Implosion Of The European Paradigm

The process of globalization, it can be argued, is now the most important development in world affairs. It marks the end of the world order dominated by nation states (or countries) and the beginning of an era in which national governments have to share their power with other entities, most notably transnational corporations, intergovernmental organisations and non- governmental organisations.

Note the following bullet points of the Westphalian System and globalization's effect on it:

1 ­ National governments are the sole holders of (legal) sovereignty.    
 ->Effect : Legal sovereignty is now no longer the monopoly of national governments.

2 ­ Sovereignty is exercised over physical territory
 -->Effect : The control of physical territory is much less meaningful today both as a source and domain of power.

3 ­ National governments are not only legally sovereign but are also the most powerful players of the world system.
 -->Effect : non-state actors are emerging as the new stars of the global order

4 ­ The only enforceable international law is that based on treaties between sovereign countries.
 -->Effect: International law is beginning to challenge the supremacy of state sovereignty .

5 ­ War Is A Legitimate Instrument of International Relations
-->Effect : "Westphalian" wars are in decline. Non­-Westphalian conflicts are on the rise.

For more than 360 years, the state system created by the Treaty of Westphalia in 1648 AD determined relations among states and their peoples. Under its terms, the devastating Thirty Years‟ War of 17th Century Europe was ended and the territorial sovereignty of the states of the Holy Roman Empire was recognised and the 300 princes of the Empire became absolute sovereigns in their own dominions.
                   
In the 21st Century, such is no longer the case, with the form of the nation-state weakening and once all-powerful governments being obliged to reluctantly share their former unrivalled dominion with Trans National Corporations (or TNCs), International Government Organisations (or IGOs) and Non Governmental Organisations (or NGOs.)

The resulting decline of nation-state rule and its implications for the resultant, changed international order and populations most directly affected. I conclude that the post-Westphalian state system will have a variety of potential forms and manifestations and that new political institutions and practices are needed to enable the world's people to cope with altered international society and to govern their own, increasingly interdependent, affairs.
           
In the final analysis, the emerging governance vacuum is essentially the result of two opposite trends. On the one hand economic and technological trends are eliminating borders and abolishing distance. On the other, the global political system still continues to consider chunks of territory as appropriate domains for the exercise of power, ignoring the death of distance and the high mobility of factors of production and destruction. As a result we have, in the World Public Sector a proliferation of national and subnational governments with decreasing and fragmented policy capacity while in the World Private Sector, giant mergers and alliances wield immense power and play one jurisdiction against the other. This resulting imbalance of power is the final nail in the coffin of the Old Westphalian System. The Old Westphalian players are reduced to bit players while the new non­-state actors are grabbing center stage.    

THAT brings me to my premise - that what we are witnessing is, of course, the gradual dissolution of the Westphalian System, but the cause may be disturbing for some - globalization, the rise of “non-state” players, the rise of NGOs and NPOs, are ALL contributing to the acceleration of the META/META/META process, which is the implosion of the European Paradigm, or the white, eurocentric, post-colonial global governance system. IOW, the global white power structure template is breaking down, and is being replaced by...what?            
               
It is, therefore, MY contention that the acceleration of "globalization" in the late twentieth century has severely destabilized the Westphalian Order by weakening the authority of national governments. An increasing number of human activities are now escaping national regulation and spinning out of control. The emerging cracks in the global governance META-structure are deepening to the point where the whole system could break down within the next ten years.
                           
The increasing importance of the global economy and global interdependence, combined with the heightened power of domestic interests, have forced developed states to abandon territorial expansion and military conquest as means of accumulating relative gains. Instead these trading states have concentrated on increasing their share of the world economy. Only states whose economic output is based on the production of goods from land seem to retain territorial ambition. But in states where capital, labour and technology are mobile, and where they dominate the economy, the urge to increase the market share has supplanted that of territorial acquisition.        
                   
