Governing Globalisation

Caspar Henderson George Monbiot
29 November 2001

Caspar Henderson: openDemocracy has opened a debate on globalisation. It has held two openInterviews, first with Maria Cattaui, who heads the International Chamber of Commerce, and then a discussion between Peter Sutherland, who founded the World Trade Organisation (WTO) and is now Chairman of BP and heads Goldman Sachs International, and the British politician and scholar, Shirley Williams. They share a vision of globalisation which sees institutions like the WTO as part of a global, rules-based system. One that helps rich and poor alike through economic growth. What do you understand by ‘globalisation’?

George Monbiot: Globalisation is a problematic term which has come to mean whatever people want it to mean. This vagueness creates a special problem for what is called the ‘anti-globalisation’ movement, which is often perceived as something it isn’t. It is portrayed, quite wrongly, as being in favour of autarchy and separation, rather than the sort of internationalism which has always been a feature of progressive politics.

I was struck when reading both Peter Sutherland’s and Maria Cattaui’s interviews by the extent to which they remain trapped within current models and definitions – of how the world is rather than how it could be. They appear to expect miracles from institutions which have an extremely limited mandate.

Take the WTO, for example. In 1944, the original intention of the Bretton Woods conference was to create an International Trade Organisation. Its purposes would have been to assist free trade, but also to help poor countries towards economic prosperity, through technology transfer, defending labour standards and improving their trade balance. In the event, all these functions except one – free trade – were effectively ruled out by US business objections. As a result, we ended up with a General Agreement on Tariffs and Trade (GATT), which was meant to be an interim solution, pending a much wider agreement.

At the time, it was widely recognised that simply implementing free trade measures without also acting to generate prosperity in the poor world was not going to deliver economic justice. This fundamental problem has yet to be resolved. GATT turned into the World Trade Organisation, and the ITO’s original objectives have been forgotten. The WTO is a flawed mechanism for delivering prosperity to the poorest countries – flawed because it discharges only one of the important functions envisaged at the beginning.

The stages of development

Caspar Henderson: But aren’t parts of your analysis shared by Cattaui and Sutherland? For example, Sutherland talks about a driving need for advanced countries to achieve a minimum target of 0.7 per cent GDP in development aid as a starting-point. The UK chancellor, Gordon Brown, is calling for a big increase in aid transfers from the rich industrial countries. Isn’t this a broadly similar recognition to yours, that we need to move towards a more progressive, rules-based global system?

George Monbiot: I am certainly in favour of increasing the aid budget, if only in order to plug part of the massive gap left by the failure of the Bretton Woods institutions. The original vision for an ITO was to regulate the international economy so that poor countries could survive and prosper, rather than relying on handouts from the first world. The fact that now, fifty seven years later, we are still talking about having to increase aid for the poor world, demonstrates the terrible failure of the reliance on free trade to create wealth. Regulatory failure always leads to public expenditure.

Caspar Henderson: Against this, Sutherland would say that poor governance (including the colonial inheritance) in areas like Africa has contributed to their current problems; while open systems and effective regulation in areas like south-east Asia have helped to deliver substantial prosperity. These are both negative and positive reasons for participating in an open system of international trade.

George Monbiot: Well, it would be extraordinary to put the Asian economic miracle down to free trade alone. The countries which prospered most, up until the 1997-98 crash, had followed a three-step process to development. The first was massive land reform and distribution. Japan, Taiwan and Korea experienced the effective dismantling of feudal landed power by war, and instituted a systematic program of land reform, leading to a great redistribution of wealth. Second, this was accompanied by protectionist help for local and national businesses. Third, only after those two factors precipitated very strong internal growth were their economies exposed to the free market which Peter proposes.

The problem today is that we are requiring poor countries to cut out stages one and two and go straight to stage three. But unless you first build up the wealth of local communities and business, people simply cannot compete with multinational capital. When the latter moves in, they have no basis for competition. So in Russia for example, with the blessing of the International Monetary Fund (IMF), virtually all effective business and financial regulation was removed and the economy fell into the hands of either foreign capital or indigenous Mafiosi.

