The Global Compact of the United Nations
- / -
Part 2 of: "Globalization": the UN's "Safe Haven" for the World's Marginalized
Launch of the Global Compact
The Secretary-General of the United Nations has over the past years been a
frequent speaker at business gatherings, notably the annual World Economic Forum
(http://www.weforum.org/), still known
as the Davos Symposium. He spoke there of his hopes for a "creative partnership"
between the UN and the "private sector". It was on the third such
visit on 31 January 1999 that he purportedly challenged the CEOs of multinational
corporations to join in a "global compact of shared values and principles,
which will give a human face to the global market". However it was only
on 26 July 2000 that the Global Compact was formally launched in partnership
with the International Chamber of Commerce (ICC) and the first partners meeting
was held under the chairmanship of the Secretary-General (see Executive Summary
and conclusions: http://www.un.org/partners/business/gcevent/press/summary.htm).
It is far from clear what consultations, and with what parties, led up to the
Davos challenge and what subsequent consultations preceded the formal launch.
The regrettable non-transparency bodes ill for a supposedly transparent initiative.
At Davos, the Secretary-General called upon business:
"to embrace, support and enact a set of core values in the areas of
human rights, labour standards, and environmental practices". He continues:
"Why those three...I chose those three areas because they are the ones
where I fear that, if we do not act, there may be a threat to the open global
market, and especially to the multilateral trade regime." (http://www.un.org/partners/business/davos.htm)
In exchange for the support of business leaders he stressed: "More important,
perhaps, is what we can do for you in the political arena, to help make the
case for, and maintain, an environment which favours trade and open markets".
It is however clear that the process involved considerable interaction with
the ICC as the self-acclaimed representative of world business - it is now subtitling
itself the "World Business Organization". However its critics point
out that it only represents the larger corporations and in no way can claim
to represent the interests of the myriad of smaller businesses around the world.
But it is quite unclear in what way this initiative has received the approval
of UN Member States - normally hypersensitive to their prerogatives in such
circumstances. Or is this silence part of a secret deal negotiated with the
government delegates so evidently present at Davos? From whom could reliable
clarification be obtained?
Ironically the ICC has long been accredited as a nongovernmental organization
(an NGO) to the UN ECOSOC - like many other NGOs. The World Economic Forum is
also an accredited NGO to ECOSOC. But it is strange to find a partnership between
the UN Secretary-General and an individual NGO, in this case ICC, used as a
front for multinational corporations. The secretary-general of ICC is a
former employee of the World Economic Forum.
Status of the Global Compact
What is most curious is the apparent lack of information on the exact status
of the Compact in reality rather than in public relations terms - or rather
the ways in which what is said is open to a variety of interpretations. It is
has been made absolutely clear that it is in no way a binding agreement. Corporations
of any size ("large or small") can adhere to it - although the target
is 1,000 major companies within 3 years (Ruggie, 13 October 2000). Whether this
means that a mom-and-pop restaurant in a developing country can do so is unclear
- nor are the effects of thousands of such businesses doing so, especially in
the reaction of multinationals to the dilution of their new found "international"
status within the Compact.
Does the "partnership" involve a signature by both parties? Who signs
for the UN? Or have such "formalities" been circumvented to avoid
legal difficulties for the UN? Does the partnership effectively extend international
legal recognition to corporations, whether multinational or otherwise?
To allay fears that it was yet another attempt at providing a "code of
conduct for transnational corporations", the Secretary-General has stated
that: "The Global Compact is not a code of conduct. Neither is it a disguised
effort to raise minimum standards, nor a vehicle for special interest groups.
It is a Compact to help markets deliver what they are best at - while at the
same time contributing to a more humane world." (UN Press Release SG/SM/7004,
25 May 1999). It is unclear how contributing to a more humane world is to be
achieved without raising minimum standards. This is a major departure for the
Another UN report states: "The Global Compact is not a code of conduct;
monitoring and verification of corporate practices do not fall within the mandate
or the institutional capacity of the UN. But neither is the Compact to be used
as a corporate shield from criticism. To the contrary, it highlights the global
citizenship qualities of corporations, and opens up opportunities for focussed,
mediated, directed and constructive dialogue." Unfortunately these qualifiers
to the nature of the dialogue leave every interpretation as to the manner in
which participants and comments will be "focussed" and "directed"
(by whom?) in order to meet the criteria of being "constructive".
