On the Political Economy of World Government

On the political economy of world government: a short discussion of the role of the World Economic Forum and the World Social Forum and indicating the possibility of a World Parliament

Thomas Colignatus, January 16, 2005

http://thomascool.eu

Summary

Rational agents would opt for world government, properly defined. Without world government, dealings between sovereign states are not only affected by the military and economic power of those states and by the international bodies that they agree upon to wield and control their power, like the United Nations (UN), Worldbank (WB) and International Monetary Fund (IMF), but also by the flux of world opinion. Many branches in economic theory tend to accept wants as ‘given’ but these wants are observed to develop over time and some branches of economics can study those changes. The economic theory and practice of marketing is explicitly directed at influencing consumer choices. There is a similar situation with respect to world opinion. The media report about activities at the World Economic Forum (WEF, annual meeting January 26-30 2005, Davos, Switzerland) and the World Social Forum (WSF, convention January 26-31, 2005, Porto Alegre, Brazil). What are these forums, should economists pay attention ? Can these forums affect the stock markets, the oil price, exchange rates, labour relations, migration and tourist flows, consumer boycotts, (inter-) national decisions ? We see that institutions like the UN, WB and IMF have some dealings with WEF and WSF, but what are those dealings and what do they mean ? Reports on these forums can be hopelessly confused. A clearer scope of their objectives and limitations helps the interpretation of these forums and the results reported. Basically, each forum is only a market place and any result reported depends upon the very source of it. The place where a result is presented only adds flavour - but flavour sells to a target audience, and repells to some other audience. The WEF is a non-profit institution and it can be observed to seek the approval and participation of the powerful, rich and famous. The non-profit status still allows perks like good salaries and good hotels in luxurious resorts. The WEF can freely use the term ‘economic’ since there is no scientifically guaranteed protection of that label. The WEF claims to be a socially responsible activity. The WSF originated however as a social protest and countervailing activity to the WEF. It can freely use the term ‘social’ since there is no scientifically guaranteed protection of that label. The WSF can be observed to seek the approval and participation of the ‘grassroots’, the powerless, poor and unknown billions, but it is caught in the paradox that it has to be economically financed nevertheless, with its participants requiring a source of income, while it will have to develop some power if it is to have the effect that it wants to have. The discussion of these aspects helps to clarify that economics is a social science quite related to ethics. From this point of view, the WEF and WSF are merely different brands. A suggestion is to create a World Parliament (WP) by an open political process.

Keywords

Tinbergen, world government, globalisation, G8, development, world poverty, international bodies, United Nations (UN), Worldbank (WB), International Monetary Fund (IMF), non-governmental organisations (NGO), World Economic Forum (WEF), World Social Forum (WSF), World Parliament (WP), ethics

Introduction

Step (1): First see the summary, that forms an integral part of this paper. Step (2): Economics teachers will notice that some of their brightest students are interested in issues that might be indicated with keywords such as globalisation, G8, world development, world poverty and the role of international bodies such as United Nations (UN), Worldbank (WB), International Monetary Fund (IMF). Eventually, organisations like the World Economic Forum (WEF) and the World Social Forum (WSF) pop up in the discussion. Step (3): A standard approach is to ask those intellectually prone students to write a paper on the subject so that they spend some hours on the internet and produce that paper. (Socially inclined students would also help each other.) Step (4): Now you have to grade the paper. The subsequent discussion below is intended to help teachers give A’s to A-papers. Step (5): When presenting medals and prize awards to those honours students, you off-handedly refer to Jan Tinbergen and his thoughts on world government and the Optimal Order. PM. When the prize is an airplane ticket to Davos or Porto Alegre, a choice is involved, since the conventions are on the same date. If there would have been world government, one would hope for better planning.

When working through all these steps, it helps both you and your students to understand that economics is a social science closely related to ethics. So let us delve into ethics before concentrating on the dreary subjects of WEF, WSF and world government. (Ethics is also that students may help each other when writing their paper but that they don’t cheat unless nazis threaten to kill their family in which case they may consult books on ethics.)

It might be noted that interest in globalisation etcetera does not imply that your students are bright. In the past, some students have been throwing bricks at G8 meetings - which is no proof of intelligence. The bright students in step 2 above know, so to speak, that if they see a brick lying on the ground, then it can’t be there since some less bright student has picked it up already.

