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The worldwide free market is strengthening the American model, which today relies on its strong comparative advantages in the post-industrial sectors of financial and cultural services, communications, leading-edge technologies and scientific-technical production. At the same time, a normative world culture is emerging in the realms of economic activity, social practice and private international law.

And it is the US which is laying down the new groundrules, i. Acting both as judge and party, they are imposing US normative criteria on the rest of the world 8. American capital thus operates in a universe of rules which it is constantly redefining and which determine the constraints of the international system. The US itself is not subject to those constraints. Nor has the American state lost control of the markets: the Federal Reserve's decisive action following the stock market crash in and the US Treasury's intervention in after the collapse of the Mexican peso are obvious cases in point.

The state also played a crucial though belated role in during the Asian crisis in preventing the collapse of international banking system and ensuring that liberalisation could continue. Globalisation is institutionalising a new balance of power between states that hardens the sovereignty of some while reducing the autonomy of the others. The worldwide free market accentuates the disparity between the centres of capital and the peripheries.

The players with knowledge and power lay down the rules; the others fall into line. Trapped in an international division of labour that forces them into often harmful specialisation, the most vulnerable third-world countries are losing the last remnants of their sovereignty, while the newly industrialised countries have become even more dependent over the last few years, as recent experience in East Asia proves 9.

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This is hardly surprising. While the European Union is an active participant in the worldwide free-market utopia, at the same time it constitutes a potential counterweight. Since the early s European unification has been directed towards the creation of an entity capable of competing with the US, rather than opposing it. By combining forces in a larger unit, the member states have been attempting to assert their sovereignty jointly in response to globalisation, since none of them is any longer able to do so individually.

From to France still believed it could go it alone. In the end it was forced to abandon its policy of growth stimulation in favour of an antisocial austerity package chillingly described as competitive deflation. It might seem that the constraints of globalisation and the demands of economic unification were now absolute and left national governments no room for manoeuvre.

A closer look at the redeployment of sovereignty and political power in Europe shows this conclusion to be false. Transfers of sovereignty to the EU - with regard to monetary matters or competition law - do not necessarily imply a reduction of national sovereignty. They are not a zero sum game. Under pressure in the new international political economy, the European nation states are pooling their sovereignty to resist submersion.

In other words, they are attempting to recover the sovereignty under threat at national level by relying on the strength of a larger regional entity. The EU has no central authority. Decision-making bodies vary from sector to sector. But on matters of strategic importance, the influence of the member states often remains decisive.

The Council of Ministers i. If we consider sovereignty as relative autonomy within the inter-state system, there is little doubt that the national executives have been able to exercise it through the EU institutions, at least in key areas relating to the world economy. If there is one subject of European consensus, it is free competition, which has been raised to the status of an absolute good. There can be no doubt about the concordance of national and European policy on this matter, since many of the reforms introduced by member states at national level preceded the corresponding EU regulations and sometimes go much further than required by strict compliance with EU constraints.

France's deregulation of its financial markets in , on Anglo-American rather than German lines, is a case in point Popular sovereignty, on the other hand, is breached with increasing frequency by EU practices that prevent parliaments and, even more so, civil society from playing their proper role in areas of crucial concern. In the context of globalisation and European unification, we have a situation - often referred to as the "democratic deficit" - in which the redeployment of state sovereignty is being achieved at the cost of a considerable increase in the autonomy of the political authorities, barely concealed by a barrage of new regulations designed to attenuate the effects of social distress.

And when it comes to social measures, the Commission is deliberately holding back on the grounds that the complexity of national systems of social protection, and the specific historical development in each member state, would make social harmonisation highly problematic if not impossible. National governments, which are closer to their citizens, are supposed to be in a better position to defend their interests when it comes to respect for social traditions and national temperament. Nevertheless, all the national social reforms proposed or implemented are converging towards the same goal: the liberalisation of labour markets.

Contrary to the new conventional wisdom, the fact that such reforms are entrusted to the member states, and are implemented incrementally, by no means indicates any resistance by national governments to the forces of globalisation. The nation states are simply playing the role which Karl Polanyi identified in the context of the first "great transformation" see 'Globalisation then and now' , that of "altering the rate of change, speeding it up or slowing it down as the case may be".

Governments are defusing resistance by reforming step by step. But as the combined effect of the measures comes to be felt, they too are experienced as faits accomplis. There is much lamenting over the powerlessness of national governments. Yet these very governments are contributing fully to the elaboration and implementation of the new hegemonic political economy.

