Frank R. Pfetsch: Consequences of Globalization and Europeanization for the State in its Social Responsibilities Abstract
The processes of Globalization and Europeanization have severe consequences for the social. They strengthen neo-liberal forces, i.e. competition, rationalization, concentration and as a consequence the reductions of labor force, unemployment and marginalization of significant parts of the society. The state remains then the only addressee for compensations of such consequences since no other agent is so far responsible for social charges. By this the nation states’ budgets run into deficits being overburdened by social demands. The freedom of action becomes smaller if circumstances remain as they were before. There is, however, a way out of this dilemma: the nation state can compensate the loss of maneuverability either through coordination or/and by integration on the regional or international level. This shifting of competences can give back to the nation state what it has lost due to scarce resources. This means that as to the European context the European Union must assume more responsibilities for the social since she is one of the producers of social charges. The symmetry of the economic and the social in the sense of “Soziale Marktwirtschaft” must be established.
This presentation starts with some thoughts concerning the concepts of globalization and Europeanization and their effects on the state. Specifically, how are we to perceive and understand these concepts: As a threat for some, as a benefit for others? What are the effects upon the state and its capacity for action? In the following section, I will try to explain the nature of the state’s crisis in terms of democratic theory, because the democratic constitutional state is located at the crossroad of external and internal challenges to the state. With the opening of the world markets and the state borders, the democratic theory, traditionally conceived of in the framework of territorial defined conceptions, is no more applicable to the virtual world of exchange of immaterial goods independent from time and space. The new electronic networks create another world, different to that known in the world of nation states. In the third part of my analysis, I entertain a study of the existing or foreseeable strategies that would allow the state to regain its capacity for action and its legitimacy. The strategies proposed are, as far as international level is concerned, the strengthening of international governance with new forms of cooperation at the state as well as at the non-state level, the establishing of international regimes or networks. At the national level, state reform and changes in the social relations with corporatism and a new nationalism can be considered as means to increase the maneuverability of the state. My final thoughts are presented in the conclusion.
1. Globalization and Europeanization as threats to the state
Situations giving a concept such a wide audience as has happened with globalization are rare. However, this concept encompasses many different meanings. In most general terms, ‘globalization’ refers to the global diffusion of political, social, economic, cultural and technological phenomena such as transports, communication, production, financial flows, technological and weapons transfers; that is to say almost everything that has reached global dimensions: population, migrations, environment, poverty, under-development, the diffusion of nuclear weapons, etc.1 According to the Organization for Economic Cooperation and Development (OECD), this term refers to the increasing internationalization of markets for goods and services, the financial system, corporations and industries, technology and competition.2 As such it could be considered as the third step of internationalization.3
There are other ways to understand globalization. This term evokes, according to Bull (1977: 21),”the expansion of the European states system all over the globe, and its transformation into a states system of global dimension”. McGrew expands this concept to include the social realm: ”Globalization concerns the multiplicity of changing liaisons and relations between the states and societies constituting the global system” (McGrew and Lewis 1993:23). According to him, the concept concerns the (global) perimeter as much as the intensity of interactions between states and societies.
Speaking of understanding, it may be added that globalization is not in itself a recent phenomenon. It is rather a process that began five centuries ago and is known under the phenomena of trade liberalization or division of labor. Yet, but a few of the facts and statistics, respectively, demonstrate what a profound and qualitative change in international economic and financial relations the contemporary international community has gone through.
As indicators for economic globalization the following are mentioned frequently: world trade expansion, increase in foreign exchange, increase of foreign direct investment (FDI), of financial flows, of information flows through modern technology, relocation of production units etc.
Take, for instance, the growth rate of the world trade in goods rose by 4, 9% in 2003 as against the world GNP (UNCTAD 2004:4-5), which increased by 2, 6%. The part of the world trade in goods in world total production has grown from 10 percent in 1965 to 30 percent in 2004 (Fischer Weltalmanach 2007:631).
