Documento(s) 4 de 11

International security in a postbipolar world
Growing economic and financial interdependence
Persistent inequalities and economic uncertainty
Social conditions
Environmental sustainability
Culture, religion, and ethical concerns
Governance and democracy
The knowledge explosion and the knowledge divide
Concluding remarks

In plastic historical periods like the one we are living through at present, when almost anything seems possible, it is important to identify the underlying forces shaping the future of international relations. This chapter reviews the major political, economic, social, environmental, cultural, governance, and knowledge transformations, whose implications have been the subject of heated debate during the 1990s, and that are creating a new global and increasingly interconnected context for development cooperation.⁴

International security in a postbipolar world

The end of the Cold War undermined the ideological, military, and political foundations of the international order that had prevailed after the late 1940s, a period in which the concept of development emerged as the new incarnation of the Western idea of progress.

We are well along the way in the transition to a postbipolar world order (Stremlau 1989), whose nature is being defined, but which requires a profound reexamination of the means to provide national, regional, and international peace and security, as preconditions for the pursuit of development objectives. Some elements of this new order include the unquestioned military predominance of the United States, a greatly diminished threat of an all-out nuclear war between the Russian Federation and the United States, an increase in the number and intensity of violent local and regional conflicts, the transformation of the means of waging war (including the persistent threat of chemical warfare and the emergence of electronic warfare), the likelihood of a more cooperative approach to conflict resolution among key political and economic players, and an emerging larger role for international institutions in fostering and maintaining international security (Carnegie Quarterly 1993, 1996; Nolan 1994; Sahnoun 1994; Rubin 1997; The Economist 1997a).

The demise of East-West rivalry has complex implications for national security and governance. The Cold War imposed a certain logic in the organization of conflicts between and within nations. Most of these conflicts were not left to run their own course (if they ever had one) but were enlisted in the service of the East or the West (Hogan 1992). Although this suppressed many legitimate grievances and often led to repressive regimes supported by either East or West, it also provided an order of sorts that contained conflicts and limited their escalation, lest the two superpowers became involved in local wars with unpredictable but possibly catastrophic consequences. Moreover, within developing countries, conflicts and insurgencies based on Cold War ideology and once generously financed by the two superpowers have vanished, as has the possibility of developing countries playing one camp against the other.⁵

Some of the international security threats of the Cold War have disappeared, but they have been replaced by others just as ominous. Although the prospects of nuclear Armageddon have receded, the current potential for arms proliferation has led to a situation in which the likelihood of the use of nuclear weapons — either in a regional conflict or by terrorist groups — is probably greater now than in the bipolar era. The mid-1998 test of nuclear weapons conducted by India and Pakistan has led to a major escalation in South Asia and may run the risk of provoking China into conducting further tests. Moreover, an economically driven global arms trade — which has the implicit support of the United States and the major European powers — may lead to the proliferation of both conventional weapons and weapons of mass destruction. In an environment in which the arms trade is controlled increasingly by profit-oriented corporations engaged in strategic alliances across borders, which are responsive primarily to the concerns of their shareholders and largely unaccountable to the citizenry, access to all types of weapons has become easier and difficult to control. Biological weapons are particularly insidious because the destructive potential of their constituent pathogens is quite unpredictable; they are relatively inexpensive; and their components are much easier to obtain than, for instance, those of nuclear weapons (Keller and Nolan 1997–98).

Catastrophic terrorism, with weapons that range from nuclear devices to computer viruses, has been identified as an eminent threat that even the United States is not quite ready to deal with. It has been suggested that meeting this new challenge will require joint efforts of the international community to design innovative systems to prevent, deter, and respond to such threats (Carter et al. 1998).

Ethnic and religious tensions within countries and regional conflicts over natural resources — such as water, oil, or tropical forests — and over environmental spillovers are creating new sources of political instability (Brown 1993; Myers 1993). In particular, religious-fundamentalist terrorism in Algeria and Egypt; the persistence of ethnic and religious violence in Israel, Lebanon, Northern Ireland, Palestine, and Spain; and the persecution of ethnic minorities in Iraq clearly indicate that religious and ethnic allegiances have become a dangerous source of strife and violent conflict. These tensions and conflicts may be kept in check by concerted actions of the major military powers, regional and international organizations, or a combination of both. But so far, despite diminished global superpower rivalry, there is no evidence of a decline in regional disputes, civil wars, or organized violence of ethnic groups, secessionist movements, terrorists, criminals, or drug traffickers.

