The Illusion of "Free" Trade

The more common a term becomes, the more it is taken for granted and the less it is subjected to criticism. A case in point is the term “free trade”. These two words are so frequently seen next to each other, that little thought is given to what they really mean together. Is it reasonable to talk of “free” trade?

Trade is usually said to be “free” from an economic point of view, namely when there are no tariffs or subsidies that hinder or otherwise distort trade. With this definition there is clearly little “free” trade between nations, because most world trade is regulated by bilateral trade agreements which are not “free” in this sense. For instance, despite its name the so-called “North American Free Trade Agreement” (NAFTA) is not “free” since it defines tariffs on many goods that are exported and imported between the Canada, Mexico, and the United States.[1] In this conventional definition, therefore, “free trade” is a term that does not describe the real world, since international trade often does not meet these conditions. But it is possible to go further, because even in the rare occasions when these economic conditions are fullfilled, like within the European Union for instance, there are fundamental political reasons why trade still should not be called “free”.

Trade between nations cannot, in principle, be “free” if this word is considered in its negative meaning of “absence of constraints.”[2] Trade between two individuals can be called “free” if both these individuals are lucid and informed, consenting to trade with each other under fair rules, and no pressure is exerted by one over the other, or by any third party on either of them. From a philosophical point of view, this is of course never the case; an individual is always constrained, if only for biological reasons. But politically, and for all practical purposes, it can be said that there are conditions in which two such individuals can engage in “free” exchange. However, this is not true for trade between nations, because nations are not like individuals, for two main reasons.

Firstly, nation-states are far more complex than individuals. Unlike individuals, they must take into account myriad internal factors. Nations are constrained by innumerable domestic affairs which prevent them from trading “freely” with the rest of the world. To this argument it might of course be objected that government administrations largely act independently of the will of the people, even in democracies, especially with regard to international relations. Foreign and trade policy in particular traditionally transcends party lines; all parliaments, governments and high courts, regardless of their composition, are understandably committed to defending their countries’ particular interests on the international stage. Can anyone seriously state, for instance, that the people, whether in the developed or in the developing world, have had much influence on the WTO trade negotiations that have been going on for several decades? On the contrary, such decisions are often made on behalf of the nation by a small group of civil servants. Modern nations are usually governed by bureaucracies rather than by elected representatives of the people.

Nevertheless, despite these important objections, it does not seem possible to equate nations with individuals. A country’s public opinion and poll results cannot be entirely dismissed by government administrations, in particular when trade policy is seen as affecting local economies at home. Bureaucracies responsible for negotiating and setting trade policy cannot act entirely independently of society because they must take into account many different interest groups of varying degrees of influence. Nations are not atomic entities; unlike individuals, they are incapable of making politically independent and unconstrained decisions, not least with respect to trade. Thus, international trade should not called “free” because nations, as opposed to individuals, are obliged to consider numerous, often contradictory, claims and requests from a variety of sources when making decisions regarding trade.

The second reason world trade should not be called “free” is because the current international order is unjust. Political freedom, whether among individuals or nations, requires the rule of law. Since there is, to this day, no comprehensive and impartial international jurisprudence to which all nations are equally bound, trade can only really be “free” between equal nations; whose interests are aligned and complementary. Besides the obvious difficulty of assessing whether this is ever the case, the extreme diversity of nations makes such a situation unlikely. When nations are unequal, as is usually the case, when one is stronger than the other economically or militarily, trade becomes skewed. (In extremis, when one nation is far superior to the other, trade becomes a tribute payed by the weaker nation to the stronger one, such as often happened in feudal times.) Nations tend to interact with each other as individuals do in a “mafia” environment; that is, where “might makes right.” In such an environment, stronger nations naturally benefit more than weaker ones from trade, since they more easily impose their demands and obtain more favourable trade terms. In current times, the United States, by far the world’s biggest military and economic power, most enjoys such an advantageous trade position.

Thus, to sum up the preceding points, trade cannot be called “free” from a political perspective because nation-states are not like individuals, who in many circumstances are able to trade freely with each other. Firstly, nations have internal constraints that individuals do not. Secondly, nations are far from operating in the same kind of legal environment as citizens of modern nation-states. Freedom is first of all a political concept; “free” trade should therefore be defined not only economically as in the standard definition above, but also politically. These political considerations for international trade will now be illustrated using both historical and contemporary examples.

   
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The 19^th century after the defeat of Napoleon is often described as a time of “free” trade during which a benign Pax Britannica reigned over the world and assured the peaceful and “free” exchange of goods between all countries. Strong reservations must be made, however, regarding such a statement. The world was largely divided between a few big European powers and only a handful of countries were actually engaged in international trade; most other regions were trading on terms dictated by their colonial masters. At that time, trade was also far smaller than today; it has been estimated that international trade represented only one percent of global wealth in the 19^th century whereas today it amounts to more than 40 percent of world GDP. In comparison with the XXIst century, nation-states were then largely autarkic and world trade could therefore hardly be called “free” from any meaningful point of view.

Britain’s colonial domination and her control of the sea routes during this period assured favourable terms for the export of British goods. For instance, from the end of the 18^th century the British started to demand that India give up the production of cotton and instead import finished textiles from Britain.[3] The raw cotton was then sent to England where it was made into cloth in the mills of Manchester and Lancashire, before being shipped back and sold in India.[5] This decision was as beneficial to England’s industrialisation as it was detrimental to India’s development. So advantageous was this state of affairs for the United Kingdom that India was not allowed to set tariffs on cotton goods until 1917.[4] This is an example of how the stronger trading partner tends to benefit more from trade than the weaker one.

