Making It #7 - Governing a globalized world

8/2/2019 Making It #7 - Governing a globalized world

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MakingItIndustry for Development

3rd quarter 2011

Governing

globalizedworld

nDani Rodrik

n Indonesia: Clup the river

n Solar Sister

nMark MallochBrown

nBangladesh


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A quarterly magazine. Stimulating, critical andconstructive. A forum for discussion and exchangeabout the intersection of industry and development.

NUMBER1, DECEMBER2009lWe must let nature inspire us Gunter Pauli presents analternative business model thatis environmentally friendly andsustainablelHot Topic: Is itpossible to have prosperitywithout growth? Is greengrowth really possible?

NUMBER2, APRIL 2010lThe International EnergyAgencys Nobuo Tanaka looks atenergy transitions for industrylEnergy for all KandehYumkella and Leena Srivastavaon what needs to be done toimprove energy access

NUMBER3, JULY 2010lChinas stunning economicrise: interview with minister ofcommerce, Chen DeminglTowards a more productivedebate Ha-Joon Chang callsfor an acceptance that industrialpolicy can work

NUMBER4, NOVEMBER2010lStrengthening productivecapacity Cheick Sidi Diarraargues that the LDCs should and can produce more, andbetter quality, goodslPatriciaFrancis on climate change andtradelHot topic: The relevanceof entrepreneurship

NUMBER5, FEBRUARY 2011lA window of opportunity forworld trade? Peter Sutherlandassesses the prospects for theconclusion of a multilateraltrade agreementlA path tomutual prosperity Xiao Ye ontrade between sub-SaharanAfrica and China

NUMBER6, APRIL 2011lFeeding a crowded world IFADs Kanayo Nwanze arguesthat smallholder farmers musthave opportunities to beentrepreneurslNestl CEOPaul Bulcke on Creating SharedValuelHot Topic: Does energyefficiency lead to increasedenergy consumption?


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Never has the world been more interdependent, never has it been more shby technological, economic and social progress and never has it been mvulnerable to economic and environmental shocks and political failure. O

global economic, social and political systems have been under great pressfor a while, and the future appears uncertain. As the financial crisis evolvefrom a credit crunch affecting mortgages in certain developed countries tworldwide calamity encompassing financial, manufacturing and serviceactivities, we have taken a turn towards a situation of even greater globalfragility and risk.

Popular perceptions of globalization are getting more and more polarbetween those who see it as a source of freedom and new opportunities, athose who associate it with rising inequality and injustice.

We clearly live in a multi-polar world. It is no longer possible to isol

the complex risks and fragilities that we face, nor is it possible to findnational solutions to global challenges. They require a diversified andmulti-polar response.

As we stand at a crossroads of global policy and governance, this issue oMaking It: Industry for Developmentoffers a selection of some of the bestcontributions to the growing debate. These include the keynote article byProfessor Dani Rodrik, in which he embarks on a fascinating journey into

globalization paradox, and a candid interview with formUN Deputy Secretary-General, Mark Malloch Brown, in

which he gives his views on how to stay one sahead of failure during a century of continuo

change and likely drastic upheaval.Aside from articles addressing the mai

theme, there are also discursive contributhat question mainstream economists

approaches, debate the pros and cons onuclear power, and look at theeconomic progress of Banglades

Photo:istock

Editorial


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Editor: Charles [email protected] committee: Ralf Bredel,Tillmann Gnther, Sarwar Hobohm,Kazuki Kitaoka, Wilfried Ltkenhorst(chair), Cormac OReilly andJo Roetzer-SweetlandWebsite and outreach:Lauren [email protected] illustration: Maya ZankoulDesign: Smith+Bell, UK www.smithplusbell.comThanks for assistance toDonna ColemanPrinted byGutenberg PressLtd, Malta www.gutenberg.com.mton FSC certified paperTo view this publication online and toparticipate in discussions aboutindustry for development, please visitwww.makingitmagazine.netTo subscribe and receive future issuesofMaking It, please send an emailwith your name and address [email protected] It: Industry for Developmentis published by the United NationsIndustrial Development Organization(UNIDO),Vienna International Centre,P.O. Box 300, 1400 Vienna, AustriaTelephone: (+43-1) 26026-0,Fax: (+43-1) 26926-69E-mail:[email protected] 2011 The UnitedNations Industrial DevelopmentOrganizationNo part of this publication can beused or reproduced without priorpermission from the editorISSN 2076-8508

GLOBAL FORUM6 Letters8 The barefoot economistInterview with acclaimedChilean economist,Manfred Max-Neef10Hot Topic: Is nuclear powernecessary for a carbon-free

future? Environmentalists ChrisGoodall and Jos Etcheverry debate

16Business matters news and trends

FEATURES16Fairer, greener and moresustainable Hedda Oehlberger-Femundsenden argues that UNIDOs

Green Industry initiative can build

on the successes of globalization,while helping to rectify itsshortcomings18 Interview: The unfinishedglobal revolution MarkMalloch Brown on thechallenges and opportunities ofglobalization in the 21st century

KEYNOTE FEATURE

22 The globalization paradox Dani Rodrik argues thatglobalization works best when it isnot pushed too far

30 Unfair share Thomas Pogge looksat the statistics of world poverty andexposes a series of broken promisesand rigged initiatives

MakingItIndustryforDevelopment

The designations employed and thepresentation of the material in this magazinedo not imply the expression of any opinionwhatsoever on the part of the Secretariat of theUnited Nations Industrial DevelopmentOrganization (UNIDO) concerning the legalstatus of any country, territory, city or area or ofits authorities, or concerning the delimitation

of its frontiers or boundaries, or its economicsystem or degree of development. Designationssuch as developed, industrialized anddeveloping are intended for statisticalconvenience and do not necessarily express ajudgment about the stage reached by aparticular country or area in the developmentprocess. Mention of firm names or commercialproducts does not constitute an endorsementby UNIDO.The opinions, statistical data and estimatescontained in signed articles are theresponsibility of the author(s), including thosewho are UNIDO members of staff, and shouldnot be considered as reflecting the views orbearing the endorsement of UNIDO.This document has been produced withoutformal United Nations editing.

MakingIt4

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Contents


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Number 7, 3rd quarter 20

34 Globalization, governance and G20 Jan Wouters and Dylan Geargue that network governance nto be transparent, inclusive, andresponsive36 Country feature: Bangladesh Manufacturing, the garment induand women workers bring progrto one of the worlds most populo

countries, plus an interview withDilip Barua, Minister of Industri40 Cleaning up the river Goldman Environmental Prizewinner, Prigi Arisandi, explains ha local movement is helping to stoindustries from polluting the riveflowing through the Indonesian cof Surabaya

POLICY BRIEF42Beyond the resource curse44Drivers of development

46Endpiece Katherine Lucey onSolar Sister, a social enterprise thprovides women with training ansupport to create solar micro-businesses

Maki

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LETTERS

MakingIt6

On energyefficiencyWhile I commend Ms.Moscoso-Osterkorn on hereffective defence of energyefficiency (Making It, issue 6),I have to note that the original

claims by Jenkins andSaunders (Hot Topic) stillremain, at least from my pointof view. Their focus was on theclimate change effects ofenergy efficiency no doubtthat they would also agree thatthere are other economic andsocial benefits toimplementing energyefficiency.

Their rebound effect theoryalso focused on the developing

nations and their thirst fordevelopment and more energy.The reply gave excellentcounter-examples but mainlyfrom the US and Japan. Wheredeveloping nations werementioned, the examples areskewed for example, howmany Ghanaians will continuepurchasing and using compactfluorescent lights (CFLs), oncethe original supply needsreplacement? And if Thailand

really saved 1,725 MW of peakpower (or is that 1.725 MW?),did this offset the need for newelectricity generation or didthis just shift consumption toother uses as the reboundeffect claims?

Dont get me wrong I agreewith Moscoso-Osterkornswider claims on energy

efficiency and am a bigproponent of the same I amjust wondering if her responsemissed the point in this case.lPeter Bartlett, websitecomment

I fully agree with Mr Bartlettssentiment, but I believe thatthe impact of the reboundeffect is fundamentally

different between developedand developing countries.There is no doubt that therebound effect exists and that itcan affect climate change in anegative way. In countrieswhere energy access is not anissue like developedcountries rebound canindeed lead to increase in useand carbon emissions. Indeveloping countries, energyefficiency will not only

facilitate energy access for thepoor, it will also act as analternative to fossil fuel energyproduction. If a farmer savesenergy by using an efficientbulb, he can light his secondbulb with the energy he issaving instead of starting uphis diesel generator or burningmore wood.

