College Quarterly
Summer 2008 - Volume 11 Number 3
Reviews Modern State Intervention in the Era of Globalisation
Nikolaos Karagiannis and Zagros Madjd-Sadjadi
Cheltenham, UK: Edward Elgar, 2006

Reviewed by Howard A. Doughty

A taproot of commentary on leadership is surely the discussion of the organization of the state arising, in various accounts, from “proto” forms that came into existence as our species shifted from nomadic scavenging, hunting and gathering to sedentary existence dependent on primitive agriculture. Abandoning the innocence of animal life and thus experiencing the “fall from grace,” Homo sapiens discovered means of accumulating surplus goods, and the battle was on. In the familiar narratives provided by anthropologists of political evolution, distinctions based on ranking and stratification divided men among themselves and segregated women from men. The division of labour quickly rewarded some more than others and, when it came time to enforce these divisions, the state began to emerge as a distinct aspect of social and political development.

By these lights, leadership is both a simple recognition of the difference between the rulers and the ruled, and an inventory of the characteristics needed to acquire and maintain a leadership position. Among these characteristics may be brute force, the correct selection of parents, guile and wit or, today, the ability to motivate underlings in the quest for administrative authority and the consequent capacity to “get results.” Seeking the characteristics of leadership can sometimes result in the “cult of personality,” which many denounced but most pursued as personal ambition, or as temporarily happy camp followers.

There are, of course, subtler versions of leadership skills. In Sutra 17 of the Book of Tao, Lao-tse says: “As for the best leaders, the people do not notice their existence. The next best, the people honour and praise. The next, the people fear; and the next, the people hate. When the best leader’s work is done the people say: ‘We did it ourselves!’” Modern political arrangements leave little room for “the best” leaders.

Leadership in the contemporary world is rarely sui generis. It is fashioned in the context of massive organizations which the people (including the leaders) seldom understand. The cleverest (which is not to say the best in any normative sense worthy of the name) are skilled in manipulating the political system. This requires arrogance, focus, image-making skills and all the techniques known to princes since Machiavelli was a pup. It requires timing and a collection of happy accidents — sometimes called fortuna. Whether talking about the district manager of a corporation, a cultural icon who provisionally defines some performing art or literary form, a local mayor or an aspirant national official, the path to leadership is not negotiated by those who read self-help books on achieving success (though those who write them may have a shot). It is much more a crude and decidedly unfair selection process in which an occasional gaffe, a single poor judgement (such as failing to take the opportunity to stab a rival in the back) or, in the alternative, a providential serendipity which places the hopeful monster in the presence of a flock seeking inspiration and none too demanding about where they find it.

This may all sound somewhat depressing, even cynical; however, it is no more than the basis for a solid understanding of what leadership genuinely means. To get to the real stuff, we need to look at the oppressively heavy load that stands above us; namely, the structure of power in the increasingly globalized world.

We should not become overly awe-struck, of course. Globalization is, after all, nothing new. Political captains from Alexander the Great and various Caesars to Napoleon and Adolph Hitler had in mind the conquest of the world. Some recent American politicians have charmed themselves into thinking that they were specially chosen to be the “leaders of the free world,” while Soviet apparatchiks indulged in a similar fantasy. Early Christians and early Muslims aggressively sought to dominate humanity “spiritually” by converting the heathens and infidels to their respective creeds or putting those who resisted to the sword. And, of course, eighteenth-century mercantilists had in mind world-wide empires based on the cunning use of trade regulations and warships to achieve their economic purposes. What makes our particular version of globalization different is the degree to which technological homogenization have led our economic and cultural practices to be intertwined and to converge. Osama bin Laden, I suspect, would be unimpressed by Marshall McLuhan’s concept of a “global village.” But, perhaps not, for McLuhan was a deeply conservative and an arguably reactionary man. Osama, for his part, is rather skilled at using communications technology and perhaps seeks a global culture that differs from McLuhan’s Christian dreams only in the sense that their respective interpretations of Yahweh differ.

