(Burlington, Vermont, 19/4/96)

The internationalisation of the market economy and the project for an inclusive democracy






I am going to talk tonight about the present internationalisation of the market economy and its economic and political implications. Also, at the end, I would like to touch on the question why today the need for a new liberatory project is, to my mind, more urgent than ever.

In a nutshell, my argument is that the present internationalisation of the market economy represents the completion of a process that within two hundred years has created

a) the system of the market economy, which has resulted in the present neoliberal economy that condemns one third of the world population to unemployment  and one fifth of it to absolute poverty and

b) the growth economy, which has already resulted in the greatest damage to the environment in the entire History.

  But, before I discuss the issue of how we reached this stage, I would like to clarify the terms I am using, starting with the central concept of the market economy. Why market economy and not capitalism? Obviously, the reason I prefer the term market economy is not to comply with today’s “political correctness” which has exorcised the words “capitalism” and—more conveniently —“socialism”. It is a choice which is implied by my belief that although the concepts “capitalist mode of production” and “capitalist world economy” have provided important insights in the analysis of social classes and the world division of labour respectively, they are too narrow and outdated. 

They are too narrow because they imply that power relations in general can be analysed in terms of (or be reduced to) economic power relations whereas it is obvious that economic power is only one form of power and if used  as the central concept in the analysis of social phenomena related to hierarchical relations (in the household, work etc.), or issues of  racial and cultural “identity”, it is bound to lead to inadequate or oversimplified interpretations.

They are outdated because in today’s internationalised market economy, neither the Marxist class analysis nor the concept of the world division of labour implied by the “world-system” approach, are particularly relevant. We need a different class analysis to understand today’s class structures as well as different conceptions of the North and the South to understand the present international economic structures. Of course, this does not mean that the concept of the market economy, is,  per se, broad enough to adequately interpret social phenomena like the ones I mentioned. Still, the very fact that this concept is used to explain only one part of reality, the economic domain, without claiming that this domain determines (not even  “in the last instance”) the other domains, does allow enough flexibility for the development of adequate interdisciplinary interpretations of social reality.

So, I am using the term “market economy”  to define the concrete system that emerged in a specific place (Europe) and at a particular time (two centuries ago) and not as a general historical category of an approach aiming to show the evolution of the economic system throughout History,  as  the Marxist concept of the mode of production supposedly does. I will define the market economy as the self-regulating system in which the fundamental economic problems (what, how, and for whom to produce) are solved `automatically', through the price mechanism, rather than through conscious social decisions. Of course, this does not mean that in a market economy there are no social controls at all. Here, we should introduce an important distinction between the various types of social controls which will help us to interpret today’s marketization and internationalisation of the economy.

There are three main types of possible social controls on the market economy

  • regulatory controls, which have usually been  introduced by the capitalists in control of the market economy in order to “regulate” the market. The aim of regulatory controls is to create a stable framework for the smooth functioning of the market economy without affecting its essential self- regulating nature. Such controls have always been necessary for the functioning of the system of the market economy. Examples of such controls are the various controls introduced at present by the latest round of GATT, or by the Maastricht treaty, which aim at regulating the world and the European markets respectively in the interest mainly of those controlling the respective markets (multinationals etc.)

  • social controls in the broad sense which, although they have as their primary aim the protection of those controlling the market economy against foreign competition, still, they may have some indirect effects that could be beneficial to the rest of society as well. A primary example of such controls is the various protectionist measures aiming at protecting domestic commodities and capital markets (tariffs, import controls, exchange controls etc.).

  • social controls in the narrow sense which aim at the  protection of humans and nature against the effects of marketization. Such controls are usually introduced as a result of social struggles undertaken by those who are adversely affected by the market economy’s effects on them, or on their environment. Typical examples of such controls are social security legislation, welfare benefits, macro-economic controls to secure full employment, environmental controls etc.

The market economy, as I defined it, is a broader term than capitalism and the two should not be confused with each other. The market economy refers to the way resources are allocated, whereas capitalism refers to property relations. Although, historically, the market economy has been associated with capitalism, namely, private ownership and control of the means of production, a market allocation of resources is not inconceivable within a system of social ownership and control of economic resources. This distinction between capitalism and the market economy is particularly useful today when many in the self-styled “Left”, after the failure of the planned  economy, rediscover the merits of a ‘socialist’ market  economy. At the same time, several “communist” parties in the South (China, Vietnam etc.) have embarked on a strategy to build a “socialist” market economy and are in the process of achieving a synthesis of the worst elements of the market economy (unemployment, inequality, poverty) and ‘socialist‘ statism (authoritarianism, lack of any political freedom etc.).

Although the market today permeates all aspects of life, from family life to culture, education, religion, etcetera, it can easily be shown that, despite the fact that markets have existed for a very long time, the marketization of the economy is a new phenomenon, which emerged in the last two centuries. Markets, up to the end of the Middle Ages, played no significant role in the economic system. Even when, from the sixteenth century on, markets became both numerous and important, still, they were strictly controlled by society, under conditions that, made a self-regulating market unthinkable.

The crucial element that differentiates the market economy from all past economies (where markets were also self-regulating, since all markets tend to produce prices that equalise supply and demand) was the fact that, for the first time in human history, a self-regulating market system emerged—a system in which markets developed even for the elements means of production, that is, labour, land and money. In fact, it was at the end of the eighteenth century that the transition from regulated markets to a system of self-regulated ones emerged, marking the `great transformation' of society, that is, the move to a market economy, which had built-in elements to become the present internationalised economy.

