The spring meetings of the World Bank and the IMF will take place in Washington later this week. Thousands of ministers, bank leaders and top officials from around the world will discuss and take decisions on matters vital to millions of people. Thousands of demonstrators will be there, too. Protesting against globalization. To them the World Bank and the IMF are advocating a neoliberal globalism which puts profit before people. At every juncture of international negotiation after Seattle – there has been protests. Ordinary political fora seem to be insufficient as channels for the demonstrators’ political cause. The street becomes an all the more important arena for political action, and to force change.
This is a factor of globalization. And we will see much more of this in the future. In addressing my topic, I will first put my emphasis on the globalization and it’s challenge to governments, on global governance, then on companies, and on business & ethics, or what generally is named corporate social responsibility.
Globalization: what kind of animal is it?
Globalization may be seen as an impregnable wall of multilateral intrigue, as newfound cultural or economic imperialism, as poverty generation, or as providing new possibilities for everyone. Never before has the distance between the individual human being and the global community been smaller, and the disparities larger. Globalization is about risks, as well as opportunities. The challenge is to make globalization an instrument of opportunity and inclusion – not of insecurity and exclusion.
But what kind of animal are we, actually dealing with? At the very core of globalization lies a world wide process of integration of economies through trade, financial flows, technology spillovers, and communication networks. New markets and actors, new norms and new technologies. People are affected. And some benefit more than others. The situation is all the more critical for the developing countries.
Globalisation provides undeniable benefits with greater opportunity for many. There is no doubt about that. The economic reforms of South-East Asia is maybe the most profound example, increasing living standards and lifting hundreds of millions out of poverty during the first half of the nineties. Numerous statistics show that. On the other hand, there are major risks involved, not the least in relation to the trends of greater disparity, of creating an even larger gap between the rich and the poor. Many poor are completely left out, not being able to make use of the new opportunities globalization provides. As president Mkapa of Tanzania said at the Davos-meeting in January, ”The chances of Tanzania to benefit from globalization, are as big as Tanzania’s chances to win the World Cup in football.”
Whatever view one takes, globalisation appears to be an irreversible process that challenges existing societal patterns both at home and abroad. Revolutions in technology and communications tend to shift power and authority from states towards markets – from governments to companies and non-governmental organisations. State actors are still potent players, but however strongly national governments want to exercise power, their scope of action is gradually reduced, at least in relative terms. Unless they are able to reinforce global intergovernmental action, global governance. I will come back to that.
These forces behind globalisation also have a clear bearing on what seems to be gradual decrease in the relevance and capacity of established political structures. Traditional political party configurations along the left versus right continuum wither and give way to unpredictable single issue politics. Political parties struggle in order to grasp globalisation and adapt to be able to answer people’s concerns. In an increasingly competitive political market they often loose out to a multitude of NGOs. As the relative influence of business versus governments is seen to increase, companies become targets of political action.
This is not to say that the volume of political energy is diminishing. Rather, it is seeking new outlets through new political actors and aiming at new targets. These developments lead to changes in the sources of and search for political legitimacy.
There is a major paradox here. While the Executive and the NGOs on the street participate heavily in the debate on globalization, the parliaments and parties seem to be absent. This is unacceptable. Their participation is crucial. And what is even more important, who represent the poor? Western NGOs who ask for closed markets? Or their own elected representatives?
Self-appointed demonstrators on the streets are not necessarily the ones that are giving voice to the true needs of the poor.
Also in relation to the private sector there are major challenges to governments. They must advance regulatory thinking and long term planning in order to cope with larger and more complex interfaces with the private sector and other non-governmental stakeholders. Pressure builds up on a dominant corporate sector to prove that its expanding
A few trends in globalization
There are trends towards new divisions and greater disparities. One third of the world's population is technologically disconnected, neither innovating at home, nor adopting foreign technologies. Only 1 % of the people connected via Internet live in Africa. Less than 5 % live in developing countries. The process of exclusion is not only related to the digital divide. It is also paramount in the areas of trade, foreign investment, resource flows, and political decisionmaking. These trends may strengthen the existing gap between the rich and the poor. Where the richest 20 % of the global population receive more than 80 % of the global income. 1,2 billion people live in extreme poverty, under 1 dollar a day. 2, 8 billion still live under 2 dollars a day. We see marginalization of the poorest. If no measures are taken soon, - to ensure that globalization works for the poor, and not against them. I’ll come back to that.