How is this intention to be distinguished in practice from cynical "consultative"
exercises purely for public relations purposes?
None of the early Global Compact documents appear to have made any reference
to a related undertaking with UN-system involvement, namely the Global Reporting
Initiative (see http://www.globalreporting.org)
that provides companies with guidelines in areas which overlap those of the
Compact. The GRI was established in late 1997 with the mission of developing
globally applicable guidelines for reporting on the economic, environmental,
and social performance, initially for corporations and eventually for any business,
governmental, or non-governmental organisation (NGO). Convened by the Coalition
for Environmentally Responsible Economies (CERES) in partnership with the United
Nations Environment Programme (UNEP), the GRI incorporates the active participation
of corporations, NGOs, accountancy organisations, business associations, and
other stakeholders from around the world. The GRI's Sustainability
Reporting Guidelines were released in draft form in London in March 1999.
The GRI Guidelines represent the first global framework for comprehensive sustainability
reporting, encompassing the "triple bottom line" of economic, environmental,
and social issues. Twenty-one pilot test companies, numerous other companies,
and a diverse array of non-corporate stakeholders commented on the draft Guidelines
during a pilot test period during 1999-2000. Revised
Guidelines were released in June 2000 -- a month prior to the launch of
the global compact. A link to the the GRI site is now provided from the UN's
Most curious is that available information implies that it is an initiative
of the Secretary-General's Office in direct collaboration with ICC. It is unclear
what other organs of the UN system are involved and in what way it has required
the approval of ECOSOC, as has hitherto been the case with respect to any UN
interaction with non-UN bodies. He has declared that the "International
Labour Organisation, the Office of the High Commissioner for Humn Rights and
the UN Environment Programme are currently joining forces under the guidance
of my Office to create the capacity to encourage global corporate citizenship
and to foster the translation of these principles into corporate practice."
(UN Press Release SG/SM/7004, 25 May 1999) The Compact's website is a joint
effort by these bodies and is its most tangible feature.
There is obviously a lot of "flexibility" envisaged in the relationship.
Thus one tobacco company, that has caused considerable embarrassment for influencing
WHO health committee appointments, has become a partner -- despite assurances
from the Secretary-General that such partnerships would not be permitted. It
might well be asked whether the UN has any real say in the matter and is not
being completely "taken for a ride".
The Secretary-General affirms that the UN and ICC are "good, close partners".
Also the "United Nations is the global institution. ICC is the global business
association." Those adhering to the Global Compact should however be aware
that UN officials have been mouthing analogous phrases of mutual appreciation
in relation to "NGOs" for decades - with little consequence. The ICC
would presumably be aware of that.
A major difficulty in assessing the Global Compact is not what is visible on
the various websites but what deals have been struck under the table and can
readily be denied. The history of UNDP's Global Sustainable Development Facility
provides an obvious example (http://csf.colorado.edu/pen-l/mar99/0317.html)
Rationale of the Global Compact: the "only
A new economic elite of banks and corporations is emerging -- composed of a
network of bodies including especially the: World Economic Forum (composed primarily
of chief executives and government leaders), International Chamber of Commerce,
World Trade Organization, Business and Industry Advisory Committee (to the OECD),
the banking community's proposed Private Sector Advisory Council (of the Institute
for International Finance) and its Steering Committee on Emerging Markets Finance,
the European Round Table, Transatlantic Business Dialogue and the United States
Council for International Business. The UN is endeavouring to develop a partnership
with these groups, which (other than the WTO) are, curiously, what the UN would
normally define as "NGOs". For some, these new actors have partially
usurped the role of an older "shadow government", composed of bodies
such as the Trilateral Commission, the Bilderberg Group, the Club of Rome, and
the Council on Foreign Relations - also "NGOs". Unfortunately the
Global Compact provides every reinforcement for anti-UN conspiracy theorists
who have long identified the role of these elitist bodies as highly problematic
in a supposedly democratic society.
An event which was presumably the most official precursor of the Global Compact
was a highly unusual lunch for 10 CEOs of multinational corporations hosted
by the UN leadership on 24 June 1997 -- subsequently described by David Korten
in terms which presumably encouraged the subsequent secretiveness on the part
of the UN. He states:
"Those of us who have been studying these issues have long known of
the strong alignment of the World Trade Organization (WTO), the World Bank,
and the IMF to the corporate agenda. By contrast the United Nations has seemed
a more open, democratic and people friendly institution. What I found so shattering
was the strong evidence that the differences I have been attributing to the
United Nations are largely cosmetic."
