Sarkozy to Davos: This is a crisis of globalization

Category: Business & Economics | NGOs & Government
Published on Jan 28, 2010

French President, Nicolas Sarkozy, gave the opening address to Davos yesterday. His message: this is not just a global financial crisis; it is a crisis of globalization. My overall assessment of his talk: A good job diagnosing the problems with today’s economy, but Sarkozy offers little in the way of novel or innovative solutions.

Not surprisingly, he was very critical of bankers and financial power brokers who have rigged the system to extract maximum profits for themselves, while squeezing everyone else.

“Globalisation  . . . gave rise to a world in which everything was given to financial capital and almost nothing to labour, in which the entrepreneur gave way to the speculator, in which those who lived on unearned income left the workers far behind, in which the use of leverage, to an unreasonably disproportionate extent, created a form of capitalism in which taking risks with other people’s money was the norm, allowing quick and easy profits but all too often without creating either prosperity or jobs.”

In a more provocative statement, he argues that the entire accounting system has been falsified.

“Our entire system of representation had been falsified: the economic value of a company does not change from one second to another, nor every minute, nor every hour. . .Our entire system of statistical assessment had been distorted, too. In the statistics, we noted the increase in revenues. In life, we saw a widening inequality gap. In the statistics the standard of living was rising, but meanwhile the number of those feeling ever more keenly the hardships of life was also constantly increasing.”

The notion that the financial system only accounts for revenues and profits and not social or well being is not a new idea. But it is not discussed often enough, particularly by heads of state. Sarkozy failed to mention, however, that the financial system also treats virtually all natural resources and ecological systems as free inputs, save the labour required to extract them.

Sarkozy goes on to lament the triumph of market values over democracy:

“By discarding all our responsibilities in the marketplace, we have created an economy which has ended up running counter to the values on which it was nominally based, and to its own objectives. By over-mutualising ownership and risk, we have diluted responsibility. By placing free trade above all else we have weakened Democracy, because citizens expect from Democracy that it should protect them.”

He then warns that, left unchecked, the current imbalances will generate further crises.

“In the future, there will be a much greater demand for income to better reflect social utility and merit. There will a much greater demand for justice. There will be a much greater demand for protection. And no-one can escape this. Either we change of our own accord, or change will be imposed on us by economic, social and political crises. Either we are capable of responding to the demand for protection, justice and fairness through cooperation, regulation and governance, or we will have isolation and protectionism.”

As alluded to earlier, the problem is that Sarkozy doesn’t really show the way forward. He points to the G20 as a source of solutions and new models of global governance. He calls for taxes on financial speculation to help fund the fight against poverty. He demands that the world move quickly to adopt a more robust, binding global agreement on climate change.

All of these things, while necessary, are only the beginning of what is needed. Like most heads of state, Sarkozy tends to see the same institutions that produced the current mess as the source of solutions and stability in the future. He argues for a change in values, but still takes most of the old assumptions about how the world works for granted.

For example, he doesn’t consider the fact that markets may have triumphed precisely because our models of government and democracy are broken. He doesn’t call for a complete rethink of the top-down approach to global problem-solving. He merely calls for the same old elite club of decision-makers, except this time with a few additional members at the table. He doesn’t seem to recognize that the of new models of social innovation and wealth creation that offer genuine promise are fundamentally incompatible with his outmoded vision of the role of the nation state in a global economy. Sarkozy proposes traditional instruments like taxes and legal agreements, when we really need a more dynamic way to marshal and fully exploit the collective ingenuity of citizens and businesses around the time-urgent problems facing the world.

In my forthcoming book with Don Tapscott, Macrowikinomics: Rebooting Business and the World (Sept 2010), we’re calling for a new approach to global problem solving that relies less on central control and more on a self-organizing critical mass of people and organisations working in all sectors to initiate small experiments and social innovations that, under the right conditions, can mushroom into pervasive changes in societal behaviour. Put simply, the world needs a new model of problem solving that taps into the world’s decentralized sources of knowledge and capability – an approach built on a platform of openness that mobilizes not just leaders of the world’s largest nations, but a whole ecosystem of citizens and organizations around the world.

Perhaps the book will give Sarkozy and company some food for thought. In the meantime, you can download the full transcript of Sarkozy’s talk here.

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Isn’t it ironic that he laments the triumph of the free market over democracy? The two were supposed to be companions in social progress – non? Alternate models to that path paired central planning with autocracy, and failed in even more spectacular fashion. Now in China we see the development of a, and disregard other, previous uses of the term, third way – one that combines the free market with an autocratic state.

Those developments aside,your assessment that “he (Sarkozy) doesn’t consider the fact that markets may have triumphed precisely because our models of government and democracy are broken” is one I would needs a bit of explaining. His top-down regulatory ideas are a desire to reign in the unobstructed freedoms and fiefdoms that our broken democracy have brought about, and as such form a rather explicit acknowledgement of the broken nature of government policy as it stands. However it is broken within a democracy, as designed in its modern liberal form, that doesn’t translate smoothly as a meritocracy.

Two alternate paths have so far emerged as solutions.

The first, employed by Chavez & Morales in South America, has sought a rejection of free markets and democracy for central planning and whatever you might call that form of democracy. The results of this switch are far from certain, but so far show little tangible progress, and may in fact show a large regression, from the former free-market, democratic model.

The second, as developed by yourself, is one that would see a bottom-up approach to policy and governance supplement, if not replace, the current model. You refer to this as the introduction of “a self-organizing critical mass of people and organisations working in all sectors to initiate small experiments and social innovations that, under the right conditions, can mushroom into pervasive changes in societal behaviour.”

While I understand and applaud the theory and practice of these new social innovations, their applicability to broader areas of regulation, service delivery and governance remain an area of uncertainty for me.

We note that our current system of governance has been captured by special interests. So how might we navigate between the development of new “self-organized” causes that do the same? These groups still represent a very small percentage of citizens, the apathetic remain predominant. Moreover, these groups will not always represent purely altruistic values, or better yet, broader values that represent society as a whole. What will, or should, never change is that the State is tasked with placing society ahead of such interests.

These new models of vox populi should indeed become part of the governance structure, and when accompanied by a new model of government transparency, will be part of a new, and hopefully, more effective model of governance.

But … let us not forget that the role of government is to be both guardian and visionary.

Balancing those two roles with respect to this new, more representative governance model will not be easy. As Winston Churchill said, democracy is the worst form of government except all the others. Rebuilding that democracy doesn’t mean throwing out the State model, nor the democratic model. It means trying to find a more nuanced version that balances State power and private interests, while ensuring that political opportunism doesn’t lead the whole thing astray.


posted by Dan Herman on 01.29.10 at 6:05 pm

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