Thus, the introduction of new systems of industrial production to a commercial society, where the means of production were under private ownership and control, inevitably led (with the critical support of the nation-state) to the transformation of the socially controlled economies of the past, in which the market played a marginal role in the economic process, into the present market economies. This was inevitable because private control of production required that those controlling the means of production would have to be economically efficient in order to survive competition. And this meant that they had to ensure two things:

  • the free flow of labour and land at a minimal cost, which implied the minimisation of social controls (narrow sense) on the markets, particularly the markets for labour, capital and land, i.e. the marketization of the economy. For instance, legislation to protect labour made the labour market less flexible and, consequently, the flow of labour, less smooth or more expensive. Therefore, historically, those having private control of the means of production have always directed their efforts towards further marketizing the economy, that is, minimising the social controls on the market.

  • the continual flow of investments into new techniques, methods of production and products, in an effort to improve efficiency and the sales figures (--a logic aptly expressed by the motto `grow or die'). The outcome of this process is economic growth.

Thus, as soon as a market economy was established, which separated society from the economy, a ceaseless social struggle started. Schematically, this is the struggle between those controlling the market economy, i.e. the capitalist elite controlling production and distribution, and the rest of society. Those controlling the market economy aimed at minimising social controls on markets,  particularly the labour market , so that the free flow of commodities could be secured. On the other hand, those at the other end, particularly the growing working class, aimed at maximising social controls on the markets, that is, their objective was to maximise society's self-protection against the perils of the market economy, especially unemployment and poverty.

At the theoretical and political level, this conflict was expressed by the clash between economic liberalism and socialism (in a broad sense). Economic liberalism sought to establish a self-regulating market, using as its main methods laissez-faire, free trade and regulatory controls. On the other hand, socialism sought to conserve humans,  as well as productive organisation, using as its main methods social controls on the markets. This struggle constituted the central element of Western history, from the Industrial Revolution to date. An important point that can be made here is that whereas the fundamental components of the market economy were  two, marketization and growth,  still it was only one of them, marketization, which, historically, has divided the intelligentsia of the industrial era and led to the two large theoretical and political movements, liberalism and socialism. No similar divide had arisen with respect to the second component, that is, economic growth.  In both the capitalist and the ‘socialist’ versions of the growth economy economic growth became a central element of what I will call the dominant social paradigm (i.e. the system of beliefs, ideas and the corresponding values, which is associated with the political, economic and social institutions). Thus, economic growth became a liberal as well as a socialist objective, although it is intrinsically linked to the market economy. This of course was linked to the post-Enlightenment identification of Progress with the development of productive forces that was adopted by socialists, Marxists in particular.

Historically,  we may distinguish three main  phases in the process of marketization:

a) the liberal phase, which after a transitional period of protectionism led to

b) the statist phase, which was succeeded by the present

c) neoliberal phase.

The liberal phase covered a period of about 40 years in the mid of the last century. Something very similar to what is going on today happened  in the 1830s and the 1840s when, particularly in Britain, there was an explosion of legislation repealing restrictive regulations and an attempt to establish the foundations of a self-regulating market, that is, free trade, a competitive labour market and the Gold Standard—namely, the international monetary system of fixed exchange rates where the value of a currency was fixed to the value of gold. Although universal free trade was not attained during this time, for a brief period in the 1860s and the 1870s the world came close to a self-regulating system, as described by classical economic theory. So, the nineteenth century saw the first attempt for an internationalised market economy. This is  shown by the massive expansion of the movement of commodities, as well as capital and labour that took place during this period. This expansion  was not, of course,  an unexpected development given that the precondition for the reproduction of the newly established market economy was its continuous growth, and this growth, in turn, necessitated the continuous expansion of the market, initially of the domestic market, and later on of the external market

However, the attempt to establish a purely liberal internationalised market economy, in the sense I described it (free trade, competitive labour market etc),  lasted only 40 years, and by the 1870s and 1880s protectionist legislation was back. Thus, the aim to liberalise the markets in the first phase of the marketization process had the paradoxical effect of leading to more protection: either because of pressure by those controlling production to be protected against foreign competition, or because of pressure by the rest of society to be protected against the market mechanism itself.

Protectionism, in both these two forms, undermined the market economy that had been established in the nineteenth century and, in fact, led to its near collapse in the twentieth. It undermined, first, the domestic market economy by distorting the price mechanism and obstructing the self-regulation of markets. It undermined, secondly, the world market economy by leading to colonial rivalry and competition for markets still unprotected. As a result of protectionist policies, the world economy, on which the nineteenth century balance-of-power system had rested, started disintegrating. This inevitably led to the near collapse of the system itself because, as Polanyi has persuasively shown, the “100 years' peace” (1815-1914) crucially depended on two freedoms: the freedom of trade and the freedom of capital. Once colonial rivalry started having its effect on both freedoms, the first world war became inevitable. Therefore, it was the collapse of pure liberalism which set the foundations for the near collapse of the market economy itself in the 1930s and opened the way for the rise of statism.

The outcome of the disintegration of the world economy and of the consequent collapse of the Gold Standard was that all major countries entered a period of active state interference to control the economy. In other words, they entered the period of what I call statism, that is the period of active state control of the economy and extensive interference with the self-regulating mechanism of the market aimed at directly determining the level of economic activity. This was an  event that marked a new phase in the marketization process which was, one may argue, the logical conclusion of protectionism that particularly  flourished during and after the first world war and reached its peak in the 1930s with the adoption of many direct restrictions on trade, such as import and export licensing, quotas and exchange controls.

