[Paleopsych] Prospect (UK): David Held: Global Left Turn

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David Held: Global Left Turn 
http://www.prospect-magazine.co.uk/article_details.php?id=6584&AuthKey=1f160fba4227a1115ea020940d5f509f&issue=496
Prospect Magazine, 5.1

    Martin Wolf and I come from similar backgrounds and agree about much
    in the globalisation debate. But while he regards liberal markets as
    sufficient, I think the globe needs a turn to social democracy
      _________________________________________________________________

    David Held is a professor of political science at the LSE and author
    of "Global Covenant: The Social Democratic Alternative to the
    Washington Consensus" (Polity Press)

    Martin Wolf, the chief economics commentator of the Financial Times,
    has written a remarkable but flawed defence of the global market
    economy: Why Globalisation Works: The Case for the Global Market
    Economy (Yale University Press). Wolf conceives globalisation in
    essentially economic terms. The book says little about the political,
    social, cultural and environmental aspects of globalisation, although
    he does argue that nation states remain the locus of political debate
    and legitimacy and that the best way to combine economic globalisation
    with political stability is via liberal democracy. But it is economic
    globalisation - meaning greater openness of trade, free movement of
    capital, expansion of foreign direct investment - which is the focus
    because it is, in Wolf's view, the key to boosting prosperity and the
    life opportunities of all.
    Wolf's mission is to dispel the illusions about globalisation
    promulgated by the forces of what he calls anti-globalisation.com, or
    the "new millennium collectivists." The book is about the intellectual
    clash between liberal capitalism and its opponents. Wolf is on the
    streets fighting a new wave of dark forces. The stakes are high:
    disorder and the fragmentation of the global economy threaten unless
    they are defeated. And defeating them requires both showing them they
    are wrong and offering hope for a better future.
    Wolf's voice is clear, serious and didactic, and his book offers a
    carefully crafted account of the global market economy and the
    strengths and limits of his opponents' views. Yet there is also
    something anachronistic about the book and the territory it covers:
    its agenda seems to have been set a few years ago when the
    anti-globalisation movement was at its peak and hundreds of thousands
    were marching against the forces of economic globalisation. These
    days, after 9/11 and the war in Iraq, it is seldom asked whether we
    are for or against globalisation. The ground has shifted to a debate
    about the type of globalisation we want. On these grounds, Wolf's
    contribution is less impressive.
    I have been thinking and writing about globalisation and global
    governance arrangements for over a decade, and have considered much of
    the material that informs Wolf's book. It is therefore interesting to
    reflect on the points of similarity and difference in our background
    and approach.
    Wolf begins his book with a brief autobiographical essay, describing
    his recent family history and its influence upon him. His father was
    an Austrian Jewish refugee who came to Britain before the second world
    war, and his mother was from a Dutch Jewish family. My parents were
    both Jewish and born in Germany, one in Leipzig and the other in
    Berlin. Both came to Britain in the early 1930s fleeing the Nazis.
    Wolf, like myself, was brought up with a strong sense of the menace of
    authoritarian dictatorships, and we both learned early about the
    importance of the values of an open society and of the forces, from
    the left and right, which might threaten it.
    Both Wolf and I grew up in communities strongly committed to the
    Enlightenment ideals of freedom, democracy and the pursuit of reason -
    the impartial pursuit of truth - and with a strong sense of the
    fragility of the world's commitment to them. But while he believes
    that the liberal market economy is the best means of embedding these
    ideals, and that markets and liberal states create a framework for
    humans to be free and equal, I consider that the Enlightenment ideals
    remain unfulfilled in important respects and that the neoliberal form
    of globalisation to which Wolf subscribes is a challenge to them.
    We have both been influenced by Friedrich Hayek. Wolf takes him as one
    of the great champions of personal liberty, of the market economy as a
    necessary condition of democracy, and of the dangers of intrusive
    government. I, like Wolf, take Hayek as one of the great theorists of
    the market, and of its advantages over other systems. But I also think
    that Hayek failed to grasp the nature of markets as systems of power
    which can also threaten liberty and democracy. Wolf conceives of
    markets as powerless mechanisms of co-ordination, while I understand
    them as highly fluid and risk-laden - often generating damaging
    externalities with regard to health, welfare, income distribution and
    the environment.
