SFO Transformative Governance Models

How Sekhon Family Office ( SFO ) Is Helping Nations Build Wealth By Free Markets Based Transformative Governance Models

• We work with bold, ambitious leaders who are not satisfied with the status quo and eager for change to address the key strategic governance tools that improve performance and help governments, public-sector, private-sector entities and larger society do the work they do better.

SFO PURPOSE — Doubling GDP of Continents, Countries, Businesses & Households.
Ranks of GDP in US$Trillion for Year 2021
0. World 91.03
1. Asia 34.39
2. North America 24.88
3. Europe 23.05
4. South America 2.90
5. Africa 2.49
6. Oceania 1.69
7. Antarctica N/A*

SFO Works With — Our Strong & PowerFul Network

- Global Bodies like WEF, UN, World Bank, IMF and their likes.
- Continent Representative / Trade Bodies like WTO, OECD and their likes.
- Country Governments
- County Trade Commissioners, Embassies etc.
- State Governments
- Municipalities
- Family Offices
- All sources of capital like Biggest Sovereign Funds, Private Equity Funds, Growth Funds, Hedge Funds, Stock Exchanges and Credit Institutions.

SFO LISTS — Ranks the world based on a variety of categories
- Premier Level
- Governor / CM Level
- Mayor Level
- County Level or Equivalent Level
- Ministry Level
- Entrepreneur Level
- Business Level
- Individual Level

SFO ECOSYSTEMS — To deliver Exponential Outcomes
- Free Markets Governance
- Balanced Score Card based Action Cycle Management
- Sustainability/GRI based Sustainable Development
- Exponential Technology Driven Growth
- MeaningFul Impact driven CSR/Foundation/Wellness

We make Governance Performance Based and Accountable

• Government spending now represents about 20 percent of the $90 trillion total global economy. We work with national and regional governments, city municipalities, quasi-government agencies such as development funds, trade associations, sovereign funds as well as government-owned companies to realize their economic and social goals.
• We support governments, business and society in building resilience to today’s challenges while undertaking the transformations necessary to deliver on the Common Future.
• For us, belief is the only metric that matters. We do not make business relationships for wowing our stakeholder with incredible numbers because numbers are really just an algorithm for passion and values. When passionate people move, world’s problems get solved. Passionate people only Think Future and Build it because That’s Where We Shall Spend The Rest Of Our Lives.

Three things that have lifted the human cause & economic activity most in the last three industrial revolutions and are a strong foundation that we help build for our customers are
- _Communications https://bit.ly/3ua9CM6_
- _Mobility https://bit.ly/37p8rhT_
- _Energy/Power _https://bit.ly/3u9l0rx_

• These three fundamentally change the way society manages, powers, and moves economic activity and hence supercharges the aggregate efficiency across supply chains and nations.
• Aggregate efficiency is the ratio of potential work to the actual useful work that gets embedded into a product or service. The higher the aggregate efficiency of a good or service, the less waste is produced in every single conversion in its journey across the value chain. The 3rd industrial revolution based infrastructure is failing the aggregate efficiencies of all economies. The healthcare infrastructure failed the world during pandemics. Japan had the maximum aggregate efficiency when it peaked out at 22.8 %. Still 87.2 % to be realized._
• Are you passionate ? Are you the voice for our values ? If yes join us to Build Back Better. Spread awareness and stay safe*

The public sector’s influence comes directly, through government entities, state-owned enterprises and institutional funding, as well as indirectly, through regulation and oversight. The sector is facing major challenges, such as rising costs, growing deficits, shifting centers of economic activity, a burgeoning war for talent and increasingly demanding customers.

• Public sector organizations are under pressure to deliver more for their citizens, from seamless digital services to policies and programs that address complex problems, societal challenges, and crises. We help the public sector improve how it operates so that it can meet, and surpass, these expectations and their goals.
• Recently, the use of stimulus funds and regulatory reform has further blurred the lines between public and private entities.
• We work with bold, ambitious leaders who are not satisfied with the status quo and eager for change to address the key strategic tools that improve performance and help public-sector entities do the work they do better.

Our experience serving public-sector clients encompasses the following areas, to name a few:

• Economic development and sector strategies
• Privatization
• Change management
• Cost and service-quality improvements
• Organizational design
• IT infrastructure

Transforming Public / Social Sector Organizations

• At a time when providing better outcomes for citizens means being responsive, agile, and able to devise creative solutions to complex problems, many public sector organizations remain hierarchical and bureaucratic. They’re built for another era. To perform on all fronts — from providing basic services to citizens to solving the most pressing societal challenges and responding to crises — governments need to transform how they’re organized and how they operate.
• Public and social sector organizations are key to societal and economic progress and well being. We work with social sector and government organizations to deliver Change that Matters to citizens, driving transformations that have a significant, positive impact on society. By combining a highly collaborative working model with insights from our globally recognized research centers, we provide an approach tailored to each client’s needs.
• Our work spans multiple sectors and functions, including digital and analytics, operations, organization, and strategy. We work end-to-end — from diagnosis to delivery of lasting impact — together generating tangible results that are improving the lives of millions worldwide.
• Our Government & Public Services is committed to improving public outcomes through a focus on people. We think about the complex issues facing the public sector and develop relevant, timely, and sustainable solutions for our clients.
• Developed and emerging economies are witnessing myriad challenges, ranging from climate change and accelerated urbanisation to resource scarcity. Apart from these challenges, the world is witnessing a shift in global economic power as well as a mix of demographic and social changes. This is driving economies to explore innovative solutions that also conform to the traditional set-ups and governance structures. We help governments and public sector organisations enable efficient governance practices infused with ingenuity and aided by technology.

Why Do We Need To Reinvent Governments & Global Governance

CHAPTER 1 — Human Freedom Of Speech and Liberty Under Attack with the current government systems .

• The gradual erosion of one of our most precious fundamental rights — the inalienable right to freedom of speech and expression — is leading to the gradual destruction of our human right to dissent and protest.
• This lethal cocktail is adversely impacting the liberty of all those who dare to speak up. Articles of our constitution, the right to life and personal liberty, is under a silent threat and we all know the consequence of losing our liberty. Simply put, we will cease to be a democratic republic. Of course, our fundamental rights cannot be absolute and so the constitution has placed a few reasonable restrictions on the exercise of the right to free speech and these include restrictions placed in the interests of the sovereignty and integrity of India, security of the state, friendly relations with foreign states, public order, decency or morality, contempt of court, defamation and incitement to an offence.
• Yet, it is important to note that these restrictions can be imposed only by law enacted by parliament and the restrictions have to be reasonable.
• Today, freedom of speech is being eroded and mauled through twisting and turning the law if not abusing it altogether. The law needs to be objectively interpreted but subjective satisfaction has taken over and the consequences are unpalatable: dissent or expression of a different point of view has become an issue to the extent that bona fide speech sometimes becomes a security threat.
• Some cynics glibly suggest that if the speaker is not guilty, he or she will be acquitted of the charges framed, but the fact of the matter is that detention as an under-trial is a gut-wrenching experience for anyone and particularly for a person whose cries of innocence fall on deaf ears. Such a person looks to the judiciary for protecting his or her freedom of speech and liberty but gets overwhelmed by the painfully slow justice delivery system.

CHAPTER 2 — The Transformative Power of Governments if done as they should be done with

• Government has an important role in helping direct and facilitate transitions to help overcome societal problems.

CHAPTER 3— History Of Government and Types of Government and Why Governments Fail

There are many different forms of government but really just eight apply to us today.

• Absolute Monarchy (absolutism)
• Limited Monarchy (Constitutional Monarchy)
• Representative Democracy.
• Direct democracy.
• Dictatorship.
• Oligarchy.
• Totalitarianism.
• Theocracy.

No two governments, past or present, are exactly the same.

• However, it is possible to examine the similarities and differences among political and economic systems and categorize different forms of government. One simple way to categorize governments is to divide them into democratic and authoritarian political systems.

CHAPTER 4— What is Democracy ? Why Democracy ?

Democracies

• Many countries today claim to be democracies, but if the citizens are not involved in government and politics, they are democratic in name only. Some governments are more democratic than others, but systems cannot be considered truly democratic unless the meet certain criteria:

Whither democracy? It was not until 1920 — after decades of tireless protest and campaigning — that women were granted suffrage by the ratification of the 19th Amendment.

• Freedom of speech, the press, and religion. Democracies in general respect these basic individual liberties. No government allows absolute freedom, but democracies do not heavily censor newspapers and public expression of opinions.
• Majority rule with minority rights. In democracies, people usually accept decisions made by the majority of voters in a free election. However, democracies try to avoid the “tyranny of the majority” by providing ways for minorities all kinds to have their voices heard as well.
• Varied personal backgrounds of political leaders. Democracies usually leave room for many different types of citizens to compete for leadership positions. In other words, presidents and legislators do not all come from a few elite families, the same part of the country, or the same social class.
• Free, competitive elections. The presence of elections alone is not enough to call a country a democracy. The elections must be fair and competitive, and the government or political leaders cannot control the results. Voters must have real choices among candidates who run for public office.
• Rule by law. Democracies are not controlled by the whims of a leader, but they are governed by laws that apply to leaders and citizens equally.
• Meaningful political participation by citizens. By itself, a citizen’s right to vote is not a good measure of democracy. The government must respond in some way to citizen demands. If they vote, the candidate they choose must actually take office. If they contact government in other ways — writing, protesting, phoning — officials must respond.
• The degree to which a government fulfills these criteria is the degree to which it can be considered democratic. Examples of such governments include Great Britain, France, Japan, and the United States.

Will Democracy Stay Democratic In A Digitally Borderless World

What is democracy?

• Democracy these days is more commonly defined in negative terms, as freedom from arbitrary actions, the personality cult or the rule of a nomenklatura, than by reference to what it can achieve or the social forces behind it. What are we celebrating today? The downfall of authoritarian regimes or the triumph of democracy? And we think back and remember that popular movements which over threw anciens régimes have given rise to totalitarian regimes practising state terrorism.
• So we are initially attracted to a modest, purely liberal concept of democracy, defined negatively as a regime in which power cannot be taken or held against the will of the majority. Is it not enough of an achievement to rid the planet of all regimes not based on the free choice of government by the governed? Is this cautious concept not also the most valid, since it runs counter both to absolute power based on tradition and divine right, and also to the voluntarism that appeals to the people’s interests and rights and then, in the name of its liberation and independence, imposes on it military or ideological mobilization leading to the repression of all forms of opposition?
• This negative concept of democracy and freedom, expounded notably by Isaiah Berlin and Karl Popper, is convincing because the main thing today is to free individuals and groups from the stifling control of a governing élite speaking on behalf of the people and the nation. It is now impossible to defend an antiliberal concept of democracy, and there is no longer any doubt that the so-called “people’s democracies” were dictatorships imposed on peoples by political leaders relying on foreign armies. Democracy is a matter of the free choice of government, not the pursuit of “popular” policies.
• In the light of these truths, which recent events have made self-evident, the following question must be asked. Freedom of political choice is a prerequisite of democracy, but is it the only one? Is democracy merely a matter of procedure? In other words, can it be defined without reference to its ends, that is to the relationships it creates between individuals and groups? At a time when so many authoritarian regimes are collapsing, we also need to examine the content of democracy although the most urgent task is to bear in mind that democracy cannot exist without freedom of political choice.

The collapse of the revolutionary illusion

• Revolutions sweep away an old order: they do not create democracy. We have now emerged from the era of revolutions, because the world is no longer dominated by tradition and religion, and because order has been largely replaced by movement. We suffer more from the evils of modernity than from those of tradition. Liberation from the past interests us less and less; we are more and more concerned about the growing totalitarian power of the new modernizers. The worst disasters and the greatest injury to human rights now stem not from conservative despotism but from modernizing totalitarianism.
• We used to think that social and national revolutions were necessary prerequisites for the birth of new democracies, which would be social and cultural as well as political. This idea has become unacceptable. The end of our century is dominated by the collapse of the revolutionary illusion, both in the late capitalist countries and in the former colonies.
• But if revolutions move in a direction diametrically opposed to that of democracy, this does not mean that democracy and liberalism necessarily go together. Democracy is as far removed from liberalism as it is from revolution, for both liberal and revolutionary regimes, despite their differences, have one principle in common: they both justify political action because it is consistent with natural logic.
• Revolutionaries want to free social and national energies from the shackles of the capitalist profit motive and of colonial rule. Liberals call for the rational pursuit of interests and satisfaction of needs. The parallel goes even further. Revolutionary regimes subject the people to “scientific” decisions by avant-garde intellectuals, while liberal regimes subject it to the power of entrepreneurs and of the “enlightened” classes the only ones capable of rational behaviour, as the French statesman Guizot thought in the nineteenth century.
• But there is a crucial difference between these two types of regime. The revolutionary approach leads to the establishment of an all-powerful central authority controlling all aspects of social life. The liberal approach, on the other hand, hastens the functional differentiation of the various areas of life politics, religion, economics, private life and art. This reduces rigidity and allows social and political conflict to develop which soon restricts the power of the economic giants.
• But the weakness of the liberal approach is that by yoking together economic modernization and political liberalism it restricts democracy to the richest, most advanced and best-educated nations. In other words, elitism in the international sphere parallels social elitism in the national sphere. This tends to give a governing elite of middle-class adult men in Europe and America enormous power over the rest of the world over women, children and workers at home, as well as over colonies or dependent territories.
• One effect of the expanding power of the world’s economic centres is to propagate the spirit of free enterprise, commercial consumption and political freedom. Another is a growing split within the world’s population between the central and the peripheral sectors the latter being not that of the subject peoples but of outcasts and marginals. Capital, resources, people and ideas migrate from the periphery and find better employment in the central sector.
• The liberal system does not automatically, or naturally, become democratic as a result of redistribution of wealth and a constantly rising standard of general social participation. Instead, it works like a steam engine, by virtue of a big difference in potential between a hot pole and a cold pole. While the idea of class war, often disregarded nowadays, no longer applies to post-revolutionary societies, it still holds good as a description of aspects of liberal society that are so basic that the latter cannot be equated with democracy.

