International Politics and Society

Politik und Gesellschaft Online
International Politics and Society 3/2002

David Miliband
The Future of New Labour: a View from Inside

Hansjörg Herr
Feeling the Way: China's Successful Reform Process

Peter Wolff
Viet Nam: Laissez-faire Under a Socialist Umbrella

Hans-Jürgen Burchardt
Post-Castro Cuba
The New Inequality and the Emerging Neopopulist Alliance

Alec Rasizade
Dictators, Islamists, Big Powers and Ordinary People
The New “Great Game” in Central Asia

Carlos Santiso
Promoting Democracy by Conditioning Aid?
Towards a More Effective EU Development Assistance

David Miliband

The Future of New Labour: a View from Inside

The Labour Party retained power in the 2001 election with an overwhelming majority. This can be regarded as recognition for the achievements of the first Blair government in terms of economic growth, social security reform, consolidation of public finance, the fight against crime, decentralization and involvement in Europe. A role was also certainly played by the disastrous state of the Conservative opposition. But the key factor was that the agenda and the appearance of the renewed Labour Party reflected the mainstream of modern British society. That is not to say that "New Labour" has a hold on power for the next decade. There is still no comprehensive social alliance for a thorough modernization of the UK in line with the needs of the new era. Only that sort of alliance would make Labour the dominant political force for a long time to come. The first Blair government merely laid the foundation stone for the coming major reforms. In fact, the promise made before the 1997 election was "a start not a revolution". The Labour Party now needs to develop a convincing vision of a society which, as well as being fit for the demands of the globalized markets, offers its members both opportunities and sufficient security. It needs to push ahead with institutional reforms (e.g. in the health and education systems) which are seen as an expression of this vision. In the heterogeneous society of today and tomorrow, the Party itself must shift responsibility to the local level, so that it is able there to promote progress and to mobilize support for it. Even after four years of a Labour government, Britain is still a long way from equality of opportunity. Substantially improving this remains Labour's great task. Also, it is necessary to create not only jobs for those on the margins of national prosperity, but career opportunities as well. The widespread uncertainty about falling behind economically – and as a consequence also socially – must end. And the country's old economic problem, the relatively low productivity, is far from solved. Once again, the breakthrough can only be made at local and regional level. All this necessitates appropriate institutional reforms and corresponding governance skills. But it is also important for such reforms to be driven by an ideal which meets with a response in the population because it reflects the changed lives of broad sections of the population.

Hansjörg Herr

Feeling the Way: China's Successful Reform Process

The People's Republic of China has been pursuing a strategy of gradual emergence from central planning for over twenty years. Administrative price-setting and quantitative planning were gradually liberalized. The management of the state-owned companies was reformed, but a cautious start on their privatization was not made until the mid-1990s. At the same time, a new private sector of small firms was allowed to emerge, and it now contributes more to the national product than the state-owned companies. Capital movements are still strictly regulated, and free trade is only just beginning following China's accession to the WTO. For decades, monetary stability was ensured by credit rationing in the largely state-owned banking system. China's reform strategy differs sharply from the economic orthodoxy of the West. Nevertheless, the country has enjoyed over two decades of extremely high economic growth and a low inflation rate. Despite high foreign direct investment, its current account tends to be balanced. In contrast, the strategy of shock-like reforms – immediate price liberalization, abolition of the planning agency and the give-away of the state companies and banks – has led Russia into economic disaster. The People's Republic of China shows that, if macroeconomic stability is maintained, a dynamic development can go hand in hand with a diversity of microeconomic inefficiencies (especially in credit allocation). This shows that accumulation, i.e. investment rather than optimal allocation, is the key to development. High investment has been driven in China by the state-owned companies, the newly emerging private sector and the joint ventures of foreign companies. Despite all the distortions, the banking system has supported this development. However, the delays in reforms have also created fresh risks, particularly in terms of the high proportion of bad loans from the banks to the state-owned companies. A more restrictive approach to credit by the banks in the last few years has weakened investment levels and slowed down growth. China's accession to the WTO is also producing new challenges. If the wrong policies are pursued – e.g. overhasty liberalization of international capital flows – even the Chinese process of transition can still fail. Nevertheless: the neoliberal alternatives to the Chinese transition and development strategy do not offer anything like the same chances of success.