In clarifying the nature of the Compact to the NGO community, John Ruggie states
the view of the UN as articulated by the Secretary-General with respect to the
process of globalization:
"The world needs open markets. They are required to sustain prosperity
in the industrialized world. And they provide the only hope of pulling
billions of poor people in the developing countries out of abject poverty."
(13 October 2000) [emphasis in original].
Mainstream economics has sustained the UN and the Washington Consensus (IMF,
World Bank, etc) through many decades of development whose achievements are
questioned in their own studies, notably with respect to Africa. In the light
of the above claim, "we the peoples" are owed a careful clarification
on the distinction between the UN's current argument and that of the promoter
of any Ponzi Scheme. There is the suspicion that western economic logic
only "works" (for the west) when the pool of disadvantaged is constantly
replenished. It is difficult for many to distinguish between this logic and
Pyramid Selling or Ponzi Schemes (see http://www.moneypages.com/syndicate/stocks/sec/ponzi.html),
except in terms of scale - and especially when rather similar selling techniques
are employed, and the same kinds of people seem to benefit. Africa is the ideal
sucker for such a process. As has been argued, the "projects" that
it has had to receive have more often than not been as damaging to local cultures
Would it not be simpler for the UN, and its member governments, to acknowledge
that they have significantly failed to control transnational corporations after
a quarter century of largely token effort? The UN is now faced with the problem
of rationalizing globalization as defined by those corporations. As one NGO,
the Rural Advancement Foundation International, puts it:
"Now, with the Global Compact, the campaign to control has become a
lemming's rush to capitulation. Here's what's changed over the decades.
- One-third of the U.S. Fortune 500 companies listed twenty years ago were
bought out by 1990 and another 40% were merged by 1995. In the past five
years the pace of corporate extinctions has surpassed the loss of livestock
- In 1980, the UN Centre for Transnational Corporations published a study
of the world food and beverage industries identifying 180 companies that
dominated highly segmented markets at that time. Today, at least half of
these companies occupy roughly the same market power - and UNCTC is extinct.
- Twenty years ago, not one of the world's 7,000 major sources of planting
seed held an identifiable share of the commercial seed market. Today, the
top ten seed companies have a third of the world's market.
- Twenty years ago, the top 20 pharmaceutical companies held about 5% of
the world prescription drug trade. Today, the top ten companies control
well over 40% of the market.
- Twenty years ago, 65 agricultural chemical companies were competitors
in the world market. Today, nine companies have approximately 90% of global
- Twenty years ago, RAFI was not monitoring the world veterinary medicine
market. Today, however, ten companies have more than two-thirds of world
- Twenty-five years ago, the total value of mergers in the U.S., in a single
year, soared to $11.4 billion. In 1999, the total value of U.S. mergers
was more than $1.7 trillion.
- In 1999, the total value of global mergers and acquisitions approximated
10% of the combined GDP of the entire world, more than $3.4 trillion.
- Twenty years ago, intellectual property was largely a rich mans sport
confined to non-living material. Today, intellectual property monopolies
play a role in more than half of all goods and services (living and non)
traded across national borders.
- At least 70% of all international patent royalty payments are made between
parent and subsidiary companies.
- The number of annual patents applied for in Europe has risen from barely
3,000 per year in the early 70's to over 76,000 in 1999.
- Ninety percent of new technologies and product patents are controlled
by global corporations.
As the new millennium begins, the world's top 200 corporations account for
28% of global economic activity; the top 500 account for 70% of world trade
and the top 1000 companies control more than 80% of the world's industrial
David Korten, in the above-mentioned 1997 report, concludes:
"So long as official forums remain captive to this closed and deeply
flawed ideological culture, our governmental and corporate institutions will
almost surely lead our world ever deeper into crisis. The burden of providing
alternative leadership that falls on those elements of civil society that
are not captive to the official culture is thus enormous. We must speak fearlessly
with force and clarity in an effort to penetrate the veil of silence that
shields our official and corporate institutions from confronting the devastating
consequences of their ideologically driven leadership."
