NOtes

DEMOCRACY AND GLOBALIZATION

If the Seattle World Trade Organization (WTO) meeting proved anything, it was that globalization is too important to leave in the hands of trade ministers. With their narrow focus on bargaining for national economic interests, the ministers are ill-equipped to deal with the “new” issues of environment, consumer, and labor demands put forward by restive constituencies. And beyond these issues are larger questions about democracy, sovereignty, and global governance which will hold center stage well into the new century. The New Economy Information Service has reviewed a number of post-Seattle commentaries in an article entitled, “After Seattle, What’s Next?” An excerpt is shown below (the full text can be found in "Related Documents" above):

The next U.S. administration will have to grapple with the dilemma of how to have it both ways: expand the economic benefits of trade and promote labor, consumer, and environmental improvement. To do so, it will help to consider the relationship between markets and democratic institutions. One place to start is Harvard’s Dani Rodrik, who more than any other mainstream economist has put democracy front and center in economic development theory. In an October 1999 presentation to the International Monetary Fund (IMF), he argues that a country’s market economy functions best when it is "embedded" in a set of democratic regulatory institutions. These he groups into five categories: property rights, market regulations (anti-trust, securities regulation, financial supervision, product safety rules, etc.), macro-economic stabilization (fiscal and monetary agencies like central banks), social insurance (social security, unemployment insurance, etc.), and conflict management mechanisms (independent judiciary, free elections, unions, etc.). Modern markets need all five institutions, Rodrik believes. There appears to be growing support for this view–especially since the Asian financial crisis of 1997--even though debate still rages about the particular forms these institutions take.

For developing countries to acquire the full set of market enabling-institutions, democracy is essential, Rodrik holds. He regards democracy as a kind of "meta-institution," overarching the others and facilitating their development. In this he echoes India’s Nobel Prize-winning economist Amartya Sen, who cites the "instrumental" value of democracy in mitigating economic crises. "Many economic technocrats," Sen writes, "recommend the use of economic incentives (which the market system provides) while ignoring political incentives (which democratic systems could guarantee). This is to opt for a deeply unbalanced set of ground rules."

As evidence for democracy’s role, Rodrik musters considerable empirical research showing that democratic countries have better institutions, better markets and better economic outcomes than authoritarian states. The IMF is thus advised to give greater emphasis to fostering democracy. In Rodrik’s words:

While I am a great believer in institutional diversity, I see no argument that would make it appropriate for some governments to deny their citizens basic political rights such as freedom of speech, the right to vote and stand for political office, or freedom of association. If there is one area where institutional conditionality is both appropriate and of great economic value, it seems to me that this is it.

Some important figures in the international financial world have taken this pro-democracy view a step further. In a remarkable speech to the Industrial Relations Research Association on January 7, Joseph Stiglitz, the World Bank’s outgoing Chief Economist, argues that economic democracy, not just political democracy, is “essential” to development:

I would argue that economic democracy is essential to effect the systemic change in mindset associated with the democratic transformation, and to engender policies that make change—which is at the center of development—more acceptable. …By becoming advocates of stronger workers’ rights and representation, at every level—from the workplace, to the local, regional, and national level, to the international level—I believe that we can achieve much more than improvements in efficiency. Labor unions and other genuine forms of popular self-organization are key to democratic economic development. That is why today, the World Bank supports the Labor Standards of the ILO, including the rights to organize and collectively bargain.

Stiglitz is caustic in his criticism of the international financial institutions and the "Washington Consensus" for imposing radical market reforms on developing countries before the full package of underlying institutions are in place. This imbalance, he believes, poses a threat to democracy:

Too often, in advising countries on policies that they should pursue, the focus has been too narrow. While potential efficiency benefits were stressed, the downside risks were given short shrift; worse still, little attention was put on sequencing—ensuring that the country had in place the institutions that would enable the country (and especially the most vulnerable workers within it)—to bear the risks. And in exposing the country, and its workers, to these risks, we not only put at risk the lives and livelihoods of the workers, but more fundamentally the systems of economic and political democracy.