David Ricardo’s famous example of the trade of Portuguese wine for English wool should also be seen in this context. It is an interesting example since it has been used by economists to prove that “free” bilateral trade is beneficial for both countries when based on natural comparative advantages. However, economists often lack an understanding of history and politics. It is essential to have an idea of the geopolitical situation between Britain and the Iberian Peninsula in order to understand the actual trade relations between these countries. In fact, the progressive British military ascendancy over Portugal and Spain in 17^th and 18^th centuries gradually led, as expected, to tangible commercial benefits for Britain. Writer and journalist Eduardo Galeano wrote the following in his now classic work on the political and economic history of Latin America:

“Gold began to flow [from Brazil to England] at the same moment Portugal signed the treaty of Methuen, in 1703, with England. This was the coronation of a long series of privileges obtained by British merchants in Portugal. In exchange for her wines for the English market, Portugal was to open her own market and its colonies to British manufactured goods. Given the level of industrial development which existed at the time in Portugal, this measure meant the ruin of local manufacturing. It was not with wine that English cloth was to be bought, but with gold from Brazil, and as a consequence the nascent cloth industry of Portugal was paralysed. Portugal not only nipped in the bud its own industry but also destroyed the seeds for any other industrial development in Brazil. The kingdom prohibited the operation of sugar refineries in 1715; in 1729 it declared a crime the opening of new roads of communication in the mining region; in 1785, it ordered the burning of the Brazilian textile and thread mills.”[6]

This example of Spain and Portugal (and their former colonies) shows that to allow the unconditional import of goods from more developed countries can have disastrous social consequences that can last for centuries. Indeed, the value of the exports of these two countries still remains relatively small in the XXIst century. The Methuen treaty was evidently not a trade agreement between two equal partners within a system of rule of law, and can therefore not be considered “free” trade. England was able to industrialise partly at the expense of the development of Spain, Portugal, and its colonies, by making full use of a favourable balance of power with these countries.[7]

These historical examples are interesting because they clearly show to what extent nations try to turn political and military advantages into commercial ones. It is a general rule that should be evident to any honest student of international relations; namely that trade agreements are generally skewed by the political situation in which the trading partners find themselves at a given time. This is still the case today of course, though the modern world adds a layer of complexity. It is well known that most of the high value goods that are traded today depend only on conditions that can be acquired (such as education and infrastructure). However, the acquisition of these conditions is often difficult and costly. The high barriers to entry of many industries, such as the automobile or the pharmaceutical industries, means that it is important today not only to have a favourable geopolitical position, but also to be the first in as many sectors as possible. As a result, though the modern world creates significant opportunities, in this sense it also tends to entrench the political status quo. This “first mover advantage” helps to maintain the historical power relations between stronger and weaker nations, i.e. the intractable split between the North and the South.

A consequence of this idea is that protectionism can be recommended in the modern world. Indeed, “Global Trade and Conflicting National Interests”, an important work from 2000 by Professors R. E. Gomory and W. J. Baumol, supports this conclusion. They found that though some bilateral trade can be beneficial for both nations, there are many trade scenarios in which the national interests of two countries conflict with one another. The authors noted that, “It is often true that improvement in one country’s productive capabilities is attained only at the expense of another country’s general welfare.”[8] Using mathematical modelling, the authors showed what can often be grasped intuitively, namely that trade does not always benefit all involved parties. A nation may be worse off if it increases trade with a more industrialised and developed trading partner, rather than trying to limit its trade with this partner.

It can thus be in the interest of the weaker countries of the world to engage in protectionism. Protecting nascent industries and promoting their development until they are competitive enough to compete at internationally, may be a good strategy in some cases for emerging and undeveloped nations. On the other hand, this is precisely the reason why the deregulation of trade is generally supported by the richest and most developed countries. Indeed, the biggest proponents of “free” trade have long been the West; those nations which, due to their positions of relative economic and political strength with the rest of the world, have been (at least until recently) in the best position to profit from increased international trade.

The West, though, hasn’t always been so enthusiastic about global trade. The economist Ha-Joon Chang described in his excellent study, Kicking Away the Ladder, how trade policies of Western nations have changed significantly over time. The same countries that today officially support “free” trade all used protectionist measures in the past, when they deemed that their own recently founded industries had to be protected against foreign, and in particular British, competition. This was precisely the way in which for instance Germany and the USA were able to build up an industrial economy and become internationally competitive. As Chang wrote, “between the Civil War and the Second World War, the USA was literally the most heavily protected economy in the world.”[9] It should not be surprising, therefore, that the first support for “free” trade originated with British economists, such as Adam Smith and David Ricardo.