Positive examples from Japanand California highlight thatpolicy intervention and public

support can change consumerpatterns, and these successstories should serve asguidelines for others. InGhana, nobody can forcepeople to buy compactfluorescent lights (CFLs) oncethey need replacement. But thehuge market created throughthis governmental programme,

lowers the price of CFLswhich makes them affordableto everybody.lMarianne Moscoso-Osterkorn, REEEP, Vienna,Austria

Women and theArab Spring

Re: An Arab Spring forwomen? (Making It, issue 6),meanwhile, in Lebanon, a newcabinet has been formed. It iscomposed of 35 men, and nota single solitary woman.lMM, website comment

MM, you shouldnt expectchange to come from the top.It never has and it never will.It is only by organizing at thegrassroots that women (and

men) will be able to forcethrough progressive change.lCharlene, website comment

Lebanon is a democracy. Themajority of voters voted forthe government. If the electedrepresentatives endorse acabinet that does not includeany women, that is democracyin action. PresumablyLebanese women (and men)voted for the members of

parliament who endorse thenew cabinetlKnox, website comment

Indeed, there is a strongglobal and MENA backlash inrelation to womens positionand womens rights which istaking various forms andshapes. Turkey has just

dismantled the Ministry foWomen and replaced it wit

Ministry for Family AffairsThis is an indication of agrowing conservative view womens role being in thefamily rather than them beindependent citizens endowith rights.

It would be wise to rethinthe common definition ofdemocracy. It is widely heldthat free elections are thecornerstone of democracy. time to challenge this idea.

While free elections are a mthey do not necessary lead tinclusion, full participationnon-discrimination andequalityl Lina Abou-Habib, websitecomment

It seems it would also be wito rethink the common(media) definition ofrevolution. Somecommentators would have

believe that what has beenhappening in several countin the Arab world arerevolutions, but, as womenfinding out, nothing verymuch has really changed, athere certainly has not beenprocess of one class takingpower from another.lRed, website comment

The Global Forum section ofMaking Itis a space for interaction anddiscussion, and we welcome reactions and responses from readers aboutany of the issues raised in the magazine. Letters for publication inMaking Itshould be marked For publication, and sent either by email to:[email protected] or by post to: The Editor, Making It,Room D2142, UNIDO, PO Box 300, 1400 Wien, Austria. (Letters/emailsmay be edited for reasons of space).

GLOBAL FORUM


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Rice powerI think this article (A revolutionin electricity, Making It, issue 6) isinteresting as it illustrates a realpossibility in places that producehigh volumes of rice. Its also anice read because it shows thepower, literally, of entrepreneursin developing countries.

From a people side, it makes

you wonder how manyentrepreneurs in developingcountries already have theknow-how to producealternative and renewableenergy processes to providetheir own villages withelectricity, such as this featuredcompany.

Another thing the articleraises is a concern about riceproduction, and therefore aboutavailability of bio resources to

gasify and therefore to createenergy with. I could see thismethod working well wheremass quantities of rice aregrown namely in India andother Southeast Asiancountries but the videoproduced by the companysfounder seems to hint at theirdesired to expand to a globalmarket, and this just doesnt

seem feasible where rice husksarent readily available in suchlarge quantities.

Can this method be extendedto other organic byproducts, oris it limited to rice husks? And,are there many moreentrepreneurs out there indeveloping countries who haveother ideas for energy resourcesand production?l Sara Patalone, websitecomment

Breast is bestInteresting to see Nestlgettingspace in your magazine,Creating Shared Value forsociety and shareholders(issue 6, Making It). This is thecompany that, according tonutrition campaign groups andUNICEF, the UN ChildrensFund, violates a global code on

the marketing of breast-milksubstitutes.

The International Baby FoodAction Network, which links200 groups in 100 countries,backs a boycott ofNestlproductsbecause, it says, the companyskirts restrictions on promotinginfant formula contained in theWorld Health Organization-endorsed International Code ofMarketing of Breast-milkSubstitutes.

In developing nations, theuse of infant formulaincreases the odds of an infantcontracting food-borneillness, and increases infantmortality rates. UNICEFestimates that a formula-fedchild, living in unhygienicconditions, is between six and25 times more likely to die ofdiarrhoea, and four times

more likely to die ofpneumonia, than a breastfedchild.

But Nestlcontinues topromote its new formulaproducts, calling them acomprehensive nutritionsystem. As someone hasalready remarked, the realcomprehensive nutritionsystem is a pair of lactatingbreasts.lMary Gland, by email

For further discussion of theissues raised in Making It, pleasevisit the magazine website atwww.makingitmagazine.net andthe social networking Facebooksite. Readers are encouraged tosurf on over to these sites to joinin the online discussion anddebate about industry fordevelopment.


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GLOBAL FORUM

MakingIt8

Could you explain barefoot economics?Well, its a metaphor, but a metaphor thatoriginated in a concrete experience. Iworked for about ten years of my life inareas of extreme poverty in the sierras, inthe jungle, in urban areas, in differentparts of Latin America. At the beginning ofthat period, one day I was in an indigenousvillage in the sierrain Peru. It was an ugly

day. It had been raining all the time, and Iwas standing in the slum. And, across fromme, another guy was also standing in themud. Well, we looked at each other, andthis was a short guy, thin, hungry, jobless,five kids, a wife, and a grandmother, and Iwas the fine economist from Berkeley,teaching in Berkeley, and so on. And we

were looking at each other, and thensuddenly I realized that I had nothingcoherent to say to that man in thosecircumstances, that my whole language asan economist was absolutely useless.Should I tell him that he should be happybecause the GDP had grown five percent orsomething? Everything was absurd.

I discovered that I had no language in

that environment, and that we had toinvent a new language. And thats theorigin of the metaphor of barefooteconomics, which is the economics that aneconomist who dares to step into the mudmust practice. The point is that economistsstudy and analyze poverty in their niceoffices, have all the statistics, make all the

models, and are convinced that they kneverything that you can know aboutpoverty, but they dont understand povThats the big problem, and thats whypoverty is still there. And that changed life as an economist completely. I invena language that is coherent with thosesituations and conditions.And what is that language?The thing is much deeper. I mean, its nlike a recipe with 15 lessons or satisfact

guaranteed or your money back. Thatsthe point. The point is much deeper. Leme put it this way. We have reached a pin our evolution where we know a lot. Wknow a hell of a lot, but we understandlittle. Never in human history has therebeen such an accumulation of knowledlike in the last 100 years. But look how ware. What was that knowledge for? Whadid we do with it? The point is thatknowledge alone is not enough. We lacunderstanding.

The difference between knowledge a

understanding? I can give an example. us assume that you have studiedeverything that you can study, from atheological, sociological, anthropologibiological, and even biochemical pointview, about a human phenomenon calllove. The result is that you will knoweverything that you can know about lov

The barefooteconomist

Democracy Nows Amy Goodmanspeaks with the acclaimed Chileaneconomist, Manfred Max-Neef

Photo:PosterBoy MANFRED MAX-NEEF is a Chilean economist and founder of the

Centro de Estudio y Promocin de Asuntos Urbanos (CEPAUR).In 1981 he wrote the book for which he is best known, From the OutsideLooking in: Experiences in Barefoot Economics, which describes hisexperiences practising economics among the poor in South America.In 1983, Max-Neef won the Right Livelihood Award for his work inpoverty-stricken areas of developing countries. In 1993, he wasappointed rector of the Universidad Austral de Chile in Valdivia.His latest book, Economics Unmasked: From Power and Greed toCompassion and the Common Goodwas published in 2011.


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GLOBAL FORUM

but sooner or later you will realize thatyou will never understand love unless youfall in love. What does that mean? That youcan only attempt to understand that ofwhich you become a part. If we fall in love,as the Latin song says, we are much morethan two. When you belong, youunderstand. When youre separated, youcan accumulate knowledge. And thatsbeen the function of science. Science isdivided into parts but understanding is

holistic.And that happens with poverty. I

understood poverty because I was there. Ilived with them, I ate with them, I sleptwith them, and so on. And then you beginto learn that in that environment there aredifferent values, different principlescompared to those from where you arecoming, and that you can learn anenormous amount of fantastic thingsamong poverty. What I have learned fromthe poor is much more than I learned inthe universities. But very few people have

that experience, you see? They look at itfrom the outside, instead of living it fromthe inside.

The first thing you learn is that inpoverty there is an enormous creativity. Ifyou want to survive, you cannot be anidiot. Every minute you have to bethinking, what next? What do I know?What trick can I do here? Whats this andthat, that, and that? Your creativity isconstant. In addition, this is combinedwith networks of cooperation, mutual aid,and all sorts of extraordinary things which

youll no longer find in our dominantsociety, which is individualistic, greedy,and egoistical. Its just the opposite ofwhat you find there. And its sometimes soshocking that you may find people muchhappier in poverty than what you wouldfind in your own environment, which alsomeans that poverty is not just a questionof money. Its a much more complexthing.