The future is Keynesian

Caspar Henderson: Doesn’t Maria Cattaui agree on this point? She says: “All over south-east Asia countries are stronger than they were in the 1960’s despite the ’97-98 financial crisis, but we forget that the policies were not laissez-faire policies. They were strongly government inspired. More recently they have become less government oriented. Why? Because we know that the kind of subsidies they used eventually didn’t work and they made industries uncompetitive. We know now that Korea has moved on, but the developed world did exactly the same thing. One must always understand the purpose of a subsidy.” In other words, there are stages in economic development. Isn’t this a shared acceptance that this a multi-step process and that countries need to come into this globalised economy on their own terms?

George Monbiot: I find it extraordinary that Maria accepts that this is how those once poor nations achieved fabulous wealth, but then rules this out as a prescription for the many countries which remain poor today.

But perhaps more importantly, both she and Peter are putting the burden of change onto the host governments whose economies are failing. While there’s no question that many such governments have managed their economies poorly, to say that all the failings of poor countries are down to poor governance at the domestic level is a grotesque insult to the people of those countries.

First, many of the countries we chastise for incompetent economic management are effectively run by the IMF. Economic management has little to do with the government itself – it has been reduced to having to implement IMF policies. If those policies have failed, it’s hard to see why we should lay responsibility for this at the door of the impoverished national governments.

Second, there is really nowhere for many poor countries to go. To develop they need basic infrastructure. But they are trapped in a cycle of under-investment. Because they don’t have good roads, schools and hospitals, their economic position continues to deteriorate, which then makes it in turn impossible to generate the money to build those things. Their only option is to increase public spending. Yet they’re not allowed to increase public spending because the IMF and World Bank prevent them from doing so. Their whole economy is effectively re-oriented, by those two institutions, towards the extraction of resources and wealth in order to pay grotesque levels of debt for which the lenders should be blamed and which were often obtained in the first place by corruption. By all means criticise corrupt governments in poor countries but shouldn’t we also blame the corruptors?

We have to re-examine not just the WTO as an institution but also the World Bank and IMF. They are the wrong set of institutions to bring about positive, global economic change. There are two reasons for this. First, they are entirely controlled by the creditor nations. The countries in which they operate have no control over their operations. That is extremely unfair; it’s a glaring democratic deficit. Second, their role is in effect to police debt. They are the bailiffs of world economy. They are not there to restore a balance of trade, but to enforce the imbalance of trade.

What we need instead is something like the international clearing union that John Maynard Keynes proposed during the Second World War, which puts an equal onus on creditors and debtors to clear debt: a self-correcting global economic system, as opposed to a system run by the creditor nations in their own interests.

Caspar Henderson: How would that work?

George Monbiot: Keynes’ idea was simple. He devised a self-correcting world trade system, which irons out its own imbalances. The idea was that international transactions be conducted not in national currencies like the dollar, but in an international currency, which he called the bancor.

That currency would be held by a central bank called the International Clearing Union. It would impose the same rate of interest on creditors as it imposed on debtors. So if a country was one hundred million bancors in either credit or in debt, it would pay the same rate of interest. The beauty of this arrangement is that it would give creditor nations an incentive either to adjust the value of their national currencies against the bancor, or to reinvest massively by buying far more of the debtor country’s products. So debt would be a transient phenomenon – not the cumulative, compounding problem it has become.

Keynes came to Bretton Woods with this proposal. He predicted that the contrasting US proposal for an international stabilisation fund (which gave rise to the IMF) and a World Bank would lead to massive endemic debt, the continued impoverishment of the poor world, and the growing power and wealth of the rich world, particularly the United States. The US threatened that if Britain persisted in pushing Keynes’ idea it would withhold its war loan. Britain backed down, Keynes’ prediction came true. Today, we need to re-examine Keynes’ proposal and look at re-shaping the global economic architecture in a very radical way.

Making the powerful respond

Caspar Henderson: As you have described it, Keynes came up against the reality of US power in the early 1940s. The US is the world’s biggest economy with twenty-five per cent of world GDP, huge military programmes and enormous financial power. How would you overcome US interests where Keynes failed?

George Monbiot: Well, parts of the world are now in a much stronger position than the British were in 1944. The EU is a very powerful trading bloc. And if it combined with some major developing economies they would have considerable clout. It would not be easy. Confronting power never is. But that is the perennial challenge faced by anyone involved in progressive politics.