The European Union presents an interesting example in this discussion, since it is a historically rare case of unregulated trade between nations at very different stages of social and industrial development. The unhindered movement of goods and services within the European Union has enabled the strongest powers among the 27 EU members, in particular Germany, to benefit hugely from trade with the weaker and less developed ones. Germany has enjoyed huge current account surpluses, partly at the expense of other European countries which predictably have suffered from weak industrial output, large trade deficits and high levels of debt. The “free” trade environment in the EU has been beneficial mostly to the stronger nations, and has helped reestablish Germany as the dominant power in the region. As expected, for the weaker EU nations it is certainly far from clear that the increased “free” trade with Germany has had positive long term effects, in particular considering the major economic difficulties that they now are facing.[10]

Though the most developed nations understandably promote unregulated trade, at the same time they also discreetly contribute to distorting and regulating trade when they want to protect their own industries. Such protective measures include tariffs, of course, such as the EU and US tariffs on Chinese goods.[11] Subsidies are also a common tool used to distort trade when these nations cannot compete on price. Agriculture is a good example; the EU and the US have been heavily subsidising their agricultural sectors for decades. The Common Agricultural Policy, which subsidises European agriculture, consists of almost half of the entire budget of the EU, or around 50 billions euros per year.[12] Similar protection is given by the United States to its cotton and corn industries, both receiving billions dollars per year in subsidies. These policies have the effect of distorting world market prices and of denying access to Western markets for many of the world’s poor and emerging countries. In the name of “free” trade however, the EU and the US continue to demand that other countries, usually poorer ones, open up their markets to Western investment and trade. This is the main reason the latest “Doha” round of WTO trade negotiations has stalled for years.

The consequences of such trade policies can be devastating for weaker nations. In a surprisingly candid moment, former US president Bill Clinton confirmed in a mea culpa appearance in the Senate Foreign Relations Committee in March 2010 that he had sacrificed the future of the Haitian society for the sake of US interests.[13] He confessed that, as president, he had deliberately chosen to give in to the demands of the rice farmers of his home state of Arkansas, as well as the IMF and World Bank, “conditioning access to foreign aid on Haiti dramatically cut its trade tariffs on imported US rice”. The customs duties that had protected Haiti’s domestic rice production were reduced from 50% to 3%. Not surprisingly, this trade policy decision by the Clinton Administration fatally undermined Haitian agriculture, made Haiti even more dependent on imported food and strongly contributed to the social and economic catastrophe that Haiti has been experiencing for the last decades.[14]

Despite what is often heard, therefore, “free trade” is an illusion. Trade is not “free”, neither from an economic nor from a political point of view. The reason for this lies not in the nature of international trade, but in the nature of the agents who engage in it. Nation-states do not trade “freely” with each other not only because it is not in their interest, but because they are inherently incapable of doing so. It is therefore utopian of the United Nations to wish for “a universal, rule-based, open, non-discriminatory and equitable multilateral trading system”[15], since, on the contrary, international trade between nation-states tends to be specific, discriminatory and inequitable. To claim that world trade is, or should be, “free” is an idea that has been promoted by the most developed nations. These countries support a largely unregulated international trade system under which tariffs and subsidies are acceptable only if they are in the interest of these very countries. This is the reality of international trade.

Notes:

[1] See, for instance, Mexico under NAFTA, by Timothy A. Wise, Director of the Research and Policy Program at the Global Development and Environment Institute, Tufts University.

[2] For a review of positive and negative liberty, see the classic essay from Isaiah Berlin, in “Four Essays on Liberty”.

[3] H.-J. Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective. Anthem Press, 2003. p.22-23.

[4] As T. S. Ashton wrote in Standard of Life of the Workers in England: "Instead of producing muslins, cambrics, and other goods of high quality for sale in Europe and in the United States, the factories of Lancashire were increasingly concerned with cheap caliceos for Indian and Far Eastern markets.", in Capitalism and the Historians, p136, by F. A. Hayek, editor.

[5] H.-J. Chang, Kicking Away the Ladder: Development Strategy in Historical Perspective. Anthem Press, 2003. p53.

[6] E. Galeano, Las Venas Abiertas de América Latina, Siglo XXI de España Editores. The Treaty of Methuen was a military and commercial treaty signed between England and Portugal, which stipulated that no tax could be charged for Portuguese wines exported to England or English textiles exported to Portugal.

[7] E. Galeano, Las Venas Abiertas de América Latina, p24-25. (Siglo XXI de España Editores.). The treaty of Nanking of 1842 is another example, as H.-J. Chang shows in Kicking Away the Ladder: Development Strategy in Historical Perspective. Anthem Press, 2003. p53-54.

[8] R. E.Gomory and W. J. Baumol, Global Trade and Conflicting National Interests, MIT Press, 2000.

[9] For instance: “The United States maintained weighted average tariffs on manufactured products of approximately 40–50% up until the 1950s, augmented by the natural protectionism of high transportation costs in the 19th century, “Kicking Away the Ladder”, p 17. See also, Ha-Joon Chang, “Kicking Away the Ladder”, post-autistic economics review, issue no. 15, September 4, 2002, article 3. http://www.btinternet.com/~pae_news/review/issue15.htm

[10] See, for instance, Spain, Debt and Sovereignty Stratfor June 12^th 2012,  http://www.stratfor.com/weekly/spain-debt-and-sovereignty/

[11] See, for instance, “Europe Investigates Chinese Solar Panels, Sept 2012, The New York Times, and “Backdating of Tariff Fuels Fight Over Chinese Tires”, Aug 2012, The Wall Street Journal.

http://www.nytimes.com/2012/09/07/business/global/eu-investigates-chinese-solar-panels.html?pagewanted=all

http://online.wsj.com/article/SB10000872396390444270404577609511581316168.html

[12] EU statement: “The overall cost to the European Union is about €53 billion а year. This is roughly 40% of the total EU budget. The CAP's share of this budget is constantly shrinking: from 71% in 1984 to an expected 39% in 2013.” (http://ec.europa.eu/agriculture/faq/cost/index_en.htm)

 [13] “Clinton’s Confession”, S. Gallego-Díaz, El Pais/NYT/IHT, 16th April 2010.