So, to avoid another catastrophe, collision, ifyou were in charge, what would you say hasto happen?For me, the problem begins in theuniversity. The university today has becomean accomplice of maintaining a worldwhich we dont want, because if you dontteach something different to theeconomists, well, how the hell are you goingto change it when they are professionals?Its impossible. When I started economics

in the early 1950s, it was totally different. Wehad some fundamental courses likeeconomic history and history of economicthought. Those courses dont exist in thecurricula anymore. You dont have to knowthe history. Its not necessary. Its notnecessary that you know what previouseconomists ever thought. Thats notnecessary. You dont need it. I mean, thatsstupid arrogance. No, now we know for surethis is it forever, you know? Then it ceases tobe a discipline, it ceases to be a science, andit becomes a religion. And that is what

economics, neo-liberal economics, is today.So, first of all, we need cultured

economists again, who know the history,where they come from, how the ideasoriginated, who did what, and so on and soon. Second, we need an economics now thatunderstands itself very clearly as asubsystem of a larger system that is finite,

the biosphere. Hence economic growth isan impossibility. And third, a system thatunderstands that it cannot function withouthe seriousness of ecosystems. Andeconomists know nothing aboutecosystems. They dont know anythingabout thermodynamics, anything aboutbiodiversity. They are totally ignorant inthat respect. And I dont see what harm itwould do to an economist to know that ifthe beasts would disappear, he would

disappear as well, because there wouldnt befood anymore. But he doesnt know that wedepend absolutely on nature. For theseeconomists, nature is a subsystem of theeconomy. Its absolutely crazy.

In addition, we must bring consumptioncloser to production. I live in the south ofChile, in the deep south, and that area is afantastic area for milk products. A fewmonths ago, I was in a hotel, and there inthe south, for breakfast, I was given a littlepacket of butter. I get one, and it is butterfrom New Zealand! I mean, if that isnt

crazy! And why? Its because economistsdont know how to calculate real costs. Tobring butter 20,000 kilometres to a placewhere they make the best butter, arguingthat it is cheaper, is a colossal stupidity.They dont take into consideration theimpact of 20,000 kilometres of transport.What is the impact on the environment ofthat transportation, and all those things? Inaddition, its cheaper because itssubsidized. So, its clearly a case in whichprices never tell the truth. Its all tricks, andthose tricks do colossal harm. If you bring

consumption closer to production, you willeat better, and you will have better food. Youwill know where it comes from. You mayeven know the person who produces it. Youhumanize this thing. But the way theeconomists practice today is totallydehumanized.lThis is edited version of an interview thatfirst appeared on Democracy Nowwww.democracynow.org

Economists study andanalyze poverty in their niceoffices, have all the statistics,make all the models, and areconvinced that they knoweverything that you can knowabout poverty, but they dontunderstand poverty.


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MakingIt10

GLOBAL FORUM

Is nuclear power necessaryfor a carbon-free future?

HOT TOPIC

Photo:GeoffreyGilson


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GLOBAL FORUM

The recent devastatingearthquake and tsunami in Japanhave confirmed the worst fears ofnuclear power critics.Governments everywhere are re-evaluating their nuclear plans, butare fears of nukes misplaced?CHRIS GOODALLand JOSETCHEVERRY are bothenvironmentalists but standdivided on the nuclear debate.Goodall I am looking at a website thattells me how much electricity is comingfrom various sources around Britain.After a decade of financial incentives,wind turbines are currently producingabout two per cent of our electricity.Excluding a small amount of hydro, allour electricity is coming from fossil fuelsand nuclear. Britains 10 nuclear powerstations are now producing 10 times asmuch energy as comes from 3,000

turbines.I would love it if we powered our entire

economy from renewables but I see nopolitical will to achieve this aim. Wewould need to invest billions now inrenewable technologies. Without nuclear,reducing carbon emissions at high speedis impossible. We might end up keepingold coal power stations open for the next30 years.

People say that we simply need to workharder to persuade a largely indifferentpublic to accept huge numbers of

turbines and to invest billions in otherrenewable technologies. Such idealism isirresponsible: if we truly believe thatclimate change is the greatest threat theworld has ever faced, we cannot riskfailing to achieve the growth in low-carbon energy sources. However much wemay regret this, nuclear is the onlytechnology capable of delivering largeamounts of power within the next decade.

If we truly believe that climatechange is the greatest threatthe world has ever faced, wecannot risk failing to achievethe growth in low-carbonenergy sources. Nuclear is theonly technology capable ofdelivering large amounts of

power within the next decade.

CHRIS GOODALL is a British businessmanand green activist. He is the author ofHowto Live a Low-Carbon Life, andTenTechnologies to Fix Energy and Climate.Dr. JOS ETCHEVERRY is AssistantProfessor at York University, Toronto,Canada, and is chairperson of the WorldCouncil for Renewable Energy.

We in the environmental movement havefailed to get the United Kingdom (UK) toinvest in renewables, and we now have noalternative but to welcome nuclear power.

Etcheverry Nuclear plants need to bephased out because they are dangerous,toxic, and impede the adoption of thethree key options needed to build acarbon-free energy future: conservation,efficiency, and renewable energy.

Conservation and efficiency (i.e. doingmore with less) represent two of the threemost profitable opportunities to createnew jobs and address climate change. Tovisualize the potential: Canada and theUS use electricity at embarrassinglygreater per capita rates than leadingindustrialized nations like Denmark andGermany.

Those two nations have not onlyminimized the way their citizens usepower, theyre also constantly innovatingefficient design and theyve become world

leaders in the development of renewableenergy sources.

Their success is based on developingpragmatic renewable-energy policies,such as feed-in tariffs, which quicklyenable entrepreneurs to innovate invibrant markets that guarantee easyinterconnection, fair long-term prices forall types of renewable energy, andinvestment stability.

Germanys renewable-energy policies inthe last 10 years have become the mostimportant climate mitigation strategy in

Europe, and are a strong engine ofindustrial innovation and employmentcreation.

Germans and Danes have understoodthat nuclear plants cannot complementrenewable energy sources, as they cannotbe turned on or off easily. Furthermore,they also understand that building nukesforces you to sell vast amounts ofelectricity, which acts as a clear


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(Fukushima is now a level 7 catastrophthe same as Chernobyl).lNukes take at least a decade to buildand are highly context-dependent desprojects (i.e. a nuke design from Canadcannot be cut and pasted in seismicallactive places without major designmodifications, which by definitioninvolve higher costs, longer timelines,and trial/error experimentation).lNukes are not cheap, and uranium i

finite, non-renewable toxic mineral.lNukes can easily be diverted foratomic weapons one reason thetechnology has strong fans.

Renewable sources on the other hanlAre much safer, have vastly smallerecological footprints, and representstrategic assets for current and futuregenerations.lMost renewable energy systems aremanufactured today in assembly linesand can therefore be deployed andimplemented very quickly anywhere

suitable.lMost renewable energy systemsbenefit from economies of scale;therefore the more money we invest inthem the cheaper they become. Plus, thuse fuels that are plentiful and cheap lsun and wind or that can be locallyproduced at stable prices like biogas anbiofuels.lRenewables can promote localresilience and energy autonomy, sodefusing sources of conflict instead ofbecoming weapons.

Goodall Fukushima is a horribledisaster, but we can reasonably expectthat no one will die as a result of theradiation leaks. Yes, nuclear power is vexpensive, but so are all low-carbontechnologies. Most studies show nuclecosting less than offshore wind. What more, nuclear will deliver power reliaband throughout the year.

contradiction to efforts at conservationand efficiency.

These lessons are starting to beunderstood by 148 other nations that haveformed the International RenewableEnergy Agency (IRENA) to develop rapidlya new paradigm of energy security andclimate protection.

Goodall Almost all of us welcome therapid growth in renewables but even inGermany only 17% of electricity comesfrom these sources. The key question iswhether renewables have any prospect ofgrowing fast enough to replace fossil fuelsources completely. In the UK andalmost everywhere else, I dont thinkanybody pretends that low-carbonsources are increasing at anywhere closeto a fast enough rate. That is why nuclearis vital not because we dont want

renewables.The second illusion is to believe that

energy efficiency measures cansignificantly reduce demand forelectricity. All independent sourcespredict a rise in electricity use because ofhome heating and the need to switch toelectric vehicles. Conservation efforts arebarely denting the demand for power.Environmentalists can bemoan the lackof interest in efficiency, but we need todeal with the world as it is, not how wewant it to be. We may not like todays

consumerist, high-energy use lifestyles,but we cannot change the worldspriorities overnight. Nuclear power isnecessary to meet peoples demands forelectricity.

