reading response w6

Eleven MAKING THE WORLD

A BETTER PLACE

CHAPTER OUTLINE ‘The best of all possible worlds’? 355 TNCs and corporate social responsibility 357 ‘The business of business is business’ 357 Approaches to CSR 358 International CSR and GPNs 358 Types of code of conduct 361 How effective are codes of conduct? 362 States and issues of global governance 363 Global–national tensions 363 Regulating the global financial system 365 The established ‘architecture’ of the global financial system 365 Towards a new global financial architecture? 367 Regulating international trade 369 The evolution of world trade regulations 369 Battles within the WTO 371 Regulating TNCs 374 International guidelines and multilateral agreements 374 Dealing with problems of tax avoidance 375 Burning issues: global environmental regulation 378 The evolution of climate change initiatives 378 Where are we now? 379 A better world? 380 Alternative economies? 380 To be ‘globalized’ or not to be ‘globalized’: that is the question 383 Eradicating extreme poverty: the UN Millennium Development Project 384 Goals, aspirations and collective will 384 A moral imperative 387

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‘THE BEST OF ALL POSSIBLE WORLDS’?

As we have seen, the world has changed dramatically over the past several decades. It is, in very many ways, a different place. But is such a ‘globalized’ world a ‘better’ world? Voltaire, the eighteenth-century French writer, wrote a wonderful satirical novel, Candide, in which the eponymous hero lives in a world of immense suffer- ing and hardship, yet whose tutor, Dr Pangloss, insists that Candide’s world is ‘the best of all possible worlds, where everything is connected and arranged for the best’.1 Today, such a Panglossian view is held by those to whom an unfettered capi- talist market system – based on the unhindered flow of commodities, goods, ser- vices and investment capital – constitutes the ‘best of all possible worlds’. Although they might agree that globalization is a savage process, they also argue that it is a beneficial one, in which, they claim, the winners far outnumber the losers.2 But it is arguable that ‘now is the best time in history to be alive’.3

Certainly, there is considerable divergence in the views of ordinary people in different parts of the world. For example, a poll of 34,500 people in 34 countries, commissioned by the BBC World Service in 2008, concluded that

in 22 out of 34 countries around the world, the weight of opinion is that ‘economic globalization, including trade and investment’ is grow- ing too quickly … Related to this unease is an even stronger view that the benefits and burdens of ‘the economic developments of the last few years’ have not been shared fairly … In developed countries, those who have this view of unfairness are more likely to say that globaliza- tion is growing too quickly … In contrast, in some developing coun- tries, those who perceive such unfairness are more likely to say globalization is proceeding too slowly.4

There is, in fact, a highly differentiated geography of attitudes towards globalization.5

Without doubt, large numbers of people in the developed economies, and also in the rapidly growing economies of East Asia, have benefited from much increased material affluence: ‘The average person is about eight times richer than a century ago, nearly one billion people have been lifted out of poverty over the past two decades.’6 There has been immense growth in the production and con- sumption of goods and services and, through international trade, a huge increase in the variety of goods available. But the evidence discussed in Chapters 7 to 10 suggests a very different reality for a substantial proportion of the world’s popula- tion, not only in the poorest countries and regions, but also among certain sectors of the population in affluent countries, who have not benefited – or have bene- fited very little – from the overall rise in material well-being. The fact remains that there is vast inequality between the haves and the have-nots (or, as some have put it more ironically, between the ‘have-yachts’ and the ‘have-nots’). And that gap has been widening, despite the operation of precisely those globalizing processes that are supposed to create benefits for everybody. For many, insecurity has become the norm, much exacerbated by the impact of the 2008 financial crisis:

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Globalization increases objective and subjective insecurities among a great many workers and producers … different faces of economic globalization can be expected to have different implications for risk. For instance, some faces of globalization more than others are visible, direct, and palpable with respect to job risks – for instance, via threats of outsourcing by companies rather than via trade competition.7

What can or should be done? How can the world be made a better place for all, including those at the bottom of the heap? There is no simple answer. Choices are never unconstrained:

Our choices … are shaped by systems and structures over which we, as individuals, have no control. Economic, political, technological and social dynamics make some choices available and remove others from the table.8

We are all deeply embedded in specific contexts, structures and places and con- strained by our knowledge and resources. As we have seen, the map of such con- straints is immensely uneven; for many people, in many parts of the world, the exercise of choice is extremely limited. More broadly, of course, it depends on one’s political and ideological point of view. It is about values.9 It is about where we want to be. In terms of ‘making the world a better place’, one person’s ‘utopia’ is another person’s ‘dystopia’.

For example, GCSOs vary widely both in their agendas and in how these agendas are pursued: from vociferous, often violent, confrontation through to more reform- ist movements. Anti-capitalist groups advocate the replacement of the capitalist system,10 although precisely what the alternative should be varies between groups. For some, it would be a democratically elected world government; for others, a structure in which the means of production and distribution were controlled by a nationally elected government. For some, it would be a system of locally self- sufficient communities in which long-distance trade would be minimized. This is the position, for example, of the ‘deep green’ environmental groups. For some, the focus is on ‘fair’, rather than ‘free’, trade – although who decides what is ‘fair’ is a crucial issue. For the more nationalist–populist groups, and for some labour unions, the agenda is one of protecting domestic industries and jobs from external compe- tition (especially from developing countries) and restricting immigration. For some, the objective is removing the burden of debt from the world’s poorest countries or improving labour standards in the developing world (especially of child labour). The problem is that, very often, these agendas are contradictory.

Not surprisingly, GCSOs have themselves attracted considerable criticism from some quarters, questioning their legitimacy and, in some cases, their abilities to further economic and social development goals for the poor. Although the prolif- eration of GCSOs has ‘unquestionably projected the globalization debate into the

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popular political consciousness in important ways … the movements themselves have a severe democratic deficit: representing humanity ultimately requires legiti- mation through some sort of people’s mandate’.11 Nevertheless, GCSOs undoubt- edly force people – including politicians and business leaders – to recognize, and to engage with, the uncomfortable reality that both the benefits and the costs of globalization are very unevenly distributed and that there are severe and pressing problems that need resolution:

The advocatory movements of global civil society are the originators, advocates and judges of global values and norms. The way they create and hone this everyday, local and global awareness of values is by spark- ing public outrage and generating global public indignation over spec- tacular norm violations. This they do by focusing on individual cases.12

In fact, the major responsibility for making the world a better place lies with two dominant sets of actors/institutions: TNCs and states. The central argument of this book has been that, among the multiplicity of actors involved in the global economy, these two – whether in conflict or collaboration – are responsible for much of the shaping and reshaping of the global economic map. As such, they bear the primary responsibility for improving the lives and livelihoods of people throughout the world. For that reason they form the focus of the next two sections of this chapter. First, we will look at the role of TNCs in terms of their corporate social responsibility (CSR). Second, we will focus on states in the context of global governance issues.

TNCs AND CORPORATE SOCIAL RESPONSIBILITY

‘The business of business is business’ This statement, generally attributed to Milton Friedman, the free market econo- mist, implies that the primary purpose of firms is to maximize shareholder value. In other words, the only actors who matter are the shareholders (stockholders): the ultimate owners of the company. Everybody and everything else – employees, cus- tomers, suppliers, members of the communities in which the company’s facilities are located, the environment – are not the company’s direct concern. This is the ideology of business that dominates the USA and the UK economies in particular: the neo-liberal model of free market capitalism. It is demonstrated most clearly in the context of company takeovers, where the views of employees are usually ignored, even though they are much more directly engaged in the company than many of the shareholders (which are predominantly huge financial institutions for whom a firm is simply part of a broader portfolio), and have more at stake (their incomes and livelihoods). In fact, such a narrow view of business responsibilities

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is far from universal. In many European countries, for example, a broader concept of stakeholder capitalism exists in which other actors (‘stakeholders’, such as labour, consumers, suppliers) are explicitly recognized as having legitimate interests in business decisions.

Issues of corporate responsibility impinge on virtually all aspects of modern life and span the entire spectrum of relationships between firms, states and civil soci- ety.13 We cannot explore all of these. Instead we will concentrate on those aspects of CSR that have an explicitly international dimension.14

Approaches to CSR Rob van Tulder and his colleagues identify four approaches to CSR (Figure 11.1), each of which reflects different degrees of relationship to the social environment and to external stakeholders:15

•• Inactive CSR is essentially that embodied in the ‘business of business is business’ philosophy: ‘the only responsibility companies (can) have is to generate profits … no fundamental ethical questions are raised about what they are doing’ (p. 143).

•• Reactive CSR is slightly different: it ‘shares the focus on efficiency but with particular attention to not making any mistakes … entrepreneurs monitor their environment and manage their primary stakeholders so as to keep mounting issues in check … Entrepreneurs … respond specifically to actions of external actors that could damage their reputation’ (p. 143).

•• Active CSR ‘represents the most ethical entrepreneurial orientation. Entrepreneurs … are explicitly inspired by ethical values … on the basis of which company objectives are formulated. These objectives are subsequently realised in a socially responsible manner regardless of actual or potential social pressures by stakeholders’ (p. 145).

•• Proactive CSR occurs where an entrepreneur involves ‘external stakeholders right at the beginning of an issue’s life cycle’ (p. 145). It implies active and ongoing discussion with stakeholders: a ‘discourse ethics’ approach.

International CSR and GPNs As we have seen throughout this book, the production, distribution and consump- tion of goods and services are primarily organized within GPNs, usually controlled and coordinated by TNCs. Such networks raise hugely important questions, par- ticularly regarding relationships between lead firms and suppliers and the treatment of labour throughout the network. In Chapter 8, we discussed the developmental implications of involvement (or non-involvement) in GPNs for people and busi- nesses in local economies using the criterion of various types of upgrading. Of these, social upgrading relates specifically to work and labour standards. This includes a

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whole spectrum of social, economic and ethical issues, including pay, work condi- tions, occupational health and safety, and human rights. Questions of CSR, there- fore, are intrinsically involved in the operation of GPNs.16 We examine some specific examples in the cases of agro-food (Chapter 13) and clothing (Chapter 14).