However, local ethnic and religious conflicts have the potential to ensnare the major military powers — or at least those in the West — as the 1998–99 Balkan conflict clearly shows. The recently enlarged North Atlantic Treaty Organization began a bombing campaign in early 1999 that threatens to escalate and might become a protracted exercise with unforeseen consequences for European and international security.

New threats to national and international security have now emerged, often resulting from the actions of nonstate actors and so-called rogue states. We are witnessing an increase in, and the convergence of, criminal and terrorist activities: “Previously distinct issues — proliferation, terrorism, arms control, and organized crime — are now merging; the roles of organized crime and foreign corruption are especially neglected by most policy analysts who work on the proliferation issue” (Sopko 1996–97, p. 16). Terrorism, once associated chiefly with political motivations, has become linked in this turbulent context with widespread ethnic and religious conflicts. Terrorist activities, including those supported by rogue states, seem likely to intensify in a world of easily available weapons of mass destruction and advanced information and communications technology (Cetron and Davis 1991).

At the same time, states are becoming less important as political units, in the sense of being able to control whatever phenomena, whether economic, social, environmental, or technological, taking place in the world at present. The preeminence and sovereignty of states are being eroded in many aspects of foreign and economic policy, as highlighted by the renewed importance of the United Nations in conflict prevention and resolution, the proliferation of regional trade and economic agreements, the growing economic power of international corporations and private investors, the rise in power of international NGOs, and the conditions established by international financial institutions on obtaining access to resources under their control. However, the state is far from disappearing or becoming obsolete, and we are still struggling to understand the changed role of the nation-state, one of the most remarkable institutional innovations of the last three centuries (Mathews 1997).

The need for international cooperation in assuring political stability, preventing and resolving deadly conflicts, and fighting against cross-border criminal activities has grown significantly during the last three decades. Not even the richer and more powerful nations can ignore the fact that a more dense and complex web of engagements, which should involve countries at all levels of development, is required to create an international environment conducive to steady improvements in living standards and human well-being. Although the movement toward supranational forms of action and regulation is likely to proceed by fits and starts, with temporary reversals and renewed bouts of nationalism, it will probably gain momentum in the early years of the 21st century.

Political pluralism, popular participation, democratic movements, and pressures to ensure respect for human rights are everywhere becoming a fact of life, in the East, West, North, and South. International protest and, in a few cases, economic and political sanctions are sending a clear signal that repressive political regimes are no longer considered — at least in principle — acceptable members of the community of nations. Nevertheless, there is also plenty of evidence that indifference and disaster fatigue are dampening the expressions of sympathy for the plight of countries torn by internal conflicts and suffering human-rights abuses. Similarly, political expediency and narrowly defined economic interests often displace considerations of human rights and democratic governance in the exercise of foreign policy. Perhaps the most striking example of this is the fact that China and Indonesia, two countries considered to have repressive regimes, were respectively the third and fourth largest recipients of aid from established democracies in 1996 (The Christian Science Monitor 1997).

During the early 1990s, Eastern European countries had their first open elections in half a century; almost all the countries of Latin America had democratic regimes; Mexico advanced toward multiparty democracy; peace agreements were reached in Central America; the Middle East peace process moved forward; and a military coup failed in the Russian Federation. In addition, the Central Asian states of the former Soviet Union were struggling to become modern nations; multiparty elections were held in Romania and Taiwan; Hong Kong returned peacefully to China, without major disruptions or social conflicts; white rule disappeared in South Africa; and attempts were made to abolish one-party rule in several African countries.

However, steady advances toward democracy, respect for human rights, and peaceful coexistence are by no means guaranteed. The 1990s witnessed civil wars in Afghanistan, Albania, Angola, Cambodia, Congo, Rwanda–Burundi, Somalia, the former Yugoslavia, and Zaire; the overthrow of democratic regimes in Haiti and Nigeria; and a self-inflicted coup in Peru. In addition, the firm and deadly grip of the North Korean dictatorship, which appears ready to starve millions to maintain political control, and the tribulations of democratic regimes in Ecuador, South Korea, and Venezuela, among many others, give ample testimony to the precarious character of advances toward democratic forms of governance. Moreover, even though electoral processes are becoming an established feature of political life all over the world, democratic practices — including, checks and balances, an independent judiciary, respect for the rights of minorities, transparency, and accountability, among others — appear to lag far behind in many countries (Carothers 1997; Kaplan 1997; Zakaria 1997).

