There is one unchallenged parameter for quality rankings of universities: publications in peer-reviewed journals. The same holds for quality measurements of candidates applying for professors’ chairs at ambitious research universities. Peer-reviewed publications typically have a rather narrow disciplinary scope. Moreover, the flow of research money also follows disciplinary logic. The scientific peers deciding on research grants tend to share the same mentality with the publication peers. All this makes for a strong bias in favour of disciplinary excellence when academic quality is measured.

The bias is exacerbated when the ranking of journals is taken into account. For academic research careers, you have to show publications in so-called “A journals”. Their peer review tends to be strictly disciplinary, although top journals like Nature or Science have a multidisciplinary appearance and at least encourage some interdisciplinary consideration of a paper’s impact.

In public debates about this bias, representatives of the disciplines would reply that their impact is universal and their methods often come from neighbouring disciplines, so they are not so “disciplinary” as they may look. But that is no satisfactory excuse, given the fact that some of the biggest research challenges of our days find no adequate resonance in the submitted papers sections of A journals.

The general public as well as politicians and the media are aware of the quality rankings of universities, research institutions and countries. The most popular and most visible indicator is, of course, the head count of Nobel Prize winners. What politicians and the public are typically unaware of is the strong disciplinary bias that governs publications in A journals and even more the Nobel Prizes. These exist only for three natural science disciplines, physics, chemistry and medicine/physiology. The Peace and Literature Prizes are outside academia, and the Economics Prize, since 1969, is not a Nobel Prize proper but the Swedish Central Bank’s Prize in Economic Sciences “in Memory of Alfred Nobel”. Even this has become more and more a prize reflecting disciplinary excellence.

Complex systems and truly transdisciplinary problems are at a disadvantage when it comes to peer-reviewed journals, university rankings and academic careers. It is not easy at all to measure the extent of that disadvantage because scientists aiming at academic careers typically don’t even try to address complex and transdisciplinary problems, knowing that it would be difficult to find adequate journals.

Practical problem solving requires interdisciplinary research

Real world problems such as the ecosystem of the Black Sea and its eutrophication; the cultural determinants for the spreading of contagious diseases; or explanations for the miraculous growth since fifteen years of the Chinese economy, require interdisciplinary approaches. Solving them typically is a highly political affair, and quick results are rare. It may take decades to prove a hypothesis. Researchers engaging in such complex problems cannot realistically hope to win a Nobel Prize or similar honours during their life time. Universities that are in need of public recognition, i.e. high academic ranking scores, tend also to neglect interdisciplinary research even if they are encouraged by governments, local communities or the private sector to engage in it.

According to Einstein, we cannot solve problems using the methods that have created the problems. But in the present mindset, humanity tries exactly to do that. Many of the problems of our world relate to relatively blind applications of science and technology and leaving the steering to market powers or to state bureaucracies. The competition for economic achievement and scientific excellence is a reflection of that mindset. And the mechanism of scientific quality control nearly excludes the growing of sciences that analyse the complex, non-disciplinary nature of the prevailing destructive mechanisms.

A chance for Europe

Universities in Europe may be well positioned just to take a bold and new approach and embrace complex, interdisciplinary research. As a rule, they are not in a position financially to compete with disciplinary excellence of the mega-enterprises of US American universities. The latter can throw hundreds of millions of dollars at one problem such as the biochemistry of Alzheimers disease. Given the history and culture of European countries, European universities may well be better equipped than their American counterparts to successfully work on the fascinating array of complex and interdisciplinary problems our world is facing. Europe provides unique “laboratory” conditions for the study of some of the biggest real world problems.

