David Held: Washington gets it wrong

The Washington economic and security doctrines are subverting the benefits of globalization, according to David Held. The world needs new multilateral economic and security institutions

We live in a world of “overlapping communities of fate” where everyday life – work, money, beliefs, as well as trade, communications and finance, not to speak of the environment – connects us all with increasing intensity.

The word for this story is “globalization” and, since 1945, we have sought to build international institutions that might regulate and govern aspects of it based on universal principles of equality of all human beings.

Sixty years on, the international community has reached its next clear moment of decisive choice. I am an optimist. It is still possible to build on the achievements of the post-World War II era. But we have to be clear about the dangers and difficulties. Four developments reinforce each other and point in a negative direction:

• a lack of progress towards the United Nations (UN) Millennium Development Goals setting minimum standards of living;
• emerging concern over the regulation of world trade, and a danger that trade negotiations will worsen, not redress, global inequality;
• the complete failure to address global warming;
• the erosion of the multilateral order symbolized by the UN, but extending through a range of international agreements and agencies.

The post-war multilateral order is threatened by the intersection and combination of these humanitarian, economic, environmental and political crises. More seriously, there is a driving force taking them from bad to worse.

It can be summed up in two phrases: the Washington Consensus and the Washington security strategy.

These policy packages are, of course, not the sole cause of globalization in its current form. But together they have promulgated the view that government is to be distrusted and that regulation threatens freedom, impedes development and restrains the public good.

Both need to be replaced by a progressive framework that:

• sustains the enormous enhancement of productivity and wealth that the market and contemporary technology make possible;
• ensures that the benefits are fairly shared;
• addresses extremes of poverty and wealth as part of a commitment to overall security that engages with the causes as well as the crimes of terrorism, war and failed states.

I will call the approach that sets itself this task, “social democratic globalization” and a “human security agenda”.

The Washington Consensus
The Washington Consensus can be defined as an economic agenda that advocates, among other things, free trade, capital market liberalization, secure property rights, deregulation and the transfer of assets from the public to the private sectors. It has been the economic orthodoxy for most of the past 20 years in the Organisation for Economic Co-operation and Development, a club of rich countries, and was, until recently, prescribed without qualification, by the International Monetary Fund and the World Bank as the policy basis for developing countries.

Some of the proposals and advice of the Washington Consensus may be reasonable. Others are not. Taken together, however, they represent too narrow a set of policies to create sustained growth and equitable development. The dominant economic orthodoxies have failed to generate sustained economic growth, poverty reduction and fair outcomes in many parts of the developing world. In particular, it has been found that one of the key global factors limiting the capacity of the poorest countries to develop is the free movement of capital. While tariff liberalization can be broadly beneficial for low-income countries, rapid capital liberalization can be a recipe, in the absence of prudential regulation and sound domestic capital markets, for volatility and unpredictability in capital flows. As Geoffrey Garrett, of the University of California at Los Angeles, has shown, countries that have rapidly opened their capital accounts have performed significantly less well in terms of economic growth and income inequality than countries that have maintained tight control on capital movements but cut tariffs.

Furthermore, the experience of China and India – along with Japan, South Korea and Taiwan in earlier times – shows that countries do not have to adopt liberal trade or capital market policies in order to benefit from enhanced trade and to grow faster. All these countries have grown relatively fast behind protective barriers, and this growth fuelled rapid trade expansion. And, as they have become richer, they have tended to liberalize trade policy. (China’s deep tariff cuts are a particular feature of the past decade). Hence, as Dani Rodrik, of Harvard University, has emphasized, this shows only that countries tend to become more open as they become richer: it is not a matter of simple cause and effect.

Countries should concentrate on internal economic integration – the development of human capital, economic infrastructure and of robust national market institutions, to benefit from growth. Initially, this has to be stimulated by state-led economic and industrial policy, though public objectives can be delivered by a variety of actors, public and private. And civil society – trade unions, citizen groups, non-governmental organizations and so on – is an indispensable part of national development. Leaving it to markets to resolve problems of resource generation and allocation will perpetuate asymmetries of life chances within and between nation-states and the emergence of global financial flows that can rapidly destabilize national economies. Weakening governing capacities will often mean cutting back on services that have protected the poorest and most vulnerable. The rise of “security” issues to the top of the political agenda reflects, in part, the need to contain the outcomes that such policies help provoke.