Growing economic and financial interdependence

Major transformations are taking place in the patterns of world economic interdependence, which include the rapid growth and globalization of financial markets, a major expansion in the volume of world trade, major shifts in trade patterns, significant increases in the volume of direct foreign investment and in short-term portfolio investments, and new situations in key countries that affect the world economy.

International financial markets now comprise a tight web of transactions involving global securities trading, arbitrage in multiple markets and currencies, portfolio investments through a bewildering array of international funds, and massive trans-border capital movements. Financial transactions have acquired a life of their own and are becoming uncoupled from the production and distribution of goods and services. The combined daily average of trade in the foreign-exchange markets reached $1.260 trillion in 1995, 15 times the 1980 level and 70 times the average daily volume of international trade in goods and services (Eatwell 1996). Another indication of the uncoupling of finance and production is the fact that, in 1993, stock-market transactions grew 45% in Germany and 22% in France, a year in which both countries experienced severe recessions (Plihon 1995).

Deregulation, advances in communications and information technology, the search for higher returns and risk diversification, and the internationalization of production are the main forces behind the globalization of finance. Oddly enough, the increasingly global character of financial markets has been the result of an explosive growth in transactions between the financial centres of just a few cities located primarily in the rich countries (Amsterdam, Chicago, Frankfurt, Hong Kong, London, New York, Paris, Tokyo, Zurich, and so on) and even in a few blocks within these cities.

By the end of 1997, twenty-five cities controlled 83% of the world’s equity under institutional management, and three cities — London, New York, and Tokyo — accounted for nearly 60% of the global foreign-exchange market (Sassen 1999). In fact, the number of main international financial centres may be reduced further, as deregulation at the international level may make it unnecessary to sustain financial centres for each nation. Currently, one can speak of only three great financial centres that stand above the rest: London, New York, and Hong Kong. It is predicted that global finance will eventually need little more than one principal financial centre for each of the world’s regions (The Economist 1998).

Even though the recent growth of the emerging capital markets of Asia and Latin America is beginning to register on the screen of international financial transactions (primarily because of the relatively high returns they yield to investors), these markets are a long way from challenging or even joining the established centres of global finance. For example, although stock market capitalization increased dramatically from $95 billion in 1985 to $1371 billion in 1996 in the

18 principal emerging markets, this figure is still small in comparison with that of industrialized nations: the United States alone had a stock-market capitalization of $8.478 trillion, more than six times that of all principal emerging markets (World Bank 1997b). The emergence of an integrated global financial marketplace raises a series of issues of general concern, particularly for developing countries. The huge surge in private-capital flows in the 1990s, both in direct foreign investment and portfolios (invested through pension and mutual funds in the stock and bond markets), to developing countries has brought with it the realization of the potential risks and increased volatility of interconnected financial markets. At $240 billion, net private-capital flows to developing countries in 1996 were six times larger than they were in 1990; total private-capital flows were five times larger than official flows in that same year. From an emerging-economy perspective, these substantial inflows can be seen as an engine for sustainable growth, but it has been noted that financial integration must be carefully managed.

A recent World Bank (1997b) report points to several areas that must be strengthened to enable developing countries to achieve “productive financial integration” and avoid the serious pitfalls of injudicious financial opening and hasty deregulation. Particularly important are maintaining macroeconomic stability, strengthening banking systems, ensuring well-functioning stock markets, having a base of domestic investors to shield against flow reversals, and containing lending booms, which are characteristic of the initial stages of financial integration. Yet, as the recent stock-market, currency, and banking crises in several East Asian countries — including once unassailable South Korea — show, even the most advanced among developing countries are far from achieving the elusive goal of productive financial integration.

Major changes have also taken place in the volume, direction, and content of international trade, such as the rapid progress toward trade liberalization during the post-World War II period, as a result of several rounds of negotiations within the framework of the General Agreement on Tariffs and Trade (GATT), the emergence of the North Pacific as the world’s largest trading area (with the North Atlantic taking second place), the rise of regional trading blocks (most notably the European Union and the North American Free Trade Area), and the rapid growth of intraregional trade in Southeast Asia and the Southern Cone of Latin America (Association of Southeast Asian Nations and Southern Cone Common Market). In addition, at the end of 1994, international trade received a major boost with the successful conclusion of the Uruguay Round negotiations, the most comprehensive of the GATT agreements, which paved the way for the creation of the World Trade Organization (WTO). Yet, unless regional markets are seen primarily as an intermediate step to establishing truly global markets for products and services, the rise of regional trading blocks may slow the pace toward worldwide trade liberalization. Moreover, an insistence in maintaining nationalist or even regionalist trade policies in this new context may be counterproductive (Schwab and Smadja 1995).

