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For a Stronger, Cleaner and Fairer World

Donald J. Johnston*

When we look to the future of the world, I suggest we heed the advice offered by the great economist John Maynard Keynes, who said:“ Examine the present in light of the past for the purposes of the future.” My intention is to do just that with respect to each of the adjectives found in the title of this article: stronger, cleaner, and fairer. While I will treat them separately, they are in fact closely linked.

The present

A stronger world will not develop without our economies becoming more financially stable. The problem is that today, the world is burdened with serious financial weaknesses and imbalances. At this time, we are in the midst of a major crisis that flowed from severe market failures in the financial sector of many countries but which traces its ultimate origins to the United States. The accumulation of bad debts stemming from U.S. subprime mortgage defaults, combined with financial manipulation within the investment bank community, continue to seriously affect global economic growth.

Why? Largely because the productive side of the economy, the businesses which actually produce valuable goods and services, cannot obtain sufficient credit from financial institutions that are trying to repair their own balance sheets. In short, globalization, despite all its benefits, has shown us its downside because of the integration of markets and the contagion that spreads like a global flu pandemic when things go wrong, especially in the financial markets.

Now in terms of the second adjective: a cleaner world. For me, a cleaner world refers to the health of the biosphere with particular emphasis on halting climate change and reducing greenhouse gas (GHGs) emissions to arrest global warming. Scientists tell us that 450ppm is a critical threshold - and even that will still result in a 2°C increase in global temperatures with serious economic and social consequences due to erratic weather patterns, which we are already seeing. We have made no significant progress in reducing CO2 emissions despite the concerns broadly shared by many countries. Floods, droughts, hurricanes, tornadoes, typhoons, and ice storms are already with us. Rising sea levels that will inundate many of the world’s most populous areas and cities, including London, New York, Tokyo and others, are on the horizon. What of the third element, a fairer world? To some degree, talking about fairness usually invokes political ideologies, so I will try not to get involved in that debate. But to be honest about economic fairness, we do need to talk about income distribution, both within a nation’s economy as well as globally. In this regard, I like to use the Gini coefficient developed by the Italian economist Corrado Gini almost 100 years ago. The Gini coefficient measures the inequality of income distribution within a country. Most advanced economies within the OECD are in the low 30s on the Gini scale, but the United States is about 45! This is hard to believe for an economy so successful and a country so rich. Indeed the U.S. number is above Turkey and close to Mexico, and it is growing worse. Globally, inequality continues to grow despite huge efforts to bring much of the developing world out of poverty. Billions of humans on Earth still survive on less than $2 per day, despite governments and NGOs pouring multibillions of dollars into development.

The past

Following Keynes’ advice, let us move back from the present into the past, looking at the strength of economies, environmental issues, and fairness as we have defined it. We need not go far back. Let me describe the world we saw when I arrived as Secretary General of the OECD in 1996, only 14 years ago.

When I came to Paris, the world was bathed in a comfort zone of optimism. We had the sense of living in a stronger world. The recession of the early 1990s was already a distant memory. Stock markets marched onward and upward with technology, especially information and communication technologies (ICT), seemingly having no limits to innovation and growth. Millionaires were created daily, if not hourly, as the Dow and other indexes began their ascent to dizzying heights. The world was at peace. We were brimming with confidence about the strength of the global economy and the immeasurable benefits of economic growth that would flow from the Uruguay Round which had created the World Trade Organization (WTO). This agreement held great promise for the rapid liberalization of investment and trade that would quickly bring much of the developing world out of poverty and increase the wealth of the developed world at the same time. Sadly, it was not to be. Several unexpected events converged that destroyed this optimistic vision of the future. First, the dotcom bubble burst led to enormous economic fall-out. Second, a spate of corporate scandals, starting with Enron in the U.S., along with many others, quickly spread around the globe and demonstrated that bad, even corrupt corporate governance practices were undermining the very foundations of our free market economy. Third, the contested election of George W. Bush as President of the United States brought with him economic and social ideologies seemingly out of the mainstream from what was perceived to be the leading American philosophy. Fourth were the tragic events of 9/11, a watershed moment for America that introduced a new and dangerous enemy of prosperity in the form of international terrorism spearheaded by Muslim fundamentalism. Fifth, the Bush administration reacted to 9/11 by unleashing the war in Iraq. All of this together was a toxic cocktail that threw our optimism and our economies into reverse.