In the period between the mid-1930s and the mid-1970s, (the period of statism)  active state interference to control the market mechanism was the norm all over the capitalist world. Although the forms of statism in the West were not as comprehensive as in the East, and, of course, did not take the form of a ‘systemic’ change, still the aim, especially in the post-World War II period, was similar. In other words, the aim was not just to help the private sector flourish under some minimal social controls (as, for example, is the case with Clintonomics, or the economics of most social democrats today) but rather to supplant the private sector itself, especially in the areas where the private sector has failed to cover the needs of the whole population—mainly, with respect to the provision of social services (health, education, social insurance, public utilities). In this framework, the state sector played an important part in controlling the size of the market through the manipulation of aggregate demand. The means used for this purpose were government spending and public investment, as well as the economic activity of nationalised enterprises. The necessary condition, however, for the economic system's efficient functioning was the relatively low degree of internationalisation, that is, a degree which was compatible with an institutional framework relatively protective of the domestic market for commodities, capital and labour. It was precisely the negation of this condition, as internationalisation of the market economy grew, drastic alteration of this institutional framework that made the continuation of the social-democratic consensus impossible.

Statism  led to a huge rise of  the public sector’s significance in the economy and particularly of what has been called the welfare state, which by the early 1970s, absorbed about one-fifth of the Gross Domestic Product in advanced capitalist countries (apart from Japan). Indicative of the rapid growth of the welfare state during this period is the fact that social expenditures in Britain, which had risen from 4% of the GNP in 1910 to about 11% in the interwar period, had reached an average of about 25% in the early 1970s. However, despite the expansion of statism at the national economic level, the marketization process at the international level (in the sense of gradual lifting of controls on the movement of commodities and later of capital), which was interrupted after the Great Depression and the explosion of protectionism that followed, was resumed. Thus, whereas import penetration (imports as a percentage of domestic market for manufactures) within Europe was only 6% in 1937 and 1950, it increased to 11% in 1963 and 17% in 1971, namely, at a level significantly higher than the 1913 level of 13%.

At the same time, the emergence and rapid expansion of  MNC’s  led to the creation of an informal, at first, capital market that was free of state regulations, the Euro-dollar market. The growth of this new market was instrumental in the later lifting of exchange and capital controls. This is because the exchange controls of nation-states, particularly those in Britain, where the Euro-dollar market originated, were put under severe strain, throughout the 1970s. So, the institutional arrangements adopted in the post-war period to liberalise the markets for commodities and capital, at the planetary level (GATT rounds of tariff reductions), at the regional level (the European Economic Community [EEC], European Free Trade Association [EFTA]) and at the national level (abolition of capital and exchange controls in the US and Britain in the 1970s etc.) mostly institutionalised rather than created the internationalised market economy. In other words, it was the market economy’s grow-or-die dynamic that created the present internationalised economy, which was then ratified by the various international treaties etc.

Growing internationalisation implied that the growth of the market economy relied increasingly on the expansion of the world market rather than on that of the domestic market, as before—a fact that had very significant implications with regard to the state's economic role. During the post-war period of social-democratic consensus, when conservatives and social democrats adopted the same objectives (full employment commitment, welfare state, progressive taxation to reduce inequalities) economic growth rested mainly on the growth of domestic demand which accounted for almost 90 percent of total demand in advanced capitalist countries. However, under conditions of growing internationalisation, the size of the growth economy increasingly depends on supply conditions, which in turn determine trade performance, rather than on direct expansion of domestic demand. Thus, supply conditions  play an increasingly significant growing role with respect to accumulation and economic growth, since it is international trade that determines the size of each national  growth economy, either positively (through an exports-led growth) or negatively (through an imports-led de-industrialisation). In other words, competitiveness, under conditions of free trade, becomes even more crucial, not only with respect to an increasingly export-led growth, but also with respect to import penetration that ultimately leads to domestic business closures and unemployment. To put it schematically, the market economy, as internationalisation grows, moves from a "domestic market-led" growth economy to a "trade-led"  one.

In the framework of a trade-led growth, the prevailing conditions on the production side of the economy, in particular those relating to the cost of production, become critical. Squeezing the cost of production, both in terms of labour cost and in terms of employers' taxes and insurance contributions, becomes very important. But, squeezing the cost of production necessitated a drastic reduction in statism, since statism was responsible for a significant rise in the cost of production during the period of the social-democratic consensus, both directly and indirectly. Directly, because the expansion of the welfare state meant a growing burden on employers' contributions and taxes. Indirectly, because, under the conditions of near-full employment which prevailed during the statist phase of the marketization process, organised labour could press successfully for wage rises that exceeded significantly increases in productivity.

The cumulative effect of not letting the labour market,-- free of state intervention,-- to determine the levels of wages and employment, as a market economy requires, was the crisis of the early 1970s. In other words, the crisis, contrary to the usually advanced view, was not mainly due to the oil crisis but to the fact that the degree of internationalisation of the market economy achieved by then was not compatible anymore with statism. This was  because:

the nation-state's effective control of the economy had become almost impossible in the framework of an  increasingly free movement of capital across borders. Thus, although international trade openness increased significantly in the post-war period, still, the lack of financial openness allowed governments to follow independent economic policies. However, as soon as the development of Euro-currency markets significantly reduced the effectiveness of controls on financial markets, multinational corporations saw their power to undermine those national economic policies which were incompatible with their own objectives effectively enhanced;

the expansion of statism itself had certain built-in elements leading to inflation and/or a profitability squeeze, which, both, were particularly troublesome within the competitive framework that the internationalised market economy has created. Such an element was the rapid rise of state spending—to finance the expansion of the state's social role—which in some cases was faster than the rise of state revenue, leading to an inflationary financing of the resulting budget deficits.