The foreign exchange market has also grown significantly. In 1995, $1,300 billion (roughly the equivalent of the French annual GNP) were being exchanged daily, compared to $18 billion at the beginning of the 1970s. Furthermore, the banks’ financial assets have grown considerably in comparison to the world trade or the world production. Regarding financial flows between 1980 and 1993 (above all state obligations), they rose by 135 percent in the United States, by 170 percent in Germany and by 80 percent in Japan (UNCTAD 1997:70). Financial and stock exchange markets have shown an explosive expansion, too. The transactions operated in the various international stock exchanges were more than 40 times superior to the value of the world trade (Busch 2003:23). Compared to 1970 as a basis equal to 100, the value of direct investments has grown by about 1,000 points in 1994. The climax of FDI was reached in 2000 with world wide 1387953 Billion US$.
Transnational organizations in general and Multi-National Corporations (MNCs) in particular also deserve mentioning. For some, MNCs represent the moral consciousness of world public opinion or the local agents of the world common good (Bull 1977: 270-273). For others, they are responsible for misery in the Third World, for unemployment and for the difficulty industrialized countries have in governing. In any case, though, most of the transnational nongovernmental organizations - of which there are currently around five thousand (Yearbook of International Organization 1989/90) - take huge advantage of differences in the production costs that exist between different places of activity, thus avoiding high cost national rules. Those international activities - and above all the trans-borders free trade between merchants and private entrepreneurs - abide by the laws of the global market. The economic calculation reaches its optimum or maximum level according to the conditions of production and exchange that exist in the world, without limiting itself to the national market.
Finally, another indicator of globalization refers to the constitution of world information networks such as the Internet. It can be called the ‘fourth factor’ of capitalistic production, next to capital, labor and know-how (insurance, consulting, law assistance, and so on). The new information technologies are transforming an industrial society into an information society.
Thus, while history underlies the phenomenon of globalization, the process is in fact a recent one because of the size and the intensification of the exchanges between private agents. But the risk that these exchanges are ‘leaving the bank’ as well as national political control has increased. ”We are confronted with a new risk, that of the brutal withdrawal/departure of capital,” as an industry manager put it in Le Monde (13 January 1998). This is to say the risk of a new crash. To the choice of locality, of estimation of costs and acquisition of primary goods, decisions are being made at the world level, their control by state authorities being limited. Capital moves freely worldwide, but the state is bound to its territory. The state also has to pay for the costs stemming from globalization - for instance the cost of unemployment as a consequence of displacement. It is also true that globalization also creates jobs, especially in sectors of new technologies or services.
Globalization, therefore, has created fears and hopes: it is a phenomenon that is being applauded by some, and harshly criticized by others; an asset for some and a threat for others. On the positive side, free trade creates wealth when imports are cheaper than domestic goods; the purchasing power rises for other products within the country and produces in return a rise in purchasing power in the countries which produce cheaper goods. Gains are thus made on the side of the developing countries as well. That can lead to a rise in exports of the importing country. This is the case, for instance, of German exports toward the Southeast Asian ‘tigers’, which are higher than the German imports coming from these countries. Thus, the liberal system leads to a multiplication of products and a rise in gains for the global players.