Peter Wolff

Viet Nam: Laissez-faire Under a Socialist Umbrella

Viet Nam's economic reforms began in the late 1980s with drastic macroeconomic adjustments, the abolition of central planning and price controls, and a decollectivization of agriculture. The freeing up of the initiative of millions of small farmers and business people, which had until then been suppressed, soon ended the food shortages and supply bottle-necks. Viet Nam has since been growing steadily, and the expansion only slowed somewhat after the Asian crisis. It proved possible to avoid the sort of sharp economic collapse seen in Eastern Europe because most of the labor was employed in agriculture, where a return from production co-operatives to small-farmer-based production forms resulted in immediate increases in output and income. Also, due to the inadequacies of central planning, informal markets had already come to play a substantial role even before the reforms were launched. Most of the workers affected by the structural change were absorbed by the rapidly growing small business sector. So the avoidance of a collapse in output was due less to a consciously gradualist strategy and more to a favorable environment for the rapid development of private initiative. However, one important factor was the macroeconomic stability, i.e. the avoidance of significant trade deficits, inflation and foreign debt. The stable macroeconomic framework permitted not only the flourishing of the private sector, but also the survival of the generally inefficient state-owned companies, an important pillar of the Vietnamese understanding of the "socialist market economy". However, Viet Nam's further integration into the world market is putting this model under pressure. The state sector is virtually uncompetitive, and the private sector still generally consists of small firms. Due to the high level of internal debt and the lack of a commercial credit culture, the banking system is hardly in a position to finance the emerging private sector. This implies that the government will gradually have to give up the concept of the "socialist market economy". However, it is this concept which has made it possible to integrate the more dogged forces in the Party into the reforms via a process of consensus formation so typical of the country. The first attempts at political reforms show clearly that a gradualist process is taking place here too: better governance and greater involvement of the population, without impinging on the Communist Party's monopoly on power, are the first steps towards a transformation of the political system.

Hans-Jürgen Burchardt

Post-Castro Cuba
The New Inequality and the Emerging Neopopulist Alliance

The impressive stability of Cuba's socialist regime more than twelve years after the fall of the Berlin Wall is based firstly on an authoritarian bureaucratic state which is still succeeding in using an expansive social policy to keep the masses both socially integrated and politically excluded. Secondly, Latin American traditions and socialist structures have merged in Cuba's political culture to form a neopatrimonial regime which, through Fidel Castro's charisma, still links and unites society. Thirdly, the regime equates its policies with the island's national independence, and thus monopolizes nationalism as a source of legitimacy. Cuban socialism thus combines a highly developed welfare state with a Leninist state doctrine – legitimized by the need to defend national sovereignty. Today, Cuba should be seen less as an orthodox socialist regime, and more as a radically nationalist one. However, Cuba's present stability is fragile. It is true that the liberalization of certain sectors of the economy pursued since the 1990s – coupled with internal dollarization – did successfully reintegrate the country into the world market and saved the economy from collapse after the end of Soviet support. But at the same time it undermined social equality, one of the regime's pillars of legitimacy. Following the initial economic stabilization, the opportunity to develop a consistent reform strategy embracing all sectors of the economy was missed. Cuba therefore still has a brutal divide between the winners from the reforms in the foreign exchange sector and the losers in the domestic sector. The economic divide leads directly into a social divide, and will one day result in a political crisis. Cuba does possess many supply-side preconditions to become a model of development as a "Caribbean tiger", combining relatively equal distribution of wealth with rapid growth. But this requires adjustments that would start already today with the democratization of the state and the emancipation of society. If political change does not set in until after Fidel Castro's death, it is more likely that the winners from the reforms will join forces and assume political dominance. It can be expected that they will expand the foreign-currency sector and cement the divide in the economy via a neoliberalism based on neopopulism. The prospect of a transition to political civility and social justice would be blocked.