There are trends of centralization, of priority to bigger units, public and private. The rule is - either you eat or you are eaten. And people are layed off their jobs. Paradoxically the decentralization trend is also strong, new communication technologies making it possible for rural communities to create more jobs, and for a flatter decision-making structure in most institutions. Globalization may provide new jobs.
The challenge - to ensure the protection of the environment, of social standards and social security, in an era of cumulative economic activity is also emense. Here, the trends are also different, from reduced regulations and the tendency of making profits at the expense of people and the environment - to a major increase in environmental and social consciousness among actors, public and private institutions and businesses.
There are trends in increase in epidemics across boarders, of HIV/AIDS, malaria, tuberculosis. Violence, crime, threats of terrorism know no borders and puts strain on governments and individuals. They can only be solved globally, through globalization of political decision-making.
There are trends in the direction of increased cultural domination, a sort of Americanization in the cultural area, at the same time as new communications technologies are used to give voice to minority groups. With the world wide web we are also about to see the end of national censorship, dictators will no longer be able to prevent information from being circulated, or prevent opposition groups and human rights acitivists from getting their message through. New communications technologies may in fact provide protection of human rights and their defenders.
Driving forces in globalization movingCRS issues deeper and deeper into coroporate board rooms:
The significance of non-governmental organisations (NGOs) can hardly be overestimated. Increasingly applying modern technology, no politician or corporate executive dare ignoring their existence and their lobbying strategies. Their diversity is also a strength: some speak out loudly and specialise in shaming irresponsible companies into action, while others have for long substituted jeans and t-shirts for modern suits and ties. They increasingly work directly with companies to bring about change from within.
The role of media is often that of multiplying effects and reinforcing trends. In the bad guy/good guy world of modern media, there is a need to make stories simple and understandable. Issues linked to companies’ performance have a solid potential to grasp the audience through the human interest angle. Whatever negative event happening around the globe, the chances of domestic media coverage rise from zero to 100 if NGOs manage to link a domestically owned company to that event.
The global consumer is becoming better informed every day, not least as to the geographic as well as social origins of goods and services. NGOs, media, modern technology, including the internet, all ”conspire” to ensure an ever more robust
The political challenge: building global governance
In his introduction to last year’s Human Development Report, Ted Turner said: ”Even as communications, transportation and technology are driving global economic expansion, headway on poverty is not keeping pace. It is as if globalization is in fast-forward, and the world’s ability to understand and react is in slow motion.” This is our challenge.
The question is not whether we want globalization or not. Globalization is happening already. The political challenge is to build a framework of global governance, to make use of the opportunities, and limit the adverse effects, first and foremost to ensure that globalization works for the poor, and not against them – as I said before.
As politicians we have to recognize the impact of globalization on the exercise of political power. As the economy globalizes, democratically controlled public power is impaired. The ability of the nation-state to adress this situation is limited. Conventional national decision-making is not enough to safeguard the social needs of people above the market needs of enterprises. However, this does not imply the end of politics. On the contrary, globalization implies the need for more politics, not less. At the national level by managing adjustment processes and by strengthening social, structural, and financial systems. At the global level global answers and instruments are required. It is all the more important that political decision-making in international fora is facing up to this challenge.
Global organizations ranging from the UN and the WTO to the World Bank and the IMF provide political means for governing global development. In assessing their role, the question is not whether or not they are needed - which seems to be the debate on the streets. As the finance minister of South-Africa, Trevor Manuel, said in a debate with NGOs in Prague, demolishing the World Bank and the IMF is to leave the poor to themselves. Shutting these institutions down implies requesting balance in the budgets of the poorest countries. None of them can manage that. The Bretton Woods institutions are the only credit institutions that are willing to lend money to poor governments.
In an integrating world global rules and supervision, and global institutions are undoubtedly required, whether in the area of trade, investment or finance. Lack of rules and absence of global governance only benefits the powerful countries. They can always manage without rules of the game, the small and poor cannot. If one is to be able to capture-, and not capitulate to the process of globalization, global institutions even need to be strengthened, reformed and revitalized. However, it is necessary to examine critically their pursued policies, and to make them address the real challenges.