Etcheverry Id like to set the recordstraight on nukes:lNukes are toxic and pose great dangersto present and future generations

HOT TOPIC

Nuclear plants need to bephased out because they aredangerous, toxic, and impedethe adoption of the three keyoptions needed to build acarbon-free energy future:conservation, efficiency, andrenewable energy.


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People who live and work near nuclearreactors seem happy to have them asneighbours. By contrast, in Britain at least,onshore wind is widely detested.

I cannot accept that other technologieshave vastly smaller ecological footprints.A new nuclear station will generate the

same amount of electricity as about 3,000wind turbines covering hundreds ofsquare kilometres and requiring far moresteel, concrete and disruption to wildlife.

We come back to the core argument.There is no political will anywhere in theworld to make renewable electricityhappen in sufficient amounts. I deeplyregret this. Environmentalists watchingthe world sleepwalk into multiple

ecological disasters have to actresponsibly, and accept that nuclearpower is one of the few ways we have ofmaintaining standards of living, whilereducing the CO2 production fromelectricity generation.

Etcheverry So, what do we need toglobalize a sustainable energy path?Massive creativity, courage and politicalwill plus we need to design global

deployment strategies for renewableenergy that have tangible local socialbenefits.

For example, farmers who can own or atleast benefit directly from wind turbinessee them as a desirable cash crop. Schoolswith solar roofs see them as versatileteaching tools. Hospitals that can havelower fuel bills and cheap hot water viadistrict energy see biomass CHP(combined heat and power) technology asa smart investment.

Our biggest obstacle to solving climate

change with renewable energy,conservation and efficiency is the limitedexperience that most people have withthese options. For all of us, the mostcrucial strategy is to get directly involvedin learning by doing and to fully useour creativity, which is itself a renewableand unlimited resource.lThis discussion was originallypublished in New Internationalistmagazine, and is licensed underCreative Commons.

Image:Sevenresist


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MakingIt14

nThe global economy isexperiencing a synchronizedslowdown, as high energy andcommodity prices take a toll.The disaster in Japan, a

slowdown in US job creation andrenewed concerns about thefuture of the euro zone alsoovershadow growth prospects.

Asia is embarking on a benignslowdown as Western demandweakens and policymakers try to

to slow from 6% in 2010 to 4.in 2011.

The wave of political unressweeping the Middle East anNorth Africa (MENA) may leapositive changes in the longterm, but civil instability isdepressing short-term econoprospects. (EconomistIntelligence Unit)

n 2010 may have been the yewhen developing countriespulled away from the developworlds fossil-fuel fouled pastoward a future powered by crenewables. And despite the f

Making the body ofa Toyola stove.

trends

New technologies needed toavoid ecological destruction

BUSINESS MATTERS

get inflation under control. Foodand energy prices are still risingrapidly, potentially necessitatinga policy response that wouldslow growth sharply. Still, the

regions fundamentals arehealthy.

The Economist IntelligenceUnit (EIU) expects Chinaseconomy to prove resilient to thetightening of monetary andcredit policy and to expand by

9% in 2011. Indian GDP growthwill come in at 8.6%. South-eastAsias rate of economicexpansion will slow markedlythis year from nearly 8% in 2010,

albeit to the still-healthy rate of5.2%.

Latin American economies aredecelerating after a stellarperformance in 2010. As policytightens in response to rapidinflation, regional growth is set

A fundamental technologicaloverhaul of productionprocesses is requiredworldwide to end poverty andavert the likely catastrophicimpacts of climate change andenvironmental degradation.

Business as usual is not anoption, said Rob Vos, Director

of the Development Policy andAnalysis Division at theDepartment of Economicand Social Affairs of theUnited NationsSecretariat (UN/DESA)and lead author of thereport The WorldEconomic and Social

Survey 2011: The Great

Green Technological

Transformation,

published in July.

Without drasticimprovements in anddiffusion of greentechnologies, we will notreverse the ongoing ecologicaldestruction and secure adecent livelihood for all ofhumankind, now and in thefuture, Vos continued.

The global environments

Toyola Energy Ltd. from Ghanais the 2011 international GoldWinner of the Ashden Award forSustainable Energy. Thecompany was selected for the

coveted Gold Award (40,000) forits success in making over150,000 efficient charcoal stovesaccessible to low-incomefamilies.

Sarah Butler-Sloss, FounderDirector of the Ashden Awardsand chair of the judging panelsaid, Toyola Energy Ltd. hastaken a simple stove technology,

Toyola wins awardadapted it to make it more robustand efficient, and then focusedits efforts on making this stovetechnology accessible to the poorso that they can save money and

have cleaner, healthierenvironments to cook in. In themeantime, Ghanas forests areprotected and greenhouseemissions reduced. This is aperfect example of how muchcan be achieved through the useof simple, clean energytechnologies and clever, pro-poor marketing strategies.

capacity to cope with humanactivity has reached its limitsAbout half of the earthsforests are gone, groundwateresources are being depletedand contaminated, enormoulosses in biodiversity havealready occurred, and climatchange threatens the stabilit

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that much of that investmentwas state-subsidized, we are stillat a turning point whenrenewables such as solar,geothermal and wind (those oldwhipping posts for criticsarguing they wont competewith subsidized oil and coal)began to stand on their own twofeet, especially in parts of the

world where they are often theonly source of power available.

According to a new report byUN Environment Programme,collaborating with the FrankfurtSchool of Finance &Management and Bloomberg

New Energy Finance, investorspoured a record US$211 billioninto renewable energy in 2010,accounting for one-third of allnew generating capacity. Thats a540% rise since 2004, and duringa global financial crisis.

A big chunk of this investmentwas for massive wind farms inChina and small-scale solar

rooftops in Germany. Both arerecipients of largess fromgovernments through feed-intariffs and subsidies. Yet the farmore interesting story is theexplosion of alternative energyin places that cant afford such

schemes, where the naturalresource base (wind, sun andgeothermal) is vast and the costof generating clean energy is ator near competitive prices:Egypt, Morocco, Kenya,Argentina, Mexico and others.Even Pakistan took inUS$1.5 billion investment toboost its wind capacity.

In many parts of the world,we could expect something like aleapfrog [of energytechnologies], writes UlfMoslener of the FrankfurtSchool of Finance &Management in the report.

The strong message is grFossil fuel investment is sdominant around the worthe gap is shrinking fast. Ilook at the deals being mamuch of the [conventionainvestment is to replace ofossil plants, but renewabfinance is for new capacity

Renewables may still pr

more expensive for some come. But economics chafast. If todays trends are pthe future (the price of PVper megawatt has droppesince mid-2008), then therturning back. (Fast Comp

Appearing at UNIDOs ViennaEnergy Forum in June, former

Governor of California ArnoldSchwarzenegger told participantsthat universal energy access isntjust about lighting a dark room,or cooking on a better stove. Itsabout the freedom that energy and especially renewable energy gives us.

We dont have to be slaves tofaulty grids. We dont have to

watch our citizens get sick anddie from pollution,

Schwarzenegger said. We donthave to worry about a corruptdictator waking up on the wrongside of the bed and deciding toshut off power to our country.

The Austrian-born movie starcontinued, We need to say,Weve had enough of the oldenergy order. We are mad as helland we are not going to take it

any more! Its time for enfreedom.

Schwarzeneggers attendat the Forum marks hiscontinued commitment towith the United Nations, afengaging with UN SecretarGeneral Ban Ki-moon last at the launch of a project tocreate new green jobs andreduce greenhouse gases athe world.

Time for energy freedom

Over the next 40 years,

US$1.9 trillion per year willbe needed for incrementalinvestments in greentechnologies. At least one-half, or US$1.1 trillion peryear, are needed indeveloping countries to meettheir rapidly increasing foodand energy demands throughthe application of greentechnologies.

The report recommendsthat policies be guided by

four key goals:l improving energyefficiency without expandingconsumption where energy-use levels are high;l supporting a broad globalenergy technologydevelopment portfolio whilescaling up the use of knowngreen technologies inspecific places;l supporting greaterexperimentation and longer

discovery times; andl applying superiorgovernance andaccountability strategies inenergy-related technologicaldevelopment than at present.