As far as the fears are concerned, there are first of all difficulties in controlling the markets. ‘Market dictatorship’ is opposed to democratic legitimacy. Within the states, political leaders lose their ability to coordinate and harmonize the actions of individuals or groups. In the market, globalization reinforces concentration of companies, driving some small or medium-size businesses out of the market. With the help of rationalization, multinational firms increase their profits and create unemployment. As Beck put it in his polemical article Capitalism Destroys Labor the capitalization process produces a ”capitalism without labor” (Beck 1996: 140). Some fears about labor moving out also exist. To give an example: during the 1960s, Daimler-Benz employed 9 percent of its workers outside Germany; today this proportion amounts to 23 percent of its work force. According to the theory of collective costs (Mueller 1979, Petersen 1997) the neo-liberal system neglects collective needs. For instance, to build a lighthouse is not a profitable operation for an individual entrepreneur even if everybody takes advantage of it. There is, therefore, a need of an institution that assumes the role of an agent of the common good. Finally, globalization can marginalize a considerable part of the population. As a result, globalization presents a double face, and one has to see the pros and cons
One may conclude, therefore, that ‘Globalization’ is a catch-all term that can be defined in a narrow or broad sense. As for its state-threatening capabilities, there seems to be a dominant opinion in the ever-growing literature dedicated to this topic that international and transnational agents are influencing more and more the domestic policies of states, whose scope for maneuverability is therefore reduced (Busch 2003). The evaluation of the effects of globalization varies according to the position of the author. For liberal economists, supporters of free trade (Sachs and Warner 1995; Ohmae 1995), wealth gains dominate. Neomarxists and Neokeynesians (Strange 1995) fear the loss of steering capacity and the loss of confidence in the democratic state as a result of social crises. Finally, members of the regulation school (Boyer/Drache 1996, Glyn 1995) perceive new chances for the democratic state.
Last but not least, it should be mentioned that through globalization the accumulation of resources in the hands of non-state actors, under the prevailing conditions, can be a threat to the stability of the world economy (examples are the late Mexican crisis or the crises in East Asia) because the governments and the central banks are no more able to control the vast flows on the financial markets. By this the states in Western democracies may lose their ability to function as the agents of the common good.
Apart from globalization, there are other phenomena - such as Europeanization, individualization and re-nationalization - that challenge the state in its capacity to act. While all of the three are crucial for identifying modern trends in industrialized societies, the focus here will be on Europeanization because this process has similar effects on states as globalization and Europeanization can be seen as a special case of globalization in terms of economic, social or cultural functions.
The transfer (or pooling) of national sovereignty to supranational institutions was the basic inventive idea of what has become the European Union. The EU, however, does not stand for unilateral transfer from member states to the central organs of the EU but for a complex interlinking of both. This is particularly true in the field of economics. It is this aspect that I am considering here and use it as a synonym for liberalization. The driving forces are the member states and the Union and both are also part of an overarching international process of liberalization promoted i.e. by the World Trade Organization. By Europeanization, therefore, I do not mean “the process in which states adapt EU rules” (Schimmelfenning/ Sedelmeier 2005) or “a process of domestic political change caused (somehow) by processes of European integration” (Vink 2003) or, in a wider understanding referring to the formation of a European identity and domestic systems changes of the member states. Europeanization is perceived here as a subcategory of globalization. In this respect, there are three points concerning Europeanization which I would like to develop further: first, the relations between the member states and the EU; second, the liberalizing policy in which the Union engages itself; and third, the question of EU’s legitimacy.
As for the first point; according to some analysts, the metamorphosis of the relations between the member states and the EU is critical because the latter delegitimizes the democratic polity (Weiler 1991) and restraints state control of economic interest groups (Scharpf 1994). According to other authors, states cooperate in the EU because they can gain more together with others than by acting alone (Wessels 1992:36-61). Others take the position that the European state system has been transformed by economic and technological processes and the transfers of national functions to the European institutions; such formal transfers of sovereignty constitute, according to them, a danger for national identity (Wallace/Wallace 1997:453-4).
The EU is a dynamic, multi-layered system. Every state engages itself in the community system and gets back decision-making rights in some fields where it could not have had any influence had it remained alone. This system is built on different levels (communes, regions, states, Union) with competencies distributed according to the principle of subsidiarity. This and through the redistribution of resources results in a political system which is a mixture of supra-nationality and intergovernmentalism. According to estimates of the Commission, about 80 percent of the decisions linked to the common market or 50 percent linked to the Union have become community law. A great part of the legislation regarding economic policy has been transferred to the community level. The political capacity of individual states to act has been transformed into coordination of policies.