To assist us in comprehending what political leadership means today, a very good place to get our bearings is Modern State Intervention in the Era of Globalisation. In it, Nikolaos Karagiannis of Nova Southeastern University and Zagros Madjd-Sadjadi of Winston-Salem State University collaborate on an excellent, high grade introduction to the nature of the contemporary global political economy and the choices that are available to leaders therein. (NSU, incidentally, is the largest “independent” institution in Florida; it features on-line courses, practical programs aimed at the vocational needs of a wide client base and is, in itself, a successful leader of a sort. So is Winston-Salem. Established in 1892 and chartered in 1897, it was the first African American institution in the United States to grant degrees in elementary teacher education. Traditionally a Black college, it changed its name to Winston-Salem State University in 1969, and merged into the University of North Carolina system in 1972; it, too, has been an educational leader operating on the motto, “Enter to learn, depart to serve.”)

Karagiannis and Madjd-Sadjadi begin with a solid review of the major theories concerning the rise of the modern state. Addressing specific economic issues, they offer an informed assessment of the private-public balance in mixed economies noting, for example, that “public enterprises are ubiquitous” throughout the world and are not just the product of leftist politics or the “command” economies once thought to dominate in parts of the underdeveloped world. Anyone familiar with the American Department of Defense budget will find that unsurprising, but staunch advocates of “free enterprise” seem unusually unaware of the obvious in this regard despite the fact that, until George W. Bush, the heroic foe of big government, Ronald Reagan, had put the United States further into deficit and debt than all previous presidents combined.

What may be more controversial is the assertion that “privatization of enterprises have never resulted in dramatic upswings in economic performance and often firms that were once privatized fall back into the hands of the government after an unsuccessful run as a private sector entity.” They also remind us that a number of Pacific Rim countries have among the strongest economic growth, despite (or because of) the predominance of state-owned enterprises. Finally, they point out that Austria stands as a remarkable European example, having “one of the fastest growing economices in the world and yet having one of the highest concentrations of public ownership.”

The import of these illustrations is simple enough. The main difference between public and private ownership is that people have to pay the full cost for public goods and services, whereas they must pay the full cost, plus profits, plus the expense of administrative duplication in, for instance, American HMOs. The massive ideological commitment to neoliberalism has very little to support it in terms of real world application. Karagiannis and Madjd-Sadjadi wisely conclude is that “the choice between market intervention or laissez-faire is not a dichotomous one wherein either market or state has a monopoly on competency but rather one in which neither is fully competent.”

To this I would only add that a complicating factor is the degree to which corporate capitalism dominates government, seeking to reduce state intervention in the social welfare of citizens for both practical and ideological reasons (they want to profit from the privatization of institutions from education to criminal justice, and they are uninterested in displaying generosity to those whom they deem undeserving). At the same time, they see no difficulty in winning immense contracts from the government for supplying services such as mercenary armies or “Star Wars” technology, or for seeking passive tax reductions or active stimulus packages in times of trouble.

From this “real time” opening, the authors backtrack to an historical overview of analytical models used to interpret the emergence of at least the modern political economy. They do not quite go so far back as to examine the several “social contract” models that kept Hobbes, Locke, Rousseau and their supporters engaged in notions of “the state of nature” for several centuries and, in the process, supplied us with most of what we now believe about human rights. For all their provocative suggestions, however, as Sait (Political Institutions: A Preface, 1938) says: “It is no longer possible to think of the State as a conscious invention, suddenly introduced as an antidote to confusion and chaos. The State must have evolved from rudimentary and inchoate beginnings, by a process of growth that was so slow as to have been all but imperceptible …”

The transformation of the contemporary state is plainly faster, but is no more perceptible no matter what our pseudo-scientific pretentions, nor how greatly we esteem our individual and collective rationality. The social contract theorists’ account of a rational collective decision to leave the state of nature in pursuit of security was heuristic or, perhaps, metaphorical; our models based on an assumption of rational choice are delusional and do not give us even a respectable simile.