Rodrik and Stiglitz represent the leading edge of a pendulum swing away from an earlier view which saw democracy as a hindrance to development toward a new one which sees democracy—with its full array of market enabling institutions—as not only compatible with, but even essential for, the full development of successful market economies.

This new paradigm, as its advocates like to call it, also provides a framework for evaluating the debate over the rules of international trade and investment which attracted so much attention in Seattle. Specifically, it suggests three fundamental questions, all of which are based on the assumption that markets are good things and global economic integration, if democratically grounded, can be a powerful force for reducing poverty and spreading prosperity more widely:

1) How can global market rules become better balanced; that is, to what degree can they replicate the broader range of enabling institutions which undergird the more successful markets at the national level?

2) How can the process by which global market rules are adopted and enforced be democratized; that is, made more representative, participatory, and transparent--and thus more acceptable and credible to citizens?

3) Can global market rules help strengthen democracy and institutional balance at the national level, or at least not undermine them?


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SOCIALIST INTERNATIONAL DEBATES 'THIRD WAY,' IGNORES TRADE UNIONS

British Prime Minister Tony Blair pushed for the “Third Way,” French Prime Minister Lionel Jospin pushed back, while German Chancellor Gerhard Schroeder tried to split the difference during the twenty-first Socialist International Congress in Paris November 8-10. None spent much time discussing the role of trade unions, which led to public criticism of the event by the leader of the International Metal Workers Federation.

“Social Democratic Parties are torn between embracing the U.S. model and keeping key elements of the welfare state they helped build,” reported Dick Wilson, one of three SDUSA delegates to the event. “In the process, they seem to be giving short shrift to the trade unions, their bedrock constituency.” Rita Freedman and Joel Freedman also attended the Congress.

Of the principal European heads of state who spoke at the SI, Tony Blair went the furthest in embracing the market economy and rejecting aspects of “Old Labour” welfarism. Government must step aside and allow the market a predominant economic role, he argues, while supporting education and training programs to help individuals survive and prosper as market participants. “Today fairness and enterprise do indeed go hand in hand,” he stated. “That is the central modernizing message.”

Jospin, while acknowledging the importance of market capitalism, argued that it is “only an instrument. It needs to be regulated. It must remain at the service of society. In itself, the market creates neither meaning, nor direction nor project.” The French socialists are themselves adopting some business-oriented, privatizing reforms, but Jospin preferred to emphasize a more traditional social democratic approach: “We refuse the merchandisation of societies. Health is not a merchandise. The works of the mind are not merchandise. The work of men is not merchandise. The natural environment is not merchandise.”

Schroeder, perhaps constrained by the political debate within his own German Social Democratic Party, spoke more in generalities about common values: “Fairness, social justice, freedom and equal opportunity, solidarity and responsibility.” As to how to achieve these noble aims in world of competitive pressure, he emphasized the “restoration of stable public finances,” and “providing the necessary skill-upgrading, educational and training opportunities.”

Surprisingly, none of the three speakers, nor the final declaration itself, dealt with the issue of incorporating labor and environmental protections into global economic rules, despite the fact that the SI Congress occurred just prior to the World Trade Organization (WTO) meeting in Seattle. The Blair, Jospin and Schroeder speeches may be viewed in their entirety on the web site of the New Economy Information Service at www.newecon.org (after you sign in or register, look in the Third Way tab under Social Democracy). Also available is a speech by President Clinton at a European social democratic “Third Way” conference in Florence, Italy, which took place shortly after the SI Congress.

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MCCARTHYISM REVISITED

After years of accusations that social dems were “McCarthyites,” some of our ilk may now be catching flak for being too anti-McCarthy. The occasion of this pendulum swing is Arthur Herman’s new book on Joseph McCarthy, which puts forward the view that the late Senator from Wisconsin was an unfairly maligned patriot who ultimately became a victim of the immense conspiracy he was attempting to expose.