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At the United Nations Millennium Summit inSeptember 2000, the largest-ever gathering ofworld leaders agreed that the central challengewe face today is to ensure that globalizationbecomes a positive force for all the world'speople. For while globalization offers greatopportunities, at present its benefits are veryunevenly shared, while its costs are unevenlydistributed. More than a decade later, growinginequality continues to threaten the sustainabil-

ity of economic and social development, andpoverty is still widespread, with almost half theworld over three billion people surviving onless than US$2.50 a day.

Who gains, who loses?On average, globalization has generated undeni-able benefits in terms of higher economic growthand incomes, better living standards, povertyreduction and access to essential services. Thesuccess of countries such as Germany, Japan,Republic of Korea, Singapore, Malaysia, China,Brazil and India would have been inconceivable

in the absence of globalization. It is no longerpossible to think of a countrys economic growthas a purely internal process. Open trade and theinternationalization of capital have enabledcountries to benefit from global demand for theirproducts and from new sources of funding.

Increased competition and technology transferhave led to enhanced efficiency and productivitygains. Countries able to exploit these factors havemanaged to leap-frog several stages of thenormal development process.

On the downside, in a globalized and inte-grated world, almost all problems can and dospill over borders. The painful consequences ofsocial, economic and environmental shocksspreading from one country to another have

been starkly demonstrated by the recent finan-cial, food and fuel crises. Developing countriesare especially vulnerable to the effects of theseexternal shocks, with the worlds poorest andmost marginalized people bearing the brunt ofcrises they did not cause.

Similarly, developing countries as a groupcontribute relatively little to global warmingcompared to developed countries, but many aredisproportionally affected by changing climateconditions because of their geographic position.This injustice is worsened by the fact that thewealth accrued in most developed countries can

be largely attributed to past and present indus-trial activities, at the same time as the industrialsector is responsible for a considerable share ofdeveloped countries greenhouse gas emissions.

Globalization was supposed to promoteeconomic growth throughout the world and

to level the playing field so that everyone cbenefit from increased development rising incomes. Instead, by far the greadownside to globalization has been the (utended) exacerbation of inequality, in mforms and at all levels, both within between countries. These rising inequalcoupled with greater awareness of them, stsocial cohesion, deepen the divides betwgroups and countries, and increase unrest

the potential for conflict.

Governance in the era of globalizationGlobal governance in the last decades has bdominated by a small group of powerful cotries that tried to minimize the rolgovernment in wealth generation and redibution. However, the global financial economic crisis has laid bare the inadequathis approach. Likewise, laissez-faire policienot proving particularly helpful in tacklingeffects of climate change or uncertainties athe future supply of energy. Again, we stand

crossroads of policy and governance. Tprovides us with a unique opportunity to deour shared future. As the main institutioinclusive multilateralism, the United Natcan play an important role in facilitating systemic change.

Hedda Oehlberger-Femundsenden argues that UNIDOs Green Industry initiative canbuild on the successes of globalization, while helping to rectify its shortcomings.

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A fairer, greener and more sustainableglobalization: can industry help?What is at stake is a fundamental rethinkingof the whole process of globalization thatbuilds on its successes while rectifying itsshortcomings. The UN believes that at theheart of these efforts lies the need to insert thenotion of a fairer, greener and sustainableglobalization into the centre of the currentglobal debate. This notion is closely linked to

the concept of sustainable development andits economic, environmental and social pillarsfirst articulated by the Brundtland Commis-sion, formally the World Commission onEnvironment and Development, in 1987.

The sustainable development agenda is acase in point on how the UN can use its role asa facilitator for systemic change. The Brundt-land Report came up with the classicdefinition of sustainable development:"Sustainable development is development thatmeets the needs of the present withoutcompromising the ability of future genera-

tions to meet their own needs". Acceptance ofthe report by the United Nations GeneralAssembly gave the term political prominenceand laid the basis for the groundbreakingEarth Summit in Rio de Janeiro five years later.This UN conference represented a major stepforward for sustainable development, withinternational agreements made on climatechange, forests, and biodiversity. The summitalso led to the establishment of the UNCommission on Sustainable Development.Over the past 20 years, sustainable develop-ment has become a development paradigm,

with governments, businesses, and civil societyaccepting it as a guiding principle.

Yet the concept of sustainable developmentremains somewhat elusive, and operational-ization has proven difficult. Globalization haschanged the challenges for sustainable devel-opment by relocating production, so thatresource- and energy-intensive productionprocesses are increasingly concentrated indeveloping countries, with consumption stillhighly concentrated in the developed coun-tries. Thus, on a global scale, there has beenvery little de-linking of the economy from the

environment. Progress is further hamperedby the incorrect, but common, belief thatthere is a negative trade-off between economicgrowth and prosperity on the one hand, andsocial and environmental protection on theother.

As the United Nations specialized agencyfor sustainable industrial development,UNIDO has concentrated its activities acrossthree closely related thematic priorities that

are all linked to sustainable developmachieving a fairer, greener and sustprocess of globalization: poverty rethrough productive activities; trade building; and environment and energrecently elaborated mission statUNIDO continues to underline its cment to these priorities by emphasiaspiration to support member states iing a flourishing productive sector, to

their participation in international trato safeguard their environment.

Green Economy and Green(ing) IndusThe concept of a Green Economy, launthe United Nations Environment Prog(UNEP), also incorporates manyelements of a fairer, greener, more susglobalization. The Green Economy dreplace sustainable development, butnow a growing recognition that acsustainability rests almost entirely onthe economy right. UNIDOs Green I

initiative is a concrete sectoral approperationalizing Green Economy amodel for economic growth and develo

The Green Industry vision grasps thtial for industries to decouple economicand revenues from excessive and incresource use and pollution. A newUNIDO Green Industry: Policies for Su

Green Industry, foresees a world in whichtrial sectors minimize waste in everutilize renewable resources as input mand fuels, and take every possible precaavoid harming workers, communities

environment. Green Industries will beand innovative, and constantly developways of improving their economic, emental and social performance. Tstimulate green investments, and cregreen jobs and businesses.

Twenty years after the historicSummit, the forthcoming UN ConferSustainable Development (UNCSDalso referred to as Rio+20 is a majortunity for the United Nations to come specific answers and solutions to tchallenges of sustainability and globa

What is needed is a concrete action-oagenda to realize the vision of a fairer,and sustainable process of globalAdopting a sectoral approach such aIndustry as a way of operationalizGreen Economy concept will contrimaking this vision a reality.l Hedda Oehlberger-Femundsenden is a

planning officer at the United Nations In

Development Organization (UNIDO)

Stills from UNIDOsGreen Industrypublic serviceannouncementscreened on CNNin late 2010.

There is now a growing

recognition that achievingsustainability rests almostentirely on getting theeconomy right.


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DANI RODRIK argues that theultimate paradox of globalizationis that it works best when it is notpushed too far. This paradoxmust be reflected in new globaleconomic arrangements that arebased on democratic deliberationwhere it really occurs withinnational states.

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Let me begin by framing my argument with three key ideas. One is the idea that

markets need to be coterminous with institutions of governance and regulationthat underlie them. This is a corollary to Adam Smiths notion that the divisionof labour is limited by the extent of the market. My corollary is the idea that theextent of the market is, in turn, limited by the scope of workable, and I empha-size workable, regulation and governance. A lesson that we keep learning is thatmarkets are institutions that require the support of other non-market institu-tions. Any kind of long-distance market requires non-market institutions to createit. Markets are not self-creating, theyre not self-regulating, theyre not self-stabi-lizing, and theyre not, fundamentally, self-legitimizing.

That is why well-functioning domestic markets always operate amidst analphabet soup of regulatory institutions that deal with market failure, with infor-mational asymmetries, and with incentive problems. The requisite rules areembedded in macroeconomic institutions institutions of monetary and fiscal

stabilization and in broader governance, in political institutions that also providesafety nets, social protection, the welfare state, and ultimately, of course, in polit-ical democracy, in terms of ensuring that markets operate within a set of rules thatoperate through legitimate modes of public choice. So, the first key idea is that werun into problems when markets go beyond the limits of the governance insti-tutions that we need to support them.

GovernanceThe second idea is that the main locus of legitimate governance today remains thenation state. There is a lot of creative new thinking about mechanisms of gover-nance that go beyond the nation state: various mechanisms of global governance,whether those are the traditional multilateral or international organizations, alongthe lines of the International Monetary Fund and the World Trade Organization

(WTO), or the newer forms of network governance around networks of regula-tors; or the various forms of cross-border, non-governmental organizations; or theCorporate Social Responsibility movement. However, even though all of theseare very interesting, important, and innovative methods of transnational gover-nance that are trying to deal with some of the consequences of the fact thatmarkets go beyond national governments, these structures are weak, and theyrelikely to remain weak. On their own, theyre unlikely to support anything but arelatively limited version of globalization because the focus of democratic delib-eration still resides largely with the nation state.