To the second point, it can be argued that in the field of political economy, the liberal or neo-liberal approach prevails. The common single market, with its four freedoms and its single currency, has been established in order to raise productivity, production and trade. The EEC (European Economic Community) and later the EC (European Community) have succeeded in that regard. The process of Europeanization has even gone beyond its goals, creating over-production in selected economic branches. This is particularly true in the field of agriculture. Furthermore, Europeanization has also contributed to serious social consequences: by strengthening neo-liberal forces through intensified competition entrepreneurs rationalize production and concentrate their production capabilities on the national as well as on the international/regional level; by substituting labor through capital labor forces are reduced and this means for some unemployment; linked to this marginalization of a considerable part of the population as well as migration are some of the consequences..
This double face of Europeanization recalls the historical context of post-war Germany. Supported by a favorable international environment, the Federal Republic of Germany (FRG) experienced the so-called ‘economic miracle’ on the basis of a free market. However, from the 1950s onwards, one could notice that this system led to an unequal distribution of wealth. Political leaders reacted by introducing social elements in the free market system. There has been a transition from the free market economy to the social market economy (soziale Marktwirtschaft). The EU lacks such a transition today. At present, the member states are no longer able to respond alone to social demands. This is even more the case now since they have to conduct a stabilization policy according to the convergence criteria and to the stability pact. Economic globalization and Europeanization have reinforced each other. As a consequence, the scope of state’s maneuverability has become narrower. Neither fiscal resources nor monetary instruments give enough room for maneuvering. Thus, the only variable left is the social policy. And in this domain, given the fact that the member states are being squeezed between increasing demands and scarce resources, a comprehensive European policy is very much needed.
Coming to the third point, the question of legitimacy of the EU, one needs to look at the founding principles of the liberal constitutional systems. Modern constitutionalism is based on two principles: the protection of human rights and the control of power. Fundamental rights are listed in the catalogue of values of the European treaties. However, in the European political system the control of power is not given exclusively to a legislative body, but rather to the checks and balances built into the institutional system as a whole. The Commission and the Council can check each other, as well as the Court of Justice, the Council and the Commission. Thanks to the Single European Act and the Treaties of Maastricht and Amsterdam, the European Parliament has gained powers to check, too. One could say that the basic conditions for a legitimization according to the liberal democratic concept are met. But the system is far from meeting the legitimacy criteria which prevail in the national systems. As a consequence, the EU - as all international organizations - can only be understood within a rather limited concept of democratic legitimacy.
The referenda on the constitution in France and the Netherlands have shown that the public has refused to give support to the national politicians whose agenda especially on social policies was considered negatively.
2. The crisis of the Nation-State
In 1957, Hertz talked about ”the crisis of the territorial nation-state” (Hertz 1957: 473). In 1969, Czempiel evoked its sovereignty as anachronism (Czempiel 1969). At about the same time, Bell wrote:”[T]he nation-state has become too small for the big problems of life and too big for the small problems of life” (see Wewer 1993: 11). Because of the intensification of economic interdependence, national sovereignty has become more permeable. In the traditional conception of state, the economy enjoyed a certain degree of autarchy; later on, classic liberalism considered that the ‘wealth of nations’ was guaranteed by the international division of labor and the liberalization of the external trade.
In this respect, two phenomena may be mentioned here: on the one hand, the increase of cross-border problems: pollution, overpopulation, immigration, the drug market. On the other hand, the state is challenged by the increase of social and ethnic conflicts. The state is so to speak squeezed by four different evolutions, notably seen in a European perspective:
The global liberalization of trade promoted by the GATT (General Agreement on Tariffs and Trade), today the WTO (World Trade Organization), raises the international competition and intensifies struggle for wealth distribution. As a reaction, tendencies toward protectionism continue to exist.
Liberalization within the EU aggravates international competition even in fields that were up to now protected. In fact, the relinquishing of sovereign rights is in the logic of supranational integration. A disequilibrium arises since the EU recommends economic liberalization, but lacks a common social or employment policy that is able to compensate for the consequences of liberalization.