Alec Rasizade

Dictators, Islamists, Big Powers and Ordinary People
The New “Great Game” in Central Asia

Following the collapse of the Soviet Union, national borders have been formed for the first time in history in Central Asia. There are virtually no national identities, and therefore the newly emergent political structures basically have the function of defining the field in which local political elites struggle for power. A lack of democratic traditions, coupled with an exploitation of insider advantages deriving from the Soviet era which has been particularly unrestrained since the end of control from Moscow and the farewell to socialism, has fostered authoritarian tendencies throughout the region. Despite this, the new strongmen have to cope with a lack of legitimacy. Their inability to prevent broad sections of the population from becoming economically worse off following the de-articulation of the Soviet economy, and to stop the decay of public order, has engendered a radical Islamic opposition. It is causing concern not only to the local power holders, but also to the neighboring great powers, Russia and China. The fight against Islamism underpins attempts to form alliances which of course also serve further-reaching power interests – in the struggle for regional predominance amongst the Central Asian states (Uzbekistan in particular is laying claim to hegemony) and in the struggle for the dominant influence amongst the great powers. The events of September 11, 2001 virtually catapulted the USA into the Central Asian arena. Without encountering Russian resistance, it has very quickly built up a remarkable military presence and has at a stroke become the central factor for power politics in the region. This has also opened up a new arena in the latent conflict with China for global political influence. Iran is also affected by the American presence, seeing threats to its own ambitions to build up an Islam-oriented power bloc. A long-term American strategy on Central Asia – particularly in view of the fight against terrorism – should rely not on the alliance with friendly local dictators, an alliance which may seem obvious in Realpolitik terms, but on genuine democratization and economic development which benefits the masses.

Carlos Santiso

Promoting Democracy by Conditioning Aid?
Towards a More Effective EU Development Assistance

In the course of the 1990s, the promotion of democracy, the strengthening of good governance and the enhancement of the rule of law have progressively become both an objective and a condition for EU assistance to developing countries. Promotion of democracy has become enshrined in European law while democracy assistance in its various forms has been allotted successively more finance. However, the link between European efforts and developing country outcomes is far from being straightforward. While democratic ways of dealing with conflict greatly enhance the chances of stability and peace, the attempt of democratization easily exacerbates conflicts. There is also the problem of democratic decay when existing democracies prove increasingly incapable of coming to grips with escalating conflicts. Therefore, outside promotion of democracy cannot rely on standard procedures. Successfully inducing the relevant political actors to play the democratic “game” needs to deploy a combination of positive and negative incentives that is tailored to the specific case. The EU mainly relies on dialogue and partnership with foreign governments, encouraging democratic reform in a non-confrontational manner. But it has also introduced – and made use of (as illustrated by four cases) – the suspension of aid in the event of a sudden and persistent interruption of a democratization process. Recognizing the general futility of forcing democracy on unwilling partners by withholding aid, it has turned to rewarding democratizing partner countries with extra aid. However, this principle of “incentive conditionality” is not being pursued consistently because other, mostly foreign policy, considerations get priority. Altogether, the institutions of EU development assistance and foreign policy lack the capacity to produce appropriate situation-specific programs of democracy assistance. Responsibility is divided between several units of the Commission and Commission-governed development assistance is not coordinated with Council-governed foreign policy. Current reforms tend to “depoliticize” aid, emphasizing technocratic criteria of efficiency and quantitative performance indicators. The methods of assessing democratic progress suffer from a lack of legitimacy. To make its promotion of democracy abroad more effective, the EU should enhance its strategic planning and evaluation capabilities.