Assuming that such "globalization" is a good thing for the UN to
promote, the case for the Global Compact has been summarized on behalf of the
UN by Georg Kell and John Ruggie:
"Globalization may be a fact of life, but it remains highly fragile.
Embedding global market forces in shared values and institutionalized practices,
and bridging the gaps in global governance structures are among the most important
challenges faced by policymakers and corporate leaders alike. The future of
globalization may hang in the balance. This challenge has to be met at the
micro-level, where we believe the move toward articulating and acting upon
universal values offers a viable approach. And it has to be solved at the
level of global rule-making, where we believe strengthening the role of the
United Nations has a productive role to play. The Global Compact is intended
as a contribution to both though by its very nature and scope, it can only
make a modest contribution." (Toronto, November 1999)
Kell later stated:
"We realize that globalization cannot be built on trade alone, but also
requires a global initiative to promote principles and social objectives based
on international consensus. Without that, we may face a crushing end to globalization."
(IHT, 25 January 2001):
To the business community the Secretary-General asserted in 1999 that "whether
in peacekeeping, setting technical standards, protecting intellectual property
or providing much-needed assistance to developing countries" the UN "helps
to expand opportunities for business around the world".
In remarks to the NGO community, John Ruggie stated:
"If you want to make globalization work for everyone, as we do, then
it is worthwhile. But if you reject globalization, global corporations or
even the system of capitalism itself, then you won't like what we're doing
at all, any more than your predecessors liked social Keynesianism or social
democracy because such pragmatic innovations inevitably reduce the social
rationale and political support for more polarized rejectionist postures."
(13 October 2000).
This extraordinary statement declares what it is necessary to believe in, if
one is sensible. It denigrates all who do not as "rejectionists",
and then ends by condemning postures of polarization - which many would see
as characteristic of the structure of Ruggie's argument. Just because the Secretary-General
and his advisers and their backers (whoever they may be) believe an argument
to be correct, does not necessarily imply that everyone should believe that
it is correct (seemingly a forgotten principle of the Universal Declaration
of Human Rights, omitted from the Secretary-General's "core values").
Who exactly are the "acceptionists"?
As argued by the Corporate Europe Observer (October 1999, #5), the Secretary-General:
"has made it no secret that the Global Compact is a chance for corporations
to improve their public image and counter the backlash against trade and investment
liberalization. Disturbingly, it is certain that through the Global Compact
the UN will contribute to the largely incorrect impression that corporations
are on the way to becoming socially and environmentally responsible actors."
On the occasion of the formal launch of the Global Compact, the Secretary-General
justified the UN's cooperation with multinationals in the following terms:
"We are cooperating with them for the reasons I have said, for the influence
they have, the reach they have, the impact their activities have on the lives
of the people that you are talking about...some believe that we should not engage
the companies. The companies are part of our reality. They are going to be
operating in your country, my country and all over the world. I think it is
important that we engage them and work with them in improving worker conditions
and getting them to respect the environment in which they create their fortunes,
and also respect their workers. I don't see any contradiction there at all."
(UN Press Release SG/SM/7496, 26 July 2000).
The logic of this statement is coherent but it is unclear why, as stated, it
does not apply equally to international criminal organizations -- whose impact
is acknowledged to be as great as multinational corporations and, given the
financial resources they control, must necessarily be major investors in such
corporations. Given that the UN has limited capacity to distinguish between
multinational corporations and international criminal organizations, in terms
of its Charter provisions, it would be interesting to discover in what ways
their values could be said to be different from those of multinational corporations
with respect to the Global Compact. Despite the optimism of the UN with respect
to globalization, the US National Security Council released a report on 15 December
2000 arguing that globalization had created new kinds of criminal threats to
national security - threatening the daily life of citizens everywhere (http://www.cia.gov/cia/publications/globaltrends2015/index.html).
In one of his first interviews the ICC president, Helmut Maucher warned: "We
have to be careful that they [environment and human rights activists] do not
get too much influence." (Financial Times, 6 December 1997). This
was plaintively echoed more recently on the occasion of the UN Climate Conference
(The Hague) by the ICC secretary-general Maria Livanos Cattani: "Business
is on the sidelines in The Hague, along with a multitude of nongovernment organizations,
many of which will deploy colorful and highly televisual happenings that will
capture the attention of television cameras and make the nightly newscasts.