Well, could we at least plead that we had created a cleaner world? We already knew of the dangers of CO2 accumulation in the atmosphere for more than a century, thanks to the work of a Nobel Swedish Laureate, chemist Svante Arrhenius. Global warming and climate change were the subjects of the UN Conference in Stockholm in 1972. Again at the Earth Summit in Rio in 1992, it was all repeated and amplified. I attended and addressed the 1997 UN conference in New York. Fears about global warming were repeated yet again, together with declarations of great intentions to act. Then came the Kyoto Protocol, a legally binding instrument setting targets to limit greenhouse gas emissions among industrialized countries. But the predictable failure of December 2009’s Copenhagen UN meeting means that the Kyoto Protocol remains the only instrument with widespread support, although the world’s two biggest emitters of CO2, China and the United States, are not bound by it.

On the third point, a fairer world, we saw that disparities in income distribution within and between countries remained very significant. Fairness does not suggest equality of income and wealth. But it should mean, at the very least, that everyone enjoys equal opportunities to pursue their ambitions and maximize the use of their talents and skills. I regard the essential building blocks of fairness to be access to healthcare and education. Education, in particular, helps close the income disparity gap over time but in some countries, such as the United States, much more must be done on an urgent basis. Incidentally, studies show that education is also the most important contributor to good health.

The future

Given this examination of our past and where we are in the present moment, if we want a stronger, cleaner, fairer world, we need to ask ourselves these questions about the future:

  • What measures must be taken to ensure the strengthening of our market economies and avoid the outrageous actions of a few which have brought us a global recession?
  • Will we be able to create a global consensus and act on it to reduce the GHG emissions, especially CO2?
  • Will we be able to reduce the growing wealth and income disparities that are dividing nations and the globe?

These are the questions to which you, as the leaders of tomorrow, participating in Challenge:Future, will be required to supply the answers. You will need to help develop and implement the solutions and appropriate public policies in your respective countries.

In my view, a stronger world will emerge only if we can get ethical and honest management of the financial sectors, both private and public. To do that, an appropriate balance must be found between governing principles and their application through specific rules. We need to learn from the lessons of the recent past without destroying or muzzling the creative features of free markets which have brought wealth and prosperity to so many in this world.

As for a cleaner world, I do not think it is easily doable. We may not be able to succeed in controlling the Earth’s temperature by simply trying to restrict GHG emissions to 450ppm, 550ppm, or higher through a series of unenforceable conventions. But I believe we need to try, because any mitigation, however minimal, will reduce the cost of adaptation in the long run. In the longer term, I believe that the answer lies in new eco-friendly technologies, especially in recognizing that nuclear energy must play a central role in global base load energy. Whatever the solution, it must be a global approach. Otherwise industries where a solution is imposed from the outside will not be competitive with those that are allowed to continue to operate within laissez faire fossil fuel markets.

Indeed, the more I witness the evolution of the climate debate, the more convinced I am that a healthy biosphere will probably require geo-engineering as it becomes evident to all that efforts to curb GHG emissions will not reach the scientifically agreed upon targets. Nuclear is clearly regaining the support it deserves, but it is not yet at the level I witnessed in my youth. I hope it will - and the sooner the better. However, there should be rotating international teams of experts to monitor and audit the operation and maintenance of all existing and future nuclear facilities, in particular reprocessing facilities. Such international teams would be responsible for the three elements of risk that raise public concern: preventing proliferation; ensuring operational safety, and monitoring effective and safe waste disposal.

As for a fairer world as measured by income or wealth distribution, it must not be legislated. Tax systems obviously have a key role to play in all societies, but they must not stifle competition and creativity. Indeed they must be designed to achieve both those objectives. We all know that talent and intellectual and physical capacities vary greatly from individual to individual. Public policy should address the issue of fairness by ensuring that everyone has the opportunity to develop his or her full potential. This foundation suggests that we need to maximize our allocation of resources to education and health. This is true for both the developed world and the developing world; otherwise impoverished countries will never develop the potential of their resources and their peoples. Sadly, too many are still be deviled by corruption and despots.

To conclude, you may not consider my observations optimistic as we look further into this 21st century, but they are. Can we achieve this stronger, cleaner and fairer world? Yes. But it will take committed, enlightened leadership bringing the right mix of creativity and discipline to public policy.

These comments have only touched upon a few key issues of the types of policies that are desperately needed. But when we apply the Keynes discipline and look back from where we are, there is measurable and extraordinary progress of the human condition on nearly every front.

Some people often pine for the “good old days”. Yes, there were some good days, but mostly they were restricted to the wealthy and the privileged. I hope and will even predict that when future generations look back on their own “good old days”, they will be able to see better days ahead for nearly all of human kind.

_________________________________________________________________________

*Donald J. Johnston is the Senior Counsel to Heenan Blaikie LLP, and OECD Secretary  General from June 1996 to June 2006.

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Maggie Peng

Maggie Peng

The section on the future is quite realistic and motivating. I hope our generation will thrive to achieve these goals.