		Politik und Gesellschaft Online International Politics and Society 3/2002
		David Miliband The Future of New Labour: a View from Inside Hansjörg Herr Feeling the Way: China's Successful Reform Process Peter Wolff Viet Nam: Laissez-faire Under a Socialist Umbrella Hans-Jürgen Burchardt Post-Castro Cuba The New Inequality and the Emerging Neopopulist Alliance Alec Rasizade Dictators, Islamists, Big Powers and Ordinary People The New “Great Game” in Central Asia Carlos Santiso Promoting Democracy by Conditioning Aid? Towards a More Effective EU Development Assistance David Miliband The Future of New Labour: a View from Inside The Labour Party retained power in the 2001 election with an overwhelming majority. This can be regarded as recognition for the achievements of the first Blair government in terms of economic growth, social security reform, consolidation of public finance, the fight against crime, decentralization and involvement in Europe. A role was also certainly played by the disastrous state of the Conservative opposition. But the key factor was that the agenda and the appearance of the renewed Labour Party reflected the mainstream of modern British society. That is not to say that "New Labour" has a hold on power for the next decade. There is still no comprehensive social alliance for a thorough modernization of the UK in line with the needs of the new era. Only that sort of alliance would make Labour the dominant political force for a long time to come. The first Blair government merely laid the foundation stone for the coming major reforms. In fact, the promise made before the 1997 election was "a start not a revolution". The Labour Party now needs to develop a convincing vision of a society which, as well as being fit for the demands of the globalized markets, offers its members both opportunities and sufficient security. It needs to push ahead with institutional reforms (e.g. in the health and education systems) which are seen as an expression of this vision. In the heterogeneous society of today and tomorrow, the Party itself must shift responsibility to the local level, so that it is able there to promote progress and to mobilize support for it. Even after four years of a Labour government, Britain is still a long way from equality of opportunity. Substantially improving this remains Labour's great task. Also, it is necessary to create not only jobs for those on the margins of national prosperity, but career opportunities as well. The widespread uncertainty about falling behind economically – and as a consequence also socially – must end. And the country's old economic problem, the relatively low productivity, is far from solved. Once again, the breakthrough can only be made at local and regional level. All this necessitates appropriate institutional reforms and corresponding governance skills. But it is also important for such reforms to be driven by an ideal which meets with a response in the population because it reflects the changed lives of broad sections of the population. Hansjörg Herr Feeling the Way: China's Successful Reform Process The People's Republic of China has been pursuing a strategy of gradual emergence from central planning for over twenty years. Administrative price-setting and quantitative planning were gradually liberalized. The management of the state-owned companies was reformed, but a cautious start on their privatization was not made until the mid-1990s. At the same time, a new private sector of small firms was allowed to emerge, and it now contributes more to the national product than the state-owned companies. Capital movements are still strictly regulated, and free trade is only just beginning following China's accession to the WTO. For decades, monetary stability was ensured by credit rationing in the largely state-owned banking system. China's reform strategy differs sharply from the economic orthodoxy of the West. Nevertheless, the country has enjoyed over two decades of extremely high economic growth and a low inflation rate. Despite high foreign direct investment, its current account tends to be balanced. In contrast, the strategy of shock-like reforms – immediate price liberalization, abolition of the planning agency and the give-away of the state companies and banks – has led Russia into economic disaster. The People's Republic of China shows that, if macroeconomic stability is maintained, a dynamic development can go hand in hand with a diversity of microeconomic inefficiencies (especially in credit allocation). This shows that accumulation, i.e. investment rather than optimal allocation, is the key to development. High investment has been driven in China by the state-owned companies, the newly emerging private sector and the joint ventures of foreign companies. Despite all the distortions, the banking system has supported this development. However, the delays in reforms have also created fresh risks, particularly in terms of the high proportion of bad loans from the banks to the state-owned companies. A more restrictive approach to credit by the banks in the last few years has weakened investment levels and slowed down