World trade has grown markedly in the last two decades. The total value of all imports and exports in 1994 was more than twice that of 1980. The rate of growth in world trade has exceeded that in the growth of world production: for example, in 1994, world merchandise trade grew 9.2%, more than three times faster than world GDP, whereas in the 1970s and 1980s trade grew only 1.5 times faster than production. During the 1990s, this has led to a process described as “globalization through trade integration” and to a decoupling of world trade and output (Otsubo 1996). In addition, the content of international trade has shifted away from primary commodities (exported primarily by developing countries) and toward high-technology services and manufactured products, which are typically industrialized-nation exports, as the rate of growth in trade in these services and products has exceeded that of primary commodities. Another feature of current trade patterns is the growing share of international trade taking place within corporations. It has been estimated that between 40 and 50% of imports and exports of major economies like Japan and the United States correspond to intrafirm transactions (Greider 1997).

The rapid growth and globalization of the world economy are also illustrated by the recent surge in flows of direct foreign investment, which are considered increasingly interrelated to trade as a factor behind growth and development. In fact, the recent growth in direct foreign investment has been even faster than that in trade, reaching a record high of $315 billion in 1995. Although a large part of these investment flows go between the largest developed economies, flows of direct foreign investment to developing countries were also at a record high of $100 billion in 1995. Another important indicator of economic globalization is the value of cross-border mergers and acquisitions, which totaled $229 billion in 1995, doubling the figure for 1988 (UNCTAD 1996).

The production of goods and services has also expanded and spread at an uneven pace throughout the world, and this has led to significant regional shifts and to a more balanced worldwide distribution of productive activities. Three centres of power — East Asia, North America, and Western Europe — are now in a position of strategic economic parity (Schwab and Smajda 1995). Services have become an increasingly important part of the world economy, and their average annual growth rate during 1990–95 has been 5.3% (8.8% in East Asia and the Pacific), more than twice the 2% growth rate of the world’s total output of goods and services.

A new web of commercial linkages between transnational corporations has now emerged, covering manufacturing, finance, trade, and services. Strategic alliances between corporations in precompetitive research and development, coupled with fierce competition in final-product markets, are a prime example of these new trends, which demand new corporate and national strategies. A significant shift is taking place in the organization of productive and service activities in the globalized segments of the world economy. The economic unit is no longer the enterprise, either local, international, or transnational, but a specific network created for a particular purpose at a particular time, which operates in large part independently of the various enterprises that established it. As Castells pointed out,

Under different organizational arrangements, and through diverse cultural expressions, [the new organizational forms of the informational economy] are all based on networks. Networks are the fundamental stuff of which new organizations are and will be made. And they are able to form and expand all over the main streets and back alleys of the global economy because of their reliance on the information power provided by the new technological paradigm.

(Castells 1996, p. 168, his emphasis)

A core of strategic economic activities — capital markets, business services, travel and tourism, technology, and a few production lines such as automobiles, computers, and electronic goods — now sets the pace for the evolution of the globalized economy, operating in real time and simultaneously in many parts of the planet. Many parts of the world that do not share in these activities — both in the developing and in the industrialized nations — are at the same time being marginalized and run the risk of becoming, at best, appendices to the globalized centres of production and, at worst, irrelevant to the functioning of an increasingly globalized economy. The explosion of private-capital flows in the early 1990s, for example, largely bypassed most of the nations of sub-Saharan Africa. As the Indian social scientist Rajni Khotari once said, “for the first time in history, the rich do not need the poor” (R. Khotari, personal communication, Cairo, 1981). Little wonder, then, that most developing countries have shed their erstwhile antagonistic stance toward transnational corporations. After the often hostile way in which they viewed foreign investment in the 1960s and 1970s, developing countries now welcome, seek, and court direct foreign investment.

On another plane, the last two decades have seen completely new situations in several key countries and regions that affect significantly the world economy. During the 1980s, for the first time in recent history, the United States became a net debtor nation, although by the mid-1990s it appeared poised to cut its fiscal deficit and achieve a balanced federal budget in the early years of the next century. Despite setbacks during the early and mid-1990s, Japan remains a dominant economic and financial actor on the international scene and now — after the bankruptcy of several important financial enterprises — appears ready to restructure its aging and inefficient financial system.

