The breakdown of neoliberalism as foreign policy agenda: 5 questions for David Grewal

This piece was originally featured in The New Common Sense newsletter from our Economy and Society Initiative. Read more from this edition.

In 2017, David Singh Grewal, a Professor of Law at UC Berkeley School of Law, published “Three Theses on the Current Crisis of International Liberalism,” an essay exploring the last 30 years of geopolitics and the neoliberal order. In it, he describes the comprehensive failures of international liberalism during and as a result of the shift toward globalization. In the years since, a series of global economic crises have continued to shake the foundations of the international liberal order, including the Russian invasion of Ukraine, COVID-19, climate change, the Trump administration, and others. We asked Dr. Grewal, who is also the author of the 2008 book Network Power: The Social Dynamics of Globalization, to share his insights on how these current crises shape his view of the present and future of neoliberalism.

1.) What is your overall hypothesis about the relationship between today’s crises and neoliberalism? How should we think about the relationship between our political economy and geopolitical dynamics?

I think what we are seeing at present is the breakdown of neoliberalism as a foreign policy agenda. Neoliberalism is usually used to characterize the market-oriented character of domestic political economy, not to analyze trends in geopolitics and global coordination.

But neoliberalism has an international dimension too. What the geopolitics of neoliberalism proposes is that a market-led order have pride of place in setting the terms of international relations, and that states defer to and enforce this private cross-border ordering. It proposes this, in part, as a humanitarian objective, based on the long-standing view that the globalization of capitalism is a great way of lifting people out of poverty. And if we restrict our attention to the rise of the Chinese middle class, and we ignore the complex market-state relation in China, it is arguable that many people are now living wealthier lives because of this policy agenda.

The problem is that the distributional consequences beyond urban China are very hard to determine. It is not at all clear that people everywhere — let alone in the United States — have really benefitted from this regime. Moreover, and to come to the immediate problem, the geopolitics of neoliberalism seems particularly crisis-prone, for reasons that I do not think have been well articulated.

Getting at this dimension of the problem requires understanding neoliberalism not just as an economic arrangement but as a political (and ultimately a legal) one. Politically, neoliberalism requires a “hands-tied” approach to governmental power. Thus, the geopolitics of neoliberalism tends toward a depoliticization of policy-making within and between countries: a suppression of collective decision-making to the extent that it deviates from what the private market-ordering would entail.

After the end of the Cold War, the geopolitics of neoliberalism began in earnest once international economic integration came to be seen as the means of achieving peaceable and equitable international relations globally, and not just among a Western-led alliance. This deepened economic engagement was viewed as a way to manage, even transcend, historical enmities and present differences in domestic political regimes. As a result, both Russia and China joined the World Trade Organization (WTO) and other international economic arrangements. In the background of this strategy was the sort of “end of history” thinking of the 1990s, which assumed that the relation between the market and state had been settled in existing liberal democracies that represented the form toward which all states would evolve.

We are now seeing the results of putting neoliberalism at the center of our foreign policy agenda over the last generation.

First, the focus on the market as the mechanism of international cooperation (rather than the state and its external diplomacy) has proven damaging to the developing world, especially in regions of weak or “failed” states. Indeed, since the 1990s we have seen continual, low-level war in unstable regions, with a generation of evidence now accumulating that economic reform without significant political and institutional changes is insufficient to stabilize societies.

Second, and more crucially, the position of the large developing-world democracies — India, Brazil, South Africa, Indonesia, Nigeria, Turkey, to name a few — have all declined in salient respects as economic globalization has put their nascent middle classes into competition with the rising Chinese middle class (particularly following China’s accession to the WTO in 2001). The phenomenon of the “China Shock” has been widely discussed in U.S. policy circles: it refers to the loss of manufacturing jobs after Chinese accession, and the resulting political consequences (e.g., the shift of the deindustrialized Midwest to the Republican party). We have yet to investigate the impacts that Chinese accession had on these mid-level emerging economies, and to what extent the democratic “backsliding” observed over the last decade has geo-economic roots. I suspect the story is distressingly the same.

Finally, and most immediately, in terms of international security, the greatest gamble of the geopolitics of neoliberalism was its assumption that international rivalry among great powers could be overcome through economic integration. The supposition was that the incorporation of Russia and China into the Western-led international economic system would lead to both internal democratic reforms and more peaceable external relations.

Alas, this hope has so far proven vain. If anything, the geopolitics of neoliberalism seems to have accomplished the reverse: It has empowered authoritarian forces within these countries and augmented their power abroad.

Domestically, both Russia under Putin and, more recently, China under its new president without term limits, Xi Jinping, have moved from rule by one party to rule by one person, thus confounding optimistic predictions that economic liberalization would generate political liberalization.

Internationally, one need merely skim the headlines to see that tensions between Russia and China and the United States have not only not abated but are now obviously higher than at any point since the end of the Cold War.

Thus, while almost three decades have passed since the fall of the Berlin Wall, the most that can be said for the geopolitics of neoliberalism is that its promises remain to be realized in some far-off decade. More pessimistically, but realistically, our foreign policy since the end of the Cold War has been a gamble that failed. All our investment in economic globalization has failed to bridge preexisting historical enmities even while it has undermined the relative strength of liberal democracies vis-à-vis their authoritarian rivals.

2.) Similarly, what effect has the pandemic had on the global liberal order, and/or its decay through globalization?