They have chosen to participate actively, rather than simply adapt 11 , and are acting simultaneously at national, regional, local and European levels to redefine the rules in line with current neoliberal dogma and practice. The role of EU institutions has been less to usurp national sovereignty than to enable the member states to pursue their national interests by other means.

Because of the way it was conceived from the outset, European unification is a finality without a goal, a forced and blind march forward towards a final objective that is always receding into the distance Since there is no turning back, member states cannot go back on their word. They are trapped in the machinery.

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In defining general policy options, they bear responsibility for rules subsequently laid down by the Commission that are binding on all their citizens and take priority over national legislation. So far, responsibility for the consequences of the policy choices of the nation states has been largely attributed to Europe, thus protecting them from blame. But through this blame avoidance strategy, states could well end up losing control of the process. If that happened, there could be no return to the status quo ante. Left to themselves, nation states would lose the room for manoeuvre they had regained by concerted action.

The only solution would be to redefine the purpose of European unification. The growth of inequalities not only raises ethical issues. In the end it always holds back economic development and undermines social cohesion.

The transnational dynamics of the EU could provide an opportunity for upward social harmonisation in line with the most favourable rules and practices on working conditions, wages, employment, social protection, etc. That would require political determination that is currently lacking but, if it could be mustered, would set an excellent example. Failing that, the establishment of a European free-trade empire in the face of US hegemony may perhaps result in multipolarity but will certainly not lead to a fairer world.

Keohane and Helen V. Milner eds. Another example is the change in the legal definition of the state made by France's Constitutional Council in , which removed the reference to the public interest and restricted the definition of the state to the means available to it. The practical outcome is that, as a result of joint European and national measures, activities of public interest are increasingly subordinated to competition law. See Philip S. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.

We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner. Global Policy Forum. Has Globalisation Really Made. From this dual perspective, we discuss how his ethical dimension alters the representation of capitalism.

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He has been concerned with the ways in which the interpretation of rational choice in orthodox economics is inimical to ethics. By emphasising that income, although instrumentally significant, is not adequate to fully understand what people value, he introduced the concepts of functionings and of capability as an alternative approach to judgments about the development of a society. Finally, his capability approach is central to the idea of liberalism that he endorses.

By highlighting his criticism of neoclassical utilitarian foundations and presenting his capability approach, we draw attention to the fact that his is a pluralistic, multi-dimensional representation. This pluralistic dimension is a reflection of the diversity of his background and influences. It is also a mirror of the diversity of the Anglo-Saxon world in which much of his thought was forged.

Conforming to scientific exigencies, traditional economic theory has become formal and mathematical, based on utilitarian principles. Scientific rigour was achieved through the development of rigorous, general theories and through processes of complex modelisation. The necessary generalisations and simplifications were achieved, notably, through the device of the representative agent. Neoclassical economists do not question the preferences that lead agents to choose the best possible option, but simply assume that agents are consistent in their choices.

It is thereby agreed that man could be characterised by his single-minded pursuit of self-interest.

Capitalism and resource management

Opposing one of the main assumptions based on human rationality for neglecting ethical components, Sen deconstructs the definition of rationality and strongly opposes the two underlying assumptions. Such reductionism, however, is necessary to uphold the view that markets provide the best outcomes for individuals and for society as a whole. The butcher, the brewer, and the baker want to get our money in exchange for the meat, the beer, and the bread they make, and we—the consumers—want their meat, beer, and bread, and are ready to pay for them with our money.

The exchange benefits us all, and we do not have to be raving altruists to seek such e xchange. This is a fine point about motivation for trade, but it is not a claim about the adequacy of self- seeking for economic success in general. Unfortunately, in some schools of economics the reading of Smith does not seem to go much beyond those few lines, even though that discussion by Smith is addressed only to one very specific issue, namely exchange rather than distribution or production , and in particular, the motivation underlying exchange rather than what makes normal exchanges sustainable, such as trust and confidence in each other.

Did it really give any excuse for authoritarianism […]? He then took two years of leave from Cambridge and worked and taught at Jadavpur University in Calcutta, where his thesis on social choice was finally completed. After winning a competitive Prize Fellowship at Trinity he dedicated the time to studying philosophy. Thus his immersion in Anglo-Saxon universities and his participation in the intellectual debates of these establishments kept expanding.

It was during his eight years in the University of Delhi that he pursued his research on social choice theory. To get firmer understanding of all this, it was necessary to pursue further the search for an adequate characterization of individual advantage.

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He sums it up as follows:. The approach explored sees individual advantage not merely as opulence or utility, but primarily in terms of the lives people manage to live and the freedom they have to choose the kind of life they have reason to value. The capabilities depend both on our physical and mental characteristics as well as on social opportunities and influences and can thus serve as the basis not only of assessment of personal advantage but also of efficiency and equity of social policies.