At the same time, technological developments, the information revolution, marked the transition to a post-industrial society which meant a significant decline in the working class numbers and therefore in the structure of the electorate. Furthermore as these changes created significant amounts of structural unemployment, the state commitment to full employment and the welfare state became an intolerable burden for the economic elite. The time was ripe for the flourishing of the neoliberal movement, first in academia (Chicago School of economics, resurrection of Hayek etc.) and then in politics (Thatcherism, Reaganomics). The neoliberal movement has been essentially a movement to minimise social controls on the markets, i.e. to further the marketization of the economy, through the liberalisation of markets, the labour market in particular, deregulations, privatisations, the lifting of controls on the movement of capital etc.

Thus, as regards commodity markets first, the protection of domestic markets has already almost been eliminated within the two major economic blocs (European Union and North America-NAFTA) and will soon almost disappear world-wide, following the implementation of the new GATT agreement. So, the combined effect of the ‘objective‘ factors I mentioned (economic and technological) and the neoliberal policies to free the markets, has been that the internationalisation of the market economy has accelerated sharply since the 1970s. In just over 20 years, the ratio of world exports to GDP  has grown  by 50 percent (from 14 percent in 1970 to 21 percent in 1992) and in the USA, the biggest market economy, this ratio has almost doubled in the same period—from 6 to 11 percent—and is now higher than in Japan.

Also, as far as capital markets are concerned, the neoliberal abolition of exchange controls and restrictions to the movement of capital had a decisive influence on the internationalisation of the market economy. In fact, according to some observers, the recent significant rise in foreign direct investment establishes a new trend where investment is tending to displace trade as the driving force of international integration. Thus, foreign direct investment, as a proportion of the advanced capitalist countries’ GDP, has nearly doubled in twenty years and now stands at more than 10 percent. However, short-term capital movements may be even more important with respect to the loss of the nation-state’s economic sovereignty. It has been estimated that one trillion dollars a day is changing hands on the world's foreign exchange markets and that only around 5% of the deals struck are linked with foreign trade, whereas the rest are purely speculative. Still, just twenty years ago, about 90 percent of capital movements were linked to investment and trade and only 10 percent were speculative.

The huge expansion of such capital movements has made it impossible for any nation-state (or even an economic block) to introduce, independently, any effective social controls on the markets. If we take into account the huge rise in international borrowing that took place in international capital markets since the liberalisation moves of the 1970s and the significant increase in foreign penetration of national bond markets, it becomes obvious that no national government today may follow economic policies that are disapproved of by the capital markets, which have the power to create an intolerable economic pressure on the respective country's borrowing ability, currency value and investment flows. If we assume, for instance, that a social-democratic party adopts, against the trend, expansionary policies in order to reduce unemployment, it may be shown that under conditions of free capital mobility, its currency may easily collapse in foreign exchange markets.

So, the nation-state, in today’s internationalised market economy, faces an increasing loss of economic sovereignty. This is also reflected in the creation of huge economic blocks, within the context of which the economic role of the individual nation-state is being progressively downgraded in favour of supra-national institutions. In fact, the same economic aims that brought about the emergence of the neoliberal movement  have led to the creation of these blocks. The basic aim is the improved competitiveness of the sections of capital which are based on each block. 

So, after about a hundred years since the first attempt to create an internationalised market economy collapsed, today,  a new attempt is being made which has much higher chances of success that the previous one. The reason why such a system is now in a better position to function more successfully than in the past is that the basic factor that led to the collapse of the liberal phase and in particular of the Gold Standard has been eliminated: that is, the various restrictions on the markets for goods, labour and capital which, as we saw, had introduced various degrees of ‘inflexibility’ into them. Since the neoliberal consensus has eliminated most of these restrictions, a historic opportunity has been created for the marketization process to be completed. With hindsight, it is therefore obvious that Polanyi was wrong in thinking that the rise of statism in the thirties was evidence of the utopian character of the self-regulating market and of the existence of an “underlying social process” which leads societies to take control of their market economies. In fact, statism proved to be a relatively brief interlude in the marketization process. In this sense, statism was a transitional phenomenon related to the failure of the first attempt to create a system based on an internationalised self-regulating  market economy. This failure  was due not to the supposedly utopian character of the marketization of society, as Polanyi thought, but rather to the fact that the objective conditions for the completion of this process had not as yet been created during the first phase of marketization, in the nineteenth century.

It is therefore obvious that the rise of neoliberalism is not a conjunctural phenomenon, as social democrats present it, but that it represents the completion of the marketization process that was interrupted by the rise of statism. Furthermore, the breakdown of `actually existing socialism' in the East and the collapse of social democracy in the West, for reasons I will consider next, have created the political conditions for the completion of the marketization process. So, the fact that neoliberal policies are supported today by both conservative and social-democratic parties, in government or in opposition, and that the basic elements of neoliberalism have been incorporated into the strategies of the international institutions which control the world economy (IMF, World Bank),as well as in the treaties that have recently reformed the EU (Single Market Act,  Maastricht Treaty), makes it plainly evident that we are faced with a new consensus.  This is a consensus that has replaced the defunct social-democratic consensus and which reflects the radical structural changes brought about by the development of the internationalised market economy.

As regards the collapse of social democracy and generally the political implications of the internationalised market economy, we have to refer again to the technological changes that not only created mass open or disguised unemployment, which the state is now unable and unwilling to control, but also to structural changes in the working population and the electorate. So, a new class- structure has emerged. At the one end is the  underclass, consisting mainly of the unemployed and those of the inactive population who fall under the poverty line. At the other end is the economic elite and the overclass, namely the upper middle class that has been created by the marketization process. Interestingly enough, the underclass, to which it is estimated about 30 percent of the adult working population belongs, and the overclass, which constitutes about 1 percent of the population, share between them about 28 percent of the national income,  14 percent each!