 [14] Mr Clinton’s exact words in the Senate hearing were the following: “I have to live every day with the consequences of a decision of mine which may have been good for some of my farmers in Arkansas, but it has not worked. It was a mistake. I had to live everyday with the consequences of the loss of capacity to produce a rice crop in Haiti to feed those people because of what I did; nobody else.” See Education International website, Impacts of IMF Policies on National Education Budgets and Teachers, Richard Rowden, Education International Research Institute, July 2011. http://download.ei-ie.org/Docs/WebDepot/EI%20Study%20on%20IMF%20Policies%20and%20Alternatives.pdf

[15] United Nations General Assembly, 2005 World Summit. http://www.who.int/hiv/universalaccess2010/worldsummit.pdf

Finding Our Philosopher

Once at dinner party, I happened to mention how much I admired a particular philosopher. Not surprisingly, one of the persons with whom I had been speaking replied to me in a sarcastic tone: “How sweet!”; another, condescendingly: “I don’t believe I’ve ever had a favourite philosopher.” The insinuation was, of course, that since philosophy is above worldly matters, though we may have a favourite colour or a favourite car, we cannot possibly have a favourite philosopher. According to this view, to identify with any particular philosopher is to be intellectually limited. It is the idea that the thinker does not exist, however brilliant, who is important enough to be singled-out. However, such a position fails to consider the meaning and the importance of “finding our philosopher.”

The idea of having a “favourite philosopher” is based on the observation that each person has a particular way of relating to the world. Few would claim that people who have grown up in the same environment have identical world views. On the contrary, we immediately acknowledge from our own experience, that other minds, often to our chagrin, do not work exactly like our own. As George Santayana said, “we dye the world of our own colour,” and the contrast of this personal colour increases as our mind progressively grows in rational capacity.[1] Philosophers, therefore, often leave their own personal mark on their works. As William James said, “a philosophy is an expression of a man’s intimate character.”[2] The spiritual life has its root in the soul’s particular relationship with the external world.

There is undoubtely a certain constancy in the way thinkers develop and express their philosophy. Though the thoughts of most philosophers sometimes change direction, they are never completely transformed over the course of their lives. Rather, as they mature they merely add flesh to their first skeletal constructions and expand their horizons to encompass new fields. Their fundamental view of the world is usually already apparent in their early efforts. Many first works, such as The Birth of Tragedy by Nietzsche or The Sense of Beauty by Santayana, already show the stylistic and the philosophic directions that these philosophers followed for the rest of their lives. Though philosophical investigations grow best in the rich soil of experience, they take their inspiration from an immutable inner source.

When we discover the ideas of thinkers, certain moral and philosophical concepts and the manner they are presented to us, instinctively appeal to us more than others. Some representations of the world just seem to ring truer to us than others. An individual is not drawn to all philosophic currents and to all philosophers to the same degree. He is attracted to the works of certain philosophers and less sensitive to those of others. It is natural that similar characters find similar ideas attractive. We may say then that our “favourite philosopher” is that thinker whose ideas we naturally accept because we instinctively know how close they are, in form and content, to our own.

To feel an affinity with a certain philosopher usually means, more generally, that we agree with a particular school of thought. But it goes further than that since our favourite philosopher represents the world in a way in which we ourselves would represent it, were we able to do so. Obviously, since no two individuals are exactly identical, nor live in exactly the same conditions, the ideas of our favourite philosopher can never be a perfect representation of our own thoughts. Nevertheless, discovering and absorbing the thought of our favourite philosopher is the closest we may ever come to seeing a faithful representation of our own implicit and unarticulated convictions about man and society.

It is important for the thinking person to “find his philosopher” because all intellectual speculation rests on, and largely consists of, attempts at representation of the individual world view. Philosophers are few but originality is limited in mankind; we might therefore assume that virtually everyone could have a favourite philosopher. By identifying him we might improve our self-knowledge, as our favourite philosopher paints a picture of our own view of the world. It should be valuable to know the one who can show us our inner beliefs. But this task is not an easy undertaking; far from succeding in finding our philosopher, we are usually unaware even of the existence of such a possibility.

There are means that we may use, to help us find our philosopher. We feel affinity not only with a particular philosophy but also with the particular person from whose character and inner processes this philosophy emerges. It is useful, therefore, for us to look at the lives of philosophers, since an individual’s life and actions are, at least to some extent, reflections of his mind. Though Spinoza and Leibniz were contemporaries, both their philosophies as well as the lives they led couldn’t have been more different. The same can be said, for instance, with regard to Russell and Wittgenstein. In order to identify one’s favourite philosopher, it is of interest therefore, not only to study the thoughts of philosophers, but also to read accessory literature of these thinkers, such as their biographies or their published letters.

To find our philosopher means, at a minimum, that we should become acquainted with the more influential of them. The search for our favourite philosopher necessarily therefore implies a learning process which consists in comparing the thoughts of many philosophers. It is a process whereby we study, weigh, and finally discard argumentations because we become convinced, upon reflection, that they do not exactly fit us, that they do not describe the world precisely in the way we see it. Though we may never know exactly who we are, at least we can repeatedly know who we are not. A person who has found his philosopher is therefore either very lucky or, more likely, has been persistent enough in his efforts to find him. Far from being intellectually limited then, he who has found his philosopher is more likely to be someone who has awoken intellectually.

