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Managed Globalization: Doctrine, Practice and Promise

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"Two alternate visions for shaping and explaining the governance of economic globalization have been in competition for the past 20 years: an ad hoc, laissez-faire vision promoted by the United States versus a managed vision relying on
   PLEASE SCROLL DOWN FOR ARTICLE This article was downloaded by: [Princeton University]  On: 18 May 2010  Access details: Access Details: [subscription number 917274300]  Publisher Routledge  Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK Journal of European Public Policy Publication details, including instructions for authors and subscription information: Managed globalization: doctrine practice and promise Rawi Abdelal ;Sophie MeunierOnline publication date: 22 March 2010 To cite this Article  Abdelal, Rawi andMeunier, Sophie(2010) 'Managed globalization: doctrine, practice and promise', Journal of European Public Policy, 17: 3, 350 — 367 To link to this Article: DOI: 10.1080/13501761003662040 URL: Full terms and conditions of use: article may be used for research, teaching and private study purposes. Any substantial orsystematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply ordistribution in any form to anyone is expressly forbidden.The publisher does not give any warranty express or implied or make any representation that the contentswill be complete or accurate or up to date. The accuracy of any instructions, formulae and drug dosesshould be independently verified with primary sources. The publisher shall not be liable for any loss,actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directlyor indirectly in connection with or arising out of the use of this material.  Managed globalization:doctrine, practice and promise Rawi Abdelal and Sophie Meunier  ABSTRACT  Two alternate visions for shaping and explaining the governance of economic globalization have been in competition for the past 20 years: an  ad hoc  , laissez-faire   vision promoted by the United States versus a managed vision relying on multilateral rules and international organizations promoted by the EuropeanUnion. Although the American vision prevailed in the past decade, the currentworldwide crisis gives a new life and legitimacy to the European vision. This essay explores how this European vision, often referred to as ‘managed globalization’,has been conceived and implemented and how the rules that Europe fashioned intrade and finance actually shaped the world economy. In doing so, we highlightthe paradox that managed globalization has been a force for liberalization. KEY WORDS  Capital; globalization; Lamy; OECD; trade; WTO. INTRODUCTION Est maıˆtre des lieux celui qui les organise. [He who organizes is master of thearena].–Jean de la FontaineThesustainabilityofoureraofglobalization,circa1983to2009,isinquestion,andnotprimarilybecauseofadevastatingfinancialcrisisthatdraggedtherealeconomy down with it. Rather, globalization – the free flow of goods, services and capitalacross country borders – is suffering a crisis of legitimacy, a crisis that began toemerge late in the twentieth century, the severity of which has been substantially worsened by the collapse of the American and European financial sectors.Two central challenges have not been met. First, national models of capital-ism have failed to legitimate openness to the global economy in the eyes of national societies. Skepticism has been on the rise. Second, the institutionalfoundations of global capitalism have not been made firm enough. It is thissecond challenge that we address. We argue that two alternate visions forshaping and explaining the governance of global capitalism have been incompetition for the past 20 years.One of those visions – what we call  ad hoc   globalization – largely ignores theneed to legitimate the processes of cross-border market integration. The secondof those visions – managed globalization – offers a compelling doctrine,  Journal of European Public Policy  ISSN 1350-1763 print; 1466-4429 online # 2010 Taylor & Francis 10.1080/13501761003662040 Journal of European Public Policy 17:3 April 2010: 350–367  D o w nl o ad ed  B y : [ P ri n c e t o n  U ni v e r si t y]  A t : 17 :33 18  M a y 2010  significant influences on policy regimes, and, most importantly, the promise toenhance the legitimacy of the project of building global capitalism. Alas, the American approach, heretofore defined primarily by an  ad hoc   building of cross-border ties through unilateral choices and bilateral deals, has generally dominated the European emphasis on multilateral rules and organizations to‘manage’, ‘harness’, and otherwise quite literally ‘rule’ global