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Meeting Crisis with Wisdom

Jiri Pehe: Crisis as a Chance

(Key note speech at the conference Meeting Crisis with Wisdom, Prague, 8 October 2010)

 

  1. The economic crisis that started in 2008 is part of a broader crisis that was unleashed by the collapse of the bipolar world after 1989.
  2. It was then, in that particular moment of history, that capitalism became a truly global force, unimpeded by the existence of the anti-market, anti-democracy forces represented until then by the Soviet bloc.
  3. The economic globalization has proceeded since then at a speed much faster than the globalization of politics.
  4. As a result, the gap between the globalization of economic and financial markets, on the one hand, and the globalization of political institutions, on the other, has become ever wider.
  5.  While in the previous era, developed Western democracies had been able to transform capitalism into what is sometimes called a social-market economy, market forces unleashed after 1989 on the global scale have created global capitalism, which has lost many of the civilized featured of the social-market economy.
  6. Capitalism is a good servant, but a bad master. Tamed by regulations and a social-welfare state it was a good servant of developed Western democracies; unbound and highly volatile on the global scale, in the absence of regulations and enforcement of rules working globally, it is a bad master.
  7. Global capitalism, in comparison with its predecessor, is no longer a system of “Webberian capitalism”, in which various ethical norms, virtues, and limitations, originating in the comprehensible environment of a nation state and its civil society apply and in which even the large companies have concrete owners, who are proud of their family traditions. Rather it is a system of large supranational corporations, dominated by managers and owned by groups of share holders. And it is a system in which speculative capital moves globally without significant restrictions. Moreover, it is a system, the large part of which is based not on the production of tangible physical goods and services, but on capital generating capital through speculation.
  8. The collapse of the bipolar world had yet another effect. Although Francis Fukuyama spoke about the end of history, which, in his opinion, meant the world-wide dominance of liberal democracy, the accelerating process of globalization, accompanied by the absence of democratic self-discipline imposed by the existence of a powerful outside threat in the form of the Soviet empire, began to change the very paradigm of liberal democracies.
  9. The term liberal democracy itself is rather complex. It attempts to combine two contradicting terms: democracy as a collectivist activity (dependent on the regular manifestation of the will of the majority) and liberalism as an individual activity, emphasizing the role of the individual and freedom. In a liberal democracy a certain tension exists between democracy as the rule of the people and liberalism as the rule of  law. Liberal democracy is therefore sometimes referred to as liberal constitutionalism or constitutional democracy.
  10. In this context, “liberal constitutionalism” emphasizes the rules of the game, such as protecting the rights of the individual. In advanced liberal democracies, the rules of the game include constitutionalism (as represented by a respected and not easily amended constitution), but also the protection of human and minority rights, as well as respect for the independent institutions by political majorities empowered by fair democratic elections.
  11. One might further nuance the definition of liberal democracy (beyond the rule of the people by the people) by defining it as the rule of  law over the people. This definition emphasizes civic equality as a basic and defining principle of liberal democracy. And thus, while free competition creates social and economic discrepancies, all citizens remain equal in the eyes of the law. Competing opinions may therefore thrive free from the monopoly of any one idea.
  12. The competition of opinions requires not only certain cultural and political presumptions (known as the democratic spirit, i.e., tolerance and respect of others), but it also requires that certain civic virtues are present in society.  In other words, liberal democracy will only function fully if it is enthused with certain values. Good laws and sensible rules of the game are not enough if society neither respects nor abides by them. Members of society may attain these virtues through a common ethical background or through the gradual internalization of certain rules.
  13.  After World War II, developed liberal democracies of nation states managed to combine into a more or less harmonic whole the three, initially more or less antagonistic, societal objectives of the French enlightenment: Liberty, Equality, and Fraternity. Liberty was represented by the freedom of individuals, Equality by the rule of law, and Fraternity by social solidarity.
  14.  Global capitalism has, however, disturbed this balance on several levels. First, large social and economic inequalities that had been after WW II more or less overcome in individual nation states with the systems of developed liberal democracy reappeared much more visibly in the era of global capitalism on a planetary scale. In other words, huge differences in wealth and availability of basic social services visibly appeared between the rich Western countries and the rest of the world, or, if you will, between the North and the South.  Second, global capital, whose institutional roots lie in the West, could much more easily break  rules it cannot violate in developed democracies (for example, ecological standards and labor rules) in poorer countries, to which it could now expand much more easily.
  15. This ability of global capital to break the rules by which market economies were more or less bound on the national level created a backlash in developed democracies.
  16. They were subjected to an ever growing pressure to compete economically with the parts of the world where global and local entrepreneurs did not have to worry about social safety nets, labor laws or environmental standards. This pressure was then ideologically expressed primarily in the language of neoliberalism, which advocated the primacy of markets over state regulation, the flexibility of labor (which supposedly requires rewriting rigid labor laws), and demoting supposedly unaffordable social welfare systems. In essence, this pressure stems from the logical self-interest of global capitalism to turn people into recyclable, flexible units of labor.
  17.  Poorly regulated global capitalism also launched an attack on public goods and the public sphere. However, the privatization of the public sphere and goods is, in essence, an attack on liberal democracy.  The system of liberal democracy cannot survive without a structured discourse in the public sphere that we call the public.
