Regulations or More Moral Minds: Which Way to go concerning Global Issues?

In comments about the global economy we often can read that we need responsible capitalism today but not new regulations. But what is meant by a responsible capitalism without new regulations? One often heard answer is that such capitalism can be established through a change of mind towards more moral thinking. But it is rather unlikely that this change of mind would be so fundamental and action-guiding that the global problems, which for example became obvious with the financial crisis, can be solved in this way alone.

Let us do a short analysis of the global situation: Today there are many issues that know no boundaries (transboundary), such as the global financial crisis, climate change, migration, trade etc. The territorially bound nation-states can’t solve these issues on their own. Therefore, in the world of international relations where anarchy still rules (the monopoly of power is still on the level of the nation state: there is no ‘world-government’ or state over the nation-state) states often come together to coordinate activities and cooperate concerning global issues. But cooperation between states is insufficient today. In the concept of “global governance” of political science not only state-actors but also stakeholders from the societal sectors of business and civil society are considered to be important political actors in contributing to solutions of transboundary or global issues.

Such new global governance systems exist already (e.g. Climate-Conferences, WTO, ILO, ISO14000 or private regulation-standards in different consumer-goods industries like e.g. ETI [Ethical Trade Initiative] etc.). Although they vary widely as to the specific issues, structure, actor participation and success, there is no other way in a politically still anarchic but globalised world to try to solve global issues.

Of course, it is difficult to bring together the relevant stakeholders of an issue and it is even more difficult to achieve a constructive dialogue, cooperation and meaningful coordination among them. It is already a significant success when regulatory designs can be established and when implementation and evaluation of effectiveness of the rules is seriously done. And it is also obvious that a certain change of mind is a precondition to bring the stakeholders together. These components are all parts of building-up global institutions, and regulatory designs are one integral part thereof.

But, to propagate the development of highly skilled moral competencies of humankind which make regulations unnecessary may indeed be a noble demand but won’t work in reality. Moreover, to let a global issue drift around in an anarchic environment without trying to manage it actively is simply irresponsible. There is no way to circumvent the building-up of global institutions including regulations. On the national level states have also established rules to solve issues, i.e. to provide common goods (e.g. protecting property rights, legal certainty).

Global institutions have not the aim to restrict individual rights or freedom but to provide common goods (e.g. protection of property rights, clean air). Of course, to fight the right of the stronger, which identifies the anarchic space, it is necessary to reduce the possibilities of powerful actors to exhaust certain individual freedoms by power exclusively for their private gains and at the costs of all others. Regulatory designs thus help to provide common goods by aiming to substitute the rule of the jungle through a ‘rule of regulation’. In this way, also innovative individual freedom can be protected from anarchic arbitrariness. The building up of global institutions, based on stakeholder cooperation establishing regulatory designs, is unavoidable for a responsible handling and solving of global issues. Another question, of course – not considered here – is the democratic legitimacy of such global institutions.

Claude Meier

The blame game

Have you ever noticed how efficient people or organizations are in identifying their stakeholder relations when it comes to being blamed for a specific behavior in the context of a negatively framed issue? A striking example is BP’s public communication regarding the disastrous oil spill in the Gulf of Mexico. Although assuming more or less the responsibility for the leaking wellhead’s consequences, BP continuously emphasized that deepwater oil drilling depends on cooperation between various business partners. In this regard BP frequently pointed out that the oil-drilling rig “Deepwater Horizon” was operated by offshore drilling contractor Transocean; that the oil-companies Anadarko and Mitsui are co-owners of the leaking well; that Halliburton cemented the leaking seal of the wellhead; that the oil service provider Cameron delivered the failing blow-out preventer; and that the responsible US supervisory authority did regular inspections on BP’s rented drilling rigs. It seems that being blamed for various failures leading to the oil spill in the Gulf of Mexico, BP’s communication provided the public, at least partly, with the company’s stakeholder relationships regarding the controversial issue of deepwater oil drilling.
Interestingly, in the case of success people and organizations do not mention their stakeholder relationships in the same way as they do when being blamed for failure. Indeed, employees and customers are frequently recognized as being important for organizations’ positive results, but has BP ever mentioned Transocean or Halliburton during the years of (financial) success? It would clearly add to the quality of stakeholder relationships, if an organization not only recognizes its stakeholder network in the case of being blamed, but also when it comes to the dissemination of mutually created value. 

