An invitation to re-read
Economic globalization has peculiar characteristics, which make it different from internationalization, and allow us to consider it a new phenomenon, linked to the scientific revolution. Its effects amplify and accelerate the disintegration process of the international economic order initiated by the decline of the American hegemony and the break-up of the Soviet Union. National states, even the United States, and intergovernmental institutions cannot face global problems, for which an adequate government level is still missing.To the growing evidence of the states' impotence corresponds the spreading of a sense of insecurity, which shows itself in market volatility, in xenophobic and micro-nationalist reactions by part of the groups feeling threatened, and in the forming of new global movements.
The most alarming questions relate to:
- the environmental non-sustainability of a globalized development using present-day technologies
- the economic and moral failure in wealth distribution among States and inside them
- the blow inflicted on the insuring, redistributing and social-state stabilization mechanisms by the "competition
law", imposed by transnational companies on national states
- the lack of any law guaranteeing a counterpower to global oligopolies, big tax-evaders and the new organized crime
- monetary disorder, the progressive destruction of every controlling and protecting net for financial markets misbehaviours, and the lack of a last-resort lender at world level
- finally, the primacy granted to free trading of goods and services over any other consideration of environmental sustainability, food safety, health protection, financial lawfulness and stability; a primacy ensured by the judicial and sanctioning power enjoyed, unique among all international institutions, by the WTO, not subjected to any democratic control.
The present article is an invitation to re-read, as federalists, some particularly meaningful texts, as a learning process to convince ourselves that such problems can only be governed at world level.
On the environmental question I believe I shall mention the articles by Georgescu-Roegen and the Reports by the Club of Rome, by the World Commission for Environment and Development, by the UK Department for the Environment and by the Worldwatch Institute.
Georgescu-Roegen, considered the father of bio-economy, argues (1970-1974)1 that production as practiced according to the present economic "laws", cannot last for long, for physical reasons. According to the principles of thermodynamics, in every system in which energy flows the phenomenon of entropy takes place, giving rise to a degradation of usable energy. The matter, in the course of the processes that transform it from its natural state into waste, is subjected also to an entropic, so to speak, degradation. As entropy is invisible to economic calculations, we cannot deceive ourselves that it will be the market that will take care of bioeconomic problems.
The market, left to itself, destroys the very bases for any muchneeded reconversion of our consumption models and production modes, starting with the renewable resources dependent on the Sun, like forests and a rational agriculture, which represent the real energy source for the future. A government of the economy at world level is necessary.
The MIT Report for the Club of Rome (1972)2 was leading to the following conclusions: without a radical change, the non-renewable resources which the industrial system is depending on will be depleted within one century; even if the resources were not depleted, a collapse will take place anyway, due to pollution; it could be avoided only if a limit is put immediately on population growth and pollution. In that Report, a group of managers and intellectuals, founded by Aurelio Peccei and close to industry circles, was expressing for the first time, before the oil shock, the awareness of the risk of a general collapse of our planet.
The Report for the UN prepared by the World Commission for Environment and Development (1987)3 demonstrates very well the interdependence of environmental problems. A "sustainable global development" requires that the richest adopt life styles in agreement with the planet's ecological means; it can be pursued only if population size and demographic growth are in agreement with the production capacity, which may vary; it implies difficult choices to be made in several fields: demography, food safety, conservation of species and eco-systems, energy, industry, urbanization. "So, in the end, sustainable development cannot be founded but on political will", through a deep institutional change, because "traditional forms of national sovereignty are posing special problems as to how to manage common resources and ecosystems territorially divided among several countries".
Blueprint (1989)4 was originally prepared as a Report for the UK Department for the Environment. Its authors state the possibility and the necessity to use an economic approach to environmental policy, as the costs of managing the "collective global assets", like the atmosphere and the oceans, are potentially very high. To future generations we shall leave a stock of capital goods, both natural and manmade, not smaller than the one available today. A trade-off between the forms of that capital requires that a "value" be given also to environmental assets. For some environmental assets there is no possibility of trade-off. There are obvious reasons for adopting a preventive approach, whereby the trend should be for the conservation of the natural capital. The means for assuring a sustainable development include a normative approach, based on the definition of standards, and a range of measures which operate through the market: taxes on emissions and waste, systems of depositsreimbursements and negotiable permits for emissions and the use of resources.