capitalism. Theproliferation ofhundreds of bilateral trade and investment treaties is emblematicof   ad hoc   globalization. The success of the European Union’s ‘open regionalism’represents best the triumph of managed globalization (Katzenstein 2005). As influential as the European approach has been, those organization-building endeavors culminated primarily in the institutionalization of a large,possibly growing, European economic space. Outside the union of 27 Europeancountries and the expanding but still modest influence of European-inspiredinitiatives in the international organizations that underpin global capitalism, ad hoc   globalization continued to reign. Even as US current account deficits,financed largely by surpluses in developing Asia and the Middle East, threatenedto promote an asset bubble within the United States and a dangerously imbal-anced international financial system,  ad hoc   globalization muddled along. And itmuddled until, finally, the absence of a coherent collection of institutionsrevealed fundamental weaknesses in unregulated, unsupervised financial trans-actions. The crisis of 2008 to 2009 was a failure of   ad hoc   globalization. Thatcrisis also represented the limits of the European attempt to organize theworld economy without the participation of the most important borrowerand spender inthe world – the United States – and perhaps the most influentialexporter and saver – China. Although the world economy is in tatters, ‘Europe’ – as metaphor or visionfor globalization – is decidedly not. Even in Spain, which experienced its owncurrent account deficits and debt-fueled housing boom, the financial sectorenjoyed access to liberalized capital flows, but was still regulated in such a way that exotic mortgage-backed securities were undesirable and impracticalfor the country’s banks. The impetus within Europe is towards even more regu-latory capacity to accompany its liberalized markets. Whereas  ad hoc   globaliza-tion brought liberalization without organizing, or even supervising, markets,organized globalization in doctrine and practice made great progress towardscombining market freedom with bureaucratic capability and responsibility.  Ad hoc   globalization is indeed in trouble, but the international community’ssudden embrace of managed globalization as insurance against future crises pre-sents the best opportunity at the level of the international system to re-legitimatecross-border capitalism. National governments will still, of course, have torevisit their social bargains in order to reassure their societies that the gainsfrom participating fully in the global economy outweigh the costs – and,more importantly, that those gains and costs will be shared according to eachnation’s principles.In this essay, we build on this distinction between US-supported  ad hoc   glo-balization and EU-led managed globalization. The story of   ad hoc   globalization R. Abdelal and S. Meunier: Managed globalization 351  D o w nl o ad ed  B y : [ P ri n c e t o n  U ni v e r si t y]  A t : 17 :33 18  M a y 2010  is the more familiar. According to conventional wisdom, globalization occurredbecause the United States and United Kingdom embraced  ad hoc   globalizationduring the early 1960s. Markets for goods and capital became internationalagain, the first era of internationalization having ended during the interwaryears. At various moments, American and British policy-makers adopted unilat-eral action, bilateral pressure, and even multilateral negotiations to foster thisliberalization. Major corporations took advantage of this new-found liberaliza-tion by exporting and outsourcing, and in so doing reinforced the process of globalization. Thanks to economic and technological changes, globalization isseen as an ineluctable tidal wave crushing borders without which nationalpolicy initiatives became impotent.The alternative vision, promoted over two decades by continental Europeans,is one where globalization is not formed only by striking down regulations, butalso by making them; one where bureaucrats, rather than just managers andpoliticians, write the rules of the game. The markets for those freely flowing goods and capital are built upon institutional foundations, including themyriad formal rules that oblige governments around the world to embraceopenness. Thisis a globalization made possible by codified rules and empoweredinstitutions, not by deregulation and the elimination of institutional constraints.By the end of the 1990s, Pascal Lamy, the current head of the World TradeOrganization (WTO) and for 20 years a prominent figure in French and Euro-pean bureaucratic politics, had dubbed the emergent doctrine  mondialisation maı ˆ trise ´ e  , or ‘managed globalization’ (Gordon and Meunier 2001; Lamy 2004a). Variants have included the phrases ‘harnessed globalization’ and ‘globa-lization by the rules’.Former French foreign minister Hubert Ve´drine insists that the French gov-ernment ‘calls for more rules to frame globalization so that it doesn’t only comedown to a revival of “might makes right”’ (Ve´drine 2001).  