Contours of the Illiberal State

Assembling the Smart Economy: A Typology of State Intervention Patterns Boris Vormann and Christian Lammert The era of liberal ascendance seems to have come to an abrupt end-and the notion of an imminent post-national age with it. The state is back. In fact, it never left. But the smart economy and its techno-scientific promises of big data, tracing technology and the internet, as we argue, obfuscate our view from the continuing importance of government politics. We contend that this invisibility of political agency has helped prepare the ground for the rise of illiberal states. This book seeks to salvage a richer understanding of state activity at a moment of renationalization and democratic crisis. It dissects the ways in which the context of the US state, presumed to be the most-liberal and least-interventionist possible, has in fact always been more than just a market fixer. This book fleshes out patterns of state intervention in globalization processes. It does so in historical perspective and with a planetary scope. While the smart economy for many seems on the horizon, we contend that the sanguine view of a post-statist order that it insinuates are premature. The essays collected here pull into view the active roles of governments that have been and still are necessary to make global flows of goods, people and capital across vast distances possible. While the post-Cold War era was dominated, both in academia and political practice, by the assumption of ever-integrating networks of trade and interaction that rendered the state unnecessary, this perspective was often more a normative and ideological wish than an empirical truth. As we contend, any vision of a Green New Deal or of a smart and truly sustainable economy needs to be based on an understanding of labor in global production and of the importance of the political. In a comparative perspective that includes Canada and Mexico, we trace the active role of the US state in facilitating global circulation along the logistical supply chains, communication channels and inter-urban travel itineraries of the smart economy and its antecedents. Ultimately, in pointing out the continuities and types of state intervention as a market enabler, shaper and developer across different temporal and national orders, this book helps to sketch out the contours of a political present in which the state is again increasingly seen as the key political actor. However, while earlier state formations incorporated certain social responsibilities of the state vis-à-vis its constituencies (such as the protection of political and social rights), the illiberal state is risking to revert back to its proto-liberal functions as a mere guarantor of economic rights and a facilitator of circulation. Liberalism in Crisis Until very recently, the expansion of markets seemed both inexorable and desirable. Binding societies together through networks of trade, markets have been regarded in liberal thought as emancipatory and pacifying for a long time. Why would rational actors do anything but maximize their value and interact peacefully? Smith, Ricardo and many others after them gave an unequivocal answer to this question: they would not. And yet, recent counter-movements to liberal globalization are forming in Western liberal democracies. What Syriza, Brexiteers, Podemos and Trumpists share, despite their radically different political positions, is a critique of these axiomatic assumptions. Not everybody is benefitting from globalization and global trade in similar ways. In fact, certain groups are clearly losing. This fundamental crisis of liberal democracies coincides with the rise of a new economic paradigm. New ways of amassing and analyzing data, geo-sensitive tracking technology and new means of communication and transportation are beginning to radically reshape the spatial and social division of labor. We use the term "smart economy" to denote those arrangements that emphasize the role of technological innovation and market solutions in the future of work. This umbrella term captures debates and narratives that fuse tropes of technological utopianism and economic determinism to create visions of what might appear as an impending, best of all possible worlds. Building on ideas of a postindustrial knowledge society, a flurry of new terms and concepts have been coined over recent years to capture different aspects of this emergent economic structure: the sharing economy (Sundararajan 2016; Albinsson and Perera 2018), the zero-marginal-cost society (Rifkin 2015), the green economy (Kenis and Lievens 2015), the digital platform economy (Huws 2014; Ng 2014; Dyer-Witheford 2015; Scholz 2016; Srnicek 2017), the gig economy (Mulcahy 2016; Tolley 2018), cognitive capitalism (Rindermann 2018), the second machine age (Brynjolfsson and McAfee 2014), the no collar economy (George and Buitrago 2017)-the list could easily be extended. What these terms share is a sense of novelty and a strong faith in the progressive tendencies of technological development. As the argument goes, by sharing goods and services, and by using them more efficiently through smarter allocation and re-use, we stand to develop more environmentally-friendly societies and to avert the worst effects of climate change. In a striking historical rebirth of the postindustrial society, technology- and market-driven developments are portrayed as inevitable, and ultimately beneficial to all. We do in part agree with those more optimistic discourses of the smart economy that tracing and tracking technology, in combination with other technological advances in communication and transportation have matured into an emergent technological paradigm that has already begun to revolutionize the spatial organization of work. E-commerce and the rise of the gig economy have emphasized the importance of speed to market. Coupled with a renationalization of economic discourses as witnessed after Brexit and the election of Trump, this might foreshadow a return of manufacturing to the North Atlantic. But while we share the assumption that technological innovation ushered in fundamental changes in the past-from the steam engine to the telegraph, the container to the internet-and might do so again, we are much more skeptical when it comes to