Trying to Reconcile Capital and Morality

In this interview, Ernst Ulrich von Weizsäcker, former chairman on a Parliamentary Study Commission on Globalisation, talks about capital and morality, about inequality as a virtue, and about the meaning of "glocalisation"

Globalization is regarded as a phenomenon that no one can escape, at least not in a society as advanced as that of the Federal Republic of Germany. Has globalization changed your life?

Ernst Ulrich von Weizsäcker: Any development before the beginning of the 1990's does not deserve to be called globalization. Globalization truly began when modern communications technology fanned out explosively to cover the globe, and when ideological systems began to unravel. At the beginning, sometime between 1990 and 1992, the focus was on global responsibility for the environment and hopes for peace dividends. But soon this global and at the same time thoroughly responsible subject no longer interested anyone. There was a change in paradigms; disillusionment prevailed. Up until 1992 we had the reunification boom, which then drew to a close. Thereafter, unemployment rates skyrocketed. The comfortable 80's were over in one fell swoop.

The realization dawned that we were no longer nationally and parliamentarily autonomous, but instead dependent on the world's financial markets. Dependent, for example, on Fidelity, which is the biggest financial investor in the world – with an estimated 800 billion dollars in fixed assets, and with influence and supervisory boards throughout the world. This single company tells the Korean, German, Italian and Canadian economies which rates of return can be expected on any given day.

A bitter realization. Would this mean that decisions in the world are being made today by forces other than the classic nation states we learned about in our politics textbooks?

von Weizsäcker: National parliaments are only to a limited extent in a position to create social equilibrium. The prevailing rule ever since the introduction of income tax, that the rich pay a higher percentage of taxes than the middle class and these in turn more than the poor, has been broken since 1990. Ever since then, the rich have paid proportionally less taxes than normal earners. We have experienced a shift in tax revenues from assets and capital to work and consumption. That is the phenomenon.

Capital is mobile, work and consumption are not. It is becoming incredibly difficult to tax capital. Almost the only thing that can be done is what the Austrians have started to do and what we will probably have to imitate, the flat rate tax on interest income.

Capital is no longer bound to nations, but is instead free-floating. One can no longer get a hold of it?

von Weizsäcker: Right. Even before 1990 capital was already international and mobile. But there used to be a kind of moral obligation to buy into the social consensus, which existed on an exemplary level in Sweden and West Germany, in order to prevent countries from coming under Soviet influence.

People were willing to invest a great deal of money in this consensus before 1990. Then, in 1990 this ideological competitor suddenly no longer existed. Ever since then, global competition for good rates of return on capital has forced cost-consciousness and a reluctance to support an expensive society of consensus.

Up until ten years ago, capital had political interests, while today it has only capital interests. Is there a countervailing force?

von Weizsäcker: Before 1990 the state, the electorate was the most important counterbalance. Nowadays a new, third group of actors is developing: civil society. It is extremely inconsistent. It combines a fair amount of scepticism with regards to private business, but also a fair amount of scepticism toward the state bureaucracies.

Who exactly constitutes this civil society?

von Weizsäcker: It's not very well-defined. It comprises old and new groups, the trade unions and the Red Cross, environmental groups such as WWF, Greenpeace and Friends of the Earth. It includes human rights groups such as Amnesty International and Médecins sans frontières. Then of course there's the scientific community. There is the International Council of Scientific Unions, a powerful key player these days. In addition, the World Council of Churches, the Catholic Church, the Christian works, but also Islamic groups as well as uncounted third-world groups. Most civil society groups are located in the USA and Europe. But since about 1990 large numbers of such groups have been mushrooming in Eastern Europe and the Third World as well.

Do you fear globalization?

von Weizsäcker: No, I'm not afraid of it. But I'm not blind, either. Some of this unsparing analysis I've learned from Hans-Olaf Henkel, who has just stepped down from his post as president of the Federation of German Industries. He knew only too well that the competition between systems was being replaced by competition between locations – and that the consequence of this development was the dissolution of the society based on consensus.