Hesitations of some countries notwithstanding, following the 1986 accord on a Single Act, Europe is steadily moving toward economic, monetary, and maybe some form of political unity, a path that appeared unthinkable during the years of “Eurosclerosis” in the late 1970s and early 1980s. The Soviet Union was dissolved, and its former constituents are undergoing a painful transition to becoming market economies, a path followed earlier by Central and Eastern European countries that has yielded handsome economic dividends for some of them. However, as the mid-1998 downturn of the Russian stock market indicated, economic reforms are proving to be quite painful and uncertain. China has undergone an astonishing economic transformation while eschewing political liberalization. As a result of embracing market economics and introducing major of policy reforms, China has experienced very high rates of growth during the 1990s; it has become a major player in the world economy and received huge amounts of direct foreign investment; and Hong Kong has again become part of China, bringing with it all of its economic resources and entrepreneurial spirit.

Latin America has weathered the debt crisis of the 1980s, and, after a decade of stagnation, its policy reforms led to renewed growth in the early 1990s and to sustained economic expansion by the late 1990s. Most African countries saw the precarious gains of several decades reversed during the 1980s, although policy reforms and external assistance restored growth in a few of them during the 1990s. Political instability and strife in the Middle Eastern countries has not fostered an environment conducive to economic growth. After two decades of rapid economic growth, the newly industrialized economies of Southeast Asia have experienced the collapse of their currencies, major stock-market upheavals, and severe financial setbacks in mid- and late 1997. Since the early 1990s, India has been experimenting with economic-policy reforms and liberalization, which are likely to spur economic growth, while other countries in the Asian region are trying to begin a difficult process of economic reconstruction and political reconciliation after decades of war.

After the collapse of the Soviet Union and the general failure of centrally planned economies, capitalism has emerged unchallenged as the only feasible path to prosperity. However, as the competition between centrally planned and market economies disappeared, it became possible to focus attention on the variations within capitalism and on the differences in the ways various market economies function. Albert (1991) contrasted the “neo-American” and “Rhenanian” varieties of capitalism as alternative models for the organization of market economies. The first emphasizes individual competition and short-term financial performance in enterprises and limits the range of social services provided by the state. The second emphasizes consensus and collective action and long-term productive performance in enterprises and considers a wider range of state interventions in the provision of public goods. Along similar lines and based on an extensive worldwide survey of managers, Hampden-Turner and Trompenaars (1993) identified seven distinct “cultures of capitalism,” based on the values that drive the activities of firms; even a distinct Chinese strain of capitalism has been recently identified (Redding 1997). As economic competition intensifies between the key regions in the global economy — East Asia, Europe, and North America — each is putting forward its own version of capitalism as the model to be followed by the rest of the world.

Persistent inequalities and economic uncertainty

The increasing economic and financial interdependence characteristic of globalization coexists with persistent and growing inequalities in living standards between and within nations. Despite dramatic improvements in life expectancy in many parts of the world during the last 40 years, there are still enormous and enduring economic differences between rich and poor countries and between regions within countries.

According to the World Bank, in 1995, the average per capita GNP for the 49 low-income economies was $430, whereas the average for the 26 high-income economies was $24930, almost 58 times higher. Moreover, if large and rapidly growing China and India are excluded from the group of low-income economies, their average per capita GNP would reach only $290, about 84 times less than the corresponding average for the high-income economies. The total population of the low-income countries was approximately 3.2 billion in 1996–97, nearly 3.5 times as many as the 902 million of the high-income countries, even though both groups of countries cover roughly the same area (World Bank 1996c, 1997d).

Moreover, during the last three decades, the share of world income for the richest 20% of the global population rose from 70% to nearly 85%, whereas the share of the poorest 20% declined from 2.3% to 1.4%. In the early 1990s, the ratio of income shares of the richest to the poorest 20% was about 61 to 1, and the ratio of the average income of the poorest 20% in the United States to the poorest 20% in Tanzania was 130 to 1 (UNDP 1996). Among developing countries, a few outstanding successes, notably those of Southeast Asia, coexist with a large number of stagnant or even regressing situations, particularly in sub-Saharan Africa, but also in Asia, Latin America, and the Middle East. Within many developing countries, too, the distribution of income continues to be highly skewed. The richest 20% of Chile’s population received 61% of national income in 1994, whereas the poorest 10% only received 1.4% of national income. Similar distributions are found in countries such as Brazil, South Africa, Venezuela, and Zimbabwe (World Bank 1997d).

