Present System Incompatible with Global Governance
Dr. Roberto Savio

Secretary-General Society for International Development (SID)
Director-General IPS-Inter Press Service

"I don't think that the system as it exists now is able to accommodate global governance. I think that the impact of globalization is much more strong than the system can absorb by way of a process of consensus shaping," believes Savio. But he does not see an alternative to Global Governance. Following is a slightly abridged version of his observations to the panel on the Need For Global Governance in the Era of Globalization.

I think there is a big difference in the debate that was initiated by people from Karl Marx to Pope Leo XIII on how to regulate the impact of the industrial revolution and the one being conducted on globalization. It is basically an economic one, in fact it is a macroeconomics debate - not even an economic debate - and it is largely absent at the political level. Let us look at some aspects closely. First is that telecommunication is the element which makes globalization possible. It is not the bye-product of globalization. Globalization is moving on two fronts which are fundamental. One is trade and the other finance. Allow me to point out that finance was never within the United Nations system . And now, with the creation of the World Trade Organisation, trade has also taken a place outside the UN system.

In fact, finance and trade - the two elements that are very fundamental - are going on two different speeds that the United Nations system cannot control. Thus, while global economic production has increased five times, global trade has grown over the last 50 years 11.5 times. It is not surprising therefore that it is generating much more wealth than the production by itself. And it is not coincidental that it is only since the end of the Cold War, since the collapse of the Berlin Wall 1989, that globalization world wide is beginning to be accepted as a political term in the media.

Before 1989 this word was not to be found in the media or in the political jargon. But what we often tend to forget is that the increase in financial flows has far overstepped the hike in trade. In 1989 there were 800 billion dollars floating around the world. Of these, 680 billions were in the banks. Three years later there were 950 billion dollars of speculative capital, 800 billion dollars were still in the banks. But come 1995 and the capital flow swelled to 2.5 trillion dollars. Of these, only 550 billion dollars were left in the banks.

Let us go a step further. For the production of goods and services the world over, you need 220 billion dollars a day. The transactions of the stock exchange world wide are hovering around 1.2 trillion dollars a day. And if you add to these the currency speculation which sums up to another 800 billion dollars a day, you reach a figure close to two trillion dollars a day of financial flows versus 220 billion dollars a day of goods and services.

The problem of governance is very simple: Capital flow, world wide in a continuous flow, never knows where it originates. Against every single dollar in production there are between 30 and 50 dollars in speculation. In my view, this underlines two different trends. Money which is related to production is a different mechanism than the money which is geared to financial speculation.

Let us recall the case of Mexico. In Mexico there were 70 billion dollars of foreign investment and everybody was very happy - including the IMF and the World Bank which gave Mexico very good notes..

Then came the news one day that a gunman had killed Colosio who was a candidate for presidential elections. In just a few hours, eight billion dollars left Mexico and money continued to flow out. The macro-economic analysis revealed that out of the 70 billion dollars only ten billion dollars went in for productive investment. From the macroeconomics viewpoint, Mexico is a success story because it has been able to repay the loans by the U.S. government. The indicators of inflation and so on are perfect. At the microeconomics level however the situation is completely different. The average Mexican citizen has lost 30 per cent of the purchasing power of his income. Poverty has aggravated and there is a deduction of the number of hospitals and schools. There is a very serious social and economic crisis.

What is ironic is that this paradigm of globalization is increasingly becoming an alternative to the paradigm of development on which the international relations were built in the last 40 years. There is indeed a very very long way to go until the present UN - established by the victors of the Second World War, who endowed themselves with mechanisms such as the permanent veto power in the Security Council - is transformed into an organisation which truly represents the people of the world and strives to build a global system of governance.

In the meantime, however, development assistance is on the decline. The trend discernible in the United States, Japan and the other OECD countries is in fact the tip of an iceberg. In 1998 the lowest percentage of development assistance since the beginning of ODA would have been reached.

To put it in a nutshell, solidarity, justice and co-operation as elements of a global political dialogue are becoming obsolete. Everybody looks at the United States with which Europe has built an alliance over the past 50 years during the Cold War. The Cold War is over but this relationship remains an important element in the priorities and choices of the European external affairs policy.

The language in the United States is extremely different from the one in Europe. The American statistics leave no doubt that globalization has ushered in a socio-political culture which has vastly changed the relationship between politics, ethics and the people. A chief executive in U.S. corporations earn 326 times the amount an average American worker takes home. The chief executive officers on an average account for 21 per cent of the annual profit of the corporations. But this has nothing to do with the performance. The culture of globalization is bringing in mechanisms which have nothing to do with accountability and social justice - elements which are some sort of foundation stones for our societies.