The primary mechanism for attempting to ensure social upgrading in GPNs is the code of conduct. Such codes have proliferated to the extent that they often over- lap in highly confusing ways. In 2006, for example, it was estimated that there were around 10,000 different codes of labour practice.17 Two-thirds of the 100 largest firms in the world operated a code of conduct by the early 2000s.18 A major reason for such proliferation is the increased geographical extent and organizational complexity of GPNs:

Codifications are triggered by intrinsic motivations … [including] … the greater strategic need to coordinate and control the firm’s activities spread over a large number of countries and constituencies … This is often the area of ‘internal codes of conduct’ or ‘codes of ethics’. The strategic need for the formulation and implementation of external codes of conduct as a coordination mechanism becomes bigger when firms engage in sourcing out activities to dependent affiliates (off- shoring) or to independent suppliers (outsourcing) in developing countries, where the governance quality is often relatively low and the cultural and institutional distance … is relatively high. A large number of (procurement) codes thus addresses supply chain issues such as human rights, labour standards or the right to association … In this case firms have an incentive not only to formulate codes of conduct,

Pro/interactive

Corporate societal responsibility

‘Interactive duty’

In/outside–in/out

‘Doing the right things right’

‘Doing well by doing good’

Medium-term profitability and sustainability

Active

Corporate social responsibility

‘Positive duty’ or virtue based

Inside–out

‘Doing the right things’

‘Doing good’

Long-term profitability

Corporate self- responsibility

Inactive

‘Utilitarian’ legal compliance

Profit maximization

Inside–in

‘Doing things right’

‘Doing well’

Narrow

(internal) CSR

Economic

(wealth-oriented)

Broad

(external) CSR

Social

(welfare-oriented)

Scope

Nature of responsibility

Reactive

Corporate social responsiveness

‘Negative duty’

Outside–in

‘Don’t do things wrong’

‘Doing well and doing good’

Quarterly profits and market capitalization

Figure 11.1 Differing approaches to CSR

Source: based on van Tulder with van der Zwart, 2006: Table 8.1; van Tulder et al., 2009: Table I

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but also to implement them. Extrinsic motivations for [TNCs] are gaining in importance as well: the risk of reputation damage triggered by critical NGOs precipitates [TNCs] to formulate international codes of conduct or principles of ‘corporate citizenship’.19

Figure 11.2 sets out the different kinds of CSR supplier strategy associated with the four types of CSR discussed above (see Figure 11.1). The upper part of Figure 11.2 sets out the variations in supply chain relationships between different CSR positions; the lower part shows how codes of conduct strategy may vary. The codes are classified along two dimensions:20

•• Specificity includes ‘how many issues it covers, how focused it is, the extent to which it refers to international standards and guidelines, and to what extent aspects of the code are measured’ (p. 402).

•• Compliance ‘is generally enhanced by clear monitoring systems in place, com- bined with a more independent position of the monitoring agency and the possibility of these organizations to formulate and implement sanctions’ (p. 402).

Corporate self- responsibility

Inactive Reactive Active Pro/interactive

Corporate social responsiveness

Corporate social responsibility

Corporate societal responsibility

Price only. Strong competition for customers. Active use of power position in chain. Suppliers responsible for labour conditions.

Price and quality. Suppliers responsible for labour conditions.

Fair prices and high quality. Suppliers selected on basis of approach to e.g. labour conditions.

Joint responsibilities. Prices and quality set together. Definition of fair wages and labour conditions based on consultation and strategic dialogues.

CSR only if not too costly and does not mean higher purchasing prices.

Cost, control, risk aversion.

Below 5% CSR of purchases.

Buy

Global

Internal Specific supplier General supplier Joint/dialogues

Low Medium/high Medium/low High

Low Medium/low Medium/high High

Low Medium/low Medium/high High

Cost, control, quality.

Below 25% CSR of purchases.

Make or buy

Global

Control and quality.

Target of 25–60% CSR of purchases.

Make

Regional

Co-development and quality.

Target of 60–100% CSR of purchases.

Cooperate

Local

CSR only if needed and/or available and does not mean higher purchasing prices.

Upgrading according to own standards.

Upgrading according to joint and/or open standards.

Chain

liability

Chain

responsibility

Type of code

Specificity

Compliance

Implementation

Supply chain relationships

Codes of conduct strategy

Figure 11.2 Types of CSR strategy towards suppliers

Source: based on van Tulder et al., 2009: Table II; van Tulder, 2009: Table 4

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Firms positioned at the left-hand side of Figure 11.2 tend to opt (if they do so at all) for internal corporate codes or for codes drawn up in collaboration with other firms without prior dialogue with non-firm stakeholders. On the other hand, firms positioned towards the right-hand side of Figure 11.2 tend to participate in more open agreements with non-firm stakeholders. The pressure from GCSOs is to move as many firms as possible to that more open, cooperative position. Much will clearly depend upon the relative bargaining power of the participants as well as the ‘social conscience’ of firms. There has certainly been some movement. Even among the hard-line business-is-business community there is now a consid- erable (albeit often reluctant) recognition that companies do have broader social responsibilities.

Hence, there has been a rush to formulate corporate responsibility statements. Some of this may well be altruistic, in other cases mere self-interest. However, it is difficult to avoid the conclusion that a major catalyst for CSR has been the increasing pressure on TNCs to recognize their social responsibilities and to con- form to acceptable ethical standards.21 For example, there is no doubt that such pressures led to such leading companies as Apple and Nike to publish a list of their global suppliers in their CSR reports. This was an unprecedented step for compa- nies which had always been highly secretive about their supply networks.

Types of code of conduct There are four major types of code of conduct:

•• Codes devised by individual TNCs, or groups of TNCs, with no involvement of other stakeholders. Example: the Global Social Compliance Programme established by Wal-Mart, Tesco, Carrefour and Metro.

•• Codes drawn up by coalitions of interest groups in specific industries, such as clothing.22 Example: the Global Alliance for Workers and Communities involving Nike, and Gap, together with the World Bank and the International Youth Foundation.

•• Codes formulated by TNCs in association with some of their stakeholders. Examples: Global Framework Agreements (GFAs) between a TNC and a global labour union federation;23 the UK Ethical Trading Initiative (ETI), an alliance of companies, NGOs and labour unions.24

•• Codes established by international NGOs. Example: the UN Global Compact,25 which is based upon the ILO Declaration of Fundamental Principles and Rights to Work. Figure 11.3 sets out its 10 principles.

All such codes are, of course, the outcome of complex bargaining processes:

They need to be understood as part of a contradictory process, involv- ing collaboration and conflict between commercial and civil society actors, in which inherent tensions play out.26

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TNCs clearly have an interest in being seen as having a positive relationship with GCSOs, not least because it provides a ‘seal of approval’. GCSOs need to find ways of increasing their influence on TNC decision making. But there are problems for both of them in too cosy a relationship. In the final analysis, they have very different aims and objectives. But that need not mean that such collaboration is not worth pursuing.

How effective are codes of conduct? Are such codes mainly a cosmetic exercise? How fully are they implemented? How are they monitored? These are the questions commonly posed by critics, to which there are no unambiguous answers. Inevitably, there is a good deal of scepticism about voluntary codes, whether at the individual firm or collective level. This is not only because they are ‘voluntary’, but also because they are rather marginal in their scope and effect. Without some degree of compulsion – and the monitoring of compliance – there is always the danger that such codes will amount to little more than a gesture or that companies will be able to influence how the process works.

In one sense, of course, anything that contributes to better conditions for peo- ple and communities should be welcomed:

Whilst in themselves codes of labour practice are limited, they do have a role in wider strategies to promote economic and social rights of vulnerable workers. But they are not sufficient (nor have they aimed) to achieve more sustainable systems of global production that address inherent inequalities and poverty … The issue, therefore, is whether and how codes contribute to a wider process that promotes the rights of the most vulnerable workers.27

Human rights

Labour standards

Environment

Anti-corruption

Principle 1:

Principle 3:

Principle 7:

Principle 10:

Principle 8:

Principle 9:

Principle 2:

Principle 4:

Principle 5:

Principle 6:

Support and respect the protection of international human rights within their sphere of influence.

The freedom of association and the effective recognition of the right to collective bargaining.

Support a precautionary approach to environmental challenges.

Work against all forms of corruption, including extortion and bribery.

Undertake initiatives to promote greater environmental responsibility.

Encourage the development and diffusion of environmentally friendly technologies.

Make sure their own corporations are not complicit in human rights abuses.

The elimination of all forms of forced and compulsory labour.

The effective abolition of child labour.

The elimination of discrimination in respect of employment and occupation.

Figure 11.3 Principles of the UN Global Compact

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Very often, the impacts are mixed. For example, a study of the effects of the Ethical Trading Initiative (ETI) reached the following conclusions:

ETI company codes have had a positive impact in relation to certain code principles, particularly health and safety, documented minimum (not living) wages and employment benefits. Company codes were found to have had little or no impact on other code principles, par- ticularly freedom to join an independent trade union, collective bar- gaining and discrimination … In general, permanent and regular workers were found to have fared better from company codes of labour practice … [However] … whilst there had been positive impacts on regular workers, codes of labour practice were failing to reach more vulnerable casual, migrant and contract workers, many of whom were women.28

A detailed analysis of GFAs involving firms from the USA, Europe and Japan identified two important factors in how such codes of conduct tend to be implemented:29

•• The extent to which the various stakeholders participate in a code’s formula- tion. This tends to affect the likelihood of different levels of implementation and compliance, the nature of the codes themselves and the degree of com- promise involved.

•• A country of origin effect: ‘All Japanese firms scored low on both specificity and compliance, indicating inactive codes, whereas the only examples of high speci- ficity and compliance, i.e. active codes, could be found with European firms … The US companies fall somewhere in between and generally represent the re- active CSR strategy. The difference in approach between US and European companies is particularly remarkable, but could be largely explained by the big- ger involvement of stakeholders. The implementation likelihood of almost all European codes is higher than that of their American or Japanese counterparts.’30

Codes of conduct, therefore, are useful mechanisms in the progress to greater CSR. They are clearly better than nothing. But they are insufficient, not least because they are partial in terms of both their coverage and their essentially voluntary nature.

