Global Economy & Civil Society
Myron J. Frankman


A version of this paper appears in Ted Schrecker, ed., Surviving Globalism: The Social and Environmental Challenges (London: Macmillan Press Ltd., 1997), 95-107.


INTRODUCTION

The shifting role of state and market is a recurrent theme in human affairs. At times governing powers search for a balance between these two ideal types. At other times, one alternative or the other is seen to represent a utopian solution to human ills. One chronicle of this changing balance was provided for us in 1944 by Karl Polanyi in The Great Transformation. (1)Today we are in the midst of replaying a variation of what Polanyi recounted.


Polanyi wrote that: "A nation may be handicapped in its struggle for survival by the fact that its institutions, or some of them, belong to a type that happens to be on the down grade . . . " (2) He spoke of "groups [which] are pushing that which is falling . . . and may even be perverting the trend to make it serve their aims." (3) Many of the measures that had been taken by societies to protect themselves have been and continue to be swept aside. Once again the possibility of annihilation of the "human and natural substance of society" confronts us. In the continuously transforming world in which we live today, the solutions implemented in an earlier age no longer seem viable. Our societal defenses are being singled out as being in opposition to our economic competitiveness. Polanyi spoke of nineteenth century society as being constricted by economics (4) and referred to "the pernicious nineteenth century dogma of the necessary uniformity of domestic regimes within the orbit of world economy." (5) It would appear that we have returned to the situation of uniform prescriptions at the end of the twentieth century. The gold standard may have vanished, but we remain with the necessity to deflate, devalue the currency, and despoil the social sector in the often vain hope of being able to compete in a world where low cost, large volume production leaves room for few firms in a variety of industries. (6)


As the global market expands, we seem for the moment to see mainly movements supportive of the prevalent trend and not yet the effective counter movements that check the "expansion in definite directions" (7) that Polanyi spoke about in his discussion of the self-protection of society. In today's context among the measures that we must seriously consider are those that involve institution building at a global level. Observers since at least the 1930s have remarked on the need to resolve problems of economic management at a level beyond that of the action of a single state. In the late 1930s and early 1940s numerous writers proposed measures intended to prevent the recurrence of another great depression and/or of another World War. Economists like James Meade and Jan Tinbergen had visions of international organizations with substantial powers for managing the world economy, which would redistribute income on a global basis. (8) Instead we emerged from the Second World War with an international system shaped largely by the position of strength of the United States. The more visionary proposals were cast aside in favor of economic management that uniquely stressed the freeing of markets. (9)


The search in the 1930s and the 1940s for approaches that would prevent war and depression was not limited to economists. There were many who strongly urged that movement toward global federalism was indispensable. Those voices grew even stronger after the dropping of atomic bombs on Hiroshima and Nagasaki. At the time that official representatives in San Francisco in October 1945 were but a few days away from signing the United Nations charter, the New York Times carried a front page account of a conference in Dublin, New Hampshire whose distinguished delegates signed a declaration espousing global democracy. (10) One of those who helped shape opinion in America in those years was E. B. White, famous, among other things, for his stories for children. Between 1943 and 1946 White wrote a series of editorials in The New Yorker magazine supporting democratic federal world government, a collection of which were subsequently published as a book bearing the title of The Wild Flag. (11) The following is from White's editorial of June 1, 1946:

The promising convergence of ideas spawned by the years of global economic crisis and war is barely remembered today. It was swept aside during the anti-Communist witchhunt of the late 1940s and 1950s in the United States, when it was scarcely safe to entertain even private thoughts about altering the world order. Ellen Schrecker has described in detail the "almost automatic sanctions [by private employers, including universities] on the people who had been described as politically undesirable" by Congressional hearings. (12) In that climate, "open criticism of the political status quo disappeared," as did consideration of topics imagined to be controversial. (13) The blinders with which we were fitted during the McCarthy years have kept us slavishly focused on national sovereignty for half a century longer than is desirable for either humanity or the flora and other fauna of the Earth.

