 111 allll-COIl1Il1Ullism Ilcccis to be replaccd. If Brllalll's ng-ht, the Ill'W dicsel hid Oil willch wc are to chokc IS nallonalist dClllag-ng-y. Ami as ror the brand of Iibcralism willch cClllcntcd lIlternaI peacl' III the 'Vest, the SOCIal liberalism or the suclal dcmucrallc slate. il seems all cXpeIlSI\'l~ luxury or thc (:old ''''a.-. as Pellllallt Rca. till: i'.'mll{)lIllsi's ccliwr POlllll"d ow: the ]Jcll.d tOlXOItioll (III whIch Jl was based, he Illliu'lIled LIS. was all 1I11(lorl frolll ivlarXISIlI I(u-ced 11]>01\ thc nch b\' thl' Culd War_ 19-1lalleI'J's proposals ha\T Olll' g-n:a I lIIen t: by divertlllg- Ollr attelltloll to nil ron:l'S tilat may ansl' III thl' LISt, hl' makes us I'ccl how luc!;.\· we arc hcrc III thc West. Bm how long will we be 11IcI~\' wnh the I\co-Iibcr.ds alld their propOig-andists like J\·lichael 19-nallelT ill the ascendant? :\ world economy Iarg-elY out or cOlltrol and a hollowed-ow civil society III the West makcs the liheral democratic oreicr s r\lL\ln~ look IIIcreasing-iv h-a~ile. TWICe 111 the last Cenllll'\' the western po\\'ers have piling-cd tllc world IIlLo Illisen·. \Vho will oner tiS a scholarship compelllloll 1'01' a lillie trip abroad Oil how to SIIlP it happl'lIll1g a third tllllC round?

No!t's I. TilUlllhl' t;a1"1011 .-\sh. III I,'/lro},,'_, .\'(/111,· (/"II;'lhall (:apl". 19!):;) p_ ~H~_ :!. Ralph ))ahr('lHlorl". /i,jll'd/lJII., Oil tI,,· n.""/U/IU" III btm/,,· (Chall" i:: Willdll.'. I !1!llJ)_ :; . .Jl:lfre), Sachs. /'''(''tttl\/UIII!' /t< //11' ;11,,11,(/ 1'-'-01111111.1' (~IIT Prl"ss. I!)!):I)_ .1. I III en-.l'\I' \I'll II Tilllolll\' (;a1"1011 Ash. Ox/un( J111<',.,111111"'''( /11'111171' (Willl!'r I !)~J.I)_ 5. _\Iichad 1~lIalll"lf. '011 Cil-il SoclL:l\·-./·i"Y'gll.'IJJiun (;'IJarch/:\pril 1!)9:.). (i . .I,·11r"I'Sachs. UlltI",,
=============11=============

The Post-Communist Parties in the East

One of the most unexpected features of contemporary European polillcs IS the continued strength of the post-Communist partIes. In the live countrIes of East Cenll·ai Europe l the formerly ruling COlllmunist parties emerged from the ciecuons III 191:\9-90 as the dominant parties of the Left. In six of these Erst elections they gained the largest vote of any pan\". Subsequentiy, in Poland and Hungal")', these parties were to become 1IlC most popular national parties. And seven years after the beginning of thc transition to capitalism, the ex-Comm1l111st parties remalll the dominant partIes of the Left in all the countries of the region except onc (tile Czech Repul)lic).:! Thesc former ruling CommullIst panics had swiftly rcpudiated the political system of the SovIet Bloc: espeCIally the consl1LUtlonal prInCIple oj'· the leading role of the Communist Party', whICh in practice meant a polillcal monopoly for the Commulllsts and thell· allies.:! All changed their names to 'socmlist' or 'soCIal democratic' partIes except the Czechoslovak CommulllsL~, who kept thell· name, and the Romalllan Communists, who organised themselves in a 'National Salvation Front"', before rechnstcnlJlg themseives as SOCIal DemocraL~ in 199~t These transformation decisiolls III some cases led to spliL<; wnh minOrities aLlempting to maintain the old part\' or with mlllonlles wlshmg to go further than the m'~JonLY and form explicIlly pro-capitalist social democratic parties.- I ALlempts were also made after 1989 to establish Ilew Social Democratic parlles hostile to the pnst-Commlll11sts. These partIes were initiallv encouraged by the Socialist Internallonai, notably in the case of the Czechusiovak and Hunganan SOCIal Democrats and later in the case of the Polish lIll10n of Labour. Others WIth some degree of what might be called social liberalIsm,.Jomcd wllh free market liberals 111 the centre, notably in the Hung;lI-ian Free DemocraL~ and the Polish Delllocrallc UnIOn. Yet wnh the exception of the Social Democrats in the Czech Republic, all these parlles, lJO(.h SOCIal

260

THE

P()ST·C()1I1~lli~IST

261

PARTIES IN THE E.:\ST

Table 11.1 The share of lhe vote in Ea~t and Centml Europe 1989-96 (poslCml1Jl11lnists, Independent social democrats :U1d liberal partles. lirst three elections) Marfh f CJ9()

/llil/ga,)"

I·ISI' HSDI' I-ISWI'

10.9 cUi

AFD

!! 1.·1

./11111'

1l)lJ.I

~tl

0.1

...

:t7

~)

~).-

I ~I,H

1\.1': I'ISI': 1-I1I1I~a"'all SonaliSi I'art"; HSIW: 1'\I1I1!:ariall Sonal D<'IIIt)(Tallr Part"; lISWP: HIIIIl;ariall ""lIallll'll 1-111111;:11"1;>11 W",'Ia'r,' 1''1,.1\': AFJ): ,\liialltT of Fn,., I.klllllCJ"ills. SOClali" \\·o,.k<'l"' 1';11'11",

Ia,.,,.

./11111' II)!)O

BSI' SI»,

Of/(JIWI" 1991

nf'("I'I"lwr 199,/

:l:t i

D.I O. I

f.;.,': I\SI': 1\1111-:'1"''111 SllClalbl I'artl': SIll': Sllnal D,·mlle,.allc I'anl',

I'olal/d

SL.\)

./1111"

1981)

Of/olwl" J !)C) 1

SI'/II/'l/IlwI" J 91)3

I~,O

II.n

!!O,·I )(Ui

I')_0.)<' !!, i

lk Ill, U 11 )()11 I.ah, Soli(I/UI.

i.:·)

K.,~ SI.il: IklllllCralll" l..·n :\liiaIlCt:. led Ill' lhl' Sonal l)"III1,,"OIlS of Ih" Pulish Rep"blic (SDPR); (kill, I.'" I< lII: IklllOrrallc hllOll. lal<'l" ralil'd 'hl' 1',..·,·,10,,, l'III1'"; Llh, Solid,!( 'I,: I.ahllll" Solirlanll' whkh h,'('aIlH' lilt, Ulllnll ur l.Oth!)" ...

UOII/al/III

May J 9c){)

SI'/I/I'II/II,.,. J 992

(i7 1.1

':27.:;

NSF SI»,

J..•.,~ :-;SF: :"
(.':,·rh HI'/,

CP SDI'

.I11 lit' I'N() l~t:)

.J.]

1111/1'

1!)92

1·1.:\ 7.7

.1"111' 1!)CJ(J ]O.!l 2ti.-(

I'OI.lTICS IN TilE (:I.()I\:\I.IS:\"("I( J:-! PERIOD

.1/11/1' II)()]

<':1' /I'DL SDI' :\WS

1:I,H i. ~.

I·I.·J li.J

.//11/1'

IIIC)(,

JO.·I

7 .:~

""''''"lC'rI

I\n': CP/I'III,: COli 111111 11 ". 1';11'1\'. la.I.''.1,,· Part\' 01' .h .. 1l"I1'''''''''''!' Ll'l. (PilL) aft .... ," I'"S"," wllh .h,' Sunal 11L'lIIoLTa",' Pal'll' (SI)(,); ..\\\'S: .111' :\,,,,... a II II 11 01' \\'o,-k,',-, IIrSlm·aki:1. a I.eh 'pli,,"1'1' f,-olll Ill<' (:11"'"1111,,,. I'a,-II' ah,''- II, 1'1lsHIl' Willi 1I11' Sill',

M{/rrh

}l)l)()

lli.:l :! I.H

PDS SPD

DcmocraliC and liberal, arc less succcssful tllall tile partlcs or tJw fonner Co III III u n ists, ThIS chapter will attempt to explore the polin' dvnallllcs or the trans{'(Inned C01l11ll1llllst partIes by eXalllII1l11~ thn:e WPICS: lirst, the possihie reasons ror til<: ex-COlli III 1I1l1SIS , currellt strell~th; thell thc gelleral ell\'lrOil ll1e!1t111 whIch the cx-COm1l111111S1 partlcs ha\'e fOUlld LllL'lllscl\'es III Ihc Iirst hall' or lhe 199()s: ami linall\', the \\,
I

S~urces

of Comparative Strength of the Post-Communist SociaIisl<;

There arc widely di\'crging opmions as to ",II\, the post-Communist SOCIalISts have becollle so strong. SOllle hold that til cst' panics, at least in Ille

Visegra(1 n luntnes. \\'ere lIIore or less II'Ipl'd out in the so-callt~d Rc\'olut.julls or 19Nq and thai tlwit" l'eSIIlTecllolI' IS thc reslIlt of protest \,oles agalllsl Ihe paillful coslS of 11'; III sll lOll to capitalism combined with moods of Ilostalgla for Ihe secllnt\' of Ihe (:OIllIlHlIllSI. pasl." The lI11plicatIOIl o/' suci} a \'Ie\\' IS that the POSI-COlBllIlIIllSt prolest \'ote ma~' I;ldc ill thl.: futurc. Al t1w olher cxtreme, some anaiYSls argue that the P()st-C()IlllnUllisL~ are strolll,{ becausc the baSIC structures of the oid Commulllst stales t1lwughout Uw rq.{lOn ha\'c becn changed ollly superficlalJy.ii The implication of tl1ls \,Ie\\' is that uniess thcrc IS !IIorc vigorous western poliucal intcr\'ellllon, autlHlrnanan POSI-COlllllllllIIst rq;lInes wiIJ he consoli(.i
I 970s, The subsequentl'iectoral c\'ldellcc or conllllllt'd CX-COIllIll11Il1S1 strcllgth thlls leads those dc(ermlncd to Slick III thc paradigm towards the \'Ie\\' that tile 're\'oitulIlll" or 'udl sooel\" must have been superlioal: COIIIIllUIllst stallsm has been al)tc to SUn'l\'C thc 'rc\'olUIl
~(i4

POI.ITICS IN Tl-lE CI.OII:\I.IS:\TION PERIO!)

Till' igllo/"t'{/ So("{ali.I·; 1~/1'I·llJmfl'

Opinion surveys durin~ the 19HOs m the Visl:f{rad COtllllnes and the CDR silowl:d lIlat slgnilic:t The old offiCIal ICderation's membershIp also declined, rrom 3 million at the end oi" 19~)O lO ~.5 million al tile end of I ~J~) I and only 1.6 million at the end or 1992, but It, ciollllllance wIlhm the trade ullIon field was mamtamed. In Romalllil, the olIicialuniolls also remained the su"Ongest although they fj·agmemecl into competinl-{ centres in the early 1990s.

TIlE

I'OS'I~c()~I~IUNIST I'AI~TIES

IN THE E..\ST

The oniClal uniolls o/" lhe COlllmunlst pennel tillls turn Ol\L not to have been nicre lranSIllISSlOn belts for a 'totalitarian' state witholll a significaut sOCIal hase; there was a subSlan tial trade union COllsl1lUenCV remaming in these org',Il11Sal1011s to be won by panics of the Lert ir they were prepared to oneill towards 1l,I:, If, then, there was a core socialist eiectoratc of ~5 per celll or more althe rime of the rq~imes collapse, the SU'ol1g silowllIg of these panics during lhe first part ()/" tlw 1990s as the strollgest parties on the Left. IS scarcely surpnslllg. Indeed, the puzzle is why these partIes did lIot do much heller in the firsl post19H9 elections than they did - why lhelr votes were lower in the CDR and the Visegrad zolle tilan polling e\'ldeIlCe li'om lhe 19HOs would have suggested. One expianalHHl could be lhat erstwhile CommunlSl supporters were LCmporarilv sweplu(l in the wave of emhuslrIlIeS hostile to the In11"Oduc!Joll or the capitalist market did nol ru II " lurn OUI for the posI-ComIlHlIlisIS. The reality is that there were large lIumbers of" abstentions. I ndl'ed. these were so iarge tlial man\' of those who toid pollsters the" favoured a market econOI11\' mUSl have deCided nOI to \'tHe. In the 19H9 Polish elections. less than 50 per celli of the electorate voted ror Solidaritv: the llIrn-out III thiS nrst cOll1pclll.ivc elcction was low, wnh hIgh levels ofabslenllons. In 1991. when the lirst /"ull Parliamentary elections in Poland were held, LOtalturn-out was ,13 per ccnt. In the 199:\ Parliamenlary clections both the tUnt-out (5~ per cem) amlthc vote for the SDPR went up subslanLlally and detailed analysis has shown tilal thiS correlallon was central 10 Ille SDPR's success. II Panles or llle centre and right 111 Hungary also Eliled 10 gaill support from oyer 50 per cel1l or lhe e1e~toratL' in a low LUrnoul and the pan\' calling fairly explicitly for rree market capIIalislI\, the Alliance of Free Democrats, ~ained oniy ~ I per cen I of those who voted. In Czechosiovakia, thl' Civic Forum did not campatgn 011 a rree market progralllmc III Ihe 1990 e1cctions.

~(j()

I'OUTI(:S 11': TIl E (;1.OIHUS:\T1( IN I'ERI( 1Il

A 1I11lH.' likel" explanation IS that the post-COlnnllllllst panies' sllppon 1I'{'lIt dowll III 19H~)-9() because theil' earlier slIpponers III 1ar14e lllllllhcl'S decideclllollO I'ote at aiL This cxplanallon is rCllllim:edl)l' the f;\ct that the post-Collllllunist partlcs that gallled the slllaiksl 1)l'ITL'llLage or till' vote wcre those or Poiancl and HUIl14ary - lhe tWII COUlllrles l"'len' electoral parllupalloll was lowest. In I-IuII14ar\', Oil I\' :-JH per cellt or the l'le(lllral(' turned out anc! Ihe figure was roughlY the same III Pulallrl - hardly, bv the wav, a sign or a pllpul<1r re\'(>iution ror rn:{'riom ag
TIlE

I'()S'FC{)"I~flIi\!IST

PARTIES Ij\; THE E..\ST

II'l"n~ relllnung to the trend ()f"tIH~ 19HOs, Alld they did so despitc efTons bl" .1I11t-COIl1ll11lllISt panIcs and the IlIcdia to delcgitimise them, IL wOllie! also suggest another conclUSIOn: tllat a slgllificalitminority of" dectoralL's ma\' ha\'e heJel SOCIal "allies to the lert of thL' post-Communist p,tn\" Icadcrsillps alld llIay indlTd still do so,

ofSlIppOrl Sln':lIltllllS

Table 11,2 OM

Communist ParI)' T,',msfol'llla!ious I JfIil' 0/ (://("'~"

;\'((1//1'

Polish llllJll'd Workns

Feh, I ~)~)O

I-iullganall SOCialist Workcrs

Sepl. I m'm .-\pril 1990 Fell, I ~)~)O Parl\' hroke lip

Bulgariau

COllllllUlllst

Yugosla\' l.eague or (:ollllllllnists Alballia 11 \Vorke rs Romanian COllllllunlst Nalloll,,1 S"I",1l11l1l Frollt

Socialisl Ullllr ((;nR) SI"I""\; (;"1111111111 lSI i\IClIII\'llcgTo

.IUIIC 19~1I

Jail, I !)!)() .lui\' ImJ:\ Fcll, I ~J9() I ~)~)() 1!)91

SOCIal Delllocrats or llll' Polish Rt'Jmhlic I-I utlganall SOCIalist I'any BlIlgan;1I\ Socialist Pan),

Alhanlall Socialisl I'arl\' NatlOIl"t Sah'atlotl Front Pal'll' "I' RUlIlalllan SI) Panl" of IkJllocralJl" Ldt Pan\' "I' DClllocratic l.en D('I\J(I(T;II\(" 1';lrt" .. rSocialisls

1\leallwhile III what, III a bror .-\lbanl'I.~I' These IIl11la) SllcCt~sses were not JlllIIllL'nlar\,: these parties retatlled strong- support even if" thev quentl\' til ~() Illto opposition.

\\'cn~. III Bui~an;l

ancl :\Ihania. subse-

TIll' Fa(I' of//II' !VolI-COII/II//lIIISi .'-iooal ])1'lI/lIITa//( P{/rill's

Some h;tH' suggested 1.11at the pnnclpaI cause of" post-C(JlIllllunist stren~th in the Viscgra<1 zOlle lav III mistakes Oil the part or th!.' IIldepl:lIdelll sonal deIllO(T,IIS,:! I

III llIost of'tht.' CIl\llltnes of" the reglOll 1l01l-COIlIlIll1111Sl SOCialists created Sunallkl1lOCrallC parties. hacked initial\\- lJv tlit' Souaiisl IlltlTlla110nai. III Poland after sOJlle raise starts the lIlalll such group elllerged f"rolll Soliriantv
1'01.ITI(:S IN Till': (;1.( 11l:\I.IS.·\TION I'ERI( >Il

Demn(TII or lile elccIOrate. Others have suggested an Illstonco-clIllllral explanal1on: that social democracy. was historlcallv Illlportalll oIli" 11\ llller-war Czechoslovakia and therefore there was no cullUral Iradiuon elsewhere.!!'; ThiS may Iw trlle or pans of the Balkans but it Ignores the ciomlnance of tillS t.radiuon 011 lill' Left in both inter-war Poland and Hungary. It also excludes the possihility that contemporary political acuvllV can play an important roie m the contemporary politiCS of the region. A more stnughtforward explanallon IS that these parties failed because the), made no serious appeai to the SOCialist section or the electorate we identified above. Many of these partIes simpl)' stressed the free market programme which the 'Vest European SOCIal DemocrallC parties were aq~lIlI1g for wllhin the' region in the carl\' 1990s. The westel'1l SOCialist part\' leaderships tended, so to speak. to put natIon hcli)re part" in external policy towards the East and to IIISlslll(Jon support lill' a thoroughgOing liTe market transformation combined WIth a strong anll-COmmllIl1SIlI 11\ East Central Europe. ArgUing for poliCIes that entailed first dismantling Ihe egalilanan and welfare arrangements to builcl cap1l,IIis1I1 so that one could later construct welfare capitalism seemed dislllgenuotls. These poliCies WIIW(I OUI the Social Democrats in the Balkan zone ami in Ht1ngar~,.!!i In Poland, on the othcr haml, Lal)Our Solidanty, which laler bccame tlw Union of Labour (UL), emerged as a left-Wing opposition to malllSlream Solidanty's nco-liberal Balcerowlcz Plan (for Shock Therapy). It raised I'eal ISSlles of concern to working-ciass peoph: aga111st Soliciarity-orlgmat1l1g governments. It also broke with the CatllOlic connectIOns or Solidarity and the DemdcraLic Ul11on, vlgorousl)' champIoning abonion nghts 111 199:~ while the nco-liberals 111 the Democrallc Unum sought to appease the Church hIerarchy on the Issue. As a result or thiS aClIvll>', UL ga1l1ed a genuine base

