Governance and Globalisation
“It’s often said that globalisation undermines national sovereignty and democracy”
-Benoît Cœuré, Member of the Executive Board of the ECB
If we visualize the democratically elected governing powers maintaining the world order of today on a 2D axis, we observe the judiciary, executive and legislative governmental branches stretching out horizontally, but what would mark the vertical axis? This plane of governance stretches out from the individual to the global scale, and globalisation cuts through these dimensions. In this essay, I will discuss the effects of globalisation on governance. My thesis for this essay is an extrapolation of John Stuart Mill’s political and moral theory to multinational corporations and how a sustainable growth must be accompanied by socially responsible policies and ethical standards. I will also draw on Immanuel Kant’s Categorical Imperative, his theories on “Perpetual Peace” and Jean-Jacques Rousseau's Social Contract theories. Upon discussion of these various ideas, I will reach the conclusion that globalism and globalisation directly contribute towards global peace and prosperity, and that a partial erosion of national sovereignty is a necessity to achieve these objectives.
For the purpose of clarity in this essay, I will first briefly define a few integral terms and concepts:
Good Governance
Governance is to be considered as “the exercise of political authority and the use of institutional resources to manage society's problems and affairs” (World Bank, 2001; 1). The government is thus responsible to answer social issues of the state, not only for pronouncing power and authority. However, good governance has many hallmarks that deserve to be recognised for the purpose of this essay, namely: accountability, transparency, obedience to the rule of law, responsiveness, equity and inclusivity, effectiveness, and efficiency and participation, characteristics which I shall reference throughout this essay.
Democracy
When we speak of democracy, we mean the governing of society by the people; instead of a despotic or aristocratic rule, there exists a political equality among the people. Participation, whether indirectly or directly, is of primary importance and it is a mutual hallmark of democracy and good governance. In fact, the aspirations of good governance and democracy tend to overlap, with further key traits of a democratic government being the equality of opportunity, the eradication of discrimination based on caste, religion, sex, birth etc. and the accountability of the elected rulers. Thus, when considering the topic of this essay, we can fuse democracy and governance into an overarching concept of “good governance”.
Globalisation
Globalisation, in its current form, is a highly controversial recent phenomenon that, over the past 4 decades, has spread its tentacles into every aspect of our daily lives such as our technological gadgets, our use of media and our clothes, creating an unprecedented uniformity in wants and needs throughout the globe across otherwise quite diverse cultures. The result has been an economic, political and cultural integration of individual societies worldwide. However, it has also adversely impacted most societies through an uneven economic development and its propagation of cultural imperialism. Globalisation is often defined as a burgeoning economic interdependence and integration between countries in the world capitalist market, however that underestimates the scope of globalisation and disregards its cultural and political consequences. This essay will primarily focus on the political and economical features of globalisation.
The Inescapable Trilemma of Global Economy
Economist Dani Rodrik has illustrated an “impossibility theorem”, which regrettably states that (i) democracy, (ii) national sovereignty and (iii) global economic integration (which many interpret as meaning “globalisation” ), herein referred to as “Trilemma”, are mutually incompatible – we could have 2 of the 3, but never all 3. For example, if we want more globalization, we must cede democracy or some national sovereignty. This is an extremely relevant and irrefutable concept, which I will continue to use as reference throughout this essay.
A Multinational Corporation (“MC”) is a cluster of international businesses lumped together, ranging from companies trading raw materials to manufacturing consumer goods, such as iPhones or Ketchup. MCs have managed to organise a substantial liberalization of trade and investment and thus they stand at the pinnacle of the global economy. The dominance of these large groups, many with revenues greater than the GDPs of many countries, is ever present. In this millenia countries need to invest in international trade in order to achieve competitiveness, but how can these MCs justify themselves if they are not bound to any country in particular in their dealings and transcend the laws and regulations imposed on national corporations?