notions of inexorable progress. We also disagree with the idea that processes of technological development and economic restructuring are external, overcoming us from the outside. In fact, they are highly political and the state remains a key actor on multiple scales-but oftentimes the enabling work it conducts is hard to trace. The articles united in this book look back at earlier historical formations and compare different cases to sketch how the smart economy is beginning to alter the social and spatial organization of work. But unlike many other treatments of this matter, this book puts a particular emphasis on the persistent role of the state in establishing and maintaining technological networks and new divisions of labor. Foregrounding the spatial politics of emergent economies of the future in such a manner, we seek to raise questions of political legitimacy and social justice. It might seem paradoxical to focus such an analysis of an impending economic paradigm and new state patterns on the United States. The US has typically been regarded as an exceptional case. This is the country where, at first glance, state intervention would seem most unlikely. The mythology of American exceptionalism is based on precisely that assumption of a reticent state apparatus. The land of the free was built as a contrast to the feudal absolutist states of Europe, its revolution led to government by the people-not central state power-as the key principle of societal organization (Hartz 1955; Lipset 1990). Freedom was often envisaged in these national mythologies as a correlate of markets and individual entrepreneurialism-a vision that social scientists see as a feature of US-American difference and uniqueness to this day (e.g., Hall and Soskice 2001). Echoing a critique of American exceptionalism in state-market affairs (e.g. Eisner 2011; Panitch and Gindin 2013; Orren and Skowronek 2017), we do not buy into this narrative of the liberal market economy, but rather use the United States as a case in point to outline the materiality and political nature of global restructuring in the smart economy in the seemingly most liberal of all states. As such, the book contributes to a more recent strand in American Studies that has grown more skeptical vis-à-vis the exceptionalist paradigm (Pease 2009; Fluck 2011 and 2016). While many of the transnational literatures (e.g., Tyrrell 1991; Thelen 1998; Fishkin 2005) that have emerged since the end of the Cold War equate post-exceptionalism with post-nationalism, however, we insist that we have by no means arrived at a moment where either state or nation are overcome (see also Vormann 2014 and 2018; Lammert et al. 2018). Instead, we seek to move beyond exceptionalism by highlighting the ideal-typical features of state activity that are common to all types of national contexts and that are fundamental to ensuring circulation. The Roots of the Smart Economy How do political actors and institutions facilitate technological change, build infrastructures and securitize circulation to make globalization work? By shifting the attention from debates on financialization and the footloose nature of capital, so dominant in globalization literature, to the spatial and physical dimensions of economic processes, our analysis offers new vistas on the persistent role of states and on the actual viability of green economy utopias. While state-market relations, the spatial organization of production and consumption, the role of political institutions and actors, are all historically specific, we can see continuities that the smart economy shares with earlier political economies, from the 19th century rise of national economies to the Fordist and flexible economies of the 20th century. As a historical perspective reveals, the state was at no point antagonistic to the market, but always took on facilitating roles. If its visibility and patterns of intervention shifted over time, state and market have always been intricately interconnected and codependent. How exactly the state intervenes in markets matters enormously. As we shall see, the specific constellations of state-market relations have serious implications for democracy. Broader changes in production regimes both presuppose and result from changes in the configuration of state entities. These changes are functions of many factors: shifts in the hegemonic ideological assumptions about statehood and market efficiency, transitions in the spatial set-up of production networks, exogenous crises and shocks, to name but a few. Ultimately, democratic legitimacy was at no point an essential requirement for these arrangements to produce flourishing markets. But in the past, some of them did create certain conditions that made democracy more likely than others. Those were historical periods, when liberalism was extended from its economic meaning (free markets and small states) to its political dimension (including political and social rights). A brief historical synopsis helps undergird this crucial point. In the 19th century, the emergence of national economies coincided with the consolidation of the modern bourgeois state. The establishment of canals, postal systems, railroads and telegraphs created national systems of circulation and exchange that were heavily financed and subsidized by the state. In turn, the central state solidified and professionalized to govern and coordinate industrialization processes and to reinvent markets as large-scale abstractions (Braudel 1983; Polanyi [1944] 2001; Slater and Tonkiss 2001). The expansion of market networks to a continental scale in North America presupposed the actual installation of federal governing capacities and the professionalization of the administrative state (from civil administration, to the army, and business regulation; see Skowronek 1982). At that point state activity revolved mainly around the enforcement of property rights and law and order. Security and the establishment of a framework for wealth creation also created the backdrop for what T.H. Marshall later conceived of as civil citizenship, that is, participation in society as an economic actor on the market place (Marshall [1950] 2009). In the North Atlantic world, this general framework thereby also allowed for the manifestation of new power struggles between