The third idea is that different nation states have different preferences over theshape that these institutions of governance ought to take. Because they differ intheir historical trajectories, because of their cultural background, because of theirlevels of income and development, they have different preferences, and they have

different needs. So, when were talking about the shape of a social protectionmechanisms, or the shape that financial regulation ought to take, or the shape thatlabour-market institutions ought to take, or the form that consumer health andsafety standards ought to take, there is going to be much variation across differ-ent parts of the world in terms of what is a locally desired form for theseinstitutions. This diversity is natural. There is nothing in either theory or prac-tice that suggests that capitalism, or a market-based system more generally, mapsinto a unique form of governance, into a unique set of regulations that ought to

be globally harmonized, or that, necessarily, different countries will have similarpreferences for the shape that these different regulatory institutions ought to take.

G20diversity

Dani Rodrik is the Rafiq Hariri Professor of International Political Economyat the John F. Kennedy School of Government, Harvard University, USA.He has published widely in the areas of international economics,economic development and political economy. His research focuses onwhat constitutes good economic policy, and why some governments arebetter than others in adopting it. His latest book is The GlobalizationParadox: Democracy and the Future of the World Economy. He was bornand grew up in Istanbul, Turkey.

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A patchworkWhen you put these three ideas together, you end up with the conclusion that wehave to contend with a world economy that is, and is likely to remain, a patchworkin terms of governance. We need to internalize the idea that the world economyis always going to be divided into different polities, and that jurisdictional bound-aries will be there. This conclusion really puts a damper on how far we can go interms of envisaging a truly global market, in terms of how far we can strive forwhat I call hyper-globalization, which refers to this ideal of a world economywhere national borders dont matter in the sense that they dont impose any trans-action costs on economic exchange.

When we get the balance between the reach of the market, and the reach of theworkable regulation wrong, then we tend to run into one of two kinds of problems:1) We run into problems of legitimacy when we try to push the global rules too far,and try to harmonize institutional arrangements beyond what domestic politicalconsiderations would allow. I think the best example of this is the difficulty inwhich the current world trade regime finds itself. In fact, the WTO is one of theleast popular institutions in the world. To a large extent, the reason for this isthat we have overreached in terms of rule-making in the world trade regime.2) On the other hand, when we dont have these rules, when the global governanceregime remains weak, or when the rules are highly country specific, then we getinto problems of inefficiency and instability, and that has been the curse of finan-cial globalization. I think that our experience with financial crises and problemsof contagion and financial volatility globally, reflect, in part, the fact that we have

a world in which financial markets are increasingly global, while the regulatoryarrangements and the stabilizing arrangements are still based within nation states.We dont have anything like a global regulator, or a global lender of last resort, orglobal fiscal policies.

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The nation stateComing full circle, my argument is not just that we have to rein in our ambitions

because of the continuing power of the nation state, but also that its not neces-sarily a bad thing if we recognize the centrality of nation states in the worldeconomy. Were more likely to contribute to a healthy global economy when werecognize the validity of the constraints than when we try to eviscerate them.Weakening domestic governance arrangements ultimately benefits no one.

Whether or not you buy my argument about the inherent desirability of a worldeconomy thats divided across different national polities, were likely to move intoa world where the balance of political forces is becoming significantly morecentrifugal. This is, in part, because of the declining role of the United States inthe global economy, and also because the European Union will likely remainhighly preoccupied with its own financial crisis and its own unification process.

Rising powersAs for the rising powers, led of course by China, but also others like Brazil, India,Turkey, South Africa and Russia even though they differ on a lot of different


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dimensions there is one thing that is common to all of them, which is thatall these rising powers tend to put a huge weight on the value of national sover-eignty. So, these new powers are going to be standing for a world where in fact thenation state does matter, and theres going to be much less willingness to trans-fer sovereignty to transnational or global governance mechanisms. The supplyof global leadership is likely to be in short supply in any case.

Now, this might be a very pessimistic prospect if you think that, in order tomaintain a healthy world economy, we require a lot of global cooperation, a lot ofglobal governance, and a lot of global rule-making. It might suggest that werelooking toward a somewhat bleak future. But I dont think thats that right way to

look at it, because to maintain a healthy global economy, you basically need toensure that countries do whatever is good for themselves. They need to look outfor their own interests, not those of the global economy. This is a point that is not

very well understood.

Semi-private goodsWe often think of the global economy using the analogy of a global commons we think that the world economy is like a global ecosystem. This is the wrongway to think about trade and financial policies, in the sense that trade and financepolicies are what we would call semi-private goods from the perspective of eachindividual nation. When we economists teach the benefits of trade, and the virtueof comparative advantage, we teach it from the perspective that this is good for

each country in and of itself. We dont teach that trade is good because this is howyou provide benefits for the rest of the world. We say instead that trade is goodbecause it enables you to allocate your own resources more efficiently. This is verydifferent from a true global commons, for example, in the area of climate change,where in a world where each nation is doing whatever is good just for themselves,we would collectively all go to hell because nobody would have any incentive toinvest in climate control. Trade and financial policies arent like that, becausethese are semi-private goods, and if countries adopt policies that are good for

themselves, they will have open economic policies.So, fundamentally, subject to a couple of caveats, an open economy is in fact in

each individual countrys own interest. There are spillovers of course. There arespillovers in terms-of-trade effects, and potentially mercantilist effects, and thisis why I call open trade and financial policy, semi-private goods, not purely privategoods from the standpoint of individual countries. When a country, lets say,follows protectionist policies, and if it is true that it is following these in order toprotect itself for economically inappropriate reasons, most of the bulk of thecosts are actually borne not by the rest of the world, but by particular groupswithin that country.

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The corollary of that is that when nation states in fact do have the manoeuvringroom to select their own trade and financial policies and their own institutionalarrangements that might potentially impose transaction costs on cross-bordertrade and financial relationships, the outcome need not be the slippery slope toprotectionism.

Agricultural subsidiesIm not making a claim that democratic politics are always going to result in thekind of economics with desirable outcomes, but the point is that when democraticpolitics do malfunction, the costs in the world economy are paid mostly by the

locals, and not by the rest of the world. Of course, agricultural subsidies are agreat example of that, because we say here is a fundamental failure of the worldeconomy or world governance arrangements with respect to trade rules, and thatcountries like the United States, or those in Europe, or Japan, or Korea, with highrates of subsidies or agricultural protection, generate adverse consequences forcountries that are agricultural exporters. But, of course, the fundamentaleconomic logic of this is that when countries are subsidizing their agriculturalproducts, if anything theyre providing a benefit to the rest of the world, becauseof the terms-of-trade gains that the rest of the world derives. But even leavingthat aside, the answer to the question, Who pays the cost of those policies? is thatthe costs are paid for by domestic consumers and domestic tax payers. So, theultimate failure here is not failure of global rules per se. Its a failure of domesticdeliberation, of domestic democracy. These are very costly policies from the stand-

point of each individual country, and if a democracy ends up saying that despitethose costs, we want these policies nonetheless, it is not because they want toimpose costs on others, its because democracies are entitled to make their ownmistakes.

Bigger gainsThe point is that since the costs of bad trade and financial policies are bornemostly at home, improved deliberation (and improved mechanisms of decision-making in these areas) is likely to be a much more powerful discipline, a muchmore powerful stick, than external constraints. After all, the bulk of the costs fallnot abroad, but at home. And in any case, the mechanisms of governance withinwhich we can sensibly address these issues are mostly national to begin with. So,this way of thinking about where were going has implications for how we think

about the design of global institutions, how we think about where we should focusour energies. In other words, where are the bigger gains for international coop-eration and rule-making?

One of the policy areas where one can apply some of these broader principlesis with respect to what, in some sense, is the burning macroeconomic issue of theday which is, how do you deal with global macroeconomic imbalances?

ChinaNow this is an area where cross-border spillovers are large because you can argue,quite reasonably, that Chinas mercantilist policies have costs for others. What Imean by Chinas mercantilist policies is its currency and other policies that createa large trade surplus. These have costs elsewhere in the world economy, becausethey aggravate unemployment in the United States and elsewhere, and also have

costs for economic growth in developing and emerging market economiesbecause of the relationship between exchange-rates and economic growth.However, I think that what this debate has not taken on board sufficiently is thatChina also has valid concerns about the potential employment and social conse-quences of a rapid currency appreciation. So, for the last ten years, Chinas growthmodel has relied extensively on an undervalued currency, and what one might callexchange-rate protection, which has increasingly replaced the kind of trade andindustrial policies that China used to rely on, prior to joining the WTO in 2001.In fact, its quite striking that both the external imbalance and the exchange-rateundervaluation started to rise in 2001, just as China joined the WTO.

