German Bishops' Conference Research Group

Globalization is a complex process which permeates all areas of life, creating winners and very many losers. The number of people denied prosperity will continue to rise. From the perspective of these marginalized groups, this paper presents options for action in the various policy fields and for the different political actors associated with globalization. These are intended to help the process of globalization to be of benefit to everyone, and not just to the already privileged few. This text is a reprint of part of the study "The many faces of globalization. Perspectives for a humane world order". Study of the Group of Experts "World Economy and Social Ethics" and the church agencies Adveniat, Caritas international, Misereor, missio Aachen, missio München and Renovabis. Published by the German Bishops’ Conference Research Group on the Universal Tasks of the Church.

Options for Action to Structure Global Processes

1. Policy Areas

The economy, and the values and rules determining economic activity, have proved to be the driving force of globalization and have provoked major changes, the consequences of which are hard to foresee. As a result, it becomes increasingly evident that the various processes of globalization, with their ambivalent knock-on effects, overload the confines of classical nation-state policy. The controlling principle of the free market, which prevails today, proves itself unable alone to link economic efficiency, social justice and ecological security in a compatible manner. It is even less able to create or safeguard lasting peace, democratic participation and cultural variety if it is not borne by a consensus over fundamental value-related issues. For this, we need, on the one hand, regulatory policy measures which are able to steer market economy competition in the desired direction, and on the other, a guarantee of compensatory investment in order to ensure the equality of needs and opportunities of all people.

Globalization today requires a world-wide structural policy aimed at long-term social and sustainable development. It is therefore not primarily a matter of "handing over some prosperity" to the poorer countries and people, but of creating a global order which gives all concerned fair and to some extent equal opportunities. This necessitates a Global Governance Policy creating framework conditions which favour development, and take account of the increasing differentiation of political levels on a global scale. In this context, a regulatory model based on a joint political process of sharing sovereignty between state and non-state players at various levels of activity (local, national, regional and international) is currently under discussion. Regulatory policy, as well as deliberate intervention at national and international levels, must refer primarily to the following areas.

1.1 International Legal Order and Security Policy

Global control in accordance with the principle of subsidiarity will only be successful if the community of states is able to agree on a fundamental international legal order with corresponding legal principles. The basis of this is for all countries to create the preconditions for legal security and respect for human rights in their own areas, and to provide opportunities for political participation to the population. For this, it is also necessary to strengthen the global rule of law with clear statutory rules, mechanisms for resolving conflicts and sanctions. In this context, it is imperative to increase the status of institutions such as the International Court of Justice in The Hague and to guarantee binding recognition of their rulings. In addition to institutionalised, long-term forms of international cooperation in the form of preventive security policy, there is also a need for improved mechanisms for short-term mediation in and resolution of conflicts in order to prevent, at any cost, military escalations and open armed conflicts.

The acceptance of binding world-wide frameworks and the global rule of law, however, also requires a minimum of shared values, and in particular mediation procedures for normative conflicts. Inter-cultural dialogue on universal values as a basis for common actions will only be possible if we are able to recognise the ‘otherness’ of the others, and if the individual cultures are prepared to continue the dialogue. This is the only way to change from an unbalanced community of teaching to a community of learning based on equal opportunities. This kind of dialogue certainly constitutes a particularly challenging form of mediation in cases of conflict because it is a matter not only of reaching pragmatic compromise, but of being open to the values of other cultures.

1.2 Self-Responsibility for Economic and Social Policy

The main responsibility for contributing towards overcoming poverty and underdevelopment through sound economic and social policy lies with the individual countries themselves. Only they are able, ultimately, to create the preconditions for successful participation in the global economy. These include, in addition to democratic reforms and legal security, an economic framework which promotes initiative, as well as good governance. In addition to investment in assets and human capital, considerable significance is attached to fair ownership with effective protection and balanced distribution of ownership and property, as well as fair and growth-promoting tax legislation. Furthermore, a key role is played by the creation of internal economic stability through the independence of financial institutions, strict bank supervision, fighting against inflation and state budget discipline.