Let me sketch out some of the problems that are worth studying:

• Healthy societies need a fair balance between public and private goods, or else between democratically legitimated laws and the powers of markets. Today’s markets are international, while laws remained national. This gives markets an unfair superiority over the law. Only through international legislation do we have a chance of re-balancing public and private interests. The EU tries to do exactly that. We need to study how well that works and what the limits and what the obstacles are.
• Global warming has become the highest environmental concern. Which are the realistic measures of mitigation and what can we do in terms of adaptation? I suppose we are in need for a new technological revolution that allows us to more or less de-couple economic and social well-being from the growth of energy demand. But which are the technologies doing that? And which are the policies to give those new technologies a realistic chance to take off?
• Ageing societies are in need of a fundamental restructuring of their social security systems. I suppose that on average people will have to work some five years longer. But they need not do the same work that has been designed for people aged 25–50. In fact, there are hundreds of societal and economic functions that can be better performed by the elderly than by the young. Think of all the tasks requiring experience, judgement, caution and care. In addition, there are many functions where age represents at least no major disadvantage. The respective jobs have to be designed, and regulation has to be developed and adopted encouraging the elderly to accepts the new assignments.
• Globalisation, migration and rapid structural change have put an enormous stress on people. In part that can be answered by life-long learning, – an exciting challenge to our educational system. In part, however, the new rapid changes have made people insecure, fearful and often wildly angry. In this state of mind, many have resorted to fairly primitive, often fundamentalist religions. The nexus between rapid-change economies and religious fundamentalism has consistently been denied. I suggest it should be addressed.

These are four out of perhaps fifty major and complex questions waiting to be addressed. Let me venture to say that old Europe, after having gone through the abysses of political fundamentalism, ethnic and racial violence and devastating wars, has emerged to be uniquely qualified to address such kinds of complex and intricate problems. The European unification movement, starting with Robert Schuman, Konrad Adenauer and Alcide de Gasperi and leading in 2007 to the 27 members European Union stretching from the Atlantic to the Black Sea, has been a unique success story, unparalleled in human history, of peace making, of multiculturalism, and of cultural and scientific rejuvenation. We Europeans should not be shy about ourselves, even if China has higher growth rates, the USA have a more formidable military power, and the Islamic world shows a more passionate dynamism. Hasty growth, powerful armies and aggressive passion may turn out to be part of the problem rather than part of the solution.

Opportunities for the elderly

It would lead too far into fields beyond the competence of the author to expand further on European visions. Instead, I choose to use the Festschrift for one of the grand old men of intellectual Europe as a welcome occasion to say a few words about new opportunities for the elderly.

The demographic transition from the predominance of the young in a growing population towards a stable population with a high proportion of old people is typically deplored by politicians, journalists, and by the managers of the pension systems.

In reality, I suggest, this is the natural and unavoidable state of a “sustainable” society. It also represents a new cultural universe full of exciting new opportunities. One of them lies indeed in harnessing the specific capacities of the elderly.

Let us begin with the family. What is a better holiday from young families’ stress than leaving the children under grandparents’ supervision? Actually, children tend to like that too, for a change, exploiting the seasoned habits of tolerance of the old generation.

But we can go further into public life and the private sector. Who is there in the local community to defend and protect cultural heritage and the beauties of the environment? Who is there to come with wise judgement as opposed to profit maximising options for the economically powerful? Who has the time to welcome guests from near and far and make them feel at home? Who can repair an old radio manufactured in 1970? And who is so attached to the village or the small town not to be lured into the already overcrowded megacities? It’s all the old generation folks.

One word about social security. The present system of employment knows one sharp moment in one’s life where retirement begins. Only self-employed people such as farmers, doctors, independent craftsmen or artists have maintained the habit of a gradual retirement. It is the masses of employed people who constitute the “demographic problem” as they sharply retire by the millions. What I suggest is not what is presently introduced in Germany, namely a mechanical prolongation of the work life before retirement from the age of 65 to 67. What I would find a lot more attractive is the establishment of a “third phase” of life with new job opportunities for the elderly and with very flexible working hours. The elderly would have options how much of the pension benefits earned during the “second phase” of ordinary work they want to consume during their third phase. The earlier they do that, the lower the benefits. Conversely, if they gainfully work in the third phase until the age of eighty without touching their benefits from the second phase, then they would earn bonanza payments easily three times as high as normal after retiring from the third phase. All sides would benefit: Gainful and meaningful work beyond second phase retirement means added value to the economy; the public or private pension funds benefit from not having to pay for fifteen years; and the elderly workers enjoy satisfaction and a significantly higher income during their old age. Sweden has introduced a somewhat similar system (without explicitly speaking about a third phase) and has reduced youth unemployment dramatically, chiefly because there was more added value around, from which added employment arose.