STATES AND ISSUES OF GLOBAL GOVERNANCE

Global–national tensions The world’s economy is global; its politics are national. This, in a nut- shell, is the dilemma of global governance.31

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While the world has become much more highly integrated economi- cally, the mechanisms for managing the system in a stable, sustainable way have lagged behind.32

Virtually the entire world economy is now a global capitalist market economy although, as we saw in Chapter 6, there are several variants. The collapse of the state social- ist systems at the end of the 1980s and the headlong rush to embrace the market, together with the more controlled opening up of the Chinese economy after 1979, created a very different global system from the one which emerged after the Second World War. The massive flows of goods, services and, especially, finance in its increasingly bewildering variety created a world whose rules of governance have not kept pace with such changes.

In Chapter 3 (see Figure 3.2), we noted the ‘thickening web’ of public and private institutions that make up the institutional macro-structures of the global economy. Now we focus on the core institutions, a mixture of bodies established in different circumstances, and at different times, in the seven decades since the end of the Second World War. They consist of widely differing memberships (Figure 11.4), with widely different methods of reaching agreement. Many of them – especially those set up in the immediate aftermath of the war, like the IMF and the World Bank – have power structures and sets of rules that were put in place in a very different world. Essentially, they reflect the prevailing dominance of the Western nations, most notably the USA and the bigger European nations. Since then, of course, while the world has changed dramatically the global institu- tions have seriously lagged behind this new reality. The various ‘G groups’, espe- cially the G7 and G8, are totally unrepresentative of today’s world. Only very recently has the voice of some of the growing developing countries been accom- modated through the emergence of the G20. The significance of the G20 lies in its much wider membership, especially the involvement of developing countries.

These global governance institutions reflect intricate bargaining, based upon asymmetrical power configurations within and between member institutions, in

W TO International

standards organizations

UN IMF World Bank

EU

G8

G20

G7

Russia Germany

Brazil

Turkey

Italy

Argentina

Saudi Arabia

UK

South Africa

France

India

Mexico

US

Indonesia

South Korea

Canada

Australia

China

Japan

Figure 11.4 The core of global governance institutions

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which the exercise of ‘soft’ power predominates.33 Such bargaining involves very much more than just states. It is a

multi-actor process among NGOs, states, firms, and international organ- izations. Indeed, even states may be represented by multiple authorities, such as departments of environment and state, with conflicting interests … Organizations representing labor, environmentalists, scientists and other elements of civil society have been particularly active in negotia- tions over environmental regimes … Even when not seated directly at the negotiating table, activist groups have exerted considerable influence through street demonstrations and through the disseminations of infor- mation … Thus firms and governments exert less control over the bar- gaining process, and bargain outcomes are more uncertain.34

In what follows, we focus specifically on the global scale of governance and regula- tion in four of the most important and most contentious areas:

•• international finance •• international trade •• TNCs •• the environment.

Regulating the global financial system

The established ‘architecture’ of the global financial system The regulatory ‘architecture’ of the modern global financial system came into being formally at an international conference at Bretton Woods, New Hampshire, in 1944. Two international financial institutions were created: the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (later renamed the World Bank). The IMF’s primary purpose was to encourage international monetary cooperation between nations through a set of rules for world payments and currencies. Each member nation contributes to the fund (a quota) and voting rights are proportional to the size of a nation’s quota. A major function of the IMF has been to aid member states in temporary balance of pay- ments difficulties. A country can obtain foreign exchange from the IMF in return for its own currency, which is deposited with the IMF. A condition of such aid is IMF supervision or advice on the necessary corrective policies – the condi- tionality requirement. The World Bank’s role is to facilitate development through capital investment. Its initial focus was Europe in the immediate post-war period. Subsequently, its attention shifted to the developing economies.

The primary objective of Bretton Woods was to stabilize and regulate interna- tional financial transactions between nations on the basis of fixed currency exchange

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rates, in which the US dollar played the central role. In this way it was hoped to provide the necessary financial ‘lubricant’ for a reconstructed world economy. However, through a whole series of developments, the relatively stable basis of the Bretton Woods system was progressively undermined, particularly after the early 1970s. In effect, a state-led system was transformed into a market-led system.35

What we do not have, therefore, is a comprehensive and integrated global sys- tem of governance of the financial system. Instead, there are various areas of regu- lation performed by different bodies, each of which is nationally, rather than globally, based. For example:

•• The ‘G’ groups (e.g. G7, G8 and, recently, G20) take an overall view of the monetary, fiscal and exchange rate relationships between themselves. The ‘G’ groups have no real institutional base; they are informal arrangements struc- tured around periodic summits of national leaders.

•• The international payments system is operated through the national central banks rather than through an international central bank.

•• The supervision of financial institutions is carried out through the Bank for International Settlements (BIS), established in 1975. The Basel II Accord (cur- rently being replaced by Basel III) sets out standards of banking supervision but their implementation is down to national governments, and not all govern- ments follow these standards.

Within such a lightly regulated financial system, developing countries are particu- larly vulnerable to the volatilities of global capital flows. Indeed, one of the major weaknesses of the various reforms to the global financial architecture following the breakdown of the Bretton Woods system was that they maintained a separation between the problems facing developed countries and those facing developing countries, instead of seeing them as inextricably linked. In fact, the IMF/World Bank’s conditionality ‘medicine’ often made the patient worse rather than better. By imposing massive financial stringency on countries in difficulty – including raising domestic interest rates, insisting on increased openness of the domestic economy, reducing social spending, and the like – it became extremely difficult for countries to help themselves out of difficulty:

Conditionality, at least in the manner and extent to which it has been used by the IMF, is a bad idea; there is little evidence that it leads to improved economic policy, but it does have adverse political effects because countries resent having conditions imposed on them … In some cases it even reduced the likelihood of repayment.36

In the absence of a more coordinated and institutionalized system, the global financial system could easily spiral out of control. Indeed, this is what appeared to be happening following the East Asian financial crisis of 1997, with its subsequent spillover effects

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on countries like Russia and Brazil. There was particular concern over the volatile nature of global capital flows in terms of their impact on both the financial system itself and the individual countries and their populations most seriously affected by unpredictable flows of ‘hot money’. To many observers, especially in the West, the causes of the 1997 East Asian crisis lay in structures and practices inside the affected countries (including so-called ‘crony capitalism’). The remedy was obvious: apply the usual ‘Washington Consensus’ formula in which all answers lie in the unfettered operation of markets and in the conditionality applied to financial assistance. In fact, the major (though not the only) cause of the East Asian crisis was to be found in flows of speculative capital into (and then out of) the region. It also transpired that corrupt financial practices were by no means unique to East Asia. The collapse of two massive US companies, LTCM and Enron, in 2000–1, demonstrated this in graphic terms.

Not surprisingly, there were calls for a new, or reformed, financial architecture to ensure that a similar crisis could not recur. In fact, very little happened. It was back to business as usual and the further headlong growth and diversification of finan- cial markets and esoteric financial products (see Figure 16.5). From a broad devel- opmental viewpoint, the problem still remained that

the global financial market is heavily dominated by financial interests in the industrialized countries. The governments of these countries, especially the economically strongest, determine the rules governing the market through their influence on the IFIs [International Financial Institutions]. These latter institutions in turn exercise great leverage over the macroeconomic and financial policies of developing countries. At the same time, the banks and financial houses from these same countries enjoy tremendous market power within the global financial system. The system is also characterized by severe market failures and is unstable. The upshot of all this is that most of the risks and the negative consequences of financial instability have been borne by the middle- income countries, currently the weakest players in the system.37

Ten years after the East Asian crisis, the much bigger – and potentially catastrophic – financial crisis of 2008 erupted. This time it could not be argued that the causes lay in ‘inefficient’ or ‘corrupt’ markets in developing countries. The origins of the much bigger 2008 financial crisis lay in the very heart of the ‘Washington Consensus’. The much lauded, solely market-driven, financial system did not work. This time, it has to be fixed or, rather, replaced. The discrediting of the existing, very lightly regulated, financial system means that, this time, new solutions have to be found.

Towards a new global financial architecture? It is too early to say what kind of new financial architecture will emerge or how stable it will be. What we can say is that the immediate response of national gov- ernments to the 2008 crisis was quite impressive, in the sense that total financial

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meltdown was avoided. All governments implemented short-term rescue packages for their own financial sectors. But what about the bigger – global – picture?

Potentially, the most important development has been the emergence of the G20 as the central focus of attempts to build a reformed global financial system. The G20 was created in 1999 in the aftermath of the East Asian crisis but it was not until 2007 that it came to real prominence when the G20 finance ministers agreed to pump liquidity into financial markets at the beginning of the global financial crisis. In subsequent meetings in 2008 and 2009, the G20 was at the centre of initiatives to deal with the crisis. At its London summit in April 2009, $500 billion was committed to refinance the IMF; at the Pittsburgh summit in September 2009, the national leaders agreed to expand the G20’s role, placing it at the centre of international economic policy making. Figure 11.5 outlines the major aspects of the G20’s proposed global financial reform programme.

Financial regulation

Implement higher global standards consistently to ensure a level playing field and avoid fragmentation of markets, protectionism and regulatory arbitrage.

Establish Financial Stability Board (FSB)

Includes all G20 countries, plus Spain and the EC with strengthened mandate to promote financial stability, enhance openness and transparency of the financial sector, implement international financial standards.

International cooperation

Collaborate with IMF to conduct early warning exercises of potential macroeconomic and financial risks. Home authorities of each major financial institution should ensure that the group of authorities with a common interest in that financial institution meets at least annually. Systemically important financial firms should develop internationally-consistent firm-specific contingency and resolution plans. Establish supervisory colleges for significant cross-border firms. Advanced economies, the IMF and other international organizations should provide capacity-building programmes for emerging market economies and developing countries on the formulation and implementation of new major regulations, consistent with international standards.