At the same time, competition has secondary effects, in that it exacerbates social tensions within the countries and creates a decline in financial resources that are at states’ disposal. In some Western European states more than 50 percent of the state budget is devoted to social welfare, the EU-15 devotes 43,4% (2003) of the budgets. The pressure on the state has grown considerably and stems from organized social groups (above all from trade unions), which insist that the state should respond to their demands and keep its promises.
At the international level, conflicts have drifted from the inter-state to the national framework, thus compelling governments to focus on their internal security. The costs of internal security have grown, whereas those of external security have diminished.
All these evolutions reduce the state’s capacity to act for which the state must seek compensates. How should the state react to the challenges of globalization and Europeanization? Should it react at all, given the fact that the increasing role of the non-state social actors is a substantial part of any civil society? My answer is: The necessity of state intervention stems from the deficits linked to the uncontrolled international capitalism. The classic liberal economic theory itself has always promoted the regulatory function of the state in the fields where the market could not guarantee the common well-being.
The capacity to act and the legitimacy of the state are intimately linked to each other: If the state reaches satisfactory results, its legitimacy is reinforced, even more so if it grants co-determination and protection rights. Legitimacy not only depends on the participation in the decision-making processes (input legitimacy) but also on the results the political system produces (output legitimacy).
The term ‘policy’ originally refers to the field where a small group of actors with invested powers is guided by partial or common interests in the name of collectivity, and binding decisions within the national territory. This preexisting congruence between those who govern and those who are governed has undergone a dual change:
many decisions are now made by actors located outside the national territories, and governments are no longer the only actors; international and transnational decision-makers have joined;
decisions by governments bear consequences for citizens of other countries, whereas the latter have not been associated with the decision processes. Such cross-border consequences occur especially in the economic and ecological fields.
The European integration model consists on transferring competences of national agents to a supranational agency. Although national decision-makers participate in the decision-making process the decision itself is a collective consensus beyond the national arena.
This provokes a rising discrepancy between those who make decisions and those who apply them. The circle of decision-makers does not correspond to the circle of the people concerned, and this creates a deficit of legitimacy and efficiency susceptible to destabilizing a democratic state.
Politics has moved toward the inter-state, regional and international arena; by way of doing this, the responsibilities and the competencies have become more anonymous in the relationship between the political actors and the population. It is now very difficult, if not impossible, to identify those who are competent and responsible for the political decisions that have been taken. Thus, decision-makers are hardly required to explain and justify their actions, and are increasingly difficult if not impossible to supervise.
Coming back to the state’s capacity to act and react by producing measures which can contribute to legitimacy, one can list at least two landmarks concerning the state’s scope for maneuvering: the functions of the state and its transformation.
As to the functions the state continues to play the central role as a promoter of the common good, as a pacifying power, as a factor of internal and external integration and identification, and as an international actor and the state is still the main social actor. It is the governments who manage financial resources, which have grown with the rise of public expenditures. At the time of the creation of the EEC in 1957, for instance, the average share of public expenditure in GNP was less than 30 percent in the then six member states; at the beginning of the 1990’s, this figure amounted to almost 40 percent (Kohl 1992, 361).
As to the transformation of the state which influence the capacity of the state to act domestically and externally the following can be mentioned: the growth of the public sector (with up to 50% of public spending), the increase in the number of states (In 1945, 51 states founded the UN; in 1960, the UN had more than 100 member states; in 2007, they are 191), the democratization in parts of the world (out of the 162 states that were listed 75 could be described as ‘democratic’ as against 58 authoritarian (Pfetsch 2006: 816)), the universalization of constitutional law (after 1945, among the 131 states existing in the world at that time, 109 adopted a new constitution), and the restructuring of organized political parties (emergence of new parties and the disappearance of older formations, party affiliations are loosening and show a tendency of splitting up).
