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Think Globally, Lose Locally

Theodore J. Lowi

The Cold War is over, and our side won. But what kind of victory?

The most certain victor was capitalism, and it won globally. But this is neither the first victory of capitalism nor the first era of globalization. In its major 1997 world economic survey, The Economist observed that, by most important measures, "the world was more closely integrated before 1914 than it is now, in some cases much more so."1 Everyone now recognizes that the first period of globalization confirmed the economics of Adam Smith: the economy, left alone, will produce the greatest wealth of nations and in the long run the state will wither, or be pushed away, as though by an Invisible Hand. Perhaps less appreciated is that it also confirmed Karl Marx, in a most particular way: every system of power tends to develop its own ideology, and ideology guides and rationalizes the governmental policies that impose and sustain the system of power.

Putting Smith and Marx together, a funny thing happened in pre-1914 globalization that seems to be echoed in the current scene: As the market expands, the focus of ideology becomes narrower. Economic ideology becomes microscopic, with the individual at the center, making free, rational choices, and contributing to public virtue through private vice. The focus of political ideology also narrows; although manifestly anti-statist, the state does not wither away but devolves its power from national sovereignty to local control and social order. There is a wise old saying in America, that "all politics is local;" there is a still wiser corollary, that all social control is local.

As a result, the ideology of a globalizing capitalism has a remarkably rightward tilt. It is rightward in its rejection of any government policies that have even the slightest tendency to redistribute wealth or status. It is rightward also in its support of government policies that use locally enforced social control to address the spillover effects of extreme inequalities.

The New Order

For at least 15 years there has been a sustained, world-wide tendency toward the Right. It is especially notable in the most advanced, industrialized countries, led by the United States but including Great Britain, France, Germany, Italy, Japan, Canada, and South Korea. But it also includes former socialist countries: Russia and the other former Soviet Republics, and China with its "Four Modernizations."

Within most of these countries, left parties have succeeded only by moving right-toward the center, and then beyond. Bill Clinton became a Republican, in New Democrat clothing. Labour's Tony Blair became Maggie Thatcher, in Bill Clinton's clothing. The Italian left, having given itself a new name, is now moderately well ensconced as the center-leaning government of Italy as well as in the mayoralties of many major Italian cities. It is giving Italy an anti-welfare state budget in order to remain a full member of EC, and perhaps as a condition of remaining the leader of the government coalition. In France, the unemployed and many employed workers fear betrayal by their own Socialist Jospin government on matters of job security; meanwhile the national police force has expanded by 35,000. Germany, already ruled for 15 years by a center-right coalition, is now looking toward a replacement by a grand national coalition of the leading right-wing party, the Christian Democrats, with the leading party of the left, the Social Democrats. And in Canada, a national Conservative leader has been invited to take over the Liberal party in Quebec. Except in metaphorical terms, there is no Left left, anywhere to speak of.

The Right that is first seen and heard is classically liberal. In modern policy language, this means deregulation, privatization, and devolution. In ideological terms, it means stigmatizing government, politics, and democracy itself (for all the prattle of capitalist ideologues about capitalism encouraging democracy, they reject the essential right of democratic governments to experiment and make mistakes). In the United States, because of its association with the social-democratic experimentation of the New Deal, even the word "liberalism" has dropped out of the self-description of this project. (Europeans were never fooled: they always saw liberalism as right-of-center precisely because they understood liberalism as the ideology of capitalism.) Classical liberals now call themselves conservatives, or "conservative on economics, liberal (or progressive) on social issues."

If the idealized Adam Smith epitomizes this first rightward path, Edmund Burke stands well for a second, with some help from Bismarck (and, dressed in a moral uniform, Cotton Mather). Consider the earlier phase of globalization: In each of the vigorously industrializing countries, there was an unmistakably strong government. While most public discourse was anti-statist, public policies expanded alongside the market. Colonialism was state-driven. And, Smith's warnings to the contrary notwithstanding, every industrializing country had tariffs and other restrictive trade policies that protected its "infant industries." But government policies reached far more deeply than that-downward, toward where people live. Government policy supported displacement of populations-from rural communities where individuals had "subsistence rights,"2 to urban/atomized places where poverty was closely tied to progress; bureaucratic implementation penetrated the most localized areas, where it was needed for the maintenance of public order. Both professional police forces and the public health profession were part of the scene. Aid to the poor became highly moralized, with welfare essentially a police function. All forms of labor organization were governmentally discouraged; the United States in fact holds the record for the most police violence against labor's efforts to organize.