Till': 1'< )S'[~C();-'(\llINIST

I'AI~TIES

IN THE

EAST

Oil Ihc Len III IIw 19~):~ {'l{'nlons, pollill)4 7,;\ pCI' Ce11l, AI Ihe sallie lillie, this lertist (;I'h~nlatlon was ullllblllec\ wnh anu-COIllIllUI1ISIll, Tht' eerlllan S()(:ial DemolT.nic leadership SUppOrll'CI LIL financially in the hope tllat the nrganisaLlon could be useel to splil the Polish ex-COml1lUnlsts, A prominent post-Coll1lllunist intellectual. LllnellLOwlCz, was drawn m'er \0 the pany and eff'orts were made to open a splil W1lhlll the post-COl1lmUllIsts between Cz~'moszewlcz ancl Miller hy preselltilll-{ the latter as an ullreconstructed COlllllllllllSI. However, these tactics Iilileci and II1steacl UL itself was splil in the 19~):l PreSldenLlal ciecLlons, as Lamel1lowicz was expelled ror SlIPPOrLlllg post-Comlllunlst lea riel' K\\'asl1lt'\\'ski's candidacy while other ieaders of' lhe LIL c;lml);lI~ned on hehalf' or Delllocratic UnHm candidate Jacek Kurotl, The rcsult was that the LIl.'s own candidate recclvcd negligible sllppon. But nOIl-Coll1lllunist SOCIal Dell10crats did succl'ed ill OlIl-distanclIIg the post-Col11lllunists III two cOlllllnes III the rq~ion: the Czech Republic and Slm'enia, Tlw Slm'elle d\,lHlIllICS wcre !{o\'erncd bv the break-up YugoslaVIa. Whill' thl' Yug-os\;l\' Le Illake a leftist appeal to the electorate; and the capant\' of tIll" SOCIal Democrats to establish .1 SCI'IOIlS tracll- lllllOll base. Financial support from thl' \Vest or course helpecl: tile party was f'unded from top (0 I)OIIOIll rrolll lhe \Vest. BIlt without the otiler ElclOrs. the nlOne\, would havl' been useless. The decline III support or the Czech COllll\lullist.~ was not oniy the result ofthclr continued adheSIOn to thc COllllllullisllradilion: I11cleed, after 199() theIr support actually rose ancll\l ioeal elections the\' gallleci aimost I H per ccnt or the votl' - the illghest \'ote or any C01l11l1UlllSl Part\' in cOIlLInental Europe III the early 1990s. Hilt III 199;~ the Comlllunist Part\' was IWCIl br IIlternal cOIlIliCl, which tllrlll'd the party II1wards and lI1\'o\\'ed hmh the expuisHlIl ora neo-Stalinist group anc! 1Ill: defection urgroups on tile party's

or

~70

POI.ITICS IN TilL

(;J.(lI\-\l.ISXI'I()~

I'ERIOII

Rig-ilL. The m;qority rorces III tllc pany were at tilt: same tilllc ullable (0 dc\'t:iop a coherellt strat(~gic H\eIllltY for thc pal'l\-.~/'i At the SilllW !IIlle the Czech SOCIal Democrats Wl're ablc til prest'lIL Ihernselvcs as a SCrIOUS groupmg tll lhl' Left of thc lll'o-liberais. III rile lirst planIhev n:cnutl'cl lilt' tT()[Hlllllst Komarek, Klaus's boss hl'fore the \'e\n'[ Rcvolutlon, wbo bl'came a hOllsci1old Ilame throughout rhe ("Olllltn' III \ ~J~J() because oj" hIs eCOllomlC rcJiJl'1ll I(\l:as agalllst the (;O\llll1l111lsts and II'ho LiH:1I crlLiClsed Klaus's Ileo-lihnal eCll\lO\l1IC ideolog" III a dctaikd. II'cll-inrormed Il'a\', olTtTlll~ Ills own aiternall\'e el'lInOllllC strait',.,"'. ThIS \\';, ... ullIqUl' III lhe n:glOll: tlw best-kllown lloll-Colllmunist e(OI101ll1t' expert. with IInpcccabJt- politicallTedellllals, olTenng :11\ :\lI!1lOrItallH' ;t1tl'rllatin' !tl II c( )-liberalism. The second IInportallL achIevement or the SOCIal DeJllocrats was t!lCII' ahilit)' to develop I1llhlellCe wllh Lile former orIiual Lrade UIlIOII ulIllerier
II

The Environments Confronting the Post-Communist Socialists

The most basic c!1\'irOnlllel1 tal probicm Ii))' the fol\l' panie:s we will discuss has been the terrihle economIC slllmp thal hit tlll.'lI' ecolloll1ics ;ll lilt' start ofLhe I ~)9{)s, connccted to the collapse: COll1eCOIl trade and pa\'llll'tllS lIetworks, the break-up of the lISSR, the debt bllrdens and 1i1l;IIlClal crises or

or

TilE

I'nS'I~(:(

J,\I\IU:-\IST

I'''I~TIES

1:\ TltF E;\ST

271

lht: reg-lOll, allri Iht: Sll1lllp-dt'cPClllllg (h:mOlnds of thc Intcrnational Fillallci;lllnslIlllllollS (lFb) rd1l'cl1I1g lhe goals orwestern govcnlllH:l1ls1i.H' Ihe regIOn, Thl' l'COllOlllll" (TISIS l1as hccn most scvcre ;\11<1 protracted ill Bulgaria, which had VCI T Sll'I)J)g CC()III)IIIIC lillk~ 11'1111 thl' USSR anrl had til ddaull Oil lis \'en' hcavy debl l'epavlllclIls, Thc ('ollllln' rl'llIalllS 111 a prl!limlld deprcsSlon, The HUllganan CCOIlOIllY has been reco\'cnllg from the slump vcry slowl\, anel I!S deht problellis arc severe, Both the Polish and Romanian econOllllCS ha\'(' Ilt.'cn growing Sl1Kl' I mJ:·t \Vitltlll IIIIS gellCI'.II COI1lCXl. till: sl'ltes or Illl' rcglon ['aced IIIOI"L' or h.-ss sc\'en: resourcc crIses 111 tlte form of chrollle .l1ld acute fiscal problems and del~t n:p,I\'mellt £iifliclilties alld reI\' Opp()nlllll!te~ Ii)r tacklillg thcse problems througit bOlToII'llIg on PIW;\IC capilal markels 011 homl' or abruad, RomallIa had paid olT its 11lll'lgn dt:ht ill IIll' 19HOs, but l:H:cd acute sitonages of hard nIlTCIl(\' as well as hlld~et dil"licullil'S, Polalld 1\'t rurgl"Cl1l'SS allel, ("OllltlllH:(1 \1'llh l'l"llIlOl1l1C growlh, thl~ has g-i\,l'1l the panics of lilC Len in gO\"l~rJllnellt SUI11C ruom li)r llIaIlOC\l\TC, But both Bl1lgana and Hllngary have I;tced IIHlI'e or less ClHluJlualliliallClal cnsls,:lII Sol!lLJons to mallY 0[' thest' problems could h~l\"l' beell E\riJilatl~r1 it" the Ell had opcned ItS IlI:lI"kcts wlddr ror till' reg-lOll s exports, p;lrtKlllari~' the l'Xports its llI11re ach':lI1cl'd IIldllslnal sectors, Hilt the gO\"tTlltnl'IIIS o\" lite ELI had no eCOnOl1llC 1I1lcrCSllll taking such a step ag-alllst a backgroulld or IOllg-tcrlll stag-I1:1 lI011 alld sal lira tcd domestic markets \\"1 t h III the E U COIllbincd wllh illgll ic\'ds ur IIllemployment. At titl' sallic 1II11l', the cconOl1l1C and thc state lillaIlClal crises gan' the westenl powers a qUill' extraurdinar~'· de~ree \c\'eragc ()\'cr the g'O\'l'''' llilents or llll' rq.!;H11l: the\' U 1lIid ciCil\' glll'l'rJllllt:lllS accc~s to finance and lliL'\' cllIlld dCIl\' thelll a track subslI!lllc' ["or COIlll'COIl slIllph' hy lIlailltallllllg t.hl' Coid \'\'ar l'lIllmrgol's uscd Iw tlte EC agalnsl thc SlJ\'let Bloc, This Il'verage was placed 111 lite ser\'JCc 0/';111 l'xtn~l1ld" :lmhllHlIlS \\'(,SIl~rJl GlIIlp:lI)!;1l ror dillrolighgolllg- SOCl:li cnglllecl'IlIg with!! I thl' H'g-'OII to cs!ahlish a IICW SOCIal rcgl1llC: tlte a'placemcnt Ill" rcg-lIlles of strong sonal and CCOII01l11C protel'll!l1l III these [tlunll'll's WIth n:glllles II'lIh less SOCIal protectlOIl than, sa\" the LII\. and II'ltll a g-J()b.iliscd' illSlllllliollai EKe [0 lite outside world, III other words an eXll"l'llll' I'ol'm 01' opell door fl»' proriucts ancl capItal, Illcluding IHll, slinrt-terlll 1II1l1ll'" l1ows, These reglllle guals were gwclI the label mal'i,l't \''l'1I1 II 111\\" hilt Wl'n' III rcalit\, ge'IH'd [o"'
or

or

272

I'Ol.lTlCS IN TI-IE GI.OnAl.1SATION PERIO()

scale. In such condiuons, the USA, backed hv the main \-Vest European slates (though WILl! a partial and hall~hearteci aLLempt at resistance bv the Frellch government) fell able to attempt to Impose this programme on the East Central European states 111 the midst or thell- cnsls. The camp.ugn IlIIually sharply exacerbated the eCOnllnllC cnsls. 1I1l1s strengthening lilrther western leverage. It was an agenda that olfered very handsome I-ewanls to those wllhlll the regIon with access 10 capHal or With tile possibility or partnership with western capital; but H tended to make losers or the 1I1,~j()rlty of the poplllauon and to Immlserale slgnilicant minorities. These lauer two groups were. of course, the naturai constituencies or the SOCIalist parw:s. From the point or view of US strategy therefore, the post-Commullist partIes were bound to be a potentlai obstacle and vigorous efrorts were to be made to weaken them. But these global regime goals promoted especially by the US and the IFls were potentially modified by the geopolitical interests of the malll West European states. From the start of the transition to capllalism, the Visegrad countries could hope LO enjoy some geopoliucal advantages over their neighbolll-s to the East and South: thell' location 011 Germany's eastern periphery meant that the German government was interested III (\rawlIlg them lirmly under German ini1uence (mall1iy through EU mechanisms). This olTcred the hope that for Germany a modicum of stability 111 these cOllntrles would be essential and could override the general regime goais. Slovenia and Canlua aiso hoped to gain from German lixelgn policy by separatmg from Yugoslavia, but for Croalla these gams were postponed by the war. Poland could also exploit liS great geopoliucaJ importance for the USA. As far as Romania and Bulgana were concerned, ther illltialh' lacked much geopolitical II1terest for the western alliance and durlllg 1990 the lalter took an espeCially LOugh line towards them. But tile development of the Yugoslav war (as well as the resurgence of Greek-Turkish rivalry) has gIven Bulgaria an II1creased polillcai salience and the western powers were to soften their stance towards It in what might be called the licld of symbolic polillcs. RomanIa, on the other hand, has remalllecl to a large del-{ree in II1ternallonal po\illcallimbo, despite some e/T()rlS by France to sponsor it. Against these backgrounds, the domestic political agenda was more abollt 'state refounding than aboUl what mIght be called 'normal politics' The isslles were: what kind of social principles for the new state and economy; whal kind of institulional sU-uclllre for \)oth ecollomy and state; ",hat 1(111(\ of constitution, political system etc. BlIt above all, what kind of ciass structure and whal composlllon or the new, emergent capllalist ciass. In lhis complicated environment all parties were seeking to lind ways of enhancing tllen" own legitimacy and autllorlty, principally through galllll1g alllhorilative approval hom the ''''es!. Here, the most Important source of support Ii)!" panics to the Lefl-ol~centre was the Socialist InternatlOllal. blll

TI·IE

P()S·I~CO~Il\Il'NIST

PARTIES IN THE E,\S"]"

during- the iirsliive veal's of the lransilion only the I-ISP could gain minimal recogninoll from lhal quaner I)\' bCIIlg- g-ranted observer slatlls 111 I \l9~, On lhe other hanel, the evolution of the PCI III Itaiy was a powerful indin:X~l SOlIl'Ce of inspiralion for man\' lI11elleCluals from the eX-COlllll1l111lst panics, as itlransii.mnecl itselfin 19H9 il1lo the PDS and soug-hl rull inlegraLion inLo lhe Socialisl illlCrtlallonal. These environmental condillons were lhus eXlrelllelv dil1iculL for an)' g-o"l'rnmCnl III lhc couillries concerned anclne:u'-calaslrophic for g()verll~ menlS ofLhe Left. In a ciiJTercnlllllernaliOllal cnVlHJIll11cnllhdr behaviour would undoublcdly have.: I)een verv dilferent and It IS nOI easy to disling-lIIsh the endogenous policv lI11pllises Wllhlll these parLles 1'1'0111 Lhe exng-enolls envlronmenlal constralllL'i, or IIlCleeci posllive eXlernal dikl
III

The Policy Orientations of the Post-Communists

\-\le will lry LO exal11l1le some aspects of thc polillcs of the POSl-CO!lllllUIIISl panics in Poland, I-I ungar\", ROl11alll
274

POLITICS IN TilE

deciaralOrv cOJlllllllmenls tell ences between these parLies.

liS

(;LOI~:\\.ISXrll):--;

PERIOD

liLLie ,mel obscure the slIbstanLla! diller-

lJilli'mln's Oil

'~)'.I"It'IIII(" (.'//fIl/p,I'

From an insLltlltionai poillt ofvle\\', aftn tile politICal collapse of the sing-lepan" reg-IIIle, the states ur the reglO11 clluld be described as lilrJllS of .wmtf democracy 111 the stnct sense of COJllbiIl111g' SOCIalised property fonns with poliLical democracy. The programmatic goais or these parLll's thlls had a speCial character: lhe question was to a greal, degree the eXlent til Whldl lhe parucs were prepared til dismalllie the eXlstmg illsUtllliolls m the C\irecuoll of capllalism: how much systemic retreat from socialised property and politIcal direction or eCOllomll: life, The decisions Oil lillS basic programmatic Issue depended ven Iarg-ely lIpon two JudgemenL": the new international cOlHext or theIr COUll try; anel the 0plIons opell to thelll in theIr own sOCIeties ill the nc\\' crre illltlally wagen~d on the success or Corbachl~\" was ready to enter a secunty pact with the USSR. despIte strong western opposition, and laid dowlJ the goaL~ or till' NSF as being tllOse or jvlar);et SIlClalism: till' COIItinuatlon or a non-capllalist eCllllomy. rC:lectJJ1g the I'eglnle prov;ramllle or the West. But with the Soviet collapse ;It the eud or I \HI I. thiS perspectIve Ill' Romalli;~n clc\'clopmelll Wlthm a SovIet-centred geopolitical and econOllllC space aiso collapsed. The erstwhile Pml1e l'vlilllster, Roman, responded 11\ 1992 by spliLllllg from the NSF (now called the Delllocratlc NSF) and creating a new NSF ready 1Cl embark UpOIl a trallsition LO capllalisll1 an(1 llIergillg

TI-IE

POS'I~(:( I\lilll'~IST

PARTIES IN

TilE E,\ST

'275

Wllh a grollp calling IIsdr the Dell10cratlc Pilrty, Th£' rollowiIlg ycar, Jliescu alsc) 'Shirtl'll gTOlIIHI with 1ilL' lranslilnJlallUII or his NSF II1tu the Pany of Sonal Dl'llIocrals of ROIll.lI11a, orIented towards lile IIltroc\ucl1on of capital~ ISIJI, IHII or 01 stJ"Ongh' natIonal capilalisl ratller Lhan 'glo\)aliserl' Yariel)" This rt'lI1.lIne<1 a sLrong theme III the polillcs of Lhl' l{olll.III1.1I1 Sonal Delllucrals, The .I udgelll('n L on the illlernallonal context was lIloSI diHicult for Lhe Buiganan Sociali,o;t Party leadership. Its intcrnationai econOllllC links wcre (I\"erwhclllllllgh' Willi the USSR, ilUl II was. lin like the ROJllalllOlIl gc)\"erllmenl. at L11l' iJllerseCLion of lwo p()telltlally ex.piosi\'e crises lhat the US gO\'cnllllCJll has bel'n strongly rocllsed UpOIl aIld ill\'oivcd WILlI: lhat in YlIg()S!a"liI and till' rIyaln' between Cn:ecc ,mel Turkl'\", So Ihe couJlLry's future gc()econollllC anel p()litlcal locallOl1 IVOIS ohscure, Al the samc time Hulgana was raclIlg a despel'ilte debt CrISIS with western crcditors. The BSP It-a
Prr ri)' (hgo 111.1'0/ WII ((I 'Ji"o lI.\/iJl"ll/o/ iOIl

The SDPR, the I-lSI' and the BSP were all formed al congresses of the ((lnIH:r COJ1lnlllll1S1 parl1es and npt'll cit'halcs were held Oil IIll' Ill'W Ideological and political paramcters or the 111.'\\' partlcs, New org.llllsalltlnal arrangemellts were abo iaid down and regular party COII!_\TCSSeS ha\'e subse1(1Il'ntiy Iwen helr!, wnh reai dehates and l'\'Idcnt dilferences wllhill the (larlles. But the Romalll
~7(}

POLITICS Ii\: THE (;1.0IHl.IS:\TIOi\: PERIOD

debales ;\l Pan" congresses, As a result lile PSDR reselllbies whal mlghl Ill' callcel a I.eader Part\", tending to substillltc the k;l(ll'rs will for strtlllg-iv deli lied program malic parameters, Tht' abandonlllt'llt or thc prlnClplc of 'till' leading mit' of lile Part'" l'lIlailcd aislJ the sOClllloglcai separation or till' l'X-( :OIHlllIlIlIst Parties li'mll the large mallagcnallan."rs of the old n:gllllt: - I)Olh Slate oflinals ;11)(1 t'l'O1I01l1lC managers, ThiS process or orgallisallollal diHi:rcl1l1allOII was 111aSSln: alld swirtlll both Polancl and HUllgary III 19:-l9-~1() ;UHIII'(lS 1I1lcierll'rllIt'li Iw till' SDI'R and HSP gomg into opposition, Their panv orgallisallolis bt'came \\'cstI..TlI-st\'il: parLles devotcd to electoral polil.lcal activit\', Thc proccss of dillcrcntialioll differed ill the otller 1\\'0 CO\\[llrles, whcre the ex-ComnHlIllsts remaincd in powcr aner thc lirsl e!CClIOIlS, As a rcsult, the NSF and thc BSP continueci to cxcrclsc largc powcrs of slatc patrollage and rClllallled a foclIs ror the pursull of managcriai lIl11:resls, ThiS has subscquentlv marked the evo\uuoll or thc BSP, somc of whose members have sllllultalwousiy been linked 1O powerful business groups (both statc alld pnvate), Nevertheless, the BSP's organisationai transformatioll IIlt() ;11\ aUlOl101l101lS orga11lsalJon ror political communicallon and dcliheral10n de\'elopnt IllllrC or less along the lines of the parl1cs III the Visegrad countries, especially once Il too WCllt Illtn opposn[on III J 99 J, III lhlS licld the ROInal11an casc was llillCJlIC, III some respects the collapse oj" the parLv-statc complex of the CeauseSCll regllne len a state dill' III place without any rcal part\' rormalton at all and thc proccss oj" post-COJllJllllJ)lst part\'-t(lrmauoll was Iloth slow and ic(1 from the state presl(lcllCY of lIiCSCII, The illghl\' elitist oniCial lcieoioh'}' put lilrward In' NSF's lirSl Ideologist, Brllcan, rclkcteri this SOCIOpolitical realit)', III LlIC first phase thiS ruling group sOll~lll lei maXlllllse its poliltcal l1exibilitv hy prm'ldill).!; thl' illllllmlim political (lciinilfon to the NSF, and the PSDR was sllllilarlY c1clincd strongh' rrom ahm'c tl\' the slatc preSidency, The boundanes betweeil state and parlY aCllvny werc thcreforc not full\' drawn, making the Romanian sccne ill the eari" 1990s somcwhat Similar to the Kind of' part)' or power' that operated ill parts or lhe CIS after the collapse of tllC USSR, Even when the 'Sonal Democrall(.. · pan" was created, 1l haclliule mternallili: oi'ilS own, Thus thc pany appeared more as an appendage of the clite centre III the stall' lcadcl'slllP than ,IS a l110re or icss autonomous collective polil1cal aClor, Ne\'crlhekss, as the COl1lpeltllVe party s\'stCI11 has e\'ol\'l'(l, the PSDR has had tll (Ie/inc lls polillCal rcferences and OI-gal11sallonal strllctures mon' dead\',

J)o/lIl'Jllt

Po/ilim/ Clnll1l1gl'J IIlid

/JI/ri)'

Po/it')'

Thc vanolls poSt-COl11l1llllllSt parties ha\'c defined themselvcs through ovcrIapplllf.\ p"lil1cal poiarisations and cleavages at a nattonal len'l dUrlllg lhl'

THE

I'OS'I~C()"I"fLINIST

I'.-\RTIES IN THE E;\ST

I ~)90s. In Ihrl'C or lhe four COllnlnes the Impact or Ihese poiansauolls Oil the panv wstelll have been 1O produce diYlSlOllS on I.ert-Right lines, but III Romallla tIllS spl't'lrulIl has heell blurred I)\' the Impact or nationalism. ij

L'tJllIIIIIIIIISIII llf'rJlH (1I111-(:()IIII11I1I1I,\"Ji/

Thl' IIrst great polans;tlloll III all Itlur countries was that betwecII COlllmUlllSIll and allli-Communism. At an ekctoral level. the aIlliCom Illl IIlIst appeal or the tina phase or the tranSItion has largely plaved iL~dr Olll III all rUlir ClIlIntnes as IL has been O\'Cri;lld In' other polansauolls. NeVt'rliwkss, tIllS clea\'ag-e remallls at deeper stnKlIIrai levcls a very illlportatH OIlL' 111 all rour countries because it still dindes each COUll try's sOCiopolilicai elites and becausc urthc unccrtain ruturcs ofthesc coulIlnes. In all tilt: ClJUllLneS concerncd, the panles are lcicntiJiable by rerercnce to the ongllls or thesc leading members: those rrom the former Communist establishment and those not. In all the c()ulllries also, a baSIC realllre ur I.he last live ,'cars has been the constrllC11011 and 1cg-lllmatton oj" new capnalist classes ;wcl thiS process has been III larg-e Illeasure a mailer or political decisions, connected to privatisations (rather than slmpl\' a "spontaneous' aCCllllllllatlOn or pnvate capllai wllhlll a separate eCOIHlIllIt" sphere). Thus the possibilitv eXlsls of the part\' cleavage also rL"llculIlg- a sonal cleil\'age al elile le\'el. Il'tllls does l'll1l'r~e as a signilicallllissllre, Illl1a\' makl' thl' l'mergellce of elile cOllsensus Oil what mlghl I)C called nallllnai strale).,'"\' hel'olld part\' clea\'agc:; ll\(Jrt: dil1icllll. Allied to IhlS IS tile proillem or COnSll'UClIIIg all IdeologICal COllSl'lISliS on lIatlollal and state htstoncal de\'c\opmelll. III all these ("oulltnes a vast gull' remalllS III tIllS sphcre: on the Rig-hL amongst allll-COl11ll1lUllst parties, the penoel of Slate SOCialism IS presented as olle or ellsian'l1ll'IIl, whiIe tIl<: lIlterwar y<:ars or Lll<: Pilsudski reglllle tn Poland, lhe I-/orth," reglllle 111 I-lung-an and or mOllarchism and dictatorship in Romania and Bulgaria are presented as phases or natIonal authenLJCll\'. for the post-( :OI11I11UlIlst partIes, Oil the otiler hand, the penod or statc socialism had positi\'e, de\'el0)lmelltal reallires. not least 111 ending the legaCies or i11ler-war allthontanalllsm and raSl'lSIll. Olle hndge across this gulf could have been cOllstructed by strong rUllire-onentl'd centrist liJrmatlOIlS or political liberalism. WlliwUI traditIOns LIed to IIltl'r-war regImes or to tIle state SOCialist pl'nod. Thts possibility ell\l:rgerI III I-hlngan' with the willingness of tile Alliancc Orr-rel' Democrats to cross the anLJ-CDllIllllll1lst di\'lde and ellter a cDaliulIlJ Wllh L1w 1·ISi>_ In Poland. IIIl the othcr hand, tile poiilIcal lilwrais 11;l'"C so rar n'lllall\l'd allkd Wllit tite allLJ-(:olllllHllllst Right, which dr;\\\,s Oil lhe traditiolls orc.llholic and llaLJol1alist rqeclloll or all Polish historr SIIlCl.' 19-1-1. Similar clea\'ages appl\' III 1\11114,11'1,1.

