This post is part of our symposium on Quinn Slobodian’s Globalists: The End of Empire and the Birth of Neoliberalism. Read the rest of the symposium here.
Last month, the Supreme Court handed down a historic decision in Budha Jam v. International Finance Corporation, ruling that, under the International Organization Immunities Act (IOIA), international organizations are no longer subject to absolute judicial immunity in U.S. courts. The case marked a significant victory for the plaintiffs, who are a group of Indian fishing communities suing the International Finance Corporation (IFC) over tortious environmental damage in their communities caused by the IFC-funded Tata Mundra coal plant. However, the Budha Jam decision, which now restricts international organization immunity to the same level of immunity granted to foreign sovereigns, raises a set of questions about equitable transnational governance, brought into sharp relief by Quinn Slobodian’s “market encasement” thesis in Globalists. As per his thesis, global neoliberalism operates not through a theory of pure anti-statism, but rather through reliance on a strong order of supranational governance institutions with the ability to protect private property interests in a manner insulated from democratic feedback (i.e. “markets encased by institutions”).
In a world of encased markets, what would it mean to make organizations like the World Bank and IFC more democratically and locally accountable? And, to what extent is judicial review in U.S. courts a useful path toward such accountability?
In recent years, the World Bank and International Finance Corporation have repeatedly come under fire for enacting extractive development projects throughout the developing world, characterized by insufficient local accountability, democratic checks, and human rights oversight. While international financial market incentives are responsible for many of these problems, they have been exacerbated by the political and legal structure of international organizations, which are uniquely insulated from grassroots political pressure and liability, often more so than national governments or multinational corporations.
In Globalists, Slobodian points to this phenomenon as emblematic of the neoliberal encasement of markets through transnational governance. Per Slobodian’s history, the intellectual architects of neoliberal globalism, many of whom were involved in the envisioning of the Bretton Woods arrangement, saw the purpose of international governance as the “encasement” of market forces from the pressures of democracy. Understanding that “the market cannot take care of itself,” twentieth century neoliberal theorizing centrally sought to inoculate capitalism against the threats of democratic pressures (i.e. demands for redistributive justice) by building global extra-economic institutions and frameworks that would commit nations – particularly the newly decolonizing nations of the developing world – to capitalist imperatives.
While international organizations most obviously encase markets in the context of international trade, most international organizations involved in economic policymaking exhibit this phenomenon to some extent. The World Bank and IMF’s infamous structural adjustment programs, which require countries receiving loans to commit to liberalized policies as a condition of receiving funds, are perhaps the most obvious example. Additionally, World Bank and IFC projects have also been frequently used by elite and corporate interests to direct policy and business decision-making (i.e. choices to invest in certain industries, to build certain infrastructure) through transnational means while bypassing domestic political processes. And finally, as an organization which features a significant separation between its decision-making processes and meaningful political accountability through it representative governance systems of their member states, the World Bank has been criticized as suffering from democratic deficits.
Building on Slobodian’s incisive work, I argue that the neoliberal encasement of markets through transnational governance relies not only on coercive economic policymaking through international bodies, but also on domestic policy infrastructure within member states, which allows for undisrupted transnational market encasement. Indeed, in insulating market forces from popular dissent, international organizations rely both on 1) economic policy coercion in the international realm and 2) encasement infrastructure sealing off dissent and feedback in the domestic realm. The latter, which I call neoliberal encasement infrastructure, can be defined as an array of domestic laws within a member state which assist in insulating international organizations from democratic feedback and calls for redistributive imperatives. Common examples of encasement infrastructure include a lack of transparency around a country’s engagement within an international organization, non-democratic systems of representative appointments to these institutions, and, finally, a lack of domestic accountability mechanisms regarding a country’s organizational decisionmaking within said organization.
In the years before Budha Jam, the IOIA could be understood as a clear example of neoliberal encasement infrastructure. While structured to facilitate international organization administration with plentiful potential limitations on its conferred immunities (including the presidential ability to modify or revoke immunities, to specifically designate the organizations to which they will apply, etc.), the IOIA has largely functioned as a complete jurisdictional bar for international organizations. In doing so, it has for many years given international organizations an elevated status of complete judicial unaccountability, allowing them an insulated status greater than that afforded to foreign sovereigns. Indeed, the Budha Jam plaintiffs’ claims can be best understood as an attempt to question the legal legitimacy of one piece of the IFC’s domestic encasement infrastructure.
In the face of international organizations with immense power, known democratic deficits, and a crisis of legitimacy, judicial review can provide a crucial layer of public accountability over their decision-making. However, the democratic deficits of international organizations will not be solved, or even fundamentally addressed, by judicial review, in large part because litigation in U.S. courts does not offer a thick enough mode of deliberative accountability to individuals affected by, for example, IFC-funded projects in faraway places. It does not necessarily follow, after all, that the sensitivity of an international organization to democratic feedback in the United States would be relevant to its accountability to populations affected by projects in India. Nor is it necessarily the case that the ability to sue an international organization will give poor affected people a voice over wealthier corporate interests.
Even so, I suggest that reconfiguring U.S. domestic encasement infrastructure surrounding international organizations could still provide a fruitful avenue toward destabilizing their neoliberal and anti-democratic congealment. Doing so, however, will require replacing our current neoliberalizing encasement infrastructure with a set of policy commitments that actively seek to facilitate democratization and local accountability. An international organization statutory scheme which, for example, committed American international organization involvement to local accountability measures, such as grassroots environmental monitoring, or to protections for indigenous rights, could assist in shifting the static neoliberal patterns that these entities regularly follow, particularly given the U.S.’s outsized role in directing the policies of an organization like the World Bank. While doing so artfully will require more careful thought to the what and how, a shift toward democratizing infrastructure may allow us to ensure that a case like Budha Jam is, indeed, a victory, rather than a mere stopgap, toward global economic justice.
