speri.comment: the political economy blog

‘Civic Capitalism’: locating the new model within the global context

We need to build up more intensive and sophisticated mechanisms of global governance capable of serving as the guiding intelligence of the whole global economy

Professors Colin Hay & Tony Payne, Directors of SPERI

Colin Hay and Tony Payne

Colin Hay and Tony Payne

A new national model of civic capitalism has inevitably to be located and embedded in a global context.  The extent and the complexity of the interdependence that has steadily grown between national economies and societies over the past half-century is such that this is now a truism, albeit one still too easily and too frequently overlooked in national policy debates.  In fact, the kind of civic capitalism we propose would be still-born were it to emerge and be thought of purely at a national level.  ‘Civic capitalism in one country’ is an oxymoron.  Or, put slightly differently, the conditions of existence of civic capitalism are not exclusively, nor perhaps even principally, domestic.

In the last of this series of posts we turn then to a vital question, one that in effect oversees the whole debate about the possibility of moving forward towards a civic capitalist model of development anywhere.  This is the matter of how we think about, as a means to reconfigure, what is usually called the system of ‘global governance’.  By this we refer simply to the loose mix of arrangements, institutions and rules that now exists at the global level with a view to giving some coherence and order to the diverse mix of policies and approaches to governance being followed across the many different states of the world.

The structures of global governance that we have inherited from the neoliberal era are actually very limited, both in scope and ambition.  For some time the dominant view judged that little more was required than effective rules for managing competition between national economies.  From this perspective, the International Monetary Fund (IMF) provided surveillance of financial risk and maintained the stability of the international financial order; the World Bank offered technical and other support to the development efforts of the poorer countries; and the World Trade Organization (WTO) negotiated an (ostensibly) ever more open global trading regime.  It was also highly significant that the global management and amelioration of climate change has hitherto been pursued within a United Nations framework and has therefore sat outside the responsibilities of this interconnected set of global governance institutions.

That system can hardly be judged a great success today.  Had it performed even the modest task for which it was designed, we would surely not have experienced the financial crisis of 2008-9 and suffered the subsequent Great Recession, and we wouldn’t now be witnessing the lack of progress in both the ongoing WTO trade round and the UN climate change talks.  Clearly, something isn’t working – and, put in these terms, it hasn’t been working for a long time.  The fact is that the current neoliberal system of global governance is presently locked in a mode of endemic indecision.  As we have seen, it wasn’t that ambitious in the first place, but it doesn’t seem any longer as if it can strike the deals that are needed to keep even its limited aspirations airborne.  The shifting balance of power amongst the leading states in the world has made things just too complex and of itself necessitates the striking of a new deal.

In short, we need something better, something more intensive and sophisticated as a system of global governance, something underpinned by a vision of how we want the world to be run, precisely so that citizens in different countries can then decide how they want their political economies to operate on their behalf.  The good news is that we know we can have this, because we have had it before – from 1944 to the beginning of the 1970s.

The key global governance institutions that we highlighted earlier – the IMF, the World Bank and the WTO – were all conceived as part of a vision for the restructuring of the post-Second World War order that was enshrined at the famous Bretton Woods conference of 1944.  All of this is of course well known.  But what is worth reminding ourselves is that the original vision, and indeed the initial working of the system, was much, much richer in aspiration and in practice than the narrower, more limited, successor to Bretton Woods that came into being during the neoliberal hey-day of the 1980s.  Within the academic world this system was famously described by John Ruggie as a form of  ‘embedded liberalism’, by which he meant that a significant measure of liberalism had been safely and securely grounded within the social and political orders of key participant countries.  Within the world of political ideas more generally, it was seen to constitute the underpinning political economy of social democracy.

In a new era characterised by much greater openness and interdependence, we can’t hope to create a new ‘Bretton Woods’ simply by emulating the form taken by a series of bygone institutions.  Many projects and thinkers have tried to do this over many years, and they have all failed.  They have mostly tended to look back, rather than forward, which is actually what we now need to do.  It is possible to begin to design a new package of rules and institutions for better global governance and to infuse that package with a spirit that is akin to that which drove the original Bretton Woods settlement and yet is at the same time firmly post-Bretton Woods in its grasp of changed realities.

In our view, the key question is a straightforward one.  What might such a global hosting system for various new models of civic capitalism look like?  We think it would have to possess the following four characteristics.

First, better global governance does need a renewed and extended vision.  On this front, a great opportunity presents itself.  This is the process already under way at the United Nations whereby the former Millennium Development Goals (MDGs) are being re-worked for the post-2015 era.  Whatever one thinks of the limits and nature of the existing MDGs, they have been hugely influential in setting the tone of global ambition for more than a decade.  After all, no fewer than 150 heads of state signed up to the Millennium Declaration in September 2000.  We need now to take a step further forward along the lines proposed by Sakiko Fukuda-Parr who has identified what she describes as  ‘the missing MDG’.  In her view, this should be the goal of seeking to reduce inequality within and between countries.  How apt!  The post-2015 vision for global governance should be, genuinely, to ‘make globalisation more inclusive’ (and hence more global).

Second, better global governance requires a coordinating agency to steer the global political economy.  Again, because of the panicky move taken by President George W. Bush at the beginning of the global financial crisis – at a time when he is supposed to have observed colloquially that ‘this sucker could go down’ – a Group of 20 (the G20) now exists at the level of leaders and heads of government.  It has met eight times thus far and by common consent has fallen away in effectiveness and indeed unity following a highly promising start.  Yet it is still there and it has the great political advantage of representing via its twenty member-states some 80-90 per cent of the world’s GDP and trade.  As such, it has the capacity to steer and to provide the political will and muscle to underpin global governance.  Accordingly, we have to work hard to think of ways to improve its current modus operandi.

Third, better global governance must be grounded within a truly coherent set of global governance institutional pillars, all of which in effect take their political lead from the G20. The particular elements of this structure can be debated and changes in mandate are undoubtedly needed for some current institutions.  For all that, the presence on the scene already of the IMF, the World Bank, the WTO and now the Financial Stability Board is a good starting-point.  It should be remembered that these bodies are seen in US ‘tea party’ circles as constituting elements of an embryonic and dangerous global state that needs to be brought down.  From our perspective these institutions should be defended and improved.  But what does urgently need to be added to the mix is a mechanism that can bring climate change directly into the global policy debate alongside issues of growth, stability and development.  It can’t any longer be safely left outside the main tent.  If this means creating a new global institution, then so be it.

Fourth, better global governance would be greatly facilitated by much more deliberation, debate and argument about global choices and options.  In other words, new ‘top-down’ moves, as above, must be complemented by equally important, new, ‘bottom-up’ initiatives.  This is really vital and is often neglected – and it is integral, we think, to any project to make the institutions of global governance answer to a civic capitalist agenda.  We mean deliberation both with a ‘hard edge’ (as illustrated, for example, in the debates between state representatives in the UN General Assembly and in the UN system as a whole), but also with a ‘soft edge’, as manifested in the activism of global civil society, in the global academy of ideas and also, although as yet to an insufficient degree, in the global media.  This type of deliberation really does alter the climate of opinion in which ‘mega-multilateralism’ can then do its business.

In sum, we argue that, by these various means, better global governance can both serve as the guiding intelligence of the global political economy and reflect to some degree a sense of the global popular will.  Inside such a world order civic capitalism at least has a chance.

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