Between these two poles are the middle groups which constitute the vast majority of the population, about 70 percent of the population. However, it is only the upper part of these middle groups, consisting of about 40 percent of the population, which financially is, according to a recent British study, the privileged minority, and electorally, according to Galbraith, the contended electoral majority. It is only this part of the population which is in full-time, well-paid and secure jobs that controls the bulk of income. In advanced capitalist countries, the top 40 percent of the population on the average control almost two thirds of income and by their political and economic power, determine the electoral outcome. On the other hand, the lower part of the middle groups, consisting of about 30 percent of the population, includes all those in low-paid, insecure and poorly protected jobs i.e. the marginalized and the insecure. Most of the growing army of part-timers and occasional workers in low-paid jobs with no formal employment protection, as well as the traditional blue collar low-skilled working class,  belong to this category.

Therefore, the post-industrial neoliberal society is not even a “two-thirds society” as it used to be described. It is in fact a “40 percent society”. Now, socially, the social groups constituting this privileged minority are hostile to any expansion of statism and the welfare state and are increasingly attracted by the ideology of the private provision of services like health, education and pensions—although a significant part of this ‘attraction’ is forced by the neoliberal undermining of the state provision of these services. Their attitude towards statism and the welfare state is determined by the fact that public services and their financing by taxation have a disparate effect on the privileged minority and the underclass. In other words, it is the privileged minority which has to finance, through taxation, public services in which they are not interested anymore (because of the deterioration in their quality, as a result of neoliberal policies) and which benefit mostly the underclass. As the privileged minority is also the electoral majority (because they take an active part in the electoral process, whereas the underclass mostly do not bother to vote, frustrated by the inability of political parties to solve their problems), the electoral outcome in advanced capitalist countries is determined by the attitudes of the privileged minority/ electoral majority.

The inevitable result of these changes in the class structure and composition of the electorate has been the rapid decline of traditional social-democratic parties and their consequent attempt to capture a significant part of the vote of the privileged minority by `modernising' themselves, according to the guidelines of the  neoliberal agenda. This is how what I call the ‘neoliberal consensus’ has been created which replaced the defunct social democratic consensus of the period of statism. The new consensus does not imply that the state has no more economic role to play. One should not confuse liberalism/neoliberalism with laissez-faire. We should not forget that it was the state itself that created the system of self-regulating markets. Furthermore, some form of state intervention has always been necessary for the smooth functioning of the market economy system. The state is called today to play a crucial role with respect to the supply-side of the economy and, in particular, to take measures to improve competitiveness, to train the working force to the requirements of the new technology, even to subsidise export industries. Therefore, the type of state intervention which is compatible with the marketization process not only is not discouraged but, instead, is actively promoted by the neoliberal consensus, especially by the supposedly `progressive' elements within it (Clinton administration, social-democratic parties in Europe).

So, the main objective of the elites which control today’s market economy is, at it has always been, to maximise the role of the market and minimise social controls over it, so that maximum `efficiency' and growth may be secured. Therefore, social controls in the narrow sense are universally phased out. The same applies to some significant social controls (in a broad sense) like import controls, tariffs etc. which are also ruled out as hampering the expansion of the present internationalised market economy. Still, this does not mean the elimination of all controls over the markets. Not only “regulatory” controls remain in place and in some cases are expanded but even some social controls are not eliminated. Also, as regards social controls in the narrow sense, although the welfare state is left to decay, various “safety nets” are kept in place  in advanced capitalist countries, to check massive social unrest. So, we are not just faced with an attempt to put the clock back to the 1840s. In fact, a new synthesis is attempted today. The new synthesis aims to avoid the extremes of pure liberalism, by combining essentially self-regulating markets with various types of safety nets and  controls, which secure the privileged position primarily of the “over-class” and secondarily that of the “40 percent society”, as well as the mere survival of the “under-class”, without affecting the self-regulation process in its essentials. Therefore, the nation-state still has a significant role to play not only in securing, through its monopoly of violence, the market economy framework, but also in maintaining the infra-structure for the smooth functioning of the neoliberal economy. 

So, what we face today is not the ‘globalisation’ of the economy, as many call the present trends, but the internationalisation of the market economy. The difference between globalisation and internationalisation is not just semantic. Internationalisation, refers to the case where markets become internationalised and as a result the economic policies of national governments and the reproduction of the growth economy itself are conditioned by the movement of commodities and capital across frontiers. On the other hand, globalisation refers to the case where production itself becomes internationalised, in the sense that production units become stateless bodies, operating in a borderless world, with activities not primarily aiming at the country which is their national base . and involving an integrated internal division of labour spanning many countries. All the evidence is that internationalisation does happen on a massive scale, but globalisation is still very limited.

Furthermore, as I said before, the nation-state, contrary to the claims of the “globalizers”, still has a significant role to play in the neoliberal internationalised economy. However, this role does not involve anymore the enforcement of social controls to protect society from the market. The state’s  role today is exclusively related to securing the reproduction of the market economy through its monopoly of violence and to creating the stable framework for the efficient functioning of the markets. So, in the same way that in the first phase of marketization, when the market economy was basically national, the nation-state was assigned the role of enforcing—through its monopoly of violence—the market rules, in today’s internationalised market economy the same role is assigned to the state, but also to international organisations like NATO, a capitalist controlled UN  (the latest example was the Gulf war). Of course, this does not deny the fact I already mentioned of the loss of the state’s economic sovereignty and its replacement by a multi-level system of political-economic entities: micro-regions, traditional states and macro-regions with institutions of greater or lesser functional scope and formal authority and with world cities becoming the keyboards of the global economy.

