The present global crisis has both international and national dimensions.
The international dimension relates, in my view, to the global governance regime . The national dimension relates to national public choices and policies. As it concerns the global governance regime’s failure to materialize equitable and improvement of people’s living standards worldwide, it is worth recalling that such a failed regime results from both historical and political factors.
Since the paradigma change marked by the fall of the Berlin wall in 1989, and the end of the cold war, political discourses on development and economic policies put emphasis on the primary role of the private sector, including the financial sector, in both economic and social development. As a result of this political discourse shift, governments have been advocating for cuts in ‘useless’ public expenses, particularly in sectors such as education and health care. The consequent reduced role of the State in the economy followed. Relying upon market forces to achieve economic development has been the mantra of economics worldwide. According to the liberal discourses, economic development would have a natural cascading effect from the international to the national and finally to the local level.
Simultaneously, the financial and dematerialized economy has taken a central stage in public discourses, particularly in the industrialized countries. Such a trend has had consequences for both the world economy as well as for national development policies worldwide. Indeed, national authorities diluted supervision of the financial sector activities, while leaving the real economy to the Market self-regulatory function. The market-based society was expected to take care of world welfare. As a result, in many cases, the links between economic growth, production systems and social development were neglected. Governments neglected the polarizing social effects of market instruments. While at the national level, the role and the margins of maneuverability by national authorities in formulating, implementing and evaluating national economic and financial policies was delegated to the Market. The current world crisis proves that international economic development policies that neglect the political economy of power relations among social groups can achieve neither social justice nor peace.
At the moment, practically all nations continue to face the challenges posed by the reduction of resources available to national authorities to provide services to their population, including essential services.
As a result, the post-industrial countries gave up the fundamental function of the State as an economic actor of redistribution and guarantor of social peace and stability. The real economy is so bypassed by the virtual economy first, and then by the artificial intelligence.
The present architecture of global governance is definitely to be improved. It must take into account the challenges posed by the services economy as well as the unbalance of international decision-making rules.
Action needed:
At the International Level
The existing global economic, trade and financial governance regimes must be rebalanced. The entry point of such a process would be a large debate among governments’ representatives, civil society and parliaments on the right-based and justice-based international laws. International and national processes have to be based again on cooperation rather than competition and provide a more equilibrated power balance in the financial and trade political economy. The rebalancing of the world trading system remains a political choice to be made by the major players in world trade. However, it must also be put in the context of the whole set of measures that are to be taken to draw the lessons from the current crisis. International (as well as domestic) financial rules are to be formulated and implemented to better anticipate actors’ behaviors and to avoid costly emergency situations as the system is witnessing nowadays.
Public funds used to save private companies do pose a serious reflection issue with regard to the existing governance rules. The present system has put governments in the uncomfortable position of reacting ex post to the crisis, while demonstrating its volatility and instability. The new Global Regulation should allow action to be taken ex ante. To do so, monitoring and evaluation rules are to be put in place.
At the National Level
The Role of the State shall be refocused and strengthened, in particular as the guarantor of the necessary balance of power among economic and social actors.
The Role of National Institutions needs to be redefined to support market–friendly reforms or to mediate and support redistribution and ensure social peace.
The Role of markets in societies and regulation and transparency in risk-taking. The idea of self-regulated markets and societies must be replaced by the idea that the economic activity must be embedded in the social behaviors and aimed at the well-being of the whole populations.
Methods to ensure clear and open channels of communication between governments and their population must also be improved to make sure that decision-making at the national level takes into account interests of the majority, while being based on national consultative and negotiating processes.
Public policies must give priority to active employment and taxation policies to sustain production and services in the real economy.
The Need for Change
The existing global economic and financial governance failed to guarantee the necessary stability and predictability of its operations and impacts. It did not manage to lift peoples out of poverty. The economic activity and global economic growth are not ends in themselves. They have to serve human realities, while promoting a respect for social and economic rights including through economic welfare. If economic policies serve a minority against a majority, then they fail in what should be their main mission: build social peace and cohesion. Economic policies have to be at the service of social welfare and well being for all. Time has come to put citizens at the center of international and national policy-making through national consultation mechanisms and the participation of stakeholders in decision-making.
Therefore, decisions taken by their representatives are to be in harmony with local needs and aspirations. Social cohesion has to be improved, worked upon over time, and its achievement demands a constant political dialogue and compromise as well as political accountability and commitment.
This is not utopia but rather the lucidity of those, who had realized already in 1944 that “Poverty anywhere is a threat to prosperity everywhere ”