    This is not an argument for abandoning the market, but it is an
    argument - explored in my new book Global Covenant - for reframing it.
    If we want to guarantee personal liberty and the efficient and just
    operation of the market, we must build bridges between economic and
    human rights, between the commercial and the environmental, and
    between national and international jurisdictions. Hayek does not help
    here at all. For both Hayek and Wolf, at the feast of the global
    market, power is largely absent.
    Nevertheless, both Wolf and I believe that globalisation has been much
    misrepresented. We agree, for example, that globalisation is more than
    Americanisation; that there has been no straightforward collapse in
    welfare, labour or environmental standards (although there are big
    challenges); globalisation does not mean the end of the state; it has
    not just compounded the globe's inequities; the gap between the
    world's richest and poorest states is greater than it has ever been
    and is growing, yet there is some evidence that the proportion of
    those living in extreme poverty is falling; global economic processes
    have not always reinforced corporate power; developing countries do
    not always lose out in world trade; and economic globalisation and the
    current structure of economic governance do not exclude the voice and
    influence of developing countries. Most of Wolf's book is devoted to
    examining propositions such as these, and while he does not paint a
    wholly rosy picture of economic globalisation, the force of the book
    is to show that anti-globalisation.com has precious little to offer.
    We agree on the need to dispel these myths, but Wolf's portrait of
    economic globalisation does not get to the heart of the problems of
    globalisation in its current neoliberal form. I will stress three of
    them here: global market integration is not the indispensable
    condition of development; a "market first" political philosophy cannot
    provide adequate terms of reference for thinking about a range of
    transborder problems and the capacities of multilateral organisations
    to cope with them; and liberal market philosophy is the wrong
    philosophy for the age in which we live. We require, instead, a
    cosmopolitan social democratic philosophy to guide a world of
    overlapping communities.
    Wolf's main argument is that "a successful move to the market,
    including increasing integration in the world economy, explains the
    success stories of the past two decades." Developing countries which
    have prospered, notably in Asia, have all followed this path. But his
    argument needs questioning in a number of respects.
    First, the experience of China and India - along with Japan, South
    Korea and Taiwan earlier - shows that countries do not have to adopt
    liberal trade or capital market policies in order to benefit from
    enhanced trade and faster growth. All these countries have grown
    relatively fast behind protective barriers. It is true that as these
    countries have become richer, they have tended to liberalise their
    trade policy, but there is not a simple causal relationship at work.
    As Dani Rodrik, the Harvard economist, has shown, the only thing that
    can be said with certainty is that countries become more open as they
    become richer.
    Furthermore, recent research has found that one of the main factors
    limiting the capacity of the poorest countries to develop is the
    liberalisation of capital. Geoffrey Garrett, a professor of political
    science at UCLA, has shown that what hurts developing countries faced
    with a broad liberalisation programme is not the pursuit of free trade
    per se, but the free movement of capital. While tariff liberalisation
    can be broadly beneficial for low-income countries, rapid capital
    liberalisation in the absence of sound domestic capital markets can be
    a recipe for "volatility, unpredictability and booms and busts in
    capital flows." Countries that have rapidly opened their capital
    accounts have performed significantly less well in terms of economic
    growth and income inequality than countries that have maintained tight
    control on capital movements but cut tariffs. An IMF study published
    in March 2003 found that there is no consistent support for the theory
    that financial globalisation per se delivers a higher rate of economic
    growth.
    Economic protectionism does not work as a general strategy, but there
    is evidence to suggest that a country's internal economic integration
    - the development of its human capital and national market
    institutions, and the replacement of imports with national production
    where feasible - can be stimulated by state-led industrial policy. The
    evidence indicates that the development of state regulatory capacity,
    a sound public domain, the ability to focus investment on job creating
    sectors in competitive and productive areas and the protection of
    infant industries are more important priorities than integration into
    world markets. This finding should not come as a surprise, since
    nearly all today's rich countries began their growth behind tariff
    barriers and only lowered them once their economies were relatively
    robust.
