There can be no liberalism without a regulatory system
Last week we published on line an editorial by Maurice Allais on the link between liberalism and globalization. 1. Liberalism involves different concepts for each country but it is inspired in international circles by the Anglo-Saxon vision.
The clarity of his thoughts and the extreme richness of his ideas draw up a prospective statement of errors that must not be committed and choices that must be made.
We complete his analysis by a comment on the monolithic usage of liberal thought in international proceedings and the necessity of setting up a world regulatory system to reduce excesses, notably in the agricultural sector
The agricultural negotiations that have been begun within the framework of the Doha round have reached a dead-end: the World Trade Organization (WTO) was only able to obtain very limited results at the Hong Kong summit last December, and it has had great difficulty keeping to the tight schedule that was fixed to continue the liberalization of international agricultural exchanges.
The Doha round therefore seems to accumulate failures, such as those that occurred in Cancun and Seattle. But, even though these latest meetings have met with refusal from developing countries (particularly African countries) to share the vision of developed countries, the current situation is deeper and more complex.
It is the result in fact of frequent disagreement between the forces involved (G10, G20, G33, G90…) and of a tendency to question multilateralism, and yet this is one of the WTO’s basic principles.
From now on, the issue in hand is the WTO’s ability to rally diverging interests around a principle that is commonly accepted: the benefits of liberalization.
There are three explanations to answer this question.
The concept of liberalism dates back to the 18th century and has continued to evolve differently in each country and region. Historically, the first economic theorists of liberalism1 insisted that the prosperity of a nation was founded on the satisfaction of individual interests, because, according to them, this egoism produced reciprocity, interest and harmony.
Vincent de Goumay’s 2saying “laisser faire, laisser passer” (let do, let go, let pass) was the motto.
Then, theory and experience showed us that “laisser faire“ was not an optimal strategy in a globalized world.
Economic liberalism was therefore enriched with political, ideological and social dimensions, and at the end of the 20th century, became the “master concept”, with the fall of the communist bloc and the acceleration of globalization.
As there are no longer any “opposing doctrines” and, as countries have different levels of economic development, political regimes and social structures, there are now several meanings of liberalism.
These differences explain the difficulty that international institutions face when they try to build the future of international relations on liberalism when the Anglo-Saxon vision predominates:
› because after the Second World War, the Allies wanted to avoid any new conflict, and to work towards reconstructing the world with the development of international commercial exchange. Liberalism, the most relevant approach at that time for achieving these objectives, was promoted by the creation of various international institutions (GATT, World Bank, IMF…) whose influence has continued to increase.
› and because of the importance of economic models in the choice and direction of economic politics on an international scale. Developed for the most part by Anglo-Saxon organizations, they are based on very liberal principles and reflect only one interpretation of an eminently diverse world.
2. Liberalism is applied without judgement in a complex world.
Today therefore, the lifting of protectionist measures, the deregulation of markets, the free circulation of goods and people and the opening up of borders has become the universal “tool box” of liberalism.
The WTO is a perfect illustration, as Robert Barro reminded us during a conference on liberalization, since its objective is to “increase market fluidity with a view to increase and improve public well-being.”
The same goes for the World Bank and the IMF which have pushed the different States, in the name of liberalism and often with brutality, to diversify their economies and open their borders, in order to limit their risks (financial, sovereign and credit) and to improve competitivity on an international scale.
Today, the concept of liberalism has become so monolithic that public opinion is divided into two camps, the ultraliberals and the alterglobalists, who base their attitudes on simplistic reasoning.
Consequently Ezra Suleiman3 believes that “this term is heavily charged with symbols. It is a portmanteau word concealing or distorting reality. It is used on any occasion in political rhetoric, and has almost become a talisman: allowing intellectual trickery, becoming a real antidote to rational thinking, a flash in the pan that destroys all objective thinking”.
And, international institutions, led by the WTO, continue to apply the methods used after the Second World War, in a changed world where the stakes are completely different.
They believe, because they have more confidence in economic models than in reality, that liberalism is a natural state, which is what Joseph Stiglitz, Nobel Prize in Economics in 2001, and former chief economist for the World Bank, vigorously contested by resigning from his post. In fact, the economic potential of a country cannot be defined merely by applying Ricardo’s4 theory of comparative advantages!
Because, liberalism is in fact a complex and fragile state and, although its potential benefits are undeniable, the conditions necessary to obtain them are difficult to fulfill.
For all this, confronted with this academic liberalism, nothing has been proposed, and this is the problem, because the only condition necessary for economic and social efficiency is the creation of a regulatory system for different levels of development.
3. Liberalism without a regulatory system is therefore unworkable because it is “irresponsible”.
Liberalism is based on three main principles: private property, individual freedom and responsibility.
And, as Jean-Paul Picard, CEO of Deloitte, France, confirms, “if the whole world aspires, on an individual and collective level, to the development of freedom and to the respect of private property, the commitment of responsibility is often forgotten or even sacrificed on the altar of growth and development”.
However, as the notion of responsibility can only be understood if it has a system of reference, that is to say objectives and therefore rules to reach these objectives, liberalism is not synonymous with the absence of rules, just the opposite.
Liberalism and regulatory systems are two inseparable concepts and, by dismantling support policies and protection tools without measuring the consequences on the stability of nations, the WTO is continuing a process whose only justification is an act of faith.
Similar comments can be made about democracy. For although by definition democracy means “power to the people”, it can only survive by means of the laws that structure it. By analogy, we can therefore say that liberalism without a regulatory system is like a democracy without laws: it is inefficient and dangerous.
The “responsible” liberalization of international agricultural markets can therefore only exist if there is an international regulatory system of the markets.
But, who should be responsible for this?
As Clara Gaymard, former ambassador delegate for international investment, says “at present there is no authority in charge of promoting economic liberalism that deals with crucial subjects such as energy independence, demographic issues or innovation”. Agriculture could be added to this list.
And although the WTO’s mission is to liberalize international commercial exchange, it cannot be both “judge and jury” by regulating the liberalism it promotes.
The FAO, dedicated to the fight against hunger in the world, works downstream, with the IFAD and the UNDP, to contribute to the fight against inequalities due to poverty, without having a mandate to intervene upstream at the regulatory stage.
This is why another Institution should be in charge of a regulatory system for agricultural markets to promote responsible liberalism, finishing the actions begun by the WTO and the FAO.
WOAgri aims, by developing a new international economic reference model (the NAR model), and by creating an international assessment and grading agency (NAR Agency) to reach this objective while respecting the constraints of transparency and responsibility that an undertaking such as this implies.
WOAgri will take into account the fact there are different degrees of liberalism for one and the same market, and that these degrees of freedom will vary according to the sectors and countries under consideration.
1 Bernard Mandeville in the “Fable of the Bees” , then later Adam Smith and his famous invisible hand in the “Theory of Moral Sentiments” .
2 18th century French economist.
3 Professor at the University of Princeton
4 18th century English economist and inventor of the theory of comparative advantages according to which it would be in the interests of a country to specialize in the production of a product for which it has a comparative advantage, and to sell it.