How could any two belief systems be more contradictory than the godless anarchy of pure classical liberalism and morally transcendent statism? One could at first blush simply shrug this off as the imperfection of practical politics. Confronting the actual policy implications of the two rightward paths, however, their contradictions can be appreciated as two sets of functional prerequisites of capitalism.

Let it be granted here and now that free enterprise possesses all the virtues classical economics attributes to it. Still, those virtues cannot be realized unless certain functions outside the market are reliably performed. Many of those requirements are met by families and other voluntary, non-economic institutions. But many are met by governmental institutions. Capitalism has proven that enterprise cannot work well unless it is free. But even freedom requires controls; it is not a matter of whether but which. And the more the market is driven by corporations rather than individual entrepreneurs, the more controls are needed, and the more carefully selected those controls must be.

Ideology and Policy in the US

We need to bring some evidence to bear on these claims about liberalism and conservativism, and the United States provides the best single case study of what is now a worldwide phenomenon. This is true not only because we are ahead and are being widely imitated but because the unique American federal system provides a laboratory that exposes in the purest real-world form the two kinds of ideologies-liberal and conservative-and the two kinds of policies-deregulation and social control-that are being produced to support global capitalism.
American Federalism

Federalism is a constitutional system with dual sovereignty. It provides for a central government with power sufficient to maintain the respect of other nations: that is the essence of sovereignty. But political power is also devolved upon a second, lower level of government with powers and territory that cannot be infringed without its consent or by some extraordinary decision process, such a two-thirds vote or a constitutional amendment. The constitutional scheme is well-enough known: Article I delegates a number of specific powers to the national government (to tax, to raise and support armies, to regulate commerce among the states, etc. ), while the Tenth Amendment makes quite explicit that all powers not delegated to the national government are reserved to the states, making them the linchpin of US government. What makes American federalism unique, however, is that it goes beyond this division of sovereignty to provide for a specialization of functions in the use of political power.

For over a century, the national government was concerned entirely with internal development or "infrastructure," with a common currency and standard of weights and measures, with the development of shipping, and with the distribution of lands to the states and to individuals in order to fill out the continent. All these policies and programs addressed issues beyond the reach of individual states, and all had to do with the husbandry of commerce. Absent from national government policies until the late nineteenth century-and present only in modest degree even after the 1930sæwere any laws or programs directly regulating the conduct of individuals, including those fictitious persons called "corporations." That poweræwhich came to be given the apt name "police power"æwas instead exercised almost solely by the states. Cut through all the household noise, from Eisenhower's "creeping socialism" to the recent raves about deregulation, and what comes clear is that all the national government regulatory policies adopted by Congress since 1933 (to quote Bogart in Casablanca) "don't add up to a hill of beans" in the total scheme of government in the United States. All of the fundamental policies that regulate the conduct of American citizens and corporate persons have been and still are made by the state legislatures, not by Congress and not by local governments. For example, except for federal territories, there are no national property laws, no national corporate laws, no national morality laws, no national marriage and divorce laws, no national compulsory education laws, no national contract laws for conveyance of property, no professions laws, not even any motor vehicle laws (until speed limits imposed during the fuel crisis), and almost no national criminal laws except for crimes defined as interstate.

The states also had the power to promote commerce, and they have used that power generously. But the overwhelmingly important function of state governments in the United States has been the specialized one of regulating conduct. State government in the US is a regulatory state, and as a regulatory state it specializes in setting rules of conduct and backing those rules by sanctions. That's where real "government power" is.
Implications of Federalism

Once American federalism neatly separated the function of promoting commerce from the function of regulating conduct, an unintended but no less fundamental institutional development flowed from it: American national government became the home of liberalism; state governments became the home of conservatism. Ideology followed policy, and ideology helped shape policy.

First, national government policies have been almost entirely instrumental-devoid of moral imperative. It was good to build canals and to explore and survey conquered territory-good because it encouraged national strength and wealth, not because it expressed a biblical principle or moral precept. Adam Smith was a professor of moral philosophy, yet one can find no trace of morality in his account of how individuals produce wealth. His Invisible Hand was a beautiful metaphor, but also a distinctly secular one. It was a force inherent in individual reason and action. It is liberalism, and it is this liberalism that characterized the policies of the national government in the nineteenth century and continued to characterize its policies in the twentieth century. Even after 1932, as the national government began to adopt more regulatory policies, these were also almost entirely instrumental.