    The argument here should not be taken, as Wolf might suspect, as a
    simple endorsement of old leftist, state-centred development. Public
    objectives can be delivered by a diversity of actors, public and
    private. And the development of civil society is an indispensable part
    of national development. Although there can, of course, be conflicts
    between economic development and the strengthening of civil society,
    all countries need sufficient autonomy to work out their own ways of
    managing this conflict.
    Developing nations need the latitude to create individual polices and
    institutions which may depart from the orthodoxy of global market
    integration. Similarly, organisations such as the WTO need a broader
    range of policies to encourage the different national economic systems
    to flourish within an equitable, rules-based global market order.
    Wolf acknowledges elements of these arguments throughout his book,
    especially in his discussions of the work of Dani Rodrik and Ha-Joon
    Chang (see Michael Lind's [37]essay in Prospect, January 2003). He
    accepts that there is much more involved in successful development
    than trade liberalisation, and that financial liberalisation carries
    risks. He does concede some ground to the critics of market
    liberalisation and global economic integration. But he never allows
    that these concessions have implications for the very basis of his
    liberal market approach - for its explanatory power and prescriptive
    value.
    There are many ways of conceiving and categorising the global
    challenges that we face. Jean-François Rischard, vice-president for
    Europe of the World Bank, usefully thinks of them as forming a
    triumvirate of problems, concerned with sharing our planet (global
    warming, water deficits, biodiversity and ecosystem losses), our
    humanity (poverty, global infectious diseases, conflict prevention),
    and our rulebook (intellectual property rights, unsustainable debt,
    trade, finance and tax rules). Wolf seems to think that global
    challenges such as these can be addressed by the current interstate
    order, even if it does require reform (notably in relation to the IMF
    and the WTO). But how urgent global problems might be resolved is far
    from clear, for the problem-solving capacity of the international
    system is not effective, accountable or fast enough. There are three
    main difficulties.
    To begin with, there is no clear division of labour among the many
    international governmental agencies: functions overlap, mandates
    conflict, and aims and objectives get blurred. This is true, for
    example, in the area of health and social policy, where the World
    Bank, the IMF and the World Health Organisation often have competing
    priorities.
    A second, related set of problems surrounds those issues which have
    both domestic and international dimensions. These are often
    insufficiently understood or acted upon. There is an ultimate lack of
    responsibility for problems such as global warming and the loss of
    global biodiversity. Institutional fragmentation means that these
    issues fall between agencies. This latter problem is also manifest
    between the global level and national governments.
    A third set of difficulties relates to an accountability deficit in
    the international agencies which stems from power imbalances among
    states. Multilateral bodies need to be more representative of the
    states involved with them. Developing countries are under-represented
    in many international organisations. There must also be arrangements
    in place to ensure consultation and co-ordination between state and
    non-state actors, and these conditions are seldom met in multilateral
    decision-making bodies.
    Underlying these institutional difficulties is a lack of symmetry or
    congruence between decision-makers and decision-takers. The point has
    been well articulated recently by Inge Kaul and her associates at the
    UNDP in their work on global public goods and what they term the
    "forgotten principle of equivalence." At its simplest, the principle
    suggests that those who are significantly affected by a global
    development, good or bad, should have a say in its provision or
    regulation. Yet all too often there is a breakdown of "equivalence"
    between decision-makers and decision-takers. For example, a decision
    to permit the "harvesting" of rainforests may contribute to ecological
    damage far beyond the borders which formally limit the responsibility
    of a given set of decision-makers. A decision to build a nuclear plant
    near the frontiers of a neighbouring country is likely to be taken
    without consulting that country, despite the risks for it.
    Systematising the provision of global public goods requires extending
    and reshaping multilateral institutions. Pressing issues include the
    need to develop criteria for fair international negotiations;
    strengthen the negotiating capacity of developing countries; create
    advisory scientific panels for major global issues (following the
    example of the intergovernmental panel on climate change); create
    negotiating arenas for new priority issues (such as access to water),
    together with appropriate grievance panels (such as a world water
    court); and expand the remit of the UN security council to examine
    and, where necessary, intervene in the full gambit of human crises -
    physical, social, biological, environmental.