There is no doubt of the need of change in both institutions. The World Bank has already undergone a process of reform the last 5 – 10 years, with a greater emphasis on poverty reduction. The IMF is picking up now, under it’s new managing director, Horst Köhler. Both institutions have signed up to the development targets of the UN, of halving the number of people living in absolute poverty by 2015. The G7 and the heads of states at the Millenium Assembly of the UN have also recommitted themselves to these targets. A quiet revolution in conceptual thinking is about to take place.
The ambition of increased poverty focus of the IMF, the World Bank and the WTO is long overdue. Now we need to see follow-up and action. It is the national governments that are the shareholders and members of these institutions. They should reinforce this process. Still, their success requires increased accountability and transparency of these institutions and a reduction of the democratic deficit. A critical analysis is needed of the policies of the Bretton Woods institutions and the implementation of their more poverty oriented policies. All stakeholders should be crucially involved in discussing the right pace and sequencing of liberalization of trade and capital markets for d
Corporate social responsibility (CSR)
This regards not only the way companies operate, in relation to the evironment, social standards and human rights, but also where they operate and choose to invest. This may loosely be defined as Corporate Social responsibility. The more globalized the world becomes, the more important Corporate Social Responsibility becomes. More and more companies begin to realize that respect for human rights and CRS is good for business.
The issue of corporate social responsibility (CSR) is rapidly climbing domestic as well as global political agendas. Troubled and costly experiences have convinced companies such as Shell, BP, Rio Tinto, Nike and Monsanto to invest heavily in improving their own ethical profile and reputation, and, increasingly, performance. And the tendency is stronger in Europe than among companies in the US. Employees want safe and environmentally sound working places, but also demand integrity in a wider sense: no corruption, no shady deals in far-away countries, no negative media stories uncovering unethical performance in the global market place.
Governments are affected in a number of ways, for instance through the globalisation of activities of companies owned fully or partially by governments. This is the case e.g. in Norway and in France. Also, strong demands are on them to regulate, punish or even ban companies behaving badly; demands that often are terribly difficult to handle in a liberalising world economic order. NGOs and the media – often in very effective partnerships, make it more and more difficult to conceal obvious human rights violations. Even individuals, as traditional consumers as well as through the use of advanced internet tools, or as investors, have an increasing bearing on corporate behaviour. The potential effects in terms of corporate losses become a drive towards change in corporate behaviour.
That is why Corporate Social Responsiblity is moving deeper and deeper into corporate boardrooms.
The CRS’ value basis
What provides the ethical basis for these companies? The only universal value system we know of is the body of human rights. A natural starting point is the Universal Declaration of Human Rights and other international human rights standards. The universal nature of these obligations was confirmed by a world wide consensus at the World Conference on Human Rights in Vienna in 1993. Human Rights are the obligations of Governments towards their citizens. Still, it is important to note that even the Universal Declaration itself, includes an important reference to ”organs of society”. They are also called upon to ”promote respect for these rights and freedoms, and by progressive measures, national and international, to secure their universal and effective recognition and observance”. Businesses are organs of society, and increasingly important ones at that. This makes the Decleration relevant as an ethical foundation and guideline also for business.
Human Rights are of course rather encompassing in themselves. Economic, social and cultural rights and civil and political rights are equally important, mutually dependent and reinforcing. Corporate Social Responsibility implies, however, going beyond the more stringent interpretations of our human rights conventions. For instance, labour rights in the widest sense, must be taken to be included, and social standards. The same goes for community involvement, and assessments of where and when to invest. The degree of responsibility applied through corporate dealings are also important. Taking action against corruption can be seen as a part of Corporate Social Responsibility. Here, the OECD Convention against corruption provides an important legal framework.
In short; where conventionally economic responsibilities of a company can be said to be focused on the shareholders, the focus moves to the stakeholders. Stakeholders include owners and employees, but extend to their families, the local community, to contractual partners and suppli
Implications for policies
Even those who insist that less government is good government must recognise the challenge in the current situation. How can governments ensure that they fulfil their responsibilities towards their people through the development – not just economic growth – of the nation, when the means for such development are driving by in the fast lane? Globalisation expands the overall interface between governments and the corporate world, and make them ever more interdependent.