Karagiannis and Madjd-Sadjadi expose the limitations of neoclassical analysis and its contemporary expression in neoliberalism. They give a sensible account of “new right” views as transposed from the Austrian School and Monetarism and recommended by Hayek (The Road to Serfdom, 1944). Keynesian analysis comes under scrutiny, as do several mostly competing but sometimes complementary versions of Marxism, until we come to grips with the politics of the welfare state which is criticized as contibuting to personal dependency and sloth by the right, and dismissed by revolutionary Marxists as diluting class consciousness (political sloth) and having the “intent and effect … [of expanding] productivity, production and profits to maintain capitalistic profitability.” Thirty-years ago, Canadian New Democratic Party leader David Lewis won some headlines by denouncing “corporate welfare bums.” Today, his slogan would have seemed more than prescient.

Modern State Intervention in the Era of Globalisation insists that useful analysis cannot take place in the absence of historical understanding, which is precisely what rational-decision models, mathematical perceptions, economic projections and neoliberal theories do. The authors recall Karl Polanyi saying in The Great Transformation: The Political and Economic Origins of Our Time (1957) “that there is no self-regulating mechanism in contemporary capitalism and, to impose a regulatory mechanism, one must destroy the free market myth.” We have managed to maintain the myth without worrying much about a self-regulatory mechanism. We have opted for varying degrees of freedom and control, and have thus created a pragmatic mixed economy which can be said to work adequately … except when it doesn’t; for it is theoretically incoherent and therefore empirically unpredictable. So, when Alan Greenspan (an old-style “Objectivist” of the Ayn Rand sort, who was a persistent defender of the unfettered free market system, and who spent twenty years as Chairman of the US Federal Reserve finally admitted, in the Fall of 2008, that there might be some flaw in neoliberalism, and that he didn’t see the subprime mortgage rate crisis coming, a number of critics shook their heads and wondered how ideology could blinker someone who was arguably the single most important economic force in the United States. Deeper critics, of course, understood that being blinkered in that way was a main prerequisite for becoming a long-time head of “the Fed.”

Somewhat more perceptive than Greenspan’s followers are those whose studies of the global economy cause them to worry about the loss of national sovereignty in the era of globalization. They are aware of the degree to which neoliberal economic theory undercuts concerns with the quality and, indeed, the viability of life. Debate about national sovereignty has, however, come to include more than a radical cadre of critics. For some time, people falsely assumed that business enterprises endeavoured to be good corporate citizens, if not unflinchingly patriotic in their pursuit of profits. This led to some important miscalculations on a number of important issues. They have recently come to their senses.

Some countries, they have learned, have excellent (and costly) education systems, universal health care, trade union rights, decent wages, good occupational health and safety laws, strong pollution controls and other things that add to the quality of life. It therefore came as a bit of a shock when companies outsourced industrial and high tech jobs to developing countries (and to prisons in the case of call centres) because the cost of doing business was lower away from the middle class. The ruthlessness and single-mindedness of multinational corporations ought not to have surprised, but when the pattern became clear, they also discovered that firms occasionally hold citizens to ransom, saying in effect that environmental regulations and workers’ fringe benefits must be abandoned under the threat that employee costs and government regulations would join the flight of capital and those who remained would suffer loss of employment. Thus, free trade agreements which had included “harmonization” agreements were soon seen as encouragement to sink to the lowest common denominator in terms of regulation and social benefits. The fix, it seemed, was in as national governments found themselves unable to carry out needed reforms because of their treaty obligations or the application of the strong arm and the heavy hand of the International Monetary Fund and the World Bank.

The authors discuss and advance this theme by giving a fair and balanced accounting of the “costs and benefits” of the effect of multinationals on domestic sovereignty and what is known as the problem of extraterritoriality. On the positive side are matters such as capitalization of domestic economies, technology transfer, regional development, the possibility of improvements in the host country’s balance of payments, innovative organizational ideas and the promise of beneficial cultural change. On the negative side are legitimate concerns about dependency — both in fiscal and technological — the decimation of local industries and the transformation of local economies (leading inexorably to further impoverishment) are added disincentives to globalization.