Although the divide between poverty and affluence has proven to be one of the most enduring and alarming features of the international economic order, the gap between rich and poor has also been increasing significantly in the industrialized nations in recent years. The case of the United States illustrates this clearly. Between 1950 and 1978, the poorest 20% of the United States population increased its income by 140%, whereas that of the richest 20% increased by 99%. However, between 1977 and 1994, the poorest 20% lost ground and its income was reduced by 16%, whereas that of the richest 20% increased by 25%. In the United Kingdom, the share of income earned by the richest 20% of the population increased from 43% to 50% between 1979 and 1996, whereas that of the poorest 20% increased only from 2.4% to 2.6%. The skewed pattern of wealth distribution is clearly visible in France, where the richest 20% of the population concentrates about 69% of assets and 44% of income and the poorest 20% accounts for only 0.45% of assets and 6% of income (Lind 1995; Julien 1995; The Economist 1997b).

In parallel with these persistent inequalities, the uncertainty and volatility of the international economy have been steadily increasing during the last two decades. The abandonment of fixed exchange rates in 1971, the oil-price shocks of the 1970s and 1980s, and the globalization of finance during the 1980s and 1990s have created a rather unpredictable international economic environment. In the early 1990s, the range and diversity of possible outcomes in practically all aspects of the international economy appeared much larger than at any time during the preceding three decades, and this uncertainty increased toward the mid- and late 1990s. Growing interdependence, spurred by advances in telecommunications and information technologies, has created an international economic environment that transmits disturbances and magnifies disruptions. A prime example is the impact of the virtually instantaneous transmission of information on the volatility of currency, stock, and derivatives markets. This volatility is often amplified by the pervasiveness of computer trading; only extreme measures, such as halting trading in stock markets, have been able to limit its negative impact to a certain extent.

Although world-trade expansion and economic growth have provided a steady backdrop against which to project the sudden shifts and swings of economic indicators, the accelerated and uneven process of economic globalization and the high degree of uncertainty associated with it have raised questions about the need for better international economic governance. Issues such as the reform the international monetary system, coordination of macroeconomic policies among the major world economies, regulation of international transactions and financial flows, establishment of standby mechanisms to assist countries in financial distress, and financing of development and reconstruction efforts (including the reform of the Bretton Woods institutions) all point to the need for closer cooperation among governments, as well as for greater cooperation between governments and private financial institutions (Solomon 1991; Griesgraber 1994; Kennen 1994; Stewart 1995).

The need for a new architecture of international finance has acquired particular urgency after the East Asian crisis of 1997–98, which, when added to the collapse of Russian finances in 1998, has had serious negative repercussions in Latin America and other emerging markets. Although a design acceptable to all major actors on the international financial scene is still far from articulated, much less agreed on, the urgent need for a new system to guarantee greater stability has been expressed by many academics, businesspeople, and policymakers. Even the President of the United States weighed in with the view that “the global economy simply cannot live with the ... systemic disruptions that have occurred over the past year” (Bill Clinton, cited in Business Week 1998b, p. 38).

Sudden withdrawals of private capital from emerging markets, a significant contributing factor behind the financial problems that have affected several developing countries in the last 2 years, could be viewed as the international equivalent of a “bank run” on entire economies. As financier George Soros (Soros 1998–99, p. 58) has forcefully argued, there are no mechanisms at present to prevent such major disruptions and reduce the negative impact of the high volatility of financial flows: “Market discipline is desirable, but needs to be complemented by another kind of discipline: Public-policy measures are needed to stabilize the flows of international finance required by the global capitalist system and to keep the inherent instability of financial markets under control.” Moreover, the impact of the Asian crisis on developing countries has been so severe that the much-celebrated triumph of capitalism is beginning to be questioned. Global capitalism has been said to be “under siege” (Business Week 1998a) as the 1990s come to an end and some countries (Malaysia and Russia, for example) begin to have second thoughts about financial liberalization, economic deregulation, privatization, and the adoption of the Washington Consensus on economic-policy reforms.

An important concern in the evolution of global economic governance is the degree to which the interests of poor countries, along with those generally of countries without economic power, will be taken into account in the design of international economic-governance structures. This concern is made more acute by the fact that even in the Bretton Woods institutions and regional development banks — whose main objectives are to finance development projects, support economic policy reforms, and assist in reconstruction efforts — developing countries have a very limited say in setting policies and running the organizations.