Prudential regulation

Raise the quality, consistency and transparency of the Tier 1 capital base. Require banks to build buffers of resources in good times that they can draw on when conditions deteriorate. Level of capital in the banking system to be raised relative to pre-crisis levels. All major G20 countries to adopt the Basel II capital framework. Financial institutions should provide enhanced risk disclosures in all their reporting.

Compensation Align compensation with long-term value-creation, not excessive risk-taking by (i) avoiding multi-year guaranteed bonuses; (ii) requiring a significant portion of variable compensation to be deferred, tied to performance and subject to appropriate clawback; (iii) making firms’ compensation policies transparent through disclosure requirements; (iv) ensure compensation committees can act independently.

Area Purpose

Figure 11.5 Examples of measures proposed by the G20 to reform the global financial system

Source: based on Progress Report on the Actions to Promote Financial Regulatory Reform, www.g20.org

How far have these, and other, reforms progressed? The report by the G20 Financial Stability Board (FSB) in late 2013 showed that some progress has been made but that there is still a long way to go.38 Among areas where reform is urgently needed are the following:

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•• A restriction on the overall size of banks, in particular ending the ‘too big to fail’ situation in which taxpayers have to pick up the bill for failure.

•• Separating the ‘utility’ and ‘casino’ functions of banks to prevent cross-contam- ination from the risky speculative activities (like hedge and private equity funds) to those activities needed to finance the ‘real’ economy. This harks back, at least in spirit, to the US Glass–Steagall Act of 1933 (see Chapter 16).

•• Limiting the size of bonuses paid to bankers. There has been universal condem- nation of the obscene sums derived from those financial activities described as ‘socially useless’ by the chair of the UK’s Financial Services Authority.

•• Dealing with the risks posed by ‘shadow banking’: institutions which perform some of the roles traditionally performed by banks, but are outside regulatory control.

There are, of course, many other possibilities for reform. One is the imposition of a small tax on every financial transaction: the so-called ‘Tobin tax’, first proposed by James Tobin in the 1970s, with the aim of ‘throwing some sand in the wheels of cross-border financial transactions’. The idea was to discourage excessive flows of ‘hot’ money: short-term capital flows which can so easily destabilize financial systems, especially of weaker countries. In its present form it is seen as a way of raising capital for broader developmental purposes:

A small global tax on financial transactions (say on the order of one tenth of 1 per cent) would generate tens of billions of dollars to address global challenges such as climate change or health pandemics at little economic cost.39

Of course, substantial reform of the global financial system can only happen with the consent of states themselves. One of the lessons of the post-2008 crisis is that, once the immediate crisis seems to have passed (it has not), then the tendency to adopt parochial positions tends to return. Narrow, short-term national political agendas too often prevail over longer-term global needs.

Regulating international trade

The evolution of world trade regulations Compared with the international financial system, the governance of interna- tional trade is much clearer (though just as controversial).40 In 1947, the General Agreement on Tariffs and Trade (GATT) was established as the third international institution formed in the aftermath of the Second World War, along with the IMF and the World Bank – completing what some have called the ‘unholy trinity.’41 Establishment of the GATT reflected the view that the ‘beggar-my-neighbour’ protectionist policies of the 1930s should not be allowed to recur. The objective

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was to be ‘free’ trade based upon the principle of comparative advantage, first intro- duced by David Ricardo in 1817. This states that a country (or any geographical area) should specialize in producing and exporting those products in which it has a comparative or relative cost advantage compared with other countries and should import those goods in which it has a comparative disadvantage. Out of such spe- cialization, it is argued, will accrue greater benefit for all.

Whether or not there is such a thing as ‘free’ trade is highly debatable. In order to work, it needs some degree of equality between trading partners and this, as we have seen, at the global scale simply does not exist. The purpose of the GATT was to create a set of multilateral rules to facilitate free trade through the reduction of tariff barriers and other types of trade discrimination. The GATT was eventually replaced by the WTO in 1995, an institutional change which greatly broadened the remit of the trade regulator. Today, there are 159 member states in the WTO (Russia having joined in 2012) and around 97 per cent of world trade is covered by the WTO framework. Figure 11.6 traces its evolution.

W TOGAT T

Length of round

0 0

10 40

20 80

A v

e ra

g e

ta ri

ff (p

e r

c e

n t)

N u

m b

e r

o f

m e

m b

e rs

30 120

40 160

1940 1950 1960 1970 1980 1990 2000 2010

Geneva

Annecy Geneva Kennedy

Torquay Dillon Tokyo Uruguay Doha

‘Bali package’

Tariffs

Tariffs Tariffs Tariffs Anti-dumping

measures

Tariffs Tariffs Tariffs Non-tariff

barriers (NTBs) Specific ‘framework’

agreements

Tariffs NTBs Agriculture, textiles, clothing Services (GATS) Intellectual property (TRIPs) Trade-related investment (TRIMs) Creation of WTO

“Development round”

(1947–48)

(1949) (1955–56) (1963–67)

(1950–51) (1960 61)� (1973–79) (1986–94) (2001–)

(2013)

Figure 11.6 Evolution of the international trade regulatory framework: from the GATT to the WTO

Since 1947 there have been nine ‘rounds’ of multilateral trade negotiations, including the current Doha Round, initiated in 2001 and still not completed. Prior

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to the mid-1960s, the GATT was mostly concerned with trade of manufactures between developed nations. As a result, widespread dissatisfaction emerged among developing countries. A particularly sensitive issue was the lack of access of develop- ing country exports to developed country markets. Pressure led, in 1965, to the adoption within the GATT of a generalized system of preferences (GSP) under which exports of manufactured and semi-manufactured goods from developing countries were granted preferential access to developed country markets. In fact, there were a number of exclusions from the GSP, of which one of the most impor- tant was textiles and clothing (separately regulated under the MFA: see Chapter 14).

As Figure 11.6 shows, the first seven GATT rounds were both quite brief and also very limited in scope. It was the Uruguay Round, started in 1986 and eventually concluded in 1994, which constituted the most ambitious and wide ranging of all the GATT rounds to that point. For the first time, several additional trade issues were addressed. Notably, agriculture, textiles and clothing were brought into the GATT, and special agreements were concluded in services (GATS – the General Agreement on Trade in Services), intellectual property (TRIPS – Trade-Related Aspects of Intellectual Property Rights), and investment (TRIMS – Trade-Related Investment Measures). There was a further large reduction in overall tariff levels. The major organizational change was the creation of a new world trade organization.

The WTO, like the GATT, constitutes a rule-oriented approach to multilateral trade cooperation:

Rule-oriented approaches focus not on outcomes, but on the rules of the game, and involve agreements on the level of trade barriers that are permitted as well as attempts to establish the general conditions of competition facing foreign producers in export markets.42

The fundamental basis is that of non-discrimination, based upon two provisions:

•• The most-favoured nation (MFN) principle states that a trade concession negoti- ated between two countries must also apply to all other countries; all must be treated in the same way. The MFN principle is ‘one of the pillars of the GATT’ and ‘applies unconditionally, the only major exception being if a subset of Members form a free-trade area or a customs union or grant preferential access to developing countries’.43

•• The national treatment rule requires that imported foreign goods are treated in the same way as domestic goods.

Battles within the WTO The WTO continues to be widely criticised from many directions and from interest groups in both developed and developing countries.44 For example, uni- lateralist groups within the USA tend to regard the WTO as a basic infringe- ment of the country’s national sovereignty. Among developing countries there

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is resentment over what is regarded as the bullying and unfair behaviour of the powerful industrialized countries. To the anti-globalization protestors, the WTO is regarded as an undemocratic institution acting primarily in the interests of global corporations.

In one sense, in fact, the WTO is a far more democratic organization than the IMF. Whereas in the IMF the voting system is ‘weighted’, so that the more power- ful states have a greater share of the vote, in the WTO each of the 159 member states has an equal vote. However, the position is not as straightforward as it seems. Decisions in the WTO are arrived at through negotiation in formal and informal meetings and through consensus, rather than by vote. Such processes depend heavily on the resources available to countries to lobby and exert influence:

Most small delegations from developing countries do not have the appropriate resources either in Geneva or at home to service the increasingly frequent, complex, and resource-intensive negotiation process at the WTO …

However, knowledge and resources are not enough for all countries to be effective in WTO negotiations. An important reality is that the WTO rules do not entirely remove the inequality in the power of nations. It remains the case that countries with big markets have a greater ability than countries with small markets to secure market access and to deter actions against their exporters.45

Two especially important sources of tension within the WTO relate to labour standards and the environment. How far do international differences in labour standards and regulations (such as the use of child labour, poor health and safety conditions, repression of labour unions and workers’ rights) and in environmen- tal standards and regulations (such as industrial pollution, the unsafe use of toxic materials in production processes) distort the trading system and create unfair advantages?

Several countries, led primarily by the USA but also including some European countries, have attempted to incorporate the issue of labour standards into the WTO. The attempt has failed, partly because not all industrialized countries sup- port it, but also because developing countries are vehemently opposed. The argu- ment of those opposed to its inclusion within the WTO’s remit is that labour standards are the responsibility of the ILO. Indeed, all members of the ILO have agreed to a set of core principles. The counter-argument is that the ILO lacks any powers of enforcement. It is also notable that the USA, despite its current position on including labour standards in trade agreements, has not signed up to several of the ILO’s core labour conventions, arguing that they do not comply with US law.

Similar questions apply to the relationship between trade regulations and the environment. To what extent should variations in environmental standards be incorporated into international trade regulations? At one level, the problem is exactly the same as that of labour standards. If a country allows lax environmental

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standards, it is argued, then it should not be able to use what is, in effect, a subsidy on firms located there to be able to sell its products more cheaply on the inter- national market. The question then becomes one of whether the solution lies in using international trade regulations or in some other forms of regulation.