3. How can the state react to these changes?
Faced with national and international challenges, the role of the state remains important but demands new decision and negotiation models. The more the challenges become international, the more the state must become international, too. In principle, modern democratic regimes have used three instruments to react to the changes described above. These are (in the field of internal policy) corporatism, nationalism, and (in the field of foreign policy) international governance.
There is a thesis about the so-called ungovernability, formulated already in the 1970s, which was put forward by German authors like Hennis, Matz, and Kielmansegg (Hennis 1977). According to this position, the state has lost its authority in the accomplishment of its tasks, primarily because of powerful social groups and lobbies. Yet with the help of corporate policies, the state attempts to integrate these groups into the decision-making process, which leads to a coordinated action of public and private actors. In the FRG, this political model of a concerted action (konzertierte Aktion) was created during the first two postwar economic recessions. This model also exists in other countries where political stability and economic flexibility coexist interdependently (Katzenstein 1985, 200). In the corporatist system, therefore, the mobilization of resources is secured by the interest groups, which have a double function: They must simultaneously defend the interests of their members toward the state and the governmental policy toward their members (Schmidt 1995, 520). If they function effectively, the corporatist systems will be able to create national consensus, provided that a basic consensus on values, norms and rules exists. A functional equivalent for a corporatist pattern policy making is that of ‘social dialogue’, which is exercised in the national (as for instance in the FRG) as well as in the European framework in order to cope with the myriad of lobbying groups. It is through these mechanisms that social forces can gain influence in the executive branch (at the detriment of the legislatures however).
Nationalism as against European integration
Certain states use nationalism in order to control the centrifugal tendencies (associations, minority groups, autonomist groups). The nation still represents the main community that generates identity. Whether its characteristics are objective or subjective (free will), whether the nation is presented as an ‘idea’, or as the experience of living in a community, or as the product of a process of social construction or as the expression of a ‘need for warmth, power and stability’, it always generates a link of belonging together. In Western countries, mainly conservative groups are the defenders of nationalism. Yet, whereas the Western countries - thanks to the disqualification of nationalism - have been able to open themselves up to European integration after the WW2, the Eastern European countries have taken the opposite direction since the end of the Cold War. That means that they have gone from proletarian internationalism to traditional nationalism. This will raise, without any doubt, problems for the enlargement of the EU.
However, these movements of nationalist revival are complex. In many countries nationalism and state are not congruent. In addition some ‘particularist nationalisms’, which divide people more than they bring them together, also exist. Identities have many reference models anchored in the regional, ethnic or religious roots, which can destabilize national cohesion. Nationalism can be an integrative force only when identities are linked to the nation-state.
States gain when they cooperate. In the interdependent relations between states and non-governmental organizations, they can all gain something (positive sum game), and not only at the expense of the others (zero-sum game). The term ‘international governance’ refers to the steering capability of a political community, on the condition that governments and non-governmental (social) organizations pursue common goals in the context of social interdependence and international integration. States do not lose their capacity to act and influence when they join international organizations, even when they make concessions in order to reach a consensus.
At the beginning of the 20th century, the Austrian Nobel Prize winner, Alfred A. Fried, wrote:
Today, with the interdependent world economy, no state is totally independent. Because of these circumstances all states are linked to each other, and in one way or another are restrained in their actions. The international organization exerts, on the one hand, constraints and, on the other, it offers each participant compensation for having abandoned a part of its sovereignty. This compensation results from obligations assumed by other states (Fried 1907:8).
The concept of collective security, which assumes that states should provide assistance and intervene if one state has been attacked by an aggressor, is an example of a framework, where states gain. More specifically, the idea of coordinated positive sum actions has become a reality and characterizes the policy of the EU member states.
