Project Syndicate The Evolution of Modern Political Power Oct 27, 2023 JONATHAN IRA LEVY

Project Syndicate

The Evolution of Modern Political Power

Oct 27, 2023

JONATHAN IRA LEVY

From the rise of large, bureaucratic states in the early twentieth century to the triumph of neoliberalism more recently, shifts in governance models cannot simply be reduced to the natural political instincts of those who find themselves in power at any given moment. There are much larger, and subtler, dynamics at work.

CHICAGO – Where power truly lies is not always clear. In 1998, US President Bill Clinton was certainly among the most powerful people in the world. Having triumphed in the Cold War, the United States had become what French Minister of Foreign Affairs Hubert Védrine called a hyperpuissance – a superpower in terms of both hard and soft power. Notwithstanding the Monica Lewinsky scandal, America’s “New Economy” was roaring, and Clinton was still polling well after his smashing re-election victory in 1996. American-led globalization was on the march, as was representative democracy.

A central feature of the neoliberal globalization of the late 1990s was the increasing cross-border mobility of short-term financial capital. When such “hot money” fled many East Asian economies in 1997, it caused a global financial crisis. Privately pondering convening the G7, Clinton wondered about the creation of a “Bretton Woods II” to succeed the international monetary system that had underpinned the national regulation of global financial capital since the end of World War II.

As he explained in a private phone call to British Prime Minister Tony Blair, “Bretton Woods assumed 50 years ago that no matter what, the issue would be to find enough money to facilitate trade and investment – not that money flows themselves would become a greater force of nature in the global economy.” Hence, Clinton even entertained the possibility of creating a new global central bank.

Fabulous Failure

But when he broached these radical ideas with his closest economic advisers, Treasury Secretary Robert Rubin and his deputy, Lawrence H. Summers, they dismissed them out of hand. Clinton, “found no takers for any version of an international New Deal,” write historians Nelson Lichtenstein and Judith Stein in A Fabulous Failure: The Clinton Presidency and the Transformation of American Capitalism. With the matter closed, the president’s “progressive instincts gave way to a neoliberalism backstopped by all the ideological and organizational firepower mobilized on behalf of the US Treasury and its allies.”

AGAINST THE CURRENT

Though Clinton’s progressive instincts were genuine, he was swimming against the neoliberal tide. Entering office in 1993, he first advocated state-led “industrial policy” and universal access to health care. But after both initiatives failed – health-care reform most dramatically – he embraced the rush toward market fundamentalism, joining many other leaders around the world. That meant deregulating industries (from telecommunications to finance), enacting tough welfare reforms, and otherwise extolling the virtues of markets.

But who was really calling the shots? Was it Rubin, the former Goldman Sachs financier, and Summers, the former Harvard University economist? Or was everyone simply being carried along by the Zeitgeist? These questions are not merely of historical interest. Around the world, governments are reasserting powers over economic life that they had relinquished at the end of the twentieth century. But as was the case a quarter-century ago, this outcome cannot simply be reduced to the natural political instincts of the individual men and women who happen to find themselves in power.

While Lichtenstein and Stein’s excellent book illustrates this last point in spades, Harvard historian Charles S. Maier’s The Project-State and Its Rivals: A New History of the Twentieth and Twenty-First Centuries surveys what has gone wrong since the high tide of Clinton-era neoliberal globalization from much higher ground. Whereas Clinton’s politics, later reiterated by Barack Obama, aimed to inspire hope, today’s dominant political mood is rooted in fear. How did the wheel turn so quickly from the “Roaring Nineties” to populist authoritarianism, “democratic erosion,” and the broader crisis of trust in the 2020s?

THE MODERN STATE

To answer that question, Maier presents his novel concept of the “project-state,” by which he means a sovereign entity with the power to mobilize all of society behind large goals. Though the project-state has precedents going back to the eighteenth-century age of revolutions, it did not come fully into its own until the era of the two world wars.

Project-State

Winning the wars, combating the Great Depression, building social democratic welfare states, and pursuing decolonization and economic development were all examples of large societal projects. States transformed landscapes, cleared swamps, and built massive infrastructure such as dams, ports, and highways. But they also sought to transform populations, including by educating, inoculating, sterilizing, and in some cases exterminating them.

Whether they mobilized people and resources violently or through other means, the new project-states needed committed “masses” behind them. Thus, it often fell to singular charismatic political leaders – be it Hitler, Stalin, Mao, Charles de Gaulle, or Jawaharlal Nehru – to achieve the necessary critical mass, often through the organization of political parties.

But as Maier’s title indicates, the project-state had its competitors. Among these were the “resource empires” left over from nineteenth-century European colonialism and various sources of non-state “governance” and expertise such as NGOs, foundations, universities, and toothless international institutions such as the United Nations. The most powerful rival by far, however, is what Maier calls the international “web of capital.”