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So, I think that one way of squaring the circle is to accept that if the rest ofthe world the United States in particular is going to come down hard on Chinato do something on the exchange rate front, its also incumbent on us to thinkwhether China needs any insurance policy against the potential downside of lossof employment and significant reduction in economic growth that could besocially costly. And the kind of insurance policy that economic logic suggests weought to provide China with is much greater freedom to employ sectoral policiesin case particular sectors, or particular sets of firms, are adversely affected by arapid appreciation of the Renminbi, potentially causing unemployment prob-lems. The suggestion here is that greater discipline on macroeconomic and

exchange-rate policies imposed on China is really viable only if is matched bysignificantly relaxed discipline on sectoral, or microeconomic, or industrial poli-cies. In a way, the quid-pro-quo here is to look the other way if China is going to

violate the agreement on subsidies of the WTO, and use sectoral policies in orderto potentially pre-empt the employment costs of a rapid appreciation of theRenminbi. In exchange, the rest of the world can ask for greater global disciplineover macroeconomic and currency policies.

Labour mobilityThe second area is one area where globalization has advanced way too little. Ininternational trade and international finance, we need to ask how we can mitigatethe consequences of globalization having gone too far. But with respect to theworld labour regime, were in a world where globalization has not gone far

enough. The world labour regime today is roughly where the trade regime stoodin the 1950s. We live in a world in which there are very high barriers to labourmobility, very inconsistent policies quantitative restrictions all over. Now, whatthis means economically is that because were starting from a position where thesize of barriers is so large, the relative balance between the total global efficiencygains and potentially adverse distributional effects of relaxing those barriers ishighly skewed on the positive side. It is skewed in the direction of the net effi-ciency gains. For any dollar of redistribution we get from relaxing these temporaryworker mobility barriers, the surplus we generate for the world economy, theextent by which we would increase the global pie, is much greater than fromalmost any other area of reform. Even a relatively small increase in the temporarywork visa allocations of rich countries would produce net gains that are severaltimes those produced by the removal of trade barriers, or anything else thats

currently under discussion regarding the world trade regime.This is really the unexplored frontier of globalization, and I suggest that if the

trade negotiators, who are wasting their time with Doha, really want to do some-thing useful, and really expand the size of the global pie, this and not the existingagenda would be the area that they should be targeting.

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Global rulesWith respect to the nature of the global rules, I suggest that the main contribu-tion that global rules can make is through their effect on improving the qualityof domestic deliberation. If there is a shift in emphasis in places like the WTO orthe G20, instead of trying to enact global rules that try to harmonize on substancein pursuit of the objective of minimizing transaction costs across borders, theseglobal rules should instead focus on procedural safeguards that ensure that thedomestic deliberation on regulatory matters affecting trade and finance benefitfrom some key qualitative improvements. The key principle here would be toensure things like transparency, accountability, representativeness, and the use of

scientific or economic evidence in domestic deliberations with respect to tradeand industrial and financial policies. And international rules could set proce-dural standards, require the application of these principles, and, through such amechanism, could actually make a contribution to the quality of domestic delib-eration. The idea here is that there is much to be gained by legitimizing nationaldifferences and regulatory structures, but doing that subject to procedural safe-guards that can potentially improve the quality of such deliberation.

To sum up, I believe that democratic deliberation is still largely organizedaround nation states, and I believe in the right of countries to protect their ownregulatory arrangements and institutions, but I distinguish this very sharply fromthe right to impose those arrangements on others. The right to have your owninstitutions doesnt give you a right to impose them on others. I think we shouldstrive for as much economic globalization as we can get that is consistent with

maintaining this space for diversity in domestic international arrangements.

Policy spaceMy emphasis here on creating policy space is based on the argument that all kindsof countries need that policy space; the rich nations need it to provide social safetynets and social insurance programmes, to address concerns about the labour,environmental or health and safety consequences of trade, and ultimately toshorten the chain of delegation whereby decisions are made by a group of judgesin Geneva. And I think developing countries need the policy space, because therecord shows us that its those countries that use the policy space to restructuretheir economies, and to diversify their economies, that ultimately benefit fromglobalization the most, and can leverage globalization the most.

Providing countries of both the North and the South both rich and poor

countries with this kind of policy space, and understanding that this policyspace is needed to maintain the integrity of domestic institutions, is somethingthat is not just desirable from the narrow perspective of national economicmanagement. It will actually produce a global economy that is workable and thatis healthier.n

l This is an editversion of a talk the Peterson InstInternational EcoWashington, DC4 May 2011.

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You argue that the central global predicamentof the 21st century is that, in becoming moreintegrated, we have also become less gov-erned. When did this shift start taking place,and where are we today along the continuumof this unfinished global revolution?In the last twenty or so years, two great trendsthat are inherently in conflict with each other

have been playing out. By chance, I have livedat their intersection. The first trend is thedemand of people everywhere to have moresay over their own lives. This has led to the as-tonishing people power revolutions from thePhilippines and Latin America to EasternEurope and Africa, and now, recently, in Egypt.Steadily, one man rule has been rolled back,and politburos and generals have been sentpacking, as people have demanded demo-

cratic control over their societies and liveI was present at many of these rev

tions. In the early days, as a political advto insurgent candidates like Cory Aquinthe Philippines and her counterpartLatin America and Eastern Europe, and I saw a later round of these changes, andin the midst of more than my fair shar

them as a senior international official,then government minister. I saw enougI describe in the book, to understand most, if not all, of these democratic pourings have fallen short of the antiction of those who filled the streetcelebrate democracys victory. The old orcorruption, inequality, a lack of real freedtoo often has hung on, despite the new docratic trappings.

Rahim Kanani speaks to Mark Malloch Brown about hisnew book, The Unfinished Global Revolution: The Pursuit ofa New International Politics, which explores the challengesand opportunities of globalization in the 21st century.

MARK MALLOCH BROWN is a former Minister ofState in the Foreign and Commonwealth Office of theBritish government with responsibility for Africa, Asia,and the United Nations. Prior to that, he served asDeputy Secretary-General of the United Nations(2006) and chef de cabinetfor UN Secretary-GeneralKofi Annan (2005), and as administrator of the UnitedNations Development Programme (1999-2005). Earlierin his career, he served at the World Bank as vice-president for external affairs, and vice-president forUnited Nations affairs.

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But there is no doubting the depth of theyearning for control over our lives and thefreedom to make our own choices within ademocratic framework, where we have theprotection of the land for ourselves and ourfamilies. From being a minority, luxury, aspi-ration for the few in the West, democracy hasbecome a nearly worldwide demand.

This political tidal wave of our lifetimessmashes into the rocks of the other great trendof recent decades: the impact of globalization.While it has blown change through our lives,and through its mass communications tech-nologies even enabled many of the nationaldemocratic changes witness the role of Face-book and Twitter in Egypt, it has also hijackedour democracy, in unanticipated ways.

What I mean is that as our lives have

become integrated on a global level: from theglobally sourced finance that underpins na-tional economies, to the far-flung locationsfrom where our food and consumer goodscome, to where the services from bank backoffices to the staff in our hospitals originate.We live our lives with an ever greater depend-ence on international travel for work and

pleasure. All of this has consequences for na-tional democracy. Regulating finance, trade,public health, security, and all the other di-mensions of a global economy are beyond thepower of individual countries even the mostpowerful. A country only controls one or twolinks in the chain of finance, or the spread ofan infectious disease.

That is the dilemma I try to expose as ademocracy advocate and a champion of better

management of our global affairs. I dhow my thinking evolved, as I found hficult it is to carry that powerful momdemocratic revolution from the peopleof the streets to people power in the global places, where more and more ofcisions that shape our lives must be mam able to describe these inaccessible

and their workings too, in these pages bmy own journey took me from democrtivist to senior international official, was privy to significant deliberations aresponsible for major managemenacross the system. Indeed, probably has been lucky enough to enjoy suchrange of experience across the top levemerging system of global governanc

So, this is the story of two unfinis

[On] the long jthat we have haembarked on, tglobal democra


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revolutions: the imperfections and incom-pleteness of local and national democracy inthe face of the persistence of old powergroups and of poverty and marginalization;and of the long journey, that we have hardlyembarked on, to build a global democracy partly because it is even more complicatedthan one man, one vote, or one country, onevote. We have hardly begun to work out how togovern ourselves at the global level. And

indeed there are jealous politicians every-where, defending their own prerogatives, inthe name of national sovereignty, who dontthink we should even try.

