The Winner-Takes-Most Menacing Democracy, Multilateralism

Global Geopolitics Net – IDN InDepthNews

Hyperglobalization – Image credit: Twitter

By Ravi Kanth Devarakonda

GENEVA (IDN) – Securing a fourth term as German Chancellor is not an easy feat. But Angela Merkel is returning to a different Bundestag (German Parliament) after the dramatic rise of the far right in the German election on September 24. Its emergence as the third largest force in Germany is a wake-up call signifying the erosion of trust in the political establishment.

The AfD or Alternative für Deutschland (Alternative for Germany) in many ways comes close to Donald Trump’s White Supremacists in the United States, the PiS (Law and Justice) right-wing nationalist Party in Poland, and the “Knicker-Dharis” of the ruling Bharatiya Janata Party (BJP) in India. (The Knicker-Dharis is the term coined by the historian Sanjay Subrahmanyam in “Is Indian Civilization A Myth?“, are the extreme right-wing nationalists in India who are known for their “fear-mongering against minorities and immigrants.”). They all have a common ideology and political mission: “Getting back our country and our Volk!”

Notwithstanding the repeated projection of Merkel as the “mother figure” of Europe’s powerhouse, many in Germany are feeling increasingly anxious about the economic health of their communities and the prospects of their children and grandchildren. Indeed, those who voted for AfD, according serval reports, are those who are left out of the economy and feel marginalized by the social and political forces.

This runs counter to the endlessly repeated claims of the arch-globalizers that they [people] have never had it so good and that anyway, there is nothing policy makers can do to change the course as it’s all determined by markets and technology that are beyond their control.

There is a growing anxiety amongst policy makers in advanced countries about the compatibility of democracy and global capitalism. According to Financial Times columnist Martin Wolf, this is something of a surprise given that historically globalisation and democracy have moved in close correlation. Some of Wolf’s history is debatable however; not only does he ignore the links between colonial globalisation and political repression in the developing world, his characterisation of the 1920s as one of “de-globalisation” has also been contested by economic historians.

Still there is some truth when Wolf says that today global capitalism is not working for all and that the winners, by using their economic power to shape favourable political outcomes, are undermining the trust and solidarity needed for democracy to flourish

Such concerns extend beyond the advanced economies. In India, for example, an online campaign – “Take back our government – BJP’s Electoral Bonds and Corporate Control” by ‘Bharat Sarkar Bachao Committee’ (Save India Committee) is a pointer in the direction of corporate-capture of political power.

The latest Trade and Development Report of the UN Conference on Trade and Development (UNCTAD) also sees a world of growing anxiety and seeks to avoid pointing the finger at the usual suspects of trade or technology. Rather it argues that rampant financialization, unprecedented levels of private debt and a barely disguised corporate takeover of the public domain, elements that make up what it calls “Hyperglobalisation”, have propagated a super-elite at the expense of too many people in too many places being subject to precarious livelihoods and inadequate standards of living.

Harking back to the political economy tradition of Smith, Keynes, and Galbraith, a key element in UNCTAD’s argument is that “rent” seeking has become a ubiquitous source of profit making and a pervasive source of rising inequality. The Report defines rents as “derived solely from the ownership and control of assets or from a dominant market position”, rather than from innovative entrepreneurial investment or long-term productive investments.

As such, rent seeking has a long, and destructive, history in financial markets and UNCTAD believes that this has continued despite its exposure by the 2008 financial crisis. But they also insist that a big part of the contemporary story appears to be rent seeking in the non-financial corporate sector, including the emergence of predatory global IT companies. They estimate that some 40 per cent of the profits of the top 100 firms can be traced to rent seeking behaviour, a 250 per cent increase over the last 20 years that can be traced to the growing monopoly power of big firms, particularly in advanced economies.

The Report argues that market concentration and rent seeking have fed off each other to create a “winner-takes-most” economy. The Chicago economist Luigi Zingales, who has talked about a “Medici vicious circle” in modern capitalism, believes the situation is aggravated by the capture of political processes by those with economic power.

This suggests that the election of Donald Trump, the rise of the far right in Western Europe and the Brexit shock, as well as the capture of key economic-decision-making processes by one or two major corporate heavyweights close to the ruling-party in India, are more symptoms than causes of the anxieties noted by Wolf.

While these trends are most pronounced in the advanced economies, UNCTAD’s analysis draws on a database, which covers firms from both developed and developing countries. And though they suggest that the emergence of large conglomerates in the South has had its roots in more traditional forms of market expansion, it is not hard to find some of the same worrying trends in emerging economies.

Moreover, while the Report suggests that bad economic policies associated with austerity have exaggerated the inequities associated with Hyperglobalisation in the North, it also points to stalled industrialisation (or premature deindustrialisation) as hampering good job creation in many parts of the global South and heightening inequalities.

These are no small matters for the international policy community, not least as efforts persist in the World Trade Organization (WTO) to push for negotiations on ecommerce, government procurement and trade in services, all areas where the Report notes that the influence of corporate power has risen markedly in recent years. Moreover, one of the features of big companies, particularly in the IT sector, is their diversification into a range of services, including finance and logistics, with a concomitant interest in shaping a broad swathe of global trade rules.

Attempts are currently underway to launch plurilateral trade negotiations at the WTO’s eleventh ministerial conference in Buenos Aires in December among members of the coalition-of-the willing led by major industrialized countries to deny multilateral developmental goals for integrating developing countries into the global trading system.

But there is more to this challenge of growing corporate power than the bending of trade rules; tax evasion, restrictive business practices, and the build-up of sovereign debt all require multilateral action which is not unduly influenced by corporate lobbying. In this respect, the Report’s call for a reinstatement of the regulatory architecture dismantled under Hyperglobalisation would probably need institutional reforms, including a global competition observatory to monitor trends in international markets.

Paradoxically, UNCTAD’s Secretary-General Mukisha Kituyi appears to be spending an inordinate amount of time trailing behind the Chinese internet billionaire Jack Ma from Kigali to Hangzou to New York. Ma has been appointed an UNCTAD advisor on small businesses, which sounds like a typical corporate ruse, from which position he has argued, in a recent UNCTAD meeting, that the only way to promote entrepreneurship is for governments to get out of the way; a position that conveniently helps to reinforce his own dominant market position but is the opposite of what UNCTAD appears to be aiming for with a global new deal.

Significantly, policy makers in China also appear to be increasingly worried by some of these same trends of growing corporate power. As recently reported in the Financial Times “the country’s high tech giants have been put on notice that their unchecked ride to the top can no longer count on a clear pass from Beijing” with policy makers paying particular attention to the financial services offered by these companies. [IDN-InDepthNews – 28 September 2017]

Related link: TDR-Greed is not good: corporate rent-seeking and restrictive business practices in winner-takes-most world

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