TINA 1: THE RESURGENCE OF FREE MARKETS

We apparently have Margaret Thatcher to thank or blame for the acronym TINA -- "There Is No Alternative" -- which rationalizes the current quest for a market economy utopia. She insisted that there were no alternatives to liberalization, privatization, downsizing the state and creating what are euphemistically referred to as flexible labor markets.
When the prevailing myth in Latin America was that a supposedly autonomous state could fashion necessary solutions, Victor Alba suggested "these myths generate strange collective superstitions, which are clad in scientific (I might almost say dogmatic) garb by the economists and politicians of the day. They become the panacea of the moment." (14) Today's collective superstitions in support of market solutions are so pervasive and so sophistically persuasive that they lead many of those threatened by the economic sword of Damocles, or even already victimized by it, to vote for governments pledged to liberalization in the name of deficit reduction and competitiveness. (15)


Indeed the induced attachment of the popular mind to market solutions includes a conviction that they will ultimately lead us to paradise. Fatal weaknesses in economic logic are conveniently disregarded by many economists who have chosen to play the tune that those who pay the piper wish to hear. In a book intended to teach neophytes the tricks of successful policy advising, David Greenaway and Chris Milner, both active structural adjustment consultants for the World Bank, offer the following counsel with regard to one analytic approach: "[W]e saw that although the information content was less . . . it had the virtue of being a simple, transparent measure which can be readily understood." (16) In the face of experts who claim to have the truth, John Dryzek's plea for the "construction and maintenance of autonomous public spheres, whose confrontation with the state is unremitting," (17) takes on special urgency.


What I choose to call TINA 1 is indeed a stark utopia: As government budget deficit reduction and corporate and governmental downsizing spread globally, they leave in their wake devastated social programs, structural unemployment (as both public and private sector jobs disappear) and growing inequality of income and opportunity. As national governments deliver fewer and fewer benefits to regions, the financial "glue" that has been one of the elements holding countries together may gradually dissolve. (18) In today's world of top-down globalization, local political action is likely to provide at best only a modest degree of palliation for some. In this context, as Susan Strange observes, differences between policies of government and opposition parties disappear, as "society, economy and authority are no longer bound by the frontiers of the territorial state." (19)


TINA 1 rests heavily on the counterfactual assumptions of neo-classical economics, where specialization in production based on static comparative advantage both resolves balance of payments problems and leads to mutual gain. In the real world, where nations vie with one another through tax competition, beggar-thy-neighbor devaluations and social dumping, there are distinct losers and gainers. In that context, it is inappropriate to speak abstractly about nation's gaining, as gain is not shared by all. The cuts in personal and corporate tax rates introduced during the Reagan government in 1981, was one of the elements which brought record levels of capital flows into the United States. (20) Associated with that was a substantial shift in U.S. income distribution in favor of the wealthy. (21)


The free market utopia is at best a utopia for the haves, not for the have-nots. Of course, not all of today's haves can be sure of their position tomorrow. In the past, governments may have had too much power and been subject to too little control. In recent years, however, we have ridden the pendulum to the other extreme and made the world too safe for capital, with too little regard for the average child, woman and man. Economically and politically, during the period of the active state and, more particularly, now that market forces are said to cure all, capital has been the key beneficiary. With the concentration of income, wealth and ownership of the past two decades or more, it is inappropriate to speak of either economic democracy or political democracy.

TINA 2: GLOBAL GOVERNANCE?

In one sense only, Mrs. Thatcher was right. There is indeed no alternative. Unfortunately, her recipe was the wrong one. Making the world safe for some owners of capital does not make the world safe for nature or the bulk of the human subset thereof. TINA 1 is a recipe for disaster, for concentration of wealth, for social breakdown and perhaps, sooner than we care to imagine, for an abridgment of whatever substantive democracy still remains. In contemplating the fate of countries recently beginning the transition to democracy, Adam Przeworksi has remarked: "To be consolidated, democratic institutions must at the same time protect all major interests and generate economic results." (22) Reform strategies that combine "a turn toward markets with transformations of property [rights]," (23) such as TINA 1, can prove destabilizing both for transitional and established democracies.


Although considerable progress toward democratization has occurred, TINA 1 confronts us with a return to despotic rule, where elites rule in the name of the market, rather than in the name of either a monarch or the faith. It is not too far-fetched to see in our current circumstances an echo of the following passage from Thomas Paine's 1791 The Rights of Man:

Each of us who dutifully toes the line and explains that "the deficit made me do it" has become, like it or not, part of the tyranny of the free market despotism.