To map his schema onto the late Clinton administration, we might think of Clinton, in his progressive moments, as embodying the project-state; Summers, the Harvard professor, representing expert “governance”; and Rubin, the Goldman Sachs banker, spinning the “web of capital.” (As for the neoconservatives who were biding their time in Washington and eyeing Saddam Hussein’s oil-rich Iraq, they would most closely represent the legacy of “resource empires.”)

The project-state and its rivals each has its own logic and interests, but all necessarily rely on one another for sustenance. At times, the project-state embraces the logic of a resource empire, such as when the post-1945 model of social democracy was sustained by cheap oil. Similarly, the web of capital sometimes needs the state to open new markets; yet at other times, it essentially tells states what to do (such as by demanding capital mobility). While the project-state draws from governance for knowledge and expertise, governance draws from the project-state for coercive power, and from the web of capital for injections of philanthropic wealth.

Sometimes, these rivals pull and strain against one another; but at other times, their models cohere, forming what Maier calls a stable “spirit of the laws” (a reference to Montesquieu), or a broad “sociopolitical consensus” on the political-economic rules of the game. Maier emphasizes two such moments of consensus: the decades after WWII, when various iterations of the project-state reigned supreme; and the decades after 1980, when neoliberalism suffused the spirit of the laws. Today, the situation is fluid and uncertain, but presumably some new spirit will emerge.

WHERE HAVE ALL THE PROJECTS GONE?

Given the many many-sided relationships among the four rivals, Maier’s history is not always easy reading, but it is extraordinarily erudite and brimming with insight. Though it focuses heavily on Europe and the US, its scope is global.

Maier’s narrative begins in the first half of the twentieth century, when total war and then the Great Depression energized the project-state. With the start of the Cold War, most scholars began to categorize states by regime type, from liberal democracies to their authoritarian and totalitarian rivals. But Maier elides this distinction, even as he admits to some moral discomfort lumping Franklin D. Roosevelt’s America together with Hitler’s Germany.

By taking this approach, he can map out how a vast array of different project-states rose and fell over the course of the twentieth century. Fascism imploded during WWII, whereas social democracy and developmentalism petered out three decades later, and communism a decade after that. The project-state has been a mere shell of its former self ever since.

Why did the social-democratic project-state run aground in the 1970s? Some of the reasons were contingent: the era of cheap oil that the old resource empires had enabled came to a crashing end with the OPEC shocks. Following the standard historical account, Maier spends many pages showing how price inflation was both a reflection and a driver of a broader crisis of faith in social democracy. But he also suggests, more provocatively, that project-states were victims of their own success.

Some had won the world wars, but those conflicts were now in the past, as was the creation of welfare states once their basic institutions had been established. The same went for various other national projects of economic development, such as industrialization in Brazil or Soviet Russia, or the green revolution in agriculture in much of today’s Global South.

What would come after all this was accomplished? To thrive, project-states need projects – the grander the better. Efficiently running a postal service, collecting taxes, or administering national dental-insurance programs simply is not enough to sustain a project-state’s legitimacy and drive. And yet, the types of projects that can satisfy this imperative are necessarily finite. They require big bursts of energy and widespread commitments, but they soon run their course.

CAPITAL’S TRIUMPH

Thus, after 1980 or thereabouts, the project-state took a back seat, and non-state governance and the international web of capital came to the fore. As Maier shows, the web of capital solved the inflation crisis and created a new political-economic order by pushing debt onto states and households alike.

The primary lever was monetary policy, with central banks serving as expert governance institutions that operated beyond the democratic political arena. Here, Maier hedges, sometimes suggesting that non-state governance did not merely serve the interests of economic elites, while at other times acknowledging that governance was complicit with capital’s agenda.

In any case, by the end of the 1990s, capital had triumphed and consolidated a new neoliberal spirit of the laws. But, as Maier makes clear, neoliberalism was not about expanding the reach of the market, the rallying cry of its advocates, per se. Rather, it was about shifting the income distribution from labor to capital. This was to be done by any means necessary. While it sometimes required deregulation and the removal of the state, it just as frequently required the use of state power – especially American power – and the legitimacy conferred by recommendations from Harvard experts.

Ultimately, Maier suggests that neoliberalism’s triumph by the end of the 1990s was overdetermined, and that Clinton’s progressive instincts never stood a chance of influencing policy. Here, Lichtenstein and Stein’s account is a useful complement. Blow by blow, they show how Clintonian progressivism morphed into Clintonian neoliberalism over the course of eight years in office.

While Rubin had the web of capital behind him, Summers offered the academic imprimatur. But, equally important, Clinton, the quintessential politician, had no grand project. As he admitted in 1998, “Our mission has been to save government from its own excesses so it can again be a progressive force.” The moment could not have been less conducive to the project-state.

But Lichtenstein and Stein also show that neoliberals were pushing on an open door. Clinton was quite prepared to give way, owing to unique characteristics of the US project-state’s legacy. For example, as Maier, too, acknowledges, it did not take long after WWII for the social-democratic spirit of the New Deal to give way to the Cold War’s obsession with “national security.” That shift in projects set a hard limit on the influence of the left – including the labor movement – in US politics.

