Wednesday, October 01, 2003

Corporate Governance


by Ron Dore- An excellent economist. Check him out:

Level playing fields

Anti-globalization is, of course, a nonsense. Nothing short of a civilization-destroying nuclear winter will stop the multiply ramifying effects of the innovation process which makes transport and communications ever easier and cheaper. Nevertheless, the combination of trade union protectionists, passionate environmentalists, third world sympathizers, and miscellaneous antinomian activists for whom "globalization" has replaced "capitalism" and "the multinationals" as the central focus of indignation and hatred, may prove not to be a force to be dismissed lightly. Well before they were joined by the MacDonalds-trashers on the streets of Seattle, an internet-mobilized coalition of thoughtful, rich-world campaigners had played a not inconsiderable part in mobilizing developing country opposition to the OECD's proposed Multilateral Investment Agreement. And there was obvious justice in their argument - that "national treatment" for foreign investors may seem like an enlightened application of the "level playing field" principle of fairness and mutuality, but, as in rugby, it is also a recipe for making sure that the heavyweights win. They win, of course, because they are the best team, but "best" only in the single dimension of point-scoring capacity. The losers may be more beautiful or have superior morals. They may be happier at home than on the pitch; they may be more artistically creative, more sensitive in personal relations, more loyal, more altruistic.

The thing about the global economy - or rather about the combination of free capital flows and the elevation to categorical imperative of the principle of free competition in the global economy - is that it is not like a game of rugby. In three respects. First, it is very hard to opt out of playing it, or to argue that golf, with its handicapping system, would be a better game to play; the heavyweights can apply formidable sanctions against anyone who tries to drop out. Secondly, the act of playing it may do something to all those other moral, aesthetic and social characteristics, which you cherish and which you think favorably distinguishes you from the heavyweights. And thirdly, the rules are in constant evolution, and the heavyweights have the greatest say in evolving them, and the most intimidating influence on the umpire's interpretation of them.

Translated into less allegorical terms: (1) trade dependency is real dependency. To keep its access to American markets, for instance, China had to agree to American terms for its admission to the WTO. And the strength of the American farm lobby was such that those terms had to include the blunting of an important mechanism by which Europe, Japan and Korea had secured greater equality of income distribution in their period of rapid industrialization, namely subsidizing agricultural prices. (2) Economic systems are embedded in societies with distinctive values to which their citizens may be attached. The equality just mentioned is a case in point. Different societies have different views of the liberty vs. equality trade-off - of how much inequality of income and life chances can be tolerated to achieve greater economic freedom and economic efficiency. The general consensual view on that score is rather different in Scandinavia, and Japan, from what it is in America. ...{article link continued}

It is truly an excellent well written piece.

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