Social conditions

The last several decades have witnessed a rather contradictory situation in the evolution of social conditions throughout the world. The Human Development Report 1996 (UNDP 1996, pp. 17–18) indicated that

Human development over the past 30 years is a mixed picture of unprecedented human progress and unspeakable human misery — of human advances on several fronts and retreats on several others. ... The developing countries have in many respects covered as much distance in their human development during past 30 years as the industrial world managed over a century.

Since 1960 average life expectancy in developing countries has increased by more than one-third; the population with access to safe water has doubled to nearly 70%; primary-school enrollment has increased by nearly two-thirds to 77%; real per capita income has increased at an average of 3.5% a year; the infant mortality rate has been cut to less than one-half to 70 per thousand live births. Between 1980 and 1995, the total fertility rate in developing countries dropped from 4.1 children per woman to 3.1 children per woman.

But enormous challenges remain: 99% of the 20 million people who died in 1993 from communicable diseases lived in the developing countries; around 17 million people die each year from curable infections and parasitic diseases; 90% of the 18 million HIV-infected people live in developing countries; more than 130 million primary-level and 275 million secondary-level school children are out of school; nearly 800 million people do not get enough food; 500 million people are chronically malnourished; and about one-third of the people in developing countries — 1.3 billion people — live in poverty. Moreover, as pointed out in the preceding section, the gap between the rich and poor continues to widen. In 1997, about 20% of the world’s population, well more than a billion people, lived on the equivalent of less than $1 a day, whereas an unprecedented 3 million people had liquid assets of more than $1 million dollars.

The negative side of this mixed picture of advances and misery is partly the result of an explosive growth in social demands in the developing regions, which was largely triggered by population increases during the last 50 years. Coupled with a significant slowdown in population growth in the industrialized nations, this has led to a highly skewed worldwide distribution of social needs, demands, and expectations, on the one hand, and the capabilities to satisfy them, on the other (United Nations 1993).

A significant drop in the population growth rate of industrialized countries is to be expected in the transition to the 21st century, from an annual average of 0.54% in 1985–90 to only 0.38% in 2000–05. This implies a rapid rise in the number of aged people, particularly in Japan, Europe, and the United States, where the proportion of people aged 65 or more will exceed 30% of the population by 2025, and the ratio of dependents (children and old people) to active workers will increase significantly. Aging in industrialized nations will have a major impact on the demand for social services, as well as important consequences for the patterns of consumption, employment, savings, and the direction of technical progress.

Peter Peterson has warned about the dire consequences of the “graying new world older” during the first decades of the 21st century for international security, economic interdependence, and the emergence of an “old/young fault line,” which may replace the North-South divide (Peterson 1999, p. 43–44).

In developing countries, rapid population growth is expected to continue into the new century, although at a moderately slower pace, dropping from an average rate of 2.11% a year in 1985–90 to 1.74% during 2000–05. As a consequence, youth will remain by far the largest segment of the population in most of these countries, whose economies must expand at rates significantly above those of their populations to satisfy the growing demand for work. Yet, the countries with apparently the least promising prospects have populations that continue to grow most rapidly. During 1990–95, sub-Saharan Africa’s annual population growth rate was around 3%, almost twice the world average of 1.5%. China, with its 1.2 billion inhabitants in 1995, presents a rather special problem, particularly in view of its “one-child” policy, which poses a dilemma between higher population growth rates in the short term and an aging population in the long term (United Nations 1991; The Economist 1996).

World population imbalances have raised the possibility of uncontrolled mass migrations from poor to rich nations, a prospect that elicits xenophobic reactions among significant segments of the population in the advanced economies. However, as Amartya Sen has pointed out, “the explanation for the increased migratory pressure over the decades owes more to the dynamism of international capitalism than to just the growing size of the population of the third world countries” (Sen 1994, p. 70). Sen argued that in addition to world population growth imbalances, it is necessary to consider “the growing demand for immigration to the North from the South,” which is related to revolutions in transport and communications, reductions in obstacles to labour movements, and “the growing reach and absorptive power of international capitalism (even as domestic politics in the North have turned more inward-looking and nationalistic)” (Sen 1994, p. 70).

