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Home arrow Political science arrow Sustainability of Agro-Food and Natural Resource Systems in the Mediterranean Basin

Making Democracy Safe for Markets

For all the governance faults one can find in the political sphere—whether it be the sclerosis of bureaucracies or the lack of vision among those holding elected office—governance of the economic sphere is not even nominally democratic, and thus suffers from a basic defect. Market signals and impulses increasingly make business leaders slaves to the quarterly bottom line, irrespective of whether that bottom line is congruent with a company's, let alone society's, longer-term well-being. Businesses increasingly regard labor as a cost item to be minimized, driving a relentless process of automation and putting pressure on employment and wages. Yet gains in labor productivity are less and less shared with the workforce. Sidelining social and environmental factors by relegating them to the status of “externalities,” as economists are trained to do, is equivalent to shutting one's eyes to realities that one prefers not to see.

This narrow, short-term view is reinforced by the demands of a bloated finance sector. Thomas Palley (Chapter 16) writes that the rising influence of finance has been an engine of an economy that gobbles up growing amounts of scarce resources even as it distributes the product in ever more unequal ways. The result is vast wealth gaps, which have given rise to the notion of the 1 percent versus the 99 percent. A key task will be to govern the finance sector in ways that facilitate the transition to a more equitable and sustainable economy and to inject a greater degree of accountability into the private sector.

Collective bargaining and related structures (including the so-called works councils that represent worker interests at factories in several European countries) historically have been among the tools to introduce at least a modicum of democracy in the workplace, and have been essential for raising wages. But these processes have weakened as union representation has declined in countries where it once was strong (while it never gained much of a foothold in other countries). Aided by globalization, multinational corporations are able to force concessions from labor and from governments alike; workers often accept wage or benefit cuts for fear of jobs being moved offshore; local, regional, and national governments vie for industries by offering big tax giveaways or other “sweeteners.”

Governance in the economic sphere—determining what gets produced, how, and who benefits—has a powerful influence on society's ability to achieve social and environmental sustainability. But economic governance also carries over directly into the political sphere. The concentration of wealth and power essentially narrows the ranks of those with an effective voice in decision making and in public discourse. The drafting of legislation by lobbyists is not uncommon, for example, and there has long been a revolving door for people moving between positions in government and business. In Brussels, an estimated 15,000 lobbyists seek to influence European Union rule

making, according to the Alliance for Lobbying Transparency and Ethics Regulation.

Opening ceremony of the EU's eighth Asia-Europe Meeting at the Royal Palace in Brussels.

The electoral and political decision-making processes of some countries (including the United States) have been captured by powerful interests opposed to decisive action for sustainability. This became clear during the fight over U.S. climate legislation in 2009. According to the Center for Responsive Politics, during 2009 the $22.4 million spent by pro-environmental groups on federal lobbying efforts was dwarfed by oil and gas industry expenditures of $175 million. The floodgates of private money influence were opened wide by the U.S. Supreme Court's “Citizens United” ruling in 2010, which allowed unlimited political spending by corporations, associations, and trade unions. Political advocacy groups spent more than $300 million on the 2012 presidential campaign, up from $79 million during the previous election. A growing threat to democratic governance is also found in investor/state dispute-settlement clauses that are included in many bilateral investment treaties. These allow companies investing abroad to challenge a broad array of health, environmental, social protection, and other laws. Instead of applicable domestic courts, such claims are adjudicated via private disputesettlement tribunals, where secretive panels of trade lawyers can overrule the will of parliaments. According to Corporate Europe Observatory, a Brusselsbased watchdog group, more than 1,200 such treaties have been signed by

member states of the EU alone.

The number of claims for compensation brought by multinational corporations under such clauses keeps rising and involves billions of dollars. According to the UN Conference on Trade and Development, at least 62 new cases were initiated against host countries in 2012—the highest number ever filed in a single year. Cumulatively, the number of claims reached 518 as of May 2013, filed against 95 different countries. Of the 244 cases that have been concluded so far, 42 percent were decided in favor of the state and 31 percent in favor of the investor, while another 27 percent were settled. Thus, corporations do not always win cases they initiate, but sometimes the mere threat of a claim or its submission has been enough for legislation to be abandoned or watered down. The Transnational Institute sees “a permanent tension between investor rights and public welfare interests.”

Beyond bilateral treaties, the North American Free Trade Agreement has been used extensively for bringing investor claims. But two multilateral treaties with broader reach are currently being negotiated. If passed, they will essentially be models for the rest of the world. These treaties—the Transatlantic Trade and Investment Partnership between the United States and the European Union, and the Trans-Pacific Partnership between the United States and countries in the Asia-Pacific region—are being negotiated in secret, shielded from public discussion and parliamentary scrutiny, even as corporate lobbyists are playing a key role. Like the existing bilateral treaties that enshrine investor-state dispute-settlement mechanisms, these new treaties would further limit the ability of governments to make rules in the public interest.

 
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