Constantly low inflation rates are a decisive indicator of a healthy macro-economic environment. Grave fluctuations in the general price level make it more difficult for producers and consumers to distinguish relative price changes from absolute ones. If the information content of the relative prices falls, there is a risk that resources could be misused, with detrimental consequences for growth and employment. Countries with high inflation rates and budget deficits are therefore hardly attractive as locations for international capital. A stability-orientated policy is also easily justified from a social and ethical point of view: inflation is antisocial because its effects are felt primarily by the weak and the poor. Those in a better economic position, on the other hand, can more easily escape the negative effects of high inflation by fleeing into tangible assets or going abroad. As a consequence, inflation is never a suitable tool for solving economic and social problems.

In addition to macro-economic stability, high investment in real capital is a further precondition for successful participation in globalization. If, in an economy, investments grow faster than the work deployed, the capital stock per worker (capital intensity) increases and consequently the productivity of work tends to do so as well. Ultimately, this means that the national income increases. Countries which, for instance, promote the willingness to invest with fiscal policy measures are therefore more likely to benefit from the globalization process than those which discourage investors through lack of infrastructure, trade monopolies, an unclear legal situation, overblown administrations or excessive corruption. Not least, empirical studies have shown that a high degree of openness in an economy in the form of free movement of goods and cleverly liberalized capital markets makes a major contribution to the achievement of high growth rates. This facilitates the necessary importation of technology by bringing in capital, encouraging the inflow of foreign direct investment and through other forms of international joint ventures.

Investment in people (food, health, education), i.e. the formation of human capital, plays a central role. Empirical studies show a clearly positive correlation with economic growth. Thus, for instance, the world-wide gap in per capita income points towards a clear link with the differences in the duration of schooling. In a world in which simple skills are being increasingly overtaken by machines, and in which state-of-the-art communication and information technologies penetrate the work process, investing in human capital is at least as important as investing in real assets. Countries which neglect this task are to a certain extent destined to lose out in globalization.

Economic and social policy are linked to one another. Thus, the economic policy measures mentioned above, and a future-orientated, broad-impact technology policy which is tuned to the actual situation are suitable instruments to reduce poverty. Conversely, a social policy which increases occupational flexibility through social security and promotes human capital is the basis for economic performance and competitiveness, and therefore, for successful participation in globalization processes. The scope for a social form of economic policy, on the one hand, and the promotion of competitiveness through social capital, on the other, should therefore be systematically analysed and used where possible for successful participation in the global economy. All these measures would largely make a structural adjustment policy imposed from outside (International Monetary Fund) with its problematic social consequences, superfluous.

Where these measures do not take hold, or where they reach their limits, it certainly remains a primary task of social policy to combat absolute poverty with all available means. Otherwise, concern for the poor and the excluded remains mere lip service. Compensatory measures should be developed to ensure that at least the basic needs of those population groups who lose out in the economic globalization process can be met. This also applies in cases of unavoidable structural adjustments in the framework of debt restructuring.

At international level, development aid from the rich countries can never replace the individual efforts of the developing nations and countries with economies in transition, but may usefully supplement them. As a type of global social compensation, it can provide an important impetus, and therefore remains indispensable. Development aid is all the more successful, however, where it does not limit itself to transfers pure and simple, but makes a structural contribution towards the process of development.

1.3 Reform of the Global Economic Order and of the International Financial System

Even if the opportunities to benefit from globalization open to a country initially depend on the country itself, we should not overlook the fact that, today, the effectiveness of national policy measures is limited. For this reason, there is an additional need to structure global economic competition in order to give all involved fair and more or less equal opportunities. Such an order must contribute especially towards the limitation of countries’ ability to use a position of power in the international structure for one-sided economic advantage.

The present global trade order within the framework of the World Trade Organization has contributed towards considerable reductions in trade barriers, which also benefit a large number of developing nations and countries with economies in transition. Opening markets to products from these countries, their preferential treatment through preferential customs rates and similar arrangements, foregoing one’s own trade-related subsidies and the willingness to invest in poorer regions, however, remain important demands which have not by any means been exhausted. How important appropriate reforms are is shown, for instance, by the negative consequences of the European Union’s agricultural policy for poor developing countries in particular.