In this changing international landscape,what is the obligation of this generation tothe next?Well, this generation is probably the last glob-ally unregulated generation. We can racethrough the worlds finite natural resourcesof energy, water, commodities, forests, soils,and oceans, as though there was no tomorrow!

We also have the freedom to move our wealtharound, shopping for low regulation locationswhere it is not taxed and oversight is lax.Indeed, many companies employ lots oflawyers and tax accountants to play this patch-work global system, where money is global,but regulation local.

At the very least we are going to have to ex-plain to the next generation why in a world ofgrowing population, we did not have the fore-sight to think and act more clearly to addressthese issues. Why did we not understand thatin a globalized economy, letting politicians

continue in the self-indulgence that rules andregulations could still be set by them at thenational level was a recipe for incoherenceand abuse? What can we do about it? Act now,and get going on the kind of bargaining andglobal negotiating necessary to create properframeworks for handling these issues in a fair,globally inclusive way for the future.

In your book, you argue that as nationalpoliticians cede control to impersonal globalforces, they will be forced to become more ef-fective participants in international mecha-

nisms, such as the United Nations. What aresome examples of this trend, and what are thepotential consequences associated with an in-creased reliance on a system like the UN thatstill needs much reform in order to operateeffectively?

A: When one looks at a difficult and so farunsuccessful new trade round, the so-calledDoha round, one sees politicians weighing inbecause they think an agreement will bring

jobs home. So, for months at a time, trade ne-gotiations will be delegated to ambassadors inGeneva who often have no particular incen-

tive to arrive at an agreement, given the pleas-ant sinecure of Geneva life. Suddenly,politicians facing low growth and too few jobsat home wade in, and there are frantic phone-calls between leaders. The White House,Downing Street, and their Indian and Chineseequivalents are involved. In this case, withlittle result, but the point is clear: politiciansrecognize global trade matters.

Similarly, in 2008-9, when the world wasfaced with financial meltdown, leaders gotstuck in. From Bush to Brown, they recog-nized the survival of their national economies

depended on coordinated internationalaction.

A lot of these examples of coordinated po-litical action are, however, outside the UN.This is a sad commentary on its perceived in-effectiveness. It has got a fail grade from manyon its handling of climate change negotia-

tions. It has been largely missing in manthe major political confrontations of thefew years. The stark truth is it is going to to raise its game, if the new multilateralisnot to largely by-pass it.

Nevertheless, one should not overlookfact that the source of much of its weaknealso the source of its unique legitimacy: ecountry is a member. And while an inner of countries, with major interests in the i

may be able to agree an approach to finanregulation or climate change, unlesswhole global community of 192 suspicioften opposing, countries then endorse inot going to be applied universally. So, wthe dynamic part of negotiation may migfrom the UN to more purpose-built assotions of national and other stakeholders,seem likely to continue to need the UN afinal seal of approval.

That would be a reduced role for the but it may be its fate unless a new generaof leaders, like Kofi Annan, comes back

positions of prominence. As I argue inbook, what distinguished Kofi, and other lers I worked with, was the ability, proactito sense where a creative progressive consus among governments might be foundto lead, bargain, and cajole nations tothere. Then, the UN can produce remarkresults.

If President Obama granted you an audito discuss the role of the United St

moving forward in strengthening the sysof international relations and global me

nisms such as the United Nations, wwould be your advice?Senator Obama visited the UN on a coupoccasions when I was Deputy Secretary-Geral. We spoke about Darfur and other trospots. I was left with a very clear respechis instinctive multilateralism as a meanmoving forward human rights and conissues he cared deeply about. He understhat the American big stick, wielded alrarely brought the results he desired arothe world. But his faith in multilateralisma progressive force, was even then laced

a discernable scepticism about whetherUN was always fit for purpose for the big tsuch as peacekeeping in Darfur. His two cerns seemed to be the chronic instituticonservatism brought about by obedienthe sovereign rights of even the mwretched governments such as Sudan. Hcould you save the people of Darfur, if evthing you did had to have the OK of their secutors in Khartoum? His second appa

We have hardly begun towork out how to governourselves at the global

level. And indeed thereare jealous politicianseverywhere, defending

their own prerogatives, inthe name of nationalsovereignty, who dontthink we should even try.


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ence of their actions. As British Prime Minis-ter Gordon Browns G20 envoy, I saw it was ahigh point, and indeed the pace of agreement

on common action fell away sharply after theLondon Summit in April 2009 as the crisisitself receded.

So, while there is a similarly compellingcase for global action on public health, povertyor climate change, the sense of crisis andmutual threat that drove action on finance ismissing. There have been moments the con-certed action against HIV/Aids when it threat-ened to become a global scourge; anintermittent commitment to tackling poverty but what we have not yet acquired is a globalpolitical consciousness that allows us to rec-

ognize that we must worry about the badneighbourhoods next door. Just as Americansor Britons, a hundred years ago, had begun torecognize the state must address poverty, andnot leave it to private charity alone, so we areon the cusp, I suspect, of a great leap of imag-ination in terms of our responsibilities as cit-

concern was that an organization with suchgovernments having a hand on the wheel wasunlikely to have the internal resourcefulness,morale, or risk taking culture, to deal robustlywith crises.

I was left believing President Obama wasan unconditional multilateralist but a condi-tional UN supporter. The way of course toconvince him otherwise is clear. The UN mustperform. That, in turn, means a risk-taking

leadership ready again to challenge the world,including the US, to do better.

If your audience was the leadership of China,India, or Brazil, and the topic was the futureof the international system, how would youradvice differ?I would presumptuously offer the leaders ofChina, India, and Brazil, a history lesson. Itwould dwell on events they may not be thatfamiliar with how FDR came to commis-sion the design of the United Nations even asthe US entered the Second World War, and

that he did this not solely to export Americanliberal values round the world. Rather, it wasseen as a system of sharing out responsibilityfor global security. Roosevelt could see Amer-ica was going to be landed with the role ofglobal policeman, but he equally recognizedAmericans would demand that the country fo-cused its resources on the home front. TheUN became the pragmatic vehicle for squar-ing the circle, to deflect global calls for Amer-ican leadership into a robust burden-sharedsystem of global leadership, covering securityand development matters.

Today, China, India, and Brazil face similardemands to step up to global leadership whentheir people want them to continue to tacklea huge unmet domestic agenda. The UNoffers their leaders, as it did the Americans in1945, a low-cost way of meeting the responsi-bilities thrust upon them. It requires them toplunge back into the organization which theyhave traditionally resented as too Westerndominated.

Reflecting on the 2008 financial crisis, whatis the relationship between the necessity to

govern the global economy with global in-stitutions, and the necessity to empowerand enable similar institutions to addressissues of public health, poverty, or climatechange?The leap to an empowered G20 occurred in2008 because of a financial crisis that threat-ened the stability of governments and all ourlivelihoods. Briefly because of crisis leaderssurprised themselves by the force and coher-

izens, whether we believe in righmarket solutions to global poverty oleft-wing social interventions, we are cthe threshold where we will recognizis our business to worry about global peven if we still disagree about solution

As the unfinished global revolution uand having served for many years in aof public, private and non-profit insti

around the world, what insights wouimpart on young and emerging leadersocial sector who may be disenchant

the ineffectiveness and bureaucracy oinstitutions and with their inability t21st century challenges?First, the canvas on which young leadact is wide: NGOs, the UN, business. every organization is moving towardsinternational model, and with that comopportunity of more career time spent So, choices do not need to be limited toficial part of an international system.

big enough and diverse enough to touus. So, seize the chance whatever your endeavour. Recognize that new or old zations will need continuously to rethemselves during a century of contchange and likely drastic upheaval. Finaderstand that new leadership requiresthe domineering alpha male popularthe Hollywood model of governmencorporate leaders. We are likely to selantern-jawed heroic titans barking itions to deferential subordinates, and see a gentler consensus, with leaders w

seek the understanding and emotionalof the cross-cultural teams they worKofi Annan. Not George Bush.

What is it about the unfinished glob

lution that worries you the most?That its unfinished and, with a wopanding at 200,000 people a day, whave long to sort ourselves out.

And what are you most optimistic aboThat, so far, innovation, social adaptatiremarkable individuals not just so

traordinary world leaders, but civil socentrepreneurs, some working in mocult circumstances have kept us oahead of failure.

l Rahim Kanani is founder and editor-in

World Affairs Commentary. For more in

with global leaders in international deve

ph il an th ropy, ed ucat io n, and mo r

www.RahimKanani.com.

While the dynamic partof negotiation maymigrate from the UN tomore purpose-builtas

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Making It #7 - Governing a globalized world