These labour and environmental questions posed by some developed countries arose in the aftermath of the Uruguay Round in the mid-1990s. But three- quarters of the WTO’s membership consists of developing countries. They face, as we have seen in Chapter 10, immense economic and social problems. The Uruguay Round helped them in some respects but created major difficulties in others. In particular,

of the three big agreements coming out of the Uruguay Round – on investment measures (TRIMS), trade in services (GATS), and intel- lectual property rights (TRIPS) – the first two limit the authority of developing country governments to constrain the choices of compa- nies operating in their territory, while the third requires the govern- ments to enforce rigorous property rights of foreign (generally Western) firms. Together, the agreements make comprehensively ille- gal many of the industrial policy instruments used in the successful East Asian developers to nurture their own industrial and technologi- cal capacities.46

In November 1999, a WTO meeting was held in Seattle to try to initiate a new round of trade negotiations. The meeting failed, not so much because of the anti- WTO/anti-globalization protests, but, as the UN Secretary-General, Kofi Annan, argued, because it failed to initiate a

‘development round’ that would at last deliver to the developing countries the benefits they have so often been promised from free trade, instead … [we] … saw governments – particularly those of the world’s leading economic powers – unable to agree on their priorities. As a result, no round was launched at all.47

It was not until the end of 2001 that a new global trade round was announced at Doha in Qatar, with the official title of the ‘Doha Development Agenda’, to be concluded by 2004. It has effectively failed. The Doha Round has been possibly even more acrimonious than the Uruguay Round.48 Deadlines have been missed with (un)impressive regularity. A ‘make or break’ Ministerial Meeting at Cancún in 2003 collapsed without producing any significant results. Subsequent meetings in Hong Kong (2005) and Geneva (2006, 2008) made very little progress.

The G20 has committed ‘to reaching an ambitious and balanced conclusion to the Doha Development Round’ noting that it is ‘urgently needed’. But whether such rhetoric will make a difference is far from clear. The G20 also reaffirmed its

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commitment not to raise new barriers to trade. However, 17 of the 20 G20 members introduced some kind of trade protectionist measure in 2008–9.49 A further compli- cation is the resurgence of regional and bilateral trade negotiations outside the WTO, such as the proposed Transatlantic Trade and Investment Partnership and the Trans- Pacific Partnership (see Chapter 6). These call into question the willingness of some leading states to participate in the multilateral framework that is the WTO.

In late 2013, at a WTO meeting in Bali, an agreement was reached claiming to be ‘worth’ $1 trillion in global benefits. This is to be achieved primarily through ‘trade facilitation’: simplifying cross-border procedures to reduce costs and delays. There is also agreement to ‘give improved terms of trade to the poorest countries, and offer developing countries leeway to bypass the normal rules on farm subsi- dies to feed the poor’.50 In fact, the so-called ‘Bali package’ in no way completes the Doha Round; it is more symbolic than substantive (‘Doha lite’ it has been called). The need for a comprehensive trade and development agreement remains as urgent as ever.

Regulating TNCs

International guidelines and multilateral agreements In the case of FDI and TNCs there is no international body comparable to the WTO, although the Uruguay Round included a set of trade-related investment meas- ures (TRIMS). Within this framework, some of the industrialized countries, led by the USA, wish to prohibit or restrict a number of the measures listed in Figure 6.9, notably local content rules, export performance requirements, and the like. TRIMS’ advocates argue that such measures restrict or distort trade. Its opponents see such measures as essential elements of their economic development strate- gies. They, in turn, wish to see a tightening of the regulations against the restric- tive business practices of TNCs. Similarly, organized labour groups are generally opposed to measures that they feel will increase the ability of TNCs to affect workers’ interests or to switch their operations from country to country.

In fact, there is a lengthy history of attempts to introduce an international framework relating to FDI and TNCs (apart from those agreed bilaterally or within the context of regional trade blocs):51

•• OECD Guidelines for Multinational Enterprises (first introduced in 1976). •• ILO Tripartite Declaration of Principles Concerning Multinational Enterprises

and Social Policy (1977). •• UN Code of Conduct for Transnational Corporations (initiated in 1982, aban-

doned in 1992). •• OECD Multilateral Agreement on Investment (MAI). The most recent

attempt launched in the mid-1990s. Its main provisions were:

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� Countries were to open up all sectors of the economy to foreign invest- ment or ownership (the ability to exempt key sectors in the national interest was to be removed).

� Foreign firms were to be treated in exactly the same manner as domestic firms.

� Performance requirements (e.g. local content requirements) were to be removed.

� Capital movements (including profits) were to be unrestricted. � A dispute resolution process would enable foreign firms to be able to sue

governments for damages if they felt that local rules violated MAI rules. � All states were to comply with the MAI.

Not surprisingly, the MAI generated a huge amount of opposition and was even- tually blocked. Opposition was drawn from a very broad spectrum indeed, across both developed and developing countries:

The choice of the OECD as the venue for the negotiations was a seri- ous mistake because the OECD is a rich-country club and many LDCs were excluded from the discussions; why would LDCs accept an agree- ment that they had no part in formulating and that protected the inter- ests of [T]NCs? Even many OECD countries objected to rules that would harm their own interests … Labor and environmentalists objected that MAI would give [T]NCs license to disregard workers’ interests and pollute the environment. Many critics charged that no protection was provided against the evils committed by [T]NCs. Even official American enthusiasm cooled when people realized that the MAI dispute mechanism could be used against the US and its [T]NCs.52

The major dilemma in any attempt to establish a global regulatory framework for FDI and TNCs is the sharp conflict of interest inherent in the process involving TNCs, states, labour groups and CSOs. Should the focus be on regulating the conduct of TNCs (the viewpoint of most developing countries, some developed countries, labour and environmental groups) or should it be concerned with the protection of TNCs’ interests? Both TRIMS and the aborted MAI were stacked in favour of TNCs.

Dealing with problems of tax avoidance Today, as we saw in Chapter 7, there is particular concern over tax avoidance by TNCs, especially through the practices of transfer pricing and establishing shell operations in lower-tax countries. Through such means, TNCs are able to manipu- late their international tax liabilities and, hence, to deprive states (and their taxpay- ers) of legitimate revenue (see Figures 7.5 and 7.6). As a result, a variety of possible tax reforms have been put forward. One proposal is for a system of unitary taxation:

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Unitary taxation … does not allow the TNC to be taxed as if it were a collection of separate entities in different jurisdictions, but instead treats a TNC engaged in a unified business as a single entity, requiring it to submit a single set of worldwide consolidated accounts in each country where it has a business presence, then apportioning the over- all global profit to the various countries according to a weighted formula reflecting its genuine economic presence in each country. Each country involved sees the combined report and can then tax its portion of the global profits at its own rate.53

However, the kind of international regulatory framework needed for such reforms certainly does not exist at present. But pressure is certainly building. Within the EU, for example, the European Commission is investigating the tax arrangements of countries such as Ireland, Luxembourg and the Netherlands. More broadly, the Commission is aiming to deal with so-called ‘hybrid tax schemes’ which exploit ‘mismatches between different countries’ tax systems that allow companies to minimise tax using hybrid instruments such as convertible preference shares or profit participating loans, which are treated as equity in some countries and debt in others’.54

But there is still a long way to go before a coherent international regulatory system is in place. In response to a request from the G20, the OECD in 2013 proposed a series of measures to address some of the most egregious interna- tional tax avoidance practices: for example, those relating to transfer pricing, the digital economy, rules on foreign-controlled companies, including the issue of ‘permanent establishment status’ (whereby companies claim non-residentiary status for their operations). The OECD’s 15-point ‘action plan’55 aims to ‘give governments the domestic and international instruments to prevent corpora- tions from paying little or no taxes’. As such, it at least represents a potential step towards dealing with the very serious problems arising from the tax avoidance practices of TNCs.

There is clearly an urgent need to deal with the problem of offshore financial centres (OFCs), which operate as tax havens (not only for TNCs but also for very wealthy individuals). They attract investors through their low tax levels and ‘light’ regulatory regimes.56 For example, although hundreds of banks are apparently located in countries such as the Cayman Islands, only a few actually have a phys- ical presence there. Most are little more than ‘a brass or plastic name plate in the lobby of another bank, as a folder in a filing cabinet or an entry in a computer system’.57 Similarly, although there were roughly 300,000 companies registered in the Virgin Islands in the early 2000s, ‘only 9,000 of them show any signs of activ- ity locally’:58 ‘The Netherlands has about 23,000 “letterbox companies”, managed by 176 licensed trust firms … [which] attract huge flows of money through the Netherlands, making €8tn worth of transactions in 2011–13 times its gross domestic product.’59

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Figure 11.7 shows the geographical distribution of offshore financial centres. Each tends to fill a specific niche which it exploits in competition with other centres in the same geographical cluster and with similar niche centres elsewhere in the world. Much of their growth occurred in the 1970s, in places that were already operating as tax havens, to act as banks’ ‘booking centres’ for their eurocur- rency transactions:

By operating offshore booking centres international banks could act free of reserve requirements and other regulations. Offshore branches could also be used as profit centres (from which profits may be repat- riated at the most suitable moment for tax minimization) and as bases from which to serve the needs of multinational corporate clients.60

The location of these offshore centres, and especially their geographical clustering, is partly determined by time zones and the need for 24-hour financial trading.

There is now an intensifying international drive to crack down on offshore tax havens. Such action was initiated by the OECD but has been followed by specific actions by the USA, UK and other European governments.61 For example:

•• In 2013, the UK made an agreement with 10 British protectorate territories, including Bermuda, the British Virgin Islands, the Cayman Islands, Jersey, Guernsey and the Isle of Man to establish a register of the owners of founda- tions, trusts and shell firms in their jurisdictions.

•• In 2010, the USA introduced a new law – the Foreign Accounts Tax Compliance Act – to force foreign bank accounts to declare assets held by US citizens.

Vanuatu

US Virgin Is. Turks & Caicos Is.

Switzerland

Singapore

Seychelles

San Marino

Samoa St. Vincent & the Grenadines

St. LuciaSt. Kitts & Nevis

Panama

Niue

Netherlands Antilles

Nauru

Montserrat

Monaco

Mauritius

Marshall Is. Malta Macao

Liechtenstein

Liberia

Lebanon

Jersey

Isle of Man

Hong Kong

Guernsey, Sark & Alderney

Grenada

Gibraltar

Dominica

Cyprus

Cook Is.

Cayman Is.