A second example describes an issue in many countries, including Switzerland: violence between sport fans. After the abandonment of a soccer game between two teams in Zurich due to fighting scenes among rival fan groups, the affected stakeholders blamed each other for being responsible. The rival fan groups accused each other for having triggered the clash; the people accountable in the different soccer clubs blamed each other for not taking positive influence on their own fan groups; the Swiss Soccer League blamed the hosting soccer club for not providing adequate security arrangements; the hosting soccer club blamed the municipality for not getting sufficient resources to guarantee the safety of the game’s spectators; and finally almost all of the issue’s stakeholder groups blamed the police for not sufficiently demonstrating presence in the stadium. Again, this sort of “blame communication” by the different actors revealed quite exhaustively the involved stakeholder network. However, I am wondering if I have ever heard a positive mention of the police from a Swiss soccer club’s official in the case of success...
The two examples mentioned above show that being blamed often forces people or organizations to defend themselves and, therefore, leads to blaming other stakeholders in the context of a negative issue. However, recognizing the different actors in a stakeholder network can also take place in the context of success and the corresponding dissemination of mutual created value. This behavior can be appreciated as taking on responsibility, not only in the case of failure, but also in times of success. Indeed, recognizing stakeholders in the case of success may prevent organizations of being overly blamed in the case of failure.

Child labor along the Mekong

Since a week I and my husband are on a cruise on the Mekong River, having started in Siem Reap, Cambodia where we visited the amazing Angkor Wat temples. On this cruise we have the chance to see rural villages in Cambodia and Vietnam, all villages which just started to establish relations with this cruise line, owned in part by a man from Switzerland. The basic set-up is that passengers can walk through the villages and in return these villages get financial support from the cruise line. During the visits there is always a local guide to accompany us – first from Cambodia and now from Vietnam.

Just today we visited Binh Thanh Island near the Vietnamese town Sadec. In this village, we could see how rice mats were made by local women. Some of these women looked very young. Our guide told us that some of them worked there already for a long time. She especially pointed out a girl which according to her was already thus employed for six years.

When I pointed out that this was a child labor issue, our guide failed to acknowledge my objection to this practice. She indicated that the girl still went to school every day for four hours. What she failed to comprehend, however, was that such a work setup would impact her school performance as she would be tired in class, not have enough time to do her homework – and, not have enough time to play with other children. As this type of work is only done by women, it also impacts the equality of opportunity between men and women, or rather, boys and girls. These girls will benefit from less education than their male counterparts, which will impact their future work opportunities and scope of personal development. Moreover, this imbalance will make these girls in the future more dependent on their families and husbands.

My objection to this work setup really astonished my tour guide – even though she was a woman herself. As I returned to the ship I reported the incident to the manager of the ship who was not aware of this situation. The cruise line how has the opportunity to induce change.

The fact of the matter is that most such villages are very unexposed to the outside world and nobody really knows what is going on there. Due to the fact that these villages profit directly from the tourist tours from this cruise line, however, there is now an opportunity to give a voice to these young girls by negotiating with the leaders of the villages to refrain from child labor. Moreover, the cruise line has the opportunity to train the local guides so that they are aware and sensitive to these kinds of issues. Actions by the cruise line such as this one would help offering these girls the same starting conditions in life as the boys have in these villages.

Sybille Sachs

 The Class Room as an Advertising Zone

The newspaper “Sonntag” published last weekend an article on Apple’s marketing strategy at schools (http://snipurl.com/227ahrp). And sure enough, Apple knows how to promote its products.

Apple has got a 70.4 percent share of the market at Swiss schools. But it seems that the company’s goal is to have an even stronger monopolistic role in this very important market. To reach its aim Apple launches new marketing projects. Its marketing strategy focuses on the teachers. “Apple Distinguished Educators” (ADEs) is a worldwide community of visionary educators whose goal is to make a difference in the future of education. ADEs teach students, share their expertise with other educators and advise Apple on the realities of integrating technology into learning environments (http://snipurl.com/227apep). One has to admit that this idea is a great example of stakeholder involvement in the development and innovation of products. Educators have to apply for being a member of this worldwide community. Already 28 Swiss teachers have got the honor to be ADEs.