“Not so,” argues John Haynes, co-author of Venona, the groundbreaking book on Soviet espionage in America. Taking issue with this revisionism at a Borders Book Store Forum in Washington, DC, on February 24, Haynes criticized McCarthy for destroying the post-War anti-Communist consensus by demagogically using it for partisan ends. Excerpts from his talk are shown below:

“Let me say to start that the publication of Arthur Herman’s book has made my life easier. For a number of years Harvey Klehr and I have been denounced for attempting to rehabilitate Joseph McCarthy, something we had not done. Now with Arthur’s book out with its defense, albeit a qualified one, of McCarthy, people can denounce Arthur for what he did rather than Klehr and me for what we did not do. Arthur, my thanks to you for diverting so much flak.

“I think Arthur Herman’s book does an excellent job of correcting the excessive, indeed hysterical demonization of McCarthy that has been typical of far too many historical accounts. I do not, however, share his positive appraisal, qualified though it is, of McCarthy. “In my view the American Communist party was a real danger to American democracy in the context of the early Cold War. Its chief threat was that of political subversion, not espionage. It is difficult to imagine that the political mobilization necessary for America’s commitment to the early Cold War would have taken place had Communists and their allies retained the influence they had achieved in the labor movement and the broad New Deal coalition.

“But from 1946 to 1950 an internal civil war took place within labor and liberal political institutions over the direction of postwar liberalism. Initially, the Popular Front liberals of the Progressive Citizens of America appeared to be the stronger, but by 1949 the anti-Communist liberalism of the American for Democratic Action had triumphed.

“Initially, it looked as if Henry Wallace and the Progressive Party with its secret Communist leadership might wrest the mantle of heir of the New Deal from a faltering Harry Truman and the Democratic Party. But after a weak start, Truman reformulated the New Deal domestic program for the postwar era and adopted a policy of confrontation with Soviet policy that transformed him into the greatest of the Cold War liberal presidents. When the 1948 election was over, Wallace and the Progressive Party had ceased to be a viable alternative to Truman and the Democrats.

“And, finally, the last bastions of Communist institutional strength were destroyed when the CIO expelled it Communist-led unions. By 1950 only remnants remained of the once significant Communist role in mainstream politics, civic institutions, and the labor movement. The heroes of this, and they certainly were heroes in my view, were ADA leaders such as Reinhold Niebuhr, Eleanor Roosevelt, and Arthur Schlesinger, Jr., anti-Communist liberal politicians such as Hubert Humphrey and Paul Douglas, and anti-Communist labor leaders such as Walter Reuther and Philip Murray. “Soviet espionage also had been significant, but again, not all, but much of this was gone by 1950. The largest Soviet World War II espionage networks had been destroyed or neutralized in the wake of Bentley’s defection in 1945, the leads into Soviet espionage provided by Venona to American counter-intelligence, by the FBI’s full-court press against the CPUSA, and President Truman’s loyalty-security program for government employees. Soviet espionage continued, and there is a good deal we do not know about what continued in the late 1940s, but the level appears to have need considerably reduced.

“…By 1950 the shockingly high level of Soviet infiltration of U.S. government agencies that had existed during World War II was largely gone. And, at the same time, politically an anti-Communist consensus prevailed not only in the Republican Party, but in the Democratic Party and the major institutions of liberalism.

“Enter, then, Joseph McCarthy. McCarthy in my view threatened that anti-Communist consensus. He attempted to make anticommunism a partisan weapon. Senator Joseph McCarthy painted the New Deal as part of a disguised Communist plot and depicted Truman administration leaders Dean Acheson and George Marshall as participants in a Communist conspiracy. There is no basis in Venona or in the Soviet archives for implicating Acheson or Marshall as participants in a Communist conspiracy or for describing either the Roosevelt or the Truman administrations as the instrument of a Soviet conspiracy. To be sure, some officials, including some very high ones, in those administrations displayed naiveté toward Soviet espionage, and internal-security policies until the late 1940s were notably weak, but there is no evidence that would justify McCarthy’s charge of administration complicity. There were, indeed, some government officials, including a few senior ones, who betrayed the United States by assisting Soviet intelligence, but these persons were betraying Roosevelt and Truman and their administration colleagues as well as betraying the nation as a whole. “Normal democratic politics cannot proceed when one side in a partisan battle regards the other as the enemy of fundamental values. Sometimes it is true, of course, that a force in the political contest does threaten the fundamental values or the very shared rules of government or the institutional existence of others, and when that happens with major political forces one has a genuine systemic crisis and outcome may be civil war, as it was in 1860 when Southern political leaders felt that the policies of the newly ascendant Republicans threatened slavery, an institution then fundamental to Southern society. Or it may be true but the political force that threatens fundamental values is a not a powerful one and can be marginalized, as American Communists were in the late 1940s, while leaving the major participants in democratic politics largely unaffected. But sometimes it isn’t true, and we have a crisis generated by demagoguery and malign partisan zeal when one side falsely or mistakenly attempts to paint the other as illegitimate. In my view that is what McCarthy attempted to do, and is why I view his role as a negative one.