British Virgin Is.

Bermuda

Belize

Barbados

Bahrain Bahamas

Aruba Antigua

Anguilla

Andorra

0 33 66 9912 12 Hours difference from Greenwich Mean Time

Figure 11.7 The geography of offshore financial centres

Source: based on OECD data

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•• The Dutch government announced its intention ‘to crack down on the use of so-called “letterbox companies”, which do no real business in the country and exist largely for tax purposes’.62

•• The EU is ‘to create one of the toughest tax transparency regimes in the world by passing a Savings Tax Law by the end of the year’.

These initiatives reflect the fact that astronomical tax losses are being incurred as firms and individuals hide their profits offshore. The EU Tax Commissioner claimed that the scale of the problem involves about €1 trillion.

But it is not only developed countries that are affected by offshore tax havens. Oxfam estimated that developing countries are losing out on annual income of up to $124 billion because more than $6 trillion of developing country wealth is held in offshore accounts.63 The Tax Justice Network claims that ‘in tax revenue alone, at least $100billion was lost from developing countries through insufficient international tax policies’.64

Burning issues: global environmental regulation As we saw in Chapter 9, the processes of production, distribution and consump- tion, articulated within and through GPNs, have the potential to create enormous and long-lasting environmental damage. And yet, compared with finance and trade regulation, there were few systematic attempts to build an appropriate global regu- latory structure for the environment until the late 1980s.65 Today, of course, envi- ronmental issues, and especially climate change, have become one of the (literally) hottest and most contentious policy issues of all – a veritable minefield, politically, economically and scientifically.

The evolution of climate change initiatives From the outset, the UN has been at the centre of global climate change initiatives, beginning with its decision in 1968 to convene the 1972 Stockholm Conference on the Human Environment. This stimulated the setting up of national environ- mental agencies in most developed, and some developing, countries.66

In 1988, the UN established what was to become the scientific core of its envi- ronmental programme: the Intergovernmental Panel on Climate Change (IPCC). The first IPCC Assessment Report was published in 1990 and this formed the basis of the first comprehensive policy on climate change: the 1992 Framework Convention on Climate Change (FCCC). A key objective of the FCCC was to achieve

the stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.67

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The FCCC was based upon voluntary reduction of carbon dioxide levels: it merely ‘encouraged industrialized countries to stabilize GHG emissions’.

Its (not surprising) lack of success led, in 1997, to the drafting of the Kyoto Protocol. In contrast to the FCCC, Kyoto incorporated binding emission targets over the period 2008–12 for 37 developed countries, based on 1990 levels. The Protocol came into force in 2005; 184 countries (excluding, most significantly, the USA) were signatories. After the Kyoto Protocol was finally ratified, there was much argument among the signatories and, with the USA, over the details of climate change regulation. In December 2005, the UN Conference in Montreal agreed the following measures:

•• To strengthen the ‘clean development mechanism’, which allows developed countries to invest in sustainable development projects in developing countries while earning emission allowances.

•• To launch the ‘Joint Implementation’ mechanism, which allows developed countries to invest in other developed countries, especially the transition economies of Eastern Europe. In doing so they can earn carbon allowances, which can be used to meet their emission reduction commitments.

•• To implement the ‘compliance regime’ which ensures that countries have clear accountability for meeting their emission reduction targets.

Where are we now? The Kyoto commitments were time limited (2012). A new agreement was to be negotiated and signed at the UN Conference on Climate Change at Copenhagen in December 2009.

Climate scientists believe that if global temperatures were to rise by more than 2°C above pre-industrial levels then climate change would become irreversible. To meet such a criterion, a number of specific, but highly variable, targets have been proposed, including the following:

•• Developed countries to halve global CO2 emissions, compared with 1990 levels, by 2050. This has the support of developed countries in general, while the G8 promised to cut their own emissions by 80 per cent.

•• The EU promised to cut its emissions by 20 per cent by 2020 compared with 1990 levels and to increase this to 30 per cent if other countries also commit.

•• The USA promised to reduce its emissions by 17 per cent by 2020, compared with 2005 levels.

•• Japan promised to reduce its emissions by 25 per cent by 2020. •• China promised to reduce the growth in its CO2 output by 40–45 per cent by 2020.

The most intractable problem is the extent to which developing countries should be expected to adopt measures that could prevent their future economic devel- opment. Since most of the ‘stock’ of CO2 in the atmosphere was produced his- torically by developed countries then, it is argued, developing countries should be given preferential treatment. On the other hand, the developed country argument

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is that most of the growth in emissions in the future will be in developing coun- tries, especially China, India and Brazil.

Given the 2°C ‘bottom line’, the major goals of the Copenhagen meeting were to reach agreement on the following issues and to embed them into a binding UN treaty with precise numbers and a timescale: developed countries to cut their CO2 emissions; developing countries to curb their emissions; provision by devel- oped countries of financial and technological assistance to developing countries to enable them to achieve their emission targets. On every issue, of course, views differed widely between different interest groups: developed and developing countries, environmental groups and other GCSOs, and business firms.

Despite all the pre-meeting hype – and all the dire warnings – no binding agreement was reached. At the last minute, and after highly acrimonious negotia- tions, an ‘Accord’ was reached, based primarily on a deal put together by a small group of countries: the USA, Brazil, China, India and South Africa. The most striking aspect of the Copenhagen Accord was its vagueness. The only numbers related to the commitment of financial assistance to developing countries.

Since Copenhagen, discussions have continued at annual UN Climate Change Conferences in Cancún (2010), Durban (2011), Doha (2012) and Warsaw (2013). The Warsaw meeting agreed that countries must set out their ‘national contributions’ to greenhouse gas emissions in time for the 2015 Climate Change Summit in Paris. The major scientific input for these meetings is the IPCC’s Fifth Assessment Report (2013), which reaffirms the human influence on global warming and that ‘limiting climate change will require substantial and sustained reductions of greenhouse gas emissions’.68 However, the big issue, as always, is not the science but the politics.

A BETTER WORLD?

The future shape of the global economy is far from clear. Although the chances are that globalizing processes will continue to operate and that the world will continue to become increasingly interconnected, there is a huge amount of uncer- tainty. We should certainly not simply extrapolate from past trends. However, the key question is not so much what the world might be like in the future, but what it should be like. Most of all, then, we need to think about the kind of world we, and our children, would want to live in. There are choices to be made. What might these be? After all, globalization is not a force of nature; it is a social process.69 What are the choices? In theory they are infinite; in practice they are not.

Alternative economies? In thinking about alternative futures in the context of globalization debates, there is a depressing tendency towards polarization of positions of the kind we identified

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in Chapter 1. The gung-ho, neo-liberal hyper-globalizers see the solution in yet more openness of markets, unfettered flows of goods, services and capital. In other words, much, much more of the same. The anti-globalizers argue for exactly the opposite. Whereas the first strategy would almost certainly create a world of even greater inequality (as well as environmental damage) the second embodies the dangers of reverting to a set of medieval subsistence economies.

The diametrical opposition of these two positions can be illustrated by their polarized attitudes towards trade. To the hyper-globalizers, it is a central tenet that trade should be allowed to flourish without hindrance. The anti-globaliz- ers’ position is that the pursuit of ever-increasing international trade – which is clearly encouraged by a free trade regime like the WTO – should be totally abandoned, not merely regulated. The argument is basically that sustainable development is incompatible with the pursuit of further economic growth. An economic system based upon very high levels of geographical specialization inevitably depends upon, and generates, ever-increasing trade in materials and products.

A central criticism is that the energy costs of transporting materials and goods across the world are not taken into account in setting the prices of traded goods and that, in effect, trade is being massively subsidized at a huge short-term and long-term environmental cost. But by no means all environmentalists agree with this kind of viewpoint. As David Pearce argues, ‘unquestionably, there are environ- mental problems inherent in the existing trading system … [but] there is also extensive confusion in the environmentalist critique of free trade’.70 There are, in fact, very different ‘shades of green’, ranging from the position that human inge- nuity and new technologies will find the solutions without necessitating a change in lifestyles (the Panglossian view) through to the ‘deep green’ arguments that only a return to a totally different, small-scale, highly-localized mode of existence will suffice. But such a path, rather than improving the position for the poor in the world economy, ‘would condemn the vast majority of people to a miserable future, at best on the margins of the bare minimum of physical existence’.71 It is not a socially acceptable policy:

The alternative to an economic system that involves trade is not bucolic simplicity and hardy self-sufficiency, but extreme poverty. South Korea has plenty of problems, but not nearly so many as its neighbour to the north.72

But this emphatically does not mean that ‘local’ economies are irrelevant. On the con- trary. There exists a wide diversity of economies73 offering different kinds of possi- bilities and which occupy different positions in relation to the larger global economy. Many of these are, essentially, ‘community economies’. Figure 11.8 summarizes the main ways in which such economies differ from the ‘mainstream’ economy: ‘In some cases, these communities are geographically confined to the “local”, whilst in others

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they span the “global”.’74 The fair-trade networks discussed in Chapter 13 are exam- ples of the latter. The Mondragón Cooperative Corporation is an example of a com- plex of cooperatives spread across 14 countries but grounded in the Basque region of Spain and organized on worker-owned principles. The LETS (Local Exchange Trading System) uses local ‘currencies’ to facilitate the exchange of services and self-produced or self-earned goods within a network of members in a local commu- nity.75 A micro-finance scheme, which began as a local initiative in Bangladesh in the 1970s, subsequently spread across many other countries and has been a huge con- tributor to poverty reduction.76 None of these initiatives are without their problems. For example, in late 2013, the Mondragón Cooperative cast adrift its Fagor domestic appliances member, which employed almost 6000 workers.77

The diversity of alternative economies is growing and offers significant possibilities for creating fulfilling and fair communities and, more generally, for reconsidering globalization as a transformable social process and not a force of nature. But they are, by definition, mostly small in scale and often highly local in scope. They raise impor- tant issues of how such economies connect into the bigger picture (unless they decide to opt out). And it is the ‘bigger picture’ that still demands our primary attention.