The situation of the American states was very different. The coercion inherent in the regulation of any conduct affecting the "health, safety, and morals of the community" almost always possesses a moral element. Most national-liberal-regulation is concerned with conduct deemed harmful in its consequences. In contrast, responsibility for maintenance and control of public order required regulation of conduct deemed good or evil in itself. Some state policies are liberal, instrumental; for example, regulating local traffic, local markets, fire hazards, etc. But far and away the largest number of state regulatory policies are concerned with the morality of conduct and are grounded in morality. From time to time there have been radically Left regulatory policies-bank holidays, debt relief, de-segregation laws. But most state policies have been deeply, often radically conservative. And, once again, why not? The police power involves matters on which all Americans are conservative some of the time, and a large number conservative all the time. For example, although few property-owning middle class people will support such leftist policies as rent control or improved working conditions, almost all the lower classes support strict regulatory policies to preserve law and order and are the kind of God-fearing citizens who embrace most of the sexual morality laws on the books.

Cities have displayed an even more conservative tendency. Having no place in the Constitution, they are mere creatures of the states and exist for their convenience, while being permitted to adapt state law to local variations. But cities also possess a certain amount of authority under common law, such as power to control nuisance, disturbances of the peace, carnal knowledge, and lascivious carriage. Uniformed forces in the United States and throughout the world use such powers, both statutory and traditional or common law powers, to herd prostitutes into certain districts, keep the poor invisible, and help maintain the barriers between neighborhoods separated along class, ethnic, and racial lines.
The Meaning of Decentralization

Our new globalization proceeds within this context of divided government functions. The particular policies supporting global capitalism, and the ideology associated with each, are easy to appreciate and assess in the specialized atmosphere of the US federal system, but the relationship between policy and ideology on the one side and globalization on the other is worldwide. These policies can be grouped under three separate categories: deregulation, privatization, and, most importantly, devolution.
Deregulation. Most regulatory policies exist to facilitate social and economic intercourse by removing barriers, reducing risks and inconveniences, and protecting property rights. Regulatory policies spread like wildfire all during the late nineteenth century because of the enormous increase in rates of injury that accompanied the spread of mechanization. Regulatory policies to protect property also spread as "intellectual property" driving the technology explosion spread. Regulation to protect the obligations of contracts also had to be expanded as increased scale meant that the terms of contracts were harder to specify over enormous spaces and lengthier time spans. All this kind of regulation is instrumental, therefore liberal; and although every regulatory policy increases the cost of operation to someone, there was widespread justification for most of these interventions. In addition to the instrumental regulation, there was continuing spread of morally-oriented regulation, such as Sunday-closing laws, or laws regulating or prohibiting manufacture or sale of certain products and services deemed immoral. Even the US government got into the act with such efforts as the infamous Mann Act, prohibiting the transport of women across state lines for immoral purposes. Then there are also regulatory policies that can only be understood as paternalistic, such as laws requiring seatbelts and headgear or laws requiring that we set aside a certain percentage of our earnings for disability, unemployment, and retirement.

But whatever the justification, and it is almost always ample, regulatory programs have a limited life span, because the conditions that gave rise to them and justified them are likely to have changed, in part because the regulatory policy succeeds. But while hundreds of regulatory policies and programs long ago reached a point where it would be impossible to continue to justify them, and they now operate as drag on enterprise without any redeeming social value, it is amazing how little deregulation there has ever been.

Except for the Civil Aeronautics Board, killed by the Democrats under President Carter, and the Interstate Commerce Commission, terminated by the Republicans after nearly fifteen years of effort, no major New Deal regulatory program has been terminated, and few have ever been singled out in a campaign for termination. The main route to successful deregulation has been to cut down on the total number of rules and regulations being issued by regulatory agencies, accomplished by presidential/executive oversight and budgetary review. And this has worked: the total number of rules and regulations was significantly reduced during the 1980s. But why stop there?

The answer is that genuine deregulation was not the goal in the 1980s, when the deregulation movement really got into full gear, nor is deregulation the main goal now. Instead, the point is stigmatization: keep all the effigies alive, in a weakened state, and maintain a continuous attack against a live enemy rather than a dead one. In this sense, deregulation has worked, because stigmatization has been successful. And to the extent that the stigmatization of regulatory policies has been a success, so has the stigmatization of the national government and the principle of government itself. No new programs involving any regulation whatsoever have been proposed, much less adopted, except in such areas as crime, morality, and, in particular, the "War on Drugs." Somehow morality legislation is not considered regulatory. For example, the vast national regulatory apparatus implicit in the 1996 welfare reform to put poor and dependent single mothers under a welfare police state went through Congress without a hitch.
Privatization. Privatization is a different policy principle, but it serves the same purpose as deregulation in this globalizing era. There is very little privatization available in the United States, because there was never so very large a sector of public ownership as in more centralized states, especially those that had short or lengthy experiences with real socialism.