Virtues of 21st century universities

Let us now go a step further into the academic world that has been particularly impatient kicking the elderly out, – because they seemed incompetent to publish in A journals. If the complex and interdisciplinary problems of which I mentioned a few are to be addressed, it will be specifically the wealth of experience and oversight of the old generation scientists that qualifies them. The scarce resource in such fields is not methods of mathematics or molecular biology that impress the peers working for the A journals. It is rather the judgement about which elements from quite different disciplines are needed to be brought into a synergistic relation.

Think of the challenge of re-balancing public with private goods. That work will require an understanding of internationally mobile capital; international law, notably trade law; some history and philosophy of public goods and democracy; concrete experience with successful public-private partnerships; knowledge of the working methods and legitimacy of civil society groups, etc. etc. The disciplinary departments of political science or economics or law would be completely overwhelmed by the complexity of this challenge. Hence they tend show no inclination to engage in that kind of research and they don’t reach out to other departments to overcome their perplexity.

The study of global warming faces similar challenges. Here there is need of first class scientists of meteorology, botany or ocean dynamics to cope with the challenge, but also questions abound of international law, capital markets, political analysis, civil society or technologies.

All the assumed fifty odd complex questions referred to earlier show the same feature of needing disciplinary facts and interdisciplinary reasoning and analysis. In most cases, academic study is just not enough. Universities also need to leave the ivory tower and interact with real world actors in the public and private sectors. This is a demand that cannot be easily met by academic youngsters. They tend to be too impatient, too ignorant of the needs and limits of public life, or too greedy of making money in the private sector.

It is my belief that European universities of the 21st century should try to excel in the study of such complex, interdisciplinary problems. Also academic teaching would benefit from it, because universities should not graduate their students packed with disciplinary knowledge and methods and without exposure to the real world complexities. If non-European universities join in, – all the better.

The university staff would highly benefit from a healthy mix of young and old, of “hungry”, impatient researchers and wise and patient scholars having the overview of complex problems. As for the qualifications of the elderly, they must enjoy the mentality of the impatient youngsters but they should also have a credible dignity hat typically comes with age.

It would be the best of all (academic) worlds if also a new generation of A Journals emerged that accepts publications with a definitely interdisciplinary scope, using peers of outstanding credibility and judgement. Peers like Professor Mircea Maliţa!

Festschrift at the occasion of the 80th birthday of Professor Mircea Maliţa, “Coping with Complexity at the Beginning of a New Century”

The subtitle of the report of the World Commission for the Social Dimension of Globalization, which you were involved in, is “Creating opportunities for all”. It also mentions the role of companies and of the UN Global Compact, which Bosch also joined in 2004. What opportunities and initiatives should companies be taking here?

v.W.: Companies should recognize and apply the ILO’s core labour standards also within the supply chain. Companies may wish to establish assessments of climate or environmental impacts and draw their customers’ attention to them. Global Compact companies may also get involved in efforts to achieve an international i.e. competition-neutral) control of CO2 emissions and of the resource consumption. Global Compact companies could instruct their own pension funds to focus on ethical or ecological investments.

When the Kyoto protocol comes into force in February, this will mean greater climate protection. Your view is that the country that manages to disengage its economic development most efficiently from its CO2 emissions will have significant competitive advantages. How can this advantage be achieved, and with what innovations?

Japan has developed a “top runner” programme that defines an efficiency standard for energy consuming vehicles and appliances. Products failing to meet that standard will be phased out in the long run. The EU should consider joining this programme. Climate targets should be developed and agreed for the period after 2012. They should help stabilizing temperatures at a level not exceeding two degrees Celsius above pre-industrial levels. For this, CO2 concentrations should rather not exceed 500 ppm.

