Thursday, January 01, 2009

It's Time to Demand Economic Democracy

In the previous two segments of The Commanding Heights, the shortcomings of the two dominant economic orthodoxies of our time -- market economics and Keynesianism -- were explored at length.

In the third installment, "The New Rules of the Game", The Commanading Heights explores the current nature of the global economy, and examines its underlying conflicts.

Some of the points in the film seem facetious knowing what one knows now. For example, Robert Rubin, the co-chairman of Goldman Sachs during the 1992 Presidential election, talks about a meeting with then-Presidential candidate Bill Clinton, wherein he and several other corporate executives impressed upon him the need for renewed fiscal discipline in the United States.

Yet Rubin, as the current director of Citigroup Incorporated, collected more than $17 million in salary and bonuses from that company over the last year.

Especially at a time of economic crisis, that in itself is an awfully curious definition of "fiscal discipline".

While Clinton himself would prove to be a rather undisciplined individual, Clinton did manage to impress some fiscal discipline on the United States. With a then-debt of $4 trillion, it was badly needed.

But what Clinton -- what political leaders in general, in most of the countries in the world -- have failed to do is impress upon multinational corporations the need for fiscal discipline within their own organizations.

Corporate executives paying themselves multi-million dollar compensation packages while those funds could be used preparing for -- or preventing -- economic disasters is comparatively unconscionable.

However, there are answers to many of the the serious problems with the global economy. The most important of them is a democratization of the global economy.

In Jihad vs McWorld, Benjamin Barber writes about two global forces emerging as a result of globalization: "McWorld", representing market-driven consumerism and its accompanying cultural nihilism, and "Jihad", representing reactionary identity politics and its accompanying moral nihilism.

The corporations that control the lion's share of the global economy conduct their business in a disctinctly undemocratic manner. Their decisions are typically made by a very small group of people who certainly do not adequately represent the various stakeholders in their companies.

"Jihad", on the other hand, is democratic -- but only to a certain extent. The forces of "Jihad" are organized around communitarian principles. While each individual "jihadist" movement represents a broad group of people, there is little room for individual freedom within those particular groups. They demand significant personal concessions and unconditional personal loyalties as a condition of group membership.

There is often significant overlap between the forces of "Jihad" and "McWorld". Each often organize themselves and operate according to very similar principles.

But on their own, neither "Jihad" nor "McWorld" offer a tenable alternative to the other, just as the economic history of the past forty years has shown that neither market economics nor Keynesianism are truly tenable alternatives to each other.

What is needed is a "third way". In order for that third way to be created, people need to be able to exert democratic influence on both the corporations that account for so much of the global economy and the various regulatory agencies that operate them.

At least at national scale, the latter is relatively simple. Democratic countries allow for periodic referendums on the policies of these agencies -- at least so much that citizens can throw out the politicians we choose to operate them.

At the international level the matter is much more complex. Organizations such as the World Bank and the World Trade Organization function in distinctly undemocratic manners. Furthermore, there is actually only one method that can reform such institutions: it requires significant international cooperation.

Such organizations can be brought to heel, as was done in 1999 at the famed Battle of Seattle. While the organizers of trade summits have made use of methods to manage political protest and insulate themselves from it -- often banishing political protest from within miles of the meetings themselves -- civil society organizations have increasingly found themselves a seat at the table.

In a process political scientist Nicanor Perlas defines as "threefolding", government, business and civil society can more firmly establish their particular realms of interest. Each can be empowered to defend their particular areas of interest, and cooperate with others when areas of interest overlap.

At first, Perlas notes, such interaction has to be forced. In Seattle, protesters did so by creating an unprecedented ruckus and making themselves unignorable. Other individuals, such as Ralph Nader, have done so using courts of law.

In time, the expectation is that such processes will occur increasingly naturally, and on an increasingly formal basis.

Still, it cannot happen overnight. The prominence that global civil society won at the Battle of Seattle has been at constant risk of evaporation -- let alone decline -- ever since. It requires time and diligence on behalf of those who have concerns about how the global economy is developing. In democratic countries, they have the right to voice such concerns, no matter how hard the task of being heard is becoming.

Democratizing the operations of multinational corporations seems like a daunting task as well. Fortunately, there remains an important back door into the board rooms of the corporate world.

As the film notes, millions of people around the world invest in the market through RRSPs and mutual funds. As such, there are millions of people who, according to Steven Davis, Jon Lukomnik, David Pitt-Watson, control one of the largest pools of mobile capital in the world.

After the repeated stock market crashes of the past months, there is little question that this pool of capital isn't worth nearly as much as it so recently did.

But the economy's reliance on these pools of capital -- and once the economy recovers, it will be as reliant on this capital as it ever was -- makes those who control it very powerful indeed.

If those investing in various pension funds were to start democratically exercising their power, the corporate world would have no choice but to listen. This requires that the "citizen investors" that Davis, Lukomnik and Pitt-Watson learn to use this power.

Just as Ralph Nader took up numerous lawsuits in the name of consumer advocacy, the current economic crisis has shown that it's just as important that dedicated individuals take up the mantle of investor advocacy. Just as our economic elites are concerning themselves with consumer confidence, they must certainly concern themselves with investor confidence as well.

Naturally, the power held by citizen investors will favour those comparative few who enjoy the wealth to invest in the first place.

For those not blessed with such wealth, civil society -- activists, advocacy groups, and labour unions (among others) -- will be an important outlet to democratically exert their influence on the economy. Perlas' three-folding model must be applied as it has never been applied before.

For those imagining, however, that they will cordon off their individual countries or communities, there is little ahead but disappointment.

Telecommunications technology, the media, and trade have rendered globalization a foregone conclusion. It's becoming increasingly difficult to pretend that globalization -- and its accompanying free trade policies -- has forever been inevitable.

The answer now is not to turn back the clock to a time past, and old economic realities that are now unattainable. The answer is to look ahead, and democratize the global economy.

And the time to do it is now, before the world's alternating bands of revolutionaries concoct the next global crisis.

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