Definition of economics

Many people, and especially economists, are a bit confused about what economics is. I can usefully quote from what I wrote elsewhere:

Colignatus (2005:11), "Definition & Reality of the General Theory of Political Economy", Dutch University Press, defines:

"Political Economy is the science of the management of the state. More in general, ‘economics’ is Greekish for ‘management theory’. [footnote] Marshall already explained that ‘economics’ is wider than ‘political economy’, see his "Principles of economics" (1947:43). The proper definitions are:

Economics ‘in a narrow sense’ puts the approach, methods and tools, of the discipline central, and looks at a variety of subjects.
Political Economy puts the subject, the management of the state, central.
Economics ‘in a broad sense’ joins the ‘narrow sense’ and Political Economy.

One way to view these distinctions is to visualize a matrix with the sciences in the rows and the subjects in the columns. The common economist may to some extent neglect the inputs of the other disciplines, but the political economist must draw on the resources of philosophy, history, law, sociology, politicology, social psychology, biology, physics and so on. Political Economy is, just by definition, the study that tries to integrate all human knowledge about the management of the state. Political Economy is, in that respect, the proper continuation of ancient philosophy on that subject matter." It is also useful to remark that one of the basic tenets of the economic theory of the firm is that profits exist for the survival of the firm, but that the main objective of the firm is to serve the community. It is gratifying to make a profit, and it necessary to do so to survive, but in the long run it is more gratifying to have been of service to the community. Each entrepeneur has to find the personal and social optimum here. A subsequent tenet of the theory of the firm is that it tends to be suboptimal to spend profits on philanthropy to justify exploitation of people to generate those profits. It would be more optimal to avoid exploitation of people even if it causes lower profits.

A social science closely related to ethics

As an economic adviser I don’t mind admitting that I enjoy apple pie, since people generally understand that they themselves don’t have to follow suit. It would be silly to assume that you would order apple pie just because I enjoy it.Yet, when I would admit that I enjoyed Michael Shenefelt’s "The questions of moral philosphy", Humany Books, an imprint of Prometheus books, 1999, then I hesitate, since an opposite effect might occur. That is, some students might think that they wouldn’t have to read that book. Such a pity. Are you sure that your brightest students are reading this ?

Anyway, Shenefelt recalls that the economist Jeremy Bentham advanced compassion.

In particular:

"Bentham believed his theory to be no more hobbyhorse. He saw it, to the contrary, as an instrument of social reform. The laws and customs of England, he thought, clearly favored the pleasure of the few, not the pleasure of the greatest number, and because he said so publicly, he eventually became leader of the "philosophical radicals," a collection of like-minded writers, agitators, and politicians who campaigned for political change. They advocated adult male suffrage, the secret ballot, limitations on hereditary privilege, prison reform, free trade, the humane treatment of animals, and public sanitation, and their efforts culminated just after Bentham’s death in the famous Reform Bill of 1832, a landmark of British social legislation." (p48) Advised reading is Shenefelts whole book, yes all of it, also on economists like Adam Smith and John Stuart Mill.

After you have read Shenefelt, please consider Adam Smith (1759, 1984), "The theory of moral sentiments", Liberty Fund. This is one of the hallmarks of humanity, yet, you have to decide whether you want to enter that hall and join up. Please note that you are advised to read Shenefelt first, since it helps to dust the cover of an ancient treasure.

Alfred Marshall (1890, 1947:3) wrote:

"Now at least we are setting ourselves seriously to inquire whether it is necessary that there should be any so-called ‘lower-classes’ at all: that is, whether there need be large numbers of people doomed from their birth to hard work in order to provide for others the requisites of a refined and cultured life; while they themselves are prevented by their poverty and toil from having any share or part in that life." You might also consider Keynes’s remark: "along the line of origin at least, economics - more properly called political economy - is a side of ethics" Quoted by Skidelsky (2000:264), "John Maynard Keynes. Fighting for Britain 1937-1946", Macmillan Keynes’s point is commonly not seen by the general public who associate economics with money, and neither by many economists who don’t appreciate the subject of political economy.

A point of consideration is that some people associate economics with money only, or perhaps a limited concept of ‘production’. However, economic theory is quite rich in this. A good discussion can be found in the work of Hueting - see my short overview of his work.

It is interesting to observe that some might interprete these approaches of Smith, JS Mill, Bentham, Marshall, Keynes and others as ‘rightist’ while others would consider them ‘leftist’. These are curious interpretations depending upon time and circumstance. The proper approach is science and ethics. There is no political choice involved - albeit perhaps in the sense that decent scientists tend to support human rights.

If you want to understand political economy, please read my "Definition & Reality of the General Theory of Political Economy". My website contains a non-printable PDF.

The World Economic Forum

We can safely assume that students will use the internet to fill their papers with all kinds of details and even pictures of the World Economic Forum. Hence, it is of no use to us to dwell much on the WEF here. Interesting for us are only these quotes from their website http://www.weforum.org, January 16 2005:

"The World Economic Forum is an independent international organization committed to improving the state of the world. The Forum provides a collaborative framework for the world's leaders to address global issues, engaging particularly its corporate members in global citizenship."