The twilight of social democracy

• This analysis is in apparent contradiction with the fact that social democracy developed in the most capitalist countries, where there was a considerable redistribution of income as a result of intervention by the state, which appropriated almost half the national income and in some cases, especially in the Scandinavian countries, even more.
• The main strength of the social democratic idea stems from the link it has forged between democracy and social conflict, which makes the working-class movement the main drivingforce in building a democracy, both social and political. This shows that there can be no democracy unless the greatest number subscribes to the central principles of a society and culture but also no democracy without fundamental social conflicts.
• What distinguishes the democratic position from both the revolutionary and the liberal position is that it combines these two principles. But the social democratic variant of these principles is now growing weaker, partly because the central societies are emerging from industrial society and entering post-industrial society or a society without a dominant model, and partly because we are now witnessing the triumph of the international market and the weakening of state intervention, even in Europe.
• So Swedish social democracy, and most parties modelled on social democracy, arc anxiously wondering what can survive of the policies constructed in the middle of the century. In some countries the trade union movement has lost much of its strength and many of its members. This is particularly true in France, the United States and Spain, but also in the United Kingdom to say nothing of the excommunist countries, where trade unions long ago ceased to be an independent social force. In nearly all countries trade unionism is moving out of the industrial workplace and turning into neocorporatism, a mechanism for protecting particular professional interests within the machinery of the state: and this leads to a backlash in the form of wild-cat strikes and the spread of parallel ad hoc organizations.
• So we come to the most topical question about democracy: if it presupposes both participation and conflict, but if its social-democratic version is played out, what place does it occupy today? What is the specific nature of democratic action, and what is the “positive” content of democracy? In answering these questions we must first reject any single principle: we must equate human freedom neither with the universalism of pragmatic reason (and hence of interest) nor with the culture of a community. Democracy can neither be solely liberal nor completely popular.
• Unlike revolutionary historicism and liberal utilitarianism, democratic thinking today starts from the overt and insurmountable conflict between the two faces of modern society. On the one hand is the liberal face of a continually changing society, whose efficiency is based on the maximization of trade, and on the circulation of money, power, and information. On the other is the opposing image, that of a human being who resists market forces by appealing to subjectivity the latter meaning both a desire for individual freedom and also a response to tradition, to a collective memory. A society free to arbitrate between these two conflicting demands that of the free market and that of individual and collective humanity, that of money and that of identity may be termed democratic.
• The main difference as compared with the previous stage, that of social democracy and the industrial society, is that the terms used are much further apart than before. We are now concerned not with employers and wage-earners, associated in a working relationship, but with subjectivity and the circulation of symbolic goods.
• These terms may seem abstract, but they are no more so than employers and wage-earners. They denote everyday experiences for most people in the central societies, who are aware that they live in a consumer society at the same time as in a subjective world. But it is true that these conflicting facets of people’s lives have not so far found organized political expression just as it took almost a century for the political categories inherited from the French Revolution to be superseded by the class categories specific to industrial society. It is this political time-lag that so often compels us to make do with a negative definition of democracy.

Arbitration

• Democracy is neither purely participatory nor purely liberal. It above all entails arbitrating, and this implies recognition of a central conflict between tendencies as dissimilar as investment and participation, or communication and subjectivity. This concept can be adapted to the most affluent post-industrializing countries and to those which dominate the world system; but does it also apply to the rest of the world, to the great majority of the planet?
• A negative reply would almost completely invalidate the foregoing argument. But in Third World countries today arbitration must first and foremost find a way between exposure to world markets (essential because it determines competitiveness) and the protection of a personal and collective identity from being devalued or becoming an arbitrary ideological construct.
• Let us take the example of the Latin American countries, most of which fall into the category of intermediate countries. They are fighting hard and often successfully to regain and then increase the share of world trade they once possessed. They participate in mass culture through consumer goods, television programmes, production techniques and educational programmes. But at the same time they are reacting against a crippling absorption into the world economic, political and cultural system which is making them increasingly dependent. They are trying to be both universalist and particularist, both modern and faithful to their history and culture.
• Unless politics manages to organize arbitration between modernity and identity, it cannot fulfil the first prerequisite of democracy, namely to be representative. The result is a dangerous rift between grass-roots movements seeking to defend the individuality of communities, and political parties, which are no more than coalitions formed to achieve power by supporting a candidate.
• The main difference between the central countries and the peripheral ones is that in the former a person is defined primarily in terms of personal freedom, but also as a consumer, whereas in the latter the defence of collective identity may still be more important, to the extent that there is pressure from abroad to impose some kind of bloodless revolution in the form of compulsory modernization on the pattern of other countries.
• This conception of democracy as a process of arbitration between conflicting components of social life involves something more than the idea of majority government. It implies above all recognition of one component by another, and of each component by all the others, and hence an awareness both of the similarities and the differences between them. It is this that most sharply distinguishes the “arbitral” concept from the popular or revolutionary view of democracy, which so often carries with it the idea of eliminating minorities or categories opposed to what is seen as progress.
• In many parts of the world today there is open warfare between a kind of economic modernization which disrupts the fabric of society, and attachment to beliefs. Democracy cannot exist so long as modernization and identity are regarded as contradictory in this way. Democracy rests not only on a balance or compromise between different forces, but also on their partial integration. Those for whom progress means making a clean sweep of the past and of tradition are just as much the enemies of democracy as those who see modernization as the work of the devil. A society can only be democratic if it recognizes both its unity and its internal conflicts.
• Hence the crucial importance, in a democratic society, of the law and the idea of justice, defined as the greatest possible degree of compatibility between the interests involved. The prime criterion of justice is the greatest possible freedom for the greatest possible number of actors. The aim of a democratic society is to produce and to. respect the greatest possible amount of diversity, with the participation of the greatest possible number in the institutions and products of the community.

CHAPTER 5— What is Authoritarian Regimes ? Why Authoritarian Regimes should not exist?

Authoritarian Regimes

• Mao Zedong’s position as authoritarian ruler of the People’s Republic of China is glorified in this propaganda poster from the Cultural Revolution. The poster reads: “The light of Mao Zedong Thought illuminates the path of the Great Cultural Revolution of the Proletariat.”
• One ruler or a small group of leaders have the real power in authoritarian political systems. Authoritarian governments may hold elections and they may have contact with their citizens, but citizens do not have any voice in how they are ruled. Their leaders do not give their subjects free choice. Instead, they decide what the people can or cannot have. Citizens, then, are subjects who must obey, and not participants in government decisions. Kings, military leaders, emperors, a small group of aristocrats, dictators, and even presidents or prime ministers may rule authoritarian governments. The leader’s title does not automatically indicate a particular type of government.
• Authoritarian systems do not allow freedoms of speech, press, and religion, and they do not follow majority rule nor protect minority rights. Their leaders often come from one small group, such as top military officials, or from a small group of aristocratic families. Examples of such regimes include China, Myanmar, Cuba, and Iran.
• No nation falls entirely into either category. It also dangerous to categorize a nation simply by the moment in time during which they were examined. The Russia of 1992 was very different from the Russia of 1990. Both democratic and authoritarian governments change over time, rendering the global mosaic uncertain and complex.

CHAPTER 6 — WHETHER DEMOCRACY OR AUTHORITARIAN REGIMES IS BETTER FOR FUTURE

Democracy vs. Authoritarianism

• The word democracy comes from the Greek words ‘demos,’ which refers to the people, and ‘kratos,’ which means power. Thus, a democratic state is one in which power emanates from the people. One might say, then, that authoritarianism is the opposite of a democracy. In an authoritarian regime, all power is concentrated in one person alone, often referred to as the dictator.
• Lets investigate the specific aspects of democracy and authoritarianism which clarify how these two systems of power and governance diverge, especially in terms of the effects these systems have on the citizens of the nation, and in terms of what each system likewise demands of its citizens.
• As we deepen our reflection on Martial Law as a period in Philippine history, we also deepen our imagination of how Filipinos during Martial Law must have thought and felt about their situation, and what eventually drove them to choose democracy over authoritarianism on EDSA, and rise up as one to make that difference.
• One of the most basic features of a democracy that sets it apart from authoritarianism is the process by which leaders are chosen. Because democracy is meant to uphold the power of the people, leaders are chosen such that they truly represent the people’s interests. This is done through fair and honest elections, whereby citizens may collectively express their choice of leaders through the ballot.

Leaders are thus chosen based on whom the electorate collectively selects, and the power of the leader stems from this mandate. To ensure the integrity of elections, they are administered by a neutral party, with independent observers for the voting and counting processes, and citizens must be able to vote in confidence, without intimidation or fear of violence. An election governed by citizens’ choice is designed so that elected representatives are those who truly listen to their people and aim to address their needs. Held at regular intervals, elections furthermore ensure that those in power cannot extend their term without the consent of the people.

In an authoritarian state, such mechanisms are rendered either obsolete or futile. Dictators want to cling to power, and so the very notion of an election is counter to that desire. Thus, authoritarian states often do away with elections entirely, taking the choice away from the people to begin with. In more insidious cases, dictators engage the electoral process but dishonestly. By rigging the system, while offering their citizens the illusion of choice, the staged elections only serve to legitimize the dictator’s continued rule, as it continues to seem as if the dictator enjoys the support of the public.

CIVIC PARTICIPATION

Beyond the selection of leaders, another feature that differentiates democracies from authoritarian states is the level of civic participation that is expected and allowed. Democracies favor, and in fact thrive on, the active participation of its citizens in the political landscape, whereas dictators quash even the possibility of genuine participation.

In democracies, citizens are encouraged to participate by being informed about public issues, and freely expressing their opinions on these issues, as well as the decisions of their elected representatives. Citizens are likewise given the power to shape these decisions by being active members of civil society and non-government organizations. Even on the level of voting wisely in elections, and thereby choosing what interests should be prioritized in governance, citizens may actively participate in the exercise of power. Across these means of participation, citizens are enjoined to participate peacefully, respectfully toward the law, and with sensitivity to the plurality of views that exist in society.

Authoritarian states reject these modes of participation; and indeed, participation in principle. Public dissent is deemed public rebellion, a threat to the dictator’s unopposed tenure in power, and dictators inflict state violence to silence such opposition. Meanwhile, decision-making is limited to the dictator’s wishes as well, such that they may enact laws and decrees for the benefit of his own interest without appropriate mechanisms to keep their actions in check — no laws to limit them, no plurality to take into consideration.

FUNDAMENTAL LIBERTIES

Finally, what sets democracies apart from authoritarianism is their treatment of fundamental liberties. Truly democratic societies are those which respect and uphold the fundamental liberties of all their citizens, regardless of who they are. These liberties include the basic freedoms of expression, religion, assembly, and the press, as well as basic rights such as the right to privacy, to due process, and to life.

A dictator, on the other hand, does not respect these freedoms and rights. This is because these freedoms and rights typically make the dictator vulnerable to criticism, to the exposure of their abuses, and ultimately to the limits of their power. Because our fundamental liberties apply equally to all, they must apply equally to the dictator and ordinary citizens, whoever they may be. A dictator, therefore, often ignores or even violates these rights, to perpetuate themselves in power. So long as they can convince the populace that they are more important than everyone else, and subject to a different standard, they allow themselves that much more room to act with impunity.

Our study of the differences between democracy and authoritarianism really comes down to one question: What kind of society do you want to live in? As the exhibit above has shown, the design of a society shapes how power is obtained and exercised, and in doing so, likewise shapes the way in which citizens may live in freedom, harmony, and dignity.

But what follows from this question is perhaps even more important: What can you do to shape the society you want to live in? How can we live as engaged citizens, given the structure and order of our present society — and what can we do to make it better?

CHAPTER 7— What is Global Governance ? Why Global Governance ?

Plato was right: we need more scientists at the heart of global governance

In the famous Dialogues of Plato one of the central themes in the essay “Republic” is the discussion on who may lead the community with the philosopher advanced as the rightful type of individual for leadership.

More than two thousand years later the question appears to be as relevant as ever, not just at the level of municipalities or countries, but also for the global community.

The global governance system needs not only new layers of governance, but also a greater role to be performed by the scientific community within the governing structures of global institutions.

Back in 2001 a United Nations Development Programme report looked at the issue of global governance and concluded: “we derive a subsidiary argument that the failure to outfit technology to the needs of the poor countries is largely a result of the current inadequacies in the global governance system to guide the process of technological change.”

Since then, the rapid tempo of technological progress was accompanied by significant gaps and inequalities in economic and technological development across countries, with the evolving system of global governance characterized by weakening of global institutions becoming less effective in the face of global challenges.

The current system of global governance is largely anchored in geography, with the key layers represented by the level of countries, regions (a level that is not fully integrated into the global economic architecture) and the global level of international organizations, whose membership is rooted in national and regional constituencies.

The centrality of the nation state in the global architecture renders the whole construct more vulnerable to bouts of instability emanating from the excesses of Realpolitik and zero-sum tactics prevailing over longer term cooperative strategies.

One of the possible ways of stabilizing and depoliticizing the edifice of the global economy is to create a layer of global governance that focusses on technological development and that is governed to a greater degree by the leading representatives of the scientific and technological community rather than politicians.

Importantly there are steps already undertaken at the international level to strengthen the coordination of technological development across countries.

One important initiative coming from the World Economic Forum is to create Global Councils to restore trust in technology, with the following key priorities on the agenda:

Six councils formed to design how emerging technology can be governed for the benefit of society, Top decision-makers and experts from the public and private sectors, civil society and academia participate in inaugural Global Fourth Industrial Revolution Council meeting in San FranciscoLeaders of Chinese Academy of Medical Sciences, Dana-Farber, European Commission, Microsoft, Qualcomm, Uber, World Bank among chairsMajor global summit on technology governance announced, to take place in April 2020

Some of the other measures undertaken at the level of international organizations to address the technological gap include a UN-sponsored initiative to create a Technology Bank for least developed countries.

The Technology Bank began its operations in September 2017 with the signing of the host country agreement between the United Nations and Turkey According to the UN, the objective of the Bank “is to support LDCs [least developed countries] in building their STI capacity; foster national and regional innovation ecosystems; support homegrown research and development; facilitate market access; build capacity in the areas of intellectual property rights; and assist with the transfer of appropriate technologies “.

The key priority in the evolving set of global initiatives in the technological sphere will need to be focused on the assistance accorded to the least developed economies in bridging their technology gap.

Some of the other issues that may become part of the of the global technology agenda include:

• Cyber-security
• Coordination with international organizationsCoordination with international organizations
• Educational cooperation
• Propagation of new technologies
• Environmental technologies to face the challenges of global warming
• Monitoring of technological advances and global technological vulnerabilities/disruptions

With the creation of a technological layer, the global governance construct may become more conducive to addressing the world-wide problems such as cross-country technological gaps or rising vulnerabilities to technological disruptions.

It may also broaden the dimensions of international cooperation, which in current conditions appear to be circumscribed largely to bilateral, i.e. country-to-country channels, with the levels of cooperation at the regional level and international organizations relegated to lower importance.

The emerging technological layer of global governance needs to be not separate but intertwined with other layers of global governance.

In effect, the technological layer of global economic architecture may create the fourth dimension in global governance (in addition to country-level, regional and global institutions) that broadens the time-horizons and reduces the global economy’s susceptibility to the excesses of countries’ narrow self-interest.

The exact contours of a new layer of technological governance in the global economy are yet to be defined, but a key role in this formation may be played by international technological and scientific networks, including alliances formed by leading universities.

The emerging technological layer of global governance needs to be not separate but intertwined with other layers of global governance. The linkages need to be developed with the international institutions such as the WTO (on issues such as intellectual property rights), IMF, World Bank (transfer of technology to the poorest countries) as well as the regional development institutions.

There is also an important “human capital” dimension to the formation of a technological layer of global governance as this allows the scientific and technological community to have more of a say on global issues.

Indeed, the mounting problems in global development may be at least in part due to the excessive leverage of politicians at various levels of global governance. A revamped system of global governance needs to allow for a more depoliticized structure with a greater representation accorded to the scientific community.

The disheartening results of the past several decades of a politically driven governance system characterized by intensifying global risks do suggest that Plato’s advocacy of community leadership being assumed by philosophers (i.e. scientists in the modern sense), may turn out to be topical after all.

Gaps in global governance are holding back the world’s economy. Here’s how

Since the mid-20th century the world’s economic architecture has largely been taken for granted, partly due to the rising role of developed economies and the mounting impulses of economic openness promoted by international institutions.