Indeed, the practical realization of the idea of coordinated positive sum actions is the most significant achievement of the second part of the 20th century, after the total failure of the nationalist Realpolitik during the first part of the 20th century and before. While states remain the principal actors in the international arena, they cannot face alone the increasing demands brought about by the process of globalization. The solution for them is a ‘good government’ of the national states themselves, and an efficient coordination on the regional and international level. The 1997 World Bank’s Report on World Development listed some of the means that states can use to face internal and external threats: a wise fiscal policy, a monetary regime and exchange mechanism which inspire confidence, a solid bank system based on prudence, etc. (Banque Mondiale 1997:152). As far as the EU member states, with 18 million unemployed (over 10 percent of the total EU workforce) are concerned, it is useful to recall Schmid, who argued that
”in the relations among social groups which are on the labor market there has to be more flexibility and the development of ‘transition markets’, that is to say markets which make possible flexible mobility between unemployment and employment, between the educational and the employment system, between waged labor and retirement, between independent labor and waged labor” (Schmid 1996,639).
On the international plane, the World Bank (1997:152) recommends, furthermore, ”a close consultation between central banks and the organizations in charge of financial control [...] and a greater cooperation between the national authorities.”4 Clearly, therefore strategies exist for states to face the risks from outside or within their border. Yet, the more the problems become international, the more the state must become international, too.
The processes of Europeanization and globalization have not been created in a single day, but are processes of long duration.5 They produce certain consequences, though, which need to be dealt with. In the Western as well as non-Western societies, tensions have appeared between modernization and ‘indigenization’ (Huntington, 1991), between the universal and the particular, between homogeneity and heterogeneity. In all such (potential) conflicts, the state must play an important role as a mediator, a coordinator and an agent of the common good.
The state’s capacity to act is both weakened and reinforced. In his excellent book Democracy and the Global Order, David Held (1995:136) remarks that states have abandoned some competencies and freedoms, but have gained and increased others. By adopting a quite optimistic point of view one can say, furthermore, that through national or regional corporatist policies and international governance, the loss of national governments’ capacities to act, which were provoked by the processes evoked earlier, will be compensated, or could even be transformed into gains.
The margin of maneuverability of the state may not be necessarily narrow, or remain narrow. The path I propose goes beyond liberalism or neo-liberalism, beyond Keynesianism or any bureaucratic model. It consists of new forms of cooperation, of state reform and of the changes in the social relations, of establishing international regimes or networks, and finally of a greater engagement of the organizations such as the EU in the field of social affairs. The EU and its members simply must enlarge their scope of action and move from a system of a free-market economy to a system of a social-market economy.
It is ”cooperation,” as the World Bank put it, ”which is the key to any significant progress” (Banque Mondiale 1997:149). But neo-liberal market processes also require as a complement strong democratic state institutions. Without any efficient state mechanism, liberalization could well provoke social conflicts, endangering economic growth (Rodrik 1997). The more the state system develops toward a global society, the more it will become necessary to re-establish the symmetry in the political and social relationships between the governors and the governed.
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1 ‘Universalization’ is another term to describe this phenomenon.
2 OECD 2005: Handbook on Economic Globalization Indicators. Paris
3 Internationalization in its initial phase (the first step) is linked to the multiplication of exports. As a second step, internationalization (globalization) refers to investments and activities abroad.
4 The Bank also proposes regional regimes and institutions such as the EU to be introduced into the monetary system, and financial cooperation institutions to be created, such as the G10 which brings together the Ministers of Finance and Governors of the Central Banks, the OECD working groups as well as cooperation between industrialized countries within the G7 or G8. The necessity of a new global monetary architecture has indeed become evident since the Mexican and the Asian crises.
5 It should be noted in passing that the fall of the authoritarian regimes in Eastern Europe had a very limited influence on the mentioned processes. Of course, Eastern Europe has changed considerably; international relations in Europe and between the great powers have been modified; the reconstruction process in the Länder (of former Eastern Germany demand great efforts. But, on the whole, the current problems of Western democracies have not really been influenced by these upheavals; global processes have had a much more determining influence (Schirm 1997).