To privatize a government enterprise or service, it must be owned outright by the government and must then be absolutely terminated as a government activity. This is done by outright sale to one or more private corporations, or by giving it away to a corporation or corporations willing to take on the liability, or by simply terminating the activity altogether and leaving private companies to pick it up if they wish. Looking at the picture this way, the funny thing is that, despite all the cries for and praise of privatization, few enterprises outside the former orthodox socialist states precisely fit the picture. Either the enterprise was deemed public but never owned by the government, such as AT&T, and therefore could not, by definition, be privatized. Or it was a fully public enterprise that was turned into a public corporation to operate independently but remained largely or fully owned by the government and closely supervised by it: consider the TVA and the US Postal Service. As it turns out, the closest examples of real privatization at the national government level in the United States are probably the debt refinancing agencies, such as Fannie Mae, Jennie Mae and Sally Mae, plus COMSAT, which, by original design, were allowed to slip quietly over a number of years from public ownership to private; but all this was well before the globalization frenzy and the current romance with privatization.

There is more public ownership at state and local levels in the United States, and also more privatization of hitherto public activities, such as garbage collection and other city services. But the record of these public services contracted out to private corporations does not confirm the privatization faith as fully as some might think. Almost all energy companies (so-called "utilities") are already privately owned, and one hears as much complaint as praise about them. Contract public schools are a spreading experiment, but so far there are no overwhelming signs of improved effectiveness. Yet none of the fine points matter very much anyway, because, as with deregulation, privatization is not a goal in and of itself. Privatization is part of the ideological campaign to stigmatize anything public. (Does it matter whether Tennessee Power or Alabama Power are a mite better or a mite worse than TVA?)

The best example of privatization and why it has become such a shibboleth in the globalization era is privatization of prisons. Since 1980, when we can reasonably locate the dawn of the current conservative era, the American prison population has tripled, reaching 1.6 million in mid-1997, looking toward 2 million in 2000. The first privately-operated prison opened in 1983, with 350 inmates. By mid-1997, over 100 for-profit prisons held 90,000 inmates, looking to 400,000 by 2000. Thirty states now permit privatized prisons, and given President Clinton's strong support for contracting out more federal inmates to private prison companies, for-profit prisons seem certain to be a growth industry. Wall Street certainly treats it as such: spending on prisons exceeds $20 billion per year, and it is growing when all of the other social services are being cut back. The for-profit share of this growth is increasing, as additional states get on the prisons-for-profit bandwagon.

Although the overall crime rate has been dropping, and although the increasing rate of imprisonment and retention obviously share some of the credit for this decline, there is no evidence after 15 years of experience that the privatized prisons have themselves contributed to the reduction of crime. Nor is there any evidence that privatized ownership and operation of prisons results in efficiency or reduced costs. The most comprehensive evaluation, published by the General Accounting Office (GAO) in 1997, "could not conclude whether privatization saved money." And the two major trade associations of private prison companies have made no effort to amend the GAO report or otherwise to engage in direct lobbying, "because," as one industry representative put it, "it's completely unnecessary." Sufficient sentiment already existed in at least 30 states and Congress.3

Come what may with privatization of prisons (or anything else left for privatization), the following points of significance already seem clear:

1. Privatization needs no sponsor. It has become its own best testimony. Privatization is good in itself.

2. Privatization of prisons is the ultimate step, reaching into the very core of sovereignty itself. No better evidence is available to confirm that the goal of the Right is to stigmatize the state.

3. Prison privatization tends also to establish a new (or renewed) method of social control, moving from a discrete discipline-and-punish approach by constituted public authorities to a systematic, ongoing process of control by filtration and management, making little distinction between and among the reasons for being imprisoned. Consequently, prisoners can be dealt with as a market opportunity on the input side and a management problem within, with profit-backed incentives to retain and expand rather than with professional, political and legal incentives to rehabilitate and discharge.

I do not mean to idealize public prisons. The point is that in the private, corporatized world, social control is not solved by the market but is set up as a separate market while retaining all the legitimate coercive powers that are the essence of the state and of sovereignty.
Devolution. Devolution is the most interesting and instructive of the three principles guiding the rightward movement in the United States. US federalism exposes most clearly just how strongly rightward are the policies labeled as devolutionary, and that in turn indicates how strongly rightward these same policies are elsewhere. Devolution was the first rightward move against the social democratic policies of the New Deal coalition, and the first important concrete step was Nixon's Revenue Sharing. Actual federal grants-in-aid to state and local governments continued to grow throughout the 1970s, reaching over 25 percent of all state-local revenues. Out of respect for the obvious consensus still in favor of New Deal programs, Nixon attempted to introduce a conservative dimension by giving state and local governments more discretion in how they spent the federal grant money.4