In renewable energies, the German export industry is one of the world market leaders. China has announced that it will be generating 12 percent of its electricity supply from renewable energies by 2020. This ambition is underlined by its organization of a global conference on renewable energy in 2005, as a follow up to the “renewables 2004” conference in Bonn. Does that mean that German companies, with their know-how, can look forward to a good future in China as far as renewable energy is concerned?

Germany seems to have established itself as China’s preferred partner for renewable energies. This could mean major market opportunities for German companies.

At the beginning of this year you are publishing a new report to the Club of Rome. In the report, you deal with the “limits to privatization,” and conclude that the balance between public and private sector that more or less existed up to 1990 has been lost, and that the economy is now leaning more toward the private sector. What do you feel are the consequences of this, and where do you see the limits to privatization?

I co-edited the book “Limits to Privatization – How to Avoid Too Much of a Good Thing” with professors Oran Young (Univ. of California) and Matthias Finger (Lausanne, Switzerland). It features some 50 examples of privatization, both successes and failures, in every relevant sector. The book observes an increasing imbalance between the public and private sectors, – to the detriment of the public sector. The private sector must be aware that there are many “public goods” that markets will never produce or maintain. Among them are primary education, the legal system, certain infrastructures, long term environmental protection, and a minimum of social justice.

Governance and Corporate Social Responsibility stand for two approaches that are intended to contribute to a new balance between government, business, and civil society. What hopes do you personally place in the voluntary assumption of responsibility by companies, and where do you feel is the most urgent need for change in management structures?

There is a need for globally valid rules for business. There should be no incentive for companies to disregard minimum standards of human or ecological decency.Voluntary rules of Corporate Social Responsibility (CSR) are helpful but not sufficient. Governance and CSR are mutually complementary. CSR pioneers may enjoy first mover advantages as ambitious international rules are gradually emerging and are gaining broader recognition.

In my role as Chairman of the parliamentary Select Committee on Economic Globalisation I learned with a degree of surprise that the term globalisation was brand new. It began to play a role in public life not earlier than in 1993. Fig 1 shows it for the German language but similar pictures are obtainable for other languages.

Fig. 1: The career of “Globalisierung”, i.e. globalisation in the German newspaper FAZ.

The strongest reason for the sudden appearance of the term globalisation has been the end around 1990 of the Cold War. 1990 was a real watershed date of history.

Nearly everybody was happy at the time. After all,

• We were freed from the spectre of a Third World War;
• Democracy, free speech and free press spread throughout the world;
• Well-positioned and well-governed countries enjoyed exciting new opportunities, e.g. the US (owning the largest amounts of capital which could be invested at the places of highest profitability world-wide) and China (with its immense labour force, emerging high technologies and high discipline).
• Stock markets soared, letting market capitalisation of the world’s total stocks triple within ten years. The sharp increase of foreign assets shows that this growth of value was interlinked with the globalisation of capital markets.
• Inflation was sent down in most countries to the lowest levels since the 1950s.
• The Internet became an immensely powerful tool of worldwide communication. It also massively spurred economic globalisation.

Fig. 2: The 1990s saw a jump in foreign assets. The picture shows foreign assets as percentage of the World GDP, Source: Nicholas Crafts, IMF in: Financial Times 01/23/03.

Fig. 3: The rise of the Internet, measured by the number of Internet hosts.

The downside of globalisation

However, for all the good news, there is also a downside to globalisation. During the Cold War, international capital had always to seek consensus with national governments and parliaments in the North and the South. In the South, governments used to play on the East-West tensions to induce the inflow of official development aid or of private capital.

In the North, the Cold War had forced governments to establish an attractive social security net to prove to the masses that capitalism took better care even for the poor than communism. In Germany it was the Social Market Economy launched by Ludwig Erhard in the 1950s. But the entire European Union was constructed around that model of an “inclusive” capitalism. Progressive income taxes and hefty corporate taxation were never seriously disputed. For business and for the rich this may have been annoying but it was anyway better than communism.