One effect of the internationalisation of the market economy has been to enhance further the concentration of economic power, despite some physical decentralisation of industrial production from the North to the South and within them. As I said before the two fundamental pillars of the market economy are marketization and growth. Growth has already led to a huge concentration of economic power which, as a result of the marketization of the last 20 years has increased further, both between the North and the South and within them. Of course, concentration of economic power is not a new phenomenon. In all hierarchical societies, some concentration of wealth has always accompanied the concentration of political and military power in the hands of the various élites—a fact usually `justified’ through a system of social rules based upon religion. The new element in the growth economy, which resulted after the establishment of the market economy as the inevitable outcome of its grow-or-die dynamics, is the fact that the reproduction of the social system itself, as well as of the power of the élite controlling it, crucially depends on the realisation of the growth objective  which, in turn, is `justified’ through its identification with Progress. So, economic growth functions not just as a fundamental social and economic goal, but also as a basic means to reproduce the structures of unequal distribution of economic and political power which characterise  the modern hierarchical society, as well as a central element of the  ideology that supports it.

However, the fact that the modern hierarchical society relies for its reproduction on the maximisation of economic growth constitutes, also, its fundamental contradiction. This is not because, as it is usually said, the continuation of the growth economy has serious environmental implications but because the necessary condition for the reproduction of the growth economy is the concentration of its benefits to a small section of the world population. This is on two counts:

  • first, it is simply not physically possible for the wasteful consumption standards, which are today enjoyed by the “40 percent societies” in the North and the élites in the South, to be universalised and enjoyed by the world population. It was estimated that to simply universalise the North’s standard of living now, global industrial production would need to rise 130 times (not taking into account population growth projections).

  • second, a universalised growth economy is not environmentally sustainable in the sense that the universalisation of “environmentally-friendly” technologies is not possible, given their cost and the present concentration of world income.

So, concentration  and ecological disintegration do not simply constitute consequences of the establishment of the growth economy, but also fundamental pre-conditions for its reproduction. Contrary to the under-consumptionist arguments of the ‘civil societarian’social-liberals self-styled “Left” which assume that the elites of the three blocks (NAFTA, EU, Japan), facing the threat of an inadequate demand because of growing inequality, will be induced to introduce a world mixed economy (similar to that of the socialdemocratic consensus), in fact, the opposite is the case. The growth economy in the North not only is not threatened by the growing inequality of the present internationalised market economy, but, instead, depends on it. This is why the moment of truth for the present social system will come when it will be universally realised that the very existence of the present wasteful consumption standards depends on the fact that only a small proportion of the world population, now or in the future, will be able to enjoy them.

In conclusion, it is obvious that the present concentration of economic, political and social power in the hands of the elites which control the growth economy is not simply a cultural phenomenon related to  the values established by the industrial revolution, as significant currents within the ecological movement naively believe. The concentration of power constitutes the inevitable outcome of a historical process  that started with the establishment of hierarchical social structures  and the implied ideology of domination of human over human and nature and culminated in the last two centuries with the development of the market economy and its by-product the growth economy.

Now, the accelerating trend towards internationalisation of the market economy and the resulting increasing concentration of power has already led to a debate about the future of politics and democracy. Those who take for granted the present institutional framework of the market economy and liberal “democracy” are divided as regards their reading of future trends. On the one hand, there are those who support the view that the present trends,  in the long run, lead not only to the end of the nation-state but also of “politics” and “democracy”, as we know them. Thus, the supporters of the “end of politics” thesis argue that the natural place for the general good, the political sphere, on which liberal democracy rested, disappears in the present age of the networks. On the other hand, there are those in the civil societarian “Left” who  attempt to put a case that the nation-state is still the most appropriate engine for the reproduction of the growth economy and that the argument about globalisation is hugely overstated.

I would have no difficulty in agreeing with the  thesis about the forthcoming end of “politics” and “democracy”, provided, however, that these terms are meant to represent the present statecraft and liberal oligarchy which today pass for politics and democracy respectively. Because, in fact, today’s “politics” and “democracy” represent a flagrant distortion of the real meaning of these terms and are indeed in the process of being phased out, if not in form, at least in content. Just as in the past the “nationalisation” of the market led to the death of the communities, the free towns and their federations, one may reasonably expect that the internationalisation of the market will lead to the death of nation-states and national politics. Even if the present political institutions survive in the future they will be devoid of any real content and they will be just remnants of the past, constituting a symbolic formality, similar to the monarchies still existing in some Scandinavian countries.

But, the fact that we may agree with the hypothesis about the end of the nation-state and the consequent end of politics and democracy in their current meanings, does not imply that we will, also,  have to agree with the conclusions of the supporters of this hypothesis. In other words, although it is obvious that  within the new institutional framework no meaningful politics and democracy is possible, this does not mean politics and democracy themselves are superfluous. What is obviously superfluous is the present institutional framework of the market economy and liberal democracy, which however both the supporters of the nation-state and those assuming its end,  take for granted!

It is therefore clear, as I said at the beginning, that the need for a new liberatory project is today imperative if we do not wish to live in the new barbarism that is now emerging. It is also clear that this new project cannot be based on socialist statism, which has just collapsed in both its forms of ‘actually existing socialism’ in the East and social democracy in the West. To my mind, a new liberatory project should involve a new conception of inclusive democracy, which I will attempt to summarise briefly.