Why was this delegation of added discretion to the states and local governments conservative? And why would the greatly increased state-local discretion implicit in devolution be still more to the Right? Because the recipients of these grants-especially local governments-are innately conservative. Devolution (although it was not yet called "devolution") picked up speed under Reagan, who consolidated 77 categoric grants-in-aid into 10 discretionary block grants to the state governments, who were given virtually complete authority to transfer the money to localities, with or without conditions imposed by the states.5

The process came to a kind of culmination in 1996, with the Personal Responsibility and Work Opportunity Act (PRA), supported by President Clinton and majorities of both parties. This legislation reversed President Nixon's commitment to national standards for entitlement programs by assigning almost total discretion to states and cities, as though this were like the old urban redevelopment and community development programs. This New Federal Order gave states and cities almost full discretion over federal transfer of funds for dependent persons (while of course diminishing available resources). Along with giving the states and localities full discretion over eligibility, the PRA also imposed a new set of national moral criteria that local welfare administrators are obliged to follow when using their discretion. As Gwendolyn Mink puts it,

[The PRA] provides cash assistance, food stamps, and Medicaid to poor, single mothers, but only if they reveal their most intimate relations and only if they agree to associate with the men whom government designates as their children's fathers. Worse yet, it provides cash assistance to poor single mothers only if they forfeit the right to care for their own children.6

Work requirements, community service obligations, marital and age criteria, and time limits take us back to a nineteenth century condition, converting welfare administrators back into welfare police.

And it is received by willing hands. For much of this century (and perhaps further back in Europe) a false impression has prevailed that cities-all urban centers-are the liberal, even leftward, component of a society-individualist, experimental, tolerant of class and racial differences, sophisticated, respectful of privacy, in a word, urbane. Well and good. But those urbane values rarely prevail in local governance. Cities in America are tied to local tax revenues, typically raised through property taxes. This serves to reinforce the primordial function of local government to preserve social order. And all of this ties the policies of cities to a rather rigidly narrow range of constituent values: Cities can be pluralist or elitist in their power distribution; they can be more or less dynamic in their approaches to economic or cultural development. But they do not depart from their obligation to social order, which extends to keeping classes, races, ethnic groups, genders, and life-style groups in their places; by keeping the poor and the deviant invisible (another kind of place); by cooperating authoritatively with the established higher classes and the installed institutions of church, local school, philanthropy and party, as well as relying upon police and other public agencies, to maintain order. Keeping people in their places is mainly achieved by segregation. Or we can give it a more respectable name: community.

Communities within cities are given special group designations-Chinatown, Little Italy, Jewtown, Harlem, Hoovertown and Shanty Town (for the recently impoverished), and so on. "Ghetto" was a term quickly adopted in America as a designation for virtually any residential district distinctly enough segregated, whether by external discrimination or internal preference-either way, it was accompanied by police tolerance of, and enforcement of, informal restrictive covenants, plus the full cooperation of real estate agencies, banks, insurance companies and the like. It was once said that Chicago is the most segregated city in the country. People were referring to racial segregation, and it may still be true. But all cities in America are segregated, not only along racial lines but along all other lines of social discrimination. In this way, cities are not only innately conservative, and legally and constitutionally conservative, but also structurally and institutionally conservative. And most city promoters will offer this conservativism as an incentive to locate there.

A false impression about the liberal progressivism of urban centers was conveyed during the epoch of federal urban policies. Categoric grants-in-aid policies and dollar-matching programs, which reached 25 percent of city revenues on average (and up to 40 percent in more troubled cities), loosened the ties of cities to their tax base while putting even the reluctant cities under pressure to use the federal money or lose it. And even with all these federal fiscal, legal and administrative incentives to be more liberal, cities still used federal urban development and re-development money in a conservative, segregational way, as long as they had discretion about how to employ it. As a consequence of discretionary federal urban programs, and despite the liberal and leftward objectives of so many of the programs, cities were more segregated at the end than at the beginning. And the most-favored cities became the most segregated afterwards.

This is no paradox. Federal funds plus discretion provided cities with the resources to fulfill their primordial and historical obligations more effectively than they could have without the federal resources. They were more segregated not because white city politicians are racist but because they are racial, just as they are ethnic and class-oriented, and life-style conscious-committed to containing people in their places and maintaining existing social relationships. And we mustn't overlook the most massive and general federal urban policies of all-the home mortgage deduction, coupled with federally subsidized and federally guaranteed home mortgage loans (whose refinancing is now largely privatized). These subsidies had the direct effect of vastly widening urban segregation along class lines beyond the core city to the whole metropolitan area. Home owners are not only far more segregated today than ever in geographic terms; they are and always have been recognized in law as a class apart. Renters are considered a problem class due to their freedom of movement and lack of roots; owners are the preferred class not only because they have presumably deeper roots but have put themselves voluntarily under the long-term (30-year?) social control of the banker, the insurance agent, the neighbors, and the courts.