growth. China's accession to the WTO is also producing new challenges. If the wrong policies are pursued – e.g. overhasty liberalization of international capital flows – even the Chinese process of transition can still fail. Nevertheless: the neoliberal alternatives to the Chinese transition and development strategy do not offer anything like the same chances of success. Peter Wolff Viet Nam: Laissez-faire Under a Socialist Umbrella Viet Nam's economic reforms began in the late 1980s with drastic macroeconomic adjustments, the abolition of central planning and price controls, and a decollectivization of agriculture. The freeing up of the initiative of millions of small farmers and business people, which had until then been suppressed, soon ended the food shortages and supply bottle-necks. Viet Nam has since been growing steadily, and the expansion only slowed somewhat after the Asian crisis. It proved possible to avoid the sort of sharp economic collapse seen in Eastern Europe because most of the labor was employed in agriculture, where a return from production co-operatives to small-farmer-based production forms resulted in immediate increases in output and income. Also, due to the inadequacies of central planning, informal markets had already come to play a substantial role even before the reforms were launched. Most of the workers affected by the structural change were absorbed by the rapidly growing small business sector. So the avoidance of a collapse in output was due less to a consciously gradualist strategy and more to a favorable environment for the rapid development of private initiative. However, one important factor was the macroeconomic stability, i.e. the avoidance of significant trade deficits, inflation and foreign debt. The stable macroeconomic framework permitted not only the flourishing of the private sector, but also the survival of the generally inefficient state-owned companies, an important pillar of the Vietnamese understanding of the "socialist market economy". However, Viet Nam's further integration into the world market is putting this model under pressure. The state sector is virtually uncompetitive, and the private sector still generally consists of small firms. Due to the high level of internal debt and the lack of a commercial credit culture, the banking system is hardly in a position to finance the emerging private sector. This implies that the government will gradually have to give up the concept of the "socialist market economy". However, it is this concept which has made it possible to integrate the more dogged forces in the Party into the reforms via a process of consensus formation so typical of the country. The first attempts at political reforms show clearly that a gradualist process is taking place here too: better governance and greater involvement of the population, without impinging on the Communist Party's monopoly on power, are the first steps towards a transformation of the political system. Hans-Jürgen Burchardt Post-Castro Cuba The New Inequality and the Emerging Neopopulist Alliance The impressive stability of Cuba's socialist regime more than twelve years after the fall of the Berlin Wall is based firstly on an authoritarian bureaucratic state which is still succeeding in using an expansive social policy to keep the masses both socially integrated and politically excluded. Secondly, Latin American traditions and socialist structures have merged in Cuba's political culture to form a neopatrimonial regime which, through Fidel Castro's charisma, still links and unites society. Thirdly, the regime equates its policies with the island's national independence, and thus monopolizes nationalism as a source of legitimacy. Cuban socialism thus combines a highly developed welfare state with a Leninist state doctrine – legitimized by the need to defend national sovereignty. Today, Cuba should be seen less as an orthodox socialist regime, and more as a radically nationalist one. However, Cuba's present stability is fragile. It is true that the liberalization of certain sectors of the economy pursued since the 1990s – coupled with internal dollarization – did successfully reintegrate the country into the world market and saved the economy from collapse after the end of Soviet support. But at the same time it undermined social equality, one of the regime's pillars of legitimacy. Following the initial economic stabilization, the opportunity to develop a consistent reform strategy embracing all sectors of the economy was missed. Cuba therefore still has a brutal divide between the winners from the reforms in the foreign exchange sector and the losers in the domestic sector. The economic divide leads directly into a social divide, and will one day result in a political crisis. Cuba does possess many supply-side preconditions to become a model of development as a "Caribbean tiger", combining relatively equal distribution of wealth with rapid growth. But this requires adjustments that would start already today with the democratization of the state and the emancipation of society. If political change does not set in until after Fidel Castro's death, it is