Why the Density of Regulation for Global Issues is too high today

Recently I was at a conference about finance and ethics. One of the discussed topics there were regulations in the finance industry. Although the discussion was controversial there was somewhat of an overall agreement that regulation is basically necessary but that its density today is too high. I asked myself why there is on the one hand an insight that regulations are needed and on the other hand a moaning about too much regulation?

The answer, I think, is to be found in the globalization. When the West triggered the economic globalization by national and international market liberalization and deregulations one consequence was the global integration of finance and other industries. The second consequence was that especially states in the West lost control over important political instruments for regulation. And by eliminating regulative buffers, the development of economic and financial crises was facilitated because unleashed financial streams could flow nearly without control.

Besides the political instruments already given away due to deregulation and liberalization the now established economic globalization has created new realities: according to the political scientist Ch. A. Kupchan, still state-based political instruments as e.g. financial- and monetary policies have become ineffective in a globalized world because of its inherent global competition. This all shows that states – and especially Western states which carried out deregulation more thoroughly than others – aren’t able to provide solutions (alone) for global issues as the challenges in the global financial system.

Because of this inability of states and the need to solve global issues, many international and transnational regimes and organizations have come into existence or tried to expand their sphere of activity in the past two decades (e.g. OECD, WTO, Basel III, Kyoto Treaty, GRI). They aim to contribute to solutions of global issues by providing systems of regulation. Because a global coordinating authority like a world-state is not existent, this development meant that a plethora of state and private-actors, organizations, initiatives, conferences and summits try to provide regulations concerning concrete issues.

The result is that there is a mess referring regulation of global issues today. It is not very surprising therefore that regulation concerning single issues such as e.g. unleashed finance or labour conditions in producing countries has become very dense and confusing. One even can speak of a market for regulation of global issues: different international regimes and organizations etc. offer each their “regulation-package” for one and the same issue (what leads to arbitrariness instead to effective solutions).

Because the mostly unintended lack of coordination on a global level can be seen as a central reason for the high density, it is inappropriate to speak of a willfully regulation frenzy. Thus, it is better to speak of an absence of effective regulation on the level of single states as well as of an absence of coordination on a global level, which principally would be the level on which meaningful regulative solutions need to be established.

It remains to be seen if the development of institutional structures for global governance is on the way to a necessary simplification of regulations which are at the same time more binding. Solutions are the aim to which regulations are expected to contribute effectively: this is what they are needed for. Besides, also factors such as moral, (economic) Weltanschauung or mind-set play important roles for effective solutions. But regulations are an indispensable part of them.

Claude Meier

How Economic Individualism leads to Anarchy. And a possible Way Out

In Thomas Hobbes’ (1588-1679) prominent state of nature every individual fights against all other individuals. Each individual does so to survive: When I kill my neighbor he can no more steal my belongings or kill me, I am consequently safer now. Hobbes’ state of nature is an individualism-based condition of anarchy: Neither laws nor governments nor any form of contracts exist. His ultimate objective is to find ways to leave or avoid this condition.

 

The individualistic concept was new then and characterizes many schools of thought in the modern period. Among others, the neoclassical theories in economic sciences of the 20th century generally rely on the methodological individualism. Each individual aims to rationally maximize its utility accordingly.

Through neoliberal politics these theories were implemented in many countries in the last 30 years: The transfer of theoretical concepts like the methodological individualism was essentially (although not exclusively) transferred and supported by such politics into the real world. Today, they structure to large parts the perception of how the economy functions and what it is in reality. This thinking is also based on competition because others are understood as (potential) competitors. The assumption of this politics of deregulation was that market-ruled competition alone establishes the most effective and efficient solutions.

 

Yet, individualism (as also competition) is not bad per se. Every one of us is an individual and it is nothing else than self-evident that individual rights need to be protected. But, the methodological individualism as the one of economic provenience was implemented at the cost of the community. In Switzerland e.g. voluntary community work is strongly decreasing (e.g. there are less football coaches for children). People are too busy with their individual job career and want to score (financially) in their personal competitive game.

 

The strong individualism of today may be seen as a kind of a global state of nature. Some examples: The exploitation of workers and local communities by transnational corporations is fostered by political deregulation and missing cooperative global governance structures: Responsibility is left often to individual managers; because of removing or not establishing regulation it is often made easy for managers of firms to enrich themselves excessively. Conversely, single individuals can trigger shitstorms against firms by posting individually declared violations of political correctness in the social media. And, as mentioned, voluntary community work is decreasing. The neoliberal politics of deregulation thus led at least partly to conditions which for Hobbes were imperative to leave in place.

 

A possible way to balance the corrosive consequences of such overreaching (economic) individualism on communities is that we, the civil society, begin rebuilding voluntary, non-market based cooperation between us citizens. A stronger togetherness between neighbors and friends etc. can foster the creation of values that provide a whole society meaning and vision. The economy can rediscover its role in and for society by cooperating more seriously with and for stakeholders.

 

Of course humans are competition-oriented individuals but they are also cooperative and social beings needing mutual value and meanings. The sociologist Richard Sennett and communitarianists often write about the importance of cooperation and togetherness in civil societies. And the stakeholder theory explains the advantages and appropriateness of an economy understanding itself more as a part of society and related to stakeholders.

 

 

Claude Meier