Globalization with all its mechanisms has nothing to do whatsoever with equity, accountability and participation of the people. In the U.S. we have reached a situation where the 400 richest persons in the United States have a combined asset of 328 billion dollars - which is more than the combined asset of one billion people in India, Bangladesh, Sri Lanka and Nepal, considering that we have people who live with less than one dollar a day.

One could of course argue that inequality has always existed in history. But here in Germany or in any other country in Europe there were mechanisms of accountability, participation and equity in place which fuelled the development of those countries. The very concept of development was invented in the North and not in the South. The state was the father of development, the state made national development plans. In the England of 1950s, the Organisation for National Development was entrusted with the job.

But now development has come to be associated with poverty. A widely prevalent perception in the North is that the countries of the South - Latin America, Asia and Africa - constitute a belt of poverty. Combating poverty is a major objective of official development assistance. But in reality it has all but helped alleviate poverty.

Recently, Mr. (Renato) Ruggiero, the Director-General of WTO, said the world is in principle divided in four blocks. There is Europe, which is a fortress but will hopefully comprise 25 maybe 30 countries. There is the South-east Asian countries' ASEAN, which will eventually merge with the South Asian nations' SARC.

The south and north of Latin America are presently represented by the MERCOSUR and NAFTA, will Ruggiero expects also to merge into one block. And then there is the APEC, the project of putting together Asian and Pacific countries. Africa is not in the picture, Africa is irrelevant. It accounts for only four per cent of the world's trade. So it is not really important for the future.

Once those four blocks eventually merge in the first two or three decades of the next millennium and form a common market, we will have one currency for the world, there will be no wars and the wealth produced by globalization will be so immense that its benefits will trickle down to every single citizen of the world, thus accomplishing something which development failed to achieve - that is, to eliminate poverty world wide.

It is such an equitable world Mr. Ruggiero sees dawning. His is a very appreciable vision. But I have no evidence that all this will turn out to be reality. In Haiti, for example, a few families with money strongly resist - through a number of mechanisms, even military force - any attempts at taking away their privileges. In fact, not long ago, when you spoke about the need to impose taxation, in Haiti you were branded as a communist. Frankly, I do not see anywhere on the horizon a new culture of trickle-down and of parting away with one's riches.

We are in fact in a situation where a new phenomenon is emerging, the kind of which has not been known before, neither in terms of its magnitude nor dimension, the phenomenon of globalization. This needs be kept in mind while discussing global governance in the framework of existing institutions.

Let us start with the United Nations. The UN is an inter-governmental system based on common agreements created after the last war, in which the US played a very important role, it took upon itself a very heavy burden of responsibility by funding 25 per cent cost of the organisation. It was a time when the American people had a very different vision of the world. They were able to accept a Marshall Plan which was a very important element of the reconstruction of Europe. Of course it was a part of the cold war. But still the fact is that the American people came up with considerable contributions for international action.

Today the United States is a victim of the Congress which is an extremely isolationist force that wants to abandon sharing any responsibility and concern for the world at large. We have a situation where the administration goes round negotiating for something which it very well knows the Congress will not ratify.

The landmines treaty is one significant example. From the very beginning, the US was not going to ratify the treaty. In fact it was at the initiative of Norway and the NGOs - basically the American NGOs’ Coalition which became international and was able to muster support in Canada - that the landmines treaty emerged. The treaty has however yet to be ratified by the US, Russia and China - the three members of the UN Security Council which are supposed to deal with security around the world. Together with Great Britain and France, they possess a permanent veto power. The Five produce 90 per cent of the world's weapons.

For this joint IPS/FES conference, we have taken population policy as a case study. It is ironic indeed that the United Nations is bankrupt. This year UN will not get its dues from United States because of population issues. In other words, a small group of characters in the United States who think that population is not an extremely important issue stand up and proclaim they will not give any money to United Nations if their view of the world is not endorsed.

Internal issues of one single country are becoming the criteria for global governance in a debate which does not allow for any mechanisms of tolerance and of a broad-based participation. The irony is that the US delegations to the United Nations do not share that view. But then people like the head of the US delegation, Bill Richardson, have no effective say in the Congress. The result is that a single country, which is the world's only superpower, has become an impediment in a successful functioning of international mechanisms.

Let us take the case of the IMF, a fiscal regulator which has the task of recommending and seeing through fiscal stringency. But this role is certainly not the same as of regulating the financial speculation and making the enormous flow of capital accountable somewhere because those flows of capital go to countries in areas - as it happens - in the South where everybody is bottoming down to open up to foreign investment and accepting structural adjustment. But to what purpose?

The president of Tanzania, Benjamin Mkapa, for instance would tell you: "The structural adjustments? Well, I have done exactly what they (IMF) want. You wanted me to lift the barriers to free trade. I have done that. Though, our national industry has suffered, because one meter of cloth coming from China costs much less than one meter of cloth produced in Tanzania".