And what conclusions can be drawn from this? What kind of possible solution could be proposed that does not deny the fact that the competition between locations exists, that is, that globalization is in full swing, and nevertheless aims at the restoration of the societal consensus?

von Weizsäcker: That's just the question here. And it's this response, that is, a response in terms of the philosophy of civilization, that I would like to be able to give when the Study Commission completes its work: How can we influence capital to think and act not only in terms of profit, but also in terms of morality, in order to once again create a consensus?

The most recent example of international policies involving an ecological aim, namely the conference in The Hague, doesn't give us much reason for optimism...

von Weizsäcker: That's true, unfortunately. To put it in the form of a caricature: the American way of life stands in the way of climate protection. It could take decades to solve this conflict. The key to finding a solution, in my opinion, is revolutionary improvement in energy efficiency. If efficiency is increased by a factor of four, we can double worldwide prosperity while at the same time protecting earth's atmosphere and phasing out nuclear energy. Renewable energy sources can make up for any gaps in energy requirements.

Many complain that it is the Third World that suffers most under globalization. Others claim that globalization actually brings the Third World a degree of equity, since it enables them to compete with the first world and to land a greater number of work contracts due to low wages. Which version is correct?

von Weizsäcker: Industry, banks and many economists argue that the Third World is on the winning side in globalization, as manifested by the increase in average wealth in the emerging nations and many developing countries. The crazy thing about it is that, at the same time as the Third World is showing greater rates of growth, the number of people who are starving, who are victims of political persecution, who are living in absolute poverty is tending to go up rather than down, especially in Africa. The number of millionaires and billionaires is growing worldwide much more rapidly than per-capita income. Inequality has increased. We have Amartya Sen, Nobel Prize winner in economics, to thank for an important realization: in countries with democracy there is practically no impoverishment.

What about Hans Olaf Henkel's claim that inequality is the prerequisite for further development and gains for everyone? You don't accept this idea?

von Weizsäcker: Many of today's globalization proponents regard inequality as a virtue, because it increases motivation to work hard. Or they view inequality as the unavoidable consequence of the fact that global multiplication of ideas, processes, inventions or even pop star products yield gigantic premiums for a choice few. When Michael Jackson comes out with a new song, millions in sales are guaranteed. If an unknown does the same thing, the global multiplication factor fails. As the saying goes, "The winner takes it all". Sometimes it's also the case that: "The fastest takes all". Whether or not the fastest is also the best doesn't matter sometimes.

"Nestlé" or "Shell" or "Nike" are famous as brands. But this also makes their image particularly vulnerable. When I speak today with a leading representative from a globalizing industry, I can sense his fear of the sudden losses that can occur if the good image of the corporation is tarnished. This accounts in part for the power of the civil society. If it uncovers questionable conduct on the part of a corporation, it can cause the corporation a lot of trouble.

How can the Study Commission deal with this phenomenon?

von Weizsäcker: Well, at first by describing it. Then one can examine the role of the civil society in global governance. Furthermore, we can put our finger on the problems that the "Winner takes it all phenomenon" brings in its wake. The justice phase, the tax question, but also the question of whether the system can be depended upon to stabilize itself. George Soros, one of the most successful capitalists of all time, thinks that it does not stabilize itself. The Commission could consider various stabilizers for the world economy.

What might such stabilizers be?

von Weizsäcker: An international forum for financial market stability made a number of suggestions. I won't go into this in detail here. A more wide-reaching proposal is the Tobin tax. James Tobin, an American Nobel-Prize-winning economist, already suggested a capital transfer tax back in the 1970's. A very small tax, but with an anti-speculation effect. Back in the 70's this was a dormant, purely intellectual idea. But during the last ten years or so it has been taken up in international discourse. Belgium and Canada have already commissioned tests.

Are there other options for making capital political once again, that is, to motivate the actors to orient their capital investments around global, generalized, non-egotistical objectives? What should a new economic ethics look like?

von Weizsäcker: I place some hope in ethics funds, especially for private retirement plans. They are in great demand and grow faster than average. Calvert is a big investment fund in the USA that has gotten together with Hazel Henderson, one of the leading American ethics specialists. They have compiled metric indicators for moral categories, thus creating a model for objectivizing decisions with an ethical background. They are in effect building an ethically-oriented investment empire. Hazel told me that there is already a total of 2.2 trillion dollars sunk in ethical investments today. Since Americans have been familiar with the ugly outgrowths of shareholder value for quite some time, the corresponding swing of the pendulum in the other direction is that much greater.