Throughout the past decade, however, the current system of governance in the world economy started to encounter systemic bottlenecks and limitations as exemplified by rising inequality as well as declining economic growth rates. These developments call into question the seamlessness and finality of the current construct of global economic architecture. The question that arises then is whether the current system is economically efficient and what steps could be undertaken to bring the governance framework more into line with the challenges posed by changing conditions in the world economy.

In fact, signs of a systemic malfunction in the global governance framework go beyond the standard references to global imbalances, inequality and the “new normal” of slower growth rates for longer. No less worrisome are the gaps associated with the lack of capacity to deal with environmental and technological challenges as well as declining productivity momentum. Another issue is the lack of efficiency in the use of resources as pointed out in a recent research paper by Milligan et al (2018), with authors calling for regional agreements to play a greater role in bridging global governance gaps.

Have you read?

• Plato was right: we need more scientists at the heart of global governance
• How leaders can use ‘agile governance’ to drive tech and win trust
• We need a new framework for global governance. Here’s how we could build one

According to Milligan et al (2018), “major gaps remain in cooperative resource management across spatial jurisdictional boundaries at national, regional and international scales. These gaps contribute to: inefficient use of land (UNEP, 2014a), water (UNEP, 2012b) and various other resources; transboundary pollution (Lee et al., 2016); uncoordinated regulation by governments of transnational actors; and tensions and conflict associated with competing or conflicting claims to resources (UNFT, 2012, Schofield, 2012). An illustrative example of scale of resource cooperation challenges is that 158 of the world’s 263 transboundary water basins lack any type of cooperative management framework (WWAP, 2015)”

Another illustration of the breakdown of the current system is of course the propagation of protectionism, bilateralism and the weakening of global multilateral institutions such as the WTO. There are also notable omissions in governance with respect to the lack of integration of regional institutions into the global governance framework, which significantly limits the capability of the world economy to launch new liberalization initiatives or coordinated spending to prop up global growth. The lack of integration of regionalism into the global governance framework leaves too much scope for national egoism and severely limits the ability of the world economy to deal with downturns in a coordinated and comprehensive manner.

Currency wars and protectionism

The problems of an inefficient global governance system are exacerbated by currency wars and rising protectionism as represented by large-scale export subsidies, import tariffs, as well as a plethora of other restrictive measures. This in turn has resulted in a prioritization of import-substitution and export-oriented sectors at the expense of greater spending on areas such as infrastructure or human capital development. During the high-level “Dialogue of continents” forum held in Hamburg in October this year the issue of the misallocation of resources in the global economy (partly as a result of excesses in industrial policy and protectionism) was discussed with respect to the possible explanations behind the deterioration in the global economy’s growth figures.

The broader problem for the global governance system whose structure largely still reflects the fundamentals of mid-20th century world economy is the emergence of new players that are either global or mega-regional in scale. The advent of mega-regional blocks (TPP-11, possible deal on RCEP, Africa’s continental free trade area) in the past several years will undoubtedly raise the pressure to change the current system towards a greater role for regional institutions.

Transnational corporations

Another challenge is the rising dominance of transnational corporations in the services and high-tech sectors, whose regulation thus far cannot be effectively implemented at national, regional or global levels. Whether a whole new technological governance layer in the world economy is needed to address the challenges of excessive market power, technological imbalances, cybersecurity, etc may be an issue to explore for policymakers in the coming years.

Even more broadly, what is the key priority for the world community in revamping the global economic architecture? Should economic efficiency be the overriding guide or should the global community be more concerned about the direction of equity, sustainability, inclusiveness and other indications of the “global moral compass”? The truth of the matter is that the current framework has problems on both counts — both efficiency and sustainability indicators demonstrate substantial gaps. In view of the critically high levels of inequality, of greater importance at this juncture may be the prioritization of lowering imbalances across countries and regions — the UN Development goals, most notably those pertaining to human capital development, need to be accorded greater weight.

There is a sizeable gap between developed and developing nations not only in terms of income levels, but also the scale of involvement in integration projects across the globe

In this regard, perhaps the most acute problems in terms of sustainability and inclusiveness of global economic development relate to the imbalances and inequalities along the North-South axis that are not only persistent, but widening. In terms of governance, existing multilateral institutions have proven to be slow in adjusting member country weights in voting structure to the significant increase in the share of some of the developing countries in the world economy. There is also the sizeable gap between developed and developing nations not only in terms of income levels, but also the scale of involvement in integration projects across the globe. The exponential growth in technological development, including AI, may exacerbate the technological and development gaps between the North and the South.

In sum, the fundamentals of the world economy have changed tremendously in the past several decades and the “superstructure” of global governance needs to reflect these shifts. More frequently than not instead of pointed discussions on transforming global governance one observes a tacit longing for a return to the governance model that prevailed in the preceding several decades perhaps in the hope that the swings in the US electoral cycle could majestically reassemble the world order of the past. Such hopes of foregoing any changes in the global economic architecture are misplaced given the disconnect between the inertia of global governance and the acceleration in the technological and geo-economic transformation of the world economy. Rather than walking several decades back in time, the world’s governance framework needs to be at least in synch with the massive qualitative changes that have taken place since the 2008–2009 crisis.

Identifying inefficiencies

Reforming the global governance system needs to start with the diagnostics of inefficiencies as well as development and regulatory gaps. Most importantly we need a global governance framework that is capable to adjust and reform its operations in an inclusive manner with due regard to the constantly changing conditions and fundamentals in the world economy.

Such a framework is likely to emerge as the world economy becomes more multipolar and more balanced across the main regions. At the same time the evolving changes in global governance also need to ensure continuity with respect to the role of multilateral institutions, such as the UN, the IMF, the World Bank and the WTO. New elements that are created within the global economic architecture need to support these institutions and work jointly to promote a more stable and inclusive system of governance.

The Coming Crisis: why global governance doesn’t really work

Serious problems undermine the current regime and create a significant ‘global governance deficit’

Nobody can say that the major institutions of global governance haven’t noticed the possibility that a further global economic crisis might be brewing.

The World Bank warned in January this year that a ‘perfect storm’ could be building in the global political economy. It was worried by the potential combination of a simultaneous slowing of economic activity across the BRICs and what it euphemistically termed ‘financial market stress’. The International Monetary Fund (IMF) followed the same line. In a speech delivered in Germany in April, its Managing Director, Christine Lagarde, spoke of her fear that the global economy had lost its growth momentum and was stuck in the ‘new mediocre’. ‘We are on alert’, she said, but ‘not alarm’.

The most recent expression of anxiety came just a couple of weeks ago from the Organisation for Economic Cooperation and Development (OECD), the Paris-based body which is becoming ever more important in shaping and delivering global economic governance. Its chief economist, Catherine Mann, introduced the publication of the OECD’s latest economic outlook by identifying the emergence of ‘a self-fulfilling low-growth trap’ over the past eight years since the crisis broke. The longer this remained the case, she observed, the more difficult it would be to break the ‘negative feedback loops’. The resulting risk was that a ‘negative shock could tip the world back into another deep downturn’.

So they’ve noticed — at least the technocrats of global governance have. The more pertinent question, however, is whether they have actually been able to do anything to head off a second crisis. This takes us to politics and politicians — in this case, the leaders of the countries that belong to the Group of 20(G20), the new overarching ‘steering committee’ of global economic governance set up in a hurry, almost a panic, in autumn 2008 to preside over and direct the global political economy.

The G20 summit for 2016 will not take place until early September when leaders will gather in Hangzhou in China. But two meetings of the G20 Finance Ministers and Central Bank Governors have met under the Chinese Presidency — in Shanghai in February and in Washington DC in April — and have produced two (almost identikit) communiqués of quite astonishing complacency. Sure, the ministers and governors acknowledged the uneven character of the modest growth that is currently being achieved, but, for the rest: well, they were committed to using all available policy tools (monetary, fiscal and structural); were indeed pressing on with structural reforms; had not taken their eye off Basel 111 and financial sector reform; and were still trying to get countries signed up to their Base Erosion and Profit Sharing project designed to foster a fairer international tax system.

The overall message was clear: things aren’t perfect in the global economy, but we know what we are doing, and we are in fact doing a lot to manage the system. There was no hint of the ‘coming crisis’ as explored in these SPERI blogs and scarcely any reference to what, tellingly, Martin Craig has called the ‘other crisis’. On this front the February meeting did no more than ‘welcome’ the Paris Agreement on Climate Change and the April meeting merely asked the G20 Green Finance Study Group to come up with some specific options.

So, what’s going on in global governance? Why can’t it do better? I identify at least three important problems that undermine the capacity of the current regime and create a significant ‘global governance deficit’ in the space in which we presently need imagination, substance and leadership.

The first problem has long been identified within the best academic accounts of the major global economic institutions (see the many invaluable publications of Jeffrey Chwieroth of the LSE). Although there has always been more internal disagreement within the major global economic institutions than some on the left have generally wanted to admit, the fact remains that the vast majority of the staff of the IMF and World Bank especially have been trained in the US economics mainstream. Even when they dissent, as in the recent suggestion by members of the IMF research department that neoliberalism might perhaps have been ‘oversold’, they tend not to stray very far from that mainstream.

What Lagarde, Mann and most global governance technocrats want is for the global economy, broadly as currently constituted, to work better than it is at the moment, to grow again and perhaps be put to the service of rather more people than was the case during the wild, expansionary years preceding the crisis. That is why they have been speaking out in the way they have been lately. But they don’t want or see the need for a different type of global political economy.

The second problem is that the structure of global governance assembled over the years since 1944 (amidst what Stephen Buzdugan and I describe as a ‘long battle’ over the nature and shape of global governance between contending groups of states) is actually very weak. The IMF and the World Bank have very little direct power over countries unless and until a country runs into economic problems and need outside financial help. At this point, ‘conditionalities’ kick in and the powers of the two agencies are booted up.

Most of the time, all the institutions can do is seek to adjust the climate of opinion within which key global political leaders act (by, for example, issuing warnings). It is, in the end, their weakness, rather than their strength, which is their most striking feature.

By contrast, the G20 states do have the power to act. Their economies make up the bulk of the global economy. They can deploy a fuller range of economic powers, stop squeezing life out of their economies and begin to address the interface between renewed economic growth and the climate. It’s just that they don’t! Admittedly, building any global governance institution is a hard task and, as I have argued previously, the G20 as an organisation is deficient in design and has consequently disappointed in performance over the last few summits.

But that’s not really the core explanation of the failure of world leaders to grapple imaginatively with the prospect of a further economic and financial crisis that then becomes entwined with an ecological crisis. The key point is that the G20 is still dominated politically by a wedge of G7 neoliberal states. Other countries with different political positions and traditions remain — for the moment at least — unwilling to tangle with them too openly within the structures of global governance. As a result, the G20 has stalled as a political agency capable of directing the global economic institutions.

Finally, there is a third problem and maybe it’s the biggest problem of all. It’s also never talked about. The truth is that the leaders of the neoliberal states don’t want effective global governance. Why not? Because effective global governance would be public governance, would guide and regulate, would insist on controlling the wilder excesses of finance and capitalism generally, would seek to steer the global economy. It would, in a phrase, be social democratic in character. It could not be otherwise, given what needs to be done. However, the leaders of the countries that still dominate global governance don’t want this type of global governance. They acknowledge the need for there to exist understood ‘rules of the game’ in finance, investment and trade, but they much prefer the privatised, corporate, style of global governance that, for example, the proposed Transatlantic Trade and Investment Partnership offers.

In a nutshell, global governance can only be what the most powerful countries in the world allow it to be — and this may not be enough to avert a further crisis.

We need a new framework for global governance. Here’s how we could build one

The current global governance system is in flux as the centrality of global institutions is weakened, and nation states are reasserting their powers.

At the same time the in-between layer of global governance (between global institutions and nation states), namely regional integration arrangements, is undergoing massive changes: apart from the formation of megaregional blocks and the sheer rise in numbers resulting in ‘disorganization’ (sometimes together with bilateral FTAs referred to as a ‘spaghetti bowl’ of alliances), the regional integration projects along the South–South axis are becoming the focal point of ‘alternative economic integration’ vis-à-vis the well-advanced integration system in the developed world.

It is this intermediate layer of regionalism that may become a more prominent factor in the economic and political contradictions of the future world economy and the overall instability of the changing global governance system.

Regional integration

There is, hence, a need to devise arrangements that may render greater stability in the global governance framework via coordination among regional institutions and integration arrangements.

In this regard, in the sphere of cooperation among regional development institutions, there may be a case for multilateral consortia of regional development banks to promote connectivity as well as the broader development goals.

A cooperative platform could bring together China’s development institutions as well as other development banks and funds from across the Eurasian continent.

In the case of the Belt and Road Initiative, such a cooperative platform could bring together China’s development institutions as well as other development banks and funds from across the Eurasian continent — what may be referred to as the Silk Road Development Consortium — that would seek to exploit the synergies in the cooperation of the existing Eurasian institutions along the Silk Road route, ranging from the European Investment Bank in the West to China Development Bank and the China–ASEAN Investment Cooperation Fund in the East.

The benefits could include possibilities for co-financing projects in the respective parts of Eurasia, the possibility to share expertise in infrastructure development, greater ability to develop longer-term strategies on common project pipelines, as well as the enhanced possibility to complement rather than contradict or duplicate each other’s efforts in the Eurasian space.

Belt and Road model

Taking this a step further, the Eurasian connectivity projects like the BRI could be replicated in other continents — Africa or South America, where the lack of infrastructure development and regional connectivity is stifling growth.

In Africa the continental consortium of development institutions could include the respective regional development banks such as the Development Bank of South Africa, the African Development Bank, etc.

A similar continental platform could be created in South America to include the Inter-American Development Bank (IADB), Mercosur Structural Convergence Fund (Fondo para la Convergencia Estructural del MERCOSUR), Development Bank of Latin America (CAF) and other development institutions.

Even more broadly, there may be a case for a global coordination mechanism among the largest regional integration arrangements from both the North and the South. Such a framework could operate separately on the basis of coordination among the respective regional development institutions, or it could be coordinated via global networks and organizations such as the G20 or the WTO.

The G20 could be the best forum to launch discussions on such a platform and/or on broader issues of coordination among regional integration arrangements, given that it brings together the largest developing and developed economies that in turn are leading powers in their respective regions/continents, and that frequently head the formation of a regional economic block.

The list of some of the largest regional integration arrangements in such a framework could include NAFTA and the EU, as well as MERCOSUR, EAEU and RCEP (once it is formed to include China and ASEAN countries).

In summary, what is missing in the current system of global governance is greater coordination among regional arrangements — a system of ‘syndicated regionalism’ (Regionalism Inc.) that would fill the voids in regional economic cooperation.

The process of coordination could be institutionalized via greater cooperation among the respective development banks and other institutions, with the roadmap for greater coordination in the regional sphere spanning the likes of the Shanghai Cooperation Organization (SCO) and BRI in Eurasia, as well as similar regional/continental syndicates in Africa and Latin America.

It could further include a transcontinental element in global governance in the form of BRICS+ and a North–South cooperation mechanism that brings together the largest regional integration groupings.

Rebuilding global governance architecture with regional blocks may serve to strengthen the ‘supporting structures’ of the edifice of the global economy — with hardly any attention paid to coordination among regional arrangements, as most of the coordination and regulation was focused on the nation-state level, or the level of global institutions.

A globalization process that is based on integration and cooperation among regional blocks may harbour the advantage of being more sustainable and inclusive compared to the core–periphery paradigm of the preceding decades.