278

POLITICS IN THE GI.OI\:\I.ISATION PERIOD

In RomallI
VI'1'SIIS

.ml'lrd /lrotl'I'//{)1/

The second great polansaltlln has been between SlIpportl:l'S of' \lco-liberai 'Economic Rcform' and opponl"llls of tillS plalli)rm. ThIS c1ea\'age appeared lirstlJ1 Hungary, and ClIt across tIll" first cleavage bv plaClllg bOlh the ~·I\)F on lIle Right anci the I-ISP III opposition to t1l(.' Free Democrats and tile Young Democrals. In Pol;md the c1eava~e openecl through the Impact or t1H: BaiccrowlCz plan amI as Il \\'or\(e<1 Ilself through, It both I'rilglllelllcd the anu-CommullIst front and enabled the SDPR to lake the leadership of' a broadening coalitiun or interests and partIes. The same baSIC paLtern appeal'ed in Hungary ",Ilere the supporters or nco-liberalism bccanH: minorilarian as Ils cconomic and sUclal conscquences strengthened the I-ISP. In Bulgana the nco-liberal cleavage remallll'c1 superfiCIal because tile UDF did not coherently dcienci thIS polillcai stance amI III RomOlllla the advocates of neu-liberalism remall1ed weak. But a much more c1ifliclIlt Issue is to define the kind 0(' sOClueconomic alternative to nco-liberalism whIch the post-Comllllllllst Suclalisls arc seeking to promute. The sOllrce or tillS analvtlcal problelll anses iargctv rrom the cXlI'cmc practical constralllls upon these partIes III power ,mel thence from dctennilllng whL're the boundary lies between external constralJ)1 and autonumous polillcal will on til(,' part of thes(,' partws. The SDPR, HSP aJl(1 BSP all limned strong alliances, while III oppositioll, WIth the mam trade unIOn confederations. In the Polish C;lse the SDPR formed a Democratic Left Alliance with the OPZZ and as a result sonH: Sl:\'enty OPZZ candidates w(,'re electccl to parliament III 19~U. The I-IS» placed Sandor Nab,)', the head of' the trade union confederation, number two Oil Il.~ national part)' list, beiol\' pany leacler I-lorn, Similar links were l'slablished ill Bulgaria. In Romalll
THE

I'()S-I:CO~lilllINIST

I'.\RTIES IN TIlE L-\ST

leadel"s \\'elcollled llliS developmenl. ",Iuch hrought some order \IlLO illdustrial J"elalllJlls haq.;-aining.:I;' Then:lill"e, wc call spcak DCa gem:ral trelld flH- thc post-COl1ll1llll11Sl partiCS lO scck to Illcillde thc lrade 11111011 C(1Ill"etiel"a110IlS as imponalll panners 1II Ilallollal plllilicallilC "'Jlh 1Illlul'Ilce 01\ g-o\"crlllnellt polic\"-makinl-{, At the samt: unit:, thert: hOI"t: heen COllflicts bt:LWCt:1l thc partics III gll\'tTlllllCIIl alld lhc tradc UlllOllS, l'spl'nally ovcr wages policies and welfare ISSUl'S allel in no casc havl' the panics Iwell preparcd 1.0 allow thc Irack lIllJoll leadership c\ominantmflut:nct: OVCI" lhc matters of cOllcern to labour, III both Poland and HUllgary, thc SOCialist Panles have {'elt thc need to I-cassurc Ihc Illlcrnalional FillallciallnstilUlIons and lhl' linallCialmarkcts in lhl' I"Ul'maliol1 of thcII' g-oveI'llments, Till' I-1St> did this bv l"ornung a cmlliWill I\'lIh Ihc F!'t:c Dcmocrats desplle ha\'lllg- a m;~lont" 1JI lhl' Hung-anan P'lI-lialllClll. At thc samc limc, II rcsl'rn:d Lhl' Finallce lVlinist!'y for liS own P,llW, III Poiand thc SDPR appolllted a lIoll-pan" academiC, Knlodko, who had heell a ernic of Ihe Balcc\"l)WICZ plall htll who was all onllOdox chamPIOIl or low lIl11aLHlll and io\\' blld~Cl ddiuts, as Fill,II\C(' tvlilllster, There haH' bee II conSLant tellslons between thl' linance 1ll111IS1ers ami l)tl1l'1' ~()\'l'rnlllent departmcnts ()\"l')" key aspects of economic and sooal polin', wnh the Hllancc llllllisters l-{enl'l'allv rl'llccullg- thl' pressures of Ihe Intl'rnalIOllal Financial InStlLUtlonS ,1lIe1 the JinanLlalllla!'kels, Till' typical patlern has been /'01- thc Finance ivlil1lSlI'lcS to win un spcci/ic ISSUCS, while Ihl' Prcsidcnt (in Poland) and the PI'lllle jvlinister (in ]-Iung-an') have slgnalkd thclr dissalisf'aclIon \\'llh Ihc ~eneral approach of' the Finance MilllsLrv, In Polalld a long ballie took place het\\'c(~1l Finance i'l'lillISlt:r Kolodkll and Labour i\lil1lster Lcszek Miller u\'t~r all ISsue of' greal 1111po\'lanCc III the: (,olin tn', Pl'1lSlllIlS" ivliller foughlli)r pellsions lll(rcaSl'S III he ucd 10 a\"er,tg-c wagcs, while Koilldko wante
POLITICS IN THE (;L<)II:\I.ISATION PERIOD

deslg-lH:d to f;\vour the pnvaLe sector and sought to streng-[hcll state enterpnses Ihroug-h proViding- them with a more /il\'ourabJe lq~l..,iau"e framcwork.· It also commilled itself to lI11pro\'lIlg Poiand's trade and eCOIlOI1lIC links "'llh cou11lries further East as well as with the West. The I-ISt> government, on the other hand, was constantly under siege li'om Hungary's acute finanCial strams, rellecllng both liS Jack of debt forgwenl'ss and the ven- slugg-Ish economIc recoven' from the deep siump of' the earh' I 990s. These problems were erlccll\,cly used h\' the IFIs and the l\Ialll players Oil the finanCIal marke[s connected 10 HUIlg-ary LO aggressiveh' undermllw the HSP's cn:dibilitv as a defender ofa social liberal weUilre state. It should, however. be said, that the IFls had allies within pans of' the 1-ISP's ieadership. The cnsis began in early 1995 when Prime iVlinister Hom accepted the re~"gnauon of the lien-liberal Finance Minister Bekesi rather [han accecil: to hiS demands to sell olTstate hotel chams cheaply to weSLern buYers. The IFis responded to Bekesi's resignatioll by makillg- two clramatic demands: lirst, that Hungary's public utilities be privatised into mamly weslern hands; and secondly, demanding fce-paymg ciements be introduced to both health care and education, as well as cuts 111 old age and disability pensions. TIllS i\-lexican-sLYle lllililiCS pnvatisation bonanza was a 111llCflle cie\'e1opment for the reg-ion. ofTering a larg-e, cnntll1uous stream o/" profits ror western 1ll\'eSlOrs;:IH and the wellilre ClltS paCkage was deSigned in sllch a way as to break brutally with the values championed by the I-ISP, Prlllle i...linister I-lorn made a direct appeal to Chancellors Kohl and Vranitsk\- (of' AusLrla) for lhelr lllLervention against the package but was rebuffed. There li,lIowed a senes of resignations from the government. cOll1bint~d with a senes of supremc court rulings that \,anous aspects of the package were unconstitutional. As large protests and strikes lI1\'olvl11g empio"ees m eclucatlOn and health cOlllinued lilt<> November 199:1, the Free Del110crat Milllster of Education relt bound to resign over the changed education polin', The political dimenSIOn of the paCkage was 1;liriv lranSpare11l: either tile I-lSI' wOllJel swmg deCIsively lO the Right, loslIlg credibility, or i[s go\'erIlmelll would he engulred by a linancial crISIS as western (parllculariv Al11cncan) funds pulled out of BUdapest and the IFls withdrew supporl. The expcClalion III western linancial circles and among-st Amencan policy-makers was thal one way or the other, the I-lSi> would be structurally weakcned, uniess it replaced I-lorn with a lIeo-liheral as ieader. But the party membersillp continued to support the leadership while being strong-h' opposed [0 lhe poliCies forced upon it. At the same time, the government soughl to rehuild understanding With the trade Ulllons by offering subslanl1al \\'ag-e Increases and bv j';llsing the minimullI wag-e,:;!1 For dilTerent reasons, neither Romania's nor Bulg-ana\ g-overlllllcllls were 1l1luall\, susceptible to the kind of pressure which EKed the \-IS» ill

THE

POS'FCO~I~ll'NIST

PARTIES IN THE EAST

281

1-lunJ,;arr. In Romania. the absellce or a debt burden coupled with thc go\"ernnlelrl''s L1~I1\ COil trol over t he domestic finanCIal systcm g-avc thc IFls and wcstern linanClallllultinaLlonais lillie markct icvcragc, whilc the strong domcstlc nationalist consensus III Romania mC:lntthat t.he Idcological linka~e wllh domcstic nco-liberalism was vcrr weak. The Romanian g-o\'(:rnmcnt's scarch fiJI' access to western financial markcts lhereforc produced 1i\,IF packag-cs focused m:llllly upon purcl\' financial rClrenchll1<.~nt rather than sOClai engineering.'l!I The PSDR's pn\"allS:lllOn programme was geared towards passlIlg the oWllersllIp or the bulk or entcrpnses into ROlllalllan hands rather (hall ofTering large scope ror rorclgn buyers. The party was commItted to presel'\'inJ,; a welfarc statc and to building a policy dialogut~ with the trade unions on wages and SOCIal issues. In Bulgana, as the cconomlc cnsls 111 thc country steadily deepened dlll'ing (he 1990s, cnsls managcment dominated domeslIc policy-making. The economy IS burdened by very heaV\' debt rep:l\'Illents 111 conditions of cOIll.lnulIlg domestic depressllm. OUI ora GDP ofjust over $10 billion, western creeli tors were expecting to recelvc S I .27 billion 111 199(1 and $ 1.7 billion 111 1997, The IFls vlcwed thesc huge rcpaymCI1L~ strallls as a mcans or pers\lading- the BSP ~overnmel1t to sell the most valuable of thc COUll try's ('l1lel-prises to western buyers, thus producing- a shon-term lI1JeclHlIl or hard currenC)' 10 pa\' weswrn hanks (while II1CUITIllg- long--tcrlll dividend obliga1I0llS 10 weslcrn share-holders). Therdore, wilen, 111 199(j, it became clear thaI Bul~aria would ollce agam he unable to conLmue to service liS debts, Ihe IMF refused to prOVIde assiSlance until the governllleni had ag-reed bOlh to selling assetS III roreig-n im'esLOrs and to closmg down n()n-prol~' itahk slale enterprises, makinJ,; at kast 40,O()() workcrs redundant. The Bulganan g-overnment's own programme or mass priV
1'( II.lTH:S IN THE (;1.( I 11.-\ US ..UI 0 i': !'ERI< III

anrl lhl..' blllll" llle I\SP t.!;O\'t~rIlIlWlll. Thl' Illosl likel~' l'Xpiallallllll or Ihese e\'eIlL~ lies III LIS rq.~)()nai stralcg~': Ihl' DavID)) Agrl'cmcl1l Illcalll that poliTIcal stOlhilit\, III Bulgana bccalllc'les~ Imp0rlant; 1I1l"II111'hile the RussIan governmellt was c;,l1in~ lilr a SCClll'lt\' paC[ wHi! Buigana III rcspo1lse to NAT<) enlargclllcllt. These den:lo(Jlllellls made the BSI' an un;)c('(Vtablc gO\'l'l"il1IIl'l1tl,,,' \'Vashin~lOn, 3)

NII/WI/r/fi.\/II1ll'nIlS 1~"m/)('(/IIISI11

B()th the SDPR and lhe HSP have n'lll:lmerl strollgi\' Hlclltilicri wilh all allllnatIonalist, Europeanlsl and llllerll
TilE I'OSH:cl:\I:-.llINIST PARTIES IN TlIE E. \ST

13n (Ish pro\'t') lallce, ).-, ;"'Iore g-elHTalll', Llw leaders of Lhl' Polish Left share the \\'I{h,.'spread n'lHClSll1 amongsl Polish policy lIlakt'r.~ ahoUl the ClIlHlul'l of Ell policy IO\\';lIT!S Poland m'er the ia~lelghl Years, bllllhis CYlllClSm does 1101 in lhe slighlesl \"eaken lhell' resoln- [0 make the aILalllllll'1ll of full Ell mcmbership Lhl' COlJIlII"\''s ()\'(.'rnding pnonlY, In I-Iullgan' more lhall III all\' other of ,ill' «1111' ('''UlllflCS, the cleavage between lI;tuollalisJIl and Eliropcamslll has htTIi (II' celliral polin' signilicallce. because of IlS bearing IIpOIl dOllll'S\lC pal'll' alig-lllllellls and also bl'c'IlISe or irs forelgll polin' IlnpOrWIH:c. TIll' HUliganan SOCIalist Partl' has takell a IIlorc or less Idenllcal ~tallce Oil Ille hro,1l1 lcieolog-Ica! Issues as the SDPR ;lIld Lills c1em'agl' bl'IWCCll EuroPl.';iIl\SIll and nationalism acquired increasing salil"lIcc III thc rlln-up to lhe 199,1 cieCliolls becanse of IlS connectloll with central aspects of I-lungilllan foreigll plllicl': the recogllll.lllll or 1-I11l1gan's borders al\d the stallu: 01 p;Irllcs on the n~llI~ nr I-I\llIganall IHIIHII'Ilies III Ilcl).:il\)Ollrtllg Slales. The ~O\'enulIg coaliuOII lip to 1~19-ltllllk a strollgl\' lIaliolliliisl SI;lIlCe Oil lilt'se Issues which IIlc\tlried ,Ill umle1'lOlll' or irreciellUsm whik lilt' HSP and till' Ellropeanist camp repudialcd l!lIS approach, The erslwhih: lIeo-liberal camp of the r.rcc Democrats and \'()Ul\~ IkllHlcrats IIlCre:lslIlgly polansed Oil lhis Issue as the I\;\llllilalist thelllc iwcallle Illore prOIlJlIH'l\1 III lhl' laller part\', Thl' agreelllenl, Oil Ihls Issue, Oil the otller hanel. helwcen thc Fret' Democrats alld the I-IS]>, was an 1I11ponillit l'iemelll in ('lIablillgthcsl' parlles III wllrk Ie IgeLilcr Sl1b~l'qllClIl"" III COlli rasl \1'11 h POLlIld where the [)l'J1wcrallc lllllllll s anll-COlllllllllllSIlI ;lllricoIllIllJlIlH:1l1 to IIl'll-liht:ralISIll It-d II tll make (OI\CeSSIOlls ro the particulansl Rig-Ill, The rorclgn polin dimenslolls or IhlS c1l'a\'agL' Ilal'e hl'l'lI rar Illort' proIlOullcecl thall thosc In Poland. :\ lrIallgll' or isslIl's has dllllliliall.:d forelgll pulic\' debalt:: 1Illq~ratlllll Illto lI'eslerll IIlSllllltll>ltS, IllLl'lcs(alC n:IaIHllls wllh I-lung-an' S lIeighbours and deft-lice of Ihe 1Il11'1'l:sts of I-It lIlg-a nan IllIllOJ'llies li\'lll~ III nelghhouring- states, I.el't and Rig-hI hal'e difkred Oil each .,1' thest: issues and lht:\' han' also dirrcrccl Oil till' ~t'C]lIclln· or PrlOrJLll'S III ladding thelli. Ie, The :\JDF anri IlS cllalill()Jl partners, (Ill' Smallholders alld lhe Chrlstlall DenlClcnlls, lender!. in oI1icl', to prescnl the lask of delcnding Hungarian IllIllOrlll('S abroad as an histone 1lliSSIOIl. illlpro\'lllg reial.lons willt neIghbOUring' SI;lLeS - Slovakia, RCllI1ama alld Scrbla - wherc those \IllllOnU~'S lin' has bcell made conriiu()lIal upon those sla[c~ 1I11pr()\'IIl~ lite pCl~llIOII of Illl1llJrlLles, . \nd I-1ullganall IIllq~r;lIlClI1 111111 NATO and the Ell has SOIl\ClIllles appl';lred to he an IIlstrUIllL'nl. for I'll rlIll'l'lIlg Ihc.lll1ssioll lOw:lrds the millllntlL'S, The HSP has SlIUg-hl III rCI'l'rsL' lhlS sequl'llcc oj' pnOrlllcs: lhe IlIISSlon has been 1I11egraL1on WILllIll the Ell. SCllling dispUlt'S II'llh I-Iungar)'s neIghbours has bccn a IlL'Ct'ssary IIrsl task Oil lhl' road (() l\'esllTII Integralioll.

