The Recession and the State

Since the signing of the Treaty of Westphalia in 1648 the nation State has played the lead role in international relations. For while the internal make-up of the State has undergone several profound evolutions, in Europe from monarchy or empire down the path towards democracy, the characteristics of the international system have appeared to remain more constant. However, over the past twenty years or so there have been an increasing number of observers who have advanced the idea of a “decline of the state”.

Citing the increasing disillusionment with politics and the mounting influence of non-state actors such as multi-national firms, regional and international institutions and the ballooning role of pressure groups and NGO’s, academics such as Susan Strange declared a new era in International Relations. A new system in which States faced with issues which cannot be dealt with on a national level, such as terrorism, crime or climate change, no longer enjoy a monopoly of power, and will see their actions constrained by increasingly assertive and powerful non-state actors. Their authority eroded, they will no longer be the unquestioned and unchallenged kingpins of the international system.
The economic quagmire in which the world now finds itself entrenched provides a valuable opportunity to analyse the role of the hypothesis of a decline of the state. First of all, it is necessary to state that no state has yet collapsed as a result of the crisis. Similarly, calls for an international regulatory body have failed to take shape, and fiscal and monetary responses have emanated from national governments rather than from international or regional institutions. Even the European Union, often held aloft as a shinning beacon of hope for regional integration, has been unable to encourage member countries to form a single cohesive response to the economic turmoil, and the ECB has been widely criticised for its intransigence with regards to interest rates.

However, the IMF which had struggled to find a raison d’être in recent years has been infused with a new sense of purpose, much needed funding, and importantly states, led by Mexico, who are once again keen to do business with it. Indeed, the IMF is perhaps a prime example of an international institution which highlights the vulnerability of the state, its structural readjustment programs and other fiscal restrictions clearly violating the notion of sovereignty which lies at the heart of the Westphalian order.

In the introduction to her book “The Retreat of the State”, Susan Strange places particular emphasis on the importance of public opinion as opposed to academic opinion. Since the onset of the financial crises the public has not turned towards an NGO, the World Bank, or the large corporations, but rather they have demanded a response from the state. Although this would seem to convey the fact that the state remains the central actor, is this is really a sign that the State still remains authority over its territory and population. The fact that the so many states were forced, by the fear that a failure to do so would lead to a sort of financial Armageddon, to pour vast quantities of liquidity into both banks, insurance companies, and even manufacturers is surely as much a sign of the constraints that are placed on the state as it is of its pre-eminence.

The public’s faith in the abilities of large firms and in particular the banks has been profoundly undermined, pressure groups are increasingly in danger of being drowned out by fiscal imperatives and fretting central bankers, and the temptation to use nationalism to distract increasingly malcontent citizens risks undermined regional and international institutions. Do these factors dictate that the State’s authority will be restored and the principle of sovereignty restored to its once lofty perch?

The answer of course is no. For while world trade flows have sharply dipped and people have once again turned towards the state for a solution, this does not change the fact that we live in a globalised world in which high levels of interdependence render futile the efforts of single state units. Climate change can no more be countered by America, than the current recession can be ended by Alistair Darling and the British Exchequer. The nation States autonomy is significantly curtailed by the reality of this complex and interlinked world, and while the nation state is by no means about to disappear, its absolute power is no more.