The business organizations can hardly compete, and that is a pity." (International
Herald Tribune, 14 November 2000).
In an effort to re-occupy the high ground, the founder of the World Economic
Forum, by which Cattani was formerly employed, declares:
"The work we do at the World Economic Forum may not have the romantic
allure of a street demonstration, but it does, in concrete ways, make the
world a better place in which to live. So, yes, there will be a moral high
ground in Davos this week, but it won't be in the streets." (Klaus Schwab,
International Herald Tribune, 23 January 2001)
Support for the Global Compact
A later statement by Ruggie raises questions about the effective involvement
of the parties named:
"...the Global Compact represents a model of 'global governance' that
deserves support in its own right, to be emulated in other areas, as appropriate,
where major global governance gaps exist. It is an issue-based network that
brings together all the relevant social actors: government, which defined
the principles on which the initiative is based; companies whose practices
we are seeking to shape through the power of good example, in whose hands
the concrete work of global production takes place; NGOs, representing the
wider community of stakeholders; and the United Nations, the world's only
truly global political entity." (International Herald Tribune,
25 January 2001)
The UN is apparently pleased with the response from corporations and some corporations
are pleased with this opening as a means of associating with the wider, non-economic
challenges of society. Clearly some will also be very pleased at the new business
opportunities that are being facilitated for them. As Kell and Ruggie put it,
"Individual corporations have lent their support and have assisted in the
construction of the [Global Compact] website, as have leading NGO's in the areas
covered by the Compact" (Kell and Ruggie, 1999).
However in November 2000, on examining the official website of the United Nations
Global Compact Network (http://www.unglobalcompat.org/gc/unweb.nsf/),
it offered no information on which corporations had become involved in the Compact.
The site was however organized to cluster "Business + Labour + Civil society"
on its front page. But under "partners and initiatives" it indicated
that "A variety of associations and social actors are working with business
to develop programmes in the areas of human rights, labour and environment"
These were split, in the following order, into:
(a) Business associations:
- Business for Social Responsibility (BSR)
- Conference Board
- European Business Network for Social Cohesion (EBNSC)
- International Chamber
of Commerce (ICC)
- International Organisation
of Employers (IOE);
- Prince of Wales Business
Leaders Forum (PWBLF)
- World Business Council
on Sustainable Development (WBCSD)
- International Federation of Consulting Engineers (FIDIC)
- International Fertilizer
Industry Association (IFA)(**)
- International Petroleum
Industry Environmental Conservation Agency (IPIECA) (**)
- International Road Transportation
Union (IRU) (**)
(b) Workers' organizations:
- International Confederation of Free Trade Unions (ICFTU)
- Amnesty International
- Human Rights Watch
- The World Conservation Union (IUCN)
- World Resources Institute
- World Wide Fund for Nature (WWF)
(d) Other initiatives and national governments
By 25 January 2001, the same "business associations" were split under
two headings: "international inter-sectoral" and with asterisked (**)
items under a "international sectoral"; a third "national associations"
had one body listed. The number of NGOs had not changed, nor had the workers'
organizations. Strangely there was no link to the corporations involved.
As discussed below, it is interesting how "business" associations
and "labour" unions are not considered part of "civil society"
- presumably taken to mean "NGOs". The UN is clearly demonstrating
its skills in presenting statistical information in being able to avoid use
of "some" when referring to support by "leading NGOs" -
thus avoiding indication of what a very small percentage of all NGOs (even in
association with the UN) the "some" would otherwise represent. It
is also curious that the World Economic Forum (an NGO accredited to the UN),
where the Compact was first presented to CEOs, is not itself listed, whether
as an "NGO" or as a "business association".
In November 2000 the list of corporations who were members of the Global Compact
appeared to number 18 on the relevant ICC site.
Curiously, when the ICC secretary-general later claimed that more than 300 leading
companies had subscribed (IHT, 25 January 2001), the web page in question did
not reflect this and had not changed. It is possible that it is intended that
the list should in future remain confidential.
