The return of the nation state

Francis Fukuyama shocked the world with his "end of history" thesis that the market would take over the role of nations, but Sept. 11 changed all that: he now argues that our very survival depends on stronger government

By Francis Fukuyama |  Tuesday, Jul 13, 2004,Page 9

Originally published in THE OBSERVER , London

@ - The death of former US president Ronald Reagan last month and the moving tribute paid to him by former British prime minister Margaret Thatcher remind us that we still live in their shadow, in an era in which the chief impulse of politics has been to reduce the size of the state.

That agenda was critical in its time, for it was clear that the enormous growth of state sectors in the developed world in the 20th century had become economically harmful and socially stultifying. China and India have begun to free themselves from excessive state control, which reached monstrous dimensions under communism.

But there are signs that the Reagan-Thatcher era is ending and that the pendulum will swing the other way. Many recent problems have tended to come from the lack of sufficient state oversight, as with the Enron, WorldCom and other auditing scandals, or the privatizations of railways in Britain or electricity in California.

The easy gains from privatization and deregulation have long since been achieved.

The real date of the end of the Reagan-Thatcher era, however, was Sept. 11, 2001. The terrorist attacks on New York and Washington put back on the table foreign policy and security, which are pre-eminently issues for nation states. The US created a new Cabinet-level agency, the Department of Homeland Security, in direct response. But Sept. 11 also underscored a key feature of the post-Cold War world. While the great problems of world order in the 20th century were caused by too-powerful nation states such as Germany, Japan and the former Soviet Union, many of the problems of our current age, from poverty to refugees to human rights to HIV and AIDS to terrorism, are caused by states in the developing world that are too weak.

This lies at the roots of Africa's development problem; and a band of weak or failed states from North Africa through the Balkans and the Middle East to South Asia has become the breeding ground of radical Islamism and terror.

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. States can be extensive in scope and yet damagingly weak, as when state-owned firms are run corruptly or for political patronage.

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 licenses in less than six months.

The Reagan-Thatcher revolution was properly directed against excessive state scope, seeking to reduce regulation and government interference with private economic activity. But applied to developing countries, it had a perversely damaging effect. The policies known as the Washington consensus, pushed by international financial institutions such as the IMF and the World Bank, including such measures as privatization, trade liberalization and deregulation, failed to take account of missing institutional capacity in many developing nations.

Excessive zeal in pursuing this "neo-liberal" agenda undermined the strength of states to carry out those necessary residual government functions. Russia went from a state that controlled all aspects of the economy and civil society to one that could not collect taxes properly or protect its citizens from criminals.

It turns out that privatization, while reducing the scope of states, takes a fair amount of state capacity to implement cleanly. This is something Russia did not have as it sold off telecoms and energy companies to well-connected oligarchs.

Thailand liberalized its capital markets before it had an adequate bank regulation system; the result was the collapse of its currency during the Asian crisis of 1997. Elites in sub-Saharan Africa used IMF-mandated structural adjustment programs to cut core state functions while increasing the size of the patrimonial state.

Dealing with the AIDS crisis has become immensely more difficult due to the cuts in state capacity that have taken place in most African countries in the past generation.

It is perhaps in light of experiences like these that Milton Friedman, dean of free-market economists, said a couple of years ago that his advice to former socialist countries 10 years earlier had been to "privatize, privatize, privatize."

"But I was wrong," he said.

"It turns out that the rule of law is probably more basic than privatization," he added.

The cost of learning this lesson was high.

The Sept. 11 attacks underlined the fact that the lack of governance in poor and troubled parts of the world like Afghanistan could have profound security consequences for the developed world.

This has led to the ironic result that US President George W. Bush, who said when he was running for the presidency in 2000, "I don't think our troops ought to be used for what's called nation-building," has embarked on major nation-building exercises in Afghanistan and Iraq in his first term. The US experience in both countries has underlined another unpleasant truth: while the US has the ability to reach around the world militarily and unseat regimes, it does not have a corresponding capability or the institutions to provide them with strong governance.