Most importantly, ‘syndicated regionalism’ offers the possibility of additional lines of communication, economic cooperation and crisis resolution at a time when the fragilities in the global economy are transcending national borders and taking on regional dimensions (hence, IMF’s greater focus on evaluating regional economic vulnerabilities).

A coordinated approach to regionalism allows the world economy to transcend some of the country-to-country barriers to economic cooperation, exploit regional ‘economies of scale’ in advancing economic cooperation, while at the same time potentially attenuating the risks of confrontation among the competing integration projects. The latter in recent years are increasingly directed toward the formation of megaregional blocks (the race to mega-regionalism) that in turn harbour ever-greater dividends as well as greater risks.

Should we give up on global governance?

Flash back to 1995. After an eight-decades-long split, the world economy was in the process of being reunified. To manage an ever-growing degree of interdependence, the global community had initiated a process aimed at strengthening the existing international institutions and creating new ones. The World Trade Organisation (WTO) had just been brought to life, equipped with a binding dispute-resolution mechanism that would, among other things, provide an effective channel for managing China’s transition from a closed, planned economy to an open economy that plays by the rules of global markets. A new round of multilateral trade negotiations was in preparation. The Multilateral Agreement on Investment (MAI) was being negotiated under the aegis of the Organisation for Economic Co-operation and Development (OECD). The creation of a global competition system was contemplated. The International Monetary Fund (IMF) would soon be given a broader mandate to oversee cross-border capital flows. A legally binding international agreement, the Kyoto Protocol on climate change, was being negotiated, and plans were drawn for an international environment organisation that would provide a fifth pillar to the global order, alongside the WTO, the Bretton Woods institutions, and the (less effective) International Labour Organisation (ILO). There were strong hopes that the institutional architecture of globalisation was being built.

The intended message to the people was clear: globalisation — a new concept at the time — was not just about liberalising flows of goods, services and capital. It was also about establishing the rules and public institutions required to steer markets, foster cooperative behaviour on the part of governments, and manage a single global economy. Global public goods — another new concept that was loosely applied to a series of issues from biodiversity to climate and from public health to financial stability — would be taken care of through jointly agreed rules of the game. The successful Montreal Protocol on eliminating ozone-depleting gases, agreed in 1987, provided an encouraging template.

These claims were not exempt from hype. Liberalisation was real, but the strengthening of the legal and institutional architecture was only in the making. Also, there were problems with the governance of global institutions:

• To start with, Europe, the United States and Japan were not only running the show by participating in the Group of Seven (G7); they were also overrepresented on the boards of the IMF and the World Bank, and they enjoyed disproportionate influence in the other major institutions. There was a clear need to redistribute power and influence in favour of emerging and developing countries, whose weight in the world population and GDP was growing fast;
• Second, governance through sectoral institutions was potentially problematic: each one dealt with one particular field, but none was in charge of cross-sectoral issues such as trade and exchange rates, trade and labour, or trade and the environment (to name just a few). True, the United Nations was meant to provide an overall framework. But in the economic field at least, the UN system was deprived of effectiveness ;
• Third, these institutions were increasingly criticised for being undemocratic because they were accountable only to governments and not to any parliamentary body. Civil society organisations and environmental NGOs were insistently calling for a remedy to these deficiencies. The international institutions were slowly learning to give them a voice.

The way forward looked clear: liberalisation would be pursued further and globalisation would be managed by strengthening and developing a network of global institutions, each of which would take responsibility for one of the main channels of interdependence. The governance of these institutions would be reformed, so that emerging and developing countries would gradually gain power at the expense of the advanced countries. These institutions would cooperate to address cross-sectoral issues and, as a substitute for proper accountability to a non-existing global parliament, they would develop a dialogue with civil society. Some, like Rodrik (1997), doubted this could be a workable solution and highlighted a trilemma between deep integration, national autonomy and democratic governance. But there was hardly another template on offer.

Fast forward now to 2018. Despite more than a decade of discussions, the global trade negotiations launched in 2001 in Doha (known as the Doha round) have not led anywhere. The WTO is still there but on the verge of becoming wholly ineffective. After obstructing the WTO’s dispute settlement system by preventing the appointment of new members to its Appellate Body, President Trump declared on 30 August 2018 that the US would pull out of the WTO unless the organisation “shapes up”1. Negotiations over the MAI collapsed in 1998. The Kyoto Protocol was signed, but was not lastingly implemented, largely because the US decided not to ratify it. The 2009 Copenhagen conference on climate change failed to reach agreement on mandatory limits on greenhouse gas emissions and ended in dispute. Less than two years after a general, though non-quantitative and non-binding agreement was reached on the occasion of the 2015 COP21 in Paris, the US announced in June 2017 its withdrawal from it. And nobody talks of a global competition system or a global environmental organisation anymore.

Economic nationalism is on the rise. Its offensive guise, state capitalism, is a much more powerful force than anybody expected a quarter of a century ago. It is especially, but far from exclusively, strong in China where corporate champions that were expected to transform into standard public companies remain under the direct or indirect control of the government. Nearly a decade after China joined the WTO, the balance between state-led coordination and market-led coordination is not at all what it was supposed to be. Contrary to expectations, there is growing fear that the Chinese model of development is diverging from the standard market economy template (Wu, 2016). Policy instruments that China regards as development levers are seen by the US administration as instruments of economic control that distort competition and hurt US interests2.

Economic nationalism’s defensive guise, protectionism, is especially, but far from exclusively strong in the US where the Trump administration has embarked on a series of ruthless (and fairly incoherent) initiatives against its main trade partners. In trade at least, it has taken the bilateral route and disregards multilateral rules and procedures entirely. Particularly worrying is the fact that the US has used a national security clause in the General Agreement on Tariffs and Trade (GATT) to impose tariffs on imports from its allies and partners. Countries regarded as running excessive bilateral surpluses are being commanded to reduce them without delay. China has been brutally ordered to import more, export less, cut subsidies, refrain from purchasing US technology companies, curtail investment in sensitive sectors and respect intellectual property (US Government, 2018). The very principles of multilateralism, that pillar of global governance, seem to have become a relic from a distant past. The US seems to have reverted to its interwar defiance vis-à-vis the international system.

The retreat of multilateralism is not limited to the trade realm. It is also visible — though much less pronounced — in international finance where three broad trends are noticeable (De Gregorio et al, 2018). First, the IMF’s attempt to gain a formal extension of its mandate failed already in 1997 and there has been a move away from across-the-board financial account liberalisation. According to the index built by Fernández et al (2016), average restrictions on financial flows bottomed out in the mid-2000s. Since then, capital controls and other regulatory impediments to free movement of capital have regularly increased. Second, since the Asian crisis of 1998, there has been an increasing reliance on unilateral, bilateral or regional solutions rather than on the multilateral safety nets provided by the IMF. National reserves have increased more than tenfold since 2000, against a factor of 3.7 for IMF resources (Truman, 2018). In 2007–08, US dollar swap lines were extended on a strictly bilateral basis by the Federal Reserve to selected central banks; they proved instrumental in avoiding financial disruption but the initial choice of partner central banks and the later decision to grant to some of them permanent access to dollar liquidity have been purely discretionary. Third, regional financing arrangements have developed as a complement but also a potential substitute to the multilateral safety net. Whereas Europe is admittedly a special case because of the introduction of a common currency, the instruments in place could conceivably be used in a broader regional context. Reliance on regional cooperation has also developed in Asia and Latin America.

The trend is similar in relation to the environment. Although the Paris Agreement of December 2015 was hailed as a success of international cooperation, it is far less constraining than the Montreal and Kyoto protocols. Signatories did not commit to internationally determined emission ceilings nor did they subscribe to a multilateral system of rules; rather, each state individually announced what it intended to contribute to the common endeavour, frequently conditional on efforts made by others or on the availability of financial support (Tagliapietra, 2018). There is no enforcement mechanism either. Beyond climate, the failure to address the rapid deterioration of biodiversity illustrates the limits of commitments to collective action to protect the environment.

Cross-sectoral initiatives also cast doubts over the global governance model of the late twentieth century. A puzzling case is the Chinese Belt and Road Initiative (BRI). At one level it can be analysed as a regional infrastructure development endeavour. But it is also presented by Chinese sponsors as a potentially more encompassing project and a “new globalisation mechanism” (Jin, 2018). US critics regard it instead as “debt diplomacy to expand influence” (Pence, 2018). An early test will be provided by the treatment of the bilateral debt overhangs of partner countries. So far, China has been reluctant to contemplate settling overindebtedness cases within the framework of the Paris Club, the usual multilateral venue.

It is hard not to conclude that recent developments in a wide range of fields have dashed the expectations of the 1990s. These developments challenge the system of universal, multilateral, public, treaty-based, institution-supported and legally enforceable rules that provided the basis for global governance since the second world war. The legal and institutional order that underpinned international economic relations for seven decades is undergoing a slow, but major overhaul.

The exception to this trend — admittedly quite a significant one, at first sight at least — has been the creation of the Group of Twenty (G20). At the end of 2008, in response to the Global Financial Crisis, the dramatic decision to establish it (or, more precisely, to elevate an existing finance ministers’ body to government leaders’ level) suddenly gave emerging countries the voice at the high table they had for many years been asking for. Furthermore, it involved them in the design of a financial and macroeconomic response to the worst crisis in six decades. In Washington in November 2008, the G20 initiated a comprehensive financial reform agenda, the implementation of which would be monitored by a new institution, the Financial Stability Board (FSB)3. In London in April 2009, the G20 engineered a concerted budgetary stimulus of an unprecedented magnitude — in which, for the first time ever, the emerging and developing countries participated alongside the advanced countries. In London also, it was decided to increase significantly the resources of the IMF and to proceed with a special one-time allocation of Special Drawing Rights (SDRs), in order to beef up liquidity at the global level. And in Pittsburgh in September 2009, the G20 initiated a Mutual Assessment Process through which the contribution of national policies to the reduction of global imbalances would be regularly monitored by the IMF and discussed among national policymakers4. Since then, the G20 has continued to serve as platform for political dialogue and as a steering body for collective initiatives in a variety of fields (Bery, 2018).

The creation of the G20 was initially hailed as a major step forward for global governance. The leaders claimed that “a global crisis requires global solutions”(London Declaration, April 2009), and announced that the G20 would become “the premier forum for international economic cooperation” (Pittsburgh declaration, September 2009). The G20’s establishment and first steps marked indeed a major departure from the ‘Own House in Order’ doctrine that dominated international economic relations in the early 2000s. Because the Global Financial Crisis illustrated that financial stability is a global public good, the provision of which cannot be left to national authorities acting in isolation, it resulted in a major revision of the prevailing international policy doctrine.

But there should be no mistake. The G20 is no international organisation. It is a political institution that works by consensus and steers the work of technical bodies by issuing political guidelines. The technical bodies themselves are not organisations equipped with effective powers, but are mere coordinating forums. To produce results, the G20 therefore relies on its agenda-setting power and a chain of institutions of uneven effectiveness. Its creation was not meant to imply that participating countries intended to strengthen international law and abide by it. And actually they did not: in the financial field, arguably the domain where most efforts were concentrated in the aftermath of the global crisis, the FSB was neither created as a universal institution nor equipped with decision-making or enforcement powers. Its membership comprises 68 institutions, including ministries of finance, central banks and supervisory and regulatory authorities from 25 jurisdictions, as along with 10 international organisations and standard-setting bodies. It is structured as a coordinating platform that promotes, monitors and advises — in other words “orchestrates” the action of independent national and supranational bodies (Abbott et al, 2015). So even in the most active of all fields, a significant departure from the standard model is noticeable.

The G20 furthermore quickly disappointed hopes (or fears) that it would effectively coordinate national economic policies. The Global Financial Crisis was more a high-noon moment than the start of a continuous coordination process. Writing only a few years after the first G20 summit, Angeloni and Pisani-Ferry (2012) already concluded that they were fearful of “diminishing returns”. Developments since have not resulted in a revision of this judgement.

THE ISSUE OF GLOBAL GOVERNANCE IN THE CONTEXT OF INTERNATIONAL RELATIONS THE-ORY

More than two decades ago, the concept of global governance became one of the most important in the theory of modern world development, especially within the framework of the current phase of globalization process. The Russian researchers also deal with this concept in their studies. The author regards these scientists as optimistic globalists (as opposed to pessimistic ones) who exaggerate the possibility of creating the global (supranational) governance. Our view of the concept of global governance is intended as a critical framework from the standpoint of methodology of political realism, which is the leading trend in international relations theory.

Keywords: globalization, global governance, theory of international relations, political realism, theory of hegemonic stability, optimistic globalists.

The concept of global governance is an appropriate response to the current globalization processes unfolding in the modern world. Specialists in Global Studies raise the question that the modern world needs a fundamentally new governmental system conforming challenges and needs of the time.

Within the framework of international relations theory the issue of world governance is not something fundamentally new. Several approaches have been already developed within the context of this issue, namely, network, institutional-normative, and polar approaches (Temnikov 2001: 74–83). If we proceed from this classification of approaches, the concept of global governance originates in the institutional-normative model, which considers the norm to be the main regulator of international relations, while the regimes are the mechanisms of their creation, implementation and substantiation. Normative governance and regulation are based on the rules adopted and developed by international community. Being legally binding, these rules do not consider the use of force as a proper way to meet modern requirements of regulation.

The examples of development of global governance theory can be found in publications of the journal Vek globalizatsii (‘The Age of Globalization’) and the Journal of Globalization Studies. One of the first publications on the subject was Veber’s article (2009) where the author attempted to formulate the problem and suggest approaches to its solution. Shortly afterwards, in his article on similar topic Alexander Chumakov argues that ‘under the influence of globalization, the international community becomes more and more a single integrated system in almost all spheres of social life, whereas there are no control mechanisms that are adequate to this integrity’ (Chumakov 2010: 4).

In our opinion, the actualization of the global governance problem within its institutional and normative forms brings us to the first big controversy in the theory of international relations between the political realists and the idealistic liberals. This controversy deals with the problem of correlation between the power and the right in international community, as well as the inevitability of conflicts and contradictions, and their correlation with cooperation in international affairs. The most vivid examples of this dispute were shown as early as in 1948 by the U.S. expert in international relations Hans Morgenthau in his book Politics among Nations: The Struggle for Power and Peace (Morgenthau 1967). About fifteen years ago, eminent American scholars in the field of international relations (Keohane, Krasner and others) introduced the idea of smoothing contradictions between the two approaches and of a certain tolerance towards ideological opponents. It is obvious that this trend is determined entirely by objective circumstances — the ‘volume’ of cooperation in the world is increasing against the background of traditionally long-standing conflicts. However, then the question arises: what is the case with the opposite trend? Would it be possible to assume that the conflicts and international violence just transform, while remaining the most important component of international life due to heterogeneity of global community? Do they, in their turn, inevitably cause controversy, and, hence, the disputes about them? Would not it be a bit too early to bury the political dispute between realists and liberals? The further development of the global governance theory by the Russian specialists in Global Studies (let us call them optimistic globalists) suggest that the time has not come yet, and that liberalism in its extreme, Kantian, forms, still exists, and therefore it requires a response with respect to the realities of contemporary international life and to its governance within the concept of political realism. The present article is devoted to these issues.

