Global Policy Forum

By Paul Hohnen*

In the run-up to the G8 summit, Paul Hohnen considers how we have got to where we are - and how government might break the news to the people that major changes are required - and still get re-elected

Corporations and globalisation sometimes seem to get blamed for all the ills in the world. It is easy to forget that there have been at least three great waves of Globalisation in human history, and corporations have only played a relatively recent – if decisive - role.

Whether CEOs and shareholders like it or not, how they act in the coming years will largely determine the fate of humankind. In turn, they are set to receive the attention that this role implies from government and the rest of civil society. And, whether NGOs and governments like it or not, corporations must be seen as decisive when it comes to generating the finance, technologies and entrepreneurship necessary to put us on the road to sustainability.

In the run-up to the G8 and UN Millennium Development Goals Summits, here's a brief reminder of where we are, how we got here, and what our political leadership can do to help corporations meet growing social expectations and physical realities.

Pre-corporate globalisation

Taking the long view, the First Wave of Globalisation - defined here as the moment when ‘the international' began to have profound impacts on ‘the local' – probably began shortly after sedentary agriculture enabled the rise of empires, such as the Roman, with standing armies and rulers with appetites for foreign conquest and goods. Numerous parallels with modern times can be found during this period. On the trade front, anthropological evidence suggests that humans have communicated and traded over vast distances for thousands of years. Marco Polo may have been the first Westerner to open a supply chain with China, but he didn't invent the concept.

This ‘pre-corporate globalisation' was not pretty. It revealed a number of disturbing human traits. One was a predisposition to over-use local resources, and then either move on, or import them from somewhere else. Another was to pay as little as possible for labour and natural resources. Many of the architectural legacies of this period which we now visit as tourists, for example, were built by the sweat of slave or cheap labour, with not a corporation in sight. For millennia, monarchs and religious leaders, using a mix of fear, faith and greed as motivators, applied this approach.

Nation state globalisation

The Second Wave of Globalisation started during the great colonial period that followed in the wakes of Diaz, Columbus, da Gama, and the other great maritime explorers. At this point of history, decisions in the capitals of emergent nation states began to change local societies fundamentally right around the globe. While ‘the national interest' still provided the prime political motive for colonial expansion, and foreign conquests increasingly supplied the labour, markets and raw materials needed by growing populations, the state created a new tool – the chartered corporation – as a means of raising the necessary investment and managing trade . In doing so, it also created a new actor in society, the investor.

In general, corporations such as the Dutch and British East India Companies, and their investors, adopted the same objectives and moral behaviour of the First Wave: namely, to secure the greatest returns at the least cost to the home state. If this meant slavery, and disruptive changes in the agricultural practices and cultures of the colonies, these were unfortunate commercial necessities. Externalities. In this respect, the expectations of the emerging ‘shareholder king' matched those of monarchs and governments.

A series of developments in the early 20th century, however, set the stage for major changes to the dominant state/corporation paradigm and pave the way for the Third Wave. Traumatised by an economic depression, two world wars and advent of atomic weapons, governments were forced to consider the need for a new world order. The United Nations and Bretton Woods institutions were created, the Universal Declaration of Human Rights crafted, and the process of de-colonisation commenced.

The European Union was perhaps the most far-reaching example of this determination among nation states to work together, rather than conduct war. This ‘brave new world' represented a noble attempt to harness the best of human nature, while discouraging the worst. With the help of the trade union movement, the importance of defining and respecting the rights of labour were established. Slavery and child labour, while still practiced, were condemned. Nature, for its part, fared less well, still being regarded as a boundless and self-replenishing source and sink for all humankind's needs and wastes.

By the end of this era, corporations had become increasingly independent of government, and had grown in reach and power. Indeed, some had grown so large that action was taken to break them up. Overall, however, as long as corporations provided an ever increasing number of jobs, provided a good return to shareholders, paid their taxes and delivered goods and services, how they did this was not questioned by the wider society. Symbolically, the moon landing in 1969 marked the end of the Second Wave, and the beginning of Third Wave of Globalisation. The further we reached into space, the more we realised our problems, and their solutions, were back on Earth.

‘One planet, one future'?

The Third Wave of Globalisation is characterised by several distinguishing features from the previous two eras.

First, there was a major evolution in the structure of society. While the nation state and the corporation continued their formal dominance, civil society emerged as a powerful third force. Whether in the form of consumers, political parties, unions or non-government organizations, these stakeholder constituencies assumed a new level of importance, and have raised wide-ranging questions about the impacts, legitimacy and purpose of economic development.

Second, modern telecommunications, including television and the internet, have changed politics forever. These technologies created a new level of awareness about our actions, and forced a review of notions of transparency and accountability.

Third, this same technology confronted us with the fundamental contradiction between unlimited economic growth, and the resources required to maintain that growth. A satellite first revealed that holes were appearing in the ozone layer. The fastest computers in the world are now working on climate change modelling.

More than any time in history, humankind faces rival and increasingly incompatible viewpoints and realities, with the role of corporations front and centre.

On one hand, the market continues to carry on with a mind-set forged during the previous two eras. Finance, goods and services are exchanged worldwide in historically short periods and large volumes. Trade and economic policies are still framed as if there are boundless raw materials, and on the assumption that externalities can be addressed by expanding economies and new technologies.

On the other hand, it is now known that economic growth as we know it cannot continue. While delivering unprecedented health and prosperity to many, the First and Second Waves constituted planetary asset-stripping on a wholly unsustainable basis. We are using up natural capital faster than it can replenish itself. We are living beyond our means: we are now in a ‘Grave New World'.

While the reality that ‘business as usual' cannot continue is broadly recognised (for example, by a series of UN summits and public opinion polls), the underlying policy framework, and the market, continues to encourage precisely that: more of the same. And this is the crux of the current political dilemma. Governments mostly get elected by promising ‘more' and ‘better' jobs and living conditions, or by offering better protection from one or other enemy. ‘Globalisation' is now offered as a cornucopia precisely because this offers the vision of a fresh spurt of economic growth by tapping into developing world markets and labour.

While the aims of the UN Millennium Goals, including the alleviation of poverty, represent a genuine and necessary framework for the search for global solutions to global problems, it collides with the UN's own Millennium Ecosystem Assessment's findings. But how to break the news to the people that major changes are required, and to still get re-elected?

The answer may be hard, but not impossible. Polls, for example, suggest that the majority of the world's people think the world is going the wrong direction. The failure by politicians to address this feeling may actually be adding to the public's distrust of politicians. Some in business have actually moved ahead of government in recognising the problems, and are beginning to address them.

The G8 and ‘UN Millennium + 5' Summits this year, offer world leaders a timely opportunity to address these contradictions. Among other things, this means: