The Global Economic Symposium

Dennis Snower 26 September 2008

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Two giant transformations are shaping the current world order. One is the widespread integration of the global economy. The other is the progressive fragmentation of the global society.

Globalisation: Economic integration + social fragmentation

The integration of the global economy, globalisation, is driven by free enterprise in global markets, creating a new worldwide division of labour.

The fragmentation of the global society is illustrated through our numerous failures of global problem solving. As we proceed into the 21st century, we find ourselves confronted by a multiplicity of problems requiring a global response: climate change; rising disparities between the world’s richest and poorest countries; terrorism, ethnic conflict, and social fragmentation; food shortages, energy insecurity, and water scarcity; financial risk, the threat of protectionism, and job insecurity.

Each of these problems requires cooperation among countries and disparate decision makers, but in today’s multi-polar world, this cooperation is often lacking.

The progressive integration of the global economy has brought millions of people spectacular material success. The gross world product, the sum of all the goods and services produced in this world, has risen approximately eightfold since 1950. And this growth is reaching a progressively larger proportion of the world’s population. While sustained improvements in material living standards used to be restricted to Europe, the US, Japan, and a few other countries, it is now reaching Brazil, China, India, and other emerging market economies.

One important reason for this material success is that over the past decades more and more countries have discovered the magic of free markets. When people are compensated for benefits they provide and pay for the costs they impose on others, then free markets enable them to satisfy their needs at minimum resource cost. Free market exchange is the engine that has lifted 300 million Chinese and 200 million Indians out of extreme poverty in the last quarter of a century, while powering steady growth in the developed economies.

So the world community is cooperating more and more successfully in the arena of the global economy. But when this cooperation engenders global problems that require us to cooperate as a global society, we repeatedly fall short of our potential.

The failure of the Kyoto Protocol to stem greenhouse gas emissions; the collapse of the Doha Round; the persistent pockets of poverty, disease and political instability; the growing threats of military conflict and nuclear proliferation – these are all symptoms of an underlying disease that may be called globusclerosis, a failure to solve global problems cooperatively.

We face similar difficulties in achieving cooperation between generations, occupations, and income classes. In particular, many countries struggle to support their ageing populations, generate employment for their unskilled, finance health care for their poor, and make their economic growth socially inclusive.

Where markets fail

All these failures have something striking in common: they are all problems that free markets alone are powerless to solve. Some failures concern public goods: for example, there has been insufficient effort to reduce greenhouse gas emissions and contain the spread of weapons, since the costs usually fall on those involved in these efforts, whereas the benefits are shared by the entire world community. Other failures concern what is called the tragedy of the commons: for example, deforestation, over-grazing and over-fishing occurs because people lack the incentive to preserve common-property resources. And finally, yet other failures involve the inequality of income, wealth and knowledge.

Just as my cleaning lady doesn’t “do” curtains and windows, free markets don’t “do” public goods, common property and inequality. In the presence of public goods and common property, people aren’t fully compensated for the benefits and costs they generate, and thus markets cease to work properly. And while market forces have lifted hundreds of millions out of extreme poverty, free markets do not necessarily tend to equalise incomes, educational opportunities, or job security for people around the globe.

Our predicament is that nowadays most of our serious global problems are centred precisely around public goods, common property, and inequality. We have succeeded in exploiting the magic of markets, but we often fail where those markets fail.

To tackle our global problems, we need to supplement market forces through global cooperation among stakeholders in the political, business, academic, non-governmental, and civic communities. Our existing international organisations have an important role to play in achieving such cooperation, but they alone are not sufficient, for the simple reason that they are unable to redistribute incomes and allocate public goods and common property globally. Global cooperation among diverse stakeholders is necessary.

National governments must help provide some of the necessary education, research, and infrastructure. Businesses need to exploit technological advances to meet their customers’ needs. Academics and researchers need to analyse global problems and suggest unbiased blue-print solutions. NGOs, the media, and social networks need to engage in public advocacy, demand accountability, and create the personal connections on which trust can be built. Philanthropists and civic organisations can provide seed funding for implementing promising solutions. And so on, in complex webs of interaction.

Our global problems cannot be solved by any of these stakeholders acting in isolation. The present Age of Globalisation must now to be supplemented by an Age of Global Cooperation, where shared goals motivate diverse stakeholders to pull in the same direction.

It is not necessary that millions die each year from diseases for which cures are known. It is not necessary for globalisation to by-pass a third of the world’s population where help is needed most. It is not necessary that the poor be deprived of basic health services, or the elderly of heat, food and care. It is not necessary that pockets of our societies languish in unemployment.