Clinton himself was no committed champion of unions. He hailed from a hard-scrabble, poor region of Arkansas that had been left virtually untouched by the project-state, and which became the headquarters for a global neoliberal corporation par excellence: Walmart. When in office, he and even his most “left-wing” advisers tended to keep their distance from labor. This is the “fabulous failure” of Lichtenstein and Stein’s title. Even if Clinton had progressive instincts, he refused to cultivate a progressive constituency for his most progressive policies.

To be sure, at the turn of the millennium, it looked as though Clinton’s presidency had been a fabulous success. After all, every US economic indicator was up, the American model of capitalism was seemingly the only game in town. But in Lichtenstein and Stein’s telling, Clinton fell for the “illusion” that the web of capital would somehow accomplish progressive ends if left to its own devices. Likewise, Maier suggests that Clinton’s brand of “third way” center-left neoliberalism was based on “magical thinking” from the start.

Already in the late 1990s, the model was showing cracks. After the East Asian financial crisis came the massive protest at the World Trade Organization’s 1999 meeting in Seattle. Then came the 2008 financial crisis, which Maier sees as the fulcrum of recent history. While Obama’s administration (where Summers returned to serve as director of the National Economic Council) proved competent in putting the global financial system back together, neoliberalism’s broader crisis of legitimacy was not so easily addressed. The web of capital became vulnerable as the public lost faith in the counsel of the expert classes.

Does this mean the stage is set for the project-state’s comeback? Not quite. According to Maier’s analysis, today’s populist authoritarian leaders – such as Hungarian Prime Minister Viktor Orbán, Turkish President Recep Tayyip Erdoğan, former Brazilian President Jair Bolsonaro, and former US President Donald Trump – have not so much harnessed the project-state’s latent powers as cobbled together temporary political coalitions to facilitate mafia-like corruption. Maier’s book thus leaves open the question of whether the project-state will escape the dustbin of history and be revivified and redeployed, democratically, for the common good.

TOWARD A NEW SPIRIT OF THE LAWS

Can we still forge what Maier calls “a new spirit of the laws that might expand freedom and equity and justice”? To answer that, one must consider three fundamental issues. First, history shows that the project-state has always thrived most in times of war and military mobilization. In this respect, it is suggestive that the Biden administration’s revival of early Clinton-era ideas about “industrial policy” has coincided with an uptick in saber-rattling vis-à-vis China.

But since no sensible person wants outright war, the pertinent question is whether it is possible to mobilize domestic support for transformative economic agendas without a motivating military threat. The answer is not clear. As the American philosopher William James observed over a century ago, one of the abiding challenges of modernity has been to find “the moral equivalent of war.” We can only hope that the transition to a net-zero economy will furnish people with meaning in the way that glory on the battlefield once did.

The second issue concerns the fate of US global hegemony. Lichtenstein and Stein’s book is particularly effective in tracing the new logic of US economic power – based on the centrality of the dollar – as it emerged by the late 1990s. Unlike many “resource empires” of the past, the post-1980 US no longer relied on exports of capital and goods. Instead, it ran a trade deficit with the world, financed by prodigious imports of global capital.

Under conditions of freewheeling global capital mobility, I for one do not think the project-state stands any chance of returning. On this, Clinton’s instincts were right: subordinating the demands made by capital requires international governance solutions. But such solutions are sorely lacking nowadays.

Finally, there is the matter of what neoliberalism was about all along: shifting the distribution of economic spoils from labor to capital. Maier chastises “organized labor” for failing, after 1980, to “insist with more vigor on a redistribution of income shares.” In fairness, the cards have been stacked against the labor movement for many decades. It was once its own kind of project; but like all projects, it lost steam after achieving some notable successes. Had it still been in the picture, Lichtenstein and Stein suggest, the Clinton administration’s economic policies might not have failed, because they would not have taken the shape that they did.

In 2023, the structural determinants of economic and policy outcomes seem to be changing once again, and perhaps for the better. The economies bequeathed by Clinton and his fellow “third way” politicians (such as Blair in the United Kingdom) were driven by asset-price inflation and leveraged by debt. Their gains accrued largely to owners of wealth, adding little to most people’s wages. Only when economies move forward by rewarding ordinary citizens, not a wealthy elite, can there ever be a new spirit of the laws.

Nelson Lichtenstein and Judith Stein, A Fabulous Failure: The Clinton Presidency and the Transformation of American Capitalism, Princeton University Press, 2023.

Charles S. Maier, The Project-State and Its Rivals: A New History of the Twentieth and Twenty-First Centuries, Harvard University Press, 2023.

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Jonathan Ira Levy

JONATHAN IRA LEVY

Writing for PS since 2022

4 Commentaries

Jonathan Ira Levy, a professor in the Department of History and the Committee on Social Thought at the University of Chicago, is the author of Ages of American Capitalism: A History of the United States (Random House, 2021).