Caspar Henderson: Here, you express a certain hope in the potential of the EU. But elsewhere, you accuse the EU of being in the pockets of Europe’s big corporations. For example, you have been very critical of the European Round Table of Industrialists. So why should the EU do what the US doesn’t want it to do?

George Monbiot: The EU will only do what the US doesn’t want it to do if its own population demands this. Our governments are only as good as our willingness to criticise and embarrass them. No political system guarantees democracy. A system is only as good as the capacity of its critics to confront it.

A new voice in world trade

Caspar Henderson: At Doha the WTO succeeded in coming to an agreement. It is hugely complex, but many observers feel that it is significant for at least one reason: that some of the developing countries have achieved some gains with respect to both the European Union and the United States.

On intellectual property rights, the US appears to have given important ground, not least because of its current problems with anthrax. The EU appears to have made concessions on agriculture; it’s possible that some of its subsidies will eventually be dismantled. Since the dumping of very cheap food by the EU in developing countries damages indigenous farming economies, this would be an enormous gain.

In the realpolitik of world power, countries like India are beginning to assert themselves, the Chinese have become members of the WTO, and the Russians will be in. We see developing countries, or at least their governments, that are keen on the WTO as part of the solution. This may shift the balance of power, making it more even between the developed and developing countries – or at least a real negotiation. Isn’t this progress with respect to the WTO?

George Monbiot: There’s no question that some of the developing countries, India in particular, have developed a more effective negotiating power at the WTO than they had before, and they have proved themselves to be savvy and effective negotiators. They’ve done well to fight off a crude attempt by the “quad” (the US, Canada, Japan and the EU) to impose a first world agenda on the world trade talks.

But it’s far too early to predict what the outcome of this new round is going to be. Most of the promises made in the last, Uruguay, round haven’t been kept. We have yet to see what the real outcome with agriculture will be. Perhaps even more importantly, the first world countries may continue to load the agenda with new issues – investment, services and government procurement, for example – which make it much harder for developing countries to get their needs addressed.

What we’ve seen in Doha is the positive power of the poor world making itself felt, possibly for the first time in over fifty years. And that’s definitely welcome. But, as I stated at the outset, we must remember that the WTO is dealing with only one aspect of the global economy, and is institutionally incapable of resolving the imbalance of trade.

What sort of globalisation?

Caspar Henderson: In the face of such criticism, people want to know how to we get from here to there. Take George Soros, for example. He shares some of your analysis. The challenge facing the poorest countries, he argued in a Project Syndicate Glasgow Herald article published shortly before Doha, “is not really the WTO but the lack of similar powerful and effective institutions devoted to other social goals”. And he says he means education, health, and the building of “human capital”. “Enforcement of rules” at the WTO, he goes on, is “not appropriate for achieving social goals because many countries lack the resources to meet international standards. Rather than imposing requirements it would be better to provide resources to enable poor countries to comply on a voluntary basis instead of introducing a rule prohibiting child labour. We ought to provide for universal primary education”. Also, a key point, “the order of precedence should change between the WTO and the national laws, national laws should take precedence”.

Second, he argues that “the WTO may have overreached itself when it comes to intellectual property” – a view shared even by Jagdish Bhagwati, the doyen of free trade economists. And third, Soros believes that the agreement on trade-related investment should be re-negotiated to allow support for home-grown small and medium enterprises.

If there is indeed a shared perspective here between Soros and yourself, how would one take forward these proposals? What sort of globalisation, accepting your caveats about the word, are we looking for? How far should government cede sovereignty to international organisations? How far should they retain it, and what other mechanisms are necessary for proper democratic involvement?

George Monbiot: Right, you’ve just asked me about eight questions there, each of them requiring several days to answer! Many of Soros’ points are well taken, but in discussing regulation, we need to go beyond the regulation of government behaviour with regard to trade. We need also to talk about the regulation of corporations.

A great mistake of the Western powers, whether the European Union or people like Maria and Peter, has been to discuss environmental issues as if only governments should be held to account. On the issues of the environment, human rights, labour standards, consumer protection, health and safety in the workplace, we must be able to hold multinational corporations to account. They are effectively unregulated at the global level. They are not subject to the human rights standards we expect of governments. When they dispose of operations which present environmental or health liabilities, they don’t have to pick up the tab.