  18.  The public is a form of civil society, whose importance to democracy, as one Czech philosopher says, can be compared to the importance of blood circulation to a human body. However, in the situation in which the public sphere is colonized by private interests, for example by global private media, a structured public discourse is being more and  more replaced by infotainment and mindless entertainment, provided by globally organized media industries. As a result, the civil society has been marginalized or pushed from the physical reality into the cyberspace.
  19. What this change will mean for democracy is unclear. While some theoreticians speak enthusiastically about grassroots being now complemented netroots (where the “net”stands for the internet), others warn that new forms of civil society in cyberspace are too virtual and, therefore, ineffective, and that Facebook, for example, is an environment in which, entertainment freely mixes with a civic action.
  20.  The shrinking of the public sphere and possibly also the classical civil society may have adverse effects on maintaining responsible citizenship as one of the prerequisites of democracy as we have known it. Democracy, as suggested above, has two basic dimensions: It can be understood as a set of institutions and procedures, but it can also be understood as a culture. Without this cultural dimension, most often described as an internalized system of values or a democratic spirit, the institutional and procedural side of democracy does not work. For example, the rule of law, discussed at this conference, cannot be based only on good constitutions, laws, procedures, divisions of power and other institutional interactions; it will work only if people actually respect the rules of the game, if they internalize them, make them part of the moral universe.
  21.  The conflict between global capitalism and liberal democracy, in which global economic interests are not matched by a global political voice, however, has increasingly deprived democratic systems of the cultural  dimension of democracy, which has increasingly become just a technology of power, dominated by big money. This privatization of politics into the hands of powerful economic interests is a dangerous development that could transform the system of liberal democracy—a system originally infused with values and ethics—into a mindless excersise, supervised by expert bureaucracies rather than politicians and citizens empowered by truly democratic politics and civil societies, respectively.
  22.  While some conservative thinkers, in response to the above mentioned phenomena, call for a retreat from global capitalism and other forms of globalization to new kinds of local economy and the rejuvenation of the nation state, probably the only way to stop the onslaught of global capitalism, which threatens even the very paradigm of liberal democracy, is to accelerate the globalization of political institutions.
  23.  In other words, we need to create the system of global governance that will be able to control the globally functioning economy and globally operating financial institutions with global regulations and standards. We need A global system of the rule of law.
  24. Global governance is, however, an unclear notion, and an uncertain project, at this point. It ranges from utopian ideas for a global government to nebulous ideas about some kind of a global civil society. Some political scientists see as a suitable model the non-hierarchical system of polycentric governance, based on constant negotiating on many different levels, as represented to some extent by the European Union. Others foresee the gradual disaggregating of individual states in favor the growing international cooperation between various bureaucracies of nation states. Still others think that the role of a substitute global government will be assumed by formations such as G20.
  25. The above mentioned examples of ideas for global governance illustrate that the process of creating a workable mode of global governance is complicated and painfully slow. In the meantime, global capitalism, unbound by enforceable rules, has a significant potential to cause not only new global economic crises but weaken democratic systems. In other words, while early capitalism was instrumental in creating civil societies (some philosophers even described the market as a form of civil society) and, therefore, modern democracies, global capitalism increasingly appears to be a threat to democracy.
  26.  At the same time, it would be wrong to imagine the task of taming global capitalism as a one-sided interest of nation states, in particular the democratic ones. Calls for some form of global governance and a global rule of law can be equally strongly heard from representatives of the biggest multinational corporations and financial institutions. Many of them realize that the current system, driven by the logic of capitalist expansion, has a large potential to cannibalize itself. In other words, it has a significant potential not only for destruction but self-destruction.
  27. This leads me to my final point. The crisis caused by the non-sufficiently regulated global capitalism, if not met with necessary responses, has a potential to undermine the paradigm on which our industrial civilization was built and which has its origins in Enlightenment. It is based on the belief that human reason can through increasing knowledge and skills secure more or less permanent growth of wealth and improvements of living standards.
  28.  If the reform of the current system of the global economy does not succeed, more and more people will ask a question that can already be heard: To what extent is Western rationalism that set more than 200 years ago into motion the wheels of economic, social, and political Progress, just another religion? In other words, to what extent is our belief in constant progress just an unsustainable tenet of the secular religion of humanism that lost the sight of the Transcendent?
  29.  Certainly, the response by most developed countries to the economic crisis was fully within the context of the religion of Progress. In other words, huge debts from irresponsible private financial institutions and other companies were taken over by states with the belief that somehow our tomorrow’s Progress (economic growth) will pay for our today’s debts.
  30.  If this belief in the end fails (for example, because we will not be able to create quickly enough global political institutions and frameworks that could bring global capitalism under control and prevent new acts of irresponsibility that adversely affect the whole world) then we may see a shift in the very paradigm that has defined our civilization—with consequences that are difficult to predict.