Pascal Lamy: Whither Globalization?

Where is globalization headed? This is probably the central question of our time.

As globalization transforms the world — creating new wealth, new innovations, new opportunities, new dreams — it is also creating new insecurities, new risks and challenges and new nightmares. Nations and societies seem increasingly uneasy with a world on steroids that seems out of their control, where powerlessness slowly poisons democracy.

Have we adapted to the “one world” we have created? Have our cultures, approaches, institutions and imaginations caught up? Are we trying to manage the globalized world of the 21st century with a system — and a mindset — designed for a century that has faded away?

The challenges posed by globalization are far from simple. Global policymaking has become more complex as it has become more important. World Trade Organization (WTO) negotiations, for example, focus on cutting tariffs or limiting subsidies. But these issues are increasingly impacted — even overshadowed — by dramatically shifting patterns of trade, new centers of production and competition, new social demands and volatile financial flows and exchange rates.

In the same way, climate change negotiations are not just about the global environment but global economics as well — the way that technology, costs and growth are to be distributed and shared. Can we maintain an open trading system without a more coordinated financial system?

Can we balance the need for a sustainable planet with the need to provide billions with decent living standards? Can we do that without questioning radically the Western way of life? These may be complex questions, but they demand answers.

At the same time, globalization is blurring the line between national and world issues, redefining our notions of space, sovereignty and identity. As we saw during the recent financial crisis, economic turbulence in one country now sends shockwaves worldwide.

And finance is not the only area where domestic issues are turning into global concerns. Countries claim the right to use national resources as they see fit. But the byproduct can be greenhouse gases or disappearing fish stocks or raw material shortages — which impact the interconnected world we share.

Many countries still view human rights as an internal concern. But this distinction is becoming harder to maintain in a world where new media, the Internet and Facebook are creating a global audience, global public opinion and, increasingly, a global sense of right and wrong.

This raises another challenge. Economic, environmental, even social issues are becoming more global, but our politics remain local. Presidents, parliamentarians and bureaucrats are answerable first and foremost to national constituencies — whose interests remain largely domestic. Voters find it hard to understand, and accept, that their jobs can be displaced because of investment decisions in China. Or that local gas prices must rise because of a civil war in Libya or futures trades in London.

It is true that popular criticism of globalization can be irrational — or worse. But it is equally true that people are increasingly, and legitimately, worried about unemployment, poverty and growing inequalities, about the health of the planet, about the safety of their children’s food, about the basic rights of their fellow women and men. These are complex issues — too complex to be resolved in Internet chat groups, but too important to be ignored.

How to resolve the tension between the globalization of issues and our narrow national interest? How to avoid a “democratic deficit” — a gap between the international system and the people whose interests it is meant to serve?

This raises a final challenge: How to provide global leadership? Mobilizing collective purpose is more difficult when we no longer face one common enemy, but thousands of complex problems. The Cold War was about the clash, not just of geopolitical interests, but of big ideas — democracy against totalitarianism, freedom against state control. But the Cold War “glue” has disappeared. Big ideas risk being eclipsed by technical details. Grand alliances are weakened by petty squabbles and rivalries.

The reality is that, so far, we have largely failed to articulate a clear and compelling vision of why a new global order matters — and where the world should be headed. Half a century ago, those who designed the post-war system — the United Nations, the Bretton Woods system, the General Agreement on Tariffs and Trade (GATT) — were deeply influenced by the shared lessons of history.

All had lived through the chaos of the 1930s — when turning inwards led to economic depression, nationalism and war. All, including the defeated powers, agreed that the road to peace lay with building a new international order — and an approach to international relations that questioned the Westphalian, sacrosanct principle of sovereignty — rooted in freedom, openness, prosperity and interdependence.

But the end of the Cold War produced no similar search for a new approach, a narrative we could all share. On the contrary, the Soviet collapse tended to reinforce the status quo. It encouraged the belief that we had reached the end of our policy debates, if not “the end of history,” and that foreign policy could take a back seat to more pressing domestic concerns.

The result is a certain complacency — or, worse, paralysis — in the face globalization: an uneasy awareness that looming challenges confront us, yet an inability to marshal the collective vision and leadership to tackle them. I am not sure this complacency is sustainable much longer. The profound shock of the recent financial crisis, our inability to face (let alone solve) global warming, the failure to halt nuclear proliferation, even the WTO’s stalled Doha negotiations illustrate that the status quo is no longer good enough. Events are passing us by.

So what is to be done? Replacing the G8 with the G20 was a hopeful step — an acknowledgment of today’s multipolar and interconnected world, and a tangible sign that the system can reform and adapt. But the G20 is only a beginning, only one of many pieces of global governance.

To improve the way the international system works, we must “network” global governance in a better way. This should be done not by building more institutions, but by ensuring that existing ones — the WTO, the IMF, the World Bank and especially the United Nations — work together more coherently.

To improve policy coherence, we need to build consensus. The WTO’s huge success in breaking down economic barriers was the result, not the cause, of a widening consensus about the value of open trade under shared rules painstakingly built up over the past 60 years.

In the same way, we will only find answers to the other pressing issues on the international agenda — financial reform, the environment, health, taxation, migrations — not by trying to impose solutions (which is impossible), but by constructing consensus from the bottom up.

To achieve consensus, we need to strengthen the system’s legitimacy by better reflecting the interests and concerns of citizens. This means integrating global governance into democracy. Presidents and prime ministers, congressmen and parliamentarians need to be encouraged to engage more actively in global governance and debates.

Parliaments and parties, civil society and citizens need to ensure that the issues debated on the global stage are echoed and explained at the grassroots. And global institutions, along with their representatives, need to be held accountable. Harnessing globalization is not about globalizing local problems, but about localizing global problems.

So where is the world headed? Towards more globalization, not less. Towards deeper integration, wider cooperation, an even greater sharing of responsibilities and interests.

Governing this globalized world can be messy and frustrating. But the fiction that there is an alternative is naïve and dangerous. Naïve because it ignores that we are becoming more — not less — dependent on one another. Dangerous because it risks plunging us back to our divided past — with all of its conflicts and tragedies.

This article was adapted from Pascal Lamy’s speech, “Whither Globalization,” presented at the Council for the United States and Italy conference in Venice, on June 4, 2011.