Place-attached

Diversified

Multiple

Small scale

Cooperative

Decentred

Culturally distinctive

Socially embedded

Local ownership

Dispersed

Autonomous

Oriented to local market

Values long-term investment

Vitality oriented

Recirculates value locally

Community owned

Community led

Community controlled

Communal appropriation and distribution of surplus

Environmentally sustainable

Whole

Ethical

Harmonious

Locally self-reliant

Aspatial/global

Specialized

Singular

Large scale

Competitive

Centred

Acultural

Socially disembedded

Non-local ownership

Agglomerative

Integrated

Export-oriented

Privileges short-term return

Growth oriented

Outflow of extracted value

Privately owned

Management led

Controlled by private board

Private appropriation and distribution of surplus

Environmentally unsustainable

Fragmented

Amoral

Crisis-ridden

Participates in a spatial division of labour

Community economyMainstream economy

Figure 11.8 Contrasting characteristics of mainstream and community economies

Source: based on Gibson-Graham, 2006: Figure 23

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MAKING THE WORLD A BETTER PLACE 383

To be ‘globalized’ or not to be ‘globalized’: that is the question

The main losers in today’s very unequal world are not those who are too much exposed to globalization. They are those who have been left out.78

Is the problem actually globalization or not-globalization? Is the dif- ficulty being part of the system or not being part of it? How can globalization be the source of problems for those excluded from it?79

It is abundantly clear that the position of many of the world’s poorest countries is highly marginal in terms of the global economy. The usual prescription of the IMF/World Bank ‘doctors’ is that they should open their economies more, for example by positively encouraging exports and by liberalizing their regulatory structures:

For policymakers around the world, the appeal of opening up to global markets is based on a simple but powerful promise: international eco- nomic integration will improve economic performance … The trouble is … that there is no convincing evidence that openness, in the sense of low barriers to trade and capital flows, systematically produces these consequences. In practice, the links between openness and economic growth tend to be weak and contingent on the presence of complementary policies and institutions.80

‘Openness’ will only work if the playing field is relatively level – which, clearly, it is not. And it also has to work both ways – which, clearly, it does not. Tariffs imposed by developed countries on imports of many developing country products remain very high. It is common for tariffs to increase with the degree of processing (so- called tariff escalation), so that higher-value products from developing countries are discriminated against. At the same time, agricultural subsidies make imports from developing countries uncompetitive. In other words, the odds are stacked against them:81

The human costs of unfair trade are immense. If Africa, South Asia, and Latin America were each to increase their share of world exports by one per cent, the resulting gains in income could lift 128 million people out of poverty … When developing countries export to rich- country markets, they face tariff barriers that are four times higher than those encountered by rich countries. Those barriers cost them $100bn a year – twice as much as they receive in aid.82

However, simply opening up a developing economy will almost certainly lead to further disaster. There is the danger of local businesses being wiped out by more

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efficient foreign competition before they can get a toehold in the wider world. Hence a prerequisite for positive and beneficial engagement with the global econ- omy is the development of robust internal structures: ‘the development of a national economy is more about internal integration than about external integration’.83

Eradicating extreme poverty: the UN Millennium Development Project Poverty is the major problem in many parts of the world. For many years, aid programmes have been devised to help alleviate its major manifestations but such aid has generally fallen far below needs. In 2002, a meeting of heads of state in New York adopted the UN Millennium Declaration. Its aim was nothing less than the eradication of extreme poverty by 2015, as part of a broad and comprehensive development programme. The precise goals and targets of the UN project are set out in Figure 11.9. They are, indeed, extremely ambitious – especially in light of the 2008 global financial crisis. The right-hand column of Figure 11.9 shows some of the progress reported by the UN in 2013. Its conclusion was that while ‘pro- gress can be reported in most areas, despite the impact of the global economic and financial crisis … progress in many areas is far from sufficient’.84

Goals, aspirations and collective will

Society is faced with a profound dilemma. To resist growth is to risk economic and social collapse. To pursue it relentlessly is to endanger the ecosystems on which we depend for long-term survival.85

The major global challenge is to meet the material needs of the world community as a whole in ways that reduce, rather than increase, inequality and which do so without destroying the environment. That, of course, is far easier said than done. It requires the involvement of all the major actors – business firms, states, international institutions, CSOs – in establishing mechanisms to capture the benefits of globaliza- tion for the majority and not just for the powerful minority. To some, this can only be achieved by an overarching global system of governance: in effect, a world dem- ocratic government. But, as Dani Rodrik argues, there is an irresolvable political trilemma, between democracy, national determination and economic globalization:

Even though it is possible to advance both democracy and globalization, the trilemma suggests this requires the creation of a global political com- munity that is vastly more ambitious than anything we have seen to date or are likely to experience soon. It would call for global rulemaking by democracy supported by accountability mechanisms that go far beyond what we have at present. Democratic global governance of this sort is a

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MAKING THE WORLD A BETTER PLACE 385

chimera. There are too many differences among nation states … for their needs and preferences to be accommodated within common rules and institutions … A thin layer of international rules that leaves substan- tial room for manoeuvre by national governments … can address glo- balization’s ills while preserving its substantial economic benefits. We need smart globalization, not maximum globalization.86

1:

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Eradicate extreme poverty and hunger

Achieve universal primary education

Promote gender equality and empower women

Reduce child mortality

Improve maternal health

Combat HIV/AIDS, malaria and other diseases

Ensure environmental sustainability

Develop a global partnership for development

Goal Target Progress by 2013

Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day. Achieve full and productive employment and decent work for all, including women and young people. Halve, between 1990 and 2015, the proportion of people who suffer from hunger.

Proportion of people in extreme poverty halved at global level by 2010.

Hunger reduction target within reach, but 1 in 8 people remain chronically undernourished.

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Address the special needs of least developed countries, landlocked countries and small island developing states. Develop further an open, rule-based, predictable, non-discriminatory trading and financial system. Deal comprehensively with developing countries’ debt. In cooperation with pharmaceutical companies, provide access to affordable essential drugs in developing countries. In cooperation with the private sector, make available benefits of new technologies, especially information and communications.

Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources. Reduce biodiversity loss, achieving, by 2010, a significant reduction in the rate of loss. Halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation. By 2020, to have achieved a significant improvement in the lives of at least 100 million slum dwellers.

The drinking water target reached by 2010, insufficient improvements in sanitation.

Proportion of slum dwellers in cities of developing world is declining. The 100 million MDG target of improved water resources, sanitation facilities, durable housing/sufficient living space exceeded by 2010.

Have halted by 2015 and begun to reverse the spread of HIV/AIDS. Achieve, by 2010, universal access to treatment for HIV/AIDS for all those who need it. Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases.

Target of universal access to antiretroviral therapy by 2010 missed, but reachable by 2015.

Remarkable gains made in fight against malaria and tuberculosis.

Reduce by two-thirds, between 1990 and 2015, the under-five mortality rate.

Despite large reduction in under-five mortality rate, more rapid progress needed to meet the 2015 target. Increasingly, child deaths are concentrated in poorest regions and in first month of life.

Reduce by three-quarters the maternal mortality ratio. Achieve universal access to reproductive health.

Despite considerable reduction in maternal mortality, meeting the three-quarters target needs accelerated intervention and stronger political backing for women and children.

Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling.

Target of universal primary education by 2015 unlikely to be met.

Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015.

Figure 11.9 The UN Millennium Development Goals

Source: based on material in www.un.org/millenniumgoals; UN, 2013: pp. 4–5

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Nevertheless, even this would require a high level of international cooperation between nation-states. Leaving ‘substantial room for manoeuvre’ must not involve facilitating ‘beggar-my-neighbour’ policies. Certainly, any system must be built on world trading and financial systems that are equitable and reflect the new realities of the changing global economic map. This must involve reform of such institutions as the WTO, the World Bank and the IMF or, alternatively, their replacement by more effective, and more widely accountable, institutions. Pressure for reform has come from a number of directions. Not the least of these has been the newly institutional- ized self-awareness of the so-called BRICs. In 2012, the heads of state of the BRIC countries (including South Africa) urged the need for faster reform of the IMF and ‘threatened to withhold additional financing requested by the International Monetary Fund to fight the European sovereign debt crisis unless they gained greater voting power at the fund’.87 In July 2014, the BRIC leaders established a $100bn New Development Bank (NDB) aimed at redressing some of the obsta- cles created for developing countries by the established international organizations, notably the World Bank and the IMF. The NDB will have two major foci: (1) fund- ing infrastructural projects; (2) helping members facing sudden foreign capital flight through establishing a Contingency Reserve Arrangement (CRA). The NDB will be headquartered in Shanghai and is planned to be in operation in 2016.

More broadly, the emergence of the G20 is undoubtedly a step in the right direc- tion, but it is little more than that so far. The G20 has not, to date, delivered on the early promise of the major initiatives taken in 2009 to address the global financial crisis (see Figure 11.5). Much, much more needs to be done. As we have seen, the exercise of developed country power through the various kinds of conditionality and trade-opening requirements imposed on poorer countries has seriously negative results. Without doubt, trade is one of the most effective ways of enhancing material well-being, but it has to be based upon a genuinely fairer basis than at present. The poorer countries must be allowed to open up their markets in a manner, and at a pace, appropriate to their needs and conditions. After all, that is precisely what the USA and European countries did during their early phases of industrialization and as did Japan and the East Asian NIEs at a later date. At the same time, developed countries must operate a fairer system of access to their own markets for poor countries.

Of course, this will cause problems for some people and communities in devel- oped countries and these must not be underestimated. As we saw in Chapter 10, there are, indeed, many losers in the otherwise affluent economies. Will the popu- lations of the rich countries be prepared to make some sacrifices for the greater global good? The signs are not very promising. Even at the best of times, it is dif- ficult to persuade people to look beyond their own needs and wants. And these are emphatically not the best of times. The chaos wrought by the near collapse of the financial system in 2008, and the debt burdens piling up to deal with its aftermath, have increased general feelings of insecurity. For example, there has undoubtedly been an increase in the opposition of developed country populations to trade and to foreign immigration. At one stage, it seemed that ‘less-educated, lower- income workers are much more likely to oppose policies aimed at freer trade and

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immigration’.88 However, this is changing as more highly educated workers are increasingly affected.

