Social:Westfailure

In 1999, international relations scholar Susan Strange introduced the term Westfailure in her posthumously published article entitled The Westfailure System. The term Westfailure is a portmanteau (West + failure) and a pun on the term Westphalian system. Commonly used in international politics, the Westphalian system refers to the system of state sovereignty that emerged from treaties signed during the 1648 Peace of Westphalia. Strange describes the Westphalian system as one that perpetuates non-intervention, the universal recognition of state sovereignty, and the "legitimate use of violence within a given territory." Put simply, the Westphalian system promotes a system where each individual state has the inalienable authority to govern their own internal affairs (laws, market, resources, etc.) without interference from other states or non-governmental actors. The principal aim of Strange's article is to highlight how this system of international governance is failing and does not "satisfy the long-term conditions of sustainability."

General outline of the 'Westfailure' argument

While Susan Strange's work has been expanded upon since, her original work still acts as a clear and concise outline of the argument for the 'Westfailure' system. One of the foundational problems she identifies with the Westfailure system is that it has become inseparable from the market-driven, capitalist economy that it emerged under in 17th century Europe. She argues that global capitalism, in conjunction with a state-based 'Westfailure system', has created a political climate wherein "...those with political authority are inherently unable to see that socio-economic polarisation is not in anyone’s long-term interest." Under these conditions, Strange warns that there is little accountability for environmental degradation and that the socioeconomic polarization of rich and poor countries has intensified. To support her claims, the author breaks down her argument into three parts: Financial, Environmental, and Social Failure.

Financial failure

The first failure Strange identifies in relation to the Westphalian model of global governance is financial failure. Overall, Strange takes the position that the Westphalian model of state sovereignty is failing capitalism as a whole. For this portion of her analysis, Strange critiques the efficiency and sustainability of a two-tier international regulation system composed of the International Monetary Fund (IMF) and the Bank for International Settlements (BIS). Essentially, a two-tiered system was designed to predict, offset, and regulate any irregularities in the market that could lead to or prolong a financial crisis. However, this understanding was challenged by the 1997 Asian financial crisis when, despite the implementation of national banking regulations and aid from both the IMF and BIS, Asian markets still did not recover as initially predicted.

Asian financial crisis

Strange argues that the solutions implemented by national regulatory bodies, in-tandem with the IMF and BIS, during the Asian financial crisis were short-term, and "ill-considered". She elaborates on this point, stating that: "The common factor in all the stricken economies was an influx of mobile short-term capital, too much of which went in ill-considered speculative loans or in unproductive real-estate investments." However, the author does not put all of the fault on the IMF and BIS, but rather distributes it equally between national and international regulatory bodies—arguing that a two-tiered financial regulation system is simply inadequate in a globalized world. She then highlights some of the many obstacles that financial regulators face in an age of globalization, technological innovation, and Westphalian sovereignty. Some of these include:

• Tax Havens
• Technological Advancements: Instant mobility of capital across borders and currencies is making it harder for national regulators to trace funds as they move throughout the financial system. (350) Advancements in financial technology have also created a gap between those proficient in technology, and those not. Put simply, the financial system has become so complicated that only a select few understand and master it. This creates more risk for the misuse of funds by gatekeepers.
• Coercion: National regulators may feel pressured by international regulators to reform their financial systems in a way that challenges their sovereignty. As well, international regulators may be unable to force creditor governments into the necessary economic conditions that would allow them to repay their debt.

Beyond Strange's analysis

Other scholars have expanded upon the idea that global capitalism is undermining the power that states wield over their financial sectors. In one example, Dr. Inakshi Chaturvedi illustrates the problem posed by multinational corporations in a system of Westphalian sovereignty combined with globalized labour, trade, and production. Put simply, if the corporate tax rate in one state is too high, multinational corporations have the authority to retract their corporation from that area in-order to seek lower rates in another territory. Under these conditions, the state no longer has the same amount of weight or leverage surrounding the employment and revenue opportunities in their country.

Environmental failure

The second failure identified by Strange is environmental failure. While financial failure is mentioned first, Strange argues that this aspect of her argument requires the most immediate attention from international relations scholars and political actors. Strange argues this is because, historically, market economies have been able to endure and 'bounce back' from several decades of slow economic growth, but the same cannot be said for the environment. Strange argues that unless something is done to combat environmental degradation on a global-scale, long-term or even irreversible damage will be done to the Earth's environment. From Strange's perspective, states should consider threats to the environment just as they would consider conventional threats, like invasion. To further illustrate her point, the author identifies some of the major environmental issues that have been overlooked by modern states and their industries:

The three types of environmental danger

1. Destruction of the ozone layer
2. Air pollution
3. Depletion of natural resources

However, this problem has not emerged from an inability to create comprehensive and proactive policies regarding the environment, but rather from "...the territorial principle which lies at the heart of it [that] proclaims that the territorial state is responsible for its own land—but not for anyone else’s." Strange argues that the non-intervention method of sovereignty employed by the Westphalian system reduces accountability for states when it comes to respecting the environment, and also limits the ability of other political actors to intervene in countries where environmental degradation is occurring. Essentially, the Westphalian system fragments the environment into territorial limits, but does not take into consideration how degradation within those territorial limits affect the global environment as a whole, similar to a domino effect. Strange argues that this is exasperated under capitalism, as states pursue self-interest, short-term financial gain often takes precedence over solutions that call for systematic change—solutions that could require more time and funds than states are willing to invest, especially when short-term solutions typically provide immediate results.

Social failure

The final failure of the Westphalian system that Strange notes is social failure. Strange suggests that the gap between rich and very poor countries is widening. However, the author feels as though the solution to this problem has already been suggested by Keynesian thinkers in the form of redistributive tax and welfare measures. Despite this, Strange also argues that enforcing Keynesian remedial policies transnationally would be "practically inconceivable" under the Westphalian system. From Strange's perspective, global socio-economic reform will never be possible under the Westphalian system because, by definition, the states within this system pursue self-interest. In a world where all states are competing for their own self-interests, it makes sense that states are generally complacent about augmenting the socio-economic status of the states around them. This can be readily explained by the balance of power in international relations theory.

See also

• International political economy
• International relations theory
• List of treaties
• Westphalia (disambiguation)
• Civic nationalism

Further reading

• Sterling and British Policy: A Political Study of an International Currency in Decline (1971) ISBN:978-0192149855
• Casino Capitalism (1986) ISBN:0-7190-5235-1
• States and Markets (1988) ISBN:0-8264-7389-X
• Rival States, Rival Firms: Competition for World Market Shares with John M. Stopford and John S. Henley (1991) ISBN:0-521-42386-4
• The Retreat of the State: The Diffusion of Power in the World Economy (1996) ISBN:0-521-56429-8
• Mad Money: When Markets Outgrow Governments (1998) ISBN:0-472-06693-5