"The World Economic Forum is an independent, international organization incorporated as a Swiss not-for-profit foundation. We are striving towards a world-class corporate governance system where values are as important a basis as rules. Our motto is ‘entrepreneurship in the global public interest’. We believe that economic progress without social development is not sustainable, while social development without economic progress is not feasible."

"We enjoy a unique global standing by recognizing and responding to two new developments:
* The world’s key challenges cannot be met by governments, business or civil society alone
* In a world characterized by complexity, fragility and ever greater synchronicity, strategic insights cannot be passively acquired. They are best developed through continuous interaction with peers and with the most knowledgeable people in the field."

"Entrepreneurship in the global public interest
The World Economic Forum is the foremost global community of business, political, intellectual and other leaders of society committed to improving the state of the world. The Forum is an independent international organization incorporated as a Swiss not-for-profit foundation and has NGO consultative status with the Economic and Social Council of the United Nations"

"The foremost community of world leaders
Our members represent the world’s 1,000 leading companies, along with 200 smaller businesses, many from the developing world, that play a potent role in their industry or region. Our members are often innovative and inspiring individuals who challenge conventional thinking and are committed to making the world a better place. We also work closely with communities of leaders from academia, government, religion, the media, non-governmental organizations and the arts. Our members – like our staff – come from all parts of the world, and our Annual Meetings bring together people from more than 100 countries."

"Separate surveys of the world's leaders - who are invited to the Annual Meeting - and the world's citizens show that ending hunger and poverty is their top priority. The survey represents the views of 1.2 billion people."

The World Social Forum

The WSF can be found at http://www.forumsocialmundial.org.br.

Our key piece of data is the "Interview with Oded Grajew, Initiator and Secretariat Member of the World Social Forum" by Nic Paget-Clarke for "In Motion Magazine" on September 1, 2004 in São Paulo, Brazil, see http://www.inmotionmagazine.com/global/ogwsf_int.html.

Grajew appears to be a businessman and thus was a natural participant to the WEF. However:

"I tried for some time to introduce social responsibility in the World Economic Forum, some social agenda. But, having seen a big resistance to changing the agenda of the World Economic Forum, I was on holidays in Paris, in the year 2000, with my wife Marta. My holidays are to reflect, to read, to participate, like a sabbatical, to have some new ideas and to reflect about things in my life, and so on. And it was the time of the World Economic Forum. It was very difficult for me to read newspapers and to see what the newspapers were saying about the World Economic Forum. That "Now we are in the right way." That "The world knows what is the model that we need." "Looking at the world as a big market." "Looking to people as consumers." This type of vision expressed by the World Economic Forum, having a big space in the media, it was very difficult for me to support it. Then, one day, in the hotel in Paris, I was thinking, "What can we do against this?" because I know we can have an alternative, another globalization, other proposals. We must show to people that another globalization is possible. Another world is possible when you make the first step the social, not the economic. The economic as a tool for the social; not the people being a tool for the economic. Always in my head, this is my way to see things: always trying to look to both sides of things. Not one vision, but always having two visions for anything, at a minimum. Then I had the idea. Why not create the World Social Forum, as we have the World Economic Forum, speaking about the people in the world? Why not have the World Social Forum -- the social is more important than the economic -- to have a space to show that we can have an alternative? We have choice. This is not the only way you can see the world, globalization. We have another way to see it. And, at the same time, force people to look, to make a choice. What is your choice? What is your vision of the world?" Grajew then reports that the first WSF in 2001 had a turnout of 60,000 people from 120 countries and about 2,000 organizations, with about 800 conferences, workshops.

One can observe these points:

The interview with Oded Grajew is just perfect. That is, seen from the viewpoint of social responsibility. Namely, if you see a social need, you act.
He doesn’t have an economic alternative to the "neoliberal" trend in economic theory. His opposition is towards the objectives and thus is political rather than scientific.
This opposition of the WSF to the WEF is fine, since none of the two is a scientific organisation. The WEF claims to exist for the "global public interest" - but it is a political view what one considers the public interest.
It is not entirely clear however what the opposition actually is. What element in the WEF agenda needed change ? The WEF states "We believe that economic progress without social development is not sustainable, while social development without economic progress is not feasible." It would seem that this would leave ample room for the WSF.

For the clarification what this opposition is, we can look at the World Social Forum "Charter of Principles", as established by the World Social Forum International Council on June 10, 2001.

