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There are few more vital contemporary questions for political scientists than those that emanate from the relationship between neo-liberalism, the exercise of state power, and the institutions and practice of global governance. Since the demise during the early 1970s of the first ‘Washington Consensus’ provided by the capital controls and fixed exchange rate system of the Bretton Woods international economic order, its neo-liberal successor has come to dominate the relationship between states and markets in both the industrialized and the industrializing economies. Policies of privatization, deregulation, and liberalization of markets have not only given entrepreneurs and trans-national corporations greater freedom to innovate and take risks in pursuit of profit, but also largely redrawn the boundaries between the public domain of the state and citizenship and the private domain of the market, entrepreneurship and consumerism.

Faced by the advent of neo-liberal market forces, epitomized by the austerity character of EMU (Buda, 1998; Ferner and Hyman, 1998), Germany like other European Member States is having to contend with a radically new macroeconomic regime (Grahl and Teague, 2003).With the advance of European economic ‘integration’, a byword for production transparency, low unit costs and labour flexibility, governments and corporate interests are increasingly committed to improving economic performance by promoting a deregulation of labour markets (Marginson and Sisson, 2001; Lane, 2003). The following chapter contends that the aforementioned neo-liberal agenda is having far reaching repercussions on the dual system of employee representation, the heart . The forward march of decentralization is unsettling the historical equilibrium between plant level co-determination and sectoral collective bargaining, i.e. that a conflict of interest is occurring between works councils (WC) and trade unions. Certainly, the potential ‘historical tension’ between these two industrial relations actors cannot be ignored, with employee representation marked by the dilemma of unifying the particular (the place of work) and general (class affiliation).

During the past decade, the traditional dominant discourse within the discipline of political economy about the appropriate roles for the state and market respectively has been displaced by a near fixation with the nature, impact and implications of globalization for the exercise of state power, and the need to conform to the policy and institutional conventions of competitive neo-liberalism. Despite these external constraints, states have retained significant policy autonomy to mediate the effects of globalization because globalization can act as an enabling force as well as a constraint on economic governance. Indeed, ‘rather than national states being generally constrained, hollowed out, and transformed by global markets, domestic institutions – especially, , political ones – are key to understanding the effects of openness and where interdependence may be heading’ (Weiss, 2003: 4). As a consequence, the character of domestic institutions has remained decisive in determining how state power has been used to enhance the competitive advantage of nations in global markets.

At first glance, a chapter dealing with educational policy may seem out-of-place in a series devoted to the study of global governance and converging markets. While the literature on this subject often gives extensive treatment to the demands and pressures placed upon national economies, the demands being made upon national social sectors have received fewer considerations. Where the literature does attend to this matter, it often assumes, rather than demonstrates that social policy is governed by global processes and economic patterns. In educational policy, for example, the vast number of countries to have enacted large-scale, decentralization is often taken as evidence for globalization’s effect on educational policy (Folwer, 1995; McGinn, 1997; Scribener and Layton 1995; Schugurensky, 1999). Here, converging trends in educational decentralization and economic restructuring appear as ‘twinned outcomes of the new globalization’ (Carnoy, 2002: xvi), policies which are seen as ‘increasingly governed by similar [external] pressures, procedures and organizational patterns’ (Schugurensky, 1999: 288). Viewed from this perspective, educational decentralization appears as a significant neo-liberal reform, an evaluation that appears quite problematic in light of new evidence.

Under conditions of globalization neo-liberal policies are often advanced as the only ones that nation-states can pursue effectively. By embracing the deregulatory logic of the global market, it is argued, nation-states will be better positioned to achieve success than if they cling to outdated notions of state intervention. Thus states should be catalysts in promoting market adaptation. If they act in this way, their citizens will reap the benefits because their societies will be more competitive in the global economy. Arguments of this type are part of public discourse and are employed to promote, justify or legitimate the adoption of neo-liberal policies. To a surprising degree, given the simplicity of the case just advanced, and the widespread failure of neo-liberal policies referred to in the introduction to this book, these propositions continue to play a key role in the development of public policy and in the efforts of international organizations to influence the policies adopted by states. Consequently it is important to continue to interrogate the claims advanced on behalf of neo-liberal policy.

