Estudio del estado del arte

Historically, control over interest rates has allowed governments to exercise some influence over other major economic indicators such as the rate of inflation. For this reason it has been considered a vital tool of economic policy for any government seeking to manipulate the economy to achieve certain goals like full employment and the redistribution of wealth through taxation or the provision of welfare goods (characteristic of the post-war Keynesian consensus period).

One of the first acts of the British Labour Government on assuming power in the summer of 1997 was to hand over the control of interest rates to the Bank of England. In doing so, then Chancellor (now Prime Minister) Gordon Brown was in effect admitting that government control over the economy was impossible in an age of globalisation, and that henceforth social democratic parties, like the British Labour Party, would have to work with the forces of global capitalism, rather than against them. From a critical perspective actions like these represented a fundamental shift in the balance of global social forces in favour of capital and against labour. Interestingly, if we fast forward to 2008–9, it becomes apparent that financial re-regulation of markets is now very much back on the international political agenda. In the absence of regu- lation, competition in financial markets has led to irresponsible loose lending and increasingly risky forms of investment, leading to a massive failure in public confidence (which is vital to the smooth functioning of contemporary capitalism) and a near collapse of global financial markets. In this context, there have been growing demands that states once again assert a

It follows from this discussion of the state system and world order, that power cannot be under- stood solely in terms of the military and/or economic might of the state. Clearly, power is exercised directly by states in some situations. In ‘making the world safe for capitalism’, the USA has inter- vened in conflicts all over the world in order to try to influence the outcome in ways which favour global capitalism. However, power is also exercised through a range of other social institutions, and works to support a particular kind of social order. The state supports a capitalist order. In so doing, the state supports particular kinds of power relations that exist among social groups: for example, the power of business and commerce over workers, the power of multinational corporations over local communities dependent upon the employment it generates and the power of currency speculators, investors and traders in basic commodities to shape the global economy and influence the distribution of wealth throughout the world. Social and economic power is also exercised insidiously through the spread of certain ideas and beliefs in society that work to legitimise the existing order.

degree of control over markets. It is doubtful, however, that this trend really represents the reassertion of labour power, since the ensuing recession has led to the loss of hundreds of thou- sands of jobs across the world and, moreover, many ordinary tax payers will ultimately foot the bill for the bank bail-out regardless of whether or not they benefited from the initial financial ‘boom’. It seems that we are now living in an age where the state’s role in the economy has been reduced to that of intervention in the interests of ‘crisis management’.

Figure 4.3 Never a frown with Gordon Brown? The decision by the incoming Labour Government in Britain in 1997 to hand over control of interest rates to the Bank of England showed the increasing limitations on states to act as they wished in the face of global financial pressures.

Institutions and world order

Unsurprisingly, Critical Theory has made a major contribution to our understanding of world order and institutions. We have already seen how a critical conception of the state leads to a particular view of the nature of world order. At this point, it is helpful to develop this notion of world order a little further and to attempt to explain how it helps us to understand the role of international institutions such as the International Monetary Fund and the World Bank. As we saw above, in the post-Second World War period the state has become ‘internationalised’ in the sense that it has become the domi- nant form of political organisation across the world. The state has become internationalised in a second sense; its traditional regulatory functions are now performed by different states and organis- ations. If we think about the state in terms of what it does, the control and regulation of capitalism, rather than as an entity or ‘actor’, we see that these functions are now dispersed among different states in the world and among a range of international institutions and regimes.

The Gramscian notion of transnational class alliances and hegemonic domination has been suc- cessfully applied to the conception of world order. Critical Theorists adapted this idea to suggest that the dominant state in the world creates order on the basis of ideology. For example, the Bretton Woods System (BWS), which was discussed at greater length in chapters 1 and 2, would not have