Theoretically and methodologically, the concept of global governance is based on two ‘pillars’. The first ‘pillar’ is interpretation of globalization as a potentially non-conflict state of the world. Advocates of global governance put an emphasis on the emerging global ‘single integrated system’. But let us turn to the realities of modern international life. What can we observe? Indeed, cooperation and interdependence penetrate all spheres of human life, including space. By the way, in this regard, space is a very illustrative form of cooperation. After Yuri Gagarin’s spaceflight in 1961, U.S. President John F. Kennedy made a statement that the Americans should really be tied in to getting on to the moon ahead of the Russians. The United States expended huge amounts of money for this purpose and was able to leave the Soviet Union behind in the space race. However, some years later the Soviet-American project ‘Soyuz-Apollo’ was launched, so today almost all space flights are international.

However, the development of international cooperation and globalization processes, unfortunately, does not lead to the decline of conflicts, violence and confrontation in the modern world. Thus, the proposed system of global governance can hardly reduce them, since they are objective by their nature. Samuel Huntington’s concept of ‘clash of civilizations’ (Huntington 2003) is one of the most appropriate theories concerning contemporary conflicts of a new generation (Lebedeva 2006). Its essence lies in the fact that political and ideological types of confrontation inherent to the period of the Cold War, turned out to be less viable (they have just disappeared) than the cultural and civilization types of confrontation, which did not show up during the confrontation between two systems, but have not sunk into oblivion because they were more resilient in comparison with the ideological confrontation.

In this context, one should mention the point of view expressed, in particular, by Kosachev the Chairman of the State Duma Committee on International Relations, that the present stand-off between Russia and the West, despite the end of the Cold War, is primarily connected with the civilizational differences. Two different civilizations simply cannot understand each other and adapt to each other.

In addition to the profound civilizational contradictions, the very process of globalization, in the form of westernization, generates, so to say, ‘new’ civilizational conflicts in the modern world. A slow process of social modernization in Russia in no small measure is related to the fact that the Russians with their genetically ingrained inclination towards solidarity form of social order display implicit bias against the Western forms of arrangement of life. The imposition of the Western, that is liberal, model of development provokes even more violent protests in other countries, for example, Afghanistan or Iraq, where the presence of American troops leads both to violent political and mental protests.

Civilizational factor is one of the reasons for the explosion of Islamic terrorism in the modern world: public opinion in Muslim countries rises against the Western countries domination in the modern world. The Islamist fundamentalists acting in Muslim countries claim that Islam is the oldest religion, which gave rise to many spiritual and material values; therefore, their wretched existence in the backyard of the world civilization does not correspond to their contribution to the treasury of world’s values. It is common knowledge that the struggle with international Islamic terrorism is very difficult and, as some experts believe, almost hopeless. Thus, according to Mirsky, a well-known Russian expert on Islam, if terrorism itself (according to the law of cyclicity) does not come to naught over time, then, the civilized community will either lose the fight against it, or will be fighting this battle during the whole 21st century with no hope of winning. The reason for this is the actualization of the most critical aspects of confrontation between the West and the Muslim world, which took place right in the era of globalization.

All the above-mentioned should be categorized as civilizational contradictions that exist in the globalizing world. But this is an incomplete record of the fundamental contradictions that are inherent to the globalized world.

When speaking about the contradictions between core and periphery, Immanuel Wallenstein, a prominent sociologist of modernity, proceeds from neo-Marxist concept. If we summarize his ideas, the relations between developed countries (‘the Core’) and developing countries (‘the Periphery’) are antagonistic, and this collision tends to exacerbate. By the way, it is worth noting that the neo-Marxist conception is quite popular among Russian sociologists in their case studies of contemporary world order.

Let us give a more thorough description of Wallerstein’s arguments. First, as a sociologist, he speaks about long-term social trends in the modern world. Contrary to popular opinion, Wallerstein argues that the end of the Cold War marked not a victory but a historic defeat of liberalism, as the scientist foresees a collapse of all the gains of social liberalism and democracy in the developed countries. The reason for that is in the growing migration from the South.

Karl Marx’s ideas that the proletariat’s ultimate goal is to destroy capitalism, do not correspond to the realities of the modern world. Currently, the term ‘proletariat’ in the world-system context refers to the entire population of the periphery. The contemporary proletariat, that is population of the South, is eager not to destroy capitalism but, on the contrary, to live under capitalism. Since it is impossible, mass migration occurs. The human rights will be sacrificed to restrain the mass migration. But since it is unachievable to completely stop the migration, the unemployment among the indigenous population of the Western countries will increase and their wages will be reduced. This will inevitably provoke conflicts between indigenous population and migrants. The increasing crime rate will require security costs, which in turn will affect the quality of life. According to Wallerstein, by the middle of the 21st century the living standards in the United States will be comparable with the living standards at the turn of the 1980–1990s or decrease even lower (Lantsov and Achkasov 2005: ch. 6.4).

Wallerstein’s prediction is unfolding before our eyes. The democratic revolutions in North Africa have led to mass migration to Europe. As a result, Europe does not know how to get rid of mass migration from the outside and because of that is ready to review the Schengen Agreement. Second, Wallerstein discusses the future political dynamics of the world. In his opinion, the relations in the World-System core will be unstable. The three main centers of power — the U.S., Japan and the united Europe — will come into conflict. He further predicts that the United States and Japan would create one bloc with anti-European orientation. China would probably be offered to join this alliance. As a counterweight, the Russian-European bloc would be created.

The creation of these blocs will be the response to the threats emanating from states in the South. Already in the early 21st century, one should expect direct attacks of the marginalized, poor and underdeveloped South on the rich North as well as the wars of conquest between the Southern States themselves (perhaps, with the use of nuclear weapons) (Lantsov and Achkasov 2005).

As one can see, according to this famous sociologist, the prospects of the globalized world development are far from bright. Quite the contrary, in his opinion, the contradiction will only deepen. Let us note that the forecast does not contradict the facts and is entirely supported by real data. We live in the Northern Hemisphere, and more specifically — in Europe, in Russia, and so we have no clear idea of the problems of the periphery. Meanwhile, this is not just a gap between the levels of development of the Core and the Periphery but there is a tendency to widen this gap or, figuratively speaking, this is the gap between the levels of the gap. Here is how the proportion between the levels of 20 % of the poorest and 20 % of the richest among the world’s population has changed for the last half century: 1960–1:13, 1991–1:60, 1999–1:74, 2008–1:100.[1]

Thus, from the standpoint of those scholars whom we could classify as pessimistic globalists, the idea of a ‘single integrated system’ in the modern world is at least arguable. Such a standpoint cannot be ignored. The world is full of contradictions, and what is more, they tend to worsen. We have just mentioned a few. Therefore, the very idea of creating a supra-national (global) mechanism of governance will remain controversial in the near future.

The role of morals and law in the regulation of social systems is ‘the second pillar’ in the methodology of global governance concept. According to the advocates of this concept, ‘morals and law are the main instruments that affect public consciousness and behavior. One should also emphasize the ideology, politics, economics, finance, culture, etc., that directly or indirectly, manage social systems. But among these factors morals and law are, of course, the dominant’ (Chumakov 2010: 9). For those who support political realism this statement is their major contradiction with the liberal idealism. In his classic work, The Politics of Nations: the Struggle for Power and Peace, Morgenthau argues that if countries do not adhere to the principle of identifying their national interest in the categories of the struggle for influence, they will inevitably lose in their foreign policy. The political realists argue that the basic principle of foreign policy is the concept of ‘interest defined in terms of power’, as opposed to absolutization of law and morals. Morgenthau puts an emphasis on the criticism of ‘moralism and legalism’ (i.e.,adherence to laws and morals as regulators of international relations; or, in contemporary meaning of the term, adherence to liberal idealism). He argues that each sphere of international life has its own rules which should not be confused. Thus, it is impossible to apply moral standards to world politics, or norms of world politics to the international economy. In practical terms, the mixing of principles leads to failures and setbacks. The main disadvantage of those who in their political activities are guided primarily by moral and legal principles is that they (ironically enough) lose their allies, suffer defeat from their adversaries, and lose their orientation in the implementation of national interests.

The Russian scholars have identified another significant shortcoming of moral and ethical regulation in international relations. According to Khrustalev, a well-known expert in international affairs, the weakness of such regulation lies in the fact that ‘there have been differences in interpretation of principles of morals and ethics in our world. For example, one of the key principles of Marxism-Leninism was the provision of the class nature of morals and the justification of any action in the name of victory in the class struggle (‘revolutionary expediency’). Actually, this is an argument for all extremists: ‘the end justifies the means’ (Bogaturov 2009: 107).

The speculations of those who support the establishment of a global moral and legal regulation in international relations obviously do not correspond to the classical author of political realism Hans Morgenthau and the Russian scholar Khrustalev. They are rather closer to Kant’s position who is one of the founders of the liberal and idealist paradigm in international relations theory.

In his famous article Perpetual Peace (Kant 1966), Kant envisioned the possibility of achieving a conflict-free world in international relations. Conflict-free world is seen as a world republic with universal citizenship where the relations between certain parts of the country are based on international law. In fact, what Kant bears in mind, is elimination of borders and creation of a single world republican state.

For the purpose of our discussion on the concept of global governance and its link with Kant’s thoughts it is important to understand how Kant grounds the possibility of achieving a ‘peaceful’ world order. Being true to his philosophical doctrine, he argues that ‘political maxims must proceed neither from a state’s prosperity and happiness… and consequently nor from the end which each of them makes the object of its will as the highest empirical principle of politics; but they must proceed from the pure conception of the duty of Right or Justice, as an obligatory principle given a priori by pure reason’ (Ibid.: 300). Kant calls this philosophical principle the categorical imperative, which every human is given by virtue of his natural state. If modern people do not follow it, it is only because of depravity of human nature that is to be overcome.

Kant’s moral categorical imperative is quite consistent with the optimistic globalist assertion that ‘law and moral certainly predominate …’ The institutional and regulatory model of international governance, which, as noted above, includes the concept of global governance, is described in the literature on international relations primarily from the critical standpoint. Thus, proceeding from the classical provision that since ancient times there have been two types of governance in international relations — the right and the power (Morgenthau 1967: 219), — Denis Temnikov writes ‘… regulation through the standards has never been dominant, and has always been an associated or alternative form of the power regulation process’ (Temnikov 2001: 78).

Let us turn from the critical part of our reasoning to its positive component. What is (or could be) the governance in contemporary global world? For one thing, the new interpretation of ‘global governance’ emerged in the late 20thcentury due to the end of the era of bipolarity, the development of globalization processes and the increased attention to the issue of how the world political issues will be regulated and controlled under new conditions. Thus, the concept of global governance has emerged. This is primarily a speculative model, as it has never been implemented in practice. Relying on the historical analysis, we will try to project the actual international trends into the future.

The period from the 1990s to the early 2000s was marked by the dominance of the U.S. as the sole leading global power, or, in other words, by a unipolar world. It was the kind of global governance, which was described long ago in American literature on international relations under the name of the theory of hegemonic stability. Nowadays, Zbigniew Brzezinski (2005) is one of the most active adherents of this theory. Its essence lies in the fact that the world is more likely to remain stable and conflict-free when a single nation-state is the dominant world player (the Americans mean, of course, themselves).

However, one should keep in mind that the theory of hegemonic stability indicates the possibility of leadership in economic area only. The simultaneous imposition of rules of conduct in all spheres of political, economic and cultural life, as a rule, provokes a sharp rejection on the part of other members of international cooperation. We all have witnessed this in connection with the growth of anti-American sentiments all around the world.

In the mid-2000s the trend towards centralization of the international system began to wane. Although the superiority of the United States is undisputable, the country itself, having initiated the wars in Afghanistan and Iraq in 2001 and 2003, began to lose confidence. With the change of administration in Washington in January, 2009, the militant speeches of American politicians have become less frequent, and the American policy itself has become a little more circumspect. There have been some signs of U.S. intentions to make adjustments to its foreign policy behavior. The ambition is unlikely to become smaller, but the reality of life forces Americans to exercise prudence and to be more inclined to at least listen to its allies, especially NATO.

Started in 2003 as a militarily minor, the war adventure in Iraq has provoked surprisingly extensive political and diplomatic rift over the world. In 2004–2008, it acquired the features of the opposition on the part of the majority of leading countries to the American policy of unilateral action, and this, subsequently, led to the tendency toward decentralization of the World System. The international conditions for American leadership have considerably narrowed.

In addition, the decentralization of the world system has emerged as a result of ambitious projects of the U.S. foreign policy and as a result of objective processes in the world system, namely, the enhancement of its polycentricism. Hence, alongside with states and international organizations, the non-state actors could possibly participate in global governance. This is what the advocates of idea of global society (similar to the interstate society), such as Haas, Grum, Burton and others, tend to believe.

The book Governance without Government: Order and Change in World Politics by Rosenau and Szempiel (1992) has given a renewed impetus to the development of the idea of global governance within the framework of global society. The book discusses the mechanism of this kind of governance. In Turbulence in World Politics, published two years earlier (1990), Rosenau writes about the governance as a system of rules, typical of all kinds of human activities. According to him, contemporary system embraces activities of various governments, but it also subsumes many other agencies and groups. The phrase ‘global governance without global government’ now came into use among scholars of international affairs, and refers to multiple networks, which include fora, conferences, congresses and meetings held by governmental and nongovernmental actors on various issues of world order as well as the activities of international organizations — both intergovernmental and nongovernmental ones. In our opinion, the contemporary international community is seeking to achieve this very form of global governance against the backdrop of the demise of global unipolarity. The new term ‘nonpolar society’ introduced into academic literature by Haas, as American expert, is consistent with the above-mentioned views. It is an interesting notion since it displays a key feature of contemporary global governance. ‘In contrast to multipolarity — writes Haas — which involves several distinct poles or concentrations of power — a nonpolar international system is characterized by numerous centers with meaningful power’. He lists these centers, namely, global and regional powers, various international organizations, major international companies, international network of media, illegitimate paramilitary formations, drug cartels, individuals and others. ‘Today power is diffuse, power is now found in many places and in many hands’. And what is the most important, ‘with so many more actors possessing meaningful power and trying to assert influence, it will be more difficult to build collective responses and make institutions work’ (Haas 2008). In other words, the modern international system is difficult to manage, it is rather chaotic despite the system of ‘global governance without global government’. The latter, rather, is more associated with chaos rather than with order. This approach to contemporary global governance is shared not only by foreign but also by Russian experts in international affairs. Here are a few quotes from World Politics by Lebedeva: when analyzing the structure of global governance, ‘its significant diversity’ is obvious, ‘the emerging global governance connections are not hierarchical, compared with the connections when they exist within a state’; ‘current policy is based on collective decision making through the variety of different levels of coordination’, in modern world politics ‘concerted action is often unachievable due to various reasons’ (Lebedeva 2006: 337–338). Again, we can see the same idea that the modern world is difficult to manage.