I'Ol.lTICS \:-.: TilE (;[,OB.\I./S:\TION PERIOD

And proleClllll-{ the nghts of Hungarian minorIties III thosc neig-hbollrIngstates has been viewed as bem/-{ strengthened rather 111"n \\'cakenc(1 by achJC"ing li-iendly J'ciauons with thc neighbouring- states: 17 The MDF-Icd coalition consistently n:jected the Idea of new trealles belllg' signed with ShlYaKIiI and Romania repudiating any change in those countnes' borders with Hungarv. Thc\' cited the existing- Hclslllki Final Act as suHiclcnt border guarantee, IgllOrtng tile fact tbat the Filial .-\n IS not a legally 1)lIlding mternatJonai tn.-illY, The\' also frequently gan: the IIllpreSSl()Il ofharbollnng Irredentist hopes. nOlably through the MDF prune mll1lsters insistence that the\' were the leaders of all H unganans outSide as well as inside Hungary's existing borders. The I-ISP not only accepted the 1(lea of treaty-based border guanll1tees for neighbOUrIng states, but pledgecllO seek an lllstonc sClllcment WIth thesc nClghbours. The HSP-,-\FD g-o\,crnment moved swiftly to achieve such treaties after coming into office, The HSP accused the Right of seeking to promote lis own lcieoloh'Y wilhm the Hungarian mmont)' mo\'emeills 111 Sl()vakia and RDJllallla, rather than seeking to acl1J(~ve adequate guarantees of their right" from neighbouring governments, The Right accused the I-ISP in turn or bell1g ready to put mler-state relations above the intereSL<; of the mmonlles, cillng the faClthat the HSP pledged oni)' to consult 1l111l0rll), organisations over the proposed treaties rather than give them an effective veto (wer th{.'Il1. Finally, the HSP criticised the MDF coalition for trYlIlg to usc lls western links i(lI- narrow n
THE I'()S'rCOW.llTNIST I':\RTIES I!\

TilE (';"\ST

hoth tl1l' SID and lhl: HSP han' some 1H1lwS lhat lh('\" may be abk to use thl~ir' lints \\'Ith Ell sOCIal clelllo!.:!"at\( parties LI) acll\t,\"c some le\'era~e 01" Ihelr o\\'n III c!efelln: oj" IlWlr dOJl\eSlIC sOCIal goals, III BIIIg-ana, till" BSJ> has also increasll1gly adopted a Ellropeallist and 1I1l1\'ersalist stance 111 the general IdeologICal field, after lIlitially l)ein~ tainted 1\'1111 plavlIlg upon r Bulganan policy-makers gl'lll'r;dl), III the currenl CIlIIl~'~l. The Wesl's trade embargo agamst Yugosia\'l:\ hampered the dC\l,'loplllelll of Ell-Bulg;lI'Illglr natIOnalist themes while lhe OPPOSltlOll held up the banner oj' Europcalllslll and unl\'ersalisllI. There IS l'\'ldence that till: slall' CXL'cllll\'e encouraged the developmenl (If uhra-n;lllOllalisl panics on thl' Far Righl and lIiescli was pn:pared to form a gOHTllIng coaJilioll I\'llh lhelll (as well as wnh Llle lIauonalist SOClalisl Labour P;lrtl'j, ThIS dOllleslIC dimenSion ,,'as linke(IIO t'\'ldenlllTeclellLlsl It'IHil'n('leS on thl' parr of the Romalll;lII go\'ernmel\l III thl' earh' I mills; III parlicliiar l'/Torts to rl'-IIICOrporale i\-loJdm'a 11110 RomalllOl, and a refusal to accept till' Jq~llllllac\' of' North l~uko\'lllas (OI11IllLII:d IllCol'jJllraLlOII II'lLhlll Ukraille, gill hOIl1 tile sprlll).!; of I ~J~J:), lIie,~clls orielllallOl1 .,;wltl:heri III
or

or

1'0\ .ITICS I" TIlE (;U m,\l.lS:\TIOi'\ I'Eltl()1l

In L1w lilrelgn policy lield. the turll bv lIiescu III 19~):\ was equall\' marked. The PSDR ~o\'el'llmellt decian.:cllllembership orthe ELI and NATO [() he"irs 'straLL'I:{lc g-oal' ami worked VI~()rulisly, tholl~h III valll. to tn' to ensure that ]{olllalll
SI'{"It/nI"/I/II 1I/'nllS

C/III/,I'/r

ThiS ckava).{e has been espeCIally IInpo1"lant in Pnland, In predollllll,lI11h' orthodox Romania and BulgarI;I, the involvement or the ChurChill sl'clIbr and politICal albirs has Ilot l)(~l·n a m'~ior issue or cOlltenLlolI hetween parties, while III HUllgary diVisions over the role or the Catholic church have generally been subsullled under other cleavages, But ill Poland, CatholiCIsm verslIs seculansm Ilas bel'n a m;~lor political issue all
or

5) D{JIJ!/'sllt' 1'11111/1'

/II/I/ol'lly rrt;lrls

In Poland. these ISSlies have not senousiy diVided t.he III a III panics - there has been a lJroad consenslls on the stance LOwanIs bOlh the w("stern ternlones

TilE POSH;! )~I\ILINIST PARTIES 10: TIlE E:\ST

and tbe Gerlllan minorlt\', .-\parr l"ruJl\ SOI11(, rClllarks by thc Pnmatt', CII'riinal'(;Il'lllp. alllI-Senlllism ha,~ been conlinecllo Ihe Far Rig-Ill. fringe ill the I 990s, 111 I-Iullg-an the lIlalll ISSUC o/" 1ll1ll01"ll\' rig-hls has concerncd racism ag-alllstl-,'),PSIl'S alld Romanies, TIll'Ir cause has been taken up scnollsly only bv thl' parl1l'S o/" Ihl' Left. IIllt Illl!\' thc I-IS]> hm also the small ;'\'larxist I-Iullganan SOCIalist \Vod,ers Part\', III Bldg-ilrta tht' cIvil ng-hls or Ihl' Turkish IIllllOl"IlY wen' ;1 JII'!lor Issue in the lasl ph;,se or the COlllllllllllSI reg-line as Ihe BlIlganan (:Ollllllunist Pany leadcrslll)) sllllg-hi 10 holstcr tls SIIP(JO\"l h~' ellcourag-lIlg" anti-Turkish sentlIllent. Bul despllc accusattons ag-alIlst the BSP that tlS lcac\erslllp was also piavlIlg" upon such SCnlll11cl1l III 1991, Ihe Turkish minority pany has {"cit morc cOI1lIi,rlablc allving- wllh thl' BSP than wtlh till: lIDF Oil lhl' Rig-hL. The plig-hl or thL' !-"YIHies and ROJII;lllll'S IS aiso vcr\" dirJicult III Bulg-ana but tl has Ilol been takell up serIoIIs!\'])\' the lIIaln panics, The sanll_' prohkmc:-.;ists ill even IllOrt' acule llH'1ll in ]~tllllallla, The most poliucallv nHJlllelllollS ISSUL' III Ihls Ilc]el i11111lng Ihe Jillir COUIIlnes IS Lhal uf ROIll,II11a's J-Iunganan III III o I'll\", ThIS IS also all extn:mely clllllplicalt:d probiem ovcr whICh polilical partIsanshIp has often entered weslerll treaLlllellls and on whICh lion-experts shOUld be nT,' GllIlIOUS whcn illLl'llIlHln~ to makc .llldgellll'l\lS, AnlagollisllI betwel'lI the Iwo milliollstrollg I-lullganan IlllllOrlL\' III Transylvallla alld ROlllanlan puliucal IIH1H'menLs has del'p roots, g-Olllg hack to till' cl,I\'S or the ,-\I\slro-I-Iunganall EllI)JlIT when thl' I-Iunganan landowllers III TraIlS\'l\';IJII;1 r.. ('ated Lhe slIhll'rl ROlllalllan populaLion there Illort' or Icss like persolla] chauels, Dllrmg the war, lhc t;erman gon~rlllllelll Jlallded Transvl\'anla back 10 I-Ionh,"s I-I till ga n, The eOlllell1pOran' leaclership of Lhe 1-IIlIIg-anan mlllority rs sirongly nationalist and COlltatlls ng-ht-wlIll-{ IITecIellLisL trends wlLhlll II. On Ihc III her hand, ill Romallla the NSF and Lhl' PSDR have g-I\'cn support allel ellulllrag-l'llIcllt to Far Riglllllaltonalist allit's lip III 19~1-1, while lhc laLler han' laken Sln(lellth' illlli-I-llIlIganan SlillllTS n'IllIlIlSCl'lll of nlscislIl.:'·~ Al 11ll' samc lIllle the PSDR SDllghl to prcselll tlst'lras a ("elllnsl force Oil the issue. while daillllllg- with ~ollle .Iusuce, that IITedl'lIlisl puliucallrends wtlhlll thl' HIIIIg-anan minonty \\'(:re hCIllg- encollrag-ed Iw Ihe iv[DF-led coa Ii lion ill Budapcsl. It arg-ued lhat unce 1IIl' I-Il1llg-;lniln g-m'crnnwnl ("lilly guarantced RomallIa's eXlsling- honkrs III a binding treat\', lcnSIOIIS between Ihe l-iulIganaIl IIIl1lorit\" an(ltil{' RUlllalllan Slale could ht' quickly resolved, jV[callwhile, Ilit'st"ll IIIcludt'ri lite L'XIl"nlle nationalist.Parl" or Romallian Nallonal L111tlv It'd b,' Chl'orglll' Fl\llIar, Illl' i\·la\'or oj"( :Iu], III lhl: g'ovenllllg coalitHlIl. c,:; Olle or lhL' malJl Ilash-polllis has been 011 lhl' issue of educalionai nghLs lill" thl' i-lung-anal1 IIII11orll\'. The tllaill parlY o/" IltL' I-Itlllg-arian IlIIlwnly, thc

2H8

I'OI.lTICS IN TI·I E CI,( JlI:\I.lS .. \TION PERlOn

I-Illl\~anan DeJJlouaw: Fedt"rallol\ of ROl1lallla (I-IDFR). has clalllH:d lhat Hunganan edllcallonai rights have been n:stnctecl III c()mpanSIlIl with the Ceausescu penod, especially, In ,Parliament, despite vig-onllls lol)l)YIllg- In' the I-IDFR, Illl'as unable to get either nHJst of the liberal OPPOSltlOIl or Petre Roman\ Social Dem()crat~ to SUPP()rllt~ amendments to the Act ancl despllc promises from lIiescu \0 iook favourably on the amendments onl\' some thirty oj' IllS partv's deputies supported them. At the same ume the OSeE's CommiSSioner li.,r ~'Iinont.ies' Righls
COl/tll/SUJIIS

Both the SDRP and the HSP have u-ansfllrmec\ themselves 111lo westCI'Ilstyle social demucrauc parues and can he seen as bulw,u-ks or the democratic integration 0(' their polities. The PSDR has evoived frolll authoritarian anci oligarchIC ungllls bUllressed by a stnclelltnallonalism in lhe directloll of a westt:rn-slyle social democratic part\" The BSP has also evolved as an '1I1I.ilenIIC socialist pany commuted to democratic cie\'elopmell\, litollf.{h locked into a desperale cconomic Crisis and an tlllstab1c political situation 111 till: Iludst 01' tcrribie nlllniseratioll 01' large parL~ or the population, Yet in no case IS lhe ruture or these panics secure. In POland, a Christian Nationalist Right with deep reserves or anti-SOCialist. amllOl'1lananism remains a potenually p"werfulli.)I'Ce irit can ulllte, while the liberai centn: IS weak and lends to ally wnh the Catholic Rif.{ht against the SDPR. A det:p elite clea\'agt: thus remains, In Hung-ary the populist Far RiglltlS todav the most d\'ll.UIlIC poliucal force and the IFI inter\'enuon, uulismg the eCl1l10mlC cnsls mhented by the l-ISP. has deepl\' diVided the forces of tile Lel'L. thrt:atelllng to destabilise the government. In Bulgaria the pl'llspeCl of a breakdown oj" the political order cannot be excluded, Parac((lxlCally, economic gn)\\'th and the wide b.ise of popular support for a gradual transformation towards a westernonented Ilationai capitalism seems to offer the mOSl secure prospects for the development of a cenlre Ld't in a l~li.-iy stailie polilical context, now that the

THE I'OS"FCO;-'I1\llINIST PARTIES

I~

TilE I;..\ST

or

Far Ri).1;ht nationalists art' weakened. at It'ast for the IlHlll\elll. But lhe lest gm'ei'lIlllclIlal ailerl1anCl' has VL'I to occur ami must hL' an IInponalll olle, ).1;1\'l'1I the amhOnlarian Orll4l1ls of the PSDR, But all these issues will he prolillllldlv 111 {1uenceci by the course or policy Oil the pan of the Ell aile! other western insLltlluOI1S, Much or the IIlstability ill the rC~101l o\'cr the iast seven years is a direct consequence or the substallce of western policy, If thiS poliC\' tn:nci continues, thc cvolutioll of \Vest Europcan slvic liberal d(,lllOcracics, whIch rest \'erl' largely Oil lhc cxistclln~ of a strong l.en
or

or

NOli'S'.

Fa,1 Cl'nl)";ll EII"III'" "',, lIlean 1'"lalld, l·i:II;\g~ln·, Cl(·chn,lm'akia, ·1~"'II;in;;; ;;;1;·' \\';Ih Ihl' hreak-1I1' III" C/l"chll~lll\·akia Ih"y, of rllllr,,·. b"C,IIlII' '1:-;, ~. III film of Ihelll (Poland, (-(nll;.:ary, BlIlgana ami ROlllalllai II It· I" han' IWl'n Ihl' le~lIlillg pari II·, al a nallonalll'\'l'1 dllrlll~ Ihl' 1~1~IOs. ;L This 1I1OIIOpolisalloll of Iht' polilical arena hacl. III [;U:I h""11 brol;(,11 III 1'llIlIJ.:an' Sill ("I. Iht' 1I11c1·)!'l-lO, and had nol h""11 IIIlal in Polalld SIII("(' Ihl' I ~I:;(), . .1. Th" 1lI0Si SIJ.:llilicalll IIr JIlt' I.eft splils was III HlIlI!.:ar\". whl'rl' a nlll II 11·11\· lIIanllalll"cllh(' I hlllganan SonaliSi \\'ork"rs' Part'· and slIbs"qllellllv !.:allled ·I.i per n'llt III Ihe lirSi (,1(,('· 11111": III Poland, a grollp left III" [i'J'I11er (;clansk party Ie,ukr FiS/bach cCl'aled all IIIdepl'll' (kill grollI', clIlIsidl'nllg Ih," Ih,· lie-\\' POSI-COIIIIllIIIIISI 1I1O'J"IJ{V h:1(1 1101 slIninl'lIll\' Ira"s· li.rJlll,d Ihelr party. Then' \\"ITl' 1:",,1 splils III IIIl' Rii-:ht frolll III,' ( j .... h COIllII II II II SIS alillHlIl,d e'l'l'<"Ially III pllhlicalllllls lIf Ih,' L'S (:"uncilor Forl'lglI Rdaliulls. St'" II", arllcll's Ill' Allm' Applehaulll alld ~lichael IHllallef ill 1!l!)(; iSSIl", IIf I-ill>"lgll :lllilin. :\ ilion: s"phi.'I'C'II .. d argllnll.'111 rlllllllll!.: alollg sllIIilar lillt's IS rOllnd 111 (:Ilar!l's (:all, 'The :'Ilil'IHl' "r 11t'IIHlcran' , '!iml.llii"", :!:! IIlardl 1~'H(i, '7 ..\ H,,,,cI('x"IIlI'I,' "flhis
l~y

BIII!-l~II·I'l.

290

POLITICS IN TI-IE CI.OBAUSATION PERIOD

1'0SI-COIllIlIUIlISI Polilics', III I':(HI Hr/l"/J/Jt't/JI Polili..., (//111 So",rlr, :-,: I (Willler I~I~)) ), H. Lelia Kolarska-BohillsI-a, 'iil\'lh of Ihe iilarkel, Realill' Df R"f('I'III'. III S. Clll1\ulka alld :\. Polollsk)" Po/i.'h Pamdo.wI (RouII~dge, 1 \ 1 \ 1 1 ) . ' ".. .9, Bill l.OIll;'X, 'Hullgary', ill SIl'pl","'Whill'neld (l'II.), TI". N,71' Imlllltirmllr/ :1I,.hil,'(/rm' 1:'tW,'1'1I 1:111'0/'" (St. iilanill's Press, 1!)9:1), 10. Di"'"r Segerl. 'The SI')) III Ihe Volkskallllller ill I!)!H): :\ New Pari), III Sl'arch of a I'oliucal Prolil,,', III MichaL:! Waller, Brllllo COpprl'll,rS alld Chrrs I.ksch"u\\'l'r ("ds.), Son,,/ /)"III"'?"III), 11/ Po.I/-OII/III//{ IIH/l:"t/l"O/'" (Frallk Crss, I \/fI·I). II. Sharllll W,,)Chik, (.':t'I'/w.f/tJI!(/ilia III Tml/.lliirm (Pillll'r, I!)!)I) alld .Iallles P. iilcl;n'gor. 'Valli" Slnlclllres III a ))",'L:!oped SOCialisl S~'Sll'III: IIIl' Case of Czechosloyakia', Cum/lllmln',' Polilic" 2:\: 2 (199 I). 12. S"c Ihe speCial ISSII,' of Ihe ,/"",.,/(/1 oj COII/II/III/HI S/lUii".I. 'I'arll"'. Tradl' UllrOIlS illld Socr"l)' 111 Easi-Cellirall~urolw', 9: ·1 (Dc""lIIher I !I!I:l). 1:1. Sec Rulh A. Balllll.ak, 'The Role of Lahour III I'll,I-SoCialist Hllllgary , 111 Ihl' /!,"'/t7/1 i1{](fimi Po/iliml Hell/WillY, 2M: 2 (lillie I!I!),I). j.i, For a I'aluahle allah'sis of Ihl' Czech Irade II111llllS, Sl'" :\lIl1a I'lllkn, 'Froll1 Acqlllescellce 10 :\ssnlloll? 'I'ra
ur

or

TilE

P()S'(~COM~IUNIST

I'ARTIES IN TIlE EAST

:l:!, 1'''11',· Roman·s D,'lllonallC l'arll·-Nallllll;11 SalvalLoII 1'1'0111 Ioas no\\' sc'l lip all d"ulIral alliallc,· 1~.11o Ih" slIIali Sonal IkIIlO("L11U- l':trll" or HOIII:lll1a_ Tltl' :\lIi;III("1' IS c-all .. d lh" Soci,,1 [)l-tHI)(TaIU" linltH)'

"i",-. {( ..-

:u .. t~x:lInpk. :llit"Cl.l-sla\\' RaKo\\'sKi. 'Our :\eIIOIl' aI''' Ddilll'd h)' tlte \\"'JJ1ll'ill!-: of 1'0);lIul', a SP",,[-It OIl 1"lenslIllI, 1:1 Seplclllbt'r I~IH~), n'prllllt'd ill I.·'IIIII'III/",rtll)' I'lIlalll/. 110. )0 ( I ~I1'~II. :1·1. S"c LlI,l\dk Krasllcki. '011 t1w Hnnzoll -Ihl' 11th I'arl\' CUll!-:ress,- COII/<'11'/IIIIWJ 1'01(1//(/. 1IlI, !I. (EIH~I), This artIcle. repnrlllll-: pr"pal'alLOIIS Itll- IItl' lasl I'UW), COIIl'n'ss, spells OUI lhal IIH~ I'U\\'I' ll'a1:'. "/iIl1l\11;,,,,, ~H .I •• IIl' 1~)~}(i. :I.~. S,·,· .IelT FI'l~'·II1;III .. J IlIlIgan;lll Ulilil" 1'1'1\';11""11011 1IIo\'t·, Forward'. '/iwwiilJl', :1 :>.Ia), I ~ 1~1I i. :HI, S"l: i'.sllJia Szilagl'l. 'CIlIlIlIlIlIlIf'allflil Hn'akdo\\'11 11.'1\\"'('11 11Il' (;O"CI'IIIIH:1I1 and Ihl' l'ublk-. 'Jiwl.ll/il!lI. ~~ 1Ilarch I!l!lIi . .]0. Thl' I~IF did IIISI'I UpOIl lite Opt'lIlnl-( "I' a .,Iock lIIarkt·1. bUI Ihe rl'sulL was a siock "xcllalll'" wlllt 11I'1'1t'l' 'luoll'd COIII)l;Ullt·'. lIllll' 0111' "'hicil was full,' PI'll';II<:. Sl't: 101ll',CU, . [{lllll;lIl1a·s Slalld .. lly .-\1-:""l'1II ,. 11 I' . UH:·/lU. 11,'.1/'111'1"11 lI.jllln. :1: 1H (Ii ~Ia,' I ~I!)·I), ,II, :'tlichal'1 Wnan. 'l~l'II"\I'<,d E,·tIlllllllU· ens.s \lal' [lid FlIlIl-l)ral'1-:11l1-: R.·fnrllls',

or

or

"/'u/lJ\ltillll. :?~~ :\ll~lISl 19~1(j. ·I~.

S,·" Kidl F.lIg-dlorda. 'lIulg-analL I'''\\'l'\'

"JiOIl\l(;IJII.

(;;UlIl'~

l;;,·,· \\'01\' III (;r"'\'IIIg- ClIlllp,·llIioll·.

!,!(i.lalluary 199().

