By: Edmundo Sussumu Fujita
Source: The Jakarta Post, February 4, 2009
Suddenly, last summer, the concept of globalization acquired new perceptions. Seen until that time as the road paved with good intentions for a rosy future for mankind, it became overnight the nemesis for perdition of innocents.
Globalization is good for you, used to say the heralds of the “Washington Consensus”. The “End of History” would bring about the eternal monotony of prosperity, announced triumphantly the heroes of the new civilization. There would be no more centers dominating peripheries, thanks to the “decoupling” of the geo-economical cardinal points, assured confidently the benefactors and beneficiaries of the new order.
But when an increasing number of people started to note that “sub-prime” in certain instances does not necessarily refer to an inferior quality of beef rib, a silent “tsunami” started to form across the oceans. First, there was a realization that the globalization of financial markets was a desirable process when it occurred during a hopefully eternal bull market, but it became extremely detrimental when it translated into a universally contagious crisis of confidence.
Secondly, the increasing fading of the correlation between the financial and the real markets did not prevent the latter from being contaminated by the disturbances in the former, due to the culture of indebtedness prevalent in certain societies.
Thirdly, the belief in the decoupling of economies in some emerging regions from the influence of developments in the central actors proved to be shallow, due to the close reliance of exports from many developing countries on imports and finance from crisis-affected countries.
Now, a new ideological debate is under way in many decision-making, opinion-building and academic circles about the best strategies to combat the globalization crisis. Some argue for a bigger regulation and intervention by governments, through a return to nationalization policies and/or more populist oriented programs. Others insist on defending the free-reign of the market forces and more tax cuts for the affluent classes, while demanding - somewhat contradictorily - the pumping of more money by governments to private financial entities without disclosing how such generous grants of public money is to be used by the beleaguered and, until recently, well rewarded sectors.
In reality, most of those views are approaching the problem from false premises, advocating innocuous solutions without recognizing the true causes. It is not more public intervention or more private freedom that will automatically correct the wrongdoings that brought about the present quandary. Neither the best detailed regulation nor the most complete absence of intervention will accomplish its purposes by just theorizing about them.
The true proof of the pudding is in the eating. The most admirable prescription or the most spontaneous burst of creativity mean nothing without an effective and honest implementation, whatever the recipe chosen. In other words, whatever treatment is adopted ought to be followed by faithful observance, scrupulous enforcement and exemplary punishment and redress for its non compliance.
The most perfect regulatory system is useless if it is only on paper. There should be guarantees that there are no hidden vested interests, no informal oligopolies nor surreptitious collusion between public and private actors. Likewise, the freest of laissez faire environment would be entirely unfair if it is only a camouflage for the privatization of profits and socialization of losses. The execution of rules chosen should be practiced in a truly equal manner for all, as nobody should be “more equal” than others.
These considerations apply not to people but also to states. There is a parallel discussion at the international level whether, at this juncture, countries should uphold an open international trade system or should resort to protectionist measures. Here again, there seems to be a false dichotomy between export-oriented and self-reliant models, coupled with equally misleading antinomy between what is economically efficient and socially just.
Economics is not an exact science based on arcane mathematical formulae that determine the definitive solutions (at least, not yet), but rather an attempt at identifying and orienting human behaviour in society under given economic conditions. The subject and object of analysis are human beings, not some metaphysical forces or universal truths. Otherwise, taken to extremes, it may end up becoming more a kind of ideological beliefs or fashionable preferences.
Democracy is a necessary condition for the equal treatment of all members of society, without political preferences or favoritisms. Same legal rights and obligations, same access to opportunities for economic betterment and same social respect and consideration without ethnic or religious prejudice are the foundations for a sound life in society. Transparency is a fundamental element to ensure that the conditions of democracy and free economy are being observed by all. It is not solely a matter for one to be subjectively honest, but to be effectively seen to be honest.
This, however, should not be construed as a suggestion for the undue intromission of a Big Brother in the private affairs of individuals, but rather as a matter of openness in public affairs that is of interest to the society as a whole. An independent media not conditioned by political or economic groups is a central element in this respect. Last but not least, accountability is a critical aspect in ensuring law and order in society. Independent judges, efficient police as well as fair and rigorous mechanisms for compensations and punishments are indispensable to give credibility to the political and economic system.
All the above may sound as old-fashioned truisms, but the fact is that they are more easily said than done. It could be convincingly argued that the vast majority of citizens are conscious of these principles, but past experiences show that now and again some astute minorities take advantage of undetected flaws in the system for undue advantages.
In the present circumstances, when many important actors recognize their “mea culpa” and declare themselves ready for drastic reforms, it could be good time to renew our reflections on old truisms and act upon them. If we do not try to do it now, as the saying goes, History may reveal itself; once as tragedy, then a second time as a farce. But, nothing warrants a third act.
In this regard, developing countries such as Indonesia and Brazil should learn not only from the apparently successful experiences of other countries but also from their mistakes; in order to find the most adequate ways and means for their own realities.
They need not hastily choose between the prevalence of the internal or the external market, nor unconditionally adhere to the international division of labor or a widespread nationalization of the means of production, as mutually excluding options. Rather, they should endeavor to enforce authentic democracy, transparency and accountability, both at national and international levels, as the best foundation for the well being of their people.
As countries endowed with large human and natural resources, convivial multicultural societies and growing global credibility, they are in position to offer an exemplary contribution to the international community in terms of effective ways ahead. So the fruits of recovery and the instauration of a legitimate order may be long lasting in this new century.
The author is Brazilian Ambassador to Indonesia. The opinions expressed are personal.