While early assessments of neo-liberalism stressed its destructiveness in rolling back the institutions of the Keynesian welfare state, recent analyses have begun to assess how its consolidation involves creating new institutions and patterns of governance to extend market relations to new spheres of social life, and to stabilize emergent contradictions. Jessop has crafted the expression ‘flanking mechanism’ to describe attempts at shoring up neo-liberalism in the Anglo-American countries through various Third Way policies. These mechanisms may prove unsuccessful in their task should confusion persist over the proper form of support: is the solution to prop up neo-liberalism with institutions based on other logics, or is it to deepen the spread of market metrics ever more broadly over the social world? Moreover, what happens when both flanking strategies are employed at once?

This chapter argues that the post-Cold War era global phenomenon of proliferating transitional market economies are characterized by institutional diversity, rather than by neo-liberal convergence. The contention of diversity presents a direct challenge to the apparent ambition of the international community to engineer institutionally a neo-liberal economic world order, as reflected in the Good Governance development model orthodoxy. Two principal claims are made to argue why development scholars and practitioners should remain sceptical that institutional convergence is occurring or is likely to occur around the prescribed governance reforms. First, empirical evidence cannot confirm the view that these neo-liberal institutions are being progressively implemented by the fastest-growing emerging market economies. Second, and more theoretically, a set of faulty assumptions surrounding the neo-liberal conceptualization of state power and the state’s role in institutional change can be linked to a paradox, or unintended consequence, which undermines the neo-liberal ambitions for institutional convergence.

The Mexican government recently produced a 31 page pamphlet, , directed at its citizens attempting to cross the Mexican–US border without legal documents.

Under neo-liberalism, commodification has emerged as a major issue of concern for those studying immigration and immigrants. The term ‘commodification’ refers to market relations where services are bought and sold. According to Burke, commodification under neo-liberalism shows ‘an increasing reliance on the market’ for the financing or delivery of services (Burke, 2000: 180). This is certainly true for Canada, where both federal and provincial governments increasingly rely on the global market for a constant supply of domestics, especially from the Philippines, for childcare and eldercare financed by private employers. Social democrats expect domestics’ work to be a regulated arena. However, in Canada the absence of government regulations as well as the lack of private bonds and obligations has created an unregulated, neglected area where labourers are mostly at the mercy of their employers. Immigration statistics from 2001 show that under the Live-in Caregiver Program (LCP), about 4,000 workers entered Canada in 2000. The Vancouver Philippine Women Centre newsletter brings this statistic to life: ‘As of 1996, there were over 50,000 Filipino women in Canada who entered as domestic workers under the Live-in Caregiver Program (LCP). Over 6,000 of these women work in the Lower Mainland area and most are between the ages of 20–35 with at least a two-year university level education’ (The Centre Update, 1996: 1–2).

In 2004, US households owed 119 per cent of their disposable income, UK households 155 per cent and 108 per cent in Canada (Office for National Statistics 2004; Federal Reserve Bank 2004; Statistics Canada 2005). The outstanding totals of consumer credit has been calculated in the United States as $769 billion (Federal Reserve, 2003), in the United Kingdom £157 billion (Office for National Statistics, 2004), and in Canada $288 billion (Statistics Canada, 2003). The escalating level of consumer indebtedness in these three countries has not gone unnoticed. There have been many important contributions to understanding the causes of this recent trend of household over-indebtedness. These can be put in three broad categories: those who believe the cause is over-borrowing by consumers, those that see the cause as over-lending by banks, and those who claim it is low interest rates. For those that ascribe to the first claim, it is usually the case of the hedonistic consumer, the decline of thrift in society, or the magical effects of a plastic card that does not allow for restraint that has caused escalating debt levels. For those who accept the second claim, it is that relaxed banking regulations, aggressive marketing campaigns, and millions of mail outs that have led to increased debt for households. While the rest simply believe that consumers are acting as rational economic units and responding to the stimuli of low interest rates.