With the end of the Cold War, the need for consensus disappeared. Now the name of the game was catch as catch can. Competition got ever more brutal. You can see it from the number of business bankruptcies in many countries, including Germany.

Fig. 4: The rising tide of annual business bankruptcies after 1990 in Germany. 2003: HERMES-Prognosis.

Let me illustrate what happened by an anecdote from the automobile sector. Volkswagen got into deep troubles in 1993 because its cars were simply too expensive for the competitive world market. In response, Volkswagen hired a fairly controversial Spaniard, Mr. Ignacio Lopez whose task was to reduce costs, which he did by squeezing the last penny out of the parts suppliers, by saying they had to supply the same quantity and quality of parts next year, but at ten percent lower costs. If they complained hinting at their own costs, he coldly replied that Volkswagen would then go to another supply firm, maybe in Malaysia or Czechia.

It sounds brutal and it was brutal. But then, Fiat, which, I am sure, was much gentler to its part suppliers, ran into deadly difficulties a couple of years later.

For the state, the situation was not at all more comfortable. The increasing weakness of the state in negotiating with the private sector was soon felt in the field of taxation. Fig. 5 shows the steady decrease of corporate tax rates, resulting from ever-increasing pressures the private sector imposed on the states, in this case the OECD states.

Fig. 5: Corporate tax rates have been systematically reduced during the 1990s.
Source: KPMG Corporate Tax Rate Survey.

The joy of the winners and sadness of the losers

You can imagine that many people were truly happy with the new situation. The market philosophy originating with Adam Smith in the 18th century became something like a new religion. The Adam Smith Institute had a Christmas card recently showing the exuberant joy on the part of the new religion:

Fig. 6: A Christmas card from the Adam Smith Institute.

Unfortunately, there were also many losers, notably the poor in the developing countries. Fig. 7 shows the unfortunate dynamics of a growing gap between rich and poor in the world. Since the 1970s, the factor of the accumulated income of the richest 20 percent of the world population divided by the accumulated incomes of the poorest 20 percent rose from 30 to 75!

Fig. 7: The gap is growing between the rich and the poor.

During the 1980s, the reason for this growing gap were the “forerunners” of globalisation, the debt crisis and the “Washington Consensus”, which mandated the IMF to force liberalisation, privatisation and budget austerity upon countries needing IMF money. In the mean time, Joseph Stiglitz and others have brilliantly demasked the Washington Consensus as something that mostly benefits capital and rather impoverished the poor. In Latin America the effects were aggravated by the skyrocketing since 1979 of the US dollar interest rates leading in heavily indebted countries to what is now called the lost decade.

Keeping a balance between public and private interests

Before coming to solutions let me first recapitulate that Adam Smith himself made it clear that at least three conditions needed to be fulfilled before markets could become a blessing for all. (i)External peace and (ii) internally the rule of law are necessary to let the “invisible hand” work for the wealth of nations. Moreover, (iii) the state has to safeguard services and investments that are not by themselves profitable on the markets. Among them you would count mass education, infrastructure, social cohesion, culture or care for the environment.

“Inclusive” capitalism can be seen as one of the best ways of fulfilling Adam Smith’s conditions. When globalisation began to attack social justice and the provision of elementary infrastructure services, it thereby began to destroy the balance between public and private interests and thereby the very basis of healthy capitalism.

To visualise the idea of that balance, let us go through a small series of pictures symbolising the shift of power from the public to the private sector:

Fig. 8: In the 1970s the state was dominant but the business sector was happy.

Fig. 9: In the 1980s, the state was on the retreat.

Fig. 10: In the 1990s, globalisation set in and made the private sector dominant over public interests.

Let me submit that it is now high time to re-balance public and private interests.

Democracy, US unilateralism and WTO

To put it in more dramatic language: What we are up to is nothing less than a re-invention of democracy.

How that? Have I not said at the outset that the end of the Cold War helped the spreading of democracy? True enough, but at the same time nation states have lost much of their power to shape their own future because they have to obey the rules of world markets.