Article 1 contains the phrase "opposed to neo-liberalism and to domination of the world by capital and any form of imperialism". Article 4 is most explicit:

"The alternatives proposed at the World Social Forum stand in opposition to a process of globalisation commanded by the large multinational corporations and by the governments and international institutions at the service of those corporations’ interests, with the complicity of national governments. They are designed to ensure that globalisation in solidarity will prevail as a new stage in world history. This will respect universal human rights, and those of all citizens - men and women - of all nations and the environment and will rest on democratic international systems and institutions at the service of social justice, equality and the sovereignty of peoples." For an economist in the tradition of Adam Smith, Jeremy Bentham, John Stuart Mill, Alfred Marshall, Leon Walras, Arthur Pigou and John Maynard Keynes, it is close to impossible to see what the opposition of WSF towards WEF is. It seems like the distinction between Pepsi and Coca Cola, where some people claim that they can taste it, but the difference wouldn’t matter to the truly thirsty.

Given the stated frustration of Grajew that the WEF showed resistance to change, perhaps it didn’t properly function as a market place ? In that case, the root cause would not be opinion but procedure. Indeed, one can consider it unfortunate that business leaders and grassroots representatives are not discussing world issues together at the same market place.

It may also be that the WEF and WSF have different views on economics. The WSF Charter of Principles has 14 articles, and the following amendment would help:

"15. Organisations participating in the World Social Forum have their own scientific bureau or are affiliated with a scientific institute that can function as such. Each bureau has at least the function for an economic scientist. Each such bureau respects the common standards of science and warrants that it is respected as such in the scientific community. In matters sufficiently important, the organisations let themselves be advised by their scientific bureau, either by explicit request or by initiative by their scientists themselves. Each such advice is open to the scientific community. The functioning of the scientific bureaus is evaluated on a regular basis by the other scientific bureaus in ways that are openly documented for the scientific community." If all organisations participating in the WSF, and similarly the WEF, would have their scientific bureau, then these would form a network in constant contact, and this could cause some co-ordination in their uses of economic science and the development of world opinion.

Creation of a World Parliament

A suggestion could be to set up a World Parliament (WP). The current UN represents nations and not people. It could be interesting to set up a body representing people, a World Parliament. This body could only talk, but that is plenty of power to start with. When there are 10 million people around the globe interested in this idea, and each is willing to pay € 10 per annum to participate in the vote, then there is € 100 million to play with each year, and that is good money for an experiment in world democracy. The € 10 annual contribution could be seen as a barrier to participation, but democracies have known census limits before and were still considered decent beginnings. Possibly, half of that amount is lost to transaction costs, such as translations, registration, cashing, selection of candidates, processing the ballot, but then € 50 million remain. When there are 100 Members of the World Parliament (MWP), including the executives, each earning € 50 grand, then there remain € 45 million to allocate by parliamentary procedure. One can create a website, broadcast the weekly sessions, discuss what single language to use, where to locate the WP (Greece, Egypt or Thailand are logical places), what problems to study or investigate, what activities to license, and how to promote popular support for the WP. When the funds increase, they would allow two chambers of Parliament while the executive would develop separate ministries. If the issue is handled well, existing political parties would be motivated to participate in the process since it gives them exposure; if some participate then the others will have to join the competition. When the WEF and WSF are viable economic activities, as they apparently are, then such a venture as this WP would seem to be viable too and have more (internal) democratic legitimacy.

Concluding remarks

World opinion can be influenced by activities on market places such as WEF and WSF. Economic science can play a useful role here, particularly if people better understand what economics is. Eventually, rational agents would opt for world government, properly defined.

Literature

Colignatus (2000), "The seminal contribution of Roefie Hueting to economic science: Theory and measurement of Sustainable National Income", draft, at http://thomascool.eu/Papers/Environment/HuetingsContribution.html

Colignatus (2005), "Definition & Reality in the General Theory of Political Economy", 2nd edition, Dutch University Press

Marshall, A. (1890, 1947), "Principles of economics", Macmillan

Shenefelt, M. (1999), "The questions of moral philosphy", Humany Books, an imprint of Prometheus books

Skidelsky, R. (2000:264), "John Maynard Keynes. Fighting for Britain 1937-1946", Macmillan

Smith, A. (1759, 1984), "The theory of moral sentiments", Liberty Fund

Paget-Clarke, N. (2004), "Interview with Oded Grajew, Initiator and Secretariat Member of the World Social Forum", In Motion Magazine, September 1, http://www.inmotionmagazine.com/global/ogwsf_int.html.

World Social Forum, "Charter of Principles, as established by the World Social Forum International Council on June 10, 2001", at http://www.forumsocialmundial.org.br/main.php?id_menu=4&cd_language=2