In the post-World War II era, nation-states have been effectively curbed in their individualistic pursuit of goals and payoffs by the proliferation of International Organisations and regimes and the internalisation of international norms and rules by domestic societies. The modern nation-state has undergone significant changes both in terms of its purpose and sovereignty. States have traditionally been based on territorial factors. Increasingly, however, state participation in the global economy has led to the former‟s integration with the latter and, consequently, an increased degree of interdependence among states. The result has been the rise of trading states which measure themselves by their relative shares of the global economy and not by territorial size or military power.
               
The weakening of my “bullet points” of the Westphalian System, is creating a growing governance vacuum. globalization is making political borders irrelevant and this borderless world is also becoming a ruleless world. The transnational mobility of factors of production (such as corporations, entrepreneurs, investors and inventors) is accompanied by a parallel mobility of the factors of destruction (malcontents, terrorists, organized crime etc.). Both groups are now in a position to escape national regulation by pitting one jurisdiction against the others in order to obtain maximum advantage. Whatever international rules exist take the form of voluntary guidelines with doubtful enforcement capability by national governments. As a result an increasing number of sectors of human activity are now escaping any form of control such that a visiting Martian may well conclude that on Planet Earth, no one's in charge! Here are some illustrative examples:

Global commerce is becoming a free for all. Although the World Trade Organization was created to consolidate global trade rules and achieve the proverbial "level playing field" the thrust of its action so far has been to disallow national policies considered to be protectionist without replacing them by common international rules. There is no competition law at the global level and no anti­trust legislation. Mergers and acquisitions can occur at will at the global level. For instance, there is nothing to prevent Microsoft Corporation, if split up in the US to reconstitute itself elsewhere. As to "corporate governance" which describes the internal accountability of corporations to their shareholders and stakeholders, it varies from country to country. There are no global bankruptcy laws; no enforceable property protection or deterrence against corrupt practices beyond "voluntary guidelines." In addition there is no globally enforceable legislation to protect consumers. Overall the global economy is beginning to resemble the Olympic Games but with a twist : there are high rewards for the medalists and very little for the also rans but, in the economic olympics there are no rules and no referees with true clout.

Global finance is increasingly chaotic. The sheer volume of short term speculative capital seeking quick profits tends to decouple the financial from the real economy. As the financier George Soros has pointed out the global financial system is in structural disequilibrium. Feedback loops create self­ fulfilling prophecies. Decisions are made in the financial economy, which defy traditional macroeconomic theory. Countries with heavy balance of payments deficits like the United States paradoxically see their currency appreciate rather than depreciate. Exaggerated price earnings ratios create overvalued corporations vulnerable to bursting bubbles etc. Exchange rates are very far from their purchasing power parities. Yet no central bank, acting on its own, is powerful enough to resist speculative attacks on its currency. The collective action by the G­7 central banks to shore up a currency is a step in the right direction, but overall there is no global overseeing financial institution comparable to what exists within nation­-states.

The ability of governments to choose and implement their own social and cultural policies is now limited by the constraints of "competitiveness." Competition across different social spaces is becoming very difficult. Assume two identical countries competing with each other for footloose investment. The first one offers its labor force shorter hours and high wages while the second one imposes long hours and low wages what is likely to happen? The threat of corporate relocation will force the generous country to lower its social standards to compete with the less generous one. Shorter workweeks with higher pay in France are tempting corporations to move elsewhere. German firms are relocating to Eastern Europe to avoid the heavy burden of social charges in Germany itself. The absence of enforceable social clauses in international trade agreements is accelerating this race for the bottom, as it is now called, thus increasing inequalities and widening the gaps between rich and poor.

The Internet is a global technology par excellence. This means that attempts to regulate it will either have to be global or totally ineffective. The Internet's overall impact of governance is likely to be enormous because of its inherent ability to frustrate national rules. Privacy protection, intellectual property protection, the exclusion of pornographic or hate mail, even the prevention of premature publication of election results in a country with many time zones like the United States can only be achieved through global regulation of the Internet. Otherwise national rules can easily be circumvented extra­territorially. Anything short of a concerted effort by all the governments in the world to declare certain practices illegal is unlikely to succeed because the Internet has no fixed geographical base. It is in some senses the ultimate global challenge to national governance.