Capitalism's Dirty Little Secret

Make no mistake about it. Deregulation, privatization and devolution have become popular in Europe and in all other countries going capitalist because concerns for social control strengthen as societies are loosened up by liberal policies necessary to join global capitalism. This is the dirty little secret of capitalism, in fact of classical economics itself: they have nothing to say about life after meltdown, or even about what happens when the loosening creates large troubles.

An intimation of the answer to life after meltdown was provided by the Indonesian authorities confronting their own meltdown in January 1998. As panicked Indonesians raced to buy rice, flour, sugar, and cooking oil in anticipation of rising prices, and as the head of research for a major corporation was wailing that "Wide-scale social unrest is certain as bankruptcies, business failures and unemployment rise," the Indonesian military "vowed to preserve order across the sprawling island chain of more than 200 million people."7

Bankruptcy is another intimation of the answer to what happens after meltdown. When a single company goes bankrupt, the public-private distinction quickly becomes hazy. To avoid fights among creditors, the government takes over, puts the failed company "in receivership," and may even continue to operate the company while the proper authorities decide about the disposition of the remaining assets. This process was deemed to be so inherently public that power over bankruptcy was one of the few specific substantive powers the Constitution expressly delegated to the national government: "To establish . . . uniform Laws on the subject of Bankruptcies throughout the United States." In practice, Congress let bankruptcy laws slip to the states, but the principle remains: The public character of private markets is revealed whenever troubles loom.

The public foundation of capitalism is fundamental and universal. It is simply overshadowed when markets are working. Americans have been the most orthodox free market liberals and the strongest believers that enterprise was once free before big government came along. But this is simply because American federalism had already devolved the maintenance of the public character of private markets to the state governments, which gave states and localities sufficient power to keep classes and races and other components in place even as capitalism was loosening up all social relationships. Other capitalist and pre-capitalist countries appear to have been more public (interventionist, heavy-handed, regulatory, paternalistic, socialistic) mainly because their highly visible central governments were always doing most of the governing. And a lot of that governing was quite anti-capitalist because these governments were old enough to have existed when the dominant policies of the post-feudal ruling classes were anti-capitalist. But in recent decades, as much of this old structure was torn away, conservative policies toward local social order were in a state of readiness once these countries decided to join global capitalism. Taking all public functions and policies together, regardless of level of government, the public foundation of private enterprise is not all that different from country to country. Though certain practices and formalities may differ, the degree or extent is far less likely to.

This is why devolution is such an important public strategy today. Whatever deregulation and privatization accomplish in the quest to reduce the overall size and cost of government and to increase the freedom of free enterprise, devolution is pushing in the opposite direction-toward more government, but more of a certain type. All governments seeking to join global capitalism are trying to cut their budgets and to eliminate the oppressive, complex, and discouraging networks of government licensing and other rent-skimming and pass-throughs. But even as those maddening public interferences disappear, those same countries are beefing up their institutions and methods of local social control.

Consider countries that have not yet privatized their prisons. For example, world trade in arms and armaments remains brisk, despite considerable shrinkage since the end of the Cold War. Setting aside the United States, the top ten importers of arms in 1995 bought, respectively: (in billions) Saudi Arabia, $8.6; Egypt, $1.9; Taiwan, $1.2; South Korea, $1.1; Thailand, $1.1; Australia, $0.9; Kuwait, $0.9; United Arab Emirates, $0.875; Greece, $0.825; Malaysia, $0.750. Three of these are Mideast oil countries, but all were in or moving heavily toward the global market system. The second tier of ten major importers of arms (China, Turkey, Spain, Japan, Pakistan, Oman, India, Chile, Belgium, and Israel) include some of the remaining tyrannies in the world. But these, too, are going toward world capitalism, and that certainly adds incentives for increased arms imports.8

What's all this military equipment for? One should not push the data too far, but certain points can be made with some confidence. First, capitalism can flourish in tyrannies as well as in democracies, in strong states as well as weak and permissive ones. Second, as the policies and conduct of a state become more and more favorable to participation in world capitalism, preparedness for internal military action also grows stronger, when everything the ideologues tell us about markets would lead us to expect a big decline.