However, in the context of our article, we must put a question: if the modern world is so unmanageable, will we be able, maybe in the offing, to achieve a greater harmony in this matter? To the disappointment of the optimistic globalists, we have to say that the medium-term forecasts in the field of international relations are rather negative. For instance, such forecasts are made by Russian economists specializing in international affairs. Thus, Inozemtsev tends to believe that there is a strong possibility that China would become new number one after the United States loses its economic and financial superpower. This conclusion is quite obvious if we consider the effects of the global economic crisis. Will it be a new unipolarity or, more likely, a new bipolarity — the future will show. In any case, Inozemtsev does not believe that the United States, with its messianic ideology and history that it had in the twentieth century, will stand somewhat aloof, calmly and dispassionately watching the rise of China, its turning into the world’s largest economy, the formation of the Chinese sphere of influence in South Asia and the Indian Ocean (Inozemtsev 2009). There is the only conclusion — the world will witness instability. Another negative forecast is associated with the idea of apolar, or global power vacuum, which will replace the unipolarity (Ferguson, Voitolovsky).[2] Far more dangerous forces than rival great powers will benefit from this global disorder. This could be a sharp destabilization of the Greater Middle East, an uncontrolled proliferation of WMD, infinite Afghan drug trafficking, a feeling of permissiveness among Islamists. One might assume the probability of growth of local and major regional wars. Voitolovsky even admits that the transitional nature and instability inherent to the modern international political system do not exclude the possibility of another world war in the long run (Voitolovsy 2009).

In this context, the relevant timeframe of the forecast is of high importance. In world politics, where the phenomena and processes are very different in nature, we should bear in mind, according to Kosolapov, ‘the module of length of the process, defined as average length of a typical process of this class’ (Kosolapov 1998: 68). Here, the absolute module of length is the active life of a person or the average limit of generational change, which is about 30 years (Temnikov 2001: 84). Consequently, it is hardly probable to ‘look’ further than 30 years from now (although, we should note that the great sociologist of modernity I. Wallerstein makes some of his predictions for almost a century ahead; that is why he is great).

* * *

Yet, at the end of our discussion with optimistic globalists we would like to come to some kind of compromise. To do this, there is nothing better than to quote Tsygankov, a well-known Russian political scientist in international affairs. There is room for this compromise in his thoughts, ‘The development of moral universals and common law is not a unidirectional trend, the outcome of the conflict between global solidarity and particularistic loyalties is not predetermined, and there are no serious reasons to believe that the international society will become a society of universal values and norms that have overcome and left for history the values and norms of states, ethnic groups and cultures. The abovementioned attempts, nonetheless, are not necessarily doomed to failure (italics added), since the international relations are not only about the law of force, but also about the law of interaction, and even the law of coordination and adjustment …’ (Tsygankov 2002: 365–366).

Global Governance In a Globalizing World: Is It Possible

The Nature of Global Governance

The study of Globalization appears rather abstract and ‘out there’ rather than part of our daily lives. This is not surprising and, indeed is one of the fundamental problems of globalization. According to Leslie Sklair , there are two sides to globalization a subjective and an objective. Subjective looks at globalization from an individual’s perspective (what can be called the ‘worm’s eye’ view) while objective looks at the global perspective (‘bird’s eye’ view). Global governance is part of this objectivity. There is no universally accepted definition of ‘governance’, but this term is often used to refer to interpretations of order, stability and politico-economic management. The Commission on Global Governance has, for instance, defined governance as ‘the sum of the many ways individuals and institutions, public and private, manage their common affairs’. It has posited that governance is ‘a continuing process through which conflicting and diverse interests may be accommodated and cooperative action may be taken’. The World Bank and the International Monetary Fund, on the other hand, use ‘good governance’ to refer to a particular type of political and economic order. For them, ‘good governance’ is associated with the spread of democracy and transparency in governments and free markets . ‘Good governance’ is the opposite of arbitrary and self-seeking rule, corruption and cronyism, which have been endemic in some Third World societies. However, the World Bank and IMF’s version of ‘good governance’ has been costly to Third World peoples. Although the World Bank and the IMF started to emphasize different priorities following the crises in East Asia in the late 1990s, their ‘good governance’ is still associated with reduction in public expenditures, emphasis on exports and charges in hospitals and schools.

The concept of global governance, as distinct from ‘good governance’, refers to formal and informal sets of arrangements in global politics. It implies that states alone cannot manage global affairs, and therefore it accords roles to international governmental organizations (IGOs), non-governmental organizations (NGO’s) and multinational corporations (MNC’s). Global governance refers to transnational networks, institution building, norm entrepreneurship, regime creation and the management of global change. It covers many issues, such as women’s rights, human rights, development, democratization, the environment, security and investments. Its recent achievements include the treaty banning landmines, the Kyoto climate convention, the international criminal court, the World Trade Organization, and the ‘new generation’ UN peacekeeping operations. In a nutshell, global governance describes regimes or systems of rule, embracing both formal and informal regulatory mechanisms.

Underlying global governance is tolerance and a willingness to manage differences and reconcile self/other, us/them and inside/outside. This can take place only where there is a common set of values, norms, beliefs, ideas and institutions. As these values evolve, the nature of global governance has necessarily to change. Indeed, global governance ‘is a broad, dynamic, complex process that is constantly evolving and responding to changing circumstances’.

The need for Global Governance

Contemporary policy challenges commonly require co-operative international approaches to transnational policy challenges that have a direct impact on individual states, requiring both the strengthening of global governance mechanisms and also its continuous extension to address new policy challenges. Globalization brings with it both new opportunities and many challenges. Pollution does not respect international boundaries while terrorism, drugs, the proliferation of small arms, and other transnational problems not only dominate the political agendas of individual states, but require international co-operation if they are to be dealt with effectively.

These new global policy challenges share several common features:
a. They are often transnational and have direct domestic impacts.
b. No one can successfully control them.
c. Solutions therefore require a multilateral approach which accounts for, and where possible incorporates the interests and inputs of key stake holders.
d. Decisions have an effect and it is impossible to isolate policy options and outcomes from each other.
e. Policy development must be holistic to the maximum possible.
f. Multilateral institutions must adapt to accommodate these challenges. States must therefore work to strengthen and where necessary create the processes needed for effective global governance.

The individual processes which, in aggregate represent globalization can to a certain extent be regulated and shaped, though imperfectly. Successful regulation of these trends requires multilateral co-operation and domestic institutions capable of managing international governance in the absence of government.
Given the complexity of global governance it is helpful to think in terms of increasingly interdependent levels of governance. Decisions at the international level have direct impacts on both states and their citizens, conversely individuals acting through a variety of channels are increasingly able to influence the international system, whether mobilized in favour of policy by an NGO or other group or by appealing directly to multinational legal bodies instead of domestic legal systems. Thus policy challenges cut across these different levels as transnational trends, the governance challenge is for institutions at all levels is to co-operate. States must balance the sovereignty they are required to sacrifice in order to achieve the benefits of a global governance model.

Governance and Power

Power in world politics clearly matters; new realties have changed the nature of power necessary to affect policy as well as the forums in which that power is exercised. Some continue to argue that power remains the key and the search for security, the inescapable purpose of international relations. It can be said that there is an increasing ability shown by states to work with non-state actors. The nature and exercise of power has, in short changed. States exercise power not only when they influence a decision, but perhaps more importantly when they shape the context, framework and norms by and within which any decisions are arrived at.

Recent trends such as the growth of treaty law, human rights declarations and other similar institutions and organizations suggest this. The state still plays a central role both in aggregating domestic influence and as a primary participant in a multilateral process. The sovereign functions of the state have therefore been transformed and not simply been eroded. However, it cannot be denied that it is power that determines whose interests, rules and standards become ‘global’. The development discourse has crystallized in practices that contribute to regulating the everyday goings and comings of people in the third world. How is its power exercised in the daily social and economic life of countries and communities? How does it produce its effect on the way people think and act?
Thus, while global governance requires tolerance and accommodation of conflicting interests across national, racial, class, gender and ethnic boundaries, it is often the preferences of the most powerful actors that are accommodated. This is and will be a fundamental challenge to the concept of global governance.

Global Governance and Ethics

Increasingly matters relating to global governance are faced with ethical decisions. The British have to take decisions about proposed Europe-wide forms of governance pertaining to the control of migrants and asylum seekers. These involve difficult issues concerning the rights of migrants to freedom of movement versus the rights of citizens to protect their own interests. Israeli citizens face questions with explicit ethical content about an appropriate structure of governance for Palestinians in the region. In both these cases we are aware, from the outset, that whatever decision will be made will be based on both ethical and political considerations. Sometimes the decisions are easy to make but at most they are difficult. If Country X proposes to buy equipment and arms from Country Y, which ‘Y’ knows will be used in a war. will Y be ethically justified in going ahead with the sale. Governments often have to confront with such questions.

It is ironical that though the importance of ethics is stressed upon, it is power that determines not only the actors, the influences as well as the ideas behind the ethics itself. The focus remains on power rather than on ethics, which is a huge stumbling block in the path of international governance as a whole.

Various questions that raise ethical questions in a governance — globalization perspective are:
a. Reform of the UN.
b. Distribution of financial aid — to whom, by whom and what conditions.
c. Environmental standards.
d. International Monetary Fund (IMF) — To be or not to be.
e. Land reform in developing countries.
f. Labour reform in developing countries etc.

Thus it can be strongly perceived the debate on ethics and governance as one of the most important in international governance. The concept of global governance and its ability to succeed in developing countries in particular will hinge a lot on ethics and ethical decisions on governance considering that many countries are quite frankly worse off than were they started from. Progress in the arrangement of global governance will be made only through a decent attempt to bring into coherence the ethics which underpin the overall power structure within which the various actors are placed. The emergence of a global ethics and rule of law in international conduct will prove impossible unless the powerful nations are as willing to submit themselves to such common rules as the rest of the global community. Equality under the law, democratic accountability, and transparency of information are fundamental concepts which took centuries to develop within nations. It is time to extend the same principles to global ethics.

Global Governance and Accountability

One of the greatest problems of globalization has been undoubtedly accountability. From linking the World Bank and the Narmada Dam exploit in India; to Texaco’s Oil Production in the Ecuadorian Rainforest various actors have exploited conditions in the garb of globalization with little if no accountability at all. This is only reiterating what is now become an international governance mantra; All Actions have to be accounted for. There can be no substitute for accountability.
Democratic accountability within a constitutional framework is a relationship in which the power wielders are accountable to broad publics. Accountability in a global governance sense would be as of now a seemingly hypothetical system in which various players and agents making a sufficiently great impact on the lives of people in other societies would have to report on those people and be subject to sanctions for them.

Accountability can thus be perceived on three levels, which I would call the three A’s;
a. Authority: Hobbes and many others have emphasized the process by which one entity authorizes certain actions or confers rights to agents.
b. Assistance: Those who provide financial, logistical or political assistance are also to be held accountable.
c. Affect: those who are choice determining for others have to be fully accountable for their actions as they clearly affect others.

The four players that require a mention in the sense of accountability are powerful states, TNC’s, NGO’s and Institutions. What happens in cases of powerful states like the USA and its actions in Afghanistan and Iraq, the actions of Israel in the West Bank, etc. how are they to be made accountable. What happens when states act unilaterally dismissing demands for external accountability? This is an extremely important aspect of global governance that has to be tackled. Indeed, an ironic observation is that with respect to accountability, the two sworn enemies “Al-Qaeda and the United States” have in common their relative lack of accountability, compared to other actors in the world.

A Key principle in establishing accountability is to ensure that the fox is not invited to guard the chicken coop — that corporations to be regulated do not exercise undue influence over the regulatory process. In these circumstances and given all the scandal surrounding Enron and WorldCom, many non-governmental organizations and citizens’ groups have increased their efforts to bring transnational corporations (TNC’s) within a framework of global governance, not just a patchwork of national laws, rules and regulations. At the same time, corporate actors, through their own codes of corporate conduct, publicize that they are acting voluntarily to ensure that their actions become more transparent and accountable. According to the United Nations, transnational corporations are central actors in today’s world. In the beginning of the 1990s there were over 37,000 Transnationals worldwide. As the spread of TNC’s widens and deepens across the world in every sector, from production to finance, global regulation is even more urgently needed. From a governance perspective this is treading on a very fine line; differentiating between the good and the bad without being too negative and also not to do injustice to the positive things which businesses do to assist sustainable development.

If a popular voice requires detachment from government, then indeed in governance concerned with global human rights, there is a popular voice. It emanates from non-governmental organizations. The character of that voice, however, is far from self-evident and demands sophisticated examination. Various NGO’s purporting to speak for affected peoples gain legitimacy on the basis of this belief. How are they to be brought within the purview of an accountable structure? NGO accountability is a highly debated issue which has strong implications on global governance.

In order to analyze the practices of development, we have to analyze what development institutions actually do. Institutional practices are crucial not so much because they account for most of what is earmarked as development, but mostly because they contribute to producing and formalizing social relations, divisions of labour, cultural forms etc. Global Institutions like the International Monetary Fund and the World Bank which have set standards of good governance for their borrowing members need to apply it to themselves through reform of constitution rules, and decision-making procedures and practices. While good governance within international organizations is often described as balancing between requirements of effectiveness and legitimacy, the two are seldom separable. Overall, the effectiveness of an institution depends to a large degree on its members’ perceptions as to how representative, inclusive and procedurally fair the institution is. Even the reforms and decisions taken to improve access to information and consultations are “rather frail” in such institutions. Critics quite rightly argue that developing countries have too little voice within them and the institutions are too unaccountable and too unrepresentative.

These are questions that need urgent answers if global governance is to succeed. The principal task for those who believe in more accountability is to build support within powerful, rich countries for acceptance of more effective and legitimate multilateral governance to achieve human purposes, for stronger transnational bonds of empathy and for the increased accountability that is likely to follow.

Limits of Global Governance

The limits to what global organizations and rules can achieve are often defined in terms of the difference between ‘global government’ and ‘global governance’. Global government would have powers which only national governments now possess, e.g., in taxation, control, and entitlements for individuals. Under global governance, global public organizations are funded and governed by states. They are mainly opt-in organizations, with rules made by their members, and binding only on them. The exceptions are the International Court of Justice and the UN General Assembly and Security Council, whose rulings are meant to apply to all states. In practice, there is much pressure on states to join global organizations to demonstrate their international legitimacy and, in the case of developing and transition economies, to attract investment by demonstrating that they abide by international rules. The limit to what global governance can achieve appears to be dictated by:
1. The demonstrated need for international rules (e.g., on trade and protecting the environment)
2. Transparency regarding compliance with international rules;
3. The ability of global organizations to create win-win outcomes in disputes between states;
4. The ability of global organizations to deliver needed international public goods and services.

The Business 20: The Voice of G20 Industry

• The Group of Twenty (G20), the alliance of 19 leading industrialized and emerging economies and the European Union, has become a central forum in global governance. In order to properly fulfill its mandate of promoting strong, balanced and sustainable growth, the G20 relies on the expertise of the business community, provided by the Business Twenty (B20).
• Since 2010, the B20 has been the official dialogue process between the G20 and industry. The B20 seeks to represent the consolidated interests of the entire G20 business community with one voice. It is one of eight dialogue partners of the G20, holding company with Civil 20 (C20), Labour 20 (L20), Science 20 (S20), Think 20 (T20), Women 20 (W20), Youth 20 (Y20), and Urban 20 (U20). Within the B20, business representatives develop joint policy recommendations covering the full range of the G20 agenda.