A useful starting point in discussing a new conception of democracy may be to distinguish between the two main societal realms, the public and the private, to which we may add an "ecological realm", defined as the sphere of the relations between the natural and the social worlds. Contrary to the practice of many supporters of the republican or democratic project, I will include in the public realm not just the political realm, but also the economic realm, as well as what I will call the ‘social realm in a broad sense”. In other words, I will include any area of human activity where decisions can be taken collectively and democratically. To my mind, the extension of the traditional public realm to include the economic, ecological  and ‘social’ realms is an indispensable element of an inclusive democracy. So, we may define the political realm as the sphere of political decision-taking, the area where political power is exercised. The economic realm is defined correspondingly as the sphere of economic decision-taking, the area where economic power is exercised with respect to the broad economic choices that any scarcity society has to make. Finally, the social realm is defined as the sphere of decision-taking in  the workplace, the education place and any other economic or cultural institution which is a constituent element of a democratic society.

Correspondingly, we may distinguish between  four main types of democracy that constitute the fundamental elements of an inclusive democracy: political, economic, ecological and ‘democracy in the social realm’. Political, economic and democracy in the social realm may be defined, briefly, as the institutional framework that aims at the equal distribution of political, economic and social power respectively, in other words, as the  system which aims at  the effective elimination of the domination of human being over human being. Correspondingly, we may define ecological democracy as the institutional framework that aims at the elimination of any human attempt to dominate the natural world, in other words, as the  system which aims to reintegrate  humans and nature.

Therefore, in this conception of inclusive democracy it is first recognised that  political or direct democracy,  where political power is shared equally among all citizens, is neither feasible nor desirable, unless it is accompanied by economic democracy in the sense of equal distribution of economic power. Political and economic democracy in this sense would represent the re-conquering of the political and economic realms by the public realm, that is, the reconquering of a true social individuality, the creation of the conditions of freedom and self-determination, both at the political and the economic levels.

However, political and economic power are not the only forms of power and therefore political and economic democracy do not, by themselves, secure an inclusive democracy. In other words, an inclusive democracy is inconceivable unless  it extends to the broader social realm to embrace the workplace, the household, the educational institution and indeed any economic or cultural institution which constitutes an element of this realm. A crucial issue that arises with respect to democracy in the social realm refers to relations in the household. Women's social and economic status has been enhanced this century, as a result of the expanding labour needs of the growth economy on the one hand and the activity of women's movements on the other. Still, gender relations  at the household level are mostly hierarchical, especially in the South where most of the world population lives. However, although the household shares with the public realm a fundamental common characteristic, inequality and power relations, the household has always been classified in the private realm. Therefore, the problem that arises here is how the ‘democratisation’ of the household may be achieved.

One possible solution is the dissolution of the household/public realm divide. Thus, some feminist writers, particularly of the eco-feminist variety, glorify the oikos and its values as a substitute for the polis and its politics, something that, as Janet Biehl observes, "can easily be read as an attempt to dissolve the political into the domestic, the civil into the familial, the public into the private". Similarly, some green thinkers  attempt to reduce the public realm into an extended household model of a small-scale, co-operative community. At the other end, some Marxist feminists attempt to remove the public/private dualism by dissolving all private space into a singular public, a socialised or fraternal state sphere.  However, as Val Plumwood points out, the feminists who argue for the elimination of household privacy are today a minority although most feminists stress the way in which the concept of household privacy has been misused to put beyond challenge the subordination of women.

Another possible solution is, taking for granted that the household belongs to the private realm, to define its meaning in terms of the freedom of all its members. To my mind, the issue is not the dissolution of the private/public realm divide. The real issue is how, maintaining and enhancing the autonomy of the two realms, such institutional arrangements are adopted  that introduce democracy at the household and the social realm in general and at the same time enhance the institutional arrangements of political and economic democracy. This is particularly so if we take into account the basic fact that an effective democracy is inconceivable unless free time is equally distributed among all citizens, and this condition can never be satisfied as long as the present hierarchical conditions in the household, the workplace and elsewhere continue. Furthermore, democracy in the social realm, particularly in the household, is impossible, unless such institutional arrangements are introduced which recognise the character of the household as a needs-satisfier and integrate the care and services provided within its framework into  the general scheme of needs satisfaction.

The final question that arises with respect to the conception of an inclusive democracy refers to  the issue of how we may envisage an environmentally-friendly institutional framework that would not serve as the basis of a Nature-dominating ideology. Some critics of inclusive democracy misconceive the issue as if it was about the guarantees that an inclusive democracy might offer in ensuring a better relationship of society to nature than the alternative systems of the market economy, or socialist statism. This is a clear misconception of what democracy is about because, if we see it as a process of social self-institution where there is no divinely or ‘objectively’ defined code of human conduct, such guarantees are by definition ruled out. Therefore, the  replacement of the market economy by a new institutional framework of inclusive democracy constitutes only the necessary condition for a harmonious relation between the natural and social worlds. The sufficient condition refers to the citizens’ level of ecological consciousness. Still, the radical change in the dominant social paradigm that will follow the institution of an inclusive democracy, combined with the decisive role that a well-rounded education in knowledge and skills, i.e. the education of the individual as citizen will provide, in an environmentally-friendly institutional framework, could reasonably be expected to lead to a radical change in the human attitude towards Nature.

In other words, a democratic ecological problematique cannot go beyond defining the institutional preconditions that offer the best hope for a better human relationship to Nature. However, there are strong grounds to believe that the relationship between an inclusive democracy and Nature would be much more harmonious than could ever be achieved in a market economy, or one based on socialist statism. The factors supporting this view refer to all three elements of an inclusive democracy: political, economic and social.