“He did not succeed, and did not even come close. As I said earlier, I do not regard McCarthy as some sort of monster who terrorized the nation and seriously threatened its democratic values. Rather than the Great Satan he is depicted as in many histories, he was a minor devil. In my view the new evidence in general vindicates the broad anti-Communist consensus of American politics in the late 1940s and 1950s but does not vindicate Joseph McCarthy in the particular.”

From Amazon.com comes this review of Venona: “With this new volume, John Earl Haynes and Harvey Klehr build upon their groundbreaking work in The Secret World of American Communism and solidify their reputations as the foremost historians of Soviet espionage in America. In Venona, they provide a detailed study of how the United States decrypted top-secret Com-munist cables moving between Washington and Moscow. This account, based on information unavailable to researchers for decades, reveals the full extent of the Communist spy network in the 1940s. At least 349 citizens, immigrants, and permanent residents of the United States had a covert relationship with Soviet intelli-gence agencies, among them Harry White (assistant secretary of the treasury in FDR’s administration and the Communists’ highest-ranking asset) and State Department official Alger Hiss, whose association with the Soviets had been hotly debated since the mo-ment he was first publicly accused in 1948.”

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BITS & PIECES:

NEW PBS DOCUMENTARY ON RUSTIN
Word is out that PBS is compiling material for a new documentary on the life of Bayard Rustin. It’s time to send in your old photos, audio tapes, video clips, if you have them. Stay tuned for the timing of this production.

COLD WARRIER ALERT
Check out the January 3 issue of The New Republic for a Ronald Radosh review of Arthur Herman’s new book, Joseph McCarthy: Reexamining the Life and Legacy of America’s Most Hated Senator.

FAN MAIL
. . .This is a fan letter from a newspaperman who finds the stuff you and the NEIS are putting out enormously useful. As you may know, I’m immensely interested in globalization and, especially, global governance and where it’s going, with the result that Chicago Tribune readers get a pretty steady dose of this topic. I try to keep up with what’s going on, but it’s a chore, especially since so much is being written on it these days. For that reason if none other, your compilations are terrific, and gratefully received. What prompted this note was your “After Seattle, What’s Next?” which I’ll be rifling for stories over the next couple of weeks and which I’ve also assigned to a seminar on international relations which I teach at Northwestern, as a great summation of the state of play in a debate that will dominate and shape much of the lives of my students. Keep me posted on whatever you do, and keep the good stuff flowing.
Cheers,
Dick Longworth,Chicago Tribune

REMEMBERING OUR HEROES
NOtes Reader John Wade of Amherst, MA, wrote to request that we remember the heroes of social democracy like his friend Herb Croner of Dallas, Texas, who endured seven years in German prisons and concentration camps because he was a socialist, “a category of humanity Hitler hated almost as much as he hated Jews.” John writes that “Herb had to make a decision: to either leave Germany and escape, or take a stand and fight. He decided to take a stand and he went underground with the Socialist opposition to Hitler. And he was arrested in 1938 by the German Gestapo and was sentenced to life imprisonment, serving seven years in death camps—Dachau, Bergen-Belsen, and Auschwitz.” Miraculously, he escaped at war’s end and came to America, where he was active in labor and liberal causes until his death in 1984.