However, even the global trade order itself needs to be developed if it is to facilitate fair competition in the global economy. This includes, on the one hand, international competition law which prevents the development of a concentration of economic power by applying clear rules, reliable controls and effective sanctions. On the other hand, social and environmental standards need to be developed and enforced, for example, the labour standards of the International Labour Organization, to prevent expansion of global trade harming the poorest of the present, as well as of future generations. It should certainly be remembered here that new protectionism among the industrialized nations should not be promoted under a new name, as the countries of the South and East fear, not without justification.

There is a similar need for action to reform in the global financial order, as has been shown once again by the turbulence in the financial markets of Asia, Russia and Latin America. Governments need to create functional bank supervision in all countries in order to ensure better reserves against banking risks (e.g. capital cover rules). Since the volatility of the international financial markets poses a particular risk to financial stability, and thus to the opportunities for growth open to the developing countries and the countries with economies in transition with barely-developed financial systems, the question arises as to whether a time-limited restriction of the inflow of short-term capital is not a suitable countermeasure. Also, the discussion on introducing a tax on foreign currency transactions, intended to reduce the attractiveness of short-term currency speculations, is by no means closed.

A special matter of concern for the churches and many other civil society groups on the threshold of the next century is of generous debt release, especially for the poorest countries which otherwise have virtually no future prospects. This kind of release is, however, only helpful and justifiable if it primarily benefits the poor and the main population (e.g. through counterpart funds). Making this a condition of this aim is indispensable, not least in order to prevent loans being taken up recklessly in the future. The greater the willingness of the debtor countries to do so, and the more determined they are to introduce necessary economic and social reforms, the more generous the release should be.

Debt problems can certainly not be entirely ruled out in the future, since it is never possible to calculate all risk factors, even with good governance and considerable prudence (price falls for exports, exchange rate fluctuations, ruinous competition). We need international insolvency proceedings for such cases aimed at including the basic premise of bankruptcy law and the law on composition proceedings, as well as of exemption from attachment, in international legal relations. In this way, one could counter imprudent granting of loans, react more quickly and more effectively than previously in the event of payment problems occurring, and consequently reduce the likelihood of new, long-term debt crises.

1.4 Global Environmental Policy

Environmental damage occurring in the past at regional level has now taken on global dimensions (the greenhouse effect, the hole in the ozone layer) and nationally operating environmental policy has mostly reached its limits, particularly in climate protection. As a result, the need for an internationally coordinated approach towards cross-border effects has grown continually. Because of contradictory state interests, it has, however, proved difficult to implement effective international agreements, as is shown by the sobering discussions on ecology at the Earth Summit held in Rio and at the conferences to implement the Conventions concluded there.

A global environmental policy aimed at resolving these shortcomings is a transverse political task which must be coherent, and involve all policy areas. It must focus on creating an economy and lifestyle which are both socially and ecologically acceptable. Here, priority must be given to preventive measures which avoid wasting resources and ecological overcropping, rather than to subsequent compensatory measures. Because of their high use of resources and their politically, economically, and socio-culturally dominant role, the rich industrialized nations and the rich in the South have a particular responsibility here. This kind of policy is in line with the long-term self-interest of the industrialized nations themselves, but is also an aspect of long-term development policy because it has a major impact on future development opportunities, in the South and East in particular. All this requires forward-looking, courageous structural adjustment in the North within its strategy of sustainable development.

2. Players

2.1 Nation-States and Communities of States

The above considerations have shown that both trained human and social capital, and institutions which can sustain a corresponding legal, economic and social order, are vital to the creation of opportunities for a country to benefit from globalization. The main responsibility for structuring these location-related social sub-systems, and hence for the common good, remains with the nation-states in spite of losses of sovereignty.

Nevertheless, one should not overlook the fact that the effectiveness of national policy measures on social and economic development is now limited. For this reason, there is an additional need, as was stressed above, to control global economic competition at the various regulatory levels.

The intensification of mutual transnational relations requires a federal system of shared sovereignty in which, without loss of coherence, competences are divided among the corresponding levels in accordance with the principle of subsidiarity. The nation-state as a territorial structure remains, in this case, the load-bearing pillar since it carries out an indispensable function as a hinge or link between the various levels of activity. However, its role undergoes fundamental changes, both internally and externally. In many problem areas, the state is no longer able to draft solutions independently, but relies on cooperation with social groups, such as transnational enterprises and the world-wide networked NGOs. It is responsible for balancing the interests between the various players and for implementing the agreements reached at international level.