Each MC exercises a different level of technology and organizational structure. The defining feature of an MC is, however, that they are firms with foreign subsidiaries that allow their production and marketing to stretch beyond national boundaries. The global scope and special, opportunistic characteristics of MCs are infamous for giving rise to political conflicts, especially when a firm’s interests collide with the national needs of the host country of their operations. This can lead to jurisdictional problems, due to lack of empowered credible global institutions with both juridical and executive powers to manage these conflicts. States, by themselves, can not exert legal control over the MCs who function across borders.
Philip Blumberg, a renowned scholar, suggests two approaches on how to govern the MCs, namely the entity approach, where each country, in which the MCs operate, establish laws that apply in their territories, and the enterprise approach, where one law applies to the entire MC globally. The latter can be implemented either extra-terrestrially, where the home country decides on the laws, or through harmonization, where various countries harmonize their laws.
Despite these approaches, governing MCs has become an ever growing challenge, especially when, according to an article published by The Guardian in January 2017, “The world’s eight richest billionaires control the same wealth between them as the poorest half of the globe’s population”. This insane concentration of wealth has led to corruption and exploitation. In these cases, globalisation has created wealth, which is in itself not evil. However, governments must pursue good governance in order to prevent potential abuse from global companies who may take advantage of weaknesses in governance, such as corruption, and easily bribe key decision makers in these governments to their advantage and to the adverse interests of the community in which they are operating. They can push for lower taxes, lower royalties and less community spending in order to maximise profitability. Thus, if governments have good governance, thus minimizing corruption, they can insist that MCs operating in their territory pay their fair share of taxes, contribute to the local communities and act responsibly towards the environment - governments are in dire need of a regulatory environment that will on a fair basis monitor the behaviour of the MCs. The confluence of good governance and companies that themselves pursue socially responsible policies will in turn produce mutually beneficial results. This mutual benefit flourishes into a virtuous cycle where the companies grow in a sustainable and profitable manner due to the absence of strikes, sanctions from local governments and protests from environmentalists. Ultimately, the stigmatization of globalisation stems both from MCs acting purely out of self interest and from weaknesses in governments, leading to a susceptibility to corruption.
To illustrate this point we can observe two oil-rich countries with stark discrepancies in their economic and social environments: Norway and Ghana. Both countries are oil rich and are attractive destinations for MCs, however they have extremely different political and social atmospheres. Norway is reaping the benefits of its optimal geographic location, with the wealth trickling down to its citizens and a separation of power leading to a stable (and ‘good’) governance. Ghana on the other hand resides in corruption in areas ranging from public procurement, to tax administration, to judicial and legislation. In fact, in the 2016 Corruption Perceptions Index, Norway ranks 6th in the world, whereas Ghana ranks 70th in the world . MCs can much easier pursue their self interest in less transparent and more corrupt countries who agree to unilaterally beneficial deals for Foreign Direct Investments (FDI).
It is important to note, however, that these weaknesses are not solely the fault of the developing countries; low literacy and know-how make them unable to leverage the benefits of innovations and information in production. To this, Kant’s categorical imperative states that you have a duty to act morally. He says, “Act uniquely according to the rule that makes you simultaneously desire its transformation into Universal Law”; following this line of thought, companies have the duty to reconcile their long term self interests, with the interests of the citizens of the countries they operate in. If this objective become a universal law, world poverty could be defeated. The trend is positive: although MCs often exploit the human resources in developing countries in their constant search for cheap labour, many are beginning to support the communities in which they operate, building infrastructure and schools, as well as employing locals under fair compensation regimes.
The MCs prioritize maximizing profitability, but from a rational/duty-based as well as from a utilitarian standpoint, considering the ethical dimensions of FDI will lead to more sustainable projects, as mentioned above, where profitability is increased in the long run. Besides, the need to develop weaker economies will in turn lead to the development of these economies becoming stronger markets for the products of the MCs, benefiting the world economy as a whole.
To sum up the foregoing, it is not globalisation that is buffeting governance, it is poor governance which is allowing globalisation to spread its vicious tentacles. If we follow Mill’s approach to liberalism, the global corporations can pursue whatever project they wish, as long as they do not harm or impinge on the freedom of others. A further point to note is that transparent regulatory framework and fair legislation comes from democratic governments, which are immune to bribery - Democracy is a prerequisite for a virtuous cycle, creating a framework in which globalisation can be a growth factor in the countries concerned.