The only alternative to the negative sum game of competitiveness in which we are all engaged is TINA 2, democratic federal global governance. This is an old solution whose time has come. TINA 2 involves no more and no less than extending democratic federal institutions beyond national boundaries. In our day, this should strike us as less remarkable than the forging of nations from smaller units over the past several centuries. Ours is one world; our nation is the planet and the mapping of many of our current problems is global. This is a task that we must pursue energetically, for global governance is very likely the only alternative that can rescue us from our current impasse.


In a paradoxical reversal, to be able effectively to assure local equity, opportunity and justice, we may have to act globally -- what Richard Falk has referred to as "bottom-up-globalization". (25) The reality of increasing global concentration of income necessitates that democratic structures be extended to facilitate global taxation, global redistribution of income and the universalization of what Tocqueville called "equality of conditions." A global market requires global offsets, which, in turn, requires a consciousness of the link between worsening local conditions and the absence of responsive mechanisms of global governance. As the tax competition of sovereign states for industrial activity increases, reduction of social expenditures at home is predictably matched by a reticence to continue voluntary support of international activities in general and of foreign aid to developing countries, in particular. The precariousness of voluntary funding for financing global order has prompted numerous for global taxation dating back to at least 1884. As the world restructures, we can conceive of a part of such tax revenues being distributed not uniquely to developing countries, but more generally to those suffering from the consequences of globalization, whether in the north or the south. Among these proposed revenue sources are taxes on foreign trade, foreign travel, fees for the use of global commons (deep-sea bed resources and geo-stationary orbits) and global personal and corporate income taxes. (26)


The most frequently discussed revenue-raising proposal of late has been the Tobin Tax on foreign exchange transactions. When originally presented in 1972, the intention was not to raise revenue, but to "throw sand in the wheels of international finance." (27) The recent "rediscovery" of the proposal reflects the enormous revenue potential offered by the exponential growth of daily volume in cross-border financial transactions. It is, of course, the hyper-mobility of financial flows that represents a sword of Damocles that is perceived to threaten any government contemplating measures that diverge from the current market conception of proper public sector behavior. A contrasting view would see the Tobin Tax as an anachronism, desperately striving to restore some measure of economic sovereignty to national authorities. (28) The world as a single market would likely be served better by a single currency in the context of a democratically controlled public sector, rather than the multiplicity of currencies that presently plague us.


If one seeks to enhance autonomy for the local or for the regional, one must do so by democratizing governance at all levels, those that exist and those that are yet to be created, and in as many contexts as possible. Even in the classroom, one does not learn to value democracy by reading scholarly works, but rather by first hand experience of the play of argument and laboring together to shape workable rules. One must also insist on the principal of subsidiarity -- control at the lowest level that is practicable. This lesson is clear to many regions of Europe, which have looked to Brussels, rather than to their national capitals in order to foster local autonomy. (29) To turn back the tide of globalization seems most unlikely, but markets can be tamed and substantive democracy can be enhanced. These are difficult, full-time tasks, but to fail is likely to be both truly immoral and potentially catastrophic. Negative sum scenarios which generate unemployment in the name of competitiveness have led to war in the past, they can easily do so again.


We are already engaged in a war of sorts against the powerless, a war declared by those who are currently privileged and secure. The extreme expression of present trends would be a world without community, without responsibility and without ethics, other than the "ethics" of consumerism, of the bottom line, and of economic indicators which tell us of the progress of selected abstractions which may have little connection to the well-being of people.

GLOBAL CIVIL SOCIETY: THE MISSING LINK

Globalization is the reality that all of us confront. With some 44 percent of the world now living in urban areas (31) and with all but the smallest part of the earth's rural population included in the realm of the automobile and the radio, if not television, VCRs and pirate videos, one can speak seriously of an emerging global culture. And once again academics are writing about global governance. That is a hopeful sign, but it is not enough. I would suggest that we must move from global culture to global civil society.