-1:1. Th" real ongllls of Oll'l'holl'ski's 1'<'''1'11:111011 sel'1lI II> han' 1:.111 III a charl't· Ill' Ih" SJ.ll Ihill hI' was ;)('11111' ilil-gall\' bl' l'Olllbillillf( his pOSI as 1'01''''1-;11 \lilllSll'r "'1111 a full salan ;IS 111L' din'['\or of a pn\'all' halik, a !"h"I'I'" upheld hI' lite Poli,h ... >llrlS .I11S1 hl'ron' Oledltlll'ski

reM~llt·d. ·1·1. s.·t~

Jail

II. dl' \\\'nlellihai. 'Polish FOrl'Ig-1l Polin' :\fler Ihl' EI"CIIHIIS . UFI:'/III, UI'."'lIn·" ·11 (I:. OClollt'1' 1!1!1:\). ·1:1. :\11 IlUporlanl 111011\'1' hen' IS <:tHln'I'IIS ""t'l' Polish,r;"rlll:ln ... ·latHllls. As Illclicalt'd IIi Ihl' I !I!I() Polish .. Gerlllan Tr,·all·. Ihe Polish gOI't:rnIlH'1I1 will lakl' " Illor,' relax,·d '1IIIlUd,' [ClI\'anl, lis \I't'slerll t('ITlIlIl"Il'S lIlIlt' aher Polallcl's 1'1111 ill I"gralll II. 11110 a slrong Ell. ·Hi, Sn' .\Ifrl'd :\. R"N·h. '1-llIlIganan Parlil's' Fort'II'II,l'ulin- Elt'clllr,,1 l');lIltlrlll' , 111-1-:/111, N'1",r".~:

lin.-",.}, 1I'·lmr(.I, :1: 19 {I:\ :'11;1\'

19~1-lj.

,I i. S,'" ,\Ifr"d :\, Rt·"I'h. 'Thl' Nt·,,· I-ilmganall t;",·.'rtlllll·1I1 , FOI'l'lgn Polin- 1IF1·:/1II. /{nml''-}' U,jJllr/l, :1: :17 (:!Ii :\lIgllsl \l1~1·1). ·11'. Set· KjL'1I EllgeIhrL'kl, 'Solllhl'aSI Ellrop"all Slal"~ S,·,·!:. Eqllal Trl'all1l('111 1:1-1:'/111. 111'.11''' ..,-}, lI,tll/til, :1: I:! (19\1-1), ,)!1. S.',· Dall IOllesclI, 'RulIlallla ,\<111111",,1 10 Ih,~ C01lllcil ur Ellrop'" IU·,/c/IU.II,'.\""",,}, 11'1""·/'\, ~: -1-1 (:; Non'lIIll"r I!HI:1). :;11,011 Ihl' I'IlIIp['r:IIII'1' di'lllllt· which f"lIo,,"'d Iht'''' rt'lllarks, Sl't' IIliclt:!el ShallI'. ':\lIal<)lI1\' or a Pr .... EIt·cllllll I'ulillcd Dh'()IT"-, '/i'tIll.I/lio/l. ~(i -,,'lilian'. I !J!lIi. ;. I, SLT f):1II lum·scll. '11:ullllll'nllg' 011 NATO's 1)00"- 1iIlI/Ulilll/. ~I AUI'IIS1 1!I~Hi. ;I:!. U" [Ii .. ROIlI;lIIl"11 Ilallonalisl parlles h;\l'k~rUIIl)(1. "'" '1'1'111 (;;tllaght:r. 'Ell-clOral IIrL'aklhrlllll:h rur Rom;HII;1I1 Nal.o"ali'I'·. 111-1:/111. lin,.",.,.), U'-/IIII'/I. I: .\;) (1:\ ;-':""l'llIl>l'r

I ~1~1:! J. :':1. After Ihl' I~I!J~ parliaml'nlan' "It·cuolls. Ih .. NSF I'll'kt·d a H1;~I'"'I(\' III lit,· l'ariialll""1 and illliiall), SOIlf(hl a f(rallCl'·IlaliIIlHI. IJlII 11'111'11 Illlahll' 10 achi.·n· al'IT"III"11I mlh Iltl' aull" CIIIIIlIIlIIIISllIPPOSllillll. li,rlllL'rl a rualilillll \\'IIIt IIltra"II:1l1l1llali,b .• :1'1. Sl'l' ~Jich;I'" Shalir. 'ElhilIC Temilln RIIIlS J-iil'h III [{"mallla'. ll"ditJ I·;·.·.· FIIHl/",/Ul/IJio l.ilu·r/.l' 1I"Il'lIr,-}' U,ll1/ri,. :\: :\:! (,\Ilgusl I !19'll. ;':1, Sl't· :'tlicha'" 19nalldloll Ih,' slipposed'" cl'lppled dl'lllllnacl' Ihal r ..slIlts rrolll Ihe cull" 1I1111,'t! streng-lit of till' pOSI'( :UIIlIIIIIIIlSls and Alln,' AppldulIlll S :I rg-II1llt:1II as 10 wh)' 11ll: (l"P' IIlisl Ril'hl sh"uld 1)(' look,·d "1'''" 11101''' 1;1\'I>lll'al>l)' IIt;II' 1111' 1',,'I,C"'llIlIlIIlISIS.

=============12=============

The Enlargement of NATO and the EU

The end of the Cold 'Val' IS Itself now comlllg to an end as Europe ell t("rs a new phase marked by the redi\'ision o/" the continenl. This is the real siguilicance of the NATO enlargemelll and the likely signilicance of the next moves of the EU in the long saga orwilatls called EU eastward enlaq.~elllenl. This may seem a perverse VIew of the process that was launched b\' the NATO ['"Iaelnd Summit in July 1997 and by the EU Commission's AgclHla 2000 documents. After aiL the contlllent has aireadv been diVIded between those II1slde the EU ancl NATO slIlce I ~)H9, and those outSide. And are not the deCisions or 1997 going 10 produce a less divided, llIore IIlcluslve resuit? As /;11" as NATO IS concerned thiS will be true onlv 111 all antillllellcai and not a political sense, because the main political meaning or the NATO enlargement lies not in Poland's inclusion, bllt above all ill Russia's exclusIOn fnllll a dctenlllned elTon to consolidate NATO as Europe's malll poli lIcal lIlSlIllIlIOIl. In the case or the EU, the break between the hopes o/" 19H~) allCl the emerglllg realilles has been more gradual. but the result IS turnlllg out to be the same: the European polillcal ecollomy IS bell1g rrag-ml~llled once agall1, III ways lilal are different in character frolll those which eXisted during the Cold ''''ar but which, for a number of countnes, are likel\' to be Just as deep. At the same time, the two parallel processes of new di\'lslons - the olle involving NATO and the other in\'olVlng the EU - mllst each be seen 111 the context of the other, the IInpacL of each feeding ()ac\;. Oil the other. ',Ve will attempl, bndly, to analyse the character, causes and consequences or the ~ll1ergel1 t divlSIOIlS.

THE

I

ENl.:\R(a':~IENT

OF NATO ..\NIl TilE Ell

NATO's Expansion and the Exclusion of Russia TIll' UliI'ml UIII7!t'I:mliJI ProllllSl'

oll 1)81)-9/

The populations of Ihe former SO\'let Bloc were assured after 19f!9 lhal once they became marl,et economies and c\enHlcranes the divisioll of Europe would he overcome and they would be mcluded ill 'lhe ',Vest' and in 'Europe', NATO oHicials tounng the 1()J'mel- USSR alld East Central Europe assured audiences that European peace and secun ..\, were now 'indivisible' and that all Europeans were now' in the same boat', Provided all the states hecame 'market economies' and 'democracies' evel'\'body would be included, With the threat of Commulllsm ami of the USSR gone, Europe wouirL III PreSIdent BUSh's worcis, heco1lle 'whole anci free' ill a s\'stem of colleCll\'e securllY WIUlOUt alliances agalllst enemies, r\-jore than rhetonc was involved: the OSeE was strengllwnl'd as a panEuropean secllnt\' forum, recogl1lsed as a UN rq,\'lonal oq~al1isation and gwen roies III reduclllg conflict .Illd promotlllg thl' peacel'ul SeUll'llll:lll of disputes_ A strong, pall-Europeall conventional arms c011lroltreat\" the eFt-:, was approved, limiting force strengths, Ami the ad1l11Uedh' umatisf;lClory NPT was rl~-elldorsed wnh a supposed COllll1llUllent on the pan of the nuclear powers to move towards deeper disarmament. All these steps wcre part of a widcr framework for what cOlliel be described as a liberal visulIl ror building- a ncw Izmel oj" seetlnt)' orcier ill Europe. based upon g-cnullle collecu\'c Sl~cunt\' rather than a power politics Iwaln' sllch as eXIsted dUring- the Cold War and in the 19:10s, These possibilities seemed all the more realisable because t;el'ln:lnv had a poliucai c!litun: vcr\, difTerellt li'om the more militarist and natiollalist tradillons of S01l1e other western slates (such as France and Bntam): strong("onslIlllencies in the Federal Republic desired a 1l1ultilaterai CIvilian model or European de"elopmellt. NATO's lirstllHwes towards the CEECs III the 1990s seemed to cOlllinn thiS COlllmillnent to pall-European secunly: the North Atlanllc Co-operation Council, 1()lIowcd iw the PartnershIp for Peace were. ill principle, all-inclusive bodies for EuraSIa as a whole, The seeds or thIS liberal order Wt~re supposed to he contained within the womb of the NATO alliance IIself: the NATO powers c1all11cd that theIr alliance was based llot UpOll power politics bllt PI-CCISely on what cOlllemporary liberal schools or thoughl abOtll IllternallOllal relatiolls daUll: the ll1ternal delllocrauc systems and the shared liberal ancl. democrallc \';tiues ur the wcstern states, If thIS was the case, then there was even' reason to hope lhat thc transli.>rmation o/" the rormer SO\"ll't Bloc 1I1lo liberal dC1llocracies would generatc a slInilar harmo1l\' or shared valucs across lhe whole of the continent. Lilus making- rcal collccl1\'e secllntv based Dil com mOil observance

POLITICS IN TilE C;t.oB:\l.IS:\TION PERICh)

of shared norms and ruies a realiLY. Such were the declaraLOrv prillCiples of the NATO powers dUring- the 1990s. And, IJlcieccl, sllch are tlH.'lr declared principles Loday. Of course, peace and securi Lv depend upon more Litan the cleslg'n of sectlnty and poliucal IIlsUtuuons. The\' rest on economic and SOCial precondiuons: withoUL prosperity and/or economic deveIopment, slIcll values and instituLions can come under stram, if 1I0L collapse. ThiS was the pOin t at which the roit: of the EU and the otller institutions or the West's political economy raised great hopes in Central and Eastern Europe. As 111 the case ofwestcrn Europe alter the war, the CEECs now hopCCI that they would be offered a devc!opment-onented II1seruon III the IIlternatlonal divlsioll of iabour and that the hllter wouid soon be anchored in their accessioll to the EC/EU. And even if tillS EU did not stretch as far eastwanb as RUSSia (despite John iYh~Jor\ declared aim of including RUSSia) a ITgllne of free u-ade woulcllink the EU to a prosperous CIS. The EU. committed preCisely to European unit), and having always recog-1l1secl thaI Europe lI1c1uded Budapest and Solia e\'en if it was IlIlcertalll about Kiev and lvloscow. would adapt to accommodate tile CEECs. Agalllst thiS background, the CEECs have spent the last decade transforming themsdves into market economies and libel'al democraCies. Today both privatt: capllalism and liberal democracy IS the norm - lholl~h not UIlIversal - across the former Soviet Bloc regIOn. The transforlllation to capitalism has been extremciy costly 111 econolllic, social and health terms. But the peoples of the regioll have largely accepted these pnVa110llS Jillone overnding reason: the goal of entering the club of \Vest European-style prospent)', democracy and peace ol1cred to them Iw the leadel-s of the western alliance. Of courSe, neither the capitalism nor the democracy that have emerged are per/en from the standpoint of libel-al norms_ BlIl that onlv makes these CEE slates Similar to Lheir Iit.- fmm perfect coullterparts In the Wesl. The main Lhing is that they have passed the test set for Ihem by the 'West European states: Liley have been accepted into the Council of Europe. They are on targel. But now the goalposts are being moved.

NATO EII/all!/IIII'lit

In 1994 the US adlllll1islration indicated it was In J~IVO\l1' of NATO's eastward eniargemelll. It then retreated somewhat, gl\'lng 110 date alld promoting the PartnerShip for Peace as pel-haps even an altel'1laL1ve. But in I 99[), after the RUSSian Pn!sldenual elecuons were out of the way, Washington lifted enlargement to the top of NATO's agenda ane! the process of enlarging NATO began at the Madrid SUllImit ill July 1997 in order to be completed b~' 19~)9.

'1'1-1 E ENL·\RCEi\IENT OF N.-\T() ANn TIll'. Ell

The rorm or the Amencan camp:lIgn for enlaq~ell1ell( IS lllteresllng becali'se' of ffi; complete lack or credibility. We arc led to belie\'c Ihal picking sllllahle entrants 10 NATO has notiung to do wIlh geopoliLics hllL is raLher abouL which sLates of the region have achieved high enough standards of democraC\' and market eCOJlomy to he worth\'. Thus, dUring Secretary (;eneral Solana;s tour of the CEECs 111 199[): The secreLary general will be making ILclear that no decisions have beeJl taken vet and that each applicanl will beJlIdged on II1ciividual ment,' a NalO ofliClal inl\'1ousl\', thev will be the lirst to jOin.' Aithclligh Nato has not vet specified I<Jrlnal CrIteria ror admitting members li'om the l
P()I,ITICS IN TI-IE CL()II:\I.ISSrlON I'EI{()()

and en-ordill;IIHIIl Illl'Ch;II1ISms to dcplm' rorn' Oil Poland's horrlt ...~ willi l'I.ralllL' \"L'r\' r:l[llClir III a ens(s. ,\s a rL'sult, thL' l'1I1l<,'d Statl's ;lIld <';(:nll:ltll' 'll"qUII"l' !la' .. bilit\, 10 usc .. far 11 Hl Ft· POlt'lIl f'orm or COL'ITI\'L' dipllllll;11."I agamst RUSSia, ill the e\'ellL that RUSSian ;lIIeI US mterests dash III tIll' IOlles around RUSSia's I)orcil'rs, This a~alll IS IIlhel'l'lIt 111 allY expansIOn NATO IIltD Poland. Soothing words about stratq~1C partnerships, consultation. etl'. IwtwL'ell the US/NATO and RUSSia wiIllwt di,~pose or this ract, III this COIlIlL'ctlOIl It IS Imponant to n:l'Il,~IlISe the transli:lrmallon or tht' I)aiann' or military pO\\,lT that has occurn_,d SIIlCl' I ~)H9, Tod .. \, N ..\TO h;ls llla'l' tlllles the militan- strellglh of'Russla (/111/ IIII' n'sl (!f'lhf' CIS (fIlllbillf'd, \Vilb Poiand alld the othel" CEECs,IolIllng, NATO's bCWI" or pn:dollllll.lllrl' will be rour to Olle, ThIS IS also important wlH:n considerlllg thL' rhetnl'lC rrolll \Vars"w or frolll till' Repuhlican Ri1J;lu III Ihe UnJled Slates about till' continued . RUSSian lhreat', such lang'lIagL' as all eXplallaLJOIl l'or NATO l'xpanslon IS.JUSt not credible, Thus Polish membcrship or NATO will al)solul<:I\, Ille\'itabl" n:pD\anSl' EuropL'an politics, Those who say Russia sl10lliri \\'ekomc thiS cnl:lrgl'IlH'1l1 1)l"COluse NATO IS purL'lr del'eIlSI\'e and thre;ltens 11I1i>ody arc either 19'IWLlIlt Dr inlerll;uional polillcs or l1lendarlllll.~, because IhL'\' 19'1Iore the simple Lll'I that RUSSia will 1;lLe a Illlght)' nuclear-armcd military alliallcc Oil liS 11\\'11 border (or the Kalinll1grad tnangle), an alliance whose ieading powers arc already eng-aged in a vigorous compeLJLJon \\'nil RUSSia for IIllluenCl.' O\'er ItS ASIan enerh,)'-and-mlllerais underbelly and over UkraJllt\ Russia will, therefore, mevlLably do what It can under all\, icarlcrsillp to underminc this SlaLe of amuJ's, or course. sOllle argue thal RUSSia will havL' til come to realise that Jlmust accept the lIew rc,lliLJes, give up its ambitions to be a Creal Power 11\ European p"lillcs and acrept that what counts no\\' I~ :o.lrcIIglh as a capitalist eCOllomr, Alollg this lille of' argulllent, NATO l'Xp"IISlon ;lCllIallv h<.:lps RUSSIa hy making Ilel' I;t<.:c these [;lctS. Bllt llll:-' I:> !lsdljust the language or Mar/ilimlili/; and aCI~Il()\\'iedges that NATO l'l d.llgeIllent IS a deliln:ratc assertion or power ag;lIl\sl RUSSIa deSIgned to make liS elites sober up and racc c1el'eat. IL IS ;liso a dislI1gCllllOUS argul11cl1l becausl' the fJuest for economic strengtll cannot Iw clivorced rrom the fJ"l'st Ii II" polillcaJ 1II1luence, above all in Rll~sia's lOlse. where a c10sc rel;ll1oJJslup with Ukraine ami the Caspian and ASI;IJ) Republics Gill hrlllg tl1(' Ill'\\' RUSSian capitals vcr\, hancisome rewards, Agamsl thiS backgroulld, we call prcdict all cHi)rt br Russlall gon:rnments to combat NATO's expansIOn mlo Poland. This rcsponsL' II1lght t.. kl' a "arlet)' of rorms and mIght devL'iop at a Vanet\' of paces orcr lhl' IIcxt clccades. Russia could thrcaten Polanci by slulling Kalinll1gnld or Belarus with tacucal nuclear weapons;:1 it could repudiatc thc CFE: scrap ItS START COI1lIl1IL1l1CIllS;'1 ellgage 111 wreCKing lac lies In tIle UN; turn the BaltiC slates into hostages; tll1"11 llaSl\' on thc Black Sea Flel't: lUI' II Its base on the J)J1~'str

or

TIlE F;'\!L\IH;I,:1\IENT OF 01 ..\']'0 ANI) THE Ell

IIllo a lhreat III i\'loldo\'a: t:lIlhark upon amon' ;LCll\'lst polie\' to rit:stabilise lIknlll'le ()I,' s\,:ek to expand liS ttIllllt'Ill'l' In lhe Balkam, NlIlIl' 01' thiS Il\a~' s('nolls\\' lhreall'j) the seel I1'1 l\' of \-,'estern ElIrnpl' and II Illight en:n strengThen lhe nllT{,1I11~' Yen' ragg'c'rl cohesion oj'tlll: ..\llanllc alliance and US leadershIp III Wl'slern Europe, B11l it could cause mlscry (II' hundreds 0[' millions or pt~opk ttl EaSlerll Ellrope and the (.lrmcl' Sonel UIlIOJI. Parllcu\arh' dangt'rOlls will be lht: Ollsel oj' intense Anll'l'Ican-Russian rt\'alr\, ",ilhlll Ukr;lllle, Russlil has powerfUl le\'ers (II' pllrslIllIg L111s slnlg~le, Ilot leasll\s t'COnOllllC le\'erage on:r lill' Ukrallllan economy. liS links wilhin UkraineS polillcal ciil(:s and lhe cnsls or Ukrallle's armed rorces and sialt: admllllslralioll (nol 10 speak lIr ilS appalling gencral econOJllll' nisls). All.he same lime, Amencan hopes lltal il has a strong base of' polil1cal SlIpport ill Ukrainc mar prow unrollnrlcd and a rlt'ep illlernal ensls wlIllIlI lhal COUIlII'\' could ensUt:, .\lollg lhe borders I)clween lhose d ..:linlleiv 111 and lho".,: dc(inlll'l\' OUL. there lies ;t gn'\' 1.l>1ll' 01' Siaies which Ill.1\' or m~'" 1101 Iw lIIduclcd, The Frcnch gO\'L'l'l1llll'lll would like Rum"JlI" Ill, whill" olhl'J' lI'eSll'J'l1 gO\'l:rllJI1CIlIS disagree, The l;~~rman go\'(:rll III ell I wOllid (;\\,our Slm'l'IJI;\ S IllclUSlUl1: Olhcrs (notably III 11;11\') arc Ell' less elllltuslaSllc. SlovakIa IS anolhl'l' g-rcv zone country, The slaH's IeI'I (lUI will become a field or polilll';t\ )')\';111')' Iwtwecn RUSSIa anel Ihe West and, 111 Ihe Balkans, belwl'en TurkcI' and Gl'cece, Indeed, there are clear sIgns thaI such rivalr" IS already unrler"'a\' In Bulgaria, In any caSl', the !'l·sul\.. . of' lhls expansloll Gill onl\' be 10 Inerl',lse lIIst'cunt\' ('01' lhe excludt'd SLatcs by tilling the loell balance oj' ('orces ,lga111st Slovakia. Romania, and Bulgaria, The tl'lIden(\' will he ji))' Ihe t~xcludcrl '" r('ar a Ill'\\' local assertlvencss I'rom lht: Illduded and to devote llIore o('lIlt:lr t':-':lrl'JlIcly llIeagre I'CSOUI'Ces 10 lIlililarv budge IS, Thlls airt:ad\' O\'crSll'l'lcltnl hudgl'ls and po\'erly-slnckl~lI populations will be siralllt'd e\'en ['lInllt'!. If' Romallla " k-I't (ltJl 0(' NATO whilt' 1'llIngar\' IS 1Ildlldl'd, Illl' potential 1'01' conflict bt·tWt'l.'lI ROlllallL;\ and 1'1 1111 f,!;' u'\' O\'C\' Tr;1I1,,"J\';lllJa ",illlJ\creasl', r1esplle the treal\' bl'I\\'t'l'll kft-lI'lllg gm'L'J'I1111cnls in both l'OllIlIJ'lL'S rl'g-L1I;IIlllg- Iheir relallDlls Oil thIS ISSIIt:, Both Ihc Rom;ulJan and lhl' l-iJIIlf,!;anall RighI arc nIl' rrom l'et'llllcih.:r1 WJlit lhe lreat), 111 place. Thc samt' pallern could OCCIII' iwtweell I-lung-an' and Slovakia if' the laller is excludcd (i'om NATO, Oll the olher hallc!. if' Romallla IS included III NATO, lhl' pOleJlual ['or IlTedcn list PI'( ~It'cts Oil lite pari or a Romall iall i{()\'lTnllll'lll to\\'ards bOlh [,,[oldo\,;! ;llId Ukr;lIl1e (over NOJ'lh BlIkllo\'JJla) ilia\, t'l'eall' a Ill'W ZOlll' or lenslOn, A rorelaSlt: of'sllch rUIIIH' possible n\'alrics \\';\S g-I\'Cll In thl' 1a1L' aUllll11l1 I ~)96, \\'hen Boris \(.'''SIIl Sllg-g-L'Slt:d lIlal an alliallcl' wilh Bllli{aria nllgh t he buill: tillS exacerbated poliuGti lensiolls \\'Hhll1 lhal CI 'lllllry III ways thaI couie! Olll\' runlter dt:cpl'll lht' political (and (inallCJ;t1) (TISIS lllnc, Themalloeuvrcs ... l!lulI BIII~ana WlTt' directly slimuJaI<.:cl bl' Iltt' plans [(lI'

