Kant’s commitment to the pursuit of peace and the establishment of a just international order where states’ actions are regulated by international law is widespread among liberals today.
One of the most celebrated works on the end of the Cold War, Francis Fukuyama’s The End of History and the Last Man (see Further reading) contained much which would have been fam-iliar to Kant. Fukuyama’s dramatic phrase ‘end of history’ is not intended to imply that we face some apocalyptic future. On the contrary, in simple terms, Fukuyama argues that human history has been driven by conflict and struggle over value systems and different ways to organise human societies. The driving force behind the Cold War was the ideological struggle between East and West, communism and capitalism. According to Fukuyama, the end of the Cold War saw the ultimate triumph of Western capitalism and liberal democracy. Liberal values are now widely accepted – if not widely practised – across the world and, since communism is seemingly discredited, there is no longer a credible alternative form of social, political and economic organisation. Fukuyama’s thesis is an ironic twist on Marx’s vision of communism as the highest form of human organisation and, thus, the ultimate end or destination of human history. (See chapter 3.)
It was noted above that nineteenth-century liberal economic theorists were against state interven-tion and regulainterven-tion of the economy. However, for much of the twentieth century, liberals have been less hostile to state intervention. Indeed the economic order which emerged in the aftermath of the Second World War, in Western economies at least, saw the state playing a much greater role in directing the economic activity of private individuals and firms and providing welfare support for cit-izens – the so-called ‘welfare state’. The actual influence of Keynes in the Bretton Woods negotiations held in the USA in 1944, which were held in order to establish a set of regimes, institu-tions and agreements negotiainstitu-tions has been disputed. However, Keynesian economic theory, which supported interventionist government policies to regulate what were basically free-market economies, formed the basis of the ideas which underpinned many Western economies in the post-Second World War period.
The aim of the Bretton Woods System (BWS) was to facilitate economic growth, development and trade by providing a stable framework for international economic activity. After the Second World War the prevailing wisdom was that the cause of the war was the economic collapse and world reces-sion of the 1930s which created an unstable climate in which extreme nationalism flourished. It was believed that, when the economic climate was harsh, states immediately took action to protect their own economies. Typically, this involved measures to protect domestic markets, such as increasing tariffs. The knock-on effects of such ‘selfish’ behaviour were a slow-down in world trade and, eventu-ally, international recession. The BWS was designed to create a framework in which it would be difficult for states to act in a self-interested way when the going got tough by, at one and the same time, discouraging protectionism and providing a helping hand to countries in temporary economic difficulties.
The BWS consisted of the International Bank for Reconstruction and Development (IBRD), the International Monetary Fund (IMF) and later the General Agreement on Tariffs and Trade (GATT), now the World Trade Organisation (WTO). In the first years of its existence, it was envisaged that the IBRD, more commonly known as the World Bank, would play an important role in distributing aid to the devastated economies of Western Europe. In more recent history the World Bank has served as a source of investment, aid and loans to the developing world. The International Monetary Fund was designed to ensure liquidity in the international economy. This means that, in effect, countries expe-riencing short-term balance of trade difficulties (effectively spending more than they were earning) could borrow money and so continue to trade effectively. In the longer term, if any individual country had an enduring – or structural – balance-of-payment deficit, the IMF could insist upon changes in domestic economic policy, including the devaluation of the currency, in return for fresh loans. The General Agreement in Tariffs and Trade (which came into being a few years after Bretton Woods and has since been superseded by the World Trade Organisation) was designed to bring about a gradual reduction in trade barriers around the world.
These institutions all played an important role in regulating the world economy. However, the linchpin of the system was the US dollar. The US dollar served as the major world trading currency.
2,000
1,500
1,000
500
100
1950 ’55 ’60 ’65 ’70 ’75 ’80 ’85 ’90 ’95 1998
World exports World GDP
Exports as percentage of GDP 8.0
26.4 Index 1950 = 100
Figure 1.2 The increase in exports as a percentage of GDP since 1950.
Original source: United Nations (1995 and 1999), World Economic and Social Survey, New York: United Nations, p. 35 and p. 2.
Taken from: C.W. Kegley and E.R. Wittkopf (1999), World Politics: Trend and Transformation, 7th edn, New York: St Martins, p. 310.
The relative value of all of the other world currencies was fixed in relation to the US dollar. Since, in the post-war period, the US economy was easily the largest and most powerful economy in the world, it was believed that pegging all currencies to the US dollar would ensure confidence in the inter-national economic system.
The BWS has been described as an economic order in which the broad principles of liberalism were ‘embedded’. The system of multilateral institutions, fixed exchange rates, capital controls and trade regulation aimed to encourage the progressive liberalisation of trade among countries and to promote the principles of free-market economics internationally. However, none of these institutions or rules were incompatible with state intervention and the management of the domestic economy.
This meant that, even while encouraging a large degree of free trade and open competition, states could pursue ‘liberal welfare’ or ‘social democratic’ goals, such as full employment and the provision of welfare goods.