In the light of increasing regionalisation and particularisation, which runs counter to globalization, local and regional policy takes on a major role in a federal system. The gradual transfer of nation-state authority to international institutions can be prepared through regional integration projects. Stronger regional cooperation between the developing nations and the countries with economies in transition can increase their ability to use the opportunities for globalization, and by that means strengthen their position in the global economy, or so the experience of the European Union leads us to believe. In addition to the supranational institutions, at the centre of which stands the United Nations, international regimes such as the World Trade Organization, with its agreements and rules, or the Framework Convention on Climate Change with its contractual implementation, will become ever more important control instruments in the architecture of a global order.

2.2 Transnational Enterprises

The cross-border activities of transnational enterprises, which are becoming increasingly independent of national arrangements, contribute to their increasing power and influence at global level, and therefore in the nation-states as well, especially if these countries are small or economically and geostrategically unimportant. With this increase in power, however, their responsibility for a humane structure of world trade also increases. At least in parts of the private economy, there is a growing awareness that market expansion can only be successful if it is accompanied by political and economic stability, and by social compensation.

Transnational enterprises must therefore understand that they must accept this responsibility in their own interest in order to secure the conditions for successful global trade in the long term. Their commitment should particularly cover those areas in which the private economy can make tangible changes. These clearly include striving for a global economic regulatory policy which is able to guarantee forward-looking regulation of international financial markets in order to avoid financial crises such as those in East and Southeast Asia or Latin America in future. However, they also mean acceptance of human rights, creation of humane working conditions and implementation of environmental protection rules, especially since there are generally valid standards and targets in these areas set out in international agreements, for example in the Universal Declaration of Human Rights, in the Conventions and Recommendations of the International Labour Organization or in the Declarations and Programmes of Action of the Conferences of the United Nations (e.g. Agenda 21 of the Earth Summit held in Rio).

Transnational enterprises can support the implementation of such standards by, on the one hand, publicly fighting for them in the political arena, including at international level, and on the other, ensuring that they are implemented in their own facilities and uncovering unfairness and irregularities instead of hiding them. They will only gain confidence and plausibility if they pursue suitable labour, social and environmental standards within their own jurisdiction. Since they are now major investors, important employers and leading producers in all parts of the world, they have sufficient influence to implement such standards directly, or at least indirectly. This includes such fundamental norms as the right to free trade unions, the prohibition of exploitative child labour and forced labour, and a recruitment policy which does not place anyone at a disadvantage because of their race, religion, gender or ethnic origin. They can also take the initiative to implement standards themselves without waiting until suitable laws are adopted in the country in question. This means, for instance, an undertaking to adhere to higher environmental standards, as well as a willingness to support voluntarily preventive environmental protection measures and to promote the development and spread of environmentally friendly technologies.

2.3 International Civil Society

International civil society has gained in importance in recent years, as is demonstrated by the fact that it has taken an active part in the major world conferences and the subsequent negotiations to implement conventions. Because of its world-wide networks, it can make a major contribution to the process of globalization by pursuing it critically and by offering innovative suggestions. Many governments and international organizations work with NGOs in many areas now, taking advantage of their specific strengths. They are frequently well organised, work professionally and have extensive specialist knowledge. By virtue of close international cooperation, they have considerable knowledge of local situations, as well as direct contact with the population, which is highly significant for development cooperation based on concern for the poor. This facilitates effective assistance for self-help orientated to actual needs.

Civil society players are also becoming increasingly important in public relations and lobbying because they involve as wide a spread of the population in their work as possible. Since they are largely independent of state politics and, in contradistinction to political parties, do not depend on majorities of voters among the population, they are able to follow new paths, take path-breaking initiatives and seize on important problems which might otherwise remain subject to political taboos. In the Western democracies in particular, where virtually every interest group has its political lobby, development policy NGOs are important because they are able to represent the interests of the poor and the victims of globalization, who otherwise would be virtually unrepresented.