The Tanzanian president would also tell you: "We were asked to privatise. We have privatised. But who has bought the Tanzanian companies? Foreign capital has bought them. This is because we have no capital. Now we have more problems in regard to exports. The gap between them and a high level of import, is widening. We now have serious problems with the balance of trade. Because of lack of funds, we are constrained to cut back on health care and education."

The concerns of the Tanzanian president are in fact the concerns of all the countries that have implemented structural adjustment programmes, with untoward consequences for their economies. And where have the promised foreign direct investments gone? It's true that they have reached 350 billion dollars which is seven times more than the ODA. But they go to a very small group of countries. Subsequently we are in a situation where the existing multilateral institutions are incapable of influencing the flow of capital and channelling it in a direction where it is most needed with a view to encouraging development.

Then there is the other organisation that was created to monitor and regulate trade. But uppermost in its mind are not the people, not the environment but the criteria that seek to provide protection to capital. For instance, recently the World Trade Organisation ruled against the United States on the issue of fishing shrimps. The US had introduced a rule that to fish shrimps you must have a device that leaves turtles unharmed. The WTO pulled up the United States saying that this mechanism was an impediment to free trade and had therefore to be abolished.

It is ironic indeed that the countries which are resisting the establishment of an International Criminal Court on the ground that it would be able to sit in judgement over one of its nationals have no compunctions whatsoever in vesting the WTO with powers that go far beyond. Like it or not. The WTO is the only international organisation that has teeth. Once you join the WTO, you have to follow what the WTO tells you. If you do not, you are sure to become a pariah of the international community, because WTO has enormous capabilities for imposing sanctions.

To conclude: Do we have global institutions? I don't think so. We have only intergovernmental, international institutions. In my view, they are incapable of coping with global governance. They are very important because they have been coming up with debates on values - from Rio de Janeiro to Vienna, from Cairo to Beijing, the world sat down at UN conferences and established some values.

When Reinhard Keune says that the human rights resolution of the General Assembly in 1996 is an extremely important document, he is right because a set of universal values has been introduced. But the problem is that of implementation. The United Nations has no power. It is not a global institution.

The problem of course is that we cannot have global institutions if we do not agree on global values. The only global values that are emerging from the paradigm of globalization are efficiency, competition, a number of things that are very important but they do not suffice for the welfare of humankind. As President Aristide said, we need to inculcate other values. I would submit that the values of modernity, equity, of people's participation and of accountability are extremely important values that need be inculcated.

We are faced with yet another problem. There is an obvious divide between the North and the South, a divide that is very much cultural in its roots and dimensions. But if we start to discuss values not as a confrontation of national cultures between North and South and instead take to a system of global governance, the differences will disappear very fast, because globalization is blurring the North-South dividing line and is drawing a line of exclusion also in the North.

As this country (Germany) knows very well, because of a very serious problem of unemployment, which is partly due to the fact that so many jobs emigrate to Eastern and Central Europe, globalization rewards countries with low labour costs without taking into account the social aspects. Capital goes where there is less loss, less control, low wages, less trade unions - in other words: where the social consensus is at its weakest.

Against this backdrop, a crucial role should be assigned to information and communication. The reality however is that a debate on globalization is conspicuous by its absence in the of the media. The media continues to look at the world as nothing more that a sum of events, without realising that while we often tend to put the spectacles of our national experiences, of our national cultures, such experiences are now not Italian or French. In Europe they are European. They are no longer specifically Gabonese or Kenyan - in Africa they are African. They are no longer Peruvian - they are increasingly Latin American.

Whether we like it or not, the world has become interdependent and complex.. And yet the focus of the mainstream media is not on global governance. We should start discussing the challenge thrown up by booming drug trade, environmental pollution, and the world wide wave of migration.

We need to start with the support of the media an earnest effort to bring about global governance. Without global governance, there is no way to build up societies which cope with this new situation, with a new culture.

World wide we are now spending 147 dollars per person on health care and 210 dollars per person on education. World advertising last year was already 160 dollars per person, and in 15 years we will be spending more on advertising than on education. The global corporation Nike has recently bought for 100 million dollars the right to put the company logo on the clothes of the American soccer team. The same Nike paid half a million of its workers all over Asia - only three times the amount in one year.

As we fast approach a point where the world is changing and a new culture is emerging, we need to use information and communication to create a broad-based awareness of what globalization is all about. Without a strong awareness in the civil society, we will not succeed in
making a combined effort in encouraging and steering a debate on global governance, the kind of which existed at the time of the industrial revolution. Without this, there is a serious danger of continuing to regard globalization only as an economic and social problem, unrelated to political implications for societies and communities.

© Friedrich Ebert Stiftung | technical support | net edition fes-library | Dezember 1998

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