Some scientists, such as your brother, Cologne economist Professor Carl-Christian von Weizsäcker, say that in general globalization or trade brings democracy, because every country that wishes to participate in trade must behave in an acceptable fashion.

von Weizsäcker: There is definitely something to that assertion. He is a pro-globalization lawyer and has written a very good book about globalization. The constitutional state, freedom of speech and a democracy that respects the interests of capital are all to the advantage of a market economy. The market economy has no interest in impoverishment, either. But it rewards the strong and the competent even when those less competent are living in misery and the environment is being destroyed. Without appropriate ethical and ecological counterbalances, the globalized market economy can become a ruinous one.

Does the word "capitalism" have an evil sound to you?

von Weizsäcker: An evil sound, no. I realize that there is no alternative to the market economy. And hence it makes no sense to use the word "evil".

A cold sound, perhaps?

von Weizsäcker: Yes, capitalism is a cold-sounding word. I once wrote an essay against Social Darwinism. It dealt primarily with the classic Social Darwinism of the English, but also the Germans, in the 19th century and beyond. I think that their intellectual grandchildren are today sitting in some boardrooms or in economics department chairs at some universities. According to a pattern of thought particularly widespread in the Anglo-Saxon culture, competition sorts out the weak and the bad. Only the best are left over. They then reproduce themselves, whether by means of ideas, assets, or elites. But also biologically. And this process, analogous to biological evolution and the Darwinian principle of natural selection, is called technical and cultural progress. Between businesses as well, there is selection, cannibalism and merciless competition. I see plenty of coldness here. And I am worried about the fact that this economic Darwinism is eating its way into all civilizations and cultures throughout the world.

The world's decision-makers are freeing themselves more and more from ethically conditioned national patterns. They are less bound by restrictions, freer in their decisions and more difficult to control...

von Weizsäcker: Freedom from ethics, freedom from cultural ties – what a desolate kind of freedom that is! One form of re-emphasizing cultural obligations is known as "glocalization". This entails experiencing and going along with globalization, while at the same time remembering more provincial values. This offers something of a palliative for the uneasy soul. "Laptop and lederhosen": that's Edmund Stoiber's slogan. The lederhosen stand for the homey aspect. It might simply be part of the corporate image for a Bavarian top manager to have a Bavarian accent. This connection to local culture has long since become a valid sales pitch.

So, in uncertain times there's a growing need for security?

von Weizsäcker: Exactly. But whether recourse to lederhosen creates genuine security, is a different question entirely. I would like to mention another phenomenon. In his book, my brother writes that globalization puts a premium on speed. The fastest wins. But I would venture to claim, as a biologist schooled in cybernetic patterns of thought, that if the fastest wins it is a fatal flaw in the system. As a biologist well-versed in evolutionary theory I can tell you that the evolution of the world's organisms contains a whole series of firewalls for the preservation of the slow. These are uniformly ignored by economic Social Darwinism. That's why there's such a call for stabilizers and rewards for slowness. There have been two famous cases in the past few years in which the fastest, but not the best, has won. One example was Betamax versus VHS video systems, and the other was Apple versus Microsoft. Microsoft was faster and more powerful.

Globalization is not only the globalization of the economy. It entails the need for many people to constantly change their place of residence. What are the implications of this development for the cultural heritage of individual regions, states and nations? Is the end result of all this one big homogeneous McWorld?

von Weizsäcker: That is a real danger. But it is not the theme of the Study Commission. At UNESCO, intensive discussions are being held on this subject. Professor Klaus Töpfer has also repeatedly emphasized that the disappearance of languages and cultures is an urgent ecological problem, ushering in a reduction in biodiversity. For example, plants such as millet or potatoes that exhibit particular localized characteristics only have a chance of surviving within the context of a local culture, and would simply be left to die out if overrun by a global McDonald's culture.

Interview: Hans Monath, Annette Rollmann

Hans Ulrich von Weizsäcker is the former Chairman of the Parliamentary Study Commission "Globalization of the World Economy – Challenges and Responses".

This interview was first published in "Das Parlament".

Translated from the German by Jennifer Taylor-Gaida