Co-operation vs sovereignty in an unequal world order

Global governance is understandably something of a preoccupation as economic globalisation seems to be in retreat at the same time that the scale and intensity of global challenges – climate change, the AI race, actual or simmering conflict, organised crime – is increasing. The Bretton Woods institutions – IMF and World Bank – established in the wake of World War Two remain important and powerful, and will have a lot on their plates in the next year or two, including the possibility of a new debt crisis alongside a surge in poverty and hunger. This context raises two questions. One is what is their guiding philosophy in terms of economic analysis and policy recommendations going to be now the old Washington Consensus version of conditionality has been more or less ditched? The other is whether they can help address the new kinds of challenges, or whether instead new institutions are needed?

They were forged out of a crisis of course, but in The Meddlers: Sovereignty, Empire and the Birth of Global Economic Governance Jamie Martin traces their forbears in the international economic institutions established near the beginning of the 20th century. The key issue he highlights is on the one hand the delicate balance between mutually beneficial co-ordination and voluntary loss of sovereignty among peer countries, and on the other the exercise of power by some countries over others (Imperial powers over colonies or later the US over its debtors) at the expense of the latters’ sovereignty. Co-ordination and co-operation require ceding some decision-making ground but when there is a parity of power this expands the opportunities or benefits each party experiences. However, the international institutions also embed inequalities of power – symbolised by the Asian crisis image of an IMF bureaucrat (Michel Camdessus) leaning over a local politician (Indonesia’s President Suharto) signing up to loan conditions.

Some technocratic institutions governing for example international post or shipping have lasted throughought the century plus, while the BIS (established in 1929/30) is an interesting example of an organisation with a broader mandate yet lasting throughout the 20th century and beyond, despite its missteps during the 1939-45 conflict. Other pre-WW2 international bodies such as the Economic and Financial Section of the League of Nations fell with the implosion of the international order at the outbreak of war. The book argues that the context of post WW1 reparations, the tensions in the European empires, the growth of US economic power and the pressures of the gold standard and the tariff wars of the 1930s all contributed to their downfall. International co-ordination was both essential and impossible.

The lesson for the 21st century, it concludes, is that today’s context of shifting economic power and economic crisis pose similar challenges for the Bretton Woods institutions. The history of earlier institutions suggests that it is fundamentally hard to resolve the core dilemma of a need for co-operation with the desire for sovereignty in a world of unequal power: “Tweaks to existing international institutions, like the IMF and World Bank, may be insufficient to produce a more stable reconciliation of global governance and democratic politics.” But what form should new institutions take? This very interesting book leaves the question hanging.

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Governing badly in a crisis

I’ve now read Jeremy Farrar’s Spike: The Virus vs the People – the Inside Story, as a follow-up to Vaxxers, and found it also very interesting. It’s less gripping as a personal memoir, although it does track his own involvement in pandemic policy via SAGE (in the UK) and WHO and other international organisations. On the other hand, it is enlightening as an insight into the dysfunctionality of decision-making in the UK & in this way is a companion to Michael Lewis’s Premonition about the US pandemic lack-of-preparedness. Farrar writes: “Many of the UK’s biggest successes during the pandemic were achieved by teams working outside formal government structures and agencies.”

We will (eventually) have an inquiry into the handling of the pandemic by the Westminster/Whitehall and devolved governments but reading Spike makes it clear that any debate about the future governance of the UK or about co-ordination between levels of government within England and the other nations absolutely needs to include lessons from the pandemic. My starting hypothesis will be that across countries there will be a strong correlation between eventual excess death rates and the competence of government, the state’s ability to co-ordinate in a crisis. The pandemic has exposed fragilities of governance.

Formal structures of government are one thing. Another message I took from Spike is the importance of personal relationships and the serendipity that introduces: “I thought, probably like most people, that the world works through official or formal channels but much of it operates through private phone calls and messaging apps.” This absolutely speaks to my bias that as soon as possible we should get back to conferences and in-person meetings. The nature of online communication is such that it excludes much exchange of tacit knowledge or small bits of information, not to mention trust-building.