There is one country that feels differently about the new situation after 1990, the USA: Thomas Friedman, author of the brilliant book The Lexus and the Olive Tree wrote an enlightened article the New York Times (June 2, 2003) by, entitled Why the rest of the world hates America. He quotes a Pakistani saying that America is touching the daily lives of Pakistanis more than their own government does. This disturbing observation would not have been true before 1990 because it is only since 1990 that the US remained as the only superpower. If Washington judgments and decisions touch peoples lives more than their own parliament’s and government’s decisions do, the very meaning of democracy is at stake: What’s the use of going to the ballots if whom you vote for matters less than how some fellows on the Potomac behave?

To prevent too much of US unilateralism, many governments in the West – understandably – put their hopes on multilateral agreements. But then, what kind of agreements are there that have the capacity to impress America? America coldly disregards the International Criminal Court, the Kyoto Protocol and even the ABM treaty negotiated between the superpowers twenty years ago. The set of rules impressing America most are the free trade agreements. But there we are in a Catch 22 situation. Governments try further to strengthen the WTO, but in doing so sacrifice even more of their own democratic sovereignty. And regarding the aforementioned balance, WTO rather makes things worse by its inbuilt tendency of protecting the private sector at the expense of public sector needs.

As I write this, it is not clear yet whether the next WTO Ministerial at Cancún will make headway on global investment protection and the other “Singapore Issues”. There is no need for me to advise governments and NGOs from the South to be extremely cautious about the Singapore Issues, which further erode the shaping powers of national democracies.

NGOs have been active in challenging recent developments of the free trade agenda, including in particular GATS and TRIPS, both addenda to the old GATT during the “Uruguay Round” of negotiations.

I am not saying that trade in services (GATS) and patent protection (TRIPS) are per se undesirable, but we need a context of rules ensuring a reliable balance between public and private interests. How can that look like? Is there a chance of re-strengthening democracy, the public sector and the good sides of the nation state?

Global governance and civil society

I suggest that there are two mutually supportive strategies available for re-inventing democratic mechanisms:

• International rule-setting, often called “global governance” but also rules-based regional governance such as in the EU;
• The strengthening of a third actor, civil society, the NGOs, which can case by case line up on public issues with democracy thus strengthening both.

International rule setting and global governance should, of course chiefly address those aspects of political life that have come under that awful pressure of global competition. That is human rights, social equity, and environmental protection. The subordination under WTO rules of social and environmental treaties must under all circumstances be avoided. Shame on negotiators at the World Summit on Sustainable Development (Johannesburg, 2002) who tried to do exactly this! Climate change is likely to hit the poor far more than the rich. Also biodiversity losses could be disastrous for small farmers in developing countries. The ILO is right to insist on core labour standards that are essentially human rights protecting the weakest actors of the global economy. And the Forum on Financial Stability was right to establish recommendations (hopefully to become rules) against wild currency speculations.

Global governance also needs structures. The most important structure is the system of the United Nations. The UN are the hope also for those who are afraid of too much US unilateralism.

More realistic than global governance is regional governance. We see a number of regional economic groupings such as NAFTA, Mercosur or APEC. But none of them has so far attempted, let alone achieved a degree of democratic rule setting of the type built up in the process of European unification.

While deepening economic cooperation and integration, the EU (formerly the EEC and the EC) has created impressive mechanisms of democratic control, legal supervision, geographical spread of the benefits accruing, and political including environmental coordination. We have a European Parliament, a European Court of Justice, the “Cohesion Funds” and a regular coordination of policies at the Council level. Soon we shall even have a European Constitution. The EU is also reasonable open to cooperation with the NGOs, although so far the industrial lobbies are far stronger in Brussels than their NGO counterparts.

What is systematically deficient about global governance and even regional governance is direct and democratic participation of citizens. It is virtually impossible for “the man or the woman on the street” to influence the European Commission, the WTO or the Conference of the Parties to the Climate Convention.

