In the final analysis, everybody will have to make sacrifices and learn to reach compromise solutions that take account of the interests of the major players in the world economy. Not that these always coincide perfectly.
We need a new model of development
The financial crisis that started in 2008, and which, in my opinion, is not yet over, demonstrated how closely intertwined are the three major challenges of the modern globalized world. Undeniably, militarism, expensive military interventions and the growth of military spending all played a crucial role in the explosive growth of budget deficits, most notably in the United States, that triggered the crisis. Another reason was the economic model itself, premised on overconsumption and excessive profits. It is this same model that condemns us to the continuing degradation of the environment. It is all one big tangle.
The crisis took world leaders completely by surprise. At the G8 summit in Japan just a couple of months before it started, they seemed to have no awareness of tell-tale signs of what was to come. Their reaction to the crisis when it came was little more impressive.
From the outset, I said that we could not restrict ourselves only to firefighting, and I had some questions I wanted to put to the ‘Group of Twenty’ leading economic powers in response to the crisis. The mere fact that the leaders of the G8 had now to be joined on an equal footing by the leaders of China, India, Brazil and nine other countries was very telling. That is simply how it now has to be, reflecting a shift in the global economic and political balance.
In early 2009, New York Times Syndicate published my article, listing questions I had for the G20, in newspapers around the world. The first of these was ‘whether the decisions adopted in London can resolve the global financial and economic crisis, setting the world economy on track to sustainable growth’. My own opinion was that the decisions taken at the first summits of the G20 could only be a first step. ‘Crisis prevention should not be the G20’s main task. What’s needed is a transition to a new model, integrating social, environmental and economic factors.’
Another question concerned the place of the G20 within the system of global institutions. ‘What is this group?’ I asked. ‘A “global politburo”, a “club of the powerful”, a prototype for a world government? How will it interact with the United Nations?’ I wrote:
No group of countries, even if they account for 90 per cent of the world economy, can supersede or replace the United Nations. But clearly, the G20 could claim collective leadership in world affairs if it acts with due respect for the opinions of non-members. …To avoid mistakes the G20 must be transparent and work closely with the UN. At least once a year, its summit meetings should be held at UN headquarters. It should submit a report for substantive discussion to the General Assembly.
I thought that the G20 could not ignore political problems closely linked with the fate of the world economy.
One of the problems ripe for debate is the militarization of world politics and economics. Militarization deflects resources from the real economy, stimulates conflicts and creates an illusion that military rather than political solutions are viable. By initiating a serious discussion within the G20, world leaders can build momentum for the work of those UN organizations that are responsible for progress in this area.[2]
Within the framework of the World Political Forum and the World Summit of Nobel Peace Laureates, we carefully studied the course of the crisis and social processes accompanying it. In several countries, including the United States, mass protest movements materialized.
During a trip to the United States in 2011, I saw protest demonstrations of the Occupy Wall Street movement that had sprung up and spread to many other countries. Millions of people were asking why it should be primarily ordinary people who were having to tighten their belts when they had not been responsible for the crisis. Extremists and irresponsible elements tried to hijack the protests, and that could, of course, only be condemned, but there were those who tried to use that as a pretext to write off the protest movement in its entirety.
I believed, and still do, that people have a legitimate democratic right to protest about extreme inequality and injustice in the distribution of wealth in society. In November 2011, I said at a conference of the Forum in Montpellier that the people who came out on to the streets and were ‘occupying Wall Street’ quite rightly blame the crisis on the mammoth corporations that push tax loopholes favourable to themselves through parliaments.
They blame a financial sector that has drifted away from the real economy and rewards itself with monstrous bonuses; and a large part of the blame they place squarely on the politicians. They are demanding a return to the principles of equality, social justice and solidarity. I see these principles as universal human values, no less important than the values of human rights and freedom, but in the last 20 or 30 years they have been relegated far down the list of priorities.
Politics, I pointed out, is confined in an iron cage by the demands and dogmas of neo-liberal economics, but every day it becomes increasingly obvious that these dogmas do not stimulate, but stifle, economic development.
The development model based on giving priority exclusively to the economic factors of profit and consumption, shovelling around huge amounts of money while ignoring social and economic responsibilities, has manifestly failed. It generates social injustice, inequality, confrontation and crises and is fraught with catastrophic consequences. Transition to a different model, staged but fairly urgent, struck me as inescapable. That, as I wrote in an article published in the International Herald Tribune and Rossiyskaya Gazeta in late 2009, will require a change in our system of values, a search for new drivers and incentives for economic development:
The global economy must be reoriented toward the public good. It must emphasize issues like a sustainable environment, healthcare, education, culture, equal opportunities and social cohesion – including reducing the glaring gaps between wealth and poverty.
Society needs this, and not just as a moral imperative. The economic efficiency of emphasizing the public good is enormous, even though economists have not yet learned how to measure it. We need an intellectual breakthrough if we are to build a new economic model.[3]
Another issue needing to be rethought in the light of the crisis was the role of the state. ‘Return of the State’ was the title of an article I wrote at the very beginning of the crisis. More than 30 years ago, I said, ‘an attack was launched on the role of the state. Economists, businessmen and politicians declared it to be the source of nearly all the economy’s woes.’ In those years, the electorate was choosing to vote for politicians who promised to cut back state bureaucracy and give greater freedom to entrepreneurs. This was exploited by people who, under the slogan ‘a rising tide lifts all boats’, wanted to give maximum freedom of action to large corporations, to exempt them from important obligations to society, and to dismantle structures safeguarding the welfare of workers.
Next, as the wave of globalization swept over the world, monetarist principles and a weakening of the role of government started to be introduced on an international scale. The Washington Consensus, I wrote, was an expression of these principles, imposed on many countries. What was the result?