rising interests, notably the emergent middle classes, labor and industrial capitalists. In essence, these contestations later gave rise to claims for political participation, inclusive policies and governmental responsiveness: the Marshallian idea of political citizenship (Marshall [1950] 2009). But it would be a mistake to conclude that the progression from civil to political (and ultimately social) rights were following any clear and preordained teleological progression. These rights had to be claimed and fought for. The Great Depression was the key turning point toward a Fordist economy. New Deal legislation in the United States contained the rationale of Keynesian-Fordist macroeconomic management through (anti-cyclical) investments and redistributive mechanisms. Ensuring aggregate demand and full employment became principle targets of government intervention (Blyth and Matthijs 2017). As such, the Fordist compromise between labor, capital and the state allowed for a national nexus of mass consumption and mass production through redistribution while creating channels of responsiveness through which the state could be held accountable. This spatial arrangement of the economy also allowed labor to leverage collective bargaining powers. In this phase, state intervention was the most visible. The emancipation of an industrial proletariat that organized in growing unions was but one dimension of a gradual integration of heretofore marginalized populations, which later included women and African-Americans, although only to a certain degree. The social and political integration of those groups gave rise to the principle-never fully realized in practice-that people needed specific economic resources in order to participate in the developing and expanding democratic system. T.H. Marshall captured the idea that some goods needed to be protected from the market-or "decommodified"-in what he called social citizenship rights. As redistribution, decommodification and regulation facilitated upward mobility, the state became the principle agent in mitigating social risks. The scope of this liberal state exceeded the tasks of ensuring economic freedom and securing trade, but reflected the principles of political liberalism (such as universal voting rights, religious and free speech) and assured the institutional mechanisms (through redistributive and regulatory measures) to socially maintain it. The modern welfare state was openly interventionist-and therefore also vulnerable to critique from both sides of the political spectrum: From the left, which accused it of an inescapable state capitalism that subjugated all spontaneity and desire to technocratic and instrumental rationality, and from the right, which highlighted the paternalism of the state, the utility-maximization of public actors, and the fatal tendency toward totalitarianism. After the crises of the 1970s, Hayekian critiques of the central state and Friedmanite visions of a supply-side economy gained currency and entered an uncanny alliance with progressive calls for individual liberalization. New technologies in communication and transportation fully undermined the Fordist compromise and made global production networks economically possible. Ostensibly, the state retreated. In reaction to the (partly self-imposed) global pressures, state entities from local to federal governments were reenvisioned as "competitive" (Cerny 1999), "entrepreneurial" (Harvey 1989; Mazzucato 2015) actors whose chief goals became low inflation rates and the attraction of global flows of capital and high-skilled populations. Competitiveness in the flexible economy implied downsizing and restructuring the welfare state as well as the reinvention of education and labor markets to flexibilize workers and maximize "human capital" (Becker 1964). On a macro-economic level, this shift implied the deindustrialization of major regions in the US and the rise of what some described as the knowledge-based and service-oriented "postindustrial society" (Bell 1976). On a micro-level, it led to the shift of social risks towards individual self-responsibility (Hacker 2006). As austerity became the new mantra on both sides of the Atlantic (Peck 2010; Blyth 2013), states restructured and responsiveness decreased-a development aggravated by skyrocketing inequalities and the ensuing uneven voice in the political system. The slashing of public expenditures in social services and the radically-reduced procurement of public goods also severely limited upward mobility, amplifying the lack of trust in establishment politics and the legitimacy crisis currently under way (Blyth and Matthijs 2017; Hopkin 2017). As an increasing number of scholars point out, the state never really disappeared in the flexible economy, but simply changed in function and became less visible. "American Amnesia" (Hacker and Pierson 2016) contributed to a myth of statelessness in which the "hidden" (Howard 1997), "submerged" state (Mettler 2011) compounded the problem of lacking responsiveness, while at the same time being highly "entrepreneurial" (Mazzucato 2015) and "innovative" (Block and Keller 2011). This more recent debate stands in sharp contrast to popular notions of a powerless state beleaguered by globalizing pressures. Indeed, the illiberal state is highly functional-but its actions lack accountability and are reduced to the bare minimum of enabling economic exchange in a proto-liberal sense. As we argue in this book, in large part the crisis of legitimacy of political actors is a result of an invisible, technocratic illiberal state whose social and political purpose has been stripped off and whose main tasks focus on the facilitation of flow. But since the state cannot 'go away' the utopian notions of the smart economy need to be weighed against the destructive potentials of a fully depoliticized technocracy. Is it a coincidence that the crisis of legitimacy which recently gave way to anti-establishment movements from Trump to Brexit and Syriza coincides with the emergence of the smart economy? On the surface, technological advances seem to have reached new heights, obliterating the role of the state in markets. It is perhaps not a surprise, then, that the state seems even less legitimate under conditions that seemingly render it obsolete. And so one might begin to wonder whether the smart economy could even solve the crisis of democracy in facilitating new modes of social organization beyond spatial and political constraints. We decidedly reject this claim. A Typology of State Action It is no news to state theorists and economic sociologists that free markets are ultimately a utopian idea. Property rights need to be ensured, currencies stabilized, and contracts enforced. Without law and order-a minimum of security for trade to happen-and without these preconditions in place, markets cannot exist. Social contract theorists and early liberal political economists of the 17th and 18th century, from Thomas Hobbes to John Locke to Adam Smith, agreed on these basic needs. In what is one of the most well-known passages of The Leviathan, Hobbes maintains that without the order provided by the state, there is "no place for Industry; because the fruit thereof is uncertain; and consequently no Culture of the Earth; no Navigation, nor use of the commodities that may be imported by Sea [.]" (Hobbes [1651] 2008). As Hobbes famously assumed, this state of affairs characteristically had "no account of Time; no Arts; no Letters; no Society; and which is worst of all, continual fear, and danger of violent death [.]." Hobbes shares this insight with Adam Smith who, some 120 years later and at the cusp of the industrial revolution, took the argument even further. Although often cited and credited for his concept of the invisible hand and the coordinating function of markets in expanding divisions of labor, Smith was acutely aware of the need for state protection. With reference to what today's economists would describe as cases of market failure, Smith pointed out that markets could only thrive under conditions where states provided a stable framework. Even more than that: Book V of his Wealth of Nations goes into great lengths to elucidate how the government needed to build infrastructures and provide national defense and other public goods (Smith [1776] 2003). While neoliberals of the past four decades have strongly emphasized the shortcomings of the state and predicted its impending decline (e.g., Ohmae 1995; Katzenstein 2005), the 2008 financial crisis has bolstered a heterodox strand of political economy literature at the fringes of main-stream economics that points out the persistent importance of state interventions in globalization processes. Building on prior work by authors such as Theda Skocpol et al. (1985) or Fran Tonkiss and Don Slater (2001), Jamie Peck (2010), Suzanne Mettler (2011), Mark Blyth (2013), Stephan Leibfried et al. (2015), Mariana Mazzucato (2015 and 2018) and many others have pointed out in one way or another how markets always co-depend on state institutions. It would not be very difficult to extend this list, especially with titles after the global financial crisis which, at least on the level of scholarly debates, seem to have worked to profoundly question market fundamentalist thinking. We build on this existing scholarship to outline patterns of state activity as it facilitates the building of global production networks. However, we differ from this existing literature in what we see as a crucial point. Instead of deriving our typology from institutional capabilities or an analysis of state investments in a particular policy field, we zoom in on the interactions of state actors at various levels of government and the dynamic arrangements they enter to produce new spatial economies. In other words, we focus our analysis of state intervention on a coherent whole. Rather than looking in an additive manner at individual policies of the state in different subfields and on different levels-such as its educational or transportation policies under the influence of global competition-we reverse the analytical perspective. We use circulation as a methodological tool to understand how states facilitate expanding markets by ensuring flows of people, capital and commodities. As such we can draw into one analytical universe what might otherwise be regarded as incoherent and detached individual policies. And we can do so by tapping into a burgeoning social science literature on the social functions and implications of infrastructure (Boutros and Straw 2010; Cowen 2014; Angelo and Hentschel 2015; Burchardt and Höhne 2015; Vormann 2015; Easterling 2016; Peck 2017; Chua et al. 2018; Danyluk 2018; Klinenberg 2018; Vormann and DeDauw 2018). Ultimately, we contend that the smart economy can be governed with-out any necessary reference in rhetoric or practice to liberal democracy. In fact, democracy might be a hindrance to the efficient resource allocation and productivity increases-as the case of China, above all, seems to suggest. Paradoxically, given the current crisis of liberal democracy, which is an immanent crisis born of a surplus, not a lack of technocracy, political liberalism seems to be undermined by economic liberalism (Brown 2015; Lammert and Vormann 2017). The illiberal state governs the smart economy in a manner absolved from questions of democratic legitimacy and reduced in its functions to the bareknuckle role of the enabler, shaper and developer of markets and circulation. These are the three core functions that states fulfill in historically specific ways in order to make circulation possible (see table below). The foundational work of the state includes its facilitation of a basic market framework. As a market enabler, the state uses its monopoly on the legitimate use of violence and its capacity to tax so as to codify property rights, enforce contracts and legal rights, ensure domestic security and order, and build the basic communication and transportation infrastructures (from railroad networks to highways) that enable circulation. In addition to constructing and institutionally stabilizing trade corridors, the state also harmonizes trade through standardization and procures the transactional environments and legal architectures that allow for frictionless circulation. Finally, the state rallies the factors of production: by mobilizing and immobilizing people and resources, by clearing, parceling and consolidating land, and by ensuring demand either through redistribution (in the Fordist context) or through subsidized cheap credit (as in the flexible economy).