When does the common experience of everyday lead us to the unmistakable conclusion that we are citizens of the globe, that we share a common predicament, common interests and common opportunities? One recent writer after another has remarked on the social correlates of globalization and has tried to discern responses. Marta Fuentes and André Gunder Frank have pointed to spontaneous social movements as a force serving to "extend, deepen and even redefine democracy from traditional state, political, and economic democracy to civil democracy in civil society." (32) A year later they wrote of the role of "autonomous participatory civil democracy in (often sub- but also transnational) civil society." (33)


If people work together on a regular basis across national boundaries does the potential for global governance grow unaided in front of our very eyes like bamboo? Fuentes and Frank suggest that social movements need no assistance, since "like street theater, [they] write their own scripts -- if any -- as they go along, any prescription of agendas or strategies, let alone tactics, by outsiders -- not to mention intellectuals -- is likely to be irrelevant at best and counter-productive at worst." (34) Although ideally no one need be an outsider to global civil society, we can think of the formation (or the disintegration) (35) of global civil society not as a movement, but rather as a concatenation of diffuse stirrings.


Fuentes and Frank may be correct in suggesting that no help is needed, but it does not hurt if in the scholarly and popular press products of the mind appear to complement feelings of the heart. Lord Keynes long ago told us that we are the prisoners of academic scribblers. The relative absence for many years of compelling scribblers sympathetic to a democratic world order has meant the absence of an important catalytic agent. The blinding effect of analyses in the social sciences, in the media, and in politics which treat the national unit as the highest level for political action and writings in economics, in particular, which either pretend that government doesn't exist or contend that it shouldn't exist are part of our current predicament. People reach out for organizing principles that square with their common perceptions. What they encounter in many instances today are principles that divide and that lead to turning against the "other" as the source of the difficulties, be that other a visible or audible minority or even a member of the family. In a world in which reciprocity and redistribution disappear even within the family, is it any surprise that there is applause when the state begins dismantling the redistribution mechanisms? Thorstein Veblen's homo economicus, who "has neither antecedent nor consequent", (36) is now afoot on the landscape, no longer merely a figment of theorizing. We have in many ways reversed the relation between economy and society which Polanyi described: society now seems to be embedded in the economy. In the circumstances, voices suggesting that there are alternatives seem entirely appropriate.


Fuentes and Frank reminded us that the spread of the world economy in the nineteenth century sparked peasant revolts as markets reached to remote hinterlands. (37) The current expansionary wave is now touching the modern landless peasantry, the urban dwellers whose security resides in state-provided entitlements and in presumed property rights in jobs. In the earlier period the profitability of export to global markets displaced peasant production. Today it is once again the global market that is the culprit in the guise of technologies which reduce the need for labor, in the mobility of funds for investment in production and in the hypermobility of funds seeking quick financial gain.


Unlike Fuentes and Frank, Elise Boulding has spelled out a strategy intended to facilitate the coming of global civil society. In her view the device which is at our disposal is that of the INGO, the international non-governmental organization. Some 20,000 of these INGOs were in existence in 1988 when her Building a Global Civil Society appeared. She urges us all to become involved with at least one such society (even the Boy Scouts and Girl Guides) as a means of breaking loose from the fetters of place in our view of the world. (38) In her view, such involvement can be a building block in "crafting" global civil society, if the global nature of these organizations is emphasized and exploited. Although a proactive approach is useful, we may, to paraphrase C.S. Lewis, be surprised by global civil society. It grows with each and every interaction across cultures, across national boundaries, across classes. Again to invoke Fuentes and Frank, like street theater it does not have a script. And just as global governance may actually enhance some dimensions of local autonomy, global and local civil society may also be seen a symbiotic. The building blocks for global civil society may be seen, in their local manifestations, as vehicles which either preserve or restore a waning local civil society.

CONCLUSION

As the gulf between individuals around the globe narrows, as the old hierarchical structures weaken, as we cease to see others as enemies, as relations between nations are supplanted by exchanges between people, rather than diplomats, the possibility may arise for structuring relations between the people of the world on the basis of cooperative interaction rather than threat.


In the concluding chapter of The Great Transformation, Polanyi argues for a double movement: devolution of freedom in the face of the necessity for higher levels of control. With the disappearance of substantial elements of national economic sovereignty, we must look to the global level for counter movements that check the excesses related to market expansion. Offsets to the effects of global markets must be sought in federally structured democratic global political systems and globally guaranteed freedom. Technical solutions must be shaped within a context of the play of global political processes. As global civil society takes form, global federalism becomes a distinct possibility. It is pointless to expect the implementation of global initiatives, such as global taxation and progressive global income redistribution, until the people of the world have staked out a claim to a broader citizenship. To put it another way, when the organizational framework of global civil society grows, the pressures for global democratic management will also grow. At that point ideas which were once thought to be utopian will become practical and will be reshaped by the play of political interests.


