Monday, July 05, 2004

Fukuyama: state building vs. nation building 

Libertarian alert: Francis Fukuyama goes statist.

Kind of. This is how the "Observer" editors describe Fukuyama's opinion piece:

"Bring back the state: Francis Fukuyama shocked the world with his 'End of History' thesis that the market would take over the role of mighty nations. But 9/11 changed all that. Now, in this exclusive article, the world's foremost economic philosopher argues that our very survival depends on stronger government."
Alas, it seems that the editors and Fukuyama have somewhat different things in mind. Writes Fukuyama:

"It is important to distinguish between the scope of states, and their strength. State scope refers to a state's range of functions, from domestic and foreign security, the rule of law and other public goods, to regulation and social safety nets, to ambitious functions such as industrial policy or running parastatals. State strength refers to the effectiveness with which countries can implement a given policy."
Throughout his piece Fukuyama laments the insufficient state oversight, which resulted in numerous recent financial scandals; he decries the fact that many post-communist and developing nations suffer from the lack of the rule of law and are incapable of protecting their own citizens; he also notes that in the post S11 world defence and security are back on the top of the agenda for nation-states.

Now, one could see this litany of complaints as a call for a bigger and more interventionist state (increasing what Fukuyama called here "the scope of the state") - this is arguably what excites the left-wing editors of the "Observer". In reality, what Fukuyama seems to be arguing for is that the states do a better job at fulfilling their core functions: defending their citizens from both internal and external threats and providing a strong framework of rules and norms for the society and the economy to function within. This is pure classical liberalism. Hence Fukuyama's observation:

"From the standpoint of economic growth, it is best to have a state relatively modest in scope, but strong in ability to carry out basic state functions such as the maintenance of law and the protection of property. Unfortunately, many developing countries either combine state weakness with excessive scope, as in the case of Brazil, Turkey, or Mexico, or they do little, and what little they do is done incompetently. This is the reality of such failed states as Liberia, Somalia, or Afghanistan. Some, such as the Central Asian dictatorships that have emerged after the collapse of the Soviet Union, manage to be strong in all the wrong areas: they are good at jailing journalists or political opponents, but can't process visas or business licences in less than six months."
All that is true, and sadly nothing new, but to get his point across Fukuyama puts up a few unnecessary straw men.

Yes, Reagan and Thatcher were both in favour of reducing the scope of the state, but at the same time they were strong defenders of the nation state and defence hawks. The somewhat utopian version of a globalised world where foreign policy is nothing but trade policy smacks of Clintonism and the Third Way, not the Reagan-Thatcher paradigm. In other words, yes, "[t]he terrorist attacks on New York and Washington put back on the table foreign policy and security" but only for the Thomas Friedmans of this world; for the right, foreign policy and security never left the table.

And yes, the neo-liberal reform in much of the post-communist and developing world was more often than not unaccompanied by any significant attempts to create and foster stable civil societies and institutional frameworks, but the lack of the latter was not caused by the introduction of the former. Contrary to what Fukuyama seems to imply, (for example) privatisation did not make Russia incapable of effectively collecting taxes - that ability wasn't there to start with.

If Fukuyama is correct about something, it's the fact that the West has not been as good in exporting institutional reform as it has been in exporting economic reform. We made a lot of governments balance their budgets but how good were we at nation-building in remote (and not so remote) parts of the world?

Fukuyama, however, is wrong to put this failure exclusively at the Western feet. It takes two to tango. The reason why economic reform has been so successful around the world is that the governments who implemented it wanted it to succeed. The reason why the institutional reform hasn't, is that the similar willingness on the part of governments was missing in this case. The problem is that governments world-wide, from China to Malaysia, from South America to Russia, want strong Western-style economies without strong Western-style societies. I wrote about this problem quite recently here and here. In the former post I argued that

"Yes, you can take what you want out of the West - technology and economic progress, for example - you can modernise without Westernising. But only in the short term. In the long term, you have to realise that the reason the West (broadly construed) is so rich and powerful is because it's open and free. In the long term you cannot grow the fruits that you desire without the soil that makes it all possible."
As reader, Mark from Colorado, commented, the "root causes" of true and lasting prosperity are called "the rule of law, freedom and fair elections."

So Fukuyama is half-right - we have to become better at nation (or more correctly, society) building, but we also have to become much better at explaining to other countries why it matters and convincing them that it is in their interest to let us help them in that regard.


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