By January 2001, the secretary-general of ICC seemed to have a concept of the
Global Compact somewhat at variance with that of Ruggie when she claimed that:
"The danger is loss of focus. The Global Compact was launched as a challenge
for business and the UN to work together. We must make sure other players
don't dilute it. That said, the participation of NGOs is vital at a grassroots
level" (International Herald Tribune, 25 January 2001)
This suggests the emergence of a degree of exclusion from the model of 'global
governance' articulated by Ruggie. ICC also publicized the comments of their
American affiliate to the effect that the main cause of American corporate hesitation
is that important details on how the program will work are still undetermined.
Companies apparently need reassurance that the agreement will remain as originally
presented by the Secretary-General. Of particular concern was the expression
of statements by heads of UN agencies:
"...at odds with what had been presented by the Secretary-General, particularly
on external monitoring and verification....Companies need to receive the same
consistent message from all the UN officials involved: a clear idea of what
is expected of them should they choose to endorse the Compact." (International
Herald Tribune, 25 January 2001)
On the same occasion the ICC secretary-general also stressed a view at variance
with that expressed by Ruggie:
"As long as the Global Compact remains true to the original concept
of a voluntary two-way partnership as set out by Kofi Annan, it will continue
to command business support...The danger is that too many players will be
brought in, and we have seen hints that that might happen in some of the rhetoric
coming out of the UN. If labor unions and so-called civil society nongovernmental
organizations are seen as full partners in the global compact, its nature
will certainly be different from the concept that a group of CEOs -- all of
them ICC members -- welcomed wholehearedtly when they pledged their support
in July 1999." (International Herald Tribune, 25 January 2001)
Clearly some rather severe internal problems have developed, although the World
Economic Forum of January 2001 opened its doors to some 70 such civil society
bodies. But it would be an amazing irony if many corporations were effectively
placed in Ruggie's "rejectionist" category with other non-profit bodies:
Variety of forms of globalization and global compact
This paper is not based on the assumption that globalization is "wrong"
or that it should not be allowed to happen - or that it can be prevented. It
questions the manner in which the Secretary-General is presenting a very particular
form of globalization and a very particular Global Compact - excluding other
possibilities - and then treating all that are opposed to it as opposed to globalization
as may otherwise be envisaged.
In concluding his presentation of the Secretary-General's particular insight
into the merits globalization, and the Global Compact's contribution to good
governance, Ruggie states: "This is our agenda expressed, most recently
in the United Nations Millennium Declaration, adopted by our heads of state
and government at the Millennium Summit in September, and reflecting the priorities
laid out by the Secretary-General in his Millennium Report: We the Peoples"
(13 October 2000; emphasis in original). But, following a spate of failed development
decades and an acknowledged democratic deficit in many countries, is there no
slight recognition that "our" does not necessarily include major portions of
the world population and may only include a rather small minority of people
who have a good track record of ignoring those who disagree with them?
The UN is clearly part of non-civil society and as such can scarcely claim
to speak in the name of "we the peoples" -- behind closed Millennium
doors in secret debates, or through presentations behind barbed wire to the
business world. The UN can endeavour to claim to speak for the world, but this
is not necessarily the democratic reality on the ground. Perhaps that publication
might have been more truthfully entitled We the Elites -- for that is
how application of the Charter principles should now be understood. This new
spin on "our agenda" takes on new meaning when the section specially
sponsored by ICC in the International Herald Tribune on the Global Compact
(25 January 2001) has a piece by Kofi Annan under the heading "Rallying
Firms for UN goals" -- not the goals of the peoples of the world.
There was considerable simplistic hype surrounding the process of globalization
prior to the Asian financial crisis. The United Nations and its Washington associates
were very much part of that hype. The irresponsible advocates of unfettered
globalization were found to be quite inadequate in their thinking, and in their
provisions for dealing with the situation that they had facilitated. Without
actually having done anything to remedy the structural situations that created
that crisis, they are now naively hoping that these annoyances have gone away
and that they can move on with their original agenda. The only rectification
is a verbal appreciation by the Secretary-General that globalization, as originally
conceived is "unsustainable". This is not necessarily the belief of
his new multinational partners, whatever they may declare for the purposes of
entering into such partnership.
Missing from any arguments put forward by the Secretary-General, or his conceptual
henchmen, is a simulation of how his view of globalization and the Global Compact
will address the instabilities that became evident in the Asian crisis -- and
others which will surely emerge to surprise the overconfident in their pursuit
of business as usual. Has it not yet become clear that the only thing certain
about the future is uncertainty? Alternative arguments are clearly summarized
by Hazel Henderson (1999) in work commissioned by the New Economics Foundation
in association with Focus on the Global South. Relevant southern concerns are
also raised by I Johan Mohan Razu (1999).