The Washington security agenda
The terrorist attack on the World Trade Center and the Pentagon on September 11, 2001 was a defining moment. In response, America and its allies could have decided that the best way to defeat the global terrorism would be to strengthen international law and enhance multilateral institutions; that it was important that no single power or group should act as judge, jury and executioner; that global hot spots like Israel/Palestine, which feed global terrorism, should be the main priority for coordinated international efforts; and that the disjuncture between globalization and social justice needed urgent attention. They could have decided to be tough on terrorism and tough on the conditions that lead people to imagine that al-Qaeda and its like are agents of justice.

Instead, they have decided quite the reverse. Since 9/11, the world has become more polarized, international law has become weaker, and the systematic political failings of the Washington Consensus have been compounded by the triumphs of new Washington security doctrines.

The rush to war against Iraq in 2003 gave priority to a narrowly conceived security perspective that is at the heart of the new American doctrine of unilateral and pre-emptive war. This agenda contradicts most of the core tenets of international politics and international agreements since 1945. It throws aside respect for political negotiations among states. A single country that enjoys military supremacy to an unprecedented extent has decided under its current president to use that supremacy to respond unilaterally to perceived threats.

The new doctrine has serious implications. Among these is a return to the view of international relations as a “war of all against all”. Once this “freedom” is granted to the United States, why not also to Russia or China; India or Pakistan; North Korea or Iran? It cannot be consistently argued that all states, bar one, must accept limits on their self-defined goals and that this can be called law.

Wanted: a broad security policy
What the world needs is a global security agenda that requires three things of governments and international institutions – all currently missing.

First, there must be a commitment to the rule of law and the development of multilateral institutions that can prosecute a robust form of international law enforcement.

Second, a sustained effort has to be undertaken to generate new forms of global political legitimacy for international institutions involved in security and peacemaking.

Third, there must be an acknowledgement that the ethical issues posed by the polarization of wealth, income and power and, with them, the huge asymmetries of life chances, cannot be left to markets to resolve.

Instead, we are now witnessing a deeply misguided response to terrorism in which the new security agenda of the American neo-conservatives arrogates to the United States the global role of setting standards.

Specifically, we need to link the security and human rights agenda in international law; reform the United Nations Security Council to improve the legitimacy of armed intervention, with credible threshold tests; amend the now outmoded 1945 geopolitical settlement as the basis of decision-making in the Security Council and extend representation to all regions on a fair and equal footing; expand the remit of the Security Council with a parallel Social and Economic Security Council to examine and, where necessary, intervene in the full gamut of human crises – physical, social, biological, environmental – that can threaten human agency; and found a World Environmental Organization to promote the implementation of existing environmental agreements and treaties, and whose main mission would be to ensure that the world trading and financial systems are compatible with the sustainable use of the world’s resources.

To reconnect the security and human rights agenda in this way we need a global covenant that encompasses both the fundamental legal humanitarian issues and social and economic wellbeing, such as basic education and fundamental humanitarian priorities, for example, clean water and public hygiene.

Social democracy at the level of the nation-state means being tough in pursuit of free markets while insisting on a framework of shared values and common institutional practices. At the global level it means pursuing an economic agenda that calibrates the freeing of markets with poverty reduction programmes and the immediate protection of the vulnerable – north, south, east and west. Economic growth can provide a powerful impetus to the achievement of human development targets. But unregulated economic development that simply follows the existing rules and entrenched interests of the global economy will not lead to prosperity for all. Economic development needs to be conceived as a means to an end, not an end in itself.

If developed countries want global legal codes that enhance security and ensure action against the threats of terrorism to be swiftly implemented, then such codes need to be part of a wider process of reform. Only if the much more prevalent insecurities of life in developing societies are addressed can the developed world hope for security from terrorism.

David Held
David Held is the Graham Wallas Professor of Political Science at the London School of Economics and Political Science. His main research interests include rethinking democracy at transnational and international levels and the study of globalization and global governance. Held’s latest book Global Covenant was published by Polity in 2004.