Additionally the Education-Team at Apple Switzerland is implementing the global “Apple Professional Development Program”. It should complement the offers of the University of Teacher Education in information and communication technology (ICT). Teachers teach teachers how to use Apple products in the class room.

Furthermore regional training centers are built, a pilot project allocates iPads for schools and Apple is developing school books in all four national languages for iPads. Apple pursuits a pretty offensive marketing strategy, but also Microsoft tries to bind schools to its products, what already caused differences with the Swiss government (http://snipurl.com/227b86u).

These examples show that the education market is very important for tech companies and therefore highly competitive. As education is part of the public sector the companies role in this area should be controversially discussed.

The critical aspects of the mentioned marketing strategies are multifarious.

Both enterprises try to consolidate their market position by their campaigns at schools. As the knowhow of using technology is very important for nowadays education and schools only have limited financial resources, these “public-private partnerships” are actually important. But the problem is that these examples aren’t real public-private partnerships. And so we have to ask ourselves who gains more profit out of these collaborations.

As this kind of products and especially the brand behind the product have got an emotional component and want to influence the attitude to life, it becomes very important for the companies to win young customers. Therefore the campaigns at schools are part of a very clever marketing strategy. But do we want ad men to teach our children? Or shouldn’t class rooms rather be commercial-free?!

If the public reacts skeptical on companies that sponsor professorships, then Apple’s behavior has to provoke skeptic too. The given examples raise the issue of independency of the educators or institutions to a certain extent. Teachers who simultaneously operate as Apple-ambassadors will find themselves in a conflict of interest. But independent education is one of the most important aspects for the development of knowledge.

Sustainable solutions are important to reduce our dependency on these companies. We should care about the sustainable education at our schools and not about sustainable volume of sales for Apple and Co.

Sabrina Stucki

Gaining a Common Good through Relinquishing Sovereignty

In the first decades after World War II the Aussenpolitik (foreign policy) from the Federal Republic of Germany (FRG) was embossed by the strategy of gain of sovereignty through a relinquishment of sovereignty: By integrating itself more into the West through concessions to the West-Allies and abandoning thereby national options, the FRG gained more scope for negotiations and an opening via the East. The gained scope used for contacts and negotiations with the Soviet Union finally led to the reunion of Germany.

When one looks at the problems of the European Union (EU) of today in general (e.g. migration, democracy deficit) and the debt crisis in particular the question of relinquishing sovereignty for gaining scope and options is at least as actual as it was in the mentioned decades. The potential gain of today would be a common good in the form of more stable, elaborate and sustainable (financial) institutions in the EU.

The text of the fiscal compact of the EU which has been completed on 30.01.12 was a step in this direction. It requires participating countries to implement a debt brake on the national level to achieve budgets that are generally in balance or surplus. In case of non-compliance sanctions are scheduled. Hence, the aim of the compact is to achieve more fiscal discipline in the participating countries. But the financial compact is often criticized referring its enforceability as well as altogether being to less to solve the debt issue sustainably.

Therefore, it is often stated, a transfer union would be necessary. Overall, this would mean that EU member-states launch common state bonds (Eurobonds) and that transfer payments from countries with balanced budgets to such with imbalanced ones have to be established. But if this really would be a more sustainable solution, why then aren’t Germany as well as other countries not willing to do this by now?

Probably because of the risks that relatively solid EU member-states would be liable for the debts of such threatened by insolvency? Maybe yes, but – and this is decisive – the problem behind the scene is deeper: Ideas like the transfer union – as well as potentially sustainable solutions in other policy fields (e.g. security policy, democracy deficit) – require a transfer of sovereignty from the single EU member-states to Brussels. The single countries are enormous struggling with that. This is understandable: Nobody likes to relinquish scope, power and independence in decision-making. But the gain of the transfer could be a common good in the form of an appropriate institutional design that guarantees stable finances and a healthy European currency. Both are preconditions and set up options for a prosperous European economy. In the picture of the well known prisoner’s dilemma this public good would be the collective optimum, the best solution for all states together. In contrast, preserving and/or even maximizing the available sovereignty for a single EU member-state would mean maximizing the individual gain on the cost of the collective one.

The example of the young FRG showed that shifting some scope from a less important field (crusty national options) to a more important one let one achieve even visionary aims. The only option for Europe today is a deeper integration and coordination what demands relinquishing national sovereignty. This does not at all mean that EU member-states have to give up all their sovereignty. But, solely by relinquishing the hurting, yet necessary part, can Europe come to inner stability. The single EU member-states would have gained the scope and institutional design they need for a prosperous national economy in an interdependent Europe and a globalised world.

Claude Meier

Society of Jealousy or Society of Justice?

It is a well documented fact that human beings, and many animals, have since early childhood an ingrained sense of justice. Chimpanzees as well as year old babies are readily capable of discerning whether they’ve been cheated or not. Give a chimp or a baby less food than their companion, and they are likely to react in unambiguous ways that this is not “ok”. Moreover, studies have found that both chimps and human babies also are inclined to want thieves to be punished – even if they themselves were not the one stolen from. And therein lies a problem.

In Switzerland, as in much of Europe, one often encounters talk of a “society of jealousy”. This term is applied to the public outrage at the large bonuses, golden parachutes, and financial and taxation acrobatics available only for the privileged few (interestingly, however, only few seem bothered at the horrendous incomes of athletes or other celebrities…). The basic premise is that this outrage is fueled primarily by jealousy and that could the rest take advantage of the same benefits, they would do so without any qualms. Consequently, this resentment is unwarranted. This logic is commonly held by much of the wealthy elite and many economists who view human affairs solely through the lens of “rational economics”.

A concrete example of this is Switzerland’s lump sum taxation practice. This is where a very high net-worth individual goes to a Swiss Gemeinde (County) and negotiates a special income tax significantly below the usually applicable rate. Thus you have billionaires who pay a pittance of their annual income in tax when compared to the average working citizen in the same Gemeinde.

In an indignant article in the Neue Zürcher Zeitung (17. Feb. 2010), Charles Blankart, then professor of economics at the Humbolt-Universität zu Berlin, made a strong case for the economic logic of such lump-sum taxation for the wealthy and lamented this “society of jealousy”. He grounded his argument in the fact that such taxation policies make perfect rational sense for the Gemeinde (as otherwise they would forego the watershed of money the billionaire would bring in) as well as the notions of competition and liberty, i.e. that each Gemeinde should be free to choose how to manage its own finances and compete with other Gemeinden. He called this with some haughtiness “Economics 101”.

Now, the problem with such a conception of economics is that it completely misses the point that human beings don’t function according to what used to be (change is on the way!) taught in “Economics 101” and that structuring our society only on such a hypothetical economic model has a plethora of nefarious side-effects.

First, what we observe in Switzerland and much of Europe is not the outcry of a “society of jealousy” as much as the outcry of a “society of justice”. Our deeply engrained sense of fairness gets systematically trampled on by taxation policies as are commonplace in Switzerland (and elsewhere!) today. Second, while such taxation policies are by all means “rational” from a purely financial standpoint of a single Gemeinde, they are highly corrosive for the trust citizens have in a democratic, law-prescribing republic.

This lack of trust in the legitimacy of the laws of the state then sooner or later manifests itself in the (mis-)behavior of its citizens, so that for example income from clandestine work remains undeclared or cheating on your tax returns is readily justified: “If the rich get to cheat, why not also the rest of us?”. At the end of the day, such policies and the cynicism they create undermine the very foundations of a functional collective as any modern democratic state is. And at a later stage, it brings out the worst in us: an “everybody for him or herself society” and a society where not just justice is demanded, but increasingly also punishment.

Because at the end of the day, we are all still driven by the same evolutionary levers as we were as babies and as our relatives the Chimpanzees are.

In my next blog post I will attempt to delve into the great mystery of why this “society of justice” seems to be remarkably absent in a large portion of the American population when it comes to politics: I doubt that Mitt Romney and his 13.9% income tax rate makes much of a dent in his popularity among his base of Republican voters – even if they are amongst the economically struggling.

Manuel Heer Dawson