Global Policy Forum

Rating Sovereignty

In this article, Professor of Philosophy Michael Marder argues that the impact of the eurozone crisis on Greece, Portugal, Italy and Spain shows the extent to which the classical model of sovereignty has eroded. The nation-state “has lost the last shreds of its supreme authority to make decisions on domestic policy matters” as they are bound by the standards imposed by extra sovereign bodies such as the EU, the Central Bank, and the IMF. This trend is even more worrying when such responsibility is given to private rating agencies such as Standard & Poor's in order to engender a “world where everything is eminently rankable." Marder views this as a direct threat to states sovereignty, which he considers un-rankable, un-ratable, and therefore incomparable.

By Michael Marder

Al Jazeera
November 10, 2012

One of the most significant political lessons of the eurozone crisis is that the classical model of sovereignty has ceased working. As the examples of Greece, Portugal, Italy and Spain have shown, the nation-state has lost the last shreds of its supreme authority to make decisions on domestic policy matters. 

Debtor states and candidates to the infamous "bankruptcy club" of countries likely to declare economic default must play by the rules formulated outside of their jurisdiction if they are to ensure borrowing rates conducive to their continued financing and, indeed, survival. In return, external political and extra-political bodies such as the Troika - the European Union, European Central Bank and International Monetary Fund - gain the right to dictate the age of retirement, minimum wages, the length of the workweek, the extent of salary and pension cuts, among other policies. 

Having turned into mere appendages of foreign financial and political agencies, the national governments of Portugal and Greece are reduced to the superfluous role of signing off on their decisions. The vocabulary of an antiquated paradigm of sovereignty and national self-determination is still used, even as its terms and coordinates have grown obsolete. In Europe, a distinct, albeit yet unnamed, model of sovereignty is rapidly being forged. 

Behind the scenes, rating agencies, such as Standard & Poor's, have had a hand in the demise of sovereign states. 

As countries increasingly finance themselves through market borrowing, their solvability and the sustainability of their debt levels provide the fodder for intense financial speculation. This is where rating agencies come in: By lowering the credit ratings of sovereign debts, they push borrowing costs of the rated states up, forcing them, in the last resort, to seek assistance from - and to deliver themselves to the whims of - the Troika. 

Formal national sovereignty is of little consequence, when faced with the oracles of the rating agencies that have the power to reduce sovereign credit status to "junk". 

Needless to say, the judgments of the emerging decision-makers are less than reliable. As the recent court case in Australia has demonstrated, S&P misled investors about the soundness of their investments by giving the highest AAA rating to the riskiest securities. Why should we be surprised? After all, this is consistent with the upside-down worldview that attributes the lowest ratings to sovereign debts guaranteed by European countries that are much more stable than derivatives and hedge funds. 

A philosophy of rankings

As a philosopher, I am interested in the framework of knowledge production and organisation, as well as in the "regime of truth" heralded by rating activity. 

To be sure, rating agencies are only a sign of the times; rankings are prevalent in all areas of life, from academic journals and universities to restaurants. The advantage is that consulting a ranking helps us make fast decisions on where best to dine or publish a research paper. But this presupposes that the end results, whereby ranked materials are sequentially ordered from the highest to the lowest, merely organise the information that is already there, without either adding to or subtracting from it. 

Problems crop up when, thanks to inconsistencies, vague criteria, or predetermined expectations, the ranking creates a world of its own, which has little to do with the situation at hand. This is, precisely, what happened in the case of credit rating agencies that, instead of reflecting the state of the world, have conjured one up. At odds with the actual extent of risk, this constructed world crumbled as soon as the crisis revealed the real extent of financial speculation and burst the bubble of fake security vouchsafed by triple-A grades. 

The next question we might raise is, "What kind of a world is it, where everything is eminently rankable?" 

The answer is obvious: It is a world in which everything has been qualitatively flattened, and where (ideally) only quantitative differences persist. What rankings organise is, precisely, information, not knowledge, and that is why they are so appropriate to today's "Information Age". In this, they are actually consistent with the modern scientific approach that strives to translate all of material reality into numbers and equations, paving the way to a complete mathematising of the world. 

The problem is not only that - as in the case of rating agencies - numbers and numeric values do not match the state of affairs they purportedly describe, but also that qualitative differences are largely lost even in the most accurate process of the world's mathematisation. While the hierarchies of valuation are probably as old as humanity itself, the numerical (and, hence, pseudo-scientific) parcelling of values is a relatively new phenomenon, which threatens the very fabric of ethical and political existence. 

When the dogma of shoddily constructed rankings presents itself under the guise of truth and when we look to its products to provide us with efficient shortcuts to informed decisions, "knowledge society" deteriorates to the status of an "ignorance society". And, then, it takes nothing less than a full-blown crisis to jolt us back to our senses. 

Un-rankable sovereignty 

There is, however, at least one exception to the general rule of flattening and to the lack of qualitative differentiation characteristic of modernity and its offshoot, the obsession with ratings. This exception is sovereignty. 

Sovereignty has been traditionally understood as the highest political clout, a power that is supreme and absolute. Following this precept, relations among sovereigns are not subject to any other authority, which is why, for Thomas Hobbes, international relations (that is, relations among sovereign states) are hopelessly mired in the state of nature and overshadowed by the perpetual possibility of war. 

We might say, in turn, that sovereignties are un-rankable and un-ratable, as they are all equally supreme and absolute within their respective domains. They are simply incomparable, much less available for external adjudication by a third party that would, with reference to its decision-making authority, trump their own supremacy. 

Modernity has always been mistrustful of sovereignty, in which it - perhaps rightly - saw the anachronistic vestiges of pre-modern absolutism. The division of powers into executive, judiciary and legislative branches in parliamentary democracy is a not-so-concealed attempt to do away with the concept of sovereignty altogether, by imposing a system of checks and balances on any authority that may claim for itself the title "supreme". 

The current disintegration of sovereignty is a culmination of a long history that saw this concept and the corresponding institution gradually eroded. Still, if sovereignty has proven resilient thus far, it is because decision-making has proven, in the last instance, indispensable. This means that sovereignty is not really destroyed but, rather, displaced, relocated elsewhere, as it was once transferred from the ideal body of the King to the ideal body of the People. 

The paradox and the novelty of the displacement we are witnessing today is that the decision-making bodies that have appropriated whatever remains of sovereignty have done so in a selective manner. The sovereignty unofficially invested in the Troika and, even less overtly, in international rating agencies is all about imposing decisions without assuming any political, legal, or financial responsibility for them. 

Seemingly emanating from nowhere - arising ex nihilo - the effects of these sovereign verdicts are clothed in a mantle of inevitability. We are led to believe that arguing against them amounts to going against the iron law of the market, heedless of any alternatives and, for that matter, devoid of freedom. But it is not enough to protest against these most recent avatars of fate that hold the destinies of entire countries in their hands. To begin with, we must consider the real root of the problem: The exceptional meaning of sovereignty in an increasingly flattened, quantitatively defined, rankable world.  


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