Let me focus not on the global liberal order, since that can have many meanings, but on the geopolitics of neoliberalism. COVID was the second nail in the coffin of that geopolitical regime.

The first was the election of Donald Trump as U.S. president in 2016. What it showed was that neoliberal globalization had become unsustainable, as a political matter, in its country of origin (so to speak). Many of us had seen that coming for some time.

COVID was the second nail in the coffin. It showed, alas, not just the failure of the borderless global economy — the “world without walls,” as WTO Director General Michael Moore called it in his book of that name from the 1990s (meant as a celebration) — it showed the failure, under present circumstances, of any real international coordination around a progressive policy agenda at the global level. We could not get agreement — even among longstanding partners and allies — on even the most modest proposals to share life-saving intellectual property or to scale up pandemic measures to deal with the fact (widely predicted and afterward realized) that vast unvaccinated populations of poor people in the developing world would generate dangerous new variants. It is now clear to anyone who is not willfully utopian that there is no progressive alternative to a world of nation-states. This means that any progressive aspiration must run through the politics of these states in order to affect change beyond them.

The final nail in the coffin — or, to shift the metaphor, the third strike — came when Putin decided to invade Ukraine. The idea that freer trade would lead to peaceable economic relations has been a favorite up to the point that the bombs start flying. As several decades of Germany’s Ostpolitik has shown, there is a lot of money to be made hoping it is true. The people of Ukraine are now paying the price for this lucrative and willful naivete.

3.) To what extent does the unionization wave currently underway in the U.S. — as well as halting steps toward increasing regulation of corporate entities and dismantling of consolidated industries — signal that a change to the neoliberal order is underway?

People across the spectrum in the United States are coming to recognize that the era of neoliberalism tried to instantiate what we might call an “impossible globalization,” a legal arrangement that cannot be universalized without undermining its constitutive foundations. The problem is what replaces it. At the moment, “de-globalization” is happening to us without any of our politicians in either party having a clear sense of what it entails or how to make it successful — which would mean turning it into an alternative globalization, not merely a curtailed version of the geopolitics of neoliberalism. Part of the problem is the near-impossibility of legislating with the appallingly undemocratic machinery of our federalism proving a constant block to majoritarian aspiration. But a lot of it is the collapse of clear thinking about transformative politics after a generation of neoliberal pablum. As the quip goes, it is easier to imagine the end of the world than the end of capitalism, as we see daily in the movies and in popular culture. And it is easier still to imagine the gradual decline of the United States than a domestic political renewal that returns us to our best aspirations, at home and abroad.

4.) In your 2017 essay, you noted that the geopolitics of neoliberalism have proven a failure — that they “failed to bridge historical enmities while undermining the relative strength of liberal democracies vis-à-vis their rivals.” Do you feel like that failure has been further proven in the past five years? Or have geopolitics and global economics shifted in unexpected ways?

Yes, I fear that my analysis there has been only confirmed in the last five years. More worryingly, here was my diagnosis of post-Cold War globalization over 12 years ago, in my first book, “Network Power” (published in 2008, but written a few years earlier):

“As the power of today’s global networks becomes increasingly coercive — because increasingly universal — we should anticipate a future reassertion of politics demanding the freedom which is achieved together through the relations of sovereignty. Pretending that globalization is on the verge of eliminating the need for politics will not help us to think clearly about that reassertion of politics when it occurs, and may, in fact, mean that we end up promoting ugly and virulent political forms — fascism, say, as opposed to resurgent democracy — without necessarily intending it.”

I point out this earlier warning not to suggest that I was somehow special in calling out the problems of globalization. In fact, I was joining a small but important chorus at the time. It was patent to anyone willing to think through the consequences of neoliberalism’s suppression of politics that a neoliberal globalization would prove not only unsustainable but highly dangerous.

5.) To what extent do you see the latest shockwaves roiling Europe —  particularly the Russian invasion of Ukraine and the European and global responses — as potentially rebuilding international liberal relations by creating closer ties among the nations of Europe, and among the U.S. and European nations?

If the post-Cold War era of neoliberalism has indeed proved an “impossible globalization,” then the question remains what alternative forms of globalization might prove feasible and desirable. This is a complex question — too complex for a brief intervention — but I would take two points as lodestars.

The first is that every geoeconomic order is always and already a geopolitical order, which means that our international economic relations need to be regulable at roughly the level at which geopolitical alliances are regulable. From this vantage, the closer relations between the nations of Europe (both in the EU and not in the EU) and the United States are appropriate, as would be an extension of cross-border market relations to durable democratic alliances elsewhere.

The second is more abstract and concerns the way that we get into things — and out of them. The great English philosopher Thomas Hobbes wrote that “As the inventions of men are woven, so are they ravelled out; the way is the same, but the order is inverted.”

This suggests to me a strategic consolidation, if not retreat, from the ambitions of an impossible globalization, as instantiated in the WTO, to something like the post-war GATT, which was an explicit geopolitical alliance of liberal countries that sought to deepen trade relations as part of a more general geopolitical alliance. We follow the same way out of this mess that we got ourselves into it. But this cannot be done all at once, of course, and it must be done carefully. That said, the conclusion of the last few decades should now be clear: we must be very careful when embroiling our country’s economy with the economies of our geopolitical rivals, whatever the supposed economic benefits of so doing.

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