One of the key concepts that forms the basis of good governance is The Social Contract - one of the most prominent political concepts of Westphalian sovereign states when it comes to the importance of a state-ruled society. It entails a voluntary civil covenant between citizens of any given state, which makes them subject to that state's jurisdiction. The main philosophers who considered this concept were Hobbes, Locke and Rousseau. I will focus on Rousseau’s approach. In The Social Contract, Rousseau asserts that we need a free and equal relationship between the state and its citizens in order to secure a long-lasting, peaceful coexistence and in this way, the state has an obligation to its citizens. Furthermore, the “General Will”, as Rousseau phrases it, reflects the rational opinion of citizens as well as the general population, which should be the basis of governmental initiatives.
However, when it comes to governance in the global arena, quite different from the world Rousseau lived in, we are obliged to tackle the asymmetries of the interdependent global-community differently. We must recognise that the autonomy of the state is largely diminished due to the interdependence of countries and the reach of MCs. As a result, countries are encouraged to cooperate and cede power, a notion that has been historically difficult to advocate in the face of strong nationalist movements in most countries. Similarly, the idea of a General Will can become problematic with MCs because of their economic superiority compared to many countries, deeming the ‘will’ of these people as inconsequential compared to the will of the MCs. The state will no longer be obligated to its citizens because bribery by MCs, for short term gains, will be prioritised over the “general will”.
Another facet of this issue is that if the general population is undereducated and lacks knowledge in politics or governmental issues, the “general will” will not yield the best results. John Stuart Mill proposed that the value of a vote should correlate with the level of education of the voter. He proposes a “plural voting system”, which functions like a quasi-electoral hierarchy. Following this line of thought, the “General Will” would lead to more efficient governance. It goes without saying that the Internet, a phenomenon of globalisation, has bolstered the education levels and has made education much more accessible, leading to a more educated demos .
The Internet has been a major factor in accelerating globalisation itself. The infinite and all-embracing nature of the Internet, and its various tentacles, namely news platforms, social media and instantly accessible information via search engines like Google has ultimately abolished all national borders, where each user is part of a virtual world and is able explore its waters freely. Granted, the governing laws of some countries, for example China, may constrain this freedom to some extent, however, again, possibly thanks to the internet, many citizens have outsmarted government officials in technical realms and can weave themselves through loopholes in the system. Governance can barely strive to fight the beast.
Perhaps the most potent force the Internet boasts is the power of influence. The world is accessible at an arm’s length and there is nothing stopping citizens learning about other countries and their mode of governance. Furthermore, inspiration can be taken from the downfall or victory of past regimes, as well as from paths of revolution. Influence of internet has had mixed results in terms of promoting good governance : It is difficult to grasp how powerful social media really is and the impact it has had on governance worldwide; not only is the Internet almost impossible to control, but also external forces can manipulate voters, which evokes the question of democracy and whether election results truly reflect the will of the people. This can be seen in the interference of external forces in recent American and French elections.
The Internet is slowly beginning to engulf our world in its virtual simulation and at the speed technology is advancing, we will live in a world governed by the forces like the Internet. Inability of governments to defend themselves against abuses of Internet is an ominous prospect indeed, and it makes us question whether governance can exist in a world at the mercy of globalization under control of the internet. Nevertheless, whether good governance can exist or not, the Internet has unified individuals and has propagated a feeling of “World Citizenship”, which Rousseau foretold, in a sense. Consequently, the Social Contract citizens have to their governments becomes blurry and individuals tend to feel obligated to the world, not solely one nation.