more likely that the winners from the reforms will join forces and assume political dominance. It can be expected that they will expand the foreign-currency sector and cement the divide in the economy via a neoliberalism based on neopopulism. The prospect of a transition to political civility and social justice would be blocked. Alec Rasizade Dictators, Islamists, Big Powers and Ordinary People The New “Great Game” in Central Asia Following the collapse of the Soviet Union, national borders have been formed for the first time in history in Central Asia. There are virtually no national identities, and therefore the newly emergent political structures basically have the function of defining the field in which local political elites struggle for power. A lack of democratic traditions, coupled with an exploitation of insider advantages deriving from the Soviet era which has been particularly unrestrained since the end of control from Moscow and the farewell to socialism, has fostered authoritarian tendencies throughout the region. Despite this, the new strongmen have to cope with a lack of legitimacy. Their inability to prevent broad sections of the population from becoming economically worse off following the de-articulation of the Soviet economy, and to stop the decay of public order, has engendered a radical Islamic opposition. It is causing concern not only to the local power holders, but also to the neighboring great powers, Russia and China. The fight against Islamism underpins attempts to form alliances which of course also serve further-reaching power interests – in the struggle for regional predominance amongst the Central Asian states (Uzbekistan in particular is laying claim to hegemony) and in the struggle for the dominant influence amongst the great powers. The events of September 11, 2001 virtually catapulted the USA into the Central Asian arena. Without encountering Russian resistance, it has very quickly built up a remarkable military presence and has at a stroke become the central factor for power politics in the region. This has also opened up a new arena in the latent conflict with China for global political influence. Iran is also affected by the American presence, seeing threats to its own ambitions to build up an Islam-oriented power bloc. A long-term American strategy on Central Asia – particularly in view of the fight against terrorism – should rely not on the alliance with friendly local dictators, an alliance which may seem obvious in Realpolitik terms, but on genuine democratization and economic development which benefits the masses. Carlos Santiso Promoting Democracy by Conditioning Aid? Towards a More Effective EU Development Assistance In the course of the 1990s, the promotion of democracy, the strengthening of good governance and the enhancement of the rule of law have progressively become both an objective and a condition for EU assistance to developing countries. Promotion of democracy has become enshrined in European law while democracy assistance in its various forms has been allotted successively more finance. However, the link between European efforts and developing country outcomes is far from being straightforward. While democratic ways of dealing with conflict greatly enhance the chances of stability and peace, the attempt of democratization easily exacerbates conflicts. There is also the problem of democratic decay when existing democracies prove increasingly incapable of coming to grips with escalating conflicts. Therefore, outside promotion of democracy cannot rely on standard procedures. Successfully inducing the relevant political actors to play the democratic “game” needs to deploy a combination of positive and negative incentives that is tailored to the specific case. The EU mainly relies on dialogue and partnership with foreign governments, encouraging democratic reform in a non-confrontational manner. But it has also introduced – and made use of (as illustrated by four cases) – the suspension of aid in the event of a sudden and persistent interruption of a democratization process. Recognizing the general futility of forcing democracy on unwilling partners by withholding aid, it has turned to rewarding democratizing partner countries with extra aid. However, this principle of “incentive conditionality” is not being pursued consistently because other, mostly foreign policy, considerations get priority. Altogether, the institutions of EU development assistance and foreign policy lack the capacity to produce appropriate situation-specific programs of democracy assistance. Responsibility is divided between several units of the Commission and Commission-governed development assistance is not coordinated with Council-governed foreign policy. Current reforms tend to “depoliticize” aid, emphasizing technocratic criteria of efficiency and quantitative performance indicators. The methods of assessing democratic progress suffer from a lack of legitimacy. To make its promotion of democracy abroad more effective, the EU should enhance its strategic planning and evaluation capabilities.
		© Friedrich Ebert Stiftung \| net edition malte.michel \| 6/2002