Environmental problems are in most cases beyond national control. Global warming, acid rain, transborder pollution flows all reflect increasing global interdependence. Collective action is required to manage that interdependence. At present there are very few universal agreements on environmental issues and even when a vague consensus exists there are no clear enforcement provisions. The Global Warming issue is the foremost example. In the first place the national governments of the world cannot agree on what to do about global warning. In the second place, even if they were to agree the implementation of that agreement would involve a considerable degree of intergovernmental cooperation and concerted action which is not  practical, given today's institutions.

Finally, the control of epidemics, the spread of viruses, (biological or electronic) and the potential for mass destruction coming from foreign terrorists or malcontents underscores the point that we are living in a very small planet where no man is an island and no country a fortress. Whether it is mad cow disease or the I love you internet virus, the spread of destructive forces is no longer limited by national borders. We are all on the same Spaceship Earth . Yet there is no captain on board. Victims of mounting interdependence we have yet to devise a practical system to manage that interdependence.

   

What Are The Options?          
                       
Governance by non-state Actors
                       
The Status Quo if left unattended will progressively transfer most governance functions to the non-state actors. As we have seen, the present world stage is made up of a motley group of players some advancing and some in full flight. In retreat are the 200 odd nation­ state governments especially when they act individually. In that group we have one superpower, a dozen or so "great powers" another 50 countries with a certain degree of real internal autonomy and the rest who exercise sovereignty in name only. The only superpower, the United States is strong enough to impact upon all areas of the global system yet not powerful enough to impose a hegemonic pax romana (and not particularly interested in doing so even if it could). Torn by the opposing forces of globalism and isolationism, the United States has yet to offer a coherent global view beyond the liberalisation of markets (which is itself challenged internally within the United States, both by the extreme Left and the extreme Right).
                       
The advancing players are the non-state actors. A first group has emerged from the market system itself: multinational corporations, nouveaux riches entrepreneurs, inventors and investors. A second group has emanated from more traditional special interest groups, labor, consumer groups, religious organisations etc. The third group, composed of NGOs, purports to represent the elusive Civil Society. These non-stae actors are now able to exert pressure and assume de facto governance functions either implicitly or explicitly
                       
What form could the full privatisation of governance take? The most probable initial scenario would be governance by markets where the forces of supply and demand will make the political decisions as well as the economic. Political democracy is normally based on the principle of "one ­person one vote." Markets function under the rule of "one dollar one vote" expressed through the price mechanism. In highly competitive markets "consumer sovereignty" gives some power to solvent consumers who can back their needs with effective demand and dollar votes. However when global markets are monopolistic we end up having "producer sovereignty" where the sole or principal producer makes the rules. Most corporations dream of becoming monopolists. In the absence of global anti­trust legislation, the move towards monopoly power is enhanced by the ease of mergers and acquisitions. As one CEO put it, "why try and beat them when you can buy them ­ or be bought by them." When profits and market control are at stake, a strategy of cooperation and alliance is more rational than cutthroat competition. If governance is left to monopolistic markets, then serious democratic deficits will arise with a handful of oligarchs making crucial decisions affecting everybody. This is a clearly undesirable scenario for all except perhaps the putative monopolist.
                       
Can the other non-state actors check the power of monopolistic markets in the absence of governments? In our view the influence of Group 3 the NGOs would decrease while that of Group 2, the covert Special Interest Groups would increase. The NGOs principal weapon is appeal to public opinion. But public opinion is itself only relevant if decisions are made on the "one person - one vote" system. If democracy is no longer in the picture with decisions being taken exclusively via dollar votes, the NGOs' relevance and the power of Civil Society itself would diminish. Civil Society needs receptive ears. The most receptive ears are those of democratic governments seeking to be re­elected. As governments lose their power, so in the long run will the NGOs.
                       