Rather than seeing the global and local as being antithetical, it is necessary to contemplate globalizing the local as Vandana Shiva suggests:

What leads me to suggest that the time has finally come for the old utopian ideal of democratic global governance, is my belief that global civil society, though of recent vintage and still shaping itself, is today very much a reality. The reality of global civil society alters radically the ways and means for constructive political action. Many of us are already involved in extensive global networks; many more are discovering that possibility daily. We are in the midst of a major rethinking, which may be viewed years from now as having been a veritable Reformation. I submit that the current rethinking may lead many to converge on the desirability of TINA 2: democratic global federal government: not the old fashioned, top-down procedural democracy, but substantive democracy: accountable, accessible, multi-level and open.


Notes (click on back to return to text)

1 Karl Polanyi, The Great Transformation (Boston: Beacon Press, 1957).

2 Ibid: 28.

3 Ibid.

4 Ibid: 252.

5 Ibid: 253.

6 Those who preach the dogma of liberalization give little attention to the reality of scale economies, preferring to base their policy recommendations on the theoretical fiction of constant return to scale. See, for example, David Greenaway and Chris Milner, Trade and Industrial Policy in Developing Countries: A Manual of Policy Analysis (Ann Arbor: The University of Michigan Press, 1993). Were constant returns to scale to prevail, I would be able to manufacture cars in my garage at the same unit cost as General Motors. The existence of increasing returns to scale is at the heart of recommendations for a protectionist industrial policy.

7 Polanyi: 130.

8 James E. Meade, The Economic Basis of a Durable Peace (New York: Oxford University Press, 1940) and Jan Tinbergen, International Economic Co-operation (Amsterdam: Elsevier, 1945).

9 See, for example, Myron J. Frankman, "International Taxation: The Trajectory of an Idea from Lorimer to Brandt," World Development, 24 (May 1996).

10 New York Times, October 17, 1945: 1.

11 E.B. White, The Wild Flag: Editorials from The New Yorker on Federal World Government and Other Matters (Boston: Houghton Mifflin Company, c. 1946).

12 Ellen W. Schrecker, No Ivory Tower: McCarthyism and the Universities (Oxford: Oxford University Press, 1986): 9. For an account by a noted academic who was an early target of Senator McCarthy, see Owen Lattimore, Ordeal By Slander (Boston: Little, Brown and Co., 1950).

13 Schrecker: 39.

14 Victor Alba in Albert Hirschman, ed., Latin American Issues: Essays and Comments (New York: Twentieth Century Fund, 1961): 45.

15 M. Patricia Marchak notes the self-interested use of ever more sophisticated marketing techniques in creating public opinion. The Integrated Circus: The New Right and the Restructuring of Global Markets (Montreal: McGill-Queen's Press, 1991): 113.

16 Greenaway and Milner: 223.

17 John Dryzek, "Ecology and Discursive Democracy: Beyond Liberal Capitalism and the Administrative State," in Martin O'Connor, ed., Is Capitalism Sustainable? Political Economy and the Politics of Ecology (New York: The Guilford Press, 1994): 189.

18 Michel Chossudovsky provides details for Canada of the phasing out of federal government transfers to the provinces for social programs, as a means of dealing with the federal debt. He notes that there has been an accompanying increase in secessionist tendencies extending beyond Quebec. "L'éclatement annoncé de la Confédération canadienne," Le Monde diplomatique, 42 (December 1995), 24-25

19 Susan Strange, "The Limits of Politics," Government and Opposition, 30 (Summer 1995): 291, 310.

20 Between 1983 and 1988 the United States received the largest gross and net inflows of direct foreign investment of any world area. Western Europe and Japan were net exporters of direct foreign investment, while the net inflows of the United States exceeded those of the less developed countries by 40 percent. United Nations Conference on Trade and Development, World Investment Report 1995 (New York: United Nations, 1995): 391-400.