According to Sen, it also confuses means and ends. The causality between income and utility, with commodities placed in between, is too hasty an explanation of the links between income and wellbeing.

His goal is to propose a better representation of wellbeing, which lies between commodities and utility. Thus the capability approach shows a more complex chain of process between having income and procuring utility. In other words, having an income does not necessarily result in procuring utility. They are related to goods and income but they describe what a person is able to do or be as a result.

Indeed, it is the very dogmatic nature of utility that he criticises. Therefore, while the capability approach entails a broader terrain of analysis whether it is poverty analysis, development economics, social choice theory, etc. Income, happiness and commodities, some of the key concepts derived in mainstream economics are obviously important. The problem is that the conceptual and theoretical content based solely on these terms fails to alert us to the possibility of creating distortion by policies aimed only at increasing one of these.

Instead, it is to be perceived and utilised as a framework of thought, a normative tool, which can be adapted, along with or in place of, alternative theories, such as the utility approach. It is reflected in the way in which he deliberately leaves it open, even incomplete, so that it can be used in any manner that people deem appropriate.

China’s model of accumulation

Overcoming the distortions and inequalities inherent in modern welfare economics is an imperative for Sen and his theory of justice 37 provides valuable advice on how to make actual situations more equal. This explains why Sen opposes mainstream approaches to social achievement, which he considers inadequate or misleading. Taking standard national accounting aggregates to illustrate his thinking, these measures of social achievement are based on the production of commodities and real income, which characterise efficiency, both technical and economic.

For Sen, this focus on the satisfaction of efficiency is associated with the confusion between ends and means. On the invitation of one of his Cambridge friends, 39 Sen helped to develop a broader informational approach to the assessment of development. His input was thus instrumental in compiling the Human Development Index for the United Nations Development Programme UNDP , used as a more adequate, more representative, and a more ethical, measure of social well-being and of standards of living than GNP or real income.

Re-reading “Das Kapital”

His applied work in these areas, especially on famines, have done much to increase awareness of these shortcomings in Anglo-Saxon capitalist economies. By providing greater insight into the nature of poverty and deprivation, and by improving the framework and the tools required for its measure and assessment, Sen has brought normative concerns back to capitalist economies and their social policies. Thus a lot of the credit for placing the discourse on inequality within mainstream economics goes to him. From a historical point of view, when analysing the long-term transformations in capitalist economies, the waves of deregulation and liberalisation, beginning in the mids in the USA, strengthened free market ideology, supporting the theory that markets were the best regulators.

Referring to the recent crisis in order to emphasise the need to go beyond rational choice and free market ideology, Sen deplores the breakdown of trust, which he cites as another necessary condition for sustainable exchange:. Even though the champions of the baker-brewer-butcher reading of Smith, enshrined in many economic books, may be at a loss about how to understand the present economic crisis since people still have excellent reason to seek more trade even today — only far less opportunity , the devastating consequences of mistrust and lack of mutual confidence would not have puzzled Smith.

Even most defenders of the American model of capitalism, symbolic of the free market model, support welfare provisions to some extent, as Cudd and Holmstrom underline. His recommendations on changing and improving financial systems stem from the notion of justice as empowerment.

click A subprime lender who misled a borrower into taking unwise risks could pass off the financial instruments to other parties remote from the original transaction. The need for supervision and regulation has become much stronger over recent years. And yet the supervisory role of the government of the US in particular has been, over the same period, sharply curtailed, fed by an increasing belief in the self-regulatory nature of the market economy. Precisely as the need for state surveillance has grown, the provision of the needed supervision has shrunk.

These agencies are hard to discipline despite their abysmal record, but a well-reflected voice of legitimate governments can make a big difference to financial confidence while solutions are worked out, especially if the international financial institutions lend their support. From the point of view of justice once more, restrictions are defended on products that are designed to be incomprehensible.

The availability of credit, for instance, through special credit schemes targeting students, first-time homeowners, can make the process of credit — availability and financing — more sustainable. In other words, government intervention to ensure special credit provisions that do not increase government debt over time are sustainable because they give people relatively more control over their lives.

Another area in which financial regulation enhances justice can be identified in measures aimed at reducing volatility, thereby reducing the disruptive effects of financial instability on long term planning. Sen defends national financial sovereignty when it comes to applying justice standards at a country level. However, his arguments are not advanced in the name of national economic development, but rather as a way of supporting the structure and design of a financial system that allows people to make the choices that they want.