The book has unflattering things to say about a number of people involved in pandemic response, not least some leading politicians; and praise for the dedicated scientific leadership. There are clearly different accounts (from the political and SAGE sides) about who said what when at key stages, particularly summer into autumn of 2020, which I guess an inquiry might get to the bottom of; Spike should perhaps be subtitled ‘an inside story’. The pandemic is not over either, and your ranking of which countries did worst will depend on your metrics: case numbers, cumulative deaths, cases and economic hit combined. Unfortunately the UK does not do well on any of these: something for us to ponder.

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Experts and values

What is the scientific method? How does science advance? Why did modern science emerge when it did about 300 years ago? Will it continue? All questions addressed by Michael Strevens’ interesting and enjoyable The Knowledge Machine: How an Unreasonable Idea Created Modern Science.

The book begins by setting out two competing theories about the scientific method: Popper’s claim that scientific knowledge progresses through falsfication of hypotheses and Kuhn’s even more famous claim that it occurs through revolutionary changes in paradigm. These are incompatible explanations – if falsfication happened, how could scientists hold on to an incorrect paradigm – and both wrong, the book argues. The falsfication hypothesis not states that ‘facts’ are only tentatively true, always vulnerable to falsification – so we can be no more confident that the sun will rise today (Hume’s induction problem) than that a human born today will live forever. The paradigm revolution hypothesis seems to rule out progress or at least doesn’t account for why the scientific community jumps from one paradigm to another with better predictive power. Strevens is even more critical, though, of the radical subjectivists who argue that there is no scientific method, that science is fundamentally all about the status of scientists, how they exercise power within the scientific institutions so that certain ideas come to dominate.

It is not that scientists are not subjective, he says; of course they have personal priors in evaluating evidence. However, the key point is that in the official public discourse in scientific publications and seminars is that there is an iron rule: only empirical evidence with predictive power counts. The evidence will often be microscopic or concern minute differences in measurement: much scientific endeavour is super-dull, detailed collection of measurement. Scientists have to be trained to have a high tolerance for this painstaking work, because it is the only way progress happens – much as in their private lives they are fascinated by the big philosophical theories or the beauty of the universe. In scientific debate, “Victory does not come through smooth rhetoric, metaphysical inquiry, moralizing, or any other sort of sweet talking or big thinking. To win, players must front up with meticulous observations.” The subjectivists, the book argues, overlook this actual scientific method – which was cemented as the way to do science by Newton.

Is this immensely successful scientific method secure? The book ends with a section on the need to retrain every genertion of scientists in this approach – dull meticulousness in disciplinary debate whatever their private philosophical flights of fancy. And on the need to sustain the institution of modern science in the face of the challenges facing humanity today, from covid to climate.

It’s a very enjoyable book, with plenty of stories of science past and present. The argument certainly persuaded me. Economics differs substantially in that the social processes we investigate do not generate data in the same way as physical or biological ones, but the ideal method is the same: of course we bring our own values to evaluating evidence but it is the evidence that wins the official disciplinary debate. We cannot ultimately be objective and impartial but we can and should set objectivity as the standard for evaluating claims. So I recognised the book’s description of the iron rule as the way researchers (try to) operate. And similarly, I reject the subjectivism of those who say economics should be pluralistic – can only be so – because there is no way of testing claims against each other.

419TbK7hZPL._SX323_BO1,204,203,200_My other reading this week has been Behold, America by Sarah Churchwell. Having been comforted by the arrival or President Biden, the book got me worried all over again about the long and strong roots of American fascism – shocking and startling photos of the swastika flying in Madison Square garden rallies. The book analyses the histories of the slogans America First and the American Dream – tracing the more-or-less constancy of the first (white supremacy) and the evolution of the second (from an evocation of equality and civic participation to a claim about material prosperity) through newspapers and other records. Along with this evidence about the persistence of populism, perhaps we should stay worried.