29H

POLITICS IN THE (;(..OIHLIS:\TION PERI on

NATO en)ar~ell1elll. The ",)wk area of the Southern Balkans m;l\' be pushed I)ad. IIlto the role of becomin~ a cockpit for power rlvalnes as it result of the NATO expansion. or course, western policy-makers arc fully alen to these dangers. This is why they arc trying to insist that NATO's expanSIOn has nothmg- whatever to do wilil US power polil1cS and state lllterests, bllllS precisciv a continuation of the Iiberai, collectivc security pn~Jcct: once a state has proved itself 10 be a consolidated democracy Il will be awarded NATO membershIp IrrespectIve of geopolitics or geoslrateg-y. In other words, those cxcluded I11mt be persuaded thatlllelr exclUSIOn IS I.he resull of 1~liling-s by theIr g-overnll1ellts to come up to western sLandards of freedoll1, democracy and liberal n~hts. Insofar as thIS message is cOl1vlllcing to the electorates of the excluderl countnes, the diVIsion or Europe will not pose LoO serious a cllalleng-e 10 European stability and seclll'it)', at least III the shun term. Local voters will blame theil' own state clites rather than the western powers for thclr cxcluSIOn from I.he wcstern club of rich states. The politiCians who have heen demanding sacrilice after saCl'ilice III order to . ellLer Europe' will not be discredited and will be able lO call for one: more bIg- round of sauilicc to ensure eventual entry JlllO the prollllsed \Vest. But this public relations exercise carnes lillie weJ~htlll a reglOll close to one orNATa's three or four IlllJstllllpOnal1l states - Turkey - which is currenLl)' engaged 111 a war agaJt1st the Kurds and systematically IIses torture agall1st IL<; own population. They, therefore, like the RUSSIans, ask thcmselves what IS really gOll1g on 111 vVasillngton: what IS the real reason - as opposed to the news management absurditIes - for thc new divisioll of Europe?

TIll' C(/IIS(!.\'

t!/ NXrO \

1:\'jJrIlISIlJII

\Ve call be sure that NATO's expanslOll has nothlJl~ to do wnh particular current tenSIOns, connicts or threats III the CEECs today. If potential Russian threaL<; had been the mOllve, NATO woulclnot be elllering Poland, it would be opelllng Its doors to the Baltic states, Yet preclseiy because RUSSia would have the capacity to occupy the Balt1cs, NATO wishes to Sleer clear of them! At the same lime, hy entering- Poland, NATO actually increases the IIlSeCllrit)' of tile Bailics. The conclusloll IS lIlescapablc, that the lirst and main basis f(lI' the JIlO\'C II1to Poiancl IS not a Russian threat bill RItSSIfI's rlll'rt'lIl ('x/n'III/' 1/!/'alulf'ss. Because of the calastrophlC SOCIal and economic collapse lIlslcie RUSSIa and the fact that its state has, for the Illoment, been captured by a clan of gangster capitalists around the West's protege Boris \'<:ltsin, the Russian state IS 11\ no pOSition at present to resist the cnlaq~clllent. ThIS Russian weakness will

TI·IE

ENL:\R(;(':~IENT

OF N:\TO AND TIlE Ell

299

aimost certallll" be temporary, We Illust assume the RussIan economy anel staH." ~I,ill ....·evlve. It could easil\, grow ten-fold stronger in resource terms than Il is today, NATO IS thus eXplOll1Ilg awmdoll' of opportunllY' that will not SlaY open Ii,>r vcr" Iong-. It IS a case, therefore. or establishll1g a fail (U'(()/II/J/i against Russia swirtlv. The anaj()g~' wIlh German\,'s r;\le af'ter the First World War IS all too obviOllS. The new unler then was based upon a temporaril\' weak Germany and when Germany reviyed it worl,ed to underm111e the Versailles order. After the Second \Vorld War. the Institutions o\,Western Europe were lmilt by the US pn:C1seh' 111 Dreier to pro\'lde a framework for the revi\'al or the strength of' the ciel"cated power (or atlcast oj' its wesLcrn pan). This time round the defeated po\\'er is to be excluded just like the WeImar Republic 111 the] 920s. In Dther words, N,\TO's expansion into Poland has link 01' notlul1g to do WIth sLrengLhen111g Europe's peace, security and stability, It IS a piece of opponullIsm, an advcl1ture, gambling with Europe's ruture security 1'01' the sake or something other than securIty, The rashlOnable answer amongst 'Vest European diplomats as to what thIS someth111g-other-than-secunty actually is tends to be a variant on Disraeli's remark about t.he causes or the BrIush Empire: Il was done in a lit oj' cllllccu"e absence of [11Ind on the pan or the AmlTlcan aclmilllst.rauon: Clinton stumbled 1I1LO Il WIthout much thought in IllS Detroit speech ill October;') or he was aher the Polish vote 111 the 111Irl-\Vest: or whatever. but themall1thingisthatonceClintonhaspublicl\.col1lnllLled IJllllsdf to It, we arc lumbered with It and must make the best oj'it. These kll1ds or explanal1ol1s cannot he taken seriouslv, not least because they express unwarrallled contempt for the AmerIcan policy-making system, \Vhate\,er the weakness or decisioll-makmg III the US eXl'CllUl'e, no Amencan pl'esldentwould be allowed to gamble with Europe's I'uture Ii,>r the sai,e or the Chicago vote. Since the elllaq~emellt deCISion reshapl~s Europe's rULlIre lI'e must aSSllllle th<\tthe US ong-Ills of the policy den\'e rrom comiderOitions on an eql11\'aient le\'e1: namelv) conslderauolls about securmg the United States; I'uture as the dominan t world power artl'r till' Semel. Bloc collapsl~, Irwl' approach the search for causes at thIS level we can engage in 'backward mapping, from the consequences oj' NATO expansIOn 11110 Poland 1'01' :\menca's power positioll ill Europe, to the likel\' 1l1OU\'es for lhal. deCiSion, Four m<\1II I'catlll'es oLIIl expiallalloll stalld Ollt: I)

NO/'/II-ba,\'t'(/

roll/'rlnl(' wntrtly

Ih assenillg NATO power III wa\'s that weaken RUSSia, the USA IS asserung its monocratic dominance III European polillCS, pn~C1sd\' to de/'eat decisi\'d\' Europeall pressures 1'01' a lIorm-based, IlIciUSII'C collectl\'e secllrIty

:100

POLITICS IN TI-IE (;U lII ..\I.IS.\TION PERIOIJ

order 111 Europe. To appreCIate thIs. we must disl.JngtlIsh llel\\'Cen qUill' dil~ ferellt senses of the llO!Jon of Jlorm-based collectl\'e security. A gelllJlIJeh' IIlclllSJ\'C collccll\'c SCCllrity order involves three corc eiemcnts: (a) a collective dl'I"ISIOII-lIlflflillg .I)'S/I'III 011 polie" anc! on opcra!JoJ}s. based upon clear rules. (b) dear rules on unacceptable state behavIOur anrl on modes of collecuvc acLlOn against states which break the rules. (c) dear mechanisms J()\'JOIJ1L actIon to enrorce the rilles. Both the Bush aIHI Clinton adml11istraLions have consistellLlv opposed such concepuons J()r the obvIOUS reasoll that the\' would underllllJ1e liS smglcpower r!onllnance ovcr decisions and operallons WllhlJ1 NATO. To strengt.hcn thc OSeE towards plaYlIlg these roles would have reduced LIS power to that or being only /mll/lls 111(('1' pan's III European amllrs: It would have remall1ed the lllostll1l1uenual power because or its militar\' capacl\\'. lis military II1frastructures JJ1 Europe. its leadership or the woriciecollolll\'. the strength or its I'vlNCs and its capacity. assIsted bv ItS great media strengths. to dominate the II1ternatlonal agenda. BUl during the Cold War, the US had been more than first among equals: it had dOllllllated and controlled till' hIgh pnlilIcs or \A/estern Europe. A European collcctlvc security reg-Iml' would have required the US to have accepted a loss or direct instituuollai control, through NATO. of the destiny of Europe. Worse, ullder it collective security order, the \-Vest European stales could have developed thell' own seCUrIty IcienLltv lI1c1ependellLly or the USA. The WEli could have replaced NATO as the primary 10clIs or strategIc polinmaking and as the primar\' nexus or military /())'ces amongst West European states. NATO couler. at best, have become a meellng piace only between two centres or stratq,'")' and two orgalllsalJons of force - one American. olle \Vest European. And tile \'Vest Europeans could have IJ1sisted that US aCLlOllS III Europc conl(>nn strictly to rules l;ud dowll III a stn~nglhenec1 OSeE and in other such collective securi ty fora. And ir Russia had been JJlciuclec\, there would have been three power pules "'Ilhlll pan-European secunt\' - the USA, a unilylllg- westeJ'\l Europe (around France and German\,) and Russlil - raising the distinct possibility or the LISA Jinding Jtself as olle agamst two. With the expansIon of the Ell illto the Visegrad COUllLrleS, this kind or marginalisauon could have stan~cl thc USA in the 1;lce. Key poliLlcal Issues involving RUSSia. Central Europe and the Ell could have been discusseci first between Ell powers and Russia. since NATO would not he IIlvoh'ed wilh RUSSia or C~el~tral Europe. At the same tUlle. if Russia had been drawn IIllO NATO, the issue or the USA's monocratic power over declslOn-lllaklllg anel operational command WllhlJ1 NATO could not have been
THE ENL\R(;E"IENT OF NATO AND TilE Ell

:~Ol

In sHch circumstances, gwen EU expallslOn IIltn Visegrad, the US 1~lCed a real loss of control-power ir NATO stayed as it was without. expansion. And by expansion. the LISA assures the continuallon orits lIIonocrallc IIlsllLlluonai POSlLlOlI: no separate West European security policy or operational frameworks. The USA conceals these Issues b\' usmg the language or collective security ;llHl or a 'West European l(lenuly' in qUill' dirJi:rent scnses. By 'collcctive' it means somethlllg arithmClic - a collection or states (under its command); by 'norm-based' it means that Ihl' USA can be relied UpOll il! d,'ride malleI'S 011 the I)asls or deIllocratlc. liberal. human ngh ts etc. norl1ls; I.e. it will IIOt: be IIIJIlilil/OI/{/!(I' hound bv an\' such norms. AmI as ror the 'European identity', this call mean a transatlantic division or labour: the troops will he European anclthe command will be American (as well as the mfi·astructures). potttl)(mlh;",lt~rv

2) G,'rll/{/ II)'

{/I/{/

RII.uUI

Bevond these malleI'S or current mSlllUlional deSIgn fill' Europe's securltv order. there arc deeper qUt~sl1(lns urg-eopolitlcal stratq,,':'1Il1O the twenty-first celltury fi)r the LISA. As the NSC: document leaked m early I mJ~ mack clear. the Amenc
TIll' Drang Nach Kie\'

For Amencan polin' plallners. Poland IS only one part or the ncccssarv geopolitical wedge between Germany and Russia. In man\' wavs, Ukra111l' IS an even more Important pnze. A combllle(\ Polish-Ukrailllan corridor under US leadership would decisive Iv split 'Europe' ('rom RUSSia. exclude Russia abo rrom the Balkans. go a long war towards sl'cunng the Black Sea ror the LISA. link lip wllh Amenca's Turkish basil 011 , and prm'icIe a verr important hase 1'01' the 'Creat Game' 1'01' the energy and m111eral resources or t he Caspian and the Asiall Republics or the former us~m. or course, to move NATO lllto Ukra11le today would cause an explosl\'e confrontation with ivloscow. For this reason, LIS policy towards UkralJle under President Clintoll has been marked by cOllslderabie sUIHlet),Following Bush's notorious 'ChICken Kie\" speech 111 tIlt' Ukralluan

3()~

l'Ol.lTlCS

I~

TI-IE

(;1.( m:\LI S:\TI 0:-1

PERI<)()

capital 111 19H1, when he attacKeci 'unrealisLic nationalism at a lIllie when the US was worried about the consequences of S(wlet collapse, Clinton Jomeci a partnership willi Moscow to ensure that Kie\' becallle non-nuclear. \"'hat was llotnoticec\ bv Russian pDliliClans was lhat if Ukrallll' !lad decided to ma1l1lam I\S lluclear statlls, It could have clone so 111 the llH:ciillm term only by means of rel)l1i1ding its seCUrIty rC'ialionsl11p Will) l\'loscow. Thlls. Ukrallle-s abandonl11elll of nuclear weapons freed II. frolll such future dependence. \-Vith Kie\''s agreement to become nOlI-lluclear, the US g"OverIlllll:nt has combined a symbolic emphasis un Ils speCIal relationship wllh i'vloscow willi all encrgeLlc lIltellsiiicalilln of ilS rciallol\S wllh Ukrallle. Kie\' is now L1le reClplelll of the thIrd largest amount of US aiel, \VaslllllgLOII has been ngorollsl\, seeking to strengthen Ukra111e's mass media III leg-I'll)' and LO strengthen military co-operation under the umbrella or the Partnership for Peace, nOlably through JOl11t exercises
THE EN1.ARGEi\IENT OF N,\TO AND THE Ell

politics turns out not be dichotomous: it acqlllres the complementary of Jlle~lil's-;lI1d~ends: Iiheral Ul1lvcrsalisll1 IS thc rhctorical means towards US

power puliucs ends, 4) TI'l'

1117/1

HUHUII/

Ihrl'tll

Therc is an ohvlous CritiCIsm that could be levclled agalllsl tim analYSIS of US power-maximisation iIllerests In NATO expansion. This is lhat Il ovcrel11phasises what Illig-Ill be called lhc traditional 'realist' way or looking at IIltcrnatiol1al polil1cs: Ilcxaggcratcs thc military-strategic clCl1lcnts of powcr ovcr the political-economv clCll1cnts, Along this line or argulllcnt, the kcy wa\" 111 which the American state assurcs Its global dominance is LUda)' lcss thnlllgh ItS military capacity than through llS IIllposluon of its global political-economy reglllle on states. I n other words, AlTlcncan ascendancy is assured through reorgamsmg the II1lcrnal structures or statcs to allow their pClletratlon bv American capitalist cOJllpalllcs anel thl'ough reCJuiring these Slates to mall1tall1 theil' Viability through compctJllon on \\'orlel markcts 111 which US capllai prCciOl11l11ates. AlIlhls is truc in gencral: 1'01' thc US In IL~ rciations wnh most states, militar" powcr IS a rcserve power, not thc [irst mcans or inllucllce. Butlt IS not possible in the RUSSian casc, because RUSSia is different: It has such \'ast cncq,,!, and raw matcrial resources that c\'en \\'Jlh a ~angstcr capitalist elilc on an almost Zaman scale of sybaritic corruption, It has nut thc slightcst dil~ licult)" in maint,lJl1In~ a healthy trade surplus and in kl'l~PlJlg westcrn capJlai at bay. And Jl can do all tillS WJlhout being integratcci IIlIO the 'vVTO. ivloreovcr, it can ofrer both energy security and, at least III the medium term, sl~nilicalll credit support to govcrnments lookll1g ror alternati\'es 10 the I1vIF. Its big capitals can also already move in to othel' states alHlcstablish themselvcs as mlluenlJal poliucocconollllc rivals to westcrn ivlNCs, cspeClally III the crUCial encq,.ry scctor. During the Cold War. thIS Russian economIc capac It\' did not ConStlllJlC a serious challenge because of the Idcological divide agaJllst Commul1Isll1. But with the Communist collapse, RUSSia'S potcntial structural power In the eneq. .'Y scctor alld thc expansIOnist capacities or its capnab constitutes a ncw kind of thrcat to US donunancc ovcr the intcrnational politlcai eCUJ}onl\', Since 1991 thc Amencan adlllll1lstration, its MNCs and the HvlF havc been II1volvcd in a complex doubie operation to IIlllucnce dcvclopments III RUSSia. On Lhc one hanel. thcre was thc rcal possibility th,lt thc GaidaI' gm'crlllllen t Wlluld actually opcn Russia's economIC asscts to Amencan buycrs. II' American capital had been able to l)ltv up RussIa's oil and gas resourccs as well as thc bulk or Russia's other Illlllcral resources we would not havc seen an\' NATO CXp:lI1slon into Poland excluding RUSSia. Washin~ton would have

:~(J'I

POLITICS IN THE (;I.OIl,-\L1S..\TI()N PERIOD

adopted a •Russia lirst' policy. Btll the G;\ldar-l~lIrblilis dnH~ collapsed, desplle the ',Vest's successful promotion 0(" the idea oj" a coup (rt'lal br \e!tslIl agalllst thl' COllslltutioll III August I ~)9:~. Thl' US thl'1l found IIself b'lrklll~ Chernolllvrdin-sLylt' RllSslan corporal!.: capnalislll a~all1sl Iht' COlllmullist challeng-c, In this ch:avage, Washll1gloll had to back YellsinCherlloIllyrdin, but the laLLer was at the same LIme a pOLenllal challengc LO the US dm'e f()r a 'globalised' capitalism III which all stales would haH' ((J compl" wllh IllarketltlSllLlltiol1s designed to El\'()Ut' US i\,INCs. Thus as soon as \C!tSlIl had lllana~ed to beat ofT the COIllIlHIIlIStS, the Clintoll arlilllillslratloll moved forward with a NATO expansIOn which will have the dlCct or cOlllaining the expansIOn of Russian capnai ahroad.