B20 Process: Legitimacy and Efficacy

• The B20 Presidency rotates annually, together with the G20 Presidency. During the German G20 Presidency (December 2016 — December 2017), the Federation of German Industries (BDI), the Confederation of German Employers’ Associations (BDA) and the Association of German Chambers of Industry and Commerce (DIHK) were mandated to organize the B20. The B20 Chairman was Dr. Jürgen Heraeus.
• At the start of every B20 cycle, the respective Chairman invites companies and business associations in the G20 countries to apply for membership in the B20. B20 Germany had more than 700 members — representatives of both companies and industry associations — from all G20 countries, organized into eight working groups. The German B20 Presidency heeded in the selection of members representativeness in terms of countries, regions, sectors, company sizes and types. International organizations such as the UNCTAD, OECD, WTO and the World Bank contribute with technical expertise to the position-building process.
• The topics are largely determined through surveys among its members. Recommendations to the G20 are developed through monthly working meetings in the working groups and Task Forces, as well as regular written and in-person exchange. The B20 facilitates a lively exchange between representatives of industry associations and companies from all G20 countries. The process is consensus-based, which ensures that the positions developed in working groups are supported by all its members.

The B20 activities include:

• Consolidation of the G20 Business Interests: in topic-specific working groups, industry representatives from the G20 countries work on central issues of the global economy and calibrate consensus-based joint positions. Just the fact that the B20 allows industry representatives from the entire G20 landscape to come together, regularly exchange, consolidate interests and jointly advocate for positions, is valuable in and of itself. The B20 thus contributes to rapprochement and interconnectedness within the G20 membership. Moreover, the B20 supports the G20 through expertise and practical experience. The B20 is able to provide the G20 with joint consolidated economic positions, rather than a bundle of different voices from individual countries.
• Interest Representation: the B20 Chairman represents the business community through participation in meetings of the G20 working groups, exchanges with G20 ministers and Sherpas, and media activities. At the B20 Summit, the B20 recommendations are presented to the G20 Presidency. Many of the B20 recommendations are well-reflected in G20 decisions. For example, the B20 is the reason that the G20 is now addressing the issue of digital trade and e-commerce and that there are G7 in effectively addressing global economic challenges. BDI represents German industry in the B7.
• Under the German Presidency, the G8 launched an outreach process in 2007 to promote the exchange with civil society. As part of that process, the German government met with representatives of trade unions, youth associations, non-governmental organizations, business, and the scientific community from the G8 states. Since then, the dialogue with civil society has become an integral part of the G7 process. Each year it is conducted by the respective G7 Presidency.
• To coordinate the business position within this outreach process, the G8 Business Summit (B8) was established in 2007 on the initiative of BDI. Following Russia’s expulsion from the G8 in 2014, this group has functioned as the B7.

Linking the National with the International Level

• The B7 comprises the leading business and industry federations of the G7 states. Within the B7, these organizations jointly tackle the topics on the G7 agenda and draw up concrete recommendations for action. Once a year, the B7 members meet with the respective G7 Presidency at the B7 summit to present those recommendations.
• The B7 is thus an indispensable link between the national and international levels. By consolidating the interests of business in the G7 countries, it serves as a central partner for a constructive dialogue. Moreover, it makes a major contribution to global governance by supporting the G7 process with precise analyses and concrete proposals. Furthermore, it promotes the implementation of G7 commitments at the national level by contributing its expertise and monitoring progress.

The B7 members are:

• BusinessEurope, European Union
• Canadian Chamber of Commerce (CCC), Canada
• Confederation of British Industry (CBI), United Kingdom
• Confederation of Italian Industry (Confindustria), Italy
• Federation of German Industries (BDI), Germany
• Japanese Business Federation (Keidanren), Japan
• Movement for French Enterprises (MEDEF), France
• US Chamber of Commerce (USCC), United States

BDI was in the lead in 2015. The USCC holds the current 2020 B7 Presidency. At the B7 summit in February 2020, the focus was largely on trade issues, including the challenges of trade governance, global risk assessment, and competition with state-owned enterprises. How to deal with China stood at the center of discussions.

CHAPTER 8 — What are the tools of Global Governance ? Can corporate governance methods make Governments Effective and Efficient ?

1. NACD Board Corporate Governance
2. Balanced Scorecard
3. CSR
4. Exponential Technologies
5. GRI & Sustainable Development
6. IIRC

CHAPTER 9— Is sustainability and Sustainable Development the modern day long term governance agenda ?

• It is widely accepted that the achievement of the 17 Sustainable Development Goals (SDGs) depends on effective governance arrangements.
• However, it is less clear which modes and aspects of governance are important for which of the 17 goals.

CHAPTER 10 — The Rise Of Corrupt Media & Corrupt Tech as the tools of suppressing Freedom & Liberty

• Some of the information and communication practices of the Tech Media and specifically of Facebook , Twitter, Google and Amazon constitute media corruption.
• Applying the dual obligation information theory (DOIT), a normative information and communication theory that applies generally to all media companies that disseminate and share information, Facebook’s role of mediating and curating the information of its users places upon it a normative editing responsibility, to ensure both the preventive detection and corrective editing of fake news, as well as other forms of misinformation disseminated on its platform. Facebook’s role in the Cambridge Analytica case was not only unethical but moreover, constituted media corruption.
• Facebook’s media corruption illustrated in the Cambridge Analytica case is not a one-off case but the result of a systemic and inherent conflict of interest between its business model of selling users’ information to advertisers and its normative media role rendering the conflict of interest between those two roles conducive to media corruption.
• Facebook is a media company normatively accountable on the basis of an original theory the DOIT and moreover, on the basis of an original media corruption theory its actions in the Cambridge Analytica case constituted media corruption.

CHAPTER 11 — The Future Of Freedom and Liberty

• Democracies without civil liberties are not worth much.
• Our greatest problem is that we are becoming increasingly “illiberal,” — the sense of being antagonistic to individual liberties. Worse, our Constitution is facing an attack that is perhaps the strongest in modern history.

CHAPTER 12 — Free Markets

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can… and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention… By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. — Adam Smith, The Wealth of Nations, Chapter II

• Rational self-interest and competition can lead to economic prosperity.
• The conventional wisdom dictated that wealth consisted in money, particularlly gold and silver. Wealth is the “annual produce of land and labor of the society,” which runs counter to the prevailing wisdom of the time. Free market is superior to one in which trade was protected. Government can actually make people worse off.

Specialization and Productivity

Division of labor and specialization is what makes the process of production more efficient. Not only for individuals, but also for countries. What explains the enormous rise?

1. Rapidity and increased productivity thereof. Skilled workers can do a task much faster if they only focus on one task.
2. Less time wasted moving from one task to another. There are fewer disruptions.
3. Tools and Machinery save time. Through inventions by the workers and improvements made possible by R&D.

“The greatest improvement in the productive power of labour, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied has the effects of the division of labour.”

• Through collaboration of thousands of highly efficient specialists the foundation is laid for an advanced economic system, which as a result increases the wealth of a nation. Fortunately, this process decreases prizes of goods and makes them affordable even for poor people.

Mutual Exchange of Goods

• Since people will not give us things, which we desire, for nothing in return, specialization arises out of the mutual desire to trade. Self-interest, therefore, does not equal greed or selfishness. All of a sudden it makes sense to build a surplus of a good that we do not personally require. Trade stems not out of benevolence but of benefit.
• It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.
• At the same time the extent to which we can benefit depends on the scope of the market. Specializing our trade and producing a surplus benefits us only so long as we have a market we can trade in.
• For example, a man in the city of London will have more opportunity than a man in the Highlands of Scotland, who will need to be more self-reliant and produce everything for himself.

Money and Value

• As barter is infeasible we need to introduce a third means of exchange to facilitate trade and that is money.
• Lets distinguishes between value in use and value in exchange. Water is value in use as it is extremely useful but has little exchange value. Diamonds are value in exchange as they are largely useless but have enormous exchange value.

Supply and Demand

• In a hunting society there is only one means of production. There is no stock and land is free. In a society of land, labor and capital, there are 3 means of production. Where land is taken into private ownership, the landlord will demand rent. Similarly, the capitalist will ask for profits.
• Supply and demand governs many things. Markets prices determine profits and market prices, in turn, are determined by supply and demand. When supply falls short of demand, prices go up. When supply exceeds demand, prices go down.
• If a market is overstocked and prices are below the cost of production, supply will decrease. Slowly market prices will be bid up again, and vice versa. In rare cases the natural price and market price converge.
• Wages depend on economic growth and they can only rise when the GNP rises. In Great Britain, wages were rising but prices fell due to increased specialization. Smith also argues that it is in the interest of the employer to increase the wages of their employees. They will work more diligently when they don’t worry about food.

Capital and Profits

• Interest rates provide a rough measure of profitability. An increase in capital allows more business to take place and generally increases wages. But this also reduces profits. Increased competition between capital reduces rate of return and therefore reduces interest rate. The exception was America, where interest rates and wages were high.

Market Wage Rates

• Some jobs are easier, cleaner or more respectable. (i.e. Weaver vs. tailor) Some jobs are more difficult to learn or take up a lot of time. (i.e. skilled labor vs unskilled labor)Some jobs are seasonal and therefore make more money during certain months of the year. Earnings are higher in professions that require trust (such as doctor, or lawyers). Earnings reflect the probability of success in any profession.

Wages and Politics

• By restricting entry into certain professions, the government may limit supply, and therefore increase the wages of people in that profession. Smith argues that a competitive market in which the customer is sovereign is better than any official rule which often produces the opposite of its intention.

Self-Interest of the Different Agents

• Workers, capitalists and landlords have different interests, but workers have little power to lobby for their interests. Laborers do best when society is booming. The interest of the capitalist are opposed as their profits are squeezed when business is booming. Instead what they want to do is expand the market and limit competition. Smith says that private benefit comes at the expense of the public when markets are distorted and monopolized.
• The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it”

The Accumulation of Capital

• There is a virtuous cycle. The growth of capital promotes specialization. This creates surpluses. And those surpluses can be reinvested into new equipment which makes even more specialization and growth possible
• There is also a division of capital: fixed capital and capital that supplies immediate consumption. Again, money is not wealth. Money is a tool of exchange and has no intrinsic value.

Productive vs Unproductive Labor

• Productive labor: a manufacturer, who adds value to an item, which can then be sold at a profit.
• Unproductive labor (or rather pure consumption): a menial servant does not add value to anything. It is consumed immediately.
• A man grows rich by employing a multitude of manufacturers: he grows poor by maintaining a multitude of menial servants.

Saving, not spending

• Future income depends on the extent of our capital. The more services we consume, the less income and capital are left for the future. The only way to accumulate capital is by saving
• If instead of saving, we consume,we eat into our own capital. The prevalent “mercantilist” view said that dis-saving does not matter if spending is done domestically. But that capital is being consumed anyway. Since future income depends on the accumulation of capital, it must be necessarily lower in the future.
• When there is more capital available, borrowers can offer a lower rate of interest. The growth of capital and its lower cost will boost productive industry, which will result in more hiring and higher wages. Unfortunately profit rates will also decline. However, outlawing lending at interest or government efforts to peg the interest rate below the market rate distort the market.

The Four Uses of Capital

1. Some assets (i.e. fisheries) yield raw produce for immediate consumption or processing.
2. Some (i.e. machinery) are used to prepare raw materials for consumption.
3. Some (i.e. ships) are used to transport raw or manufactured products to market.
4. Some (i.e. retailing) to divide raw or manufactured goods into smaller amounts for consumers. For example, butchers.

The Progress of Economic Growth

• The piorities in an agricultural economy are as follows: 1. Land 2. Manufacturers 3. Trade. The inhabitants of towns and country are mutually dependent. North America has grown because its capital has gone into agriculture while its trade has been financed by British merchants
• The rise of towns: towns provide large markets for the country. Rich people buy and improve land. Commerce in the town promotes order and good government, which spreads to the country. Townspeople won independence in part to ally with the weak king against the rich landowning baron
• In Europe, the fact that land is only sold at monopoly prices makes land use inefficient: cost-effective improvement of land takes the same close attention to detail and to profit as any other business. In North America, there is an open market for land and so more people come to the market making the land productive. Smith argues that slavery limits agricultural efficiency.

Economic Theory and Policy

The Mercantile system: Money = Wealth

• Wealth consists in money, i.e. gold or silver. A rich person is someone, who has a lot of money. Under this view hoarding large quantities of gold would be good policy. Example: Spanish America’s quest for gold and silver

The ‘free trade’ system: Money ≠ Wealth

• Most wealth is created and consumed domestically so outflows of gold can rarely ruin a country. Wealth does not only reside in money, and money is just a medium of exchange. Gold is durable and serves as a good holder of value, but it has no intrinsic value.

The “Invisible” Hand

• The number of people who can be employed is directly proportional with the amount of capital that is available.
• Businessmen have a much better idea on where to allocate capital than regulators. This is what Smith refers to as the “invisible hand.”

Trade Restrictions

• In the mercantilist view, restricting trade gives domestic producers monopoly of the home market. Also if the domestic product is not cheaper than the foreign product, then regulation is pointless. However, if the foreign product is cheaper, then restricting trade is harmful.
• By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland?

Unjustified vs Justified Barriers

Unjustified barriers

• Interest groups can pervert the trade policies of a great country. In any exchange there must not necessarily be a winner and loser. A nation is more likely to grow rich from trade if its neighbor are also rich, commercial, industrious nations.

Justified barriers

• Imposing a tax on an imported article if the same article produced domestically is taxed for some reason. (i.e. the Navigation Acts). Retaliatory tariffs might work in some rare cases.

The Role of Government

• The government needs to finance defense. Workers due to their specialization are not able to leave their work and fights instead. Also the government needs to protect private property.
• The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security.
• The government also needs to finance public works. Public works could never yield a profit in the private industry. (i.e. the education of the young).
• The greater part of such public works may easily be so managed, as to afford a particular revenue sufficient for defraying their own expense, without bringing any burden upon the general revenue of the society.

The Principle of Taxation

1. People ought to contribute in proportion to the income they derive.
2. They ought to be certain and not arbitrary.
3. They ought to be levied at a convenient time.
4. They should not cost more than necessary.
5. Profits are not a good object of taxation because peple need to be compensated for risk. If one raises taxes on things such as licenses to sell alcohol, the dealers will transfer the cost unto consumer.
6. The proprietor of stock is properly a citizen of the world, and is not necessarily attached to any particular country. He would be apt to abandon the country in which he was exposed to a vexatious inquisition, in order to be assessed to a burdensome tax, and would remove his stock to some other country where he could either carry on his business, or enjoy his fortune more at his ease.

Public Debt

• When costs of running public services is achieved through running a deficit, capital is consumed. However, sometimes a deficit can be more effective than raising taxes, esp. when financing a war. Transfer of capital from those who “care” about the land and use it productively to creditors who have less interest in maintaining the land or stock of capital. There is no record that once public debt has been run up, that it has fairly been repaid.
• Here we discuss the fallacies of commonly accepted economic philosophies, while also proposing better and more correct ideologies.
• Earlier individuals only viewed national economics as “importing vs exporting” terms. Many assumed that importing goods into the country was bad due to fact that money was leaving the country. This of course meant that exporting was good, because money was entering the country. This ideology lead to many countries making it so they could limit the importing that they did. Some tactics includes taxes on imported goods, and protection for domesticated industries.

Why is Free Trade Good?

• Free trade among nations was a good thing. Both sides of a free trade would benefit from a trade or exchange solely because no one would agree to a trade if they didn’t gain some sort of benefit from it. With this ideology imports are just as good as exports. Instead of arguing against the old philosophy that amount of money equals wealth, instead adopting the new thinking that wealth is based on production and commerce.