The international community also needs new institutions. The UN, usually tasked with organizing post-conflict reconstruction, suffers from weaknesses both in legitimacy with respect to its democratic credentials, and in effectiveness in its ability to intervene and provide security. The international community did stabilize Bosnia and Kosovo, but it rules both countries like a European raj; it has no idea how to create self-sustaining institutions in either place that would permit a graceful exit. The UN needs reform and to be supplemented by other, overlapping multilateral bodies, such as NATO or the Community of Democracies, to act where it cannot.

In what now seems like the distant era of the dotcom revolution, a lot of Silicon Valley techno-libertarians saw an increasingly stateless world in which governments "got out of the way" of wealth creators. Unfortunately, that world is one in which a lot of other, less beneficent actors run free as well. Radical Islamists can make good use of the Internet videos of their beheaded captives. With globalization, coercive technologies have become democratized and more freely available to "super-empowered individuals."

Nation states, with their legitimate monopolies of force, will have to fill this vacuum. State building, as well as state-deconstructing, is something we will have to think seriously about in the post-Reagan era now unfolding.

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If ever the Democrats wanted to drive a wedge into the Republican strategy the post on Hullabaloo is hint on how to do it.

Someone needs to point out to the religous conservatives and the right wing nuts where the power really is. We all have a common enemy and it is the corporations. The Republicans will never do anything to loose their support and that is why the wingnuts will never really get any more than grandstanding that is doomed to failure like, as the Hullabaloo post points out, the marriage amendment.

The Democrats won't do it because the same dynamic applies to them and their left wing.

Francis Fukuyama: Shattered illusions

June 29, 2004

OF all of the different views that have now come to be associated with neo-conservatives, the strangest one to me was the confidence that the US could transform Iraq into a Western-style democracy and go on from there to democratise the broader Middle East.

It struck me as strange precisely because these same neo-conservatives had spent much of the past generation warning about the dangers of ambitious social engineering and how social planners could never control behaviour or deal with unanticipated consequences.

If the US cannot eliminate poverty or raise test scores in Washington, DC, how in the world does it expect to bring democracy to a part of the world that has stubbornly resisted it and is virulently anti-American to boot?

Several neo-conservatives, such as Pulitzer prize-winning columnist Charles Krauthammer, have noted how wrong people were after World War II in asserting that Japan could not democratise. Krauthammer asks: "Where is it written that Arabs are incapable of democracy?" He is echoing an argument made most forthrightly by the eminent Middle East scholar Bernard Lewis, who has at several junctures suggested that pessimism about the prospects for a democratic Iraq betrays lack of respect for Arabs.

It is, of course, nowhere written that Arabs are incapable of democracy, and it is certainly foolish for cynical Europeans to assert with great confidence that democracy is impossible in the Middle East. We have, indeed, been fooled before, not just in Japan but in Eastern Europe after the collapse of communism.

But possibility is not probability, and good policy is not made by staking everything on a throw of the dice. Culture is not destiny, but culture plays an important role in making possible certain kinds of institutions - something that is usually taken to be a conservative insight.

Though I, more than most people, am associated with the idea that history's arrow points to democracy, I have never believed that democracies can be created anywhere and everywhere through simple political will.

Prior to the Iraq war, there were many reasons for thinking that building a democratic Iraq was a task of a complexity that would be nearly unmanageable. Some reasons had to do with the nature of Iraqi society: the fact that it would be decompressing rapidly from totalitarianism, its ethnic divisions, the role of politicised religion, its tribal structure and the dominance of extended kin and patronage networks, and its susceptibility to influence from other parts of the Middle East that were passionately anti-American.

But other reasons had to do with America. The US has been involved in approximately 18 nation-building projects between its conquest of the Philippines in 1899 and the current occupations of Afghanistan and Iraq, and the overall record is not a pretty one. The cases of unambiguous success - Germany, Japan and South Korea - were all cases where US forces came and then stayed indefinitely.

In the first two cases, we weren't nation-building at all, but only re-legitimating societies that had very powerful states. In all of the other cases, the US either left nothing behind in terms of self-sustaining institutions, or else made things worse by creating, as in the case of Nicaragua, a modern army and police but no lasting rule of law.

