Global crisis, global reform

There is growing debate about the current global economic and environmental crisis and the need for the fundamental reform of global civilisation. A number of books, articles and blogs have appeared discussing the crisis and forecasting a century of low growth, cascading problems and potential civilisational collapse. The crisis is usually identified in terms of the failure of increasingly financially determined capitalism but also in relation to emerging environmental limits to growth.

In response to this crisis, a plethora of views are emerging that are orientated towards identifying the basis of a new and more sustainable global civilisation. This article is a contribution to that debate.

Firstly, let us identify the essential problems that constitute the global crisis. There is the global economic crisis that segued out of the global financial crisis beginning in 2008: the bottom line is that almost everywhere both economies and governments are drowning in debt that cannot be repaid under normal circumstances. This problem is already taking on serious social and political dimensions as witnessed by the rise of extremist politics in many countries, including in Europe and the US.

The second aspect is the environmental crisis, of which global warming, peak 'everything' and loss of biodiversity are perhaps the best known issues. Basically, our phenomenally productive mass-industrial civilisation is using up such high levels of resources, generating so much waste and displacing so many natural systems it is beginning to hit physical limits.

These limits include the atmosphere, oceans and land as their capacity to provide raw materials and soak up wastes fast diminishes. Pollution, including carbon pollution and increasingly toxic industrial products, has become a primary problem at a global level. The availability of resources like oil and fresh water, and even arable land itself, is also facing critical limitations.

To deal with these and associated threats, the argument goes, we need to completely reform the way we do things as a civilisation. Tinkering at the edges just won't cut it.

The core themes of reformist ideas are these: the need to revitalise democracy; the need to more effectively mediate international disputes and create a genuine global governance structure; and the need to control transnational corporations and global finance markets. In other words, to radically transform or entirely replace the major institutions of late modernity.

The main underlying thinking behind most constructive criticism of the current global civilisation is that core institutional structures and arrangements have outworn their usefulness and need replacing. These institutions include the sovereign nation-state, the large business corporation and unfettered global finance markets.

The nation-state, which has been in large part undermined over the last few decades by the rise of the transnational corporation and global finance market, is exhibiting two main problems. Internally, it is losing credence due to what has been termed the 'crisis of democracy'. That is, national populations do not see national governments as being credible and they increasingly fail to participate in the democratic process. Voter apathy and the loss of support for major parties are aspects of this. The result is governments increasingly prone to capture by vested interests ruling over increasingly disengaged and apathetic populations.

The second problem is that in an age when most of the important influences on modern life are global, the nation-state is no longer the best institution to deal with global issues. There has been a realisation of the limits of national scale organisation for centuries, most clearly displayed in the tendency to engage in warfare. The League of Nations and the United Nations were both attempts to reconstruct sovereignty at a supernational level and so minimise the resort to war.

Not only do they not cooperate well enough, nation-states still prepare to go to war with each other. Current military spending is around a trillion and a half dollars, around 2.6% of global domestic product. Up 50% since 2001, this activity costs $236 per person. Ending global military completion would unleash vast amounts of resources (the Pentagon is the largest single user of oil) and people that could be put to productive use.

Climate change is the classic global problem: fossil fuel-based energy burned anywhere contributes to heating everywhere. Despite global consensus about the basic science, resulting in the UN-sponsored International Panel on Climate Change (IPCC), nation-states have been slow in collaborating to deal with the causes. There have arisen structural conflicts, such as the richer, more developed countries versus poorer countries, but all in all the problem remains national governments putting short term national interests over longer term global needs. As far as fixing global warming goes, almost all governments are trying to get away with being free-riders, undermining the credibility of all.

The increasingly pernicious influences of large corporations and global finance markets on democracy is also a growing concern. The reality is that such large firms and markets control such extensive resources they are able to outweigh popular interests, especially as they are quick to enter decision making processes through lobbying and funding of political candidates.

A paradox here is that transnational firms and markets operate globally but accept no responsibility for global problems. They promote globalism when it suits them, such as supporting free-trade, but work to control national decision-making as well and play-off countries against each other.

Huge industrial corporations are in reality dinosaurs left over from the mass-industrial age and there are plenty of commercial arguments for their demise. Big firms arose in the main to avoid open trading through control over information flows, but given we now have a much greater information capacity, they should logically be broken up into smaller parts to improve efficiencies. This is also true of financial operations, and in particular banks that have become 'too big to fail' should be broken up. Similarly, the explosion in speculation in finance markets needs to be reined in, possibly by mechanisms such as a Tobin Tax that act to control volatility.

The irony here is that much of this means a return to more genuine market-based activity of the sort Adam Smith argued for. Firms and market formations that are too big tend to artificially structure prices and inhibit trading based on real costs, thus maintaining their own positions. Down-sizing and allowing open market operations at all levels can shake out ineffiencies at various levels and free up resources for new activity. Certainly the huge payments to those at the top of big firms or who take a percentage from global money flows should dry up.

While some of the proponents of socio-economic reform seem to suggest a return to simpler means of living, especially localism, others see a core role for high-technology, especially extensive computer networks. Localism offers many advantages, especially in terms of recreating community, but many things are better done on the large scale. Long-distance trade, for instance, remains essential. One of the great successes of the global economy has been to effectively connect up various regions around the globe with specific resource strengths, such as food growing capacity or mineral deposits.

There is an argument that our core institutions were set up the way they were because of the crude communications and information processing technologies available at the time. In other words, institutions are basically shaped by the available means of communication. Hence the rise of the paper-based bureaucracies which have been increasingly replaced by electro-mechanical and then digital technology-based organisations.

When the modern nation-state, modern industrial firm and the first large finance markets were created the best communications and information processing technologies available were basic telegraphy and telephony and manual calculating machines. These institutions were clunky, inefficient and wasteful (especially in terms of human abilities) but they were the best we could do at the time.

Now we have a comprehensive, high bandwidth communications and information processing capacity available to us, and we hardly know how to use it. One big idea is that we can replace the existing hierarchies – of power, wealth and information – with a plethora of networks that use digital technologies. Such arrangements, it is argued, could be much more efficient, much less wasteful, much more democratic and much more 'human' in scale. There are already moves in this direction with the idea of small business clusters, but the real potential is indicated by the rise of social networking, file-to-file networking and "micro" activities, such as micro-credit and micro-financing and "long tail" commerce.

It may be that what we are seeing is the rise of a social-capitalist system built on huge amounts of micro-trading carried out by everyone utilising digital networks with a focus on generating reasonable profits along with maintaining social cohesion. As the existing arrangements, and institutions, decline, a new socio-economy can rise to replace them from the bottom up.

This seems like an extraordinary challenge, to reform our core institutional structures, especially as those structures will not go lightly. But we have done it before when we created the core institutions of global mass-industrial civilisation from the 1880s onward under the impetus of the industrial revolution. The last two centuries have seen constant transformation of our way of life.

Now we effect another transformation because of an even more pressing imperative, simple survival, since business-as-usual is no longer an option. We can't really afford the trial and error approach of preceding centuries, but we know a lot more about how modern civilisation works than we did and we have the communications capability to make sure everyone participates in the process.

Right now politics everywhere is dominated by the last-ditch attempts of entrenched interests to prevent real reform, but this can't last much longer. More and more people and organisations are moving on the need to achieve basic structural change in relation to the way we live, and this orientation is breaking into the mainstream. The sooner it does, the sooner we can get on with the job.