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The rise of the “self-disciplining” capitalist state highlights the political authoritarianism central to the spread of economic marketization. This authoritarian logic, however, is not confined to the state. It also extends to international financial institutions and foreign actors. Even, more so, their enhanced power to intervene and shape national agendas is similarly connected to the need to ensure “good governance” in these contexts. Specifically, their legitimization stems from having to externally discipline governments that refuse to be “self-disciplined.” They are the last line of defense against “economic irresponsibility,” using their global influence to force countries into accepting greater marketization, whether or not it is in their interests.

The History from Less Government to Better Governments

Marketization is commonly portrayed as either apolitical or anti-political. The “freeing” of the economy is largely seen as distinct from issues of political power. Instead, it is presented as a policy aimed at simply improving competitiveness and productivity. Its politics, in this respect, is principally one of implementation rather than deliberation. When it is politicized, these policies are presented as challenging and reforming entrenched power structures. Traditionally, this has translated into a direct assault on governments, whereby the public sector is if not the enemy, then at the very least a profound threat to economic growth and development. Nevertheless, the creation and maintenance of markets always involves the allocation and reallocation of socio-political power (Bardhan, 1989). The “history” of international efforts to encourage and impose capitalist reforms reflects the authoritarian politics vital to this project.

The end of the Second World War brought with it elite desires to establish some form of global economic governance. The creation of the World Bank and International Monetary Fund symbolized the attempt to prevent future military conflict through fostering shared economic development and cooperation. Concretely, these organizations advised and formally monitored country’s economic strategies and policies, guiding and coercing them through loan conditions into accepting market-driven structural adjustment programs. Ostensibly, these measures were explicitly economically and not politically focused, outside of a general criticism of government regulation and central planning. Yet:

[E]qually important to the financial and economic consequences of stabilization were the social and political effects. As was the case in Brazil and Argentina during the 1960s, the Bolivian stabilization plan aggravated social tensions, resulted in a more uneven income distribution, and precipitated authoritarianism in a fragile democracy. (Kofas, 1995: 214)

At the level of global governance, international organizations took a rather laissez-faire attitude to both economics and politics. Economically, the emphasis was on nurturing “free markets” as much as possible. Politically, whether or not a country was formally authoritarian or democratic was less important than the degree they successfully implemented marketization reforms. International power, as such, was one of disciplining countries to embrace capitalism ideologically and marketiz- ation in practice, regardless of the form of their national politics. As Lindenberg and Devarajan (1993: 180) write:

Between 1973 and 1988, democratic developing countries grew more rapidly, restructured their exports more substantially, and improved their external balances more decisively than their nondemocratic counterparts ... They were as likely as authoritarian regimes to administer strong economic medicine - structural adjustment programs - and were no more likely to be overthrown as a result.

However, new perspectives in the 1980s stressing the crucial function of the state for economic development forced these international actors to become more political in their focus. The “East Asian Miracle” directly questioned dominant understandings of government interventions as impeding economic progress. These challenges to accepted knowledge gave birth to global power struggles for influence between emerging economic powers and these international organizations. Notably, Japan promoted “state-centric” development in part to increase their own influence in the East Asian region over and against the Western-backed World Bank and IMF (Wade, 1996). In response, the World Bank successfully sought to co-opt these discourses into the “dominant liberal narrative of progress and in facilitating the wider reinvention of liberalism in the post-1945 period” (Berger and Beeson, 1998: 487).

While it was able to lessen the impact of these alternative visions of development, the World Bank and the IMF were nonetheless forced to better account for the role of the state within its policies. It was no longer able to simply dismiss public regulation and intervention as unnecessary at best and counter-productive at worst. By contrast, it progressively concentrated on the construction of a “market-friendly” state. In 1989 the World Bank publicly declared the need for “not just less government but better government - government that concentrates its efforts less on direct interventions and more on enabling others to be productive” (World Bank, 1989: 5). This set the stage for these organizations to proscribe for countries not only their economics but also their politics.

Vital to this new state discourse was the positive ability of governments to establish stability, specifically for the purpose of enacting and protecting capitalist rights. “Not just less government but better government” became a prevailing mantra for restructuring society in line with neoliberal values. While “good governance” is a notoriously ambiguous term, international organizations exclusively associated it with successful market transformations. To this end, the World Bank distinguished six main dimensions of good governance (Kaufmann et al., 1999):

  • 1. voice and accountability, which includes civil liberties and political stability;
  • 2. government effectiveness, which includes the quality of policy making and public service delivery;
  • 3. the lack of regulatory burden;
  • 4. the rule of law, which includes protection of property rights;
  • 5. independence of the judiciary;
  • 6. control of corruption.

Just as significantly it opened the way for these international organizations to take up a more explicitly authoritarian role in introducing these governance “reforms.” By defining what “good governance” is, it gave them greater legitimacy in policing nations who deviated from such internationally approved standards. In the name of ensuring “better governments,” international actors gave themselves the enhanced right to discipline the “irresponsible state.”

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