Other than World Citizenship, there has been a recent push for a European identity, one which each European School student assuredly feels. The European project has been undoubtedly successful in securing peace among countries that have been waging war against each other since pre-Roman times by, in a sense, cultivating a collective identity where citizens feel committed to Europe and not only their home countries. At its core, the European Union (EU) stands for solidarity and the importance of political dialogue. These objectives are maintained by the judiciary, legislative and executive branches, where each of the 27 countries are represented and their interests are safeguarded. However, inter-institutional dynamics of the EU are continuously in flux as the EU enters uncharted waters, as for example when it had to respond to the Euro crisis.
The EU is now experiencing a new crisis, where political wars are waged on its democratic governance, as well as its commitment to subsidiarity. As the inter-institutional dynamics of the Union shift in response to the euro crisis, the very legitimacy of the EU is being challenged as never before. A host of factors have led these waves of criticism, but the one which I will discuss in the essay are the “democratic deficits” and “lost commitments to subsidiarity”.
To say that the EU is democratic is at its core a tautology, as the EU is by definition an alliance, or union, of democratic states. In fact, the Copenhagen criteria, a set of rules laid in 1993 for the accession of new member states, require that a state has the institutions to preserve democratic governance and human rights, which is why the recent election outcome in Turkey will only hinder their accession to the EU. Therefore, as the Heads of Government are democratically elected, their votes on legislation in the Council meetings have democratic origins, as well as democratic procedures as the votes are counted either by Qualified Majority Voting, or by unanimity. Furthermore, following the Lisbon Treaty, not only does the democratically elected European Parliament have more influence over the executive powers of the EU, but the European Citizens’ Initiatives was created and many Council sessions are now open to the public, which enhances transparency. Thus, the EU is steadfast in its support for democracy; however, as the Trilemma of the World Economy professes, it is impossible to have economic integration, democracy and national sovereignty, so if national sovereignty and economic integration want to be upheld, the EU has to suffer a democratic deficit.
Similarly, the EU has firmly grounded commitments to subsidiarity, which is the appropriate locus for decision-making, anchored in its founding treaty (the Maastricht treaty). This commitment to subsidiarity maintains an equilibrium between the centralising and decentralising powers within the EU and allows objections to be made to European action on a national, regional and local level. Recently, the EU has faced political clouts undermining its commitments to subsidiarity, many of such featured in the Brexit campaigns. These criticisms are also indicators that maybe the Trilemma will also apply to the EU in the long run and that it must reconsider its commitments to subsidiarity if it wants to continue pushing for democracy and economic integration. Brexit is a leading example of why the Trilemma is very real. What the UK voted for June 23rd 2016 pronounces a desire to stray away from economic integration, opting for democracy and national sovereignty.
However, it is apodictic that many aspects of EU are aspirational for countries and regions of the world who wish to pursue good governance in the face of rising globalisation. We cannot dismiss that the EU project has been triumphant in, for example, disallowing large mergers to create an environment conducive to competition (monopolies). Similarly, the EU has been transparent in trade laws that prevent abuse and exploitation by global companies when they sell commodities in Europe. Most importantly, it has diligently enforced social and environmental policies which prevent companies from pursuing projects which will unilaterally increase profitability. The result is that EU 27 has enacted regulations that would suppress environmental calamities and it has improved the distribution of wealth through effective social programs, leading to a generally higher standard of living compared to many parts of the world. However, this does not mean that EU is problem free - disparities of wealth still prevail both between countries and within nations and Europeans should strive for better governance to eliminate these disparities.
As German President says, “If we, as Europe don’t become fully fledged partners on the world stage we will all individually become the plaything of other powers". He is calling for regional governance, transcending national authority to ensure a legitimate place on the world stage. However, I argue that regional governance is not enough. Prevalent challenges of our society are transcending regional borders and it is imperative that we have global solutions, which alone can address problems like climate change or the refugee crisis that transcend borders. Furthermore, despite increasing power given to Brussels, the EU is still a patchwork of national powers. Despite what EU critics say, and with an increasingly global economy, national politics are ineffective. The national governments have little control over the forces that control citizens’ lives and if the EU wants further economic integration, political integration must be directly proportional.