TIll' lMmildilig

So

f~\r

or us J.l'flr/I'nhi/) Through

lJOSllIII

we have unplied LhaL the US has been able to act more or less as It has in European poliLIcs. Yt'L 111 reality, desplle ItS asscrtioll or power during the Gulf War of 1991, WaslllngLOn was III danger or political lIlarglllalisalJon III a Europe that was peaceful and full or enthusiasm for O\'ercol11l1lg (he conlhmtauon beLween the blucs III 1990 and 1991. Thl: expansion of NATO today is conceivable onl\' agalllst the baCkground 0(" Waslllllgton 's successful rebuilding or its aULhority over the Wcst Europe,lIl states o"er the last SIX "ears, The first step III thiS LIS cl'f()rt was. oj' course. ensUring that GerJJlall~' was Ullilil:cl wllhin N.-\TO. The LIS reconstructloll or NATO's ascendancy III Europe then passeclthrough the Bosnian conl1icl. With Germany's success in pushing the Ee slales to recognise Slm'eilla and CroaLia at the end o/" 1991, the US, which had been against such reco)!;nlllon. found llself threatened wllh beillg marginaliscci on the 1lI'~llJr po\illcal conflicl III Europe: thaL O\'cr the cnsls of the Yugosla\' state_ Tht' Bush admilllstrauon was thus stanng in the face the prospect or Amenc<\' s European ascendancy dissolving like a lump of sligar ill Chancellor Kohl's cofh.'c cup. In lalt: January 1992, thereforI-:. the Bush ac\minisLraLlol1 laullched iLS camp.ugn for an Inc\epenclellt BllSllIan state. As Susan Woodward explall1s thiS US finn: f{lr an II1depenclellt BusllIan stale, the LIS was concerned that Genllany was "geumg out ahead of the US" (according to DeputY Secretary or Slate EaglelHlrger) ancl thaL It had IOSl an\, k\'erage on tilt' Yugoslav situation after the Ee's December decIsion, , , , As Woodward adds: 'The re-entl'\, or the Unlled Stale~ IIIlO the YUg'os[,\\' debacie as pan of a balance of' power ciynamlc aireach' III phI\' III Europe added ),eL another c1emelltto tile panicular ",av III whIch Y\l~osla\'Ja would ullra\,el. Tile UllIted States, though III competiLloll with Germany. remallled primal'il\' concerned with mall1tall1ing Lhe AUallLicisL po~ture or the Knhl go\'ernll1ellt, .. [n place urLhe confi'Olllation that could haw resulted [mtll plt~'lscd

TI-IE ENL\RCDIENT ()F N_-\TO :\N[) THE HI

(;ermall\' U\'l'r rl'("o~llIliOil orCroaliallhe UlIlted Statcs appcarcd to movc IOwai'ds' a )4eopolillcal di\'isiol1 or labour mstl'ad, cOl1cl'rlin~ a primary sphere or iJll1uelllT o\'cr CroaLla to Gcrmam' and lakin~ till Bosma as its responsibility. 'Ii As the 'Vest European statcs pOll1tcd OUl at thc lime, an alll'mpl to create an IIldepelldclll., unified BosllIan Slall' would ll'ad to war and the war that rcsllitcd bCGlml' Ihl' baSIS for a reassertlOn of NATO as the pnmarv InstrulllL'lIt or Jill'Ce III Europeilll poli lICS, On lhis baSIS, tilL' Clinton adnlllllSlralion launche(l thc pian ror NATO's easlward cnlar~l'lIlellt IIlLO Poland III urder to cns\Il'c lhat whcn lhe Visegrad coulllnes were pulled under the wlllg or l~enllan\' wnhin the rralllew'Jrk of the Ell, Germany would nol, In Ea~jeburger's phrase, he 'getlin)4 out ahead or the US' III cieclding the gTl~al political Issues of East Central EIIJ"(J]ll' together with RUSSia, lca\"lng the US lllarglllalisl'd.

II

The Emergent Divisions in Eumpe's Political Economy TIll' HO/JI'S olllJ8lJ

When COlllllllIlIISIll cullapsed in 19H9, till' populations of till' reglllll were lw no Illl'iUlS cOl1vlllcecl IhaL free market capl\aJism was thl" anSWl~r to their problems. Bllt 0pJl1lDn rapidh' silifled III I mlO itS their ncll' elill's (except III ROlllallla) argued lhal by adoptlllg- Cilpllitlist models their coUlllnes could enler Europe' III ol.ller words bOll! .I 0 III the Europeall COIllIllllllitv and becollle prosperous. This remallls the of'/icial coul"se of the states of Central and Easu:nl Europe, but the .I0urne\, has pro\'ed appallingh- costl\" J"or the whole of" the reg-lIJl1 and terrible economic crises arc cOlltllluing 10 de\'aslall' the lives of hUlldreds of milliollS or people III RUSSia, Likrallle and the Balkans. Even IIlC1re sll'ikillg- IS Ihe (;lct thill the \Vest Europeall stale.~ take absolutely 110 rcsponsibility fur the l'UJllOmtc fall' or thesl: cOllntries: Imln'd, they go to l~Xlra()rdillan' (ellg-ths 10 pill lotalt'espomihilil), for l~verYlhlllg- that occurs III llll" region lJll to Illl' elites of these weak slales, \'CL a glallce althe reality of the rC)4loll slllce the start of the 1990s delllollstrates that Ihl' entire framework for the eCOllomlC trallsrormatlll\l thl' regam has bel'n Ilnposl~cl by Ihl' westerll powers. It IS, of course, Irllc thatlhe social ill)(1 political cliLes or till' IT)4101l lIa\'C, Oil till" whole, accepted thiS li'amework and han' Inl'd to work \\'lIhlll II. Some have been g-enUlnely elllhusl
or

or

I'OI,ITICS IN THE (a,OB:\I.IS,YrlON PERIOIl

Treasury 111 19H!'} ;\S the pmg-ramllw (i)1' reorg-alllsing the Latin AIlIl'nCIII polillcal CCOllumles. It IS an illuminatin~ 1;ICl UI;H rtcspltl' the lar)!;c l'lalll1S made li)r the power and European IC;lclerslll» capacitics of till' European UIlIOIl wlthill Europe, the.: enure scheme (ill' the transformalloll 0(' thl' (:EECs has been Amencan deSigned and Anll:ncan led through the IMF/WB. TllIrdl)" despite public reiallons camp;lIgns to the cOlllrarv, the European UIlIOIl itself has not, as yet, takcll e.:\'en one slgnilicalll step to adapt Ils own internai arr
Till' Mi.l',I'I'(( Dl'v"'o/IIIII'1II O/I/mrlllllily

III I ~)H9, the lJnrtecl Slates was in no

POSlllllll

to bunch a developnll:llt

q,,'1' ('or the states of' CEE because the cupboard was, so to speak, h.m:

SII"at-

the US Trcasll1'r. Grappling with enormous pa\'IllCIHS allcl budget deliclIs and with a very large bill lo pICk up as a reslIll or the collapse of US iJousing linance II1strtllllOns, the United States 'lacked the linanclal resources 10 use positive economic IIlcenLi\'es to 1111l11enCe the reorgalllsalllln 0(' the East Cenlrai European states. \-\Then BLIsh visited Polalld in the SUllllller of' 19H9, he Elced ridicule li'om Lech 'Nalesa when he \Vas able to olfer olll\' $~()() IIlillion - the Polish authorities had been hoplllg for at iL'ast S~ billioll. Ir a 1'\'\;1I'shall Plan-style developmcnt stratc!:,,)' Ii,., the region had been adopted, the US governlllent's weakness would ha\'e been exposed and German\' and the \Vcst Europeans would have taken tile lead. As in the Jielcl of Europe's high politics, so 111 the area oj' Europc's political eConolllY, the Imlllediate aftermath of' the collapse or 1989 lel't the US in danger of' marginalisauon. In tillS conLext, II1lluenual vOices were ralseel in Western Europe, panicularly III German), anci France, f'or a de\,l:/ojJment-onenled rr;\I11ework (ill' the reorgal1lsauoll and econOllllC IIl1egl'
earned out III co-operallon With lile SO\"let lIll1on, But I-lerrhausen was assassmaled ~t1 the l'nd o/" Novemher 19H9 and his plan was rlmppedJ A silllilariv ~r()\\'th-()nented piall was proposed b\' Frcnch President \Iil!errand's
POl.lTICS IN THE

(a.OI\:\l.IS:\TIO~

PERIOD

geareclto shaplll.~ the sOCIal. IIlsLlllluonal and eCOllomlC orders or thl' stales concerned In ways thatmaxlllllse the Opport.lll1l11eS 1"(11' Amencan fnrllls of financial and manllElctllring conglomerates.

:\ 1II1'/1m /I

.<'i/a/,'(/"a/ljiJ,. (/

iVl'W iJit'/sIII/I 0/ La/J() II ,.

Thus, by default, the Gi deCISIon .Ilthe Pans sllmmllof 19H9 lU gin' the I1'vlF the lead lilr handling the hea\'ilv Illdebted Polish .lIlei J-Illngarian economIes laId the hasls f()r the US approach to completelY dominate the 1l1lq~ratlon or the CEECs. TillS approach was already IJelllg tried out on YllgoslavJa and at the start or 1990, the US launched Its agenda throughout the region by making the Polisll Balcercll\'lCz Plan (he flagship for liS operations throughout the region. The US Secret.lr" of St<1tc,Jallles Ba\.:.er, was able to "Ppl\' IllS own Baker Plan, launched with stich sLUnnlllg crfect in 19H:) upon Latin Amenca's llIdebted economIes, to the fonner SO\"let BlocH The huge academIC mdustry on systemIc transformalJon III the CEECs treats Baker Plans as ir they have thell- ongms malllly III economic theon' or in some aUlOllOIllOUS processes III global economIc and technoiog"ICal life. In (;ICt, of course, the Baker Plam emergeci from the defeat uf the cOlltainml'nt liberalism of tbe 1960s, and of Ii~ures like Robert JvlcNamara. I)\" Lht' rollback polil1cS or the Reagallltc Rightlll the 19HOs. Reaganite thmk-Ianks like the Heritage Foundation prepared the basis for a great global COUlllerolTenslve by the United States to re-establish Its dominance aner tht: catastrophes of' the late 1960s anc! 1970s. Rollback applied not (pni\' LO the Soviet Bloc, labour and Thll-cl World revoiuuolls. blll also to lilt' Third 'Voriel slales anei theIr development stratcglcs, along with theIr lise or the UN, UNCTAD ,inc! other sllcil bodies ill pressing for a New internatlOllal EconomIc Order. The opportllnllY to launch the mil back against tile COlllltries or the South came wllh the debt crunch or 19H2. By 19H!i James Baker. Reagan's Treasury Secretary, was reaeiy to unveil illS Baker Plan l'or the Third Woriel at tile Seoui IMF conlerence that )'<:<11'. The goal of Bakt:r Plan rt:strllcllll"lng has been to tl";lI\sf'orm the sWles alld polil1cal economIes of' the South III two m
~)

To replace a national lllcillstrial strale!,')' f'or eievelopment through import substitution, and the development or the Il1ternalmarkeL wllh a strate!:.'}' based upon western MNC direct rnvestment anel exports rrom the target country to the world marl;,ct. To replace a state-centred linanClal and mciustrial svstl'm WIthin the cOlin try with pnvate finanCial lllarl,ets, ownerShIp of' eCOllomlC assl'L~ III the hands or private capital, deregulated labour markets and .. st.rong role for western FDl and portfolio investrnen l.

TilE ENL\R(;)·:;-'IENT OF NATO AND TI-IE El'

These two

~()als

can be ell capsulated III the lerm 'globalisatioll'_ The result preclude growth. But IL makes the local political eCOI1o III \. Immediatel\' and pc.:rslstently dependent on 'global' market forces - in otlier words, IIIl deCisions alld devcillpments withlll the.: core states. The changes have involved a nlclical restructurmg or the social and political strtlCtUH'S Ill' non-core st
:110

l'OI.lTICS

IN TI IE (:t.OIlAI.IS.-\TI(lN I'F.RIOI)

But II rl'lllains to he Sl'Cn whcther this growth of" the strongest SUI"\"I\'urs will remall! slIslainable, The Ke\' current hOlllellecK IS a chronic and seriolls trade cldicil. As till..' Fil/(lI/olIl Til/II'.' reponc'c\ al the l'nd "I I ~I~l(i, ',\ I"ISllIglI(k or rl'cl Inl, IS splashmg ll\'Cr thc J"on:lg"n tLl{lc aCClIIJlltS or tl'lItral Europc' and there is 'a IUOIllIllg- balancc or pa\'IllelllS cruJlch ali(I tillS IS 'alread\' sparklllg warI1lngs rrom celHral bankers and linance miIllstt'rs that 19!)7 will requirL' liscai and nwnl'tar)' ug-hlelllJlg Lo rl'duce dOJ1lestlC (letllolll'-llllCIlSl\'C opcrauol1s throngh strongl\' mercalltilist trade poliCIes, The conseqllences or these policH.:s 1'01' eEE agnclllluH' h.l\·c bcen extremely ('lamaglllg alld llie mdustnal structures or lht: regloll h,\\,C bcen weakened by the C~plln drtves or wcsll'l'n companies supported b\' the subsidies (lrstatc e~pon credits (peJ'\'l'rSelv c1assilied In' the Slates C'onn'l"llcft as 'aid' til lhc 'lllp()rLin~ slates). The olle slgllilicalll Eli progr'llllllll' o(";\ld til the COlllllries oj" the regJ()n, Pi-iARE, seems to ha\'t~ becn jJl'edOllllll:lllll\, gcarecl towards asslsllng Wl'Sll'rll eCOnOllllC operators to accjlllre assets
Fht' EU: FmJII OJ/t' l)hl}(lil/~ 1.11/1' (0 :IIIIJ/!wr

The European UnlOll kadel'S and the poliltcal clitcs or most or the (:EE<:s havc been lI1S1slInl{ over thc iasL Sl'\'ell years that the 1i','IF-led J"estrurLul"lllg has been an essellual preparaLIoll Illl' the people or these COlllllnes to jOIll Emope' The peoples or the reg-ioll l1a\'c iargdy put lip with IIll' sllfll:l"llIgs

Till'

E~L\IH

:111

;(':\lENT OF N .. \TO ..\;>.il) THE EL'

01' lhc 1990s hccause lhe\' han: hel icn:d lliai. t he 1m po\'(:nsh mellI, health pmbJems'tIlHI collapsing- IIlli'astrllClllreS ther have expcl'lel1ccd have becn all essl'lIttal precolldillllil I'or ellliT lIIlll Ihe EUfI)pe11;\ terms. Tablc 12.1

Compal'ison of GDP Pcr Capila ($US) I WilJ

/(/II:!

<.:FSR

9,O-IX

~ .. «j(J

)-)1111".11-\

7.0~!' :), "-.... :)/

:1,000 i,%O ~:;"I~J I

"

Poland

-

'

I i.:)~X I ~,-I~J:;

:\Il~1 I'l;t

Spa!))

1,1. illli

Snlll'n,:: 1)~\lIIl'1 {;r(J~ ;lIlii .-\IHln', (:Ollnar/: /'t,(('lItJrd,./ (.'r'IIlnll

I1J11(

rio/,'uJ I-:UtII!Jr'

rJ \\"

\ .\'ot,.

1111

tl", "/',.(111,'

(;C1t'dlL' l'oln'f"U\',

1',.;11,"'111', , The tmpreccdcllled cicstrtlCl/O/l or c<':ollulllll'

and I Ill' downward I'cstrllClIIrtllg oj' thest' wav lI\ake II difficull for thest' stales to

assl'l.~ III

III l't' I

the CEE

dOt:s Hot

a"guHl

allY till' crlll'na or thc ({((lllis

l'(,OIHllllll'S

til

POLITICS IN TI-IE CI.OI\..\l.IS:\TION PERIOD (lJllllllllllfll//ml"l'J. The\' will be lIIore than llapp)', for example, 10 adhere to lhe StruclllraJ Funds, to the CAP, to Free Movement of Labour. Till'se would all· g-reatly bene/it them. And since their export IIHiustries are increaslIlg-ly 'globalisec\' b)' being insened 11110 the lIlternal divIsIOn of labour ori'v[NCs, while theIr trade protecltoll regimes have already been largelv dismantled, the\' find It hurl\' eas,' to change IIlelr laws and economic IIlstlLlItlons to meet IIle broad requirements of the Single MarkeL. BlIt alllhese pluscs for the CEECs 111 tcrms of ease or l'ntr" are also prcC1seiy the reasons why the EU member Slates are O\'en"heillllllg-I\' ilostile to extending the tlr'lll/s to the CEECs. To do so would cost the ELI "err large finanCIal transfers. It would also enable, via the free Illovemen t or labour, large numbers or poverly-su'lCken workers f'rom depressed regions of Poland travelling il1lo German), III search or work. ThIS problem would Ill' exacerbated by the EU-cncouraged efforts of' the Polish go\'ernmcn t to orgall1se a big shake-out of lat)ollr III Polish agncullure be/i)re accession. There are, of course, also m'~l()r problems III restl'llCtllrlllg the Eli's deCiSIOn-making inStlllltlons for an EU or. sa" twenty members. I)ut these problems are alreadY aCllle wilh or WHllout t:nlargemcnl: tht: EU IS today scarcely capable of clauning to have a cotleslve, dCI11()crallC deCISIon-making SU'ucture wnh or Wllhout the adhesion of the CEECs. Against this backgTOImd, the CEECs' governments and politlcat elites arc scriously concerned abom thc rcal onentatlon of lht: EU membcr states III rctatlf}ll to eastward eniargemcnl. The record so Ell' IS litr from encouragmg.

ELI COlI/lJlltllll'lIis (fml '/;/{'/II'S S() Far

It was only III the 'summer or 199~ that the EC gave e\'en a 11lgl1il' qualified commitment, at the Copenhagen Council, to the evcntual integration into thc European UJ1IOI1 of' thc CEECs. The Dcccmber 1994 Essen Council did not make the COl1llllltlllellL morL' ddinitc but did Illitiate a Structllred Dialogue between the EU ,mcltht: CEEC slatcs wllh Europe Agrcemellts wllh lht: Ell. IL also asked t.hc Con1l111ssion to prodlKe a \·Vhlle Book mdicatlllg lhe tasks whICh Lile CEECs hact to accomplish 111 order to bnng their iaws ,\lHI institutions illlo line wltll the EU Singie MarkcL. The Pl-lARE grant ;ud programme was also redirccted towards assIsting the CEECs to prepare for acccsslOn. And at the 1995 Dublin COllncil, the EU decided to lllstruct the CommIssIon to preparc documcllL" on the issllcs involvcci in deCIding Oil eastward enlargement, whIch appeared in the autumn o/' 199i. r\ (inal aSpl'Clllf thcsc cie,·clopnll'llts h,L~ been the so-called Stability Pact, launched hv Llle Balladul- Government III France to 'ensure thal till' CEECs sort out allthel!' ethnIC and Jlllcl'-sl;Ite problems through lcgall\' bmding u'caues, in order to ensure that sllch prol)lems will not he an obstacle both to European slabililV and to cnlargement.

:\11 aspects aJlrl(;\>Hsi()i~.

or this tram of e\'enL~ have been shottl1rotlg-h with al11bivalelH:l~

By hlr the bl~gest evasIOn lies III the E1Ct that. nOlle of the steps taken so br has acldn'ssed the ccntral prOblems of real preparation f(JI" l'nlarg-emellt: nameiv altedn~ the eXIsting nfl/illS-III other words reforming the Ell in meier to make It capable ofabsorblllg-the CEECs. All stich matters have been postponed until 1999 and instead the lIJ1preSSlOn has been spread that the cillef probiems of enlargement lie within the CEECs alld in their InstJttlllOllal structures and processes in parllcular. This suggests all obVIOUS !actlcai opllon Oil the part of the ELI: that 01' elcla,' and diVISion. ThiS option would consist of decianng that unfortunatd\' the CEECs - or at ieast the bulk of them - are not quite ready for EU lIll'mlwrshlp. The onglll of the tactic wonld be the Ell refusallO make the nl'cessary COlli III Illll Cllls to II1corporaLe the CEECs. 01' tile 1)tIlk of til em. But this (lnglll would be concealed behllld dalll1S that the prol)Jcms lay with the failures of \,anous CEECs to livc up to 'Vest European standards of democrac), and markets. The real baSIS would he the ciatlse III the Copenhagell Council deCISIOns: 'The Union's capacity to absorb new lllemilers, while mailllaining the momentum of European 1I1le~ration, is also an Important cO\lslcierallon' Blil thl~ olIiClai basis would he that vanous CEECs wert' not quite del110crallc enough or not quite free market enough. Ir tillS is the case, the COl1l1nent IS 111 for a disp11'lllng and hvpocritical exercIse wllh potentially destabilising consequences. It will he displntlIlg because It couici 1\1yol\,e us in maklIlg lIl\,tcliuus and unpleasant com pansons between the two haivcs of the con IIneIlt: IS the Elr nght stronger 1\1 Romallla than in Austna or France? Is the Turkish minorIl\, Ilwn: secure in Bulgana than 1\1 C;erlllan~'? Do the Slo"aks have a mOl-e Sl'cure set of constltlllional safeguards than Britain wHh IlS unwritten constllUl\on? I-lave tl~IlSlOnS and conflicts IIl\'oi\'lng Transvlva\lla's Hungarian Protestants been handled wiLh greater or lesser respect for the European Conven uon of Human Righ ts t.han conflicts Il1 till' UK cOllcerning I nsh (:atholics? Do the states of the regioll come olT belter or worse III the lidd of public probity or corruptlOll thall I talv? It IS aiso hypocrillcai Il1 a double sellse: lirst, hecause such criteria will ha,'e next to IIDthmg to do with the real cntena, government EU deCIsions about Ell accessIOn: and secondly, hecause the degree of democratic stability and l'COnOll1lC viability of the CEEC states depends. III reality, as much on what the Ell docs as on what domestic act.ors 111 these cOlllltnes do. The reai cnterion fi)r chooslllg the COUll tries which will be 111 the 'fast' track for membership will be nCllher democratic stabiljty nor eCOnOll1IC strength. but the criterion of western geopolitical IIltcresl.~, above all the nced to consolidate the IIlcorporatioll of the states cOllstitlllillg the Eastern Ilanks or Germam' and Allstna.