Even classical economists are now lending an ear to new developments in behavioural
economics that question the mainstream view of a rational, self-regulating economy
-- to recognize the major influence of irrational and even destructive behavior.
Authors include David Laibson (http://www.economics.harvard.edu/faculty/laibson/papers.html)
and Sendhil Mullainathan (http://web.mit.edu/mullain/www/papers.html).
The strict rationality assumption that many economists still embrace may well
be seen by the future as a quaint, unrealistic special case. Humans currently
lack the behavioral reflexes to produce a well-functioning market system where
people interact freely in pursuit of their preferences. These insights may transform
the prevailing wisdom about deregulation. In the light of such evidence, the
UN is now effectively trapped in conceptual processes termed by such behaviorists
as "representative thinking" and "categorization" which
have a tendency to lead to false conclusions. In representative thinking the
conditions of the present are treated as representative of the future, undermining
preparedness for surprises. Inappropriate categorization results in inappropriate
conclusions without adequate evidence. Perhaps the UN and World Bank economists
should attend meetings of the Society for Advancement of Behavioral Economics
Both the UN (through programs at UNITAR) and the World Bank have a considerable
background in global modelling by computer. And this is certainly true of most
of the university economics departments in the northern hemisphere on which
they rely for their expertise with regard to globalization processes. It would
appear that none of these models was capable of predicting the Asian financial
debacle. Simpler catastrophic problems in relation to globalization are very
susceptible to simulation. These have to do with removal of buffers in any dynamic
system - flooding is a readily understandable consequence in the case of watershed
systems, for example (as the UK has recently been officially forced to recognize,
seemingly for the first time). It might be helpful to think of developing countries
as inhabiting vulnerable flood plains where they are exposed to flooding by
the instabilities of the world financial system.
The World Bank should be reminded of the merits of using comprehensible water
tank and piping arrangements to simulate basic economic principles -- in the
hopes that they might be applied to clarifying confused thinking about globalization
without regulatory systems. The approach was first demonstrated by Bill Phillips
of LSE in the 1940's (http://www.newscientist.com/opinion/opinion.jsp?id=ns226850).
Maybe the World Bank should open a Plumbing Division to develop its understanding
of the dangers of economic flooding and "sloshing" and to communicate
more effectively with its critics (who might bring such media-attractive contraptions
to their demonstrations).
The public has become aware of some problematic consequences of deregulation,
such as the amazing level of rail chaos in the UK, following the initiatives
of Margaret Thatcher. Another interesting example of the incompetent thinking
that goes into exploring the potential consequences of globalization is provided
in microcosm by the widespread power outages in California in January 2001 --
following forms of deregulation (in the electrical power industry) similar to
those touted as healthy initiatives essential to globalization:
Businesses, traffic and other essential services were subject to blackout
or rolling powercuts -- ensuring "a serious short-term impact on the
most populous and economically powerful US state and an unclear longer-term
effect across the nation as the effects of the crisis ripple outward"
(IHT, 19 January 2001).
"At times last week, the country's richest and most populous state
looked more like the struggling province of a developing country...It was
born of conservative faith in unfettered competition...Planners failed to
anticipate...Finally, the system crashed...Governor Gary Davis...said the
program was sunk by greedy power-generating companies..." (IHT, 23 January
The new US Treasury Secretary described the Californian initiative as "lunacy"
in 2001. However, unlike the Asian financial crisis, here we are dealing with
a highly industrialized region with supposedly the highest level of competence
in computer-enhanced planning and other forms of systems management expertise.
And yet, somehow, the kinds of negative consequences of globalization (vociferously
denied by its propagandists) manifest only too evidently and seemingly unpredictably
-- even to the best and the brightest. It might be imagined that power grid
simulation was one of the domains most amenable to sophisticated exploration
of unpredictable vulnerabilities.
It is this quality of totally irresponsible short-term thinking that is now
being advocated by the UN to incite countries and regions to expose themselves
to new levels of vulnerability in the longer term. The blackout situation makes
these so comprehensible to ordinary people suddenly required to use candles
-- whilst they remain invisible to the enlightened entourage of the Secretary-General.