Ad hoc   globalizationentails, in other words, Thrasymachean justice, merely the will of the stronger.Globalization managed by multilateral deliberations in international organiz-ations may produce a conception of justice that is skewed. The justice of managed globalization would, however, at least be the product of dialogue,argument and deliberation.For over two decades there has been a struggle between these two alternativevisions. The story of liberalization is well known, but that of bureaucratization,an essential foundation of truly global markets, is largely unknown in theUnited States and deeply misunderstood within Europe. This essay exploreshow the European vision has been conceived and implemented, and how therules that Europe fashioned in trade and finance actually contributed toshaping the world economy.This alternative story of globalization is paradoxical, for managed globaliza-tion is no less liberal than  ad hoc   globalization; it is, in some important ways,more liberal. The rules codified a commitment to liberalism with just a few exceptions, and the bureaucracies empowered to enforce the liberal rules havebecome rather powerful, particularly within Europe. The Americans may  352 Journal of European Public Policy  D o w nl o ad ed  B y : [ P ri n c e t o n  U ni v e r si t y]  A t : 17 :33 18  M a y 2010  have helped to create a more liberal world, but Europeans have formally proscribed and informally delegitimated many deviations from liberalism.That is, the European doctrine of managed globalization has left the worldmuch more liberal than it otherwise would have become.More importantly, by embracing procedural justice, the doctrine and practiceof managed globalization have begun to legitimize the global project. True, the ad hoc   globalization favored by the United States is under severe attack, and ana-lysts worldwide lament the absence of regulation that led to the internationalfinancial meltdown. ‘Managed globalization’ may emerge to save the currentera of globalization from its worst excesses. This essay explores the srcins of the doctrine of managed globalization, how it was implemented in practice,and whether it has been successful in shaping a more liberal but also more legit-imate and more equitable world. THE GENESIS OF THE DOCTRINE OF MANAGEDGLOBALIZATION: FRANCE AND EUROPE ‘Managed globalization’ entered the European discourse in September 1999,when Pascal Lamy introduced it in his hearings to the European Parliamentas the ideological cornerstone of his future tenure as European Trade Commis-sioner (Lamy 1999). 1 Since then, the term has been used and abused by Euro-pean politicians. The doctrine of managed globalization has existed without a name, however, for more than a decade prior to this official baptism. Aspolicy doctrine, managed globalization demanded that rules for globalizationbe written and obeyed, jurisdictions of international organizations be extended,and the powers of the organizations themselves enhanced. For more than 20years European policy-makers have, often successfully, sought to codify therules of globalization and empower the European Union (EU), Organizationfor Economic Cooperation and Development (OECD), International Monet-ary Fund (IMF), and WTO. 2 The doctrine’s genesis remains somewhat obscure, but it is clear that it washeavily influenced by French policy-makers – not so much by the politiciansand their inflamed discourse, but rather by the French bureaucrats, nourishedin the cradle of etatism, who populate international organizations. 3 ‘There isa paradox’, observes Lamy, ‘of the French role in globalization. There is anobvious difference between the traditional French view on the freedom of capital movements and the fact that French policy makers played crucial rolesin promoting the liberalization of capital in the EC, OECD, and IMF’(Abdelal 2007: 13). A great deal has been written about the famous  tournant  , the U-turn, of Franc¸ois Mitterrand in the spring of 1983 (Hall 1986, 1987; Levy 1999).One theme remains to be explored, however: a handful of French policy-makers who orchestrated the  tournant   and replaced socialization with austerity and  rigueur   derived lessons from the experience that would later comprise thedoctrine of managed globalization. R. Abdelal and S. Meunier: Managed globalization 353  D o w nl o ad ed  B y : [ P ri n c e t o n  U ni v e r si t y]  A t : 17 :33 18  M a y 2010
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