The seventeenth Report by the Worldwatch Institute (2000)5 shows how the world has not been able so far to embark on a sustainable global economy. At the beginning of the new century few problems have been solved, new challenges have to be faced and the complexity of potential "surprises" overcomes our ability of analysis. As to the institutions that should take care of preserving life on the planet, the Institute does not give any opinion.
The concept of sustainable development can be shifted from the environmental problems to those affecting the relations between the world's rich North and its poor South. This is a confirmation of the very tight interdependence between the North/South question and the environmental one. The perverse distribution of wealth is the cause of wars, which in turn destroy the environment. The over-exploitation of the South's resources for the hyper-consumers in the North to be able to carry on their living models accelerates the depleting of resources and the environmental degradation in the whole world. The South is paying its foreign debt with the only resources it has, the natural ones, urged to do so by institutions and financial markets. On the other hand, a development of the South along the lines followed by the North with the presentlyavailable technologies would drive to an even faster depletion of any possibility of life on Earth. Three things: Willy Brandt's denounciation, Samir Amin's protest and the UNDP's dramatic survey sum up adequately the national governments' failure with respect to this problem.
The Report of the independent Commission on the problems of international development, chaired by Willy Brandt, was presented to the United Nations in 19806, at the end of those 1970s during which the national ruling classes, traumatized by the 1968 movement and by two oil crises, were apparently showing a new sensibility towards the limits to development, going in some occasion so far as recognizing that the solution to global problems required a supranational approach. Brandt himself, in his introduction to the Report, identifies the common interest, for the North as well as for the South, in the moral obligation to survive; and in peace the supreme value to defend. "There must be room for the idea of a global Community, or at least of a global responsibility deriving from the experience of regional communities". After his remark that official aids to developing countries were representing at the time 5% of the world's yearly military budget, he complained that the democratic method was not applying to international policy. He put forward proposals for taxation at world level and forestalled the objection: "somebody can tell us that it is difficult to think of imposing international taxes, lacking an international government. However we believe that the necessity of some aspects of what can be defined an international government has already proved to be inevitable... and before the end of the century the world most probably will not be in a condition to operate without some acceptable form of international taxation and without procedures for how to formulate decisions that improve a great deal on the present ones". It is highly remarkable, in addition, how Brandt hints at the spreading of communications as the necessary condition for the "common man" to be able to understand international problems and to participate in their solution.
Communications have advanced exponentially over the last twenty years. Moreover, the end of the cold war should have brought with it the end of hot wars, fought among the poorest satellites of the two empires. Instead, no progress has been made towards the new world order hoped for by Brandt. The crisis of the American hegemony makes a unipolar world unthinkable and the power vacuum is filled by the ultra-free-trading ideology, according to which the global market will self-rule. Instead of extending Keynes to world scale, they pretend to restore the pre-Keynesian world. In the light of the first outcomes of such an approach, it cannot come as a surprise that it has given strength back to the most radical criticism of capitalism. Samir Amir is one of the most radical thinkers of our time on the problems raised by capitalism's ever-changing nature7, North-South relations and development theory; he held several institutional posts and is presently leading in Dakar the Forum for the Third World. He depicts very well to what extreme anger globalization of economy can drive, when a political guidance able to exploit its positive aspects and to neutralize its calamitous ones is lacking.
It is the UNDP which draws the statistics of the global disaster and informs us with its annual Reports. From the one for 1999 we learn that at the end of the millennium the richest 20% of the population still takes for itself 86% of the planet's wealth, compared with 1% of the last quintile (one billion people). The first quintile monopolizes 82% of global export, 68% of investments directed abroad, 74% of all global telephone lines, 93,3% of Internet users (compared with 0,2% of the last quintile). And we also learn that the richest 225 people in the world enjoy together a wealth equal to the yearly income of half the world population. The Report 20008 shows the relation between human rights and human development. "In short, human development is essential for realizing human rights, and human rights are essential for a full human development... Without the rule of law and a fair administration of justice, laws on human rights remain on paper... As in the past, in the 21st century progress will be attained by fighting against the values of division and very strong obverse economic and political interests... Poor countries must accelerate their growth in order to generate the resources necessary for financing the eradication of poverty and for realizing human rights... The global governance system must be transparent and fair, and give voice to the small and poor countries... The world community must go back to the bold vision of those who drew up the Universal Declaration of Human Rights".