Finding our philosopher is also difficult because the realisation of his existence is usually only perceived in retrospect. That is, a young person should have the desire to search for something that he doesn’t know exists. If, at some point, he is inadvertently exposed to a representation of his own view of the world, he must have enough presence of mind to become aware of the special feeling of kinship between this philosopher and himself. In sum, intelligence and diligence are not enough in order to find our philosopher; a kind of intellectual sensitivity is needed as well. It is that intellectual sensitivity (noesis) which, along with discursive reasoning (dianoia), Plato considered to be an essential part of the thinking process (nous). John Dewey described this intellectual intuition as “a field of perception, rich in hues and subtle in shades of meaning.”[3]

Philosophy cannot only be “thought” therefore, but should also felt and imagined; it cannot be successfully approached with a cold and purely analytical mind. We should resist the temptation of becoming too academic when dealing with philosophical questions. At the same time, we thereby inevitably become aware that this requirement discriminates the access to philosophy. This is why it should not be surprising to see how unphilosophic many intelligent minds can be. If they at times do not have the capability for speculative thought, it is because they lack, or perhaps have not developed, the appropriate intellectual sensitivity. Conversely, some form of philosophical inquiry may be possible to individuals of average parts who do possess this intellectual intuition.

Finding our philosopher is thus an essential part of our intellectual development. At a dinner party or any social event, there will naturally not be enough time or interest to discuss the ideas presented in this short essay, but that does not mean we should remain unaware of them. The search for a favourite philosopher is motivated by a desire to improve the self-knowledge upon which all philosophical speculation is based. It is a sign of intellectual maturity therefore, rather than intellectual limitation. But just as self-knowledge is a necessary though not a sufficient condition for the development of philosophy, finding our philosopher is obviously not enough. It is only a starting point which could hopefully lead to the birth of our own original ideas about the world.

Notes:

[1] G. Santayana, Interpretations of Poetry and Religion.

[2] W. James, A Pluralistic Universe.

[3] J. Dewey, Experience and Nature, p315. Dover Publications, Inc., 1958.

The Future or the End of History?

It would take a great deal of confidence, in these uncertain and changing times, to publish an article called "The Future of History." Yet, this is precisely what Francis Fukuyama has done in the Jan-Feb 2012 issue of Foreign Affairs.[1] It is a bold title since it not only places this article in the ideological path of his most famous work, “The End of History and the Last Man,” but it also suggests a fundamental departure from those ideas with which he is usually associated. History seen as a directional process with a past, a present and a future is a philosophical and historiographic concept. This article, though, is not really about the future of History, but more about the political future of the world, and in particular the Western world. Nevertheless, in order to understand this latest contribution and perhaps any article of Francis Fukuyama’s, it is necessary to understand what he meant by the “end of History.”

Anyone who is interested in the modern world should read “The End of History and the Last Man.” It is without a doubt one of the most influential political works of the last decades, even though it is based mostly on 19th century ideas. Indeed, since it is heavily endebted to Hegel and Nietzsche, “The End of History” can serve as a good introduction to these two highly influential thinkers. Both of them developed original ideas about the evolution of the individual’s place and consciousness in the modern society. The problem, however, is that Fukuyama’s interpretation of these ideas was sometimes doubtful, and this makes any subsequent analysis of current affairs through this prism also open to the same criticism. Perhaps the most important objection relates to the rosy and caricatural picture that he drew of the “liberal democracy.” However, before reviewing this point, it is necessary to first recall the main ideas.

Briefly, according to Hegel, History, seen as a process of continuous ideological and moral development, “ended” with Napoleon’s victory at Jena in 1806, because with it, the universal values of the Enlightenment had thereby spread to all advanced peoples of the earth. Fukuyama used this idea in order to propose that History in fact ended in 1991 after all major communist regimes had crumbled or changed: ideology was dead, “liberal democracy” represented the “end point of mankind's ideological evolution,'' according to Fukuyama. Underpinning this idea is the concept of “recognition” in the way Hegel saw this term.[2] The ancient and feudal societies were based on the Master and Slave dichotomy and have slowly disappeared over the last centuries. In the democratic era, more and more people have for the first time been able to satisfy their desire for dignity, for recognition – that human trait that Plato called thumos, or “spiritedness.”[3] Liberal democracy is, for Fukuyama, therefore unique: it is a system which has achieved democratic legitimacy by obtaining the recognition of its citizens. Conversely, the citizens of the “liberal democracy” have no longer any desire or reason to seriously confront each other or the state because society provides them with all necessary outlets for achieving recognition. Contrary to all previous societies, in the modern liberal democracy recognition can be obtained, for example, by achieving status through salaried work, by voting in fair elections, by succeeding in the capitalist business environment, or by becoming physically victorious in sports.

Before addressing the application of Hegelian "recognition" to modern society, it is necessary to look more closely at the term "liberal democracy." In reality, the societies that are called “liberal democracies” are often far from deserving the name. It is usually a euphemism for a very different political and economic reality. Most Western societies, not least the USA, have been characterised since approximately the 1940s, by a high degree of statism and rather than calling them “liberal democracies,” it may be more correct to say that they have implemented various versions of “state capitalism.” Neither from the point of view of classic liberalism nor from the point of view of a democratic ideal is it possible to say that those societies which are commonly called “liberal democracies” live up to the expectations inherent in these two words.