Why do Greece, Spain, Malaysia, and Thailand tend to import hundreds of millions of dollars a year in guns and bullets? From what neighbor do they see a threat of war? Military preparedness is obviously needed for internal, civil control. Indonesia ranked only 36th ($0.17 billion) in arms imports in 1995. Anyone care to doubt they will move up in 1998? Or take South Korea, which has had a democracy for ten years; their recent presidential election proves that the country is a fairly stable democracy. It is also one of the most successful participants in world capitalism, with the partial meltdown of late 1997 no serious demonstration of the contrary. But the government has also been beefing up the presence of national military police patrols in Seoul and other major cities. This has little to do with North Korea, which is well taken care of by the South Korean and American militaries, and by the many hundreds of thousands of antipersonnel landmines all across the so-called Demilitarized Zone that Americans refuse to remove.

The United States is not exempt from these trends. Thanks to its federalism, it meets the needs of soical order through devolution. There is no national police force (except for FBI infiltration of all social movements, left or right, pacific or militant). If state and local police forces and the National Guard (state militia except in times of war) were not already ready for the task of crowd control, mass strikes, and other bad conduct during meltdown, a bipartisan national government has been helping to ensure their preparation. It cannot be an accident that the national government has been increasing its commitment to police preparedness during a period of sustained economic prosperity and declining crime rates. While most other areas of social policy were receiving heavy cuts in Congress, grants-in-aid to municipal law enforcement programs went up 28 percent between fiscal years 1995 and 1996 alone. Meanwhile, President Clinton, already having substantially met his earlier pledge to put a 100,000 more cops on city beats throughout the country, went to New York City to celebrate the great 1997 crime news: he rewarded the recently re-elected Republican mayor with a new federal grant of $120 million to help make good on his inaugural pledge of 1,600 additional cops, and announced another $118 million to beef up to 101,700 the total national augmentation of local police forces. The $120 million will help bring the New York City police force up to 40,000-an increase of 15,000 over 40 years ago, though the city population has shrunk by a half million during this same period. Finally, no picture of local control would be complete without mentioning America's privately employed security personnel. A 1991 National Institute of Justice study established a ratio of about 2.5 private security employees to each public police officer, amounting to a 1991 estimated national expenditure of $52 billion for 1.3 million private security employees. (The Institute's report adds that this was likely to be a gross underestimate.)

Devolution evokes warm and fuzzy feelings, until the imagery is complete. In reality, it amounts to an internal cold war. And, as with the international cold war, the United States is helping those countries who wish to join world capitalism but may not be able to afford to maintain sufficient domestic stability. For example, operating under authority of the Excess Defense Activities Act (EDA) of 1976, the United States has been disposing of its multibillion dollar weapons stockpile by giving surplus and obsolete equipment to help countries meet "domestic security concerns." According to one independent study, Turkey, the leading recipient in recent years, received $1.5 billion in EDA military equipment between 1990 and 1995, comprising more than 80 percent of Turkey's arsenal. This support has surely enabled Turkey to control its minority Kurd population. Amnesty International's documentation of Turkey's abuses of human rights against the Kurds, and the use of US equipment in those actions, are not denied but are largely confirmed by published State Department reports on human rights abuses. Other countries, in Latin America, the Caribbean, and Asia receive weapons grants for security in general and as a way to meet their obligations to carry on the war against drugs, which has become its own internal cold war.9

Outside the military and police realms there are many other methods to strengthen domestic social controls. A favorite in the United States is state and federal laws to keep hundreds of thousands of consumers and possessors of small amounts of drugs under severe criminal law jeopardy-a form of social control that reaches far beyond the most extensive welfare state. Another American control mechanism returning to popularity is criminal and civil control of abortions. According to a recent report of the National Abortion and Reproductive Rights Action League, 31 states in 1997 enacted 55 measures strengthening restrictions on abortions, including waiting periods, parental notification, counseling, etc.10 Though there has been no sign of reversing Roe v. Wade, the new restrictions have moved us closer to the pre-Roe status quo. Whatever else one might say of these new restrictions, they are certainly making women, especially lower income single women, far more vulnerable to state control. And low- income single mothers become still more insecure and vulnerable to government social control because of the virtual termination of their entitlements to welfare benefits.

