Liberalization First

This strategy constitutes the dominant paradigm in development policy, even though individual actors such as the United States, the World Bank, the IMF, regional development banks, the European Union, and bilateral donors emphasize different aspects when it comes to practical implementation. First and foremost, Liberalization First is about the promotion of political and economic liberties; the strategy aims at democratization and the establishment of market economies (the so-called Washington Consensus). In IR-theoretical terms, this approach comes closest to the liberal assumption, which sees democratic market economies as guarantors of peace and stability—in their internal affairs as well as their external relations. This hypothesis is derived from the democratic peace theory, according to which democracies are less war prone than nondemocracies, and above all do not wage war against each other. Moreover, this approach is informed by assumptions about the pacifying effects of free trade and economic interdependence (“peace by trade”) (see Oneal and Russet 1999; David 1999). International relations literature also provides the label “Neo-Wilsonianism,” following President Wilson’s idea of a liberal international order guaranteeing peace and security (Paris 2004, 40-54).

Advocates of this strategy believe that weak states suffer from a lack of transparent, democratic governance structures and from a lack of economic freedom, which is reflected in pervasive rent seeking, limited access to international markets, technological backwardness, and a low investment rate. Postconflict cases are therefore regarded and treated as special cases of transformation societies that are transitioning from authoritarian rule to democracy. Consequently, the focus of this state-building strategy is on holding free and fair elections, guaranteeing political liberties and protecting private property, and promoting good governance in terms of effective public administration and comprehensive economic reforms. The latter includes privatization and market liberalization in order to facilitate economic integration into global markets. The state is seen as a guarantor of basic liberties. According to pure theory, it is supposed to confine itself to providing a reliable legal framework within which the market economy can thrive freely. With the adoption of the Millennium Development Goals in 2000, the Liberalization First approach has been broadened and altered to put more emphasis on the welfare aspect of liberalization (Post-Washington Consensus). Particular attention was devoted to poverty reduction and the establishment of effective educational and public health systems. This volte-face was triggered by the realization on the part of large donors that meeting basic human needs is a crucial precondition for realizing civil and economic liberties.

A prominent example for Liberalization First—at least on a conceptual level—is the Bush administration’s foreign policy doctrine developed after September 11, 2001, whose centerpiece is the promotion of freedom and democracy around the world. In the same vein, the National Security Strategy of March 2006 considers the creation and promotion of “effective democracies” to be crucial for countering a number of security challenges.3 Hence, the former secretary of state, Condoleezza Rice, underlined the need for “transformational diplomacy” aimed at the establishment and consolidation of democratic, well-governed states that are responsive to the needs of their citizens and act responsible in the international system.4

The Liberalization First program, however, systematically underestimates the destabilizing effects often associated with rapid democratization and the liberalization of markets (“shock therapy”). First, it is in the very nature of elections and electoral campaigns to reinforce polarization and tensions between segments of the society; this applies to postconflict situations in particular as well as to latent conflicts. Considering the almost inevitable unequal distribution of resources, the ruling elite usually enjoys exclusive access to the state media and has manifold opportunities of manipulation; hence, it is usually the power holders who benefit from such processes, because they can clothe their actions in the cloak of democratic legitimacy. In postconflict societies this often reinforces the political cleavages and configurations of power that emerged from the conflict, thus empowering those policy makers who were responsible for the escalation of violence in the first place. The 1996 elections in Bosnia from which ethnonationalist parties emerged as dominant forces provide a virtually paradigmatic example. Under such circumstances moderate forces or new groupings do not really have a chance to influence the contours of the postconflict order.

Second, the economic aspects of Liberalization First—that is, economic reform aimed at privatization and deregulation—usually serve the interests of the economic elite such as clans or oligarchs, thus deepening the socioeconomic divide. Privatization processes in particular are usually associated with corruption and forms of organized crime. This significantly hampers the establishment of tax-funded public institutions devoted to the common good. These effects are reinforced by liberalization efforts’ tendency toward deinstitutionalization. Existing institutions and structures are deemed inef?fective; they are called into question or even eliminated by donors—see for example the structural adjustment programs adopted by the international financial institutions in the 1980s and early 1990s. The U.S.-led Coalition Provisional Authority (CPA, 2003-4) in Iraq provided a textbook example of the destabilizing effects of Liberalization First. The CPA clearly prioritized rapid democratization and market liberalization over security and rule of law.5

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