While poor countries are beset by the countless perverse effects of a foolish and unfair development, the industrialized ones are grappling with the welfare-state question, initiated by the crisis of the regulating system as established by the Fordist and Keynesian paradigm. Aglietta, Acocella and Rodrik have in common the regulation approach.
The necessity of a deep reform of the welfare state is framed in a masterly manner by Aglietta9 in the context of the mundialization of capitalism and the crisis of the wage society. The regulation approach underlines the role of the state in guaranteeing the Keynesian macroeconomic consistency and in inserting it structurally into institutions, so as to build collective bases in production, foster technical progress, master collective risks in finance, promote equity in the distribution of income. In the framework of a Fordist regulating system, social transfers, entrusted to national states, "are inspired by solidarity and by protection from non-diversifiable social risks. Thus they are not regulated by merchant contracts, but by social rules. The moral risk stems from the fact that the social protection system does not control the social costs it assumes upon itself. It organizes a passive solidarity in which responsibilities are diluted". But a purely individualistic society cannot exist, "equity is then an important dimension in reconciling capitalist interests and social progress in a wage society". Aglietta does not limit himself to examine the causes of the decline of the Fordist paradigm, but he also sketches the general lines for passing to a new regulating system.
Are Italian wages decided in Beijing? A specific session of the annual meeting (1997) of the Italian Society of Economists tries to answer this question. The papers presented there have been published by Acocella, adding two essays by the editor himself10. One can recognize the elements of novelty brought about by globalization, in comparison with the former international integration, and the competitive mechanism which may well trigger a "lowering race" among national states in the matter of welfare state, tax policies and environmental policies.
Rodrik, from his privileged and prestigious vantage point at the Institute for International Economics, rings the alarm bell for the danger that globalization, advancing much faster than our ability to govern it, will generate reactions of rejection towards free trade. The movement that for the first time took to the streets in Seattle confirms the propriety of the question he posed in 199711. Rodrik notes:
1) the high probability that the reduction of barriers to trade and investments will increase the asymmetry between groups who can move beyond national borders and those who cannot;
2) the globalization impact on national norms and institutions;
3) the increase of the demand of social insurance with the increase of international vulnerability, and on the contrary the weakening of the states' capacity to offer welfare, under the pressure of international competition. Trading with low-income countries increases the premium to qualified workers in rich countries, further impoverishing the less-qualified workers. Greater inequality, greater insecurity, lower salary and longer unemployment hit the workers and weaken the trade unions. International trade increases the cost of maintaining differing welfare models, and thus it puts pressure on national norms and institutions, up to affecting the social protection levels enjoyed by the citizens. Globalization, heightening of perceived risk, greater demand of public insurance, lower supply of the same: here is the spiral which could undermine people's approval for trade liberalization and could make us fall back into the spires of protectionism. It is essential that globalization be "managed" so as to retain people's approval for free trade. But how? Rodrik limits himself to state the necessity for national laws to converge to a certain degree, but such convergence should be promoted by the same international organizations the democratic legitimacy of which is so fiercely challenged today.
National laws and intergovernmental agreements are no longer credible, because states can ensure their enforcement only on subjects having limited or no possibility to move beyond their borders, and international organizations do not have a legal and effective sanctioning power. For activities already globalized or in process of globalization, be they legal, illegal or criminal, the states do not succeed in enforcing laws, in collecting taxes, in guarding social cohesion as cared for by labour right and social pacts, in exercising, in sum, the regulating activity made necessary by capitalism's inability to self-rule. Instead of acknowledging that the problem can only be solved by passing from international to supranational right (as partly has already been done in the European Union), today the tendency is to take the market as the dominant and the really general institution. The legality question takes on again quite a central position, especially as far as the two global operators par excellence are concerned: the transnational enterprise and organized crime. The first evades national rules, and in particular the ones on taxation and labour laws (Galgano et al., 1993)12 and tends towards monopoly (Amato, 1997). The second has already cast doubts on the capability of national states to defend lawfulness (Rossi, 2000).
