10. Commodity Price Stabilisation
Primary commodities (minerals and agricultural raw materials) are inputs
into the manufactured products of the industrial countries. Rises of commodity
prices lead to inflation in industrial countries, because manufactured
goods are priced on a mark-up basis. When inflation is fought with monetary
and fiscal contraction, unemployment rises. In the exporting developing
countries, the incomes of poor exporters fall. The instability also discourages
investment in these commodities. When the primary objective is to fight
inflation, low commodity prices are welcomed by industrial countries. But
the burden is shifter to the poor producers, and aggravated by illiberal
trade and migration policies of the depressed industrial countries. Depressed
prices and low investment then lead to the next violent price increase,
and the cycle is completed. The instability has been made worse by the
tendency of the international financial institutions to advise each exporting
country separately to devalue, to export more of its main commodity, and
to diversify into others, irrespective of the fact that this has led to
global surpluses and falling process of all commodities.
What is needed is a revival of Keynes's proposal. By stabilising commodity
prices both inflation and unemployment in the industrial countries are
reduced. Incomes in the developing countries are stabilised and raised,
by encouraging investment. And the world economy can expand at a stable
rate. "Back to the future of Bretton Woods" would not be a bad slogan for
the next reform of international economic relations.
11. Other Institutional Innovations
We can let our institutional imagination roam and think of other institutional
innovations. A Sustainable Development Commission (or a Global Environmental
Protection Agency) would be concerned with protecting the global air and
the oceans. A Global Energy Agency would avoid the zigzag movements of
oil prices. Producers and consumers would have to agree on the price of
oil in say, 15 years, and move towards it in agreed annual steps. An industrial
Investment Board would avoid the lurches between surplus capacities and
scarcities in fixed investments that take a long time to construct and,
once constructed, last a long time, such as fertiliser, steel, and shipbuilding.
A Global Anti-Monopoly and Restrictive Practices Policy would bring international
policies in line with national ones. As things are, American companies
are prohibited from colluding and forming cartels in the domestic market,
but are encouraged by the Webb Pomerane Act to do so against foreigners.
An International Commission on Global Governance, an Aid Monitoring Institution,
and an Economic Security Council would be other candidates for global institutions.
The conversion of foreign military bases to community centres would take
the form of handing these facilities with excellent infrastructures to
states and local communities.
12. Transnational Corporations
The technological revolutions in information, communications, transport and travel, with the correspondingly rapid growth of the flow of goods and capital and, to a lesser extent, people, across frontiers have shrunk the world and have integrated global markets. Some have put much hope in the resulting growing efficiency of markets, others have expressed fears about the prospects of indigenous enterprises, the growing vulnerability and exposure to uncontrollable outside forces, or about the increasing difficulties of national integration. The critics of the trend towards globalization point to the experience of the past, in which the developing countries served the metropolitan powers.
There is, however, an important difference between the past and the present. Raw materials and minerals, largely the result of physical endowments that yielded rents to a small group, used to play a much more important part than they do today, when acquired human skills and ingenuity, and government policies, are decisive.
Relations between host country governments and transnational corporations have moved from ideological heat to pragmatic light. Confrontation has been replaced by co-operation. The Ford Motor Corporation is no longer regarded by its advocates as the nearest thing to the Ford Foundation, nor by its opponents as the devil if not incarnate, then incorporated. The basic problem is how to get the best out of their potential contribution to technology generation, management and employment, while making them publicly accountable; how to avoid their excessive regulation, while encouraging social responsibility. There is evidence of a move towards a more symbiotic relationship between governments, transnational corporations and markets, as has existed in Japan for some time.
But while the world has found unworkable and has rejected the centralised
process of political decision-making that the centrally planned economies
had adopted, this very same process still governs capitalist and socialist
firms. Although there is now widespread agreement that economies do not
work well if run from the top, a corporation is presumed to work best if
it is. We know that under regimentation human beings do not give their
best. It is a challenge to people of all political convictions to find
ways that harness the enterprise and initiative of the workers at the workplace.
Experiments have been made with self-management, work enrichment, participation,
scaling-down, politicisation of the workplace, self-supervision, and the
introduction of the free market into the plant. Nothing very conclusive
has emerged from these experiments.
13. The International Civil Society
Some think of the international system as a system of states, others include besides states multinational corporations, non-governmental organisations (NGOs), international organisations and individuals. Certainly states play a predominant role in international society, but they are not the only agents. Private voluntary organisations have come to play an increasing role, next to governments and profit-seeking companies. They comprise the most diverse organisations: religious, political, professional, educational, organisations, co-operatives, pressure groups, lobbies, project-oriented, technical assistance, relief, disaster-prevention institutions, etc. Their membership and the loyalties of their members cut across national boundaries. Although they often claim to work without or even against governments, their contributions can best be mobilised jointly with governments. The most successful NGOs in the Third World, such as the Self-Employed Women's Organisation based on Ahgmedabad, India, or the Grameen Bank of Bangladesh, depend for their successful continuing and expanding operations on access to, and support and replication by, governments. Of course, in some situations their function is to criticise and exhort governments, or to fill gaps in government activities, or to do things at lower costs, with better results, and with more popular participation than governments. The relationship between NGOs and governments can be understood as one of co-operative conflict (or creative tensions), in which the challenge of the voluntary agencies and their innovative activities can improve government services and the working of markets, and help to resolve tensions between them. Without them, there is always the danger that private firms become corrupt and governments unresponsive to human needs.