To understand my argument I will use an analogy of ancient China that historian Yuval Noah Harari used when he spoke about the exigency of a global outlook on global issues. He explains that many thousands of years ago, many different tribes lived along the yellow river, which all relied on the river for survival, but many suffered from periodical droughts and floods, no one could do anything about it till all the tribes coalesced together to form what we now know as China. Separately, none of the tribes alone were able to regulate the river and develop effective solutions to the many calamities they faced, and we can view this example as a microcosm of our world today.
In fact there is a notorious trend that nationalists more often than not deny climate change and the correlation is simply that climate change is not a national issue, but a global one. Just like in the case of the floods and droughts facing the tribes along the yellow river, the nations of the world need global regulation to combat problems that are caused by forces beyond their borders. As mentioned previously in the discussion of the social contract, the will of individual countries is irrelevant when it comes to global phenomena. One example of this is recent advancements in Artificial Intelligence (AI), which has the potential of pushing millions of people out of the labour market in the near future. If the EU, for example, outlaws research in AI, but nations such as China and USA continue researching it, the pressure to pursue this high-risk-high-gain project will intensify. The EU will not want to lag behind and become the “plaything” of other nations. This goes to show that national regulations are ineffective and if something like AI, stem cell research or even the coal industry is to be outlawed or regulated, we need global institutions to develop and implement global regulations, and thus the need for a quasi global government.
A conventional concern when speaking of a global government is that you have to compromise loyalties to your country. I would argue, however, that you can have several layers of loyalties, vertically stretching from loyalties to your family, to loyalties to the planet, which relates back to the 2D axis I mentioned in the beginning of this essay. Our obsession with subsidiarity is impeding a global approach to pressing issues because they are often “lose-lose” situations, such as the issue of global poverty. The richest will need to compromise wealth in order to have a universal basic income and so on. Furthermore, we do not have the political means to tackle these issues as nations individually, particularly in the technology and scientific realms.
Rousseau proposed a “World Government”, which is, given the tribalistic nature of humans, impossible. The failure of League of Nations, the ineffectiveness of the UN, and the experience of Brexit less than a year ago have shown that nations are repulsed by the idea of ceding too much sovereignty. Given these considerations even in the 18th century, Immanuel Kant wrote an essay called “Zum ewigen Frieden”, or, in English, “Perpetual Peace”, where he stipulates that it is incumbent upon each nation to unify in order to secure peace and prosperity. Furthermore, he advocates a lasting peace, not simply a ceasefire. Similar to the “Democratic Peace Theory”, as even though he speaks of a union of republican states he is referring to the democratic systems we are familiar with today, Kant proposes a set of conditions for such an institution, which built the conceptual framework of the United Nations almost 150 years later. He believed that humanity is one and in certain aspects we are all equal; therefore, based on his political theories, if he were alive today I am convinced that he would call upon the nations of the earth to unite in tackling global issues and to leave their archaic nationalist views aside.
In my view globalisation is a positive and necessary process, and in the exponential rate technology is advancing, we are effectively “sleep-walking into a future none of us can anticipate” to quote Dean James J. Valentini of Columbia University, and if we plunge back into isolationist or nationalist tendencies that led to well documented catastrophes in history, our world will sink further and further into an abyss of selfishness and fear of change. Furthermore, if we re-assess the “inescapable trilemma” Dani Rodrik professes, we can see that not only will national sovereignty erode as a result of globalisation, and its offshoot, economic integration, but also it is imperative that it diminishes. Subsidiarity can be limited to a modicum of matters, but we need a political integration.
Sources:
https://aquila2.iseg.utl.pt/aquila/getFile.do?method=getFile&fileId=94482
http://www.mdl.co.nz/site/mckinley/files/resources/Globalisation_subsidiarity_1999.pdf
http://www.academia.edu/1437363/Rousseaus_Social_Contract_and_a_Theory_for_Global_Citizenship
https://periodicos.ufsc.br/index.php/ethic/article/viewFile/1677-2954.2013v12n1p53/25230
http://rodrik.typepad.com/dani_rodriks_weblog/2016/06/brexit-and-the-globalization-trilemma.html
John Stuart Mill- On Liberty