On a purely scientific and technical level, we would now have the competence – if we wished – to satisfy the basic needs for food, shelter, sanitation, and clothing of all people on this planet, while at the same time preserving the earth’s topsoil, water supplies, and natural habitats. We would also have the wherewithal to provide basic education and skills worldwide.

And most importantly, we have learned much in the past decades about how to help one another. Through the experiences of countless welfare states, foreign aid programmes, NGO initiatives and philanthropic activities, we have learned that the most effective help is helping people to help themselves. Active labour market policies tend to be more effective than passive ones; foreign aid that empowers the poor through skills and infrastructure has more transformative power than handouts from rich-country bureaucracies to poor-country governments.

Much is intellectually and technically within our grasp. What is often missing is the will to global cooperation. Powerful interest groups, the temptation to free ride on the efforts of others, ignorance about best practice policies, and voting procedures that are unconducive to global problem solving all play their part in generating globusclerosis.

The will to global cooperation must be nurtured through shared visions of the future that induce diverse decision makers to work together.

In this multipolar world, we know that there is no conception of the common good that is valid of all of humankind – be it Enlightenment individualism, Middle- and Far-Eastern communitarianism, religious canons, or ideological dogmas. Over the past century – after two world wars and countless other conflicts and atrocities – we have outgrown the presumption that there is one true, consistent, universally recognisable guide to human action. But we have also learnt that this need not be an insuperable obstacle to global cooperation.

Despite differences in ultimate values, there is still much that we, as a world community, can do to help one another achieve our disparate ends. And there is still vast, unexploited scope to promote solidarity in the pursuit of common goals – in dealing with climate change, promoting health and welfare, creating a safer world, tackling poverty and social fragmentation, benefiting from globalisation, and much more. With due respect for our differences, we must find this common ground through practicable, monitorable achievements.

The Global Economic Symposium

For this purpose, it is useful to have a neutral, creative space – removed from the everyday political constraints, lobby groups, institutional impediments – to think afresh about how global problems can be solved. The Global Economic Symposium (GES) is meant to be one such a neutral, creative space.

On the 4th and 5th of September 2008 the GES gathered some of the smartest and most experienced academics, policy makers, business leaders, and other decision makers on this planet. This group made good use of an opportunity to find new paths towards global cooperation. Panellists, moderators and participants of this Symposium have the responsibility to think outside the box and propose solutions that may become catalysts for future change. The results of their efforts, summarised in a document called Global Economic Solutions, will be communicated to the international communities of policy makers and researchers, thereby initiating an ongoing dialogue on global problem solving.

The hallmark of the Global Economic Symposium is that it is research-based and action-oriented.

Our research base rests on the contributions of many experts: The researchers of the Kiel Institute for the World Economy have provided a backbone of information, analysis, literature, and more for each session. Each session was also supported by a distinguished team of international experts, who proposed panellists and gave us feedback on the session content. Our distinguished Advisory Board has inundated us with strategic perspectives, innovative ideas, and valuable contacts, thereby playing a role of overarching importance.

Furthermore, we have recently launched the Global Economic Association, whose aim is to create an international community of economists devoted to the analysis and treatment of major global policy problems. A stream of eminent economists has already joined the Global Economic Association as founding members and they, too, have provided valuable input to this Symposium. And last year we launched a path-breaking, new electronic journal, called “Economics,” that adopts an open-access, open-review, interactive approach to publication. It is probably the fastest growing economics journal in the world and it provides a possible outlet for research on global economic problems.

So much for the research base of the Global Economic Symposium. Its action-orientation is up to the GES community. The GES is not a discussion forum, but a solution forum. To this end, participants of the GES have been supported by the Virtual GES, the web-based platform of this Symposium. The Virtual GES is a repository of proposed solutions to global economic problems, as well as underlying analysis. Each of the panellists, together with some other experts, have posted a short summary of their proposed solutions in the “Strategy Perspectives” section of the Virtual GES. Moderators have studied these solutions and prepared their questions accordingly. The entire GES community has contributed background information on each session to the Virtual Library. Some panellists have also exchanged ideas in advance in the Strategy Forum of the Virtual GES. Since this background analysis is already common knowledge at the GES, we are free in the Symposium itself to focus exclusively on solutions.

Once a Symposium is over, we expect that the GES community will keep contributing to the Virtual GES, so that our repository of ideas on global problem solving will continue to grow, eventually feeding in to next Global Economic Symposium, which is planned for 10-11 September 2009.

The success of this enterprise is in all our hands. I hope that the Global Economic Symposium, and the strategic dialogue it initiates, will contribute to the insight and drive that can help turn our potential for global cooperation into reality.

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Topics:  Global governance

Tags:  globalisation, Poverty, social fragmentation

President of Kiel Institute for World Economics and CEPR Research Fellow

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