21 The U.S. Congressional Budget Office made an early estimate of the combined tax cut gains and benefit losses of the US tax changes of the early 1980s. Its study indicated that the US households with income below the poverty line lost $390 per year, while the households with income equal or greater than $80,000, gained $8,260 per year. Keesings Contemporary Archives, Record of World Events, 30 (1984): 32901. A more recent evaluation showed that between 1980 and 1989 the share of the nation's private wealth held by the richest 1 percent of the households increased from 20 percent to 40 percent, reversing a lengthy downward trend. The New York Times (April 17, 1995): 1.

22Adam Przeworksi, Democracy and the Market: Political and Economic Reforms in Eastern Europe and Latin America (New York: Cambridge University Press, 1991): 89.

23 Przeworksi: 189.

24 Thomas Paine, The Rights of Man (London: Dent, 1954).

25 Richard Falk, "The Making of Global Citizenship" in J. Brecher, J.B. Childs and J. Cutler, eds., Global Visions: Beyond the New World Order (Montreal: Black Rose Books): 39.

26 See Frankman, "International Taxation"; Eleanor Steinberg and Joseph A. Yager, with Gerard M. Brannon, New Means of Financing International Needs (Washington: The Brookings Institution, 1978); and Ruben P. Mendez, International Public Finance: A New Perspective on Global Relations (New York: Oxford University Press, 1992).

27 James Tobin, The New Economics One Decade Older, Eliot Janeway Lectures, 1972 (Princeton: Princeton University Press, 1974).

28 Tobin, himself, recognizes that the best solution would be "a common currency, common monetary and fiscal policy, and economic integration." Tobin, "A Proposal for International Monetary Reform," Eastern Economic Journal, 4 (July/Oct 1978): 154. See also David Felix, "The Tobin Tax Proposal: Background, Issues and Prospects," Futures, 27 (March 1995): 195-208.

29 The fast growing regions of Baden-Würtemberg, Catalonia, Lombardy and Rhône-Alpes look to Brussels for support, while some in Brussels look to the regions to help quicken the pace of union and to foster the emergence of a European industrial policy. Jean-Pierre Husson et Yves Pérez, "L'absence d'ambition industrielle communautaire," Manière de voir: Europe L'Utopie Blessée, 22 (May 1994), 58.

30 Alexis de Tocqueville, Democracy in America, George Lawrence trans. (New York: Harper & Row, Publishers, 1988).

31 The world's urban population is estimated to have grown from 1.0 billion in 1960 to 2.4 billion in 1992 and is projected to reach 2.9 billion by 2000 (48 percent in urban areas) and 5 billion by 2025 (61 percent urban). Almost two-thirds of the world's urban population already lives in the developing countries; by 2025 this could be as high as 80 percent. UNDP, Human Development Report, 1995, tables 32 & 33 and Eugene Linden, "The Exploding Cities of the Developing World," Foreign Affairs, 75 (Jan/Feb 1996): 53.

32 Marta Fuentes and André Gunder Frank, "Ten Theses on Social Movements," World Development, 17 (Feb. 1989): 179.

33 Fuentes and Frank, "Civil Democracy: Social Movements in Recent World History," in Samir Amin, Giovanni Arrighi, André Gunder Frank, and Immanuel Wallerstein, Transforming the Revolution: Social Movements and the World-System (New York: Monthly Review Press 1990): 178.

34 Fuentes and Frank (1989): 179.

35 Jean Bethke Elshtain has spoken of the "loss of civil society" in her Democracy on Trial, CBC Massey Lecture Series (Toronto: House of Anansi, 1993): 6.

36 Thorstein Veblen, The Place of Science in Modern Civilisation and Other Essays, (New York: B.W. Huebsch, 1919): 73.

37 Fuentes and Frank (1990): 150-51.

38 Elise Boulding, Building A Global Civic Culture: Education for an Interdependent World (New York: Columbia University, Teachers College Press, 1988): 118-39.

39Vandana Shiva, "The Greening of the Global Reach," in Wolfgang Sachs, ed. (1993) Global Ecology: A New Arena of Political Conflict, (London: Zed Books): 154-55. The following is in a similar vein: "In practice, there are no development institutions managing the new integrated global economy -- much less doing so democratically in the interests of the world's people." United Nations Development Program, Human Development Report, 1992, (New York: Oxford University Press, 1992): 78.