Ch. 26, "The Declining Authority of States" Susan Strange, pp. 228-334 (excerpted from Strange, in The Retreat of the State, Cambridge, 1996)

State sovereignty is under attack Impersonal forces of world markets are now more powerful than the states to whom ultimate political authority over society and economy is supposed to belong Authority is shifting from states to other institutions, both above and below the state – to international organizations and to local and regional bodies

State sovereignty "A state (more commonly called "government" in the USA) is the sovereign authority in a specified territory, with the right to use force both to maintain internal order and to defend its territory against aggression. Sovereignty, in turn, implies that the state is the ultimate authority in its territory, exercising legal jurisdiction over its citizens and the groups and organizations they form in the conduct of daily life. The sovereign state is not subject to any higher authority – no state has the right to expect compliance from any other state, and no all-encompassing world state has emerged with authority overall all national states.“ (section intro, p. 219):

The state-market balance of power has shifted to the market "Where states were once the masters of markets, now it the markets which, on many crucial issues, are the masters over the government of states" (229) The reversal of the state-market balance of power has created three key paradoxes

Paradox I: state power is declining while gov’t intervention in the daily lives of citizens appears to be growing less and less of daily life seems immune from the activities & decisions of gov’t bureaucracies various gov’t agencies have been created to deal with matters such as inspections, permits, planning, employment services states seem less effective on basic matters that markets, left to themselves, have been unable to provide e.g., security against violence, stable money for trade and investment, a clear system of law & means to enforce it, a sufficiency of public goods like drains, water supplies, infrastructure for transport & communication – and, in today’s US, public education

Paradox II: While gov’ts of established states (e. g. , in N. A Paradox II: While gov’ts of established states (e.g., in N.A. & Europe) are losing real authority, more & more societies want to establish their own states This includes ethnic groups repressed within ex-USSR and hundreds of minorities and aboriginal peoples throughout world But once statehood is achieved, new states have little real control over society or economy, autonomy seems superficial

Paradox III: The "Asian state" has stayed strong at same time that N.A./Eur. states have weakened This is a product of exceptional circumstances – geostrategic position during Cold War and related exemption from norms of open liberal economy Exceptionalism of Asian state during Cold War will continue to erode Here, we can say Strange’s 1996 prediction proved correct, as deregulation soon spread through the region and, according to Stiglitz et al., precipitated the “Asian financial crisis” of 1997

The Neglected Factor: Technology The pace of technological change has rapidly accelerated Technology has undermined one of the primary reasons for the existence of the state – its capacity to repel attack

The Second Neglect - Finance There has been an escalation in the capital cost of most technological innovations this creates barriers to economic growth for poorer states, promoting alliances with TNCs, which then may chip away at state authority Cost of new technology in the production structure has added to the salience of money in int’l political economy Scholars have neglected the political aspects of credit creation and changes to the global financial structure They esp neglect the role of markets (as compared with other governments) as suppliers of credit

Politics, Power and Legitimacy There’s growing asymmetry among allegedly sovereign states in the authority they exercise over the economy The authority of all states, large & small, strong & weak, has been eroded as a result of technological and financial change and the accelerated integration of national economies into a single global market economy Some of the fundamental responsibilities of the state in a market economy are being abandoned