POLITICS IN THE CI.Oll:\I.IS:\TION PERIOD

Till' /)Oll/Jlr' /)i7lwo/l oIEllm/JI'

The divIsIOns accompanVlIlg the NATO expansion and those
, (;1Jl/r!II.\"IO//:

Till' Nr'l'lIJiIl' S/iorir TI/I'm!))'

The III tel\ectuai key to lineling ways to re\'erse the cit-in towards a new cra of di\'isioll and conllict 111 Europe lies ill tllrnmg current problem defillitions on their heads. The current problem-sojvll1g- ap;enclas 111 Europe all have olle thing in COllllllon: all the problems, till-cats, IIlstabiliues alld polin' disasters arc hetel to reside in the East. Worl, towards a solllLion can beg-Ill whell wc recognise that the mall1 sources of the mam prOblems in r~ICI lie III thl' \Vest. Amongst. the iatter, two are fundamental and interlinked: the first IS an unsllstalllable model of caplLalist gT<)\\'th; the second IS an 1I1l\'lable - or, at least, destabilisinp; - model of illLernationai poliucalmanagemenl. The cUlTel1l1y 1;\shlOnable model fi)r capllalist growth is that or 'g-lobalisatlon; pius 'shareholder value' - 111 other worcis, grabbing market share abroad and plIllin'g the mterests or rentiers in seCUrIties markeL'i l1rsL. It b unsllst
kadcrsillp of lhe world eCOllom\', The f;ll'l that il also curn,:nlly g-eneraLes enOElTlOUS fi~rLllneS for \'ery small social groups both in lhe West and III the East only lIIakes il lIIore dangerous because ll1ort~ dil1iClllt to change, ClobalisalJon 111 the CEECs has heen, and IS continuing to destroy "ast alllounis of productive assets, through subordinating ecollomic life lO the logiCS of finanCial speculation, In I ~J~)(), II per rellt of ilulgana's GDP was sacrificed on the altar of the preferences of internallOnallin(lllCIaI speculatlOll. These kinds of breakdowns are norma! and s\,stemlc wiLhlll the p;lohalisauoIl model: to explalll them by referellce to the activIties of a finance lllllllSLer III a Balkan COUllU'\' IS 10 LUi'll realilY Oil liS Iwad, At present IIIIS svstt'lll IS stagg-ering- from one local blow-out 10 allot1ier, aVOIding' a SYstemic collapse 1I1rough frantic and ceaseless state II1tern:I1LIOll hv the C7 states \'Ia the 1i\,IF, ThIS chaotic financial conleXI IS linked to deep sources of stagnauoll III Ihe West's Illdustnal strUCl!lres, The lack of prol~ ilable outlets for procluctI\'e invesLIncnt reeds tlIe global speculath'e bubble, It also threalens lierce IIldustnal wars between the ll\alIl wcstern states as Ihe seml-monopolics or cach slalc In' to gral) markel shares from IheIr n\'ais. To prel'cIH such conflicts, thc wcstern states sed:. through globalisatlon to grab extra market shares (iJl' IlIelr mai1l companies III the Easl and the Soulh, The\' also Iry to opcn new regIOns of capllal growth wllh In their own econOllllt~S \'Ia pnv
:~ I Ii

I'OLITICS IN THE (:(,OB..\I.IS.-\TION

PERIOD

rest orweSh:rn ElIraSla_lirstthrollg-ll lIle Bosman war and thl'll thnlll~lllhl' enlargement uf NATO IIlI.o the Visq~ra(1 slates, US concern lil" COl1l1lllled control over Its West European 'allies' has been the baSIC ratlonalc ror NATO's enlargement. The consequelH:es lJf this enl;u-gemellt III the excluded zone ami the pllssibie roles or NATO 111 tl1<: East have bCl'1l secondary details in thiS enure process, The "Vest European states were ready to ;u.:n:pt this US camp;ugn because their own liller-state s\'stem has been gridlockecl: onlv Germany coulel gwe a lead but the othcr malll stales or the ELI c1l'\'ote their cnerg"H:S til prcVCl1llllg German leaderShip, As a n's\llt the only forms or ColleCII\'e acllon on wluch the ''''est European states can IIlllte are those where Ihe\' 11;\\'(' a commOJl interest JI) exporting problems abroad b\' engaglllg in collecllve mercantilism agalllst weaker actors in the Illternauonal politlcai eCOnomy, Gridlock on IIltcrnationai politIcal strategT wllhlll the Ell rorms the basis for the return of American ieaderslllp in WeSlCrIl Europe as a supposed /1011vOIr 1//~lI/n' above the peU)" pnwlI1clai squabbles over an essentiall\' lrt\'wl agenda Within the so-called Common Foreign and Security PoliC\' orlile ELI and the WEU, The US concept or NATO cnlaq~ement mel GCl'In,UIY'S IInmediate need o('sectlrlllg Polanci as a bulkr on liS eastern !lal\k, while Ihe French and BrItish Ilacl Ill) positive alternatIve to orrer. The reslIils of these maclllavt:llian power manoellvres among lbt' \'Veslern states IS a policy towards the excluded European zone tllat can best be described as unpnnClpled ad hocer)': the antitheSIS or a genllllleIr normhased. prInCipled approach to security Issues, It is entireiv L1llciear what prlllcip1e, for example. the Western powers stand I'DI' in their el1ilJ'lS to reethlllC orgal1lse the lill'lller YugoslaVia, They are e\'ldently not 11\ Ewour scl1:determinallon I()r the Illicro-nations or the area, On the other hand. they arc aiso lIot, It 'seems, 111 favour or respecting the terri tonal illlegnty or the eXlstlllg statl's lhal have cmerged from the Yug'Osiav collapsl', NATO claims the nghl to iauncll aggressIOn agalllsl a soverclgn stale - the nel\' Yugoslav state - because it is hostile to the IIllernally represslvc policies or that state III Kosovo_ BUlit slllluitaneously rc,Jects sell~delermlllati{)n lilr the Kosovar Albanians because thal wouid undermine the 'pnnClples" applied to Bosma at Dayton and the 'prmcipies' applied to Macedonia_ At tilt: same time, NATO's AmerIcan ieadership IS delcnllmed to ensure that It has lhe right to do
or

TIlE ENL\({(;r:-.n:NT OF NATO AND TIlE El;

he\"t>l\c1lhc pr.:nmeler. First. the CEECs have become alld will contll1uc to he a slg-flific;1l1l IJmirlle-c1ass lllarkr.:tlill· western JIIulullallonals grabbing markel sh,ln' Ihere at will, using till' Single 1'vIarket mIl'S cmbodied in the Europe Agreements to iegltlmlse theIr market dominal!on. Second, the CEECs will ol"li.~r a limllless supply of cheap iabour li)r western lllultl1lationals to use fiJI' the la!>our-I1HenSI\'e parts of tlIClr production cirnl1ts. TIlIrcllv, these aurac, tinlls will be used by bIg capllal in Western Europe 10 threaten to cxit eastwards unlcss \-Vesterll E1lrope Amencanises ils Iab(lur markets, t.lIrns the \·h·Il;IIT States llllll mlnllllal sali:ty nets and allows British or AmenGIlIsl"ll- sOClalllll'f]ualit\'. !l0"l'n\', urban {leca" allel pnson POP1llatlOllS. "\'estern Europe will be distmguishable fmlll the USA (Jllly by Ihl' \'Irulence of its 1111('1"11011 racisl. neo-I;lsClst amI Xel\OplHlhlc JIlovemenls. :\ml. increaslllgiy, the Europe wllhin the Sl'CllrIt\' pCrImetcr will be unilied b,' !"car of the ug'lv arc of powrtv and political tlIrbuicnce strctchmg li'om the Kalinlllgrad tnangll' to thl..' Balkan mOllntalllS. ThIS will bc the spuntaIll'OIlS result or the current IIltcrnalJonal political eCOIlUIlW rCI-{Il11e for Ihe l'xdudcd regIOn of Soutll-Easter!l and Eastern Europe, a!lel of thc curreJll NATO power pn~JeCl \ capnClous cOl'rci\'e diplomacy. It IS simph' utopian to Im;lglne Ihat the current trenels III RUSSIa, Ukr,lllll' and SOllth Eastern Europe can COJIlllltle nllldl longer without gran' ;lllcl tl"al-{Ic consequences. Bill tillS spolllancous drif"[ will not casily be changeel: the I-{lobalisationCUlll-llco-liberal polin' cvcle IS still Oil liS upward curVl' in Europe and there IS slill a nch yein of resources 1'01' capllall-{rowth to be dug out of western welbre states, CEEC dl..'ht and the CEEC pn\'atisalrons oj" stOltI..' ell terpnses. espeCIally the pul)lie utili lies. And Ihe political path towards an aiternativc is lirmh' I)locked hy Ihl' lack ... r kderal democrac\' wnlull Ihe EU, the disarray 011 the European lel"t ali(I the g-real power interests of the United States III western Enrasla, II will thl'n~f()re take Illore than persuasIOn to ch,lIlgl' course III Europe. TherapIes will not hI..' applied until an exogenous shock hrlllgs hOllle the truth that the 'Vesl's IIllerillckllIg strllctures or aCCllIlHliaLHlI1 alJ(l gm'ernancl..' arc \lot acceplabic. The best kind of stich shocJ;. leading to therapy wOlliel he a sOClai Illm'elllcnl Il\' the peoples of Europe to demand a New Deal. The worst would be a blow-out in the I-{lohaliseellinanClal SVSlcm or a full-scak breakdown of order III the bIg repuhlics of the former SOVIet LIIIlUII.

Thne IS a lle\'Crtllcicss pcrrcul\' \'I,lhle altl'J"llalr\'c Pllti() stratq,'y for Ihc rellllcgralHlIl of Europe Oil a capllalist baSIS. Inn ([ IS olle that would reql1lre a I>rl"11;. \\'llh the Americall-Ierl l{Jubalisauoll-lIeo-libcral approach 111 cco1l01lJll"S and with the AmerlGIll power polillcs stratcg-~' liJr lhe European rel{ioll. Thus Ihe obstacles to all alternatlvc lie not III polin- Ideas but 111 political trends. The allcrnau\'e strateh'Y IS (1I1e centred UpOIl market growth wnhlll the

I'Ol.lTICS IN THE CLOB:\l.IS:HION PFIU!)()

EaSlern regIOn; a strategy for rapId reIIHh\stl'l~t1isall()ll 1I1 tlH~ East through \'cr\' I(\rge IIlJ'raslrllcLUrc pn~jccts and thwIIgh ;\ serIOUS pan-Europcan campaIgn for the desperatel" nceded n:\'1val 01' CCOIlOIllIC dcveiopllH.'nl III the CIS, parllclliari\' Russia and Ukrallle, The 1lI<11I1 Cl'()\\lIl\lIC obstaCle \0 snch markct ~r()\\,I,ll III the East lies III Sl'\'t'rt: pa\'lllellIS COllstralllls EIL'lllg statcs III the reglllll: heavy 1Il(lchwdllCSS ami CL!rn:llt ;!CCOUIll dclicllS, Wilh the arn\';t1 of tile Clln), these problems could be o\'crcomc lllrllt\!,;h a bold. co-ordinaterl straH:gy Ul\'OI\,lllg both the Europe;1ll Celllral Bani;. anrl ;111 Eli 'econOllllC govcrnment', Thc curn:nClCS in thL' E;lst could Ill' under\\'l'lllen, substantial capJlaJ transl"L'rs /ill- II1lhlstructurc 11l\'cstlllClltll1 the East could bc ral.~ccl through a large public hond issue at Ell level, gO\'crnments 11\ Ihe East could ilL' encouraged to re-II11}lose controls em thclI- capital accounts_ tile\' could Ill' gl\'en ncw flexibilit\' III thclr trade regllllcs and IIIdustnai policies ;IIHI COllld be gl\'ClI fal- Illore gelll:rC)lIs accL'SS to tIll: Ell markL't. \Vithlll stich a nc\\' strategic framework, \Vestern Europe's cconOlllY (mllel I'e\'l\'e and llIcoml'S could be substanllall\' ralsl'cl in tile East. \"'ith I'IS111,l!; lllCOIllCS III the East thc new senmt\' b,lrncrs bCll\g erccted along- N,-\TO\ ami the EU's ilorciel-s could be ovcrcome and the European SOCIal i\lodl'l could be preser\'e(i. Such a gClIlllne rcconstrucllon and developmentcfr(lrl could hI.' comb1l1ed With a ne\\', more gCllulllc col\eCll\-e seCUrlt\' reg-ulle bell1g buill ;I(fOSS the cOlltincnt, olle that would have Ihe broad alltlwnt\' to mediatc and heip maintall1 peace b\' gaiIllllg confidence Oil thc par! of both sides III conflicts. And allY such ncw stratC)",)' would have to end 1.ile dangerous trcnd towards trYlllg to exclude Russia and Ukraine from European anillrs_ Therc IS euormous de\'elopment potential still III the Eastern rcgulIl or Europe. Growth rales of 10 per ccnt per annull1 111 Illany or these slates are not ulllhllll;:al)lc il"a strong, eHi:cti'T framcwurk for linanCIai, IlHlllelan' and trade relations was pllllI1 placc, ThIS strateh')' illig-Ill lll\'ol\'C a dcia\' 111 tllc EU's Eastward eniargL'llIent, but 1\ would mectthc reill goals or pe()ple III tile CEECs when thc)' scck to .1°\11 Ihc Ell: a stratq.,'\' fill- rapId stlstallH'd eCOllomlC d('\'clopment in the East; an(1 a ~cnllllle COl1lmitmenl on the pan or Western Europc to make tlie soclClIes ur thc rq!;101\ ~ellll\ll(.' equals wnll \Vestern I~urope, But such Ol new strillel,')' would reqlure three pn~cemdillOiIS that are currently lacklllg. First, a break with the social p)'(~Jects of giobalisalloll and nco-liberalism, The Eite o(,Oskal- La/cJIltallle shows how lilr WL' still arc rrom thaI. Sccondl\', it wOllid reqlllre a seriolls illlernallollai polillcal leadership at the EU jc\'cL or at least at tllC Ellroiand !e\'cl. This ieadership Gill cOllie onl\, frolll Germall\' and Francc worklll~ togeUll,!, tel transrorm the ELllntfi a gellullle riolillcal actor capable o/'actlllg strateglCall\' 1II the pan-Ellropc
TI-n:

E~L\IH

;1':11 I F.;-';T ()F N_-\TO _-\NI) TIlE IT

:~ 19

without these, the n:spomes oi" slglliJicant pans oj" the ELI to tillS slrall'g-y \\'ollid:he'1O Irpposc II as hl'lllg-, ;dlegedl\', too (;crlll;lll-cellt rl'd, BUl then' IS a third gn'at protlll'1ll I,"ith the stratCl--~il rl'-Clrll'lltalloll 1\'IIlCI! 1I'l' have proposed: hoI\' 1O lIlanage IIll' hostility oi" the ;\ng-lo-AlIlcncan state and hUSlllCSS dill'S III \\';lshll1gtoll ,lIlel amongst 'Thll-c1 \Ya\,' Labollr and its IlllSlIleSS (TOIlI("_~? TIllS l.~ l){ll ncccssaril\' all iIlSlIpl'rall]l' problem, hilt Il IS one that the SOCIal cil'lllIJl'l;!lS 01 \Vcslerll Europl' arc unlikel\', gll'en their past recorel, 10 he ahle h) ()\'l'rCOIlH', The lint' or least ITslstanl'C IS so mllch caSler, Thus the Illostlikeil- ,',man I lllay I)l' bacl;. to lilt" fUlure: Ilack to 1920s-sll'le. grossly lIl11:quai slates III \'\'eslcrn Europl' \\'JlII narrow sonai hasl..'s alongside broken d01l'1I reglllws III I he Easl: !'Ising xellophobla alld IIco-J;\SCISl clIrrents in the \Vest, COlllilllllllg stagn
X"I,'s

II .-,} D \.'- U ,:l.U

I. :\dn~ul Ihidgl'. '~all) rhi,-I' lull!"" ...01:111· ... tighllll~ to .PHII ;111iallt"l'". IIIt/t'/Jr'III/""I, 1~ .-\pril J!I!lIi, :!. Tilt.' 1h-,'("l1l1wJ" I~)qli .",:\n> I1llnl.'lt·n;lllnl'l"11I1~ ndt)!'IUl'd lh(' J~lI''''I.IIJ ~u\"t'rl\lIh'llI Ihal N .. \T( ) de H":"I Uo( pLul [0 :-"~111I111 1IIIt'\I';U' \\..... p4,. 1:-. 011 Puli:-.h tc..'ITllor\'. :1, Russia II ])di'lIn' ;\Iill""'r Igor Rodi"",,,' has lI'anh·d dlal N ..\"/'tr, "IIJargl'llI"11I IIl1glll lillTl' RUSSIa III laq~'" IIU..J.,,,,, 11I1"ilo-, Oil ["ClIIIII"'l"S .l"llllllg Ihl' .-\llalllll· alli;lIl1'c, S"" dll' ''''''111'1/(11'111, :10 1\:o\'I'mh"r 1~1~lIi. Ikbrlls I'r,'sicl.-lIl 1.1Ika,IH'lIko wanlcd Ih;1I lI..tarus might "ill "'aliI III kl'l'jl IIII' IIl1d,·;,,· W(,"POIlS Oil ilS I"ITII1I1'\' il Poland IOllh'cl ~.-\T(), S"" JIII/rIMIIJ,."I, ',I Nun'II,hl'r '~l!l/i . .1. I."l>,"d, \\'hil.- slill \,'II,eel', ,,','unl,' chid, w;trlled ora ch;lIIgc III ({II"",', alll\{Hi.- 11I1\';mls arllls cOlllrol In'aIH" al I"s IIh"'lIl1g Willi ~ ..\TO I"ackrs III Bruss.,]s III Cl('l"hl'1'. S,·,· the 1111/'11,'1111/'111, H OClo],,'r I ~1!Hi, :1, Clil1lulI's ]),,11'011 sl"""]' Illark, 11Il' tldi1111 {\',' ,\11I[·I .... all <:1111111111111<'111 III LIpid I': ..\TO

'h"

l'XP;UISllHI.

h. Silsall I.. \\'cowlward. 1:"(1,,," ·Ii,,-~,·"\'. (,'//(/(1.' 1111.1 /1i""/II/I/)}1 "11" (I,,' L,,/d IIi,!, I. TIll, Illollkillgs 1'''1111111''", 1!1~1:I)'I']I, 1~1li-!17. 7. J I" was ass;ls"'lualed.ju~( 1",ltU',·Itt.' W;I." dtll· 1(1 UII\'l'illu"i pbu III :\c,'''. ,tu·J.;., Till' a~".I'''lIa111)11 WilS hlilBh'fl 011 Ih,· I~l'd :\l"Ill\· Fr;lkllhl) hili It was :111 t'~lrc'IlIl'h· slJphi.~lIrah'll hHet'h

320 bOlllhill~

1'0l.lTICS IN TI-IE CLOBAl.ISATION PERIOD

Ihal coulel have heell dOlle 01111' hI' prort'Sslollals, ,\ sellinI' offinal III Ihe L:Crlll:l1l Ofliee was 011", assassmaleil at this lillie, Scc 1),'1' SjllI-gd, 110, -,19, ,I Lkccl1lhl'r I!IH!I, H. III 1!IS5 Uakcr hael hcell US Treasury Secretar\' IIntler Ronald Reagall, Th,. Baker I'lall was anlloullced h" Uaker al Ihl' Seoul 1f>IF ciJllii:I'l'nn: thaI \'ear. ~I, Rohen ChlllC, 'Ballkill~ 011 a Calaslrophe: (;uidclilles'May Help I'rnl'nl Fresh DisaSlers III Ellwr~IlIH r-.JarkCl.~', Fill/III/wI Til/II', .., :! I Octoher I !HHi, 10, See Woodward, lJt/lllml 'hug"'/.\', li,r a plollccnn~ account of this I"ollapsl', I I. Amhony Rohinson, Fillllllna/ Tilll"", II Ikt'clllh,'r 1!I!J(i. I:!. Ihid. F()rel~1I