At the political level, there are grounds for believing that the creation of a public space will by itself have a very significant effect in reducing the appeal of materialism. This is because the public space will provide a new meaning of life to fill the existential void that the present consumer society creates. The realisation of what it means to be human could reasonably be expected to throw us back toward Nature. As it was recently pointed out with reference to the work of  Hannah Arendt “a world in which labour is seen as only one part of a meaningful life will find consumption less tempting”.

Also, at the economic level, it is not accidental that, historically, the process of destroying the environment en masse has coincided with the process of marketization of the economy. In other words, the emergence of the market economy and of the consequent growth economy had crucial repercussions on the society-Nature relationship and led to the rise of the growth ideology as the dominant social paradigm. Thus, an ‘instrumentalist’ view of Nature became dominant, in which Nature was seen as an instrument for growth, within a process of endless concentration of power. If we assume that today only a confederal community-based society could secure an inclusive democracy, it would be reasonable to assume further that once the market economy is replaced by a democratically run confederal economy,  the grow-or-die dynamics of the market economy will be replaced by the new social dynamic of the new society: a dynamic aiming at the satisfaction of the community needs and not at growth per se. If the satisfaction of community needs does not depend, as at present, on the continuous expansion of production to cover the wants that the market creates, and if the link between society and economy is restored, then there is no reason why the present instrumentalist view of Nature will continue conditioning human behaviour.

Finally, democracy in the broader social realm could also be reasonably expected to be environmentally-friendly. The phasing out of patriarchal relations in the household and hierarchical relations in general should create a new ethos of non-domination which would engulf not only First Nature but Second Nature as well. In other words, the creation of democratic conditions in the social realm should be a decisive step in the creation of the sufficient condition for a harmonious nature-society relationship.

But, apart from the above political and economic factors, an ecological factor is involved here, which strongly supports the belief in a harmonious democracy-Nature relationship: the ‘localist’ character of a confederal community-based society might also be expected to enhance its environmentally-friendly character. Small scale communities are more likely to have the formal conditions required for successful and enduring collective management of the commons. Furthermore, it is reasonable to assume—and the evidence about the remarkable success of local communities in safeguarding their environments is overwhelming that when people rely directly on their natural surroundings for their livelihood, they will develop an intimate knowledge of those surroundings, which will necessarily affect positively their behaviour towards them. However, the precondition for local control of the environment to be successful is that the community depends on its natural surroundings for its long-term livelihood and that it therefore has a direct interest in protecting it—another reason why an ecological society is impossible without economic democracy.

In conclusion, the present day ecological crisis is basically susceptible to two solutions: one solution presupposes radical decentralisation. Thus, the economic effectiveness of the renewable forms of energy (solar, wind, etc.) depends crucially on the organisation of social and economic life in smaller units. This solution however has already been marginalised by the internationalised market economy, precisely because it is not compatible with today's concentration of economic, political and social power. This is also why alternative solutions are being advanced which are supposed to concentrate many advantages of renewable energy, but without necessitating any radical changes in the market/growth economy.

The new conception of democracy that I described briefly implies a new conception of citizenship: economic, political, social and cultural. Thus, political citizenship involves new political structures and the return to the classical conception of politics (direct democracy). Economic citizenship involves new economic structures of community ownership and control of economic resources (economic democracy). Social citizenship involves self-management structures at the workplace, democracy in the household and new welfare structures where all basic needs (to be democratically determined) are covered by community resources, whether they are satisfied in the household or at the community level. Finally, cultural citizenship involves new democratic structures of dissemination and control of information and culture (mass media, art, etc.), which allow every member of the community to take part in the process and at the same time develop his/her intellectual and cultural potential.

This conception of citizenship,  which could be called a democratic conception, presupposes a ‘participatory’ conception of active citizenship, where political activity is not a means to an end, but an end in itself where as Hannah Arendt put it we  do not engage in political action simply to promote our welfare but to realise the principles intrinsic to political life, such as freedom, equality, justice, solidarity, courage and excellence. It is therefore obvious that this conception of citizenship is qualitatively different from the liberal and social-democratic conceptions which adopt an ‘instrumentalist’ view of citizenship, i.e. a view which implies that citizenship entitles citizens with certain rights that they can exercise as means to the end of individual welfare.

To conclude, I think that today, more than ever in the past, the choice we have to make is clear and can be described as ‘democracy or barbarism’. Democracy, however, does not mean the various oligarchic regimes in the North that call themselves today democratic, let alone the despotic regimes in the South. It also does not mean an anachronistic return to the classical conception of democracy. Democracy can only mean a synthesis of the two major historical traditions, namely, the  democratic and the socialist tradition with the radical green, feminist and libertarian traditions.


ipatory’ conception of active citizenship, where political activity is not a means to an end, but an end in itself where as Hannah Arendt put it we  do not engage in political action simply to promote our welfare but to realise the principles intrinsic to political life, such as freedom, equality, justice, solidarity, courage and excellence. It is therefore obvious that this conception of citizenship is qualitatively different from the liberal and social-democratic conceptions which adopt an ‘instrumentalist’ view of citizenship, i.e. a view which implies that citizenship entitles citizens with certain rights that they can exercise as means to the end of individual welfare.

To conclude, I think that today, more than ever in the past, the choice we have to make is clear and can be described as ‘democracy or barbarism’. Democracy, however, does not mean the various oligarchic regimes in the North that call themselves today democratic, let alone the despotic regimes in the South. It also does not mean an anachronistic return to the classical conception of democracy. Democracy can only mean a synthesis of the two major historical traditions, namely, the  democratic and the socialist tradition with the radical green, feminist and libertarian traditions.