26th August, 2010 @ 7:13 PM CEST

Jatin Kataria

Jatin Kataria | Action team | CF Chapters

Nice matrix of Stronger, cleaner and fairer… as well as Present, Past and future. nice words for future.. now I think time is gone for talks and todays youth cant talk much. Its time to go beyond talks...!!

Stronger
Present:
I feel that people are in business are very narrow in thinking and that’s why we can say that CSR – corporate SOCIAL responsibility become corporate STRATEGIC responsibility. Today if we can change from Answerable to Accountable, Entrepreneurship to Intrapreneurship (viz a vis), mindset shift from problem focus to solution focus.
Top management doesn’t get time to analyze and decide, as the same way middle and lower management don’t get responsibility to decide and to act. If you want positive result today’s leader have to give chance so young generation can fall in love with work.

Past:
nice visit of past from .com bubble to Iraq through bush, 9/11 and scandals like Enron. Even though things explained here is specifically of the US but we can say that few problems that other area faced at that time few countries realized why they were worrying earlier. After 1990s days were different in eastern geographical regions. This collaborative work today’s youth can do, only thing needed is RESPONSIBILITY to young people.

17th September, 2010 @ 11:16 AM CEST

Jatin Kataria

Jatin Kataria | Action team | CF Chapters

Cleaner
Present:
Even we are aware of climate of today still things are not reaching to common man like Scientific methods to fight against disaster. Emphasize should be more on training part as we know which areas will go to affect more.

Past:
Copenhagen (or COP) was become the place to answers in other way people are answerable there not accountable, you feel sad when you will come know detail about carbon credit and corporate mentality. I remind future book quote given by Nevenka Pargar about unbalance created by unfriendly and egoistic people.
Fairer
Present: the only things is multibillions are not at all reaching to last stage of chain. In today’s world everyone is answerable, instead of accountable. When we shift from answerable to accountable graph of problems will come down very fast.
Past: Sounds really great when you read literal meaning of fairness here “Everyone enjoys equal opportunities to pursue their ambitions and maximize the use of their talent and skills.” THAT’S THE ONLY THING MISSING… still we can see generation gap, power distance, ignorance of talent and so on.. The only things old generation is not accepting that for YOUTH they need to understand that they are much more capable then anyone (no matter how old person is). VALUE PEOPLE is much more needed “that’s what CHALLENGE: FUTURE” did.

17th September, 2010 @ 11:17 AM CEST

Dharmesh Bhadja

Dharmesh Bhadja | Action team

It’s about need for integration of the efforts. One or two countries alone will not proved sufficient. The global definition and the global resolution is must from all the corner of the world.
“We need to learn from the mistakes that brought about the current economic crisis and base our future development on innovation, increased corporate responsibility, mutual trust and respect for the environment in which we live and depend on. Across all sectors, future managers will need a different set of tools to cope with unfamiliar norms, rules, and expectations that emerge from globalization.” JAN MUEHLFEIT, CHAIRMAN EUROPE, MICROSOFT CORPORATION, CZECH REPUBLIC
Public policy should address the issue of fairness by ensuring that everyone has the opportunity to develop his or her full potential.
The three public policies cum principles to work...
a. Accountability
b. Transparency
c. Responsibility

After study the essay I feel that in my country the public policy is the area to implicate more aggressively.
Thanks for guidance and awareness, Sir Johnston.

28th October, 2010 @ 7:21 PM CEST

Harshit Kachchhi

Harshit Kachchhi

Wonderful!

The article and the comments really give us the exact idea about the future road map with the boost of moral & ethical values!!

I would say, it is nothing but a progressive idealism.
We can not sit quietly and wait patiently for everything to come at right place....For that, we will have to start from somewhere.

If we want to cross a jungle full of darkness and if it is already night, then we have two options:

1) wait for morning for light to come.....and in that process, waste the most valuable time.... &
2) Start the journey through jungle with a torch in hand which can just show you a path of 10 feet, but would lead you through out the jungle in 10 feet stretch each.

2nd path is PROGRESSIVE IDEALISM.....

If we want stronger, cleaner & fairer world then we will have to start working with this concept of Progressive Idealism.... And we are the ones (Gen. whY) who can do this....

14th November, 2010 @ 9:59 AM CEST

TITILAYO IJAGBEMI

TITILAYO IJAGBEMI | Action team

I get tired of hearing people say 'forget about the past' I mean its so sickening to be in a room with people whose life is based on this because, if we don't, how do we get to note our mistakes, see where we are coming from, not to mention where we are heading towards. So, Great Job you have done.

21st September, 2011 @ 2:28 PM CEST

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Examine the present in light of the past for the purposes of the future.

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