Yet, Fukuyama presented the “liberal democracy” as an almost flawless political system. Such thinking goes against all serious political philosophy, starting with Plato. In “The Republic,” the political system called “democracy”, or the rule of the people, was famously presented as just one of several possible systems and certainly not the best one. Further, it warned that democracy can easily degenerate into tyranny, not only because power corrupts, but because the masses are incapable of electing a just ruler. Paradoxically therefore, it is only by keeping in mind the imperfections of the democratic system that a certain acceptable level of democracy can be sustained. Thinkers like Alexis de Tocqueville, John Stuart Mill and George Santayana understood very well this fragile nature of democracy. It is important in the current discussion to remember Mill’s observation that even a democratically elected government can have complete legitimacy only in the eyes of the majority that elected it. Santayana said that constitutional democracy is not enough, in itself, to assure the survival of the democratic system; there must be an “instinct” of democracy in the people, that instinct which “assumes that, unless all those concerned keep a vigilant eye on the course of public business and frequently pronounce on its conduct, they will before long awake to the fact that they have been ignored and enslaved.”[4] Such precautions about the nature of democracy were conspicuously absent from Fukuyama’s major work. There are serious implications to such omissions; for democracy cannot be the end point of political struggle if inherent in the concept of democracy itself is the constant struggle to uphold it. Fukuyama was either ignorant of these aspects of the liberal democracy, or more likely, wilfully chose to be politically correct and not mention its dirtier sides.

In his latest article, Fukuyama does admit that there are threats to liberal democracies, but for him these threats seem only to be exogenous and new, in the form of “globalisation” and “the further development of technology.” These difficulties are real, of course, but can only be properly understood within the context of the innate weaknesses of the liberal democracy. Indeed, almost all the political, economic and social problems of today’s Western societies stem from the ignorance or disregard on behalf of the masses of these fundamental recommendations regarding democracy. The people’s lack of democratic scepticism and of political education is leaving unchecked the slow growth of undemocratic tendencies in many liberal democracies. It is possible to mention, for instance, the farcical US electoral system; where two business parties alternate in power by conducting expensive charade-like campaigns, during which candidates hardly even try to appear independent. Democracy was always far from perfect in the US, but was further undermined with the now infamous Supreme Court’s “Citizens United” decision of 2010 which allows corporations to spend unlimited amounts of money in political elections.[5] The situation in most other Western “democracies” is not much better. In Europe, it is standard procedure to circumvent the democratic process when the political and business establishment does not consider the people capable of making the “right” choice. This has often been the case with respect to the ratification of EU treatises, as well as, recently, when the Greek and Italian élites decided to change governments and implement radical economic reforms, with little regard for the will of the people.

To call an existing society a “liberal democracy” is to misrepresent and take for granted the level of liberty in this society. As Rousseau commenced The Social Contract; « l’homme est né libre, mais partout il est dans les fers ».[6] Liberty is always to some degree limited in society, since, as Hobbes observed, the social contract consists in giving up freedom for security. In this sense, taxation is also a form of state coercion but which is, if kept at “reasonable” levels, acceptable for most people. Liberal democracies often go further though; many of them are actively limiting individual freedoms by using the classic excuse of providing ever more protection, often against foreign “enemies.” In the USA, the so-called “War on Terror” has been used since 2001 as a pretext to curtail rights, and the latest National Defense Authorization Act now includes the possibility for indefinite military detention of US citizens without trial, also in the name of security.[7]

Fukuyama claimed, like many other mainstream political thinkers, that “liberal democracies” are fundamentally peaceful and tolerant. He says that “having supplied recognition, democracies tend to be peaceable and nonimperialist, and don't fight one another.” Yet, a quick survey of international events suggests that this is not the case: some of the most bellicose countries on earth are liberal democracies, as the recent military engagements of the United States, Israel or the UK show. The US and Israel have between them started or participated in scores of military conflicts in the last two decades. The number of casualties may today be smaller than before, but it would be naive to attribute this fact to an increase in empathy on behalf of political and military establishments. It is more likely related to the increase of the media coverage of conflicts and the evolution of weapons technology. Contrary to what Fukuyama believed then, a country’s military aggressiveness does not depend so much on its economic and political system per se, but more on its readiness, its interests and its capability to wage war. Thus, liberal democracies regularly get involved in military conflicts because they have significant economic and political interests to defend. For instance, as has been sometimes admitted, one of the main reasons the US has been waging war and building up military power in the Middle East for so long is the interest of controlling the world’s most important oil reserves.[8]

If liberal democracies do not attack each other it is because they have entered into the fold of US hegemony by aligning their economic and geopolitical interests with the only superpower. Integrated economies that are heavily dependent on trade with one another have also little interest in solving disputes by force, regardless of their political system. Conversely, it is precisely because of the importance of trade to the economies of almost all nations today, that modern conflicts are often waged on the economic rather than on the military level (as, for instance, the recent plan to ruin the Iranian economy by putting in place an embargo on Iranian oil exports[9]). It should be impossible to say, therefore, that liberal democracies only spread peace and tolerance; on the contrary, the actions of Western governments have shown that the competition for resources and the struggle for domination are alive and well, more than half a century after the establishment of the UN Charter. Fukuyama probably did not recognise this point because, apart from possible intellectual dishonesty, for him war was mainly the consequence of the desire for Hegelian recognition. Since, in his view, the liberal democracy satisfies the desire for recognition of all its citizens, it is a society that therefore does not engage in war, or at the very least, does not start it. The persistence of such a view is surprising considering the amount of evidence against it.