    Liberal market philosophy offers too narrow a view, but clues to an
    alternative strategy can be found in an old rival - social democracy -
    which Wolf explicitly rejects. Traditionally, social democrats have
    sought to deploy the democratic institutions of individual countries
    on behalf of a particular national project - a compromise between the
    powers of capital, labour and the state. They have accepted that
    markets are central to generating economic wellbeing, but recognised
    that in the absence of appropriate regulation they suffer serious
    flaws - especially the generation of unwanted risks for their
    citizens, and an unequal distribution of those risks.
    Social democracy at the global level means pursuing an economic agenda
    which calibrates the freeing of markets with poverty reduction and the
    protection of basic labour and environmental standards. What is
    required is not only the enactment of existing human rights and
    environmental agreements and the clear articulation of these with the
    ethical codes of particular industries (where they exist or can be
    developed), but also the introduction of new terms of reference into
    the ground rules or basic laws of the free market and trade system.
    Precedents exist: in the social chapter of the EU's Maastricht treaty,
    for example, or in the attempt to attach labour and environmental
    conditions to the Nafta regime.
    Social democratic globalisation requires three interrelated
    transformations. The first would involve engaging companies in the
    promotion of core UN principles (as the UN's global compact does at
    present). To the extent that this led to the entrenchment of human
    rights and environmental standards in corporate practices, it would be
    a significant step forward. And to avoid these principles being
    sidestepped, they need to be elaborated in due course as a set of
    mandatory rules. The second set of transformations would thus involve
    the entrenchment of revised codes, rules and procedures - concerning
    health, child labour, trade union activity, environmental protection,
    stakeholder consultation and corporate governance, among other matters
    - in the terms of reference of economic organisations and trading
    agencies.
    But this cannot be implemented without a third set of transformations,
    focused on alleviating the harshest cases of economic suffering. This
    means that development policies must challenge unequal access to the
    global market, and ensure that global market integration, particularly
    of capital markets, happens in sequence with the growth of sustainable
    public sectors, which guide long-term investment in healthcare, human
    capital and physical infrastructure, and the development of
    transparent, accountable political institutions. Moreover, it means
    eliminating unsustainable debt, seeking ways to reverse the outflow of
    net capital assets from the south to the north, and creating new
    finance facilities for development purposes. In addition, if such
    measures were combined with a (Tobin) tax on the turnover of financial
    markets, and/or a consumption tax on fossil fuels, and/or a shift of
    priorities from military expenditure (running at over $950bn a year
    globally) to the alleviation of severe need (direct aid amounts to
    $50bn a year globally), then the developed world might really begin to
    accommodate those nations struggling for survival and minimum welfare.
    This is a big agenda, which cannot, of course, be realised all at
    once. Yet, as I argue in Global Covenant, it is feasible, and can be
    pursued on a step by step basis. And unless we move in this direction,
    and make social justice a priority alongside liberty, then tens of
    millions of people will continue to die unnecessarily every year of
    poverty, disease and environmental degradation.
    The shift in the agenda of globalisation I am arguing for - a move
    from liberal to social democratic globalisation - would also have
    payoffs for today's most pressing security concerns. If developed
    countries want rapid progress towards global legal codes that will
    enhance security and ensure action against the threat of terrorism,
    then they should also participate in a wider process of reform that
    addresses the insecurity of life experienced in developing societies.
    Across the developing world, human rights and democracy are seldom
    perceived as legitimate concerns in the abstract. They must be
    connected with humanitarian issues of social and economic well-being,
    such as education and clean water.
    To be concerned today with the Enlightenment ideals of freedom,
    democracy and reason, one needs to think about their entrenchment in
    an era in which political communities and states matter, but not
    solely and exclusively. States are hugely important vehicles for
    aiding the delivery of effective public regulation, equality and
    social justice, but they should not be thought of as occupying a
    privileged level of politics. They can be judged by how far they
    deliver these public goods and how far they fail. The question is not
    why globalisation works, but rather how it can be made to work better
    to bridge the gaps between liberty and social justice, economic and
    human rights concerns, the accelerating affluence of some and the
    continuing poverty of many. Liberal economic philosophy does not equip
    us adequately for this task. End of the article

References

   37. http://www.prospectmagazine.co.uk/article_details.php?id=5460