People whose lives are devastated by ‘globalization’ – especially through loss of their livelihood – must be assisted effectively and sensitively, whether through finan- cial assistance or education and retraining. Governments must design and implement appropriate adjustment policies for such groups if trade policies helpful to develop- ing countries are to be acceptable politically. Equally, governments of developing countries must engage in their own internal reforms: to strengthen domestic institu- tions, enhance civil society, increase political participation, remove corruption, raise the quality of education, and reduce internal social polarization. Although difficult, such policies are not impossible if the social and political will is there.

However, even increased material affluence does not necessarily make people ‘happier’ in proportion to their increased wealth.89 Research by the ILO90 suggests that it is ‘economic security’, rather than wealth, that ‘promotes happiness’:

The global distribution of economic security does not correspond to the global distribution of income … South and South East Asia have greater shares of economic security than their share of the world’s income … By contrast, Latin American countries provide their citi- zens with much less economic security than could be expected from their relative income levels … income security is a major determinant of other forms of labour-related security … [and] … income inequal- ity worsens economic security in several ways … highly unequal societies are unlikely to achieve much by way of economic security or decent work.91

As we saw in Chapter 10, the trend in many countries has been for inequality to be widening, rather than narrowing.

There is a more general argument: that ‘prosperity’ needs to be defined in broader terms than just ‘gross domestic product’; that ‘well-being’ is about more than just material affluence. A number of proposals to measure well-being have emerged, beginning with the rather exotic case of the Kingdom of Bhutan, which introduced the concept of GNH (Gross National Happiness) in the 1970s. A French govern- ment commission proposed that the components that go into the measurement of GDP need to be broadened to incorporate a whole range of other measures, such as health, education, security, social connectedness, environmental sustainability.92 A rather more subjective set of measures proposed for national accounts focuses on two dimensions: personal well-being and social well-being.93 Whether or not such well-being measures will replace or supplement the conventional measures like GDP is hard to say. But the fact that we must define growth/prosperity/well-being in more meaningful terms is incontrovertible if we are to build a better world.

A moral imperative The problems facing us are both practical and moral. In practical terms, the continued existence across the world of vast numbers of people who are impoverished – but

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who can see the manifestations of immense wealth either at first hand or through the electronic media – poses a serious threat to social and political stability. But the moral argument is, I believe, more powerful. It is utterly repellent that so many people live in such abject poverty and deprivation (wherever they may be) while, at the same time, others live in immense luxury. This is not an argument for levelling down but for rais- ing up. The means for doing this are there. What matters is the will to do it – the real acceptance of, to use David Smith’s words,

the imperative of developing more caring relations with others, espe- cially those most vulnerable, whoever and wherever they are, within a more egalitarian and environmentally sustainable way of life in which some of the traditional strengths of community can be realised and spatially extended.94

We all have a responsibility to ensure that the contours of the global economic map in the twenty-first century are not as steep as those of the twentieth century. We all have a responsibility to treat others as equals. In a global context, this means being sensitive to the immense diversity that exists, to the world as a mosaic of people equally deserving of ‘the good life’.

This also means, in my view, the need to question what Michael Sandel terms ‘the moral limits of markets’:

We need to rethink the role that markets should play in our society … without quite realizing it, without ever deciding to do so, we drifted from having a market economy to being a market society. The difference is this: A market economy is a tool – a valuable and effective tool – for organ- izing productive activity. A market society is a way of life in which mar- ket values seep into every aspect of human endeavour. It’s a place where social relations are made over in the image of the market … sometimes, market values crowd out nonmarket norms worth caring about.95

As Erica Schoenberger argues:

We need to come up with a different way of producing choices from relying entirely on the blind forces of the market. We need a way of making big decisions about how things work that is not absolutely beholden to the drive for profits and does not hold private property absolutely sacrosanct. Profits and property are not evil. But if they are the only basis for making decisions about how we live on earth, then we cannot change our trajectory.96

Paradoxically, the 2008 global financial crisis seemed to offer a real opportunity for change. For the first time in several decades, both the economic inefficiencies

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and the social limitations of free, unregulated markets were exposed for all to see. In particular, an economic system based so heavily on financial speculation is, in any social and moral sense, dysfunctional. It has failed. The opportunity must be taken to build a new system to redress the imbalance that has developed between states and markets, between people and institutions and between the immensely wealthy and the rest. Such a project is global in both scale and scope, hence the need for coordinated international policy initiatives rather than individual national measures that would lead to destructive competition rather than collaboration. At the height of the crisis in 2008–9, it seemed that such a rebuilding might, indeed, be on the agenda. But subsequently, as the worst has seemed to some to be over (or is it?), there is a real danger of going ‘back to the future’. It would be a tragedy, in every sense, if that were to happen. We can – we must – do better.

NOTES

1 Voltaire (1947: 8). 2 Micklethwait and Wooldridge (2000: ix). 3 Oxford Martin Commission for Future Generations (2013: 9). 4 BBC World Service (2008). 5 ILO (2004b: 12–23). 6 Oxford Martin Commission for Future Generations (2013: 9). 7 Burgoon (2009: 148). 8 Schoenberger (2014: xx). 9 See Lee (2007), Lee and Smith (2004), Sandel (2012), Singer (2004), Smith (2000). 10 Harvey (2011: chapter 8). 11 Taylor et al. (2002: 15–16). 12 Beck (2005: 238). 13 Scherer et al. (2014) explore the increasingly complex social and political issues facing

business firms. 14 Van Tulder with van der Zwart (2006: Parts II and III) provide a comprehensive

analysis of international corporate social responsibility (ICSR). 15 Van Tulder with van der Zwart (2006: 143–5). 16 Barrientos (2008), Hughes et al. (2008), van Tulder (2009), van Tulder et al. (2009),

Barrientos (2008), Hughes et al. (2008). 17 Barrientos (2008: 979). 18 Van Tulder et al. (2009: 399). 19 Van Tulder (2009: 10). 20 Van Tulder et al. (2009: 402). 21 Gereffi et al. (2001). 22 See Chapter 14. 23 Cumbers et al. (2008: 380–4), van Tulder et al. (2009). 24 Barrientos (2008), Hughes et al. (2008). 25 See Moran (2011), Rasche (2009).

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26 Barrientos (2008: 978). 27 Barrientos (2008: 978). 28 Barrientos (2008: 980). 29 Van Tulder et al. (2009). 30 Van Tulder et al. (2009: 408). See also Maignan and Ralston (2002). 31 Wolf (2007). 32 Commission on Global Governance (1995: 135–6). 33 Gritsch (2005). 34 Levy and Prakash (2003: 143, 144). 35 Hirst et al. (2009). 36 Stiglitz (2002: 44). 37 ILO (2004b: 88, 89). 38 Letter from the Chairman of the FSB to G20 leaders (5 September 2013). 39 Rodrik (2011: 264). 40 See Deese (2008), Hoekman and Kostecki (1995), Peet et al. (2003: chapter 5),

Sampson (2001). 41 Peet et al. (2003). 42 Hoekman and Kostecki (1995: 24). 43 Hoekman and Kostecki (1995: 26). 44 See, for example, Deese (2008), Peet et al. (2003: chapter 5), Singer (2004: chapter 3). 45 Sampson (2001: 7–8; emphasis added). 46 Wade (2003: 621). 47 Quoted in Sampson (2001: 19). 48 Stiglitz and Charlton (2005) present a detailed critique of the Doha Round and show

how ‘fair’ trade and development can go together. 49 Gamberoni and Newfarmer (2009). 50 Guardian (7 December 2013). 51 See Braithwaite and Drahos (2000: chapter 10), Gilpin (2000: chapter 6), Kolk and

van Tulder (2005). 52 Gilpin (2000: 184–5). 53 Picciotto (2012: 1). 54 Financial Times (26 November 2013). 55 OECD (2013). 56 Eatwell and Taylor (2000: 189). See also Palan (2003), Roberts (1994). 57 Roberts (1994: 92). 58 Financial Times (7 December 2001). 59 Financial Times (29 April 2013). 60 Roberts (1994: 99). 61 ‘EU tax havens under pressure as leaks go public’, euobserver.com (17 June 2013). 62 Financial Times (12 September 2013). 63 The Guardian (14 March 2009). 64 Tax Justice Network (19 September 2013). 65 See Braithwaite and Drahos (2000: chapter 12), Pearce (1995). 66 Braithwaite and Drahos (2000: 257). 67 Quoted in Pearce (1995: 149). 68 IPCC Fifth Assessment Report, Approved Summary for Policymakers (2013: SPM-14).

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69 Massey (2000: 24). 70 Pearce (1995: 74). 71 Hudson (2001: 315). 72 Elliott (2002). See also Elliott (2000). 73 Gibson-Graham (2006). 74 Gibson-Graham (2006: 80). 75 Lee (1996). 76 Hulme and Arun (2009). 77 Financial Times (10 December 2013). 78 Kofi Annan, UN Secretary-General, Speech to UNCTAD Meeting in Bangkok,

2000. 79 Mittelman (2000: 241). 80 Rodrik (1999: 136–7; emphasis added). 81 See UNCTAD (2002). 82 Oxfam (2002: 1). 83 Wade (2003: 635). 84 UN (2013: 4). 85 Jackson (2009: 187). 86 Rodrik (2011: xix; emphasis added). 87 Financial Times (30 March 2012). 88 Scheve and Slaughter (2001: 87). 89 Jackson (2009), James (2007), Layard (2005), Oswald (1997), Wilkinson and Pickett

(2009). 90 ILO (2004a). See also Scheve and Slaughter (2004). 91 ILO press release, www.ilo.org. 92 Stiglitz and Fitoussi (2009). 93 New Economics Foundation (2009). 94 Smith (2000: 208). 95 Sandel (2012: 7, 10–11, 113). 96 Schoenberger (2014: xxx).

Want to know more about this chapter? Visit the companion website at www.guilford.com/dickenGS7 for free access to author videos, suggested reading and practice questions to further enhance your study.

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