The opposite is true for the militant SIGs (Special Interest Groups) especially those willing to use force. If there are no longer any rule makers or rule enforcers, who will prevent cheating and criminal activities? The very notion of crime will have to be redefined. The economic analysis of organized crime suggests that as legitimate power weakens, "mafias" i.e. structured gangs, develop and thrive. In the absence of strong ethical constraints, if it is determined that it is cheaper to take rather than to sell or intimidate rather than market, strong arm techniques will replace normal commercial practices. The Market System would then become a Mafia System with warlords competing for economic territory. Even legitimate corporations will have to arm themselves to protect their property and their profits. In failed states such as some of the republics of the ex Soviet Union and in some countries of Africa and Asia, conditions are already rife for mafia economies.
                       
It must be noted that mafias must be seen not only as outlaw corporations with a CEO at their head but also as primitive governance structures establishing a new order. In fact many of the existing legitimate power structures began as primitive clans, establishing military superiority and then stabilizing into orderly dynasties. The legitimation of military dynasties has been a recurring feature of human history. The contemporary danger is that, as globalization proceeds unchecked and unregulated, the breakdown of the rule of law will lead to a global mafia economy ­ which will presumably bring a new order but not one that is particularly desirable or stable.
                       
Westphalia II?
                       
The dangers associated with a global governance entirely in the hands of non-state actors is the best argument in favour of reforming the present international system which, on analysis suggests is based on an antiquated system of distribution of sovereignty. To abandon sovereignty altogether would be a mistake because behind sovereignty lies democracy. By neutralizing sovereignty one also neutralizes democracy. But since national sovereignty, in its Westphalia I form is becoming obsolete, the task of the negotiators of a Westphalia II will be to redefine and redistribute sovereignty to make it both efficient and legitimate.
                       
The ultimate contours of Westphalia II cannot be guessed at this early stage but what can already be identified are the broad objectives of the negotiation:
                       
1. Promote a more Human Centred Globalization. Design systems and tools which will promote the spreading of prosperity in a win­-/-win fashion. This will involve reducing the gaps between winners and losers to acceptable levels and inventing compensation mechanisms to allow the benefits of economic expansion to accrue to all, in varying degrees.
                       
2. Establish an optimum balance between market based decisions (one dollar, one vote) and political decisions (in the noble sense of political). A determination will have to be made as to which activities should be decided by dollar votes (one dollar=one vote) by democratic election (one person = one vote), inter­state agreements (one state= one vote) and by the Old Westphalian criterion (one state = one veto).
                       
3. Redesign the notion of "sovereignty" itself in terms of (a) its sources and legitimacy and (b) the actual distribution of power between levels of government from the lowest (municipal) all the way to the highest (global) via the intermediate levels of regional, national and continental levels.
                       
4. Define new principles of enforceable international law which could be based on a minimum set of globally accepted values, such as democracy, human rights, the management of interdependence, the maintenance of cultural specificity etc. One of the most important consequences of this new international law could be the prevention of war as a means of settling disputes.
                       
5. Redesign the Multilateral System of IGOs to reflect these changes and be much more inclusive and representative that it is now. The hundreds of IGOs should be rationalized and restructured to reflect the new realities. In addition the creation of a coordinating IGO involving heads of government could be envisioned. At this stage the only effective IGO functioning at the summit level of heads of governments is the G­7. A much larger G­7 type organisation could be explored.
                       
Who is likely to negotiate Westphalia II? Ultimately of course the existing legitimate holders of power, i.e. the Westphalian national governments will have to sign an eventual Westphalia II. But we believe that it would be a mistake to attempt such negotiation in the existing IGOs without careful prior preparation through one or more pre-­negotiating forums. Intergovernmental organisations are not designed to support meaningful debate for the following reasons.
                       
First, their present architecture is haphazard and messy. There is no clear division of labor and significant overlaps. Sectoral interdependence means that trade ministers at the WTO, environmental ministers at the Climate Change meetings, central bankers at the IMF and World Bank meetings etc. tend to deal with linked issues. Trade has an impact on environment, investment codes on social policies, competitiveness on culture etc. As we have seen there is no summit level IGO other than the G­8 to deal with and arbitrate on questions of sectoral interdependence.
                       