If we are to move towards re-balancing global trade, we need effective regulation of corporations. That requires a sort of mirror WTO, whose purpose is to say what companies can and can’t do. This can only work at the global level. If you try to set a high rate of corporation tax in one country, for example, the big companies will just clear off to Thailand. A global level of corporation tax would prevent this. The same applies to environmental, health and safety, and consumer protection rules.

Incidentally, as well as a global rate of corporation tax, I’d also like to see a global maximum wage, where no-one in a multinational corporation can earn more than eight or ten times the salary of the lowest paid member of their work-force or sub-contractors. That would be a powerful incentive to raise the pay of those at the bottom. This answers only a tiny part of the great range of questions. Like George Soros I want to see practical measures but I want a different world order, rather than just the present one working a little better.

Caspar Henderson: Is the difference so clear cut? Maria Cattaui agrees that corporations are not effectively regulated in many markets. But she points to the way that international opinion that can be brought to bear on corporations. Shell in Nigeria and Nike in Indonesia might be cited here. And Peter Sutherland argues that the power of corporations is greatly overestimated; he thinks it is actually shrinking.

George Monbiot: Well, let’s look at Britain. Since the early 1990s we have seen the private finance initiative (PFI), a mechanism both Conservative and New Labour governments have used to contract out the building of hospitals and schools to the private sector in return for long-term rent payments, thus placing an enormous financial burden on citizens for the next generation and more. In the words of one of its architects, this is “the Heineken of privatisation, reaching parts of the government machine not reached by previous privatisations”. It involves a far more ambitious corporate project than has ever been launched in Britain before. It’s leading to the demolition of universal social provision, and the capture of the public sector by corporate service providers. This represents an empowerment of multinational capital which corporations could have only dreamt of ten or twenty years ago. And what we are seeing in Britain is taking place worldwide. To suggest that corporate power is weakening is simply laughable.

A new model of global governance

Caspar Henderson: But at least Peter Sutherland has worked for the sharing of sovereignty and redistribution within the EU. When he says this will take a long time on a global level, isn’t he right to argue that you have to be realistic about the context in which you operate? The ideal of a universal global corporation tax is very far off being achieved.

George Monbiot: Well, let’s just examine this term “realistic”. Is it realistic to expect poor nations to pay off debts which sometimes exceed the size of their GDP? Is it realistic that the World Bank and IMF can improve the economies of poor countries, rather than continue to wreck them? Is it realistic that free trade measures alone will continue to deliver economic justice? Is it realistic that corporations can regulate themselves? Is it realistic that without proper global governance the voices of the poor will be consistently and effectively heard? If we are looking at realistic measures we have to transform completely the political and economic models of global governance.

If the term “realistic” is taken to mean achievable, then these changes are indeed achievable with sufficient political will. But if we just look at how we can survive within the current economic model, we are going to achieve nothing at all. You have to start with what’s desirable.

And this, I think, means a complete transformation in global governance. At the moment there is a massive democratic deficit at the global level. Key decisions are taken, informally of course, but still taken, by the G8. Eight men representing thirteen per cent of the world’s population. The five permanent members of the world’s security council, who happen also to be the world’s biggest arms dealers, each have a veto on the decisions the security council takes. The UN General Assembly which is meant to be the seat of global governance is a wholly undemocratic body. We have just seen an outcry here in the UK about the fact that Blair has decided that the members of the House of Lords will be appointed rather than elected. And yet we hear no similar outcry about the fact that all our UN ambassadors are appointed rather than elected, and they tend to be close to their security services and very distant from their populations.

What we need to see is something along the lines of a world parliament, with representatives directly elected on the basis of population, so that governments are bypassed, and so that a resident of Kinshasa has as much power on the global stage as a resident of Kensington in London. I’m not talking about taking power away from governments, I’m talking about democratising the powers which already exist at the international level and which a handful of governments have grabbed for themselves.

Caspar Henderson: But how would this work? How are the Chinese people, for example, going to persuade their government to allow them to participate directly in a world parliament, bypassing the structures and organs of the Communist Party of the People’s Republic?