Males on the lower end of the wage chain have also been rendered more vulnerable to control, through unemployment and underemployment. As that great libertarian magazine The Economist puts it:

In a market economy, not everyone prospers. . . . In America the problem takes the form of poverty wages, in Europe of unemployment. The underlying cause appears to be the same. There are more unskilled workers than jobs at decent wages for them to do. In America, wages are allowed to fall far enough to match the demand for unskilled labour with the supply. Unemployment is low and millions of new jobs have been created; but low wage-workers earn too little to live comfortably, and their incomes in real terms have fallen for 20 years. In Europe, wages and other unemployment costs are buoyed by minimum-wage laws and comparatively generous welfare benefits, so unskilled workers are less poor than in America; but unemployment is far higher.11

All of these and other developments are evidence of preparation for membership in global capitalism through an internal cold war. Joining world markets and opening up all domestic institutions to penetration by international trade constitute the necessary conditions for membership in world capitalism. But necessary is not sufficient. Sufficient requires also the mechanisms of local control. And here we see close analogies to the original Cold War, especially as a mentality or culture. Within a Cold War culture, social order requires social insecurity. It requires identifying that part of the population with the least stake in the system and making them more vulnerable. And then it requires a police presence, a regulatory presence-which has to be in place and not in some remote reservation waiting for violence to happen. But, unlike the original Cold War, where the cost of the alternative-hot war-was intolerable, social insecurity is going to cost just about as much as social security. The costs will simply be devolved and, along with the poor, less visible.

A few more years of experience with the Cold War approach to domestic order required by full-fledged capitalism might lead to a re-evaluation. Let us hope it won't be so far into the future that we have lost all memory of the alternative that was tried briefly during the exceptional social democratic era of the 1930s through roughly the 1960s. The model was the conservative Bismarck, who, during the first period of globalization, decided that a welfare state was a rational, albeit expensive, approach to social order: it gave lower- middle-class pensioners more of a stake in the social order while making them more dependent on the state. The welfare state was (as it turns out) a temporary social order, a brief social movement which took a security rather than an insecurity approach to social order. This made political sense because the extraordinary losses suffered by the lower-middle and working classes during two world wars deserved some recognition and reward. It also made political sense because extreme Left and Right movements proved the capacity of these classes to change history whenever sufficiently provoked by the appearance of unjust extremes in the distribution of wealth.

Global capitalism requires social order; liberalism requires conservatism; social order will always require a relatively strong state apparatus, whether national and centralized or devolved and localized. The first era of globalization ended in 1914, and it took 75 years of war and cold war to make its comeback. If the domestic-insecurity approach didn't work the first time, and if the insecurity approach to social order is not all that much cheaper today than the security approach, why not explore and reconsider the security approach? Now, before it's too late.


1 Clive Crook, "The World Economy," The Economist, 20 September 1997, p. 37.

2 Frances Fox Piven and Richard Cloward, The New Class War (New York: Pantheon, 1982), chap. 2

3 The data and the quotation in this section are drawn from Vince Beiser, "Jailing for Dollars - The New Growth Industry," The New Leader, 5 May 1997, pp. 10-11.ixon is in fact pre-modern; in manyways he is the last genuine Democratic president. He actually preferred to keep income and in-kind transfer payments (basically the entitlement programs) more national, with less state-local discretion. This was to change drastically under Reagan and his successors.

4 Nixon is in fact pre-modern; in many ways he is the last genuine Democratic president. He actually preferred to keep income and in-kind transfer payments (basically the entitlement programs) more national, with less state-local discretion. This was to change drastically under Reagan and his successors.

5 Good data on these transfers will be found in Peter Eisenger, "Cities in the New Federal Order," La Follette Policy Report, Winter 1997, pp. 1-7; and Richard Nathan, "The 'Devolution Revolution' - An Overview," Rockefeller Institute Bulletin 1996, pp. 5-16.7 USA Today, 9 January 1998, cover story. As the crisis continued, it was revealed that the troops used to control street demonstrations and protests had been trained by the Pentagon, in violation of our own human rights policies (New York Times, 17 March 1998, p. A3). A week earlier, President Suharto was elected to his seventh term, and on the same day the assembly restored his "emergency powers" that he had relinquished five years earlier. (The Economist, 14-20 March 1998, pp. 39-40).

6 Gwendolyn Mink, Welfare's End (Ithaca: Cornell University Press, 1998), p. 133. 7i>USA Today, 9 January 1998, cover story. As the crisis continued, it was revealed that the troops used to control street demonstrations and protests had been trained by the Pentagon, in violation of our own human rights policies (New York Times, 17 March 1998, p.A3). A week earlier, President Suharto was elected to his seventh term, and on the same day the assembly restored his "emergency powers" that he had relinquished five years earlier. (The Economist, 14-20 March 1998, pp. 39-40).

8 U.S. Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers 1996, July 1997.

9 Paul F. Pineo and Lora Lumpe, "Recycled Weapons American Exports of Surplus Arms, 1990-1995," Federation of American Scientists Web site, May 1996.

10 Katharine Q. Seelye, "Advocates of Abortion Rights Report a Rise in Restrictions," New York Times, 15 January 1998, p. A14.

11 "World Economic Survey," The Economist, 20 September 1997, p. 38.

Originally published in the April/ May 1998 issue of Boston Review



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