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Deregulation, governability and peace

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By Maria Alejandra Madi

In recent decades, the emergence of the neoliberal agenda has demonstrated the intellectual victory of Hayek’s ideas about the supremacy of the competitive economic order, the critique of interventionism by governments to promote economic growth and the relevance of price stability to promote economic growth in a competitive environment (Hayek, 1995). In the economic order, the principle of competition is, par excellence, the principle that guides the generation of wealth in an institutional context that emphasises individual freedom. As society becomes more complex, its survival depends on the selection of rules that reaffirm the primacy of the economic order where market competition is preserved.

Since the 1970s, the advance of the process of economic deregulation has been supported by the legitimization of this discourse on neoliberalism. Current concerns about social justice and peace in the global order demonstrate the validity of the ideas in Eric Hobsbawm’s Globalisation, Democracy and Terrorism, published in 2008. Throughout the book, the reader is presented with inner tensions that shape social reality after lengthy deregulation. Hobsbawm describes the current challenges to nation-states trying to cope with issues of public order and changes in the international balance of power.

Indeed, there is world-wide evidence that indicates serious threats to social cohesion and justice in current capitalist societies. Considering those threats, Hobsbawm sharply notes that:

They seem to reflect the profound social dislocations brought about at all levels of society by the most rapid and dramatic transformation in human life and society experienced within single lifetimes. They also seem to reflect both a crisis in traditional systems of authority, hegemony and legitimacy in the west and their breakdown in the east and the south, as well as a crisis in the traditional movements that claimed to provide an alternative to these (Hobsbawm, 2007: 137).

The extraordinary acceleration of globalization since the 1970s has been characterized by some relevant features. First, contemporary free-market globalisation has ultimately led to an increase in economic and social inequalities not only within states, but also internationally, despite the presence of a decreasing trend in extreme poverty. Second, the self-regulated market has undermined the ability of nation states and welfare systems to protect those who rely on income from wages or salaries. Third, considering the social impacts of globalisation, recent evidence indicates threats to social cohesion and justice in current capitalist societies. Finally, the deep cultural impacts of globalisation have been strengthened by the diffusion of common values and behaviours, the introduction of which have been favoured by local elites.

Besides these social and economic challenges, the collapse of the international balance of political power since the Second World War has fostered new trends. Although the number of international wars between sovereign states has declined since the mid-1960s, the number of conflicts within state frontiers has multiplied. The constant presence of arms and violence is an expression of the growing complexity of the objectives, actors and actions involved in the interstate and civil conflicts. In our times, it is difficult to establish a clear distinction between the times of “war” and “peace”, such as those related to the Middle East and Iraq. Indeed, these conflicts have become endemic and can continue for decades. Looking back to the 20th century, the roots can be traced back to the collapse of the post-WWII international balance of power. Since the end of the Cold War there has been no global authority able to control or settle armed disputes. Although the territorial states remain the only effective authority, they have lost their traditional monopoly of armed force. Nations and nationalism have been affected by the end of the duopoly of the superpowers after 1989. In this setting, especially since September 2001, the “war against terror” is an expression of the recent overall challenge to public security that requires additional and special effort (Hobsbawm, 2007).

The contemporary scenario threatens individual freedom, engenders insecurity in social relations and puts pressure on the control on individuals. It is characterised by a rise in political violence. The constant presence of arms and violence is an expression of the growing complexity of the actors, objectives and actions within interstate and civil conflicts. The conflicts, such as those we observe in the Middle East, have become endemic and can continue for decades. There seems to be a general crisis of state power and state legitimacy, that is to say, the crisis is related to the “so called sovereign–state” and the challenges it faces when attempting “to carry out its basic functions of maintaining control over what happened on its territory” (Hobsbawm, 2007:51). Indeed, public security requires special efforts at the beginning of the twenty first century since the current institutions are not coping with their main task: the control the public order.

The political, economic and social dimensions of the recent transformations represent a rupture in relation to the relative order of the Cold War era (Leeson, 2003). From a national perspective, the redefinition and reorientation of the scope of the state actions have re-shaped the relations between the state and corporations. The social and economic impacts of the global governance rules under the Washington Consensus need to be viewed in the context of global capital accumulation dynamics where the process of investment is increasingly becoming transnational. Nevertheless, the international dimension of investment is overwhelmed by tensions. The transnational corporation is nation-based but its reproduction is part of the reproduction of capital at the systemic (international) level. The challenges of growth and development at the beginning of this century are turning out to be more complex and reveal that the world increasingly seems to require supranational solutions to supranational or transnational problems.

In the framework of economic integration, global investors punish those governments whose economic policy options do not favor monetary stability. Indeed, domestic economic policies could potentially succeed when governments adopt not only the right macroeconomic policies, but also implement financially prudential measures and supervision practices. However, there is no global authority to assume these political decisions. Neither the World Bank, nor the International Monetary Fund, nor even the World Trade Organization is able to do this (Hobsbawm, 2007).

Power, finance and global governance are related issues that shape livelihoods. Considering the evolution of the international system of rival political powers, it is time to rethink the current forms of power, the construction of national identities and the connections with the world-economy. In truth, dollar diplomacy has turned out to require not only a set of recommendations for global economic integration, but also a process of homogenization of attitudes and behaviors all round the world (Rosenberg, 2003). Indeed, the access to international finance interacts with cultural features. In this scenario, tensions between private money, consenting financial practices and domestic public objectives have emerged in a context where the implementation of global governance rules have resulted in a particular way of reorganizing economies and societies. In this setting, autonomous domestic economic policies are virtually impossible.

Contemporary political, social and economic challenges should be analyzed in a broader context and in a broader and longer perspective. Indeed, Hobsbawm has attempted a comprehensive reflection on the human condition at the beginning of the twenty first century. According to his analysis, an “age” of economic instability, social insecurity and barbarization is emerging.

Taking into account this background, is the prospect of peace remote in the 21st century?   While not wanting to express firm opinions on the future, we need to seriously think on Hobsbawm’s pessimistic view of the world’s future:

A tentative forecast: war in the twenty-first century is not likely to be as murderous as it was in the twentieth. But armed violence, creating disproportionate suffering and loss, will remain omnipresent and endemic – occasionally epidemic – in a large part of the world. The prospect of a century of peace is remote. (Hobsbawm, 2007: 29-30)


Hobsbawm. E Globalisation, Democracy and Terrorism. London, Abacus, 2007

Gonçalves , J. R. B and Madi, M. A C. “Globalisation, Democracy and Terrorism by Eric Hobwbwm (book review)”, International Journal of Green Economics, 2009.

Hayek. F. “Contra Keynes and Cambridge: essays, correspondence”, in B. Caldwell (ed.), The Collected Works of F.A. Hayek, volume 9, Chicago: University of Chicago Press, 1995.

Leeson, Robert, Ideology and the International Economy: The Decline and Fall of Bretton Woods, Palgrave, MacMillan, 2003.

Rosenberg, Emily, Financial Missionaries to the World. The Politics and Culture of Dollar Diplomacy,1900-1930. Duke University Press, Durhan & London, 2003.

Madi, Maria Alejandra. “Is the prospect of peace remote?’ WEA Pedagogy Blog, 2015.


From: pp.5-6 of World Economics Association Newsletter 5(2), April 2015


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1 response

  • Greg Gerritt says:

    It may be an accurate depiction of what is happening, but as the global economy deteriorates due to ecological collapse and climate change economies ruled by corporations will fail ever more quickly. What we need is a democratically controlled shrinkiage of economies in the west, starting with dismantling the military industrial complex and the national insecurity state.

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