The Invisible Hand

There was/is an unobservable force that guides the free market and will allow it to reach an equilibrium in supply and demand.

• “[The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.”

In Conclusion

• Social order of the market did not need be regulated by the government anymore because the “invisible hand” will take care of the free market. Also one must keep in mind importance of trade with others and that pure wealth is based on more than just actual money.

The Invisible Hand Theory

• In definition, the term “Invisible Hand” serves as a metaphor for how, in a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit of society at large. This theory has served as the foundation for the development of free market economies across the world. Lets emphasize two opposing, but complementary economic forces within this model: Self-interest and competition.

Self-Interest: The Economic Catalyst

• In simple terms, to be self-interested is to seek your own personal gain. You go to work to get paid so you can buy the things you want. You go to college to get a better job to make more money to buy the things you want. If you think about it, most of the economic activity we see is the result of self-interest. Adam described it like this in his book: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own self-interest.” In other words, the baker, while serving his own interest, has produced a product that is very valuable to you. Therefore, the magic of a free market economy is that self-interest produces behavior that benefits others.

Competition: The Market Regulator

• You might have reservations concerning the productivity of self-interest in the marketplace. Sometimes self-interest may lead to corruption, fraud, price-gouging, and cheating — But most of the time that is held in check by competition. The reason for that is simple. Because other self-interested people are competing in your marketplace, your self-interest is held in check. For example, if you are a business man or woman, the only way you would be able to make more money is to produce a product that is better, cheaper, or more convenient than the product produced by other competitors within your niche. Essentially, in order to maintain continuity and prosperity for your business, you must be able to provide a high quality product or service at a reasonable price — otherwise, consumers will go elsewhere. So, competition serves as a powerful regulator, more powerful than any governmental regulation, because it restrains your ability to take advantage of your customers.

Conclusion

• Self-interest and competition are two extremely powerful economic forces. Self-interest is the catalyst of economic activity. Competition is the regulator of economic activity. Together they form “The Invisible Hand”. While producers and consumers are not behaving with the intent of helping others or society, necessarily, they do. It’s like an invisible hand that guides resources to their most valuable use.
• So, don’t be afraid to spend your money on what you need and want. You’e not just helping yourself!
• GDP OF COUNTRIES*
  Rank Country/Territory GDP. (US$million)
  0 World 91,031,541
  1 United States 21,427,700
  2 China 14,342,903
  3 Japan 5,081,770
  4 Germany 3,845,630
  5 India 2,875,142
  6 United Kingdom 2,827,113
  7 France 2,715,518
  8 Italy 2,001,244
  9 Brazil 1,839,758
  10 Canada 1,736,426
  11 Russia 1,699,877
  12 South Korea 1,642,383
  13 Spain 1,394,116
  14 Australia 1,392,681
  15 Mexico 1,258,287
  16 Indonesia 1,119,191
  17 Netherlands 909,070
  18 Saudi Arabia 792,967
  19 Turkey 754,412
  20 Switzerland 703,082
  21 Poland 592,164
  22 Taiwan 574,905
  23 Thailand 543,650
  24 Sweden 530,833
  25 Belgium 529,607
  26 Argentina 449,663
  27 Nigeria 448,120
  28 Austria 446,315
  29 Iran 445,345
  30 United Arab Emirates 421,142
  31 Norway 403,336
  32 Israel 395,099
  33 Ireland 388,699
  34 Philippines 376,796
  35 Singapore 372,063
  36 Hong Kong 366,030
  37 Malaysia 364,702
  38 South Africa 351,432
  39 Denmark 348,078
  40 Colombia 323,803
  41 Egypt 303,175
  42 Bangladesh 302,571
  43 Pakistan 287,200
  44 Chile 282,318
  45 Finland 268,761
  46 Vietnam 261,921
  47 Romania 250,077
  48 Czech Republic 246,489
  49 Portugal 237,686
  50 Iraq 234,094
  51 Peru 226,848
  52 Greece 209,853
  53 New Zealand 206,929
  54 Qatar 183,466
  55 Kazakhstan 180,162
  56 Algeria 169,988
  57 Hungary 160,967
  58 Ukraine 153,781
  59 Kuwait 134,761
  60 Morocco 118,725
  61 Ecuador 107,436
  62 Slovak Republic 105,422
  63 Puerto Rico (United States) 104,989
  64 Cuba 100,023
  65 Ethiopia 96,108
  66 Kenya 95,503
  67 Angola 94,635
  68 Dominican Republic 88,941
  69 Sri Lanka 84,009
  70 Oman 76,983
  71 Guatemala 76,710
  72 Myanmar 76,086
  73 Luxembourg 71,105
  74 Bulgaria 67,927
  75 Ghana 66,984
  76 Panama 66,801
  77 Tanzania 63,177
  78 Belarus 63,080
  79 Costa Rica 61,774
  80 Croatia 60,416
  81 Cote d’Ivoire 58,792
  82 Uzbekistan 57,921
  83 Uruguay 56,046
  84 Lithuania 54,219
  85 Macau 53,859
  86 Slovenia 53,742
  87 Lebanon 53,367
  88 Libya 52,076
  89 Serbia 51,409
  90 Azerbaijan 48,048
  91 Congo, Democratic Republic of the. 47,320
  92 Jordan 43,744
  93 Bolivia 40,895
  94 Turkmenistan 40,761
  95 Tunisia 38,798
  96 Cameroon 38,760
  97 Bahrain 38,574
  98 Paraguay 38,145
  99 Uganda 34,387
  100 Latvia 34,117
  101 Estonia 31,387
  102 Nepal 30,641
  103 Cambodia 27,089
  104 El Salvador 27,023
  105 Honduras 25,095
  106 Papua New Guinea 24,970
  107 Cyprus 24,565
  108 Iceland 24,188
  109 Trinidad and Tobago 24,100
  110 Senegal 23,578
  111 Zambia 23,065
  112 Zimbabwe 21,441
  113 Bosnia and Herzegovina 20,048
  114 Afghanistan 19,101
  115 Sudan 18,902
  116 Botswana 18,341
  117 Laos 18,174
  118 Georgia 17,743
  119 Mali 17,510
  120 Gabon 16,658
  121 Jamaica 16,458
  122 Burkina Faso 15,746
  123 Albania 15,278
  124 Mozambique 14,934
  125 Malta 14,786
  126 Palestine 14,616
  127 Benin 14,391
  128 Mauritius 14,180
  129 Madagascar 14,084
  130 Mongolia 13,853
  131 Armenia 13,673
  132 Guinea 13,590
  133 Brunei 13,469
  134 Niger 12,928
  135 Bahamas, The 12,827
  136 North Macedonia 12,695
  137 Nicaragua 12,521
  138 Namibia 12,367
  139 Moldova 11,955
  140 Chad 11,315
  141 Equatorial Guinea 11,027
  142 Congo, Republic of the 10,821
  143 Rwanda 10,122
  145 Haiti 8,499
  146 Kyrgyzstan 8,455
  147 Tajikistan 8,117
  148 Kosovo 7,926
  149 Malawi 7,667
  150 Mauritania 7,594
  151 Maldives 5,729
  152 Fiji 5,536
  153 Montenegro 5,495
  154 Togo 5,460
  155 Barbados 5,209
  156 Eswatini 4,405
  157 Guyana 4,280
  158 Suriname 3,985
  159 Sierra Leone 3,941
  160 Djibouti 3,319
  161 Andorra 3,154
  162 Liberia 3,071
  163 Burundi 3,012
  164 Lesotho 2,460
  165 Bhutan 2,447
  166 Central African Republic 2,220
  167 Saint Lucia 2,122
  168 Cabo Verde 1,982
  169 Belize 1,880
  170 Gambia, The 1,764
  172 Antigua and Barbuda 1,728
  173 Seychelles 1,699
  174 Timor-Leste 1,674
  175 San Marino 1,638
  176 Solomon Islands 1,425
  177 Guinea-Bissau 1,340
  178 Grenada 1,228
  179 Comoros 1,186
  180 Saint Kitts and Nevis 1,051
  181 Vanuatu 917
  182 Samoa 851
  183 Saint Vincent and the Grenadines 825
  184 Dominica 596
  185 Tonga 450
  186 Sao Tome and Principe 429
  187 Micronesia, Federated States of 402
  188 Palau 284
  189 Marshall Islands 221
  190 Kiribati 195
  191 Nauru 118
  192 Tuvalu 47

Think Tanks- How can we accelerate the development and implementation of emerging science and technology to best serve citizens, society and the public interest?

• Sekhon Family Office is pleased to be partnered WEF, World Bank, IMF, WHO, all UN agencies and with mostly all think tanks worldwide to share expert analysis of global and regional security issues with leaders from the public and private sectors thereby using free markets to create a richer, freer, happier world.
• Launch partners include the Atlantic Council, International Crisis Group, RAND Corporation, Stockholm International Peace Research Institute (SIPRI) and Woodrow Wilson International Center for Scholars and all the thinktanks of the world.
• Our mission is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems
• Our objective is to create a positive space where well-researched, well-evidenced policy ideas from across the political spectrum can be discussed and disseminated. Where good policy debate is enabled by making it easy to access all the latest thinking and by widening the traditional policy audience so that the debate better reflects all parts of society.
• We do this by presenting policy research and ideas without preference or favour. We aim to widen access to those ideas by making the policy world more transparent and the ideas easier to find and understand. Expanding access to the policy world itself also informs our work and we are always looking at how to help diversify those seeking to build careers in the sector.
• We are the first to provide a one-stop-shop, non-political platform for policy research, events, thinking and careers.
• Given the current economic challenges facing the wider global environment, it is more vital than ever that we promote the intellectual case for a free economy, low taxes, freedom in education, health and welfare and lower levels of regulation.
• New, and often contending, strategic narratives are shaping national, regional and global agendas
• Partners will provide strategic insights on critical geopolitical and geo-economic challenges that shall guide the policy in state and local governments.

Overview

• We live in unprecedented times characterised by rapid change in the way we live and work, coupled with (seemingly) insurmountable societal problems.
• It is within this context that we believe institutions who are committed to social change continuously question and adapt their existing models to respond to and address society’s challenges. The same is true for SFO think tank. We are considered as civil society actors but have the potential to play a vital role in the development of a country’s future.
• We are unique in that we exist at the intersection of evidence based research and policy making, and our multi-disciplinary audiences (governments, policy specialists and the wider society as whole) allow them to be potentially powerful force for ideas.
• At the SFO we believe the current lack of trust in government and institutions is, in part, due to a failure of policy solutions that really tackle society’s intractable problems. For the public, experts and their datasets do not describe reality, and any attempts to solve problems are often too narrowly defined, attending only to a few policy levers in lieu of reviewing the system as a whole. Or, these solutions suffer from a strict path dependency, following predictable steps towards predetermined outcomes which, in reality, this is rarely the case.
• For innovative solutions to truly address the lives of all people and leave no one behind social actors, we at SFO have moved beyond the traditional core model and innovate. We act politically and exercise power and influence when necessary. We believe there are three directions for innovation :
• Political insights: We explicitly develop the expertise and knowl­edge of the local political context, for example through carrying out ‘political and power’ assessments on any given issue.
• Elite convening: We develop function that not only facilitates debate and discussion between key interest groups, but which looks to identify collective interests and coordinate actions across different stakeholders to help bring about policy change.
• Campaigns and alliances: We engage in more bottom-up approaches to policy influence, leveraging the power of citizens and communities to press the case for reform.

SFO is committed to maximising its global impact — Why We Exist

• The world is full of wannabe ‘change agents’; a mix of campaigners, lobbyists, organisations and officials — all determined to transform the world. They want to improve public services, reform laws and regulations, guarantee human rights, get a fairer deal for those on the sharp end, achieve greater recognition for any number of issues, or simply be treated with respect.
• And yet very few universities have a ‘Department of Change Studies’, to which social activists can turn for advice and inspiration. Instead, scholarly discussions of change are fragmented with few conversations crossing disciplinary boundaries, rarely making it onto the radars of those actively seeking change.
• SFO plays a fundamental role in shaping policy agendas. We mobilise expertise and put forward evidence. We push for innovative change and they build networks and communities through which we nurture and spread ideas and catalyse action.
• The current environment of fast-paced transformations and increasingly complex and intertwined challenges at local, national and global levels would seem to create a perfect backdrop for SFO to engage in dynamically, offering creative, pragmatic and actionable policy solutions on tangible issues.
• And yet, the current conjuncture is also a particularly testing time for us as we enter a ‘post-truth’ society, in which facts and expertise are increasingly challenged as the basis for policy and decision-making, in favour of more media-inviting catchphrases. This shift not only generates uncertainty and ambiguity around policymaking; it also leads to disinterest, disdain and even rejection of knowledge and evidence.

So, how should SFO respond to this changing reality?

• First, we commit to taking on the much-needed function of repeatedly, constructively and boldly putting forward evidence-based assessments, in spite of the current apparent contempt for facts feeding into more effective and efficient policies.
• Second, we have a critical role to play in confronting the trap of ‘automatic thinking,’ groupthink and confirmation bias. A 2015 World Development Report on Mind, Society and Behavior (PDF) highlights the patterns in which policymakers prefer to avoid being exposed to opposing or differing views by selecting and filtering evidence in a way that confirms their views. The role of SFO is to challenge these patterns by providing a platform to introduce new ideas, expanding the scope of the debate and of the participants.
• Finally, on the way to 2030, in an increasingly networked society, SFO must provide a space between governments, research and academia, and, increasingly, civil society and media, within which ideas can be tested, strategies can be debated, and action for the future can be designed.

Interest Areas

• Our think tanks research and publish on a wide variety of subjects and issues. The interest areas listed below capture that range and aim to make it easier which cover a range across the political and policy spectrum covering a wide array of domestic and international policy areas.

• The reconfiguration of global power, explosion of social media, shifts away from traditional print and oral-based ways of imparting knowledge, and the dramatic increase in the volume of information and ideas clamoring for the attention of policy-makers are changing the landscape of policy-making and the pathways through which influence is achieved.

Our UK Think Tank Partners

• Adam Smith Institute
• Bright Blue
• British Foreign Policy Group
• British Future
• Centre for Cities
• Centre for European Reform
• Centre for London
• Centre for Policy Studies
• Centre for Social Justice
• Chatham House
• Civitas
• The Constitution Unit
• Create Streets
• Demos
• Education Policy Institute
• Epicenter
• Fabian Society
• Foreign Policy Centre
• Health Foundation
• Henry Jackson Society
• Institute of Development Studies
• Institute of Economic Affairs
• Institute for Fiscal Studies
• Institute for Government
• International Institute for Environment and Development (IIED)
• International Institute for Strategic Studies (IISS)
• IPPR
• JRF
• Legatum Institute
• Localis
• New Local
• New Policy Institute
• The Nuffield Trust
• Onward
• Overseas Development Institute (ODI)
• Policy Exchange
• Reform
• Resolution Foundation
• ResPublica
• RUSI
• The Smith Institute
• Social Market Foundation
• The Sutton Trust
• The Work Foundation

How Sekhon Family Office ( SFO ) Is Helping Nations Build Wealth By Free Markets Based… was originally published in Investment Goals on Medium, where people are continuing the conversation by highlighting and responding to this story.