This is where the NGOs come in forcefully. Everybody can join an NGO and strengthen its influence. Civil society can play and does play an increasingly important role in global affairs. NGOs can cry alarm whenever something scandalous goes on. Civil society consists of churches, trade unions, environmental NGOs, philanthropic clubs, scientific groupings, and the whole gamut of charitable or at least not-for-profit NGOs. Nearly all of them, almost by definition, defend some public good. In many cases have these groups made themselves heard and forced the private sector to withdraw from unacceptable practices. One of the earliest cases was the “Nestlé kills babies” campaign against Nestlé’s attempts to shift African mothers from breast-feeding to formula milk. In some case NGOs can cooperate with private companies on safeguarding particular public goods. A case in point is the “Marine Stewardship Council” formed by Unilever and WWF to ensure sustainable fishery by the firm.

Without NGO power both national democracies and international treaties such as the Climate treaty or the Universal Declaration of Human Rights can easily be marginalized or ignored!

NGOs can systematically cooperate with democrats in parliaments and political parties. I see lots of synergies. Parliaments can adopt transparency rules making it easier for NGOs to look into business practices including long and complex supply chains for consumer goods.

Fig. 11 symbolises the new and emerging coalitions that can be formed between the State and the NGOs.

Fig. 11: The NGOs can be seen as an emerging power helping the state defending public goods and services.

We have a long way to go both on national and international levels to develop a world society that is rooted in democratic control, in citizens’ participation and in international fairness. But then, when Charles de Montesquieu developed his fundamental ideas in the 1740s about the need for the division of power, no division of power existed in his own country, France. It took a couple of decades until, as the first country in the world, the USA took up his ideas and created a democracy built on the division of powers.

Fig. 1: The career of the word “globalisation” in the German newspaper FAZ.

The strongest reason for the sudden appearance of the term globalisation has been the end of the Cold War. We all, I am sure, were glad about many things that happened in this context.

• We were freed from the spectre of a Third World War;
• Democracy, free speech and free press spread throughout the world;
• Well-positioned enjoyed exciting new opportunities, notably the US (owning the largest amounts of capital which could be placed at the places of highest profitability world-wide) and China (with its immense labour force, emerging high technologies and high discipline).
• Stock markets soared, letting market capitalisation of the world’s total stocks triple within ten years.
• Inflation was sent down in most countries to the lowest levels since the 1950s.
• The Internet became an immensely powerful tool of world-wide communication.

However, for all the good news, there is also a downside to globalisation. During the Cold War, international capital had always to seek consensus with national governments and parliaments in the North and South. In the South, governments used to play on the East-West tensions to induce the inflow of official development aid or private capital.

In the North, the Cold War forced governments to establish an attractive social security net to prove to the masses that capitalism took better care even for the poor than communism. Progressive income taxes and hefty corporate taxation were the rule. For private sector capital this may have been annoying but is was anyway better than any move towards communism.

With the end of the Cold War, the need for consensus disappeared. Now the name of the game was global competition not only among companies but also among states. Tightened cost competition was just too much for many companies. Business bankruptcies soared in many countries.

Fig. 2: The rising tide of business bancruptcies after 1990 in Germany.

In other countries, e.g. in Latin America, in Eastern Europe and in Africa, the situation was worse. The number of people living in poverty is on the rise. Least developed countries went through a demoralising period of de-industrialisation.

The strengthened bargaining position of the private sector was able to force the states to systematically reduce corporate taxation.

Fig. 3: Corporate tax rates have been systematically reduced during the 1990s.

These few pictures and passages are just the beginning of the story of globalisation.

The German parliament, the Bundestag, has established a select committee on economic globalisation in December 1999. I was appointed chairman of the committee. In June 2002, we published a report of 600 pages and 200 recommendations. The full text is available online. English, German, French and Spanish summaries are also available.

The International Labour Organisation (ILO) has created the World Commission on the Social Dimensions of Globalisation. I was appointed member and am happy recommending their website where you will find the final report of the Commission which was released 24 February, 2004.

On my website you will also find a few papers I wrote on globalisation.