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by Jonathan Eyal

THE first summit of the World Trade Organisation ended last month in Singapore with smug satisfaction. The WTO now embraces more than 120 countries, all ostensibly committed to free trade. True, China and Russia are still not members, and some sectors, such as financial services and agriculture, remain highly regulated. But all member states have pledged to eliminate such snags, and trade across frontiers is now rising at four times the rate of growth in world gross domestic product.

Having been the cliche of academic conferences for decades, the age of the global economy is now a reality, and a very forceful one: foreign direct investment amounted to a staggering $315 billion in 1995, and is rising fast. Yet whatever was on the agenda at the WTO summit, one issue was studiously avoided: the problem of democratic control and accountability in such an interdependent international economy. The old institutions of the nation-state are decaying, yet international organisations can hardly fill the void. To make matters worse, leaders in every Western state pretend the problem does not exist -- despite evidence of a widespread, if unfocused, anxiety among all democracies.

The supposed end of the era of ideologies has reduced Western party politics to a petty bureaucratic squabble: since economic priorities now appear pre-ordained, the dispute is only about who is better suited to apply them. Britain's Conservatives are offering Thatcherism without Thatcher; their Labour counterparts are espousing conservatism without the Conservatives.

In the rest of Europe, the game is the same: while Germany's Chancellor Kohl or France's President Chirac are demanding sacrifices today in return for a promise of a glorious monetary union around the corner, their political opponents are merely offering the same monetary union with none of the pain. The electorate should be forgiven for disbelieving all of them, since it remains aware of only one tiny snag: although apparently God-given, current economic policies somehow do not deliver either the predictability or the prosperity to which they were accustomed in the past.

The world recession seems to be over, but EU unemployment is still rising, to 18 million today. Work re-training schemes operate everywhere, yet half of Europe's unemployed have been without a job for more than a year and so are probably unemployable. The British "economic miracle", now touted by the Government as an example for the entire continent, is based on the elimination of workers' rights, hardly a recipe for social stability. And, while everyone extols the virtues of free trade, few are prepared to accept that this means losing a job because someone in China or Korea can produce the same goods cheaper; economic theories about "comparative advantages" may be fine for erudite academics, but are useless as a political platform.

Politicians are in the business of purveying good news, and a conspiracy of silence is now sustained by both governments and oppositions. Everyone promises to preserve and even expand existing welfare entitlements, and every politician still pays lip service to the idea of a seemingly inexorable economic growth, which somehow will solve all contradictions.

The problem is that all Western leaders continue to derive their legitimacy from national elections but, in practice, they have little control over an economy that is truly global. Although not familiar with the intricacies of financial transactions, people everywhere are only too painfully aware of realities: those who affect their lives are usually unknown and unelected; those who ostensibly old political power prove unable to exercise it.

The obvious answer to intertwined economies could be provided by international institutions, such as the European Union. Yet the Union remains a bureaicratic construction founded on the premise that regulating the size of eggs (usually without even telling the hen) would gradually draw Europeans closer. It has a directly elected Parliament that decides very little, and a Commission that, although unelected, rules on most issues. Far from answering the needs of a global economy, the EU is merely replicating the internal problems of its member states on a grander scale.

And the start of monetary union will make matters worse. The European Central Bank will be ruled by a council composed of the governors of the continent's national bank, all unelected, and all legally independent of their governments. They, in turn, will elect an executive board, which will be responsible to itself. Instead of greater accountability, Europe will experience the new concept of "photocopy democracy": elected leaders will appoint bank governors who, in turn, appoint their representatives who, in turn, will make the real economic decisions for an entire continent. And, as with every copy of a photocopy, the text will become progressively less readable.

What would be the purpose of electing a national government if it could not decide on most financial matters? How would, say, Spanish workers react when they are dismissed from work because someone whose name they cannot even pronounce has decided in Frankfurt that their country's deficit is too large for their own good? No answer is provided: Britain's parties are ready to debate everything a out monetary union apart from the question of the Bank's control.

A good case can be made that free trade is inevitable: countries that tried to resist the trend have become considerably poorer as a result. The same may apply to European monetary union as well. The problem is, however, that no Western politician is courageous enough to give up the pretence that such trends can be controlled.

And not one of the West's leaders is ready to admit that the corollary of free trade in goods has been a free trade in politicians as well. The real rulers today are the chairmen of multi-media companies and multi-national institutions, not the humble ministers who spent what was, by all accounts, an agreeable time at the WTO gathering in Singapore.

Source -- The Guardian Weekly, Volume 156 Issue 3 for week ending January 19, 1997 "Conspiracy of silence on global economy" by Jonathan Eyal

  • see also World Trade, Jobs and the Environment.

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