Today's date:
Winter 2004

Globalization vs. Democracy

Fernando Henrique Cardoso is the former president of Brazil. This article is excerpted from the forthcoming premiere issue of the journal of Green Cross International, The Optimist.

Sao Paulo -- Is there necessarily a contradiction in terms between globalization and democracy or, on the contrary, is the interdependence of the markets merely acting in accordance with the notion of commerce idealized by Montesquieu and by the Scottish Illuminati: curbing impulses, improving habits, favoring social and political coexistence? If there are affinities between globalization and democracy, will they be inherent or will they be the product of political negotiation and institutional engineering? Is it at all feasible, under present circumstances, to contemplate the possibility of a supra-national regulatory framework which could limit the vices and accentuate the virtues of globalization?

Throughout history there have been many moments when it was fashionable to argue that the alleged demands of the economic process could not be reconciled with the desire for democracy. Some people discerned a contradiction between, for example, property rights and universal suffrage, between economic growth and social rights, between monetary stability and collective rights.

In his detailed study of conservative thought over the last two hundred years, Albert Hirschman reminds us of the importance of economics in the discourse against the broadening of the rights of the citizenry.

One case which illustrates this was the resistance of the British Parliament to the liberal reforms of 1832 and 1867, considered to be a turning point in the history of England, in which the extension of suffrage brought about the end of domination by an oligarchy. The argument was that the reforms would cause social chaos, and thus jeopardize classical civil rights and in particular the right to own property.

Just as stubborn was the campaign of opposition to social rights in Europe and in the United States in the post-war period. To counter the Keynesian thesis regarding the positive effect of social spending upon economic activity, many upheld the notion that the ideals of a balanced budget and monetary stability would be undermined, and with them, the possibility of sustainable growth.

To this must be added the apprehension that an extension of social guarantees could lead to a governance crisis, as was so frequently proclaimed by the famous Trilateral Commission during the 1960s. The various states were said to be taking on more commitments than they could reasonably deal with.

In Latin America, the conflict between economics and politics took other forms, indeed more severe and harder to reconcile. I remember one deterministic interpretation which was that the authoritarian experience of the 1960s and 1970s could be construed as being within the logic of capital.

I was amongst those who opposed this explanation. It was abundantly clear to me that Latin American dictatorships were eminently political phenomena, which depended upon the ability of the autocrats of the moment to use the spectre of the Cold War to stifle dissent. The high growth rates achieved during those years were the result of a combination of abundant public investments, together with cheap loans from abroad, and not of the dictators' sound policy-making. This could only accentuate certain negative features of the model, as for example the concentration of wealth and income.

In the 1980s, in the midst of a strong tendency towards political liberalization, the argument that authoritarianism was a factor of progress was once again on everybody's lips in Latin America. In view of the seeming ineptitude of civilian governments to promote the reforms considered necessary for economic growth to recover, it became an everyday occurrence to hear the autocratic regimes of Southeast Asia being praised to the skies, as though the high growth rates of that region were the result of their attachment to the supposedly Confucian values of order and discipline.

We know that one by one the theses which postulated a close connection between economic modernization and arbitrary rule were discredited by history. The extension of suffrage in Europe took place at the same time as the development of the Second Industrial Revolution. The confirmation of the Social Welfare State coincided with an important period of growth in the industrial economies in the 1950s and 1960s. Latin America did not become any more just or prosperous under the arbitrary regimes.

Death of Politics? | Nevertheless, this was not enough to silence the trumpet calls of the contemporary heralds proclaiming the death of politics. This time, the argument is that the present levels of production and circulation of wealth, supported as they are by transnational networks of high technological density, have rendered powerless the Nation-State, traditional locus for the practice of popular sovereignty. The decisions of immediate interest for group-welfare are no longer to be subjected to the authority of national representative bodies, but rather exclusively to market forces. Hence the weakening of the democracies, or at least their irrelevance, particularly in relatively less powerful countries.

The premise of this point of view is worthy of discussion. It cannot be denied that the phenomena of transnationalization of the productive process and of the exponential expansion of financial flows, making use of new forms of information technology, are a source of unprecedented challenges to national leaders, whether or not or not they are supported by popular vote.

The first challenge relates to the fact that current levels of competitiveness and efficiency call for a certain regulatory and institutional harmonization. For a productive process to function efficiently, it is advisable for participating countries to adopt similar rules in fields such as intellectual property, labor law, tax legislation and protection for investments.

If they are to flourish, regional integration initiatives must also involve a high degree of macroeconomic convergence. The Treaty of Maastricht is an example which is always evoked, because of the level at which the budget deficit is set as a condition for accession into the European Monetary Union. Mercosur was already committed to work towards harmonization of measurement standards and common indicators for future macroeconomic coordination and, perhaps also, the adoption of a single currency. Even less ambitious agreements, such as NAFTA, whose aim was the creation of a free-trade area, imply an eventual adoption of common rules and regulations in related areas, such as labor legislation and the protection of the environment.

But the most obvious pressures brought about by globalization are those imposed without the consent of the countries involved, such as loss of income and foreign currency caused by increased protectionism and unpredictable flows of speculative capital.

The most frequent complaints I heard in my conversations with the leaders of the countries of the North during the eight years I was president of the Brazilian government concerned the demand for access to markets and the prospect of finding a means which would make short-term capital flows easier for them to predict.

My interlocutors were and still are quite unreceptive to these arguments. The commitment of Europeans to the Common Agricultural Policy (CAP) is just as atavistic as those of the US to the non-tariff barriers that protect their least-competitive industries.

The continued existence of this type of asymmetry affects our ability to make and carry out plans. It affects the development of the state itself in Latin America, including the task of ensuring what seems to me to be the greatest challenge to the regional democracies: the universalization of public services.

It is only by means of providing universal services such as education, health care and a pension system, among others, that political systems in the region will be in a position to enable those who live below the poverty line (still an unacceptably large number of people) to enjoy the fruits of their rights as citizens, and to participate in a real way in the management and control of the res publica. I fail to see how we can make any progress in reaching our cherished goal of raising democracy to its highest degree of perfection, without a continued broadening of our social policies.

Having said that, there is no place for a fatalistic attitude. One thing is to recognize that the resources wasted by a protectionist trade policy or stolen by financial speculation could be used in the interests of a greater degree of social democratization. It's quite another thing to decree the downfall of democracy or the breakdown of political solutions. The challenge is precisely that of identifying methods which would allow us to increase to the maximum the resources available for the benefit of the common good, by means of discussion and political vision. At the same time, we must keep up our determination to demand an international order more responsive to the interests of the majority -- involving a revision of the Bretton Woods system -- using the soft power which our governments and societies can wield.

Even in a period of asymmetric globalization, it is always possible to spend more, and more wisely -- that is, with fiscal responsibly -- on meeting social demands.