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Normal history is resumed

Francis Fukuyama reconsiders the end of history thesis reports Frank Lee.

‘ …the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt for any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear the voices in the air, are distilling their frenzy from some of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.’ (John Maynard Keynes – The General Theory of Employment, Interest and Money – first published 1936 – p.383.)

It was in 1989 that Francis Fukuyama, professor of political economy and School of Advanced International Studies at John Hopkins University, and author of many best sellers in related subjects, first put forward his ‘end of history’ thesis. This came at a critical historical conjuncture in the post-1945 world. This period can be outlined as follows. Firstly, there was the collapse of communism in the east of Europe. Secondly, the transmutation of social-democratic parties in the west of Europe, into what were increasingly liberal-democratic, centre-right parties (this finding its most extreme expression in the UK with Tony Blair’s new Labour phenomenon; the market leader in this respect). Thirdly, the increasing integration of the world economy and the liberalisation of controls on capital movements – particularly finance capital. This process was to become known as globalization. Fourthly, the increasing fusion of political and economic elites, particularly in the Anglo-Saxon world. Fifthly, the genesis of a new economic and political orthodoxy - in which Fukuyama himself played a pivotal role – namely, the Washington Consensus.

The end of history thesis was based upon the idea that liberal, deregulated global capitalism had scored a definitive historical triumph, not only over communism, but over the other variants of regulated capitalism, such as that found in western Europe and the Far East. All the arguments had been settled; all societies would now move toward this North American model of capitalism, and it would be in their interests to do so. The fact that this sounded like a right-wing version of some of the cruder varieties of historical materialism was not lost on more thoughtful commentators: ‘What Francis Fukuyama called ‘the end of history’ was the apparent end of intellectual opposition to the dogmas of economic liberalism.’ (Susan Strange – Mad Money). Moreover, ‘Fukuyama’s vision of the end of history ‘is incorrigibly Americocentric, purveying a view of the world that is unrecognizable to the majority of Asians and Europeans.’ (John Gray – False Dawn). At the time, however, the Fukuyama thesis seemed to be carrying all before it; opposition was confined to intellectual groups with little or no political purchase.

What really undid Fukuyama, however, was history itself. It was not to behave in the manner which he had predicted. But isn’t this always the way with fashionable ideological fads. The end of history thesis did not survive the empirical testing that any hypothesis has to undergo in the real world. The remark made by the late Lord Stockton regarding the most difficult thing in politics ‘events dear boy, events’ can be applied a fortiori to the type of abstract theorising for which academics have such an evident penchant. History is a graveyard of failed theories.

What actually happened after 1989 was not a new golden age of liberal capitalism, it was more akin to a permanent crisis of a much more unstable and volatile capitalism. Shock therapy in eastern Europe turned into an economic collapse transforming the area into almost third world status. (The Ukraine, for example, now has a per capita national income only slightly above that of Pakistan.) Additionally, there have been various financial blow-outs in Latin-America, Brazil, Argentina, for example, followed by the Far East financial crisis of 1998 which led to financial and economic mayhem in Thailand, the Philippines, Indonesia and South Korea. This was in turn followed by the dot.com bubble which popped in 2000. Presently there are unwinnable wars raging in both Iraq and Afghanistan. Whilst in the heartlands of the new capitalism the Anglo-American liberal model seems little more than a debt-saturated bubble based upon excess liquidity and unsustainable property price rises. In this connexion, it should also be borne in mind that the American economy is being kept afloat by the willingness of East Asian central banks to take as US Treasury Bills as payment for their dollar surpluses. This means that these dollars are then recycled back to the USA, which, incredible as it sounds, is actually a dollar-deficit country. This arrangement allows the Americans to fund the historically unprecedented current account deficits as well as the US Federal government debt.

Not quite what Fukuyama had in mind perhaps? These events have forced Fukuyama to re-consider some of his earlier ideas. His present book, whilst not actually a full-on recantation of his earlier position, has had to revise some of the more extravagant claims made in 1989. On the universality of liberal Western values for example he now opines that ‘At issue is whether the institutions and values of the liberal west are indeed universal, or whether they represent … merely the outgrowth of cultural habits of a certain part of the Northern European world.’

Further, the imposition of western institutional models on non-western societies has been more problematic than anticipated. ‘There were very few warnings issued from Washington-based policymakers about the dangers of liberalisation in the absence of proper institutions. Indeed, the general inclination among policymakers at the time was that any degree of liberalisation was likely to be better than no liberalisation at all. ‘

In light of the abject failure of the crude, one-size-fits-all shock therapy approach, Fukuyama has considerably reworked his original paradigm. He now thinks that, in terms of development policy, a more nuanced and culturally specific approach is needed. This means that the types of institutions which have been the precondition for the type of self-sustaining growth patterns necessary to propel traditional societies into modern industrial societies would have to be crafted and nurtured with careful regard to local conditions and local history. These state institutions needed to be efficient and transparent. The state needed to be strong, but its scope needed to be limited. Globalization – with all of its putative benefits - could still be made to work, if the appropriate institutional framework was put in place. It is notable that in terms of core beliefs, however, Fukuyama still holds fast to the basic postulates of the 1979 settlement. ‘The privatisation of state-owned enterprises is of course and appropriate goal of economic reform.’

The book is rather more downbeat and sober than Fukuyama’s initial writing – but given what has happened what else could it be? It is still replete with the lingering, question-begging values, beliefs and general nostrums of the 1980s, such as the reputedly benign intentions of American foreign policy, and the benefits of globalization. But unquestionably this book marks a retreat from the counter-revolutionary euphoria of 1989. The elan and self-assurance of earlier years is no longer there. The tone is defensive, the certainties have now become uncertain. At this commanding level at least the ideological tide seems to be turning. It was always a moot point as to whether or not the neo-liberal ideology had any mass popular base; we can now say with some confidence that at this point it has none whatsoever. Not that Tony Blair knows this of course. But then there is always a time-lag between the delineation of a particular ideology and its acceptance into the mainstream. The opposite is also true. Ideologies begin and end their shelf-lives in think-tanks, entering and exiting the mainstream during the course of their journeys. If nothing else the book is an excellent example of this process.

State Building: Governance and World Order in the Twenty-First Century by Francis Fukuyama is published by Profile Books (Hb £15.99)