In recent years neo-classical, or neo-liberal, economic theory has been highly influential in the theory and practice of development in countries of the so-called ‘Third World’. The belief that the unfettered market ensured the most efficient allocation of resources, the best distribution of rewards, and the most effective means to foster economic growth continues to be widely held among élites at the International Monetary Fund, the World Bank and in many government overseas development agencies. Note that the use of ‘neo-liberalism’ (or neo-classical liberalism) in this context should be distinguished from ‘neo-liberal institutionalism’ discussed at greater length below. Neo-liberal or neo-classical economic theory has been used to justify structural adjustment programmes (SAPs) in the developing world, even though the social consequences may be very harsh indeed.
SAPs have been widely ‘recommended’ to Third World states by the IMF and the World Bank as an effective means of dealing with the related problems of poverty and indebtedness. The idea is that indebted states should try to export their way out of debt. As well as generating much needed foreign currency to service foreign debt, export-led growth strategies are held to encourage economic com-petitiveness, dynamism and growth which will eventually ‘trickle down’ to all sectors of society. At the same time developing countries are encouraged to cut back on welfare spending by the state, effectively privatising the provision of health and education services. It is argued that ultimately this will make economies more efficient. In the short term, however, ‘spend less’ means sacking govern-ment employees and slashing welfare budgets rather than buying medicines and building schools.
Meanwhile ‘earn more’ can lead to wage reduction, chopping down forests, selling off assets to foreign firms at cut price rates and so on. In recent years SAPs have been heavily criticised by NGOs like Oxfam and Greenpeace as well as by former members of the World Bank. Consequently SAPs often include some notional safety net beyond which basic services and welfare goods should not be cut.
In this chapter we employ the term ‘neo-liberal’ in two very different usages with different meanings: neo-liberal institutionalism and neo-liberal (neo-classical) economics. You should be sure that you understand the differences between these two usages.
REFLECTION BOX
Just as there are distinct strands in economic liberalism, political liberalism is not all of one kind.
Some liberals have applied the basic ideas of liberal thought as outlined above to their thinking about political community and obligation and to the nature and role of government. The insistence that indi-viduals are the best judge of what is in their interests is a powerful argument against authoritarian (dictatorial) forms of government. Liberals generally argue for representative government based on democratic principles.
One of the most celebrated liberal thinkers of the nineteenth century, John Stuart Mill, argued that government was a necessary evil. That is to say, government was necessary in order to protect the liberty of individuals, but could become oppressive and tyrannical if its power was unchecked. For these reasons liberals generally argue for a ‘separation of powers’ and ‘checks and balances’ which ensure that no one political leader or arm of government can become dominant. This basic idea is the origin of political pluralism, which means the distribution or diffusion of power across a range of institutions or among a number of ‘actors’. As we will see, so-called liberal pluralism has been very influential in International Relations, although the usage of the term ‘pluralism’ in this context is slightly different. We will return to this point later in the chapter.
In addition to the utilitarian conception of rationality, there is another strand of liberal thought which, while committed to the principle of liberty and wedded to notions of progress, has a rather different view of human autonomy and rationality. Rather than viewing rationality in means–ends or cost–benefit terms, the essence of ‘reason’ is seen to be the ability of human beings to understand moral principles. This strand of thought is associated particularly with Kant. For our purposes it is enough to say that liberals believe that the capacity to reason and to understand moral principles is universal, that is it is something which ‘all’ human beings possess. Collectively, these beliefs in human rationality, the possibility of progress, individual liberty and the dangers of unchecked power give rise to the liberal notion of universal human rights.
The various strands of liberal thought have contributed to the study of International Relations in many and varied ways. Below we will look at how liberals have viewed our key themes. But first, it is helpful to summarise briefly the core assumptions of liberalism.
Assumptions
The main points of the liberal world view or perspective can then be summarised thus:
1. Rationality and inherent good nature are the defining characteristics of human kind. Rationality can be used in two distinctive ways:
I in instrumental terms, as the ability to articulate and pursue one’s ‘interests’;
I the ability to understand moral principles and live according to the rule of law.
2. While people rationally pursue their own interests, there is a potential harmony of interests between people.
3. Cooperation is possible and is in fact a central feature of all human relations, including inter-national relations.
4. Liberalism challenges the distinction between the domestic and the international realm, claiming that multiple sets of relationships between people transcend national borders.
I Government is necessary, but the centralisation of power is inherently bad.
I Individual liberty is of supreme political importance.
From these basic propositions we can deduce or infer a number of other propositions which continue to inform liberal approaches to international relations. For example:
I If humans are inherently good and there is a harmony of interests between people, we might deduce that left to their own devices, people have no interest in prosecuting wars.
I If the centralisation of power is bad, political pluralism and democracy must be a superior form of political organisation.
I Because cooperation is possible, liberals believe it is thus possible to achieve positive changes in international relations.
I Similarly, liberals tend to emphasise the distribution of different forms of power (including mili-tary, economic, socio-cultural and intellectual forms) and influence among a range of actors, rather than focusing solely on the state.
I Furthermore, humans are important actors and possess agency to effect change.
I If reason is the defining characteristic of the human race, all people must have inalienable human rights.
I Liberalism is a universalist doctrine and so is committed to some notion of a universal com-munity of humankind which transcends identification with, and membership of, the nation-state community.
I The liberal concepts of interdependence and world society suggest that in the contemporary world the boundaries between states are becoming increasingly permeable.