George Monbiot: Well, this is part of the great challenge to global democracy but at the moment we’re fudging the issues of both power and representation. We allow a few governments to decide what should happen on behalf of the rest of the world, and to appoint people who govern internationally.

How do we bypass the Chinese government, or indeed our own government, to set up structures of global governance at the international level which don’t rely on domestic governments? In principle it is simple. We proceed without them, and gradually attempt to accumulate moral authority by establishing structures whose representatives can be directly elected. By accumulating moral authority you then remove it from those who have grabbed power on the international stage.

Caspar Henderson: During the English Civil War and Revolution, in the seventeenth century, Oliver Cromwell, who had overthrown the English monarchy, was frustrated by the venal behaviour of the elected Parliament. He replaced it with the Parliament of Saints, who were people directly connected to God’s will – good, ordinary people with wonderful names like “Praisegod Barebones”. The result was a disaster and he then ended up as, in effect, a dictator.

My point is that there is a long history of well-meaning schemes. In Europe it’s taken many hundreds of years for an educated population to emerge with sophisticated political consciousness and resources. And we’re still finding it very hard to achieve democratic governance on a European level. To declare a world parliament where all good and righteous people can meet together may be a laudable goal, but aren’t there many intermediate steps needed first? For example, don’t the Chinese need to become more prosperous, and be healthier and better educated and get democracy and a civil society at home before they can effectively participate in international governance?

George Monbiot: The Parliament of Saints is in fact precisely what we have in the form of the UN General Assembly. These are all the “good and the great” appointed as UN ambassadors by their governments, without any democratic credentials whatever. This is the disastrous parliament which leads effectively to the dictatorship of the G8, because of its evident democratic failings.

I think that some sort of representative body set up from the grass roots could itself become a very powerful democratising force. A truly democratic body at the world level which grows from below and provides an alternative to show what real democracy might look like, would have a huge impact. Wouldn’t the people in China, who were participating in that, then seek to overthrow their undemocratic governments in favour of something better?

After 11 September

Caspar Henderson: How do you take forward a movement for global democratisation in the current very tense international circumstances?

George Monbiot: What we have seen in Afghanistan points to the very urgent need to review the way we make decisions. It is very serious if half the world believes that it is shut out of the decision-making process, not represented on the UN security council, has no voice in international negotiations. If it feels – and this applies particularly to the Muslim world – that the West has imposed its will in an undemocratic and aggressive way, then we could have sown in Afghanistan far more trouble than we have solved.

And what this suggests to me is that we desperately need to bring the excluded populations into the key decision-making forums on the global level. At the moment this sense of exclusion has unquestionably helped to build a deep sense of antagonism towards the West.

Caspar Henderson: But how can a movement for changing these conditions achieve legitimacy without people fearing it?

George Monbiot: There’s no question people are very fearful of change at the moment; likewise, governments are very fearful of radicalism and dissent. That doesn’t mean we should stop challenging and questioning. In fact we need to do so more than ever. It is just when dissent becomes hardest that it becomes most necessary.

We desperately need to provide alternatives to the ways that decisions are taken on the global level. Desperately, because such a high proportion of the world’s population feels completely excluded and this contributes to the sense of grievance in which terrorism can prosper. So, it’s in the West’s self-interest, as well as in the interests of everyone on the earth, that we begin to resolve these problems, so that the overthrow of the Taliban in Afghanistan doesn’t become the pretext for a new imperialism.

In addition we need to clear up our own act. Before 11 September the internationalist movement (a term I prefer to the “anti-globalisation movement”) had problems of its own. It had proved to be less capable than it should have been of preventing the sort of street violence we saw at Genoa. Now there’s no question that most of the violence came from the police, but there’s also no question that some of the protesters engaged in the most stupid and mindless acts of vandalism, which gave the police the excuse to attack peaceful protesters, and gave the G8 leaders the excuse to dismiss the efforts of all the three hundred thousand people who were there.

As a movement, we have been far too soft on those who claim to be on our side, but are actually undermining our efforts. We’ve tolerated a discourse of diversity in which people say, “you just do your thing, we’ll do our thing; violent protest can live quite happily alongside non-violent protest”. That’s complete nonsense. Violent protest destroys non-violent protest – it makes it impossible. It ensures that the world sees all protestors as violent. We have to be much more disciplined than we have been in the past. We even have to question whether we can continue to organise large demonstrations of the kind that we saw in Genoa.