In some situations the state plays a passive role, only responding to the pressures of interest groups. The outcomes will then be determined by the power of these groups, which in turn depends on their size, age, motivation, and enforcement mechanisms. In other cases the state is more active, imposing regulations and restrictions, which can give rise to competitive rent-seeking by private interest groups. In others again, both the private groups and the state work together for common objectives.
Functions are divided between the state and civil society. The institutions of civil society -- churches, trade unions, interest groups, action groups, the media and many others -- are often quite undemocratic and there is a need for the empowerment of vulnerable groups: women, the unemployed, ethnic minorities. There can be undesirable concentration not only of economic and political, but also of social power.
Though there is in the early stages of development a need to strengthen
both states and markets, in fact they often tend to weaken and undermine
each other. It is the institutions of the civil society that can intervene
and inhibit such weakening and undermining. 12 Interactions
between the state, markets and civil society are complex. Both too weak
or too strong a state can discourage the growth of civil society. And too
strong private organisations can undermine the power of the state, as in
Sri Lanka or in Lebanon, and lead to the dissolution of society.
14. Honesty International: A Proposal
Until recently, any public discussion of corruption was taboo. But net to tyranny, corruption is the greatest disease of government. (It is, or course, not confined to government.) It is as old as government itself. But unlike tyranny, corruption cannot flourish in the light of day. Some cultural traits such as "gift-giving" favour it. Some writers have defended it. But everywhere it is outlawed, and unlike some other illegal activities such as gambling, it is not a thing the transgressors boast about. The first step in combating it is, therefore, information that is publicised.
The costs of corruption include: a waste of resources, an inequitable and iniquitous redistribution towards the rich and powerful, a distortion of the incentives of officials, and the breeding of powerful cynicism. Some authors have found reasons to justify limited corruption. It is true that in rare circumstances bribes can supplement very low salaries and oil the wheels of the bureaucratic engine. But if practised on any scale, there can be no doubt that it is very harmful. Far from oiling the wheels, it creates incentives to put grit into the engine, for the removal of which payments are then extracted. It is favoured by the presence of monopoly and discretion, and the absence of accountability. As the pressure on developing countries to reduce public spending is growing, as the best officials are leaving public service, and as the pay of those remaining is reduced, the temptations to accept bribes will be increased.
Several countries have set up anti-corruption agencies, such as Hong
Kong's Independent Commission Against Corruption. In some countries there
are "vigilance commissions" that control corruption. It is proposed here
that in analogy to Amnesty International a non-governmental international
organisation that might be called Honesty International should be established.
It would be financed by voluntary contributions. It would gather information
on corrupt activities from specialised staff (auditors, investigators),
from third parties (the media, banks), from clients, from the public, and
from its own agents. "Whistleblowers" and "clean" officials would be encouraged
and protected. A free press and free media are helpful. Prima facie evidence
would include people living above the standard affordable by government
salaries, personal funds transferred abroad, etc. Honesty International
would then publish the results. The shamefulness of being exposed by itself
would serve as a deterrent. Legal penalties would then reinforce it.
There is, in addition to the market, the state, and the civil society a fourth sector: the family, including the household, the tribe and the clan. It is a consumption, production and reproduction unit. Its activities are not marketed, and therefore often not counted. Its origins are ancient. It takes different forms at different stages of development. The extended family in many developing countries has given place in the North to the nuclear family, which in turn is in the process of dissolution. The neglect of women in some Asian societies, the heavy burden of work put on them in some African societies, the neglect of children by both low and high income households in terms of resources, time and attention, the role of the family as both a production unit and a social safety net in some traditional societies, these are issues worth further exploration. The family plays a particularly important part in enterprises in the informal sector.
A common theme in this essay has been the need for democratisation,
of greater participation, in each of the four responsive to citizens' needs.
And the same is also true of the civil society, where concentrations of
power are often just as strong as in authoritarian governments. It is also
true of the management of firms and profit-seeking enterprises, in which
a hierarchical order prevails. It is true of families, in which the male
head has often a decisive voice. And it is true of international organisations,
which are sometimes like medieval fiefdoms, unrestrained by democratic
control. A move in the direction of fuller participation of all, particularly
the weak, neglected and poor, should stand high on our agenda of reform.
Footnotes:
12.Michael Lipton, "The State-Market Dilemma, Civil Society, and Structural Adjustment," The Round Table (1991), 317, pp. 21-31.