Shortly after he became the first general secretary of the World Trade Organization, Renato Ruggiero observed, “We are no longer writing the rules of interaction among separate national economies. We are writing the constitution of a single global economy.”
The word constitution-with its implication of world government-shocked some international trade officials. Like a reference to sex at a Victorian dinner table by an otherwise respectable gentleman, it was resolutely ignored by the business press and the policy academics, whose public commentary acts as a Greek chorus for what George Soros so aptly named “free-market fundamentalistism.” The WTO, sings the chorus, is not a constitution. Its purpose is “free trade,” an arrangement that presumably requires less, not more, government.
Yet Ruggiero was simply acknowledging the obvious. Markets are not found in a state of nature. They are human creations, defined by enforceable rules. Even the most primitive markets require rules for what constitutes private property, valid contracts, weights and measures, and so on. And they always reflect a social contract.
In modern, civilized economies, rules are enforced by public institutions-legislatures, courts, regulatory agencies, central banks. The social contract includes protection of labor, the environment, and public health from the brutalities of unconstrained capitalism.
The precise content of a market’s rules has major consequences for who gets to be rich and who gets to be poor. Therefore, all markets have a politics. Political science, as a famous American scholar once observed, is the study of “who gets what.”
When markets expand their boundaries, so must the rules. In our own history, advances in technology, business organization, and westward migration expanded the U.S. economy from a series of regional markets, regulated by state governments, to a continental economy regulated primarily by the federal government. Note that the federal government did not just impose rules on trade among the states, but market rules within the states as well. Because we had a Constitution guaranteeing some form of democracy and a Bill of Rights, the new rules were subject to public debate. Political parties evolved around class-based conflicts over land settlement, the gold standard, anti-trust, child labor, social security, environmental protections, and so forth.
Today, technology, business organization, and migration are relentlessly expanding markets beyond the capacity of individual nation-states to regulate them. Because business must have rules, a constitution for the global market is being written-at the World Trade Organization, the International Monetary Fund, and the World Bank. Befitting a world dominated by one superpower, the U.S. Treasury and the Pentagon play leadership roles. Because there is no prior framework of d...
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