The dynamic approach by a number companies towards the new CSR agenda is putting pressure on governments to take up their part of the challenge. To remain in the drivers seat, governments must constantly try to understand and adapt to changes in the corporate world, and develop appropriate policy mechanisms. Even if globalisation lead to fast changes in the role of governments, new roles need not mean less important roles in the efforts to manage global affairs.
One role is related to legislation. I mentioned the UK government’s new regulations for pension funds. This is an interresting example of how ethically conscious legislation not only leads to changes in investment behaviour, but also stimulates the further development of CRS certification tools. In Norway we have had a heavy debate about our own State Petroleum Fund of the income from our oil and gas production and ethical guidelines for the investments of the Fund in shares abroad. An environmental fund has been created, but other ethical guidelines have been turned down by the majority in parliament.
Another important role for governments is to facilitate and catalyse comprehensive stakeholder fora. There is an urgent need for enlightened debate between stakeholders with widely different starting points and world views. Polarisation, in the media and elsewhere, between business and advocacy NGOs, often hampers constructive dialogue. The Norwegian government I was part of approached this challenge. In early 1998, the Government established the Consultative Body for Human Rights and Norwegian Economic Involvement Abroad (KOMpakt) (our KOMpakt was established two years before Kofi Annan’s Global COMPACT-initiative). The members primarily represent five groups: business associations (including representatives of individual enterprises), unions, human rights organizations, research institutes and the government. The purpose of this body was to strengthen the respect for human rights by raising awareness in the private sector and to improve their performance. In addition, the intention was to increase dialogue, information-sharing and mutual understanding between the human rights community, the private sector and the Norwegian authorities.
On the performance side, a pilot project is now being established for monitoring, reporting and verification of our businesses’ respect for human rights abroad. The intention is to develop standardized mechanisms to measure companies’ corporate social performance. This was a proposal from our government’s side which got the approval of the parliament. It is based on voluntary participation as a starting point. As the international certification systems are being developed and refined, hopefully there will be a standardization that becomes the norm for companies operating internationally. An ISO-standard on ethics, so to speak.
As well as providing the government with a better basis for shaping policy, both industry and our NGOs have gained a lot from the dialogue in our own KOMpakt. The UK-government has established a different structure, linked to a separate office in the Ministry of Foreign Affairs, but with the same focus.These are examples of multi-stakeholder approaches, which I believe will be everyday in a few years’ time in our globalized world. Some will be national. Others global, as Kofi Annan’s Global Compact. Building partnerships between governments, NGOs and businesses to improve environmental, social and human rights’ performance is critical.
A final positive example of how such partnerships can gain results, is th
Globalization of accountability
Such partnerships have to build on something, however, on some sort of common values and common understanding. From a global perspective that might be difficult. However, we do have a set of common values in our human rights framework. By providing new and frequent meetings between cultures and individuals, globalization may in itself also contribute to a common understanding of the universality of human rights. As part of international law, human rights constitute commitments on states. With globalization the scope of human rights has expanded. We now have a real chance of using the universality of human rights as a spur to concerted action. Much has changed in the area of human rights the last years, acknowledging the indivisability of human rights through a holistic approach. Today’s spirit of partnership, dialogue and open doors has replaced decades of confrontation, walls – not least the one in Berlin, and intransigent doorkeepers. For governments, companies, civil society and individuals. We all belong to the “organs of society” which The Universal Declaration talks about.
We have a universal platform of values, a common ground, a basis for a common understanding. Acting on it is essential to avoid globalization from developing into some sort of tyranny of the market forces to the vulnerable and the destitute, contributing to generating poverty rather than its elimination. That is why we need globalization of accountability, accountability of policy makers as well as companies and individuals to these common values, to human rights. They should be the basis also for active and engaged citizenship.
Human rights apply to all of us, and concern all of us. This is the basis on which we must act faced with globalization, not only for the sake of other people, but also for our own. – For the sake of decency. This is the key to progress in human development.
As Secretary General Kofi Annan underlined in one of his addresses, we need “a humanity that cares more – not less – for the suffering in its midst; and a humanity that will do more – and not less – to end it.” That is all it takes, no more – no less.