Further, Fukuyama assumed that liberal democracy “won” over ideological systems such as communism and fascism. From a literal point of view, such a statement seems simplistic and exagerated. A more truthful and precise way of putting it might be that, in the case of communism, the Soviet state failed largely due to internal economic collapse, which was partially brought about, not by something as abstract as the virtue of the liberal democratic ideal, but by something far more prosaic: the US military power resulting directly from state planning in Washington, using a defense budget of such size that it could only be generated by a capitalist system. Fascism, too, was not defeated militarily by liberal democracy since the victory over Germany in WWII would have been impossible without the sacrifice of the Soviet army on the Eastern front. More importantly, it is dangerous to believe that democracy can “defeat” fascism since, as was mentioned above, in the liberal democracy the erosion of democracy is a constant risk and the slide towards fascism is a constant temptation. For example, the corporatism, the indebtedness, and the war-mongering of the US government are obvious fascist traits, as John T. Flynn so clearly warned over half a century ago in “As We Go Marching.”

It is notable that ideology remains quite strong in the country which is the most “Western” of all, not only in terms of geography but also in terms of outlook: the United States. The capability of this “liberal democracy” to perceive communism as a threat to be annihilated, for instance with the aggressive escalation of the Cold War by the Reagan administration – not by the Soviets  – , clearly suggests that the liberal democracy can also evolve, like the societies it attempts to vilify (sic), under the yoke of ideology. Expressions such as Reagan’s “Evil Empire” of the 1980s or Bush’s “Axis of Evil” of the 2000s, are typical of an ideological state. Such terms obviously do not belong in a society where, according to Fukuyama, ideology has disappeared and reason prevails. For example, only a non-rational and ideological form of thinking among a large part of US civilian and military institutions could explain $600billion of spending on “Homeland Security” since 2001.[10] The political culture of the United States is heavily tinged by what might be called an ideology of uniqueness: “American exceptionalism”. This ideology expresses itself for instance in the “Manifest Destiny” and in the Puritan vision of the “Shining City upon a Hill,” and has its basis in the ideal of the Lockean “American way of life” which, as the phrase implies, cannot be realised anywhere else than in the United States.

Furthermore, if the liberal democratic system were always non-ideological as initially Fukuyama believed, it could not have “won” against another political system because it could not even have defined such a political struggle. That is, it is implicit in the term itself that liberal democracies, like the USA, can be to some extent “ideological.” In his latest article, Fukuyama now seems to agree with this view of the liberal democracy as also ideological; he mentions “the hegemony of liberal democratic ideology”, apparently in contrast with his earlier position. After having hailed the non-ideological nature of Western society in “The End of History,” he now calls for the emergence of a new ideology that will propose new solutions to the problems that he has identified. Unfortunately, this new-found belief in an ideology of the liberal democracy now leads him to focus on the question of “how?” (i.e. which means?), instead of the arguably more fundamental question of “what?” (i.e. which problems?) to solve in the liberal democracy.

In reality, though ideology does persist in some liberal democractic societies, the West is largely non-ideological today. It is well known that in many Western nations the importance of ideology has strongly declined since the end of the Cold War. As a result, the political parties of the traditional right and left of the political spectrum have clustered around the centre so as to become almost indistinguishable from each other, and the political message has drowned in the promotion of personalities, thereby both limiting the real political choice of the voters and at the same time confusing them.[11] Ironically, it would seem therefore, that contrary to Fukuyama’s view, the decline of ideology in the West has brought along with it a decline of democracy. Further, considering this development, it seems far more appropriate to call the typical Western society by its non-ideological name, by referring to the redistributive nature of its economic system: the Welfare State. In his latest article, however, Fukuyama only sees welfare states as “big, bureaucratic and inflexible” and as products of ideological programmes of the left. A closer look at the most modern and successful welfare states though, such as the Nordic societies, shows that far from being based on rigid ideology, they are surviving splendidly, even in the current financial turmoil, thanks to their flexibility in adapting via reform and thanks to a utilitarian outlook that completely disregards ideology.

As was shown above, the liberal democracy is in many ways not fundamentally different from other, formally less democratic, political systems. The modern welfare state, though, is a far more unique society (though, in some cases, this term represents in fact just another side of the liberal democracy). In some welfare states there are no longer any major individual differences in pre-tax income, and classes have almost disappeared, not only economically but also socially. Progressive taxation and other social contributions have enabled a further reduction of socio-economic inequality.[12] Thus, on the one hand, in the welfare state significant individual distinction in the economic sphere is far more difficult than in other societies. On the other hand, thanks to the social safety net and the generous transfer payments, everyone can thrive in the welfare state, not only the fittest. Thus, it is more accurate to say that the welfare state - not the “liberal democracy” – comes closest to the state of society at the End of History, when the world would be one “universal and homogenous state”.[13] The unprecedent level of equality in the welfare state enables most members of this society to satisfy their desire for recognition for the first time.

With the advent of the modern welfare state, Hegelian recognition has been become generally available for all because the Master and Slave dichotomy has faded from society and has been made almost irrelevant. The citizens of the modern welfare state can be said to be Hegelian Slaves. Or, to be more precise, they are not Slaves any longer since there are no longer any Masters to whom they can be Slaves, but they have kept the Slave mentality. This mentality is expressed by three typical Slave traits of the modern welfare state: the importance of work specialisation, the obsession with physical security, and the faith in material progress. The welfare state will go to great lengths to make sure that as many “others” as possible are recognised because the Slave mentality implies the recognition of the “other”. Indeed, through the implementation of universal constitutional rights and equalitarian policies, in the welfare state it is possible to say that recognition has become almost generalised for the first time.[14] In the welfare state, a mutual recognition of all citizens comes as close as possible to being actually realised.

