What is DGC?
For any national government, protecting society and the environment and providing good public services, let alone solving global problems like climate change, almost always means that taxes and regulations - especially on businesses and the rich - need to increase. But this goes against every government's need to keep its economy internationally competitive; i.e. relatively more attractive than its competitors to inward investors, multi-national corporations and the jobs they bring. Governments are therefore caught in a vicious circle of Destructive Global Competition which, absent some form of global cooperation, no government can escape. Since no government can be sure that other governments will implement the same measures, they are all systemically stuck. Either races-to-the-bottom ensue (eg. decreasing levels of corporation tax) or we encounter the more common phenomenon of "regulatory chill": each nation's need to keep its economy internationally competitive means that increases in taxes or tighter regulations to solve global problems are confined to small, glacially slow, ultimately inadequate steps. The ubiquitous pursuit of "international competitiveness", the very pursuit we are told will assure our prosperity, turns out to be the source of humanity's collective paralysis. If DGC is not solved, social, environmental or financial collapse seems inevitable.
Numerous examples of DGC can be found in the mainstream media. Some examples from newspapers:
A. Climate change:
"Governments remain reluctant to address the [climate change] threat because any country acting alone to curb its greenhouse gas emissions, without similar commitments by other governments, risks damaging the competitiveness of its industries"[1].
B. Corporation tax:
"Governments vying to attract inward investment are weighing the advantages of cutting business costs . . . [Corporate] Tax rates have been falling across the world over the past quarter of a century . . . This trend is forcing some experts to the conclusion that governments have embarked on a race to the bottom"[2].
C. Inter-racial equity and economic justice in developing countries:
How, you might wonder, could DGC have anything to do with these issues? In the following extract, the former South African Minister for trade and industry, Mandisi Mpahlwa, explains why the government had to retreat from supporting indigenous black businesses:
"The South African government has exempted foreign companies from having to sell a 25% stake in their local operations to black business . . . The government exempted foreign players because 'we had to be mindful that we also have to position South Africa in a global environment where there is fierce competition for investment'"[3].
D. Workers' rights and sweat-shops
"Asda [part of Walmart] is today offering customers a passable two-piece suit for the price of a round of drinks in a London bar. Bangladeshi student, Shafiqul Islam, said, 'People can't survive on £12 a month, but if the government protests, Asda and others will go to China or somewhere else.'"[4]
E. Financial crises
When it comes to one of the most important topics of all, Prof. David Harvey explains how, in the years preceding the crisis, DGC quietly sowed the seeds:
"As the financial system went global [in the 1980s], so competition between financial centres - chiefly London and New York - took its coercive toll . . . If the regulatory regime in London was less strict than that of the US, then the branches [of international banks] in the City of London got the business rather than Wall Street. As lucrative business naturally flowed to wherever the regulatory regime was laxest, so the political pressure on the regulators to look the other way mounted."[5]
The severity of the 2008 global financial crisis was extraordinary. As the ex-chair of the US Federal Reserve, Paul Volcker, noted, never before had things gone downhill 'quite so fast and quite so uniformly around the world'[6]. Given just how disastrous the crisis was, considerable speculation arose as to whether neoliberalism might be abandoned or even whether capitalism as we know it had perhaps reached its limit. But such speculation, I contend, is premised on a false assumption that, just because neoliberal policies were implemented deliberately in the 1970s and 80s, they can just as deliberately be reversed.
This is to completely misunderstand what we are up against. DGC has taken on a momentum all its own, and it cannot be stopped by any government. Operating in a vicious circle, it is just too ubiquitous, too powerful. This is why, despite the crash, the only story in town has been getting back to business as usual. DGC never goes away, as this article that appeared in The Scotsman in the wake of the 2008 crisis shows:
"Row erupts as watchdog calls for tax on the City. A fresh row has erupted over 'excessive' banking bonuses after Lord Adair Turner, chairman of the City watchdog, claimed Britain's financial sector has grown 'beyond a socially reasonable size'. His comments caused an uproar in financial centres yesterday, including Edinburgh, with leading figures and organisations warning that Britain would lose yet another major industry to competitors abroad. John Cridland, deputy director-general of the Confederation of British Industry, said: 'The government and regulators should be very wary of undermining the international competitiveness of the UK's financial services industry.'"[7]
The conclusion we must reach is that, far from setting adequate rules, governments are now forced to competitively dismantle them. As Prof. Will Davies points out, "The problem is that the production and enforcement of rules is now internal to the game".
What is Pseudo-Democracy?
Pseudo-democracy is the direct political consequence of DGC. It is the inability of national governments, particularly those on the centre-left, to implement the policy platforms they were elected on.
The absolute need of all governments to maintain their international competitiveness severely undermines democracy, turning it into Pseudo-democracy. Because, whichever party we elect, and whatever it may promise prior to the election, once in power it effectively has no choice but to implement much the same narrow range of neoliberal, competitiveness-oriented policies. It has to keep its national economy internationally competitive. This is why, over the past 30 years or so, centre-left parties across the Western world have gradually shifted to the right, so turning the broad centre-ground of politics into a neoliberal mono-culture. As former UK Conservative Prime Minister John Major once put it "I went swimming leaving my clothes on the bank, and when I came back Tony Blair was wearing them".
The result for voters across the West has been Pseudo-democracy: that whoever we vote for, the policies delivered remain much the same and nothing much changes except our problems only get worse. Pseudo-democracy is why citizens across the Western world have become so disillusioned with mainstream political parties and are now rebelling, increasingly resorting to the political extremes. The consequences are all too clear to see: Trump, Brexit and the lurch to far-right nationalism are therefore a direct consequence of DGC. While DGC reigns, pseudo-democracy is inevitable.
Examples of Pseudo-Democracy can be seen across the Western world. Perhaps the most graphic example was the experience of former French President, Francois Hollande:
Having initially attempted to implement the centre-left policy platform he had been elected on, he soon found France's economy becoming uncompetitive as inward investment dried up and capital and jobs moved elsewhere. Quickly, he found himself compelled to shift his stance back to the neoliberal orthodoxy. As The Times reported:
"After 18 months of stagnation under orthodox socialist leadership, [Hollande] confirmed that he was swinging towards the market-friendly policies adopted over the past 15 years by left-wing parties in Germany, Britain and elsewhere."[8]
If politicians of whatever political persuasion can no longer implement the platforms they are elected on, democracy becomes mere Pseudo-democracy; i.e. fairly meaningless.
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