We must build on the many extremely positive developments which accompanied the street protests in Genoa, and in Nice and Davos. We need to learn from groups like the World Social Forum, which has been holding vast meetings and bringing together people from all over the world. The counter gathering to Davos which it held at Porto Alegre in Brazil was a start. It is my belief that these could, unconsciously, be laying the foundations of a world parliament. We would bring in more and more people and start to turn it into a genuine representative democratic process. And then we could develop a sort of world parliament in exile.

Whether our government, or any other government, likes it or loathes it is completely irrelevant. And it’s my belief that after a while it will accumulate sufficient moral authority that bodies such as the World Bank and the IMF and some of the UN agencies will have to answer to it, to account for their actions. Then, as a world parliament, it will start to accumulate very significant power on the international level.

Caspar Henderson: Something like the World Social Forum clearly has a lot of dynamism. But isn’t it a huge agglomeration of NGOs, trade unionists and well-intentioned people who are not elected? Is the term “world parliament” really applicable?

George Monbiot: That’s my point: at the start it is not a representative body, but you slowly turn it into one. You implement the movement towards democracy within it, where people are first of all delegated by their communities, then their populations and then you turn it into an elective process. What begins as an unrepresentative body, but a body which covers all the nations on earth, and is certainly no less representative than the UN General Assembly at the moment, can be built into a genuine representative forum.

Caspar Henderson: How would you summarise the spirit of the movement?

George Monbiot: One of the great opportunities we have now is to get away from the sort of simplistic sloganeering which has dominated politics in the past, not least the protestors’. We have the potential for a far better-informed electorate at the global level as well as the national level, than there has ever been. With the use of the Internet and other modern means of communication, there is the potential to see the sort of informed debate that has been woefully lacking.

There is an opportunity to start applying complex analyses, and to start requesting that governments act on the basis of those analyses. One of the world’s great problems is that we are always seeking simple solutions to complex issues. That has to stop. We have to engage in complexity ourselves, so that governments are thereby allowed to engage in complexity as well.

Caspar Henderson: Any parliament must include representatives from all sides. In his exchange with Shirley Williams, Peter Sutherland says that he would like to see a globalisation summit with a wide spread of countries and organisations present. Couldn’t this also be a step towards the kind of world parliament you want?

George Monbiot: It could be, but I would rather see the solutions emerging from below than imposed, once again, by the national governments and global institutions whose prescriptions have failed in the past. Who decides who comes to the summit? Who mandates them to speak on our behalf? Haven’t we had enough of lofty, Olympian views from “summits”? Shouldn’t we be having “valleys” and “foothills” instead?

Stop the secrecy: Publish the NHS COVID data deals

To: Matt Hancock, Secretary of State for Health and Social Care

We’re calling on you to immediately release details of the secret NHS data deals struck with private companies, to deliver the NHS COVID-19 datastore.

We, the public, deserve to know exactly how our personal information has been traded in this ‘unprecedented’ deal with US tech giants like Google, and firms linked to Donald Trump (Palantir) and Vote Leave (Faculty AI).

The COVID-19 datastore will hold private, personal information about every single one of us who relies on the NHS. We don’t want our personal data falling into the wrong hands.

And we don’t want private companies – many with poor reputations for protecting privacy – using it for their own commercial purposes, or to undermine the NHS.

The datastore could be an important tool in tackling the pandemic. But for it to be a success, the public has to be able to trust it.

Today, we urgently call on you to publish all the data-sharing agreements, data-impact assessments, and details of how the private companies stand to profit from their involvement.

The NHS is a precious public institution. Any involvement from private companies should be open to public scrutiny and debate. We need more transparency during this pandemic – not less.

By adding my name to this campaign, I authorise openDemocracy and Foxglove to keep me updated about their important work.

Had enough of ‘alternative facts’? openDemocracy is different Join the conversation: get our weekly email


We encourage anyone to comment, please consult the oD commenting guidelines if you have any questions.
Audio available Bookmark Check Language Close Comments Download Facebook Link Email Newsletter Newsletter Play Print Share Twitter Youtube Search Instagram WhatsApp yourData