However, recognition is not perfect in this society either; there probably can never be “universal recognition”, even in the welfare state, and this is why it is impossible to say, as Fukuyama said, that the liberal democracy - is the “final form of human government.” As he hinted though, not everybody in this society is likely to be satisfied by the bland and general recognition that the welfare state provides; this is where Nietzsche’s distinction between the Superman and the Last Man becomes relevant. Some particular men and women are likely to try to find other means of satisfying their desire for recognition, for instance by engaging in different kinds of activities or perhaps simply by leaving this society. This reality is consistent with the conclusion above, namely that the liberal democracy is not the ultimate political system in the world; it is a society that is fundamentally incapable of satisfying the desire for recognition of all of its citizens.

Time has passed since the End of History was published. The last two decades have confirmed, if it was not clear earlier, that liberal democracy is not the panacea that Fukuyama made it out to be. The bloody Iraq war and the devastating financial crisis, to give two recent examples, both of which were started by the West, are probably very inconvenient for someone who has previously lavished such praise on the liberal democracy. Fukuyama is in a intellectually difficult position since he has been forced to make admissions while at the same time trying to make the current evolution of the world fit with his original views. A more accurate, and perhaps more candid, approach would be to state clearly that the economic and political conditions of the liberal democracy are far from perfect and can easily deteriorate, and that relatively authoritarian or more ill-managed societies can evidently also be successful in a wide range of areas. Fukuyama has had to acknowledge, at least implicitly, that liberal democracy is not, after all, the political system at the end of History; the title of his latest article makes this clear. History, of course, did not end either in 1806 or 1991, nor will it end until the world is controlled by a single government and social conflict has been eliminated for good. In other words, History will only end when the dream, or nightmare, of the Brave New World becomes reality.



Notes:

                          

[1] F. Fukuyama, The Future of History: Can Liberal Democracy Survive the Decline of the Middle Class?”, Foreign Affairs, January-February 2012, Volume 91, No. 1.

[2] Originally presented in G.W.F. Hegel, The Phenomenology of the Spirit, part B: Self-Consciousness, Independence and Dependence of Self-Consciousness: Lordship and Bondage. The concept of “recognition” of the “other” is the focal point of this reasoning, which was then restated in the twentieth century by A. Kojève (in Tyranny and Wisdom for instance). See for instance, L. Strauss, On Tyranny, Revised and Expanded Version, The University of Chicago Press, 2000. In F. Fukuyama, see The End of History and the Last Man, Chapters 16 and 17, Penguin Books, 1992.

[3] The human psyche could be assumed to be composed, as Plato said in The Republic (Book IV), of three fundamental parts. These parts are desire, reason and thumos (“spiritedness”), which can be described as man’s inherent urge to show his worth, to seek recognition and distinction, and his innate desire to be treated with dignity and respect. Thumos can be said to be a particular form of desire; one “whose object is not material but ideal.” (F. Fukuyama, The End of History and the Last Man, p369, Penguin Books, 1992).

[4] G. Santayana, The Life of Reason, Chapter V: Democracy (1905 Edition).

[5] Citizens United v. Federal Election Commission, 558 U.S. 08-205 (2010), 558 U.S. ––––, 130 S.Ct. 876 (January 21, 2010)

[6] “Man is born free, but everywhere he is in chains.”

[7] The Patriot Act, signed one month after 9/11, has dramatically reduced restrictions on law enforcement agencies' ability to search telephone, e-mail, medical, financial, and other records. Regarding the National Defense Authorization Act, the statement refers to sections 1021 and 1022 of the NDAA for fiscal year 2012, signed by the US President Obama on Dec 31st 2011.

[8] See for instance:

“Greenspan admits Iraq was about oil, as deaths put at 1.2m”, The Guardian, Sunday 16 September 2007. http://www.guardian.co.uk/world/2007/sep/16/iraq.iraqtimeline

“McCain tries to clarify Mideast oil remark”, msnbc.com.

http://firstread.msnbc.msn.com/_news/2008/05/02/4423875-mccain-tries-to-clarify-mideast-oil-remark

[9] To get a glimpse of the increasing economic difficulties of the Iranian people resulting from the economic warfare of the West, see for instance, “Iran’s Middle Class on Edge as World Presses In”, The New York Times, Feb 6th 2012.  http://www.nytimes.com/2012/02/07/world/middleeast/irans-middle-class-on-edge-as-international-tensions-rise.html?_r=1&ref=global-home&pagewanted=all

[10] See for instance, www.nationalpriorities.org/publications/2011/us-security-spending-since-911/

[11] For a typical example, see for instance the French Socialist presidential candidate François Hollande’s interview with the Huffington Post in January 2012. http://www.huffingtonpost.com/alexandre-devecchio/francois-hollande-foreign-policy_b_1233735.html

[12] The national Gini coefficient, which measures income inequality in a country, is now typically below 30 for the welfare states of Western Europe. See Eurostat (www.eurofound.europa.eu/areas/qualityoflife/eurlife/). The income equality in the Nordic welfare state, for instance, is such that differences even in pre-tax incomes for most professions are often found within a margin of only 15 percent around the average per capita income.

[13] Term used by Leo Strauss in the Strauss-Kojève correspondence, in Leo Strauss, On Tyranny (Revised and Expanded Version, The University of Chicago Press, 2000).

[14] As F. Fukuyama wrote, “The inherently unequal recognition of masters and slaves is replaced by universal and reciprocal recognition, where every citizen recognises the dignity and humanity of every other citizen, and where that dignity is recognised in turn by the state through the granting of rights.” F. Fukuyama, Introduction, The End of History and the Last Man.