As with the manager-engineers responsible for the decision to launch the US
Challenger space capsule that exploded in 1986 -- technical insight was deliberately
repressed to further management advantage, despite the risk to lives. The Secretary-General
has a pattern of being associated with decisions of this quality. Many are already
describing the UN's version of globalization as "lunacy"; as with
Challenger, their insights are also being suppressed. Of course, whilst livelihoods
may be destroyed as in the Asian financial crisis, no one will be faulted for
bad advice -- although, as in the Challenger case, some may be encouraged to
seek early retirement on full pension. The Secretary-General is risking very
little in risking the livelihoods of others. This may be a characteristic of
What would seem to be missing from the current hype about a particular form
of economic globalization is the need for what might be termed "conceptual
deregulation" -- to match and manage the deregulation of trade and financial
services for which arguments are so vigorously made. Such conceptual deregulation
would remove the artificial barriers to transfer of knowledge between various
academic disciplines, and notably those surrounding contemporary economics,
in order to enable insights from the many systems disciplines to cross-fertilize.
Disciplines need their own equivalent to "trade rounds" and a "WTO"
-- and achieving this is just as challenging, if not more. Ironically disciplines
need to engage in a freer "trade in ideas" (especially systems insights)
to ensure, for example, that economists understand systems implications blindingly
obvious to hydrologists. Whereas economic globalization is dependent on transportation
(the movement from port to port, even electronically), the conceptual counterpart
requires new kinds of transdisciplinary vehicles to ensure more appropriate
governance of the process (see Metaphors as Transdisciplinary Vehicles of
the Future, https://www.laetusinpraesens.org/docs/transveh.php)
"Protectionism" amongst the disciplines is very much alive and active
in opposing any such globalization of knowledge -- despite the World Bank's
Global Knowledge Partnership (http://www.globalknowledge.org/)
that in no way focuses on these issues. Such interdisciplinary cross-fertilization
is a pre-requisite to ensure the development of conceptual frameworks and techniques
capable of predicting, preparing for, and remedying the disasters which the
current blinkered approach is unable to handle. Removing buffers between trading
systems may indeed reduce transaction costs but it effectively increases the
costs associated with the system management expertise then required for what
becomes a much more complex dynamic system. This requisite is well-identified
by Ashby's Law in cybernetics (requiring that the controller of any system be
of greater complexity than the system controlled). As with the decommissioning
costs of nuclear power stations, these costs have not been envisaged by the
enthusiasts of simplistic globalization..
In focusing on an essentially geographical and geopolitical understanding
of "globalization", the Secretary-General's entourage (as with the
World Bank) has completely failed to recognize the need for a corresponding
conceptual understanding of globalization through which its implications
can be appropriately managed. There are innovative challenges to both, but hype
concerning the former dangerously and irresponsibly conceals those of the latter.
Just as the USA is the dominant actor in the former and distorts the geopolitical
debate, economics has acquired a predominant position in the latter and distorts
the interdisciplinary debate. This situation effectively oversimplifies, inhibits
and distorts the new forms of "global" dialogue required (see Judge,
1997: Future Generation through Global Conversation):
"Perhaps it is only in mathematics that the clearest, and most general,
distinction is maintained between "global" and "local". Unfortunately that
discipline is incapable of taking into account the essential psychological
distinction between the two that is associated with broader (rather than narrower)
processes of comprehension, communication and learning....In terms of the
challenges of global governance, the ability of a particular discipline to
grasp the challenges of society cannot in this sense be understood as "global".
It is necessarily sub-global, namely local in some way which honours the particular,
"local" insights of that discipline. A single finger cannot pick up and hold
a ball, just as the ball cannot be completely viewed from a single perspective.
In this metaphor, there is also a distinction between "clutching" and the
many skills required to play with the ball through a variety of grips and
actions. What does this then imply for global "conversation"? (https://www.laetusinpraesens.org/docs/converse.php#global)
The question is how insights from the variety of disciplines are to be integrated
dynamically into a whole -- a form of global understanding -- through which
the many processes of globalization (economic, social, cultural, etc) can be
managed, and without designing out alternative insights and initiatives.
This challenge is not being addressed by the UN, although it is addressed to
some degree by some NGOs (see for example the integrated databases of the Union
of International Associations).