This gets to a fundamental point about unipolarity. True, there is vast disparity of power between the US and the rest of the world, vaster even than Rome's dominance at the height of its empire. But that dominance is clear-cut only along two dimensions of national power, the cultural realm and the ability to fight and win intensive conventional wars. Americans have no particular taste or facility for nation-building; we want exit strategies rather than empires.

So where does the domestic basis of support come for this unbelievably ambitious effort to politically transform one of the world's most troubled and hostile regions? And if the nation is really a commercial republic uncomfortable with empire, why should Americans be so eager to expand its domain? In Iraq, since the US invasion, we Americans have been our usual inept and disorganised selves in planning for and carrying out the reconstruction, something that should not have surprised anyone familiar with American history.

As it happened, many Europeans raised some of these doubts in the lead-up to war in March 2003. Many Europeans did not particularly trust the US to handle the post-war situation well, much less the more ambitious agenda of democratising the Middle East. They also tended not to be persuaded that Iraq was as dangerous as the Bush administration claimed.

They argued that Baathist Iraq had little to do with al-Qa'ida, and that attacking Iraq would be a distraction from the larger war on terrorism. And they believed that the ongoing Palestinian-Israeli conflict was a more dangerous source of instability and terrorism than Iraq, and that the Bush administration was undercutting its own credibility by appearing to side so strongly with the policies of Ariel Sharon.

All of these were and are, of course, debatable propositions. On the question of the manageability of post-war Iraq, the more sceptical European position was almost certainly right.

The Bush administration went into Iraq with enormous illusions about how easy the post-war situation would be: it thought the reconstruction would be self-financing, that Americans could draw on a lasting well of gratitude for liberating Iraq, and that we could occupy the country with a small force structure and even draw US forces down significantly within a few months.

On the question of the threat posed by Iraq, everyone - Europeans and Americans - were evidently fooled into thinking that it possessed significant stockpiles of chemical and biological weapons. But on this issue, the European bottom line proved to be closer to the truth than the administration's far more alarmist position.

The question of pre-war Iraq-al-Qa'ida links has become intensely politicised in the US since the war. My reading of the evidence is that these linkages existed but that their significance was limited. We have learned since September 11 that al-Qa'ida did not need the support of a state such as Iraq to do a tremendous amount of damage to the US, and that attacking Iraq was not the most direct way to get at al-Qa'ida.

On the question of Palestine, the Europeans are likely wrong, or at least wrong in their belief that we could move to a durable settlement of the conflict if only the US decided to use its influence with Israel.

The point here is not who is right, but rather that the prudential case was not nearly as open-and-shut as many neo-conservatives believed. They talk as if their (that is, the Bush administration's) judgment had been vindicated at every turn, and that any questioning of their judgment could only be the result of base or dishonest motives. If only this were true. The fact that Washington's judgment was flawed has created an enormous legitimacy problem for the US, one that will hurt American interests for a long time to come.

The lesson of Iraq is that the US needs to be more prudent and subtle in exercising power in pursuit of both its interests and values. The world's sole superpower needs to remember that its margin of power is viewed with great suspicion around the world and will set off countervailing reactions if that power is not exercised judiciously.

This means, in the first instance, doing the simple work of diplomacy and coalition-building that the Bush administration seemed so reluctant to undertake prior to the Iraq War, and to not gratuitously insult the "common opinions of mankind".

The US does not need to embrace the UN or multilateralism for its own sake, or because we somehow believe that such institutions are inherently more legitimate than nation states.

On the other hand, the US needs like-minded allies to accomplish both the realist and idealist portions of our agenda, and should spend much more time and energy cultivating them.

Democracy promotion, through all of the available tools at America's disposal, should remain high on the agenda, particularly with regard to the Middle East. But the US needs to be more realistic about its nation-building abilities, and cautious in taking on large social engineering projects in parts of the world it doesn't understand very well.

Francis Fukuyama, professor of international political economy at the Paul H. Nitze School of Advanced International Studies at Johns Hopkins University in Washington, is author of The End of History and the Last Man (Penguin, 1992). A longer version of this article appears in the upcoming edition of The National Interest in Washington.

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