Galgano takes under examination the postindustrial economy and the crisis of the national state; he describes the universal spreading of the lex mercatoria, but concludes "we will call for a code of behaviour for multinational companies from the UN". Cassese finds in the growth of "international and supranational public powers" the possibility to overcome the limits of national governments in controlling the economy. Tremonti analyzes the fiscal crisis of the states, a consequence of the discrepancy between the territorial limits of tax collection and the global distribution of wealth, and believes that it can be countered by moving imposition from individuals to goods. Treu, finally, observes that labour right unification and its national character have come to an end, due to the enterprises sidestepping the territorial laws by delocalizing themselves, and underlines the strain between the internationalization of labour right and its segmentation.
Some of the main sectors of economic activity are already controlled, at world level, by a handful of transnational companies; other sectors will soon find themselves in the same situation. Anti-trust authorities of national states, even of the United States, face increasing difficulties in avoiding that cartels are created among oligopolists or that a single company dominates the world market in any one sector. The world system is based on national states formally endowed with exclusive sovereignty, although they are actually subjected to the primacy of foreign policy and to the ever-moreintricated intertwining of agreements and institutions of intergovernmental cooperation. This artful independence in an interdependent world not only increases the asymmetry of the marketing power connected to product specialization, but is also the cause of an unbalance in marketing power of enterprises, depending on the sizes of the markets controlled by their respective states of origin. It is not by chance that the question of trusts has been dealt with in a diametrically opposed way until the Second World War, but with consequences still infected to this day, in the United States and in the European national states. In America the first big politically unified market was constituted, the first big enterprises were founded and a process tending to block competition and concentrate in a few hands the control of the markets was developed since the beginning of the 1900s. The answer of the federal government was the anti-trust legislation. The European national states acted in a diametrically opposed way. As the size of the markets, so absurdly fragmented, prevented the formation of enterprises fit for global competition, each state bowed to its own Realpolitik, encouraging the formation of national trusts in order to use them or to be used by them.How organic this plot was cannot be better illustrated than by the relationship between the coal and steel trust and the German rearmament between the two wars. Protection of competition requires that the contrasting power be moved to the same level already reached by capital, that is from the national to the regional and world level. This is the only way to solve the "liberal democracy dilemma in the market history", that is to say the dilemma between political democracy and economic efficiency, denounced by Amato (1997)13.
Organized crime already acts at global level in key sectors, like the reduction to slavery of human beings, trafficking of arms and drugs, counterfeiting. A deregulated financial system, as we will see, allows and fuels, through market manipulation and capital recycling, the unchecked growth of illegal activities. The globalized world is a lawless world, risking catastrophe. Guido Rossi (2000)14 is convinced and convincing, when he expresses his opinion that only the UN can restore lawfulness.
The financial questiondominates, sums up and runs across all others.
The financial markets are the most globalized. The merchandise they deal with, money, is the most dematerialized. The biggest financial companies and the financial departments of banks and transnational companies control a volume of transactions several times bigger than that of the domestic product and of the international exchange of some countries. The national states are no longer in the condition to counter, with their reserves, speculative attacks against their currencies. The hegemonic state gave up in 1971, not fulfilling its pledge of the convertibility of the dollar in gold. Thus it decreed the end of the fixed, but orderly modifiable, exchanges regime, known as the Bretton Woods system. In 1975 the Rambouillet summit set off an unbridled deregulation of capital movements. The advancement in information and telecommunication technologies provided the necessary tools for the vanishing of the already wavering national borders, thus allowing a unified financial market to be born. There have been efforts to recreate the conditions for monetary stability at the level of great regional aggregates, but so far only the European Union has attained the goal of a single currency, with twelve out of fifteen member states willing to adhere. At the world level, three functions, vital for the system to operate, i.e. last-resort loans, control of the amount of circulating money and surveillance, are being carried out with less and less efficiency by national central banks. The United States hinders any reform project in order not to transfer its ruling power to a supranational organization, which will exercise it through the force of right instead of the right of force. In the meantime the markets are running towards the impending catastrophe. On the wake of the latest Keynes, the one of Bretton Woods, two economists have been fighting with courage for the reform of the international monetary system: Robert Triffin and Susan Strange.