Source: The Jakarta Post, February 4, 2009
Suddenly, last summer, the concept of globalization acquired new perceptions. Seen until that time as the road paved with good intentions for a rosy future for mankind, it became overnight the nemesis for perdition of innocents.
Globalization is good for you, used to say the heralds of the “Washington Consensus”. The “End of History” would bring about the eternal monotony of prosperity, announced triumphantly the heroes of the new civilization. There would be no more centers dominating peripheries, thanks to the “decoupling” of the geo-economical cardinal points, assured confidently the benefactors and beneficiaries of the new order.
But when an increasing number of people started to note that “sub-prime” in certain instances does not necessarily refer to an inferior quality of beef rib, a silent “tsunami” started to form across the oceans. First, there was a realization that the globalization of financial markets was a desirable process when it occurred during a hopefully eternal bull market, but it became extremely detrimental when it translated into a universally contagious crisis of confidence.
Secondly, the increasing fading of the correlation between the financial and the real markets did not prevent the latter from being contaminated by the disturbances in the former, due to the culture of indebtedness prevalent in certain societies.
Thirdly, the belief in the decoupling of economies in some emerging regions from the influence of developments in the central actors proved to be shallow, due to the close reliance of exports from many developing countries on imports and finance from crisis-affected countries.
Now, a new ideological debate is under way in many decision-making, opinion-building and academic circles about the best strategies to combat the globalization crisis. Some argue for a bigger regulation and intervention by governments, through a return to nationalization policies and/or more populist oriented programs. Others insist on defending the free-reign of the market forces and more tax cuts for the affluent classes, while demanding - somewhat contradictorily - the pumping of more money by governments to private financial entities without disclosing how such generous grants of public money is to be used by the beleaguered and, until recently, well rewarded sectors.
In reality, most of those views are approaching the problem from false premises, advocating innocuous solutions without recognizing the true causes. It is not more public intervention or more private freedom that will automatically correct the wrongdoings that brought about the present quandary. Neither the best detailed regulation nor the most complete absence of intervention will accomplish its purposes by just theorizing about them.
The true proof of the pudding is in the eating. The most admirable prescription or the most spontaneous burst of creativity mean nothing without an effective and honest implementation, whatever the recipe chosen. In other words, whatever treatment is adopted ought to be followed by faithful observance, scrupulous enforcement and exemplary punishment and redress for its non compliance.
The most perfect regulatory system is useless if it is only on paper. There should be guarantees that there are no hidden vested interests, no informal oligopolies nor surreptitious collusion between public and private actors. Likewise, the freest of laissez faire environment would be entirely unfair if it is only a camouflage for the privatization of profits and socialization of losses. The execution of rules chosen should be practiced in a truly equal manner for all, as nobody should be “more equal” than others.
These considerations apply not to people but also to states. There is a parallel discussion at the international level whether, at this juncture, countries should uphold an open international trade system or should resort to protectionist measures. Here again, there seems to be a false dichotomy between export-oriented and self-reliant models, coupled with equally misleading antinomy between what is economically efficient and socially just.
Economics is not an exact science based on arcane mathematical formulae that determine the definitive solutions (at least, not yet), but rather an attempt at identifying and orienting human behaviour in society under given economic conditions. The subject and object of analysis are human beings, not some metaphysical forces or universal truths. Otherwise, taken to extremes, it may end up becoming more a kind of ideological beliefs or fashionable preferences.
Democracy is a necessary condition for the equal treatment of all members of society, without political preferences or favoritisms. Same legal rights and obligations, same access to opportunities for economic betterment and same social respect and consideration without ethnic or religious prejudice are the foundations for a sound life in society. Transparency is a fundamental element to ensure that the conditions of democracy and free economy are being observed by all. It is not solely a matter for one to be subjectively honest, but to be effectively seen to be honest.
This, however, should not be construed as a suggestion for the undue intromission of a Big Brother in the private affairs of individuals, but rather as a matter of openness in public affairs that is of interest to the society as a whole. An independent media not conditioned by political or economic groups is a central element in this respect. Last but not least, accountability is a critical aspect in ensuring law and order in society. Independent judges, efficient police as well as fair and rigorous mechanisms for compensations and punishments are indispensable to give credibility to the political and economic system.
All the above may sound as old-fashioned truisms, but the fact is that they are more easily said than done. It could be convincingly argued that the vast majority of citizens are conscious of these principles, but past experiences show that now and again some astute minorities take advantage of undetected flaws in the system for undue advantages.
In the present circumstances, when many important actors recognize their “mea culpa” and declare themselves ready for drastic reforms, it could be good time to renew our reflections on old truisms and act upon them. If we do not try to do it now, as the saying goes, History may reveal itself; once as tragedy, then a second time as a farce. But, nothing warrants a third act.
In this regard, developing countries such as Indonesia and Brazil should learn not only from the apparently successful experiences of other countries but also from their mistakes; in order to find the most adequate ways and means for their own realities.
They need not hastily choose between the prevalence of the internal or the external market, nor unconditionally adhere to the international division of labor or a widespread nationalization of the means of production, as mutually excluding options. Rather, they should endeavor to enforce authentic democracy, transparency and accountability, both at national and international levels, as the best foundation for the well being of their people.
As countries endowed with large human and natural resources, convivial multicultural societies and growing global credibility, they are in position to offer an exemplary contribution to the international community in terms of effective ways ahead. So the fruits of recovery and the instauration of a legitimate order may be long lasting in this new century.
The author is Brazilian Ambassador to Indonesia. The opinions expressed are personal.
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