Returning to the “real” Adam Smith, the eighteenth-century moral philosopher who believed in the free market but added the caveat that the limited liability corporation was anathema to free enterprise and an economic abomination and not the selectively quoted hero of deregulation and the market mentality, Karagiannis and Madjd-Sadjadi explore the practice of taxation. John Stuart Mill, who is frequently invoked as an advocate for free speech and democracy (which he was, though occasionally reluctantly), is also considered. Adam Smith’s principles of taxation, they remind us, began with the concept of equity and insisted that “individuals ought to contribute as nearly as possible in proportion to their respective abilities.” This injunction is easily recognizable as a reiteration of The Acts of the Apostles 4:34-35, and a forerunner of the slogan “from each according to his ability; to each according to his need,” which showed up three-quarters of a century later in The Communist Manifesto. To this Mill added the idea that the costs of the state should be borne equitably, and that “a just distribution of tax shares [an idea promoted by the classical economist, Ricardo] prevails when all contribute to the common good so as to incur equal sacrifice.” This is a few short steps away not only from the progressive income tax, but also from the use of taxation to transfer productive means to the public sector, promote economic stabilization, “moderate” economic inequalities and the promote economic growth. The authors, of course, lead us along these steps using the often neglected voices of more contemporary analysts, and demonstrates convincingly that it is chiefly current neoliberal theory that embraces the use of taxation (and monetary) policy as an instrument mainly for the purpose of enhancing private accumulation. There is, however, an alternative.

Space does not permit a discussion the extensive treatment that Modern State Intervention in the Era of Globalisation gives to these and related issues in specific global case studies including the EC/EU, the Pacific Rim and especially the modern “city-states” of Singapore and Hong Kong. It is sufficient to make clear that the book provides a compelling argument for a re-evaluation of state intervention in the form of a “state development” model, which has already belied neoliberal ideology with regard to its theoretical assumptions about human nature, the origins of the modern state and the actual workings of the economy.

Karagiannis and Madjd-Sadjadi do not, of course, offer a radical prescription for the political reorganization of the economy along revolutionary lines (it is arguable that the so-called collapse of the financial system has already done some of that work). Instead, they merely balance recent corporate ideology with a narrative that shows its flaws and explores already existing alternatives.

The authors are also understandably sceptical about the wholesale importation of Western cultural norms to societies that have workable heritages of their own. Too often global capitalism arrogantly assumed the superiority of Western “values,” but they effectively argue that material prosperity can be achieved within endogenous contexts. The theory of the developmental state, therefore, is one useful option that has already been adopted in some areas. It permits countries to accept some of the practices of Western corporatism, but to take apart others and redefine them within the culture in which they may be placed. Were I to be dangerously optimistic, I would suggest that Western society could learn from others as well.

That aside, there is a clear message in this book for the Western political economy. The denigration of government and the public sphere, and the celebration of business and the private sphere have had pathological effects on our culture, our political life and our economy. Witnessing a logical, sophisticated, well-supported and yet rhtetorically moderate argument such as this one permits is to look calmly in the mirror, and see our systemic flaws that are responsible not only for our own current problems, but have also contributed to enormously adverse consequences for others. The world’s recovery may be both slow and painful. Recalling, however, the Chinese expression revealing that a “crisis” is an opportunity as well as a danger, we can perhaps hope that leadership in the second decade of the twenty-first century will consist of recognizing people with the wit and the will to safeguard us from one and take advantage of the other for real, systemic innovation.

In the Timaeus, these words are spoken: “If then, Socrates, we find ourselves in many points unable to make our discourse of the generation of gods and the universe in every way wholly consistent and exact, you must not be surprised. Nay, we must be well content if we can provide an acoount not less likely than another’s.”

Read properly, this is no invitation to cultural relativism, much less to the moral nihilism of ahistorical hyperrationalism. It is an invitation to learn as much as we can about our past, so that we may better understand our present and take advantage of authentic choices for the future. These will include choices to set aside ideas and practices that have failed the elemental Popperian test of falsifiability. Or, put another way: it is broke; we need to fix it, but we must be careful and reflective when we do. It wouldn’t hurt to consider doing so democratically as well; for, if we are to learn anything of value, it may be that most leaders are not the best; so, the people may be compelled to do it themselves.


Howard A. Doughty teaches in the Faculty of Applied Arts and Health Sciences at Seneca College in King City, Ontario. He can be reached at howard.doughty@senecac.on.ca

Reviews

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2008 - The College Quarterly, Seneca College of Applied Arts and Technology