Second even if a summit meeting of all the world's leaders were scheduled, the assembly would likely meet with failure. The absence (or at least the unsatisfactory representation) of the non-state actors would undermine the credibility and legitimacy of such a meeting. Since the WTO Seattle meetings in 1999 every intergovernmental conference on globalization has met with considerable dissent by the non-state actors purporting to represent civil society. The pre­negotiation forums should include, in some form or another,  all the relevant payers not just the governmental ones.
                       
Third, the very structure of the IGOs makes meaningful negotiation very difficult. Decision making in the IGOs is based on the Westphalian "sovereign equality" principle giving each state the same vote whether big or small, rich or poor. But sovereign equality not only means that Togo and the United States, Costa Rica and Japan have the same voting weight, it also means that they have the same veto. Since no sovereign country can be legally forced to accept decisions it has not consented to, the principal decision making procedure in the IGOs is "consensus" which means that any dissident state can impose a veto. This tends to make any radical restructuring almost impossible since the forces of inertia favor the status quo.
                       
Much more likely to succeed, are pre-negotiating forums of a semi-formal nature. What I mean by "semi­-formal" is a flexible structure which will bring together thinkers and actors. The thinkers coming from universities and leading edge think tanks could confront their views with actors from governments, corporations and civil society in a "club" type formula. One such initiative is the proposed "Club of Athens" piloted by a group of Canadian, European, American and Japanese opinion leaders. The Club would convene meetings of former heads of government and international organisations, CEOs of leading global corporations, labor leaders and representatives of Civil Society, supported by a permanent think tank of world class academics. The purpose of the Club would be to concoct scenarios for better 21st century global governance which would satisfy the double criterion of desirability and feasibility. The Think Tank would really be an "Action Tank" with the blue ribbon panel of actors giving Realpolitik validation to innovative thinking. (Side Note - this will never really happen, but hey! I can dream can't I?). The results of this or other similar pre-­negotiating forums could then be communicated to the world community and serve as an appropriate starting point for the negotiation of Westphalia II. The reference to Athens, in that particular initiative is an allusion to Plato's Republic which used Fifth Century Athens as its model. In a metaphorical sense, what we need to design is "Cosmopolis" or the Global Athens. Whether it is through a club or other formats a preparatory forum is obviously the first step in the fundamental reform of the world system. It is a necessary but by no means sufficient condition for ultimate success.

Of course, this organization, like ALL purpose-built organizations, will probably degenerate into a “Do Nothing” group engaged in the worst kind of mental masturbation and intellectual incest, and will have no REAL power at all. Think, a lot of ex-presidents, prime ministers, African warlords, etc. Think about this - how do you build an innovation-oriented business? So far, companies like Apple, Hewlett-Packard and General Electric have been happy accidents. How do you do it as a primary culture? On a global basis? No one knows...
                   
               
                       
Conclusions
                       
The US presidential election of 2000 revealed the dangers of relying on an electoral system designed in the eighteenth century to designate a president in 2001. At the heart of that crisis was the potential conflict between  the strengths and limitations of technology in counting votes and the influential role of media in influencing and distorting electoral results. The crisis also exposed the complexity in the distribution of power between state and federal authorities and between the legislative, executive and judicial branches of government. It also exposed the dangers of excessive decentralization of authority where no common standards exist and where the vagaries of vote counting in some local precincts could determine who would be President of the United States and the leader of the only global superpower.
                       
If it is anachronistic to elect presidents in 2001 using a system designed in the 1790s it is even more anachronistic to try and govern the world with a system conceived in 1648. In the 21st century the power of national governments to impose the rule of law is inversely proportional to transnational factor mobility. The more corporations, entrepreneurs and technology are geographically mobile, the smaller the influence of territory bound legislators in attempting to regulate them. As that mobility is likely to increase with the improvements of technology the nation­ based rules based system will wither and decline. It must be gradually replaced by something else. Obviously, we are not yet ready for a world government. But more effective and legitimate global governance, especially in the face of mounting interdependence is an urgent imperative. The search for such a system before painful and uncontrolled crises occur, is, in our view, the real millennium challenge. Let us just hope that it won't take a millennium to meet it…

(...to be continued. Someday…)