At the end of the 1950s, Robert Triffin proposed to confer to the IMF the currency reserves in possession of the member states and to bestow on it a role similar to that of a central superbank. The result was modest: the special drawing rights were launched, which actually were not transfering monetary sovereignty from the United States to the Fund. In touch with the European federalists, Triffin thought that a preliminary step was necessary, i.e. to create regional monetary areas, in order to make it possible to reach the final objective, a world currency. Since the beginning of the 1970s, he devoted his life to the creation of the European currency. The World Money Maze15 denounces the situation being determined when a national currency is used as the international reserve currency. His criticism, addressed at that time to the dollar, is valid as well should the euro take the same role. The creation of the euro then makes it more topical and sensible the objective of a world currency.
Susan Strange (1998)16 stresses how during these last years the system has become ever more crazy and uncontrollable. Technological changes and innovations like the derivative financial instruments, asset-backed securities, speculative funds have made the "casino" bigger and faster. The unstable balance depends on the success of Europe's political unification and the strengthening of other regional monetary areas. The International Monetary Fund and the World Bank are not capable of helping the poorest debtor countries. Financial crime has spread ever more and the connection between mafias and dirty-money recycling has strengthened. Embezzlement of public money is made possible by fiscal havens. National regulating systems are in distress because of capital mobility and the power of financial markets.The Bank for International Settlements did not succeed in establishing standards of norms equal for everybody. Banks must selfregulate, but have no intention to relax the banking secrecy. And yet "the task of exercising a joint supervision through a new institution would certainly be a formidable one, but not impossible".
The progress made by national legislations and international agreements in reducing the level of unruliness of the problems taken under examination here (sustainability of development, equity in international redistribution of wealth, solidarity within states, lawfulness, financial stability) is not only modest, but is more and more often frustrated by the primacy given to the WTO rules over all others. The problem of the democratic control of those organizations having the power to declare ineffectual the decisions democratically taken by individual states is already in the world agenda. The "people of Seattle" has put forward, with the WTO question, the one, even more complex and crucial, of international democracy. Lori Wallach and Michelle Sforza supply documentary evidence (2000)17 of the activity carried out by the WTO in its first years. As Ralph Nader points out in his presentation of the book, "globalization of finance and trade is drawn out by multinational companies, which, in the absence of rules valid everywhere, are maneuvering simply on the basis of their needs. The WTO is an essential step in formalizing and strengthening a system created on purpose for such an aim. Better defined as worldwide globalization of economy, this new economic model is characterized by the apposition of supranational constraints to the legal and practical capacity of individual states to subordinate their trading activity to other political objectives... But the idea of a global trade without any democratic control appears calamitous for the rest of the world, that would be severely exposed to a deregulated entrepreneurial initiative, bringing with it a lowering of living, health and environmental
conditions, ... and of democracy itself".
1 K. Mayumi and J. M. Gowdy (Eds.), Bioeconomics and Sustainability: Essays in Honor of Nicholas Geoergescu-Roegen, 1999.
2 D. Meadows, D. Meadows (Eds.), The Limits to Growth: A Report for the Club of Rome's Project on the Predicament of Mankind, 2001.
3 Our Common Future, Oxford 1987.
4 Blueprint for a Green Economy, London 1989. Blue Print 2, London, 1991.
5 State of the World 2000, Washington 2000.
6 North-South. A Programme for Survival, 1980.
7 Samir Amin, Capitalism in the Age of Globalization, 1997.
8 Human Development Report 2000, Oxford 2000.
9 Michel Aglietta, Régulation et Crises du Capitalisme, Paris 1997.
10 Nicola Acocella (Ed.), Globalizzazione e Stato Sociale, Bologna 1999.
11 Dani Rodrik, Has Globalization gone too far?, Washington, 1997.
12 Francesco Galgano et al., Nazioni senza ricchezza, ricchezze senza nazione, Bologna 1993.
13 Giuliano Amato, Antitrust and the Bounds of Power, Oxford 1997.
14 Guido Rossi, La sovranità degli stati di fronte ai reati globali, in La Repubblica, Dec. 13, 2000.
15 Robert Triffin, The World Money Maze: National currencies in international payments, 1966.
16 Susan Strange, Mad Money, Manchester 1998.
17 Lori Wallach and Michelle Sforza, Whose Trade Organization?, Public Citizen Foundation 1999.