The world’s elite tends to look at the big issues from Olympian heights. The challenges of the day – poverty, the environment, terrorism, pandemic diseases – are global, they say, and demand ‘global solutions’. Hence the need for ‘international co-operation’ and ‘global governance’, whereby governments, international organisations, multinational companies and ‘civil-society’ NGOs come together to fashion co-ordinated policies, backed up by ever-stronger international law.
This is the world-view of Davos Man, and it is distorted and misguided. There is a different, realistic, ground-level view. Crucial international policy choices are made and implemented at national – and increasingly at sub-national – levels. When they work, they are copied, spreading gradually and patchily across countries and regions.
This is the real story of globalisation, and is far more important than what happens in the bureaucratic straitjackets of the IMF, World Bank, WTO and UN.
Take the two powerhouses of the world economy, the US and EU. Outsiders view the US through the prism of the federal government in Washington, DC. Of course, what it does matters, at home and abroad. But what outsiders rarely notice is the sheer variety of policy experiments conducted by the state governments, enabled by a decentralised federal system.
Brussels not the only story
Europe has the ‘Brussels story’. Eurocrats and Europhiles look to EU blueprints concocted in Brussels to solve Europe’s problems. The ‘Lisbon Agenda’, for instance, is a collective design, replete with prescriptions and targets, to turn the EU into the most competitive region in the world by 2010. It has failed abysmally.
Far more important is what Carl Bildt, now the Swedish foreign minister, calls the ‘Tallinn-Bratislava’ process, a decentralised method of market-responsive policy innovation. His example is the flat tax. Going against the grain of EU attempts at ‘tax harmonisation’, Estonia introduced a flat tax in the early 1990s as part of radical free-market reforms. It worked and was copied by other governments in eastern Europe.
In Beijing, a centralised Communist leadership opened up a hitherto hermetically sealed economy and society. That is the ‘Beijing story’. But there is another, complementary, story.
Provincial flair
The chief characters are the avant-garde Chinese provinces, with business-friendly governments that have welcomed trade and foreign investment. From a few special economic zones in southern China, this spread to other provinces. The growth poles of the Pearl River Delta and Yangtze Delta have devised policy examples now imitated elsewhere. The reform-minded government of Zhezhiang province is considered a pace-setter. It welcomes foreign investors – but also provides a business-friendly climate for home-grown entrepreneurs, who are the most successful in China. Now the challenge is to spread these examples to other provinces.
In India, reforms at the centre have proceeded in stops and starts, and are stalled at present. Far more important for the country’s emergence in the world economy is what is happening outside New Delhi. Indian growth and globalisation is concentrated in about six states in the south and east. Here, several chief ministers have initiated market-friendly policies to boost growth and reduce poverty. They have relaxed restrictions on domestic business, encouraged foreign investment and started tackling such perennial problems as infrastructure and bad governance.
These stories are of “initiation from below and diffusion by example”, as historian David Landes puts it. Next time you hear Davos Man waxing abstractedly about global problems, solutions and governance, ask: is this the real story? What’s going on ‘below’? To paraphrase Donald Rumsfeld, that is where “stuff really happens”.
Razeen Sally is director of think-tank the European Centre for International Political Economy. He is also on the faculty of the London School of Economics.