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Burning platforms

In 2011 the CEO of Nokia, Stephen Elop sent a memo to staff comparing the business to a burning platform from which it was essential to jump in order to change course. He was referring to the disruption of Nokia’s revenues and profitability by Apple and Android smartphones, and he was right. Rebecca Henderson’s Reimagining Capitalism in a World on Fire is essentially arguing that most of the world’s businesses are on burning platforms, if only they knew it. Either the disruption of climate change consequences, or of social insurrection due to inequality – or, as it turns out, the effect of a global pandemic, though the book predates this – will destroy capitalism. Unless businesses across the board change their ways.

I got the book as it was one of the FT Business Book award shortlist titles I hadn’t yet read (I don’t fancy the ones on Netflix or Instagram, but have read & enjoyed all of Deaths of Despair, If/Then and The World Without Work). Henderson clearly has vast experience of engaging with businesses of different kinds, and much of the book is about the success stories – those that have re-engineered themselves to become oriented toward purpose rather than profit. The examples include Unilever and Aetna, described in some detail, as well as old chestnuts like the worker-owned John Lewis and Mondragon, and a range of smaller companies, and industry initiatives like the move to purchase sustainable palm oil.

The book has a good term for what’s needed to make the kinds of changes described in these examples: architectural disruption. As Henderson acknowledges, many more businesses are still oriented toward short term profit and share price rather than long-term social purpose – even though the purpose-driven businesses ultimately do far better in conventional terms. She identifies some key barriers, among them the necessary big internal re-organisation and culture change. Becoming a purpose-driven and high productivity business requires a high level of trust within the firm, and many managers are unwilling and able to embark on this programme.

There are external barriers too: the short-termism of some investors, the difficulties of getting co-operation among businesses, and the political and regulatory context. So reforms to corporate governance and finance (including proper risk-measurement and accounting), and to the political climate of ideas will be needed in addition. List all that’s needed and it can seem daunting. But we’re all on a burning platform. My guess is that several forces will converge to bring about change – millenial employees demanding better, political upheaval given the state of the world, and un-ignorable consequences of the damage to nature. Whether the change will happen fast enough is another matter.

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Law and technology, power and truth

I’d been looking forward to reading Between Truth and Power: The Legal Constructions of Informational Capitalism by Julie Cohen. I start out sympathetic to the key argument that the legal system is the product its society – the material economic and technological and also the political conditions. Therefore current legal contests reflect underlying changes in these same forces, and the final legal system for the digital era is still in the process of being shaped. Law and the implementation of technologies in society influence each other – the ‘rules of the game’ are not exogenous.

There are indeed some interesting insights in the book. I most enjoyed some of the earlier parts, which are more descriptive of the extension of the idea of intangibles, ideas, as “intellectual property”. This is not new – James Boyle for one has written superbly about it. But the detail here is interesting, plenty of nuggets about the US legal system and how truly, gobsmackingly awful it can be.

I also appreciated the chapter on regulation, and its basic point that many regulators are now having to “move into the software auditing business”, and indeed may have to evaluate software controls designed to evade regulation. Implications here for analysing regulation in the digital economy in terms of hyper-asymmetric information and algorithmic complexity.

On the whole though, I was disappointed. The book is almost entirely US focused – and is upfront about it – but the US system is distinctive even compared to other common law jurisdictions. Nowhere else, for instance, has its 1st Amendment fetishism. It would have been terrific to have some reflections on the extra-territoriality of US lawmaking and court judgements in the digital domain.

The book has some tantalising reflections about the limitations of law, based on concepts of individual rights, in the face of collective effects: as I’ve been arguing for a while eg here, digital power spells the end of individualism, including what we all now call the neoliberalism that gave birth to it. More on this would have been great.

There’s also just too much sub-Zuboffian rhetoric (rather than argument) about the ‘surveillance-industrial complex’. I’m all too willing to believe this exists, so all the more disappointed when the analysis is so vague. There’s also a lot of allusion to Foucault – “biopolitics”, “governmentality” –  in the book without it ever – as far as I spotted – actually citing and deploying The Birth of Biopolitics.

All in all, there’s a lot of detail in this book that didn’t, at least for me, cohere. Too many trees, not enough overview of the wood. Perhaps it’s time for me to try the highly-praised The Code of Capital by Katarina Pistor.

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