Although the massive inflows of workers from Northern Africa and Western Asia has failed as yet to materialize, in several Western European countries there is already a backlash against foreigners and growing support for right-wing nationalistic political movements. The United States has adopted stern measures to stem the flow of illegal immigrants from Central and South America, and some of its states have even reduced social benefits available to legal immigrants. In Asia, migration pressures are likely to build as a result of the growing demographic imbalances between Japan and the poorer overpopulated countries of the region. Despite increased participation of women in the labour market, the Japanese will experience a decline in the labour force after 2000, and labour shortages will be compounded by moves to reduce the number of working hours.⁶

The increased flows of refugees from civil wars, particularly in Africa, Asia, and Europe, add to the perception of a growing threat from population growth. In Africa alone, there were nearly 12 million refugees in 1995, almost four times the estimate for just 10 years earlier (World Bank 1997d). The spread of ethnic and religious conflicts in several regions, particularly in the Middle East, South Asia, and the former Soviet Block, might aggravate this situation and give rise to greater concerns, even alarmism, about population growth and migration.

The dynamics of population growth strongly condition the demand for food, education, employment, housing, and other social goods. Food and nutrition requirements have multiplied many times over, particularly in the poorest countries, and although world aggregate food production has been increasing and is sufficient to provide each and every human being with adequate nourishment, existing political, social, and institutional arrangements — at both the national and international levels — have proven incapable of doing so. Armed conflicts, droughts, and natural disasters have conspired to make it even more difficult to ensure access to food in many violence-ridden regions of the developing world.

Demands for basic health care and elementary education expanded at a rapid pace during the last three decades, and developing countries made significant efforts to improve the provision of these services to their growing populations. Nevertheless, abysmal disparities remain between rich and poor countries in access to social services. For example, although there is 1 doctor for every 390 people in the industrialized countries, the corresponding figure is 1 doctor for every 6700 people in the developing countries (CPBN 1992; FAO 1996).

The increased mobility accompanying improvements in transportation technology has made it easier for diseases to spread widely and rapidly, as shown by the worldwide AIDS epidemic. This problem is not restricted to the developing regions but also affects the transition economies. For example, throughout the former Soviet Union, particularly in Russia, risky sexual behaviour and increased drug use led to an epidemic rise in cases of AIDS. About 800000 people may be HIV positive by the year 2000 in these countries (Reid 1995). By 2000, about three-quarters of the world population living in urban agglomerations will be in developing countries. Migration and accelerated urbanization have created huge demands for housing, sanitation, transportation, and energy supply, a situation that adds unmet urban needs and widespread urban poverty to the deprivation of rural populations throughout the developing world.

Unemployment has emerged as perhaps the most difficult and urgent problem in the developing regions of the world. It has also begun to affect the rich countries during the last two decades. In most developing countries, the inability of the modern sectors of the economy to absorb new entrants into the labour force has led to a variety of “informal” arrangements for workers to earn their means of subsistence, largely in self-generated, low-productivity jobs that barely allow people to make ends meet. Developing countries face the difficult challenge of raising labour productivity while absorbing the growing number of entrants into the labour force. As yet, this fundamental problem seems to have no adequate solution. This challenge was clearly summarized in the World Development Report 1995: Workers in an Integrating World, prepared by the World Bank:

About 99% of the 1 billion or so workers projected to join the world’s labour force over the next thirty years will live in what are today’s low- and middle income countries. Some groups of relatively poor workers have experienced large gains in the past thirty years — especially in Asia. But there is no worldwide trend toward convergence between rich and poor workers. Indeed, there are risks that workers in poorer countries will fall further behind, as lower investment and educational attainment widen disparities. Some workers, especially in Sub-Saharan Africa, could become increasingly marginalized. And those left out of the general prosperity in countries that are enjoying growth could suffer permanent losses, setting in motion intergenerational cycles of neglect.

(World Bank 1995, pp. 7–8)

Differences in social and economic indicators between men and women throughout the world are a prominent and most disturbing feature of the global social situation. Despite two decades of efforts dedicated to women in development, women and children remain the poorest of the poor, and in terms of development indicators the gender gap is widening. In industrialized countries, gender discrimination appears in employment and wages, with women often getting less than two-thirds of the employment opportunities and about one-half of the earnings of men. In developing countries, the greatest disparities between males and females are in education, the job market, health care, and nutritional support. For example, women make up two-thirds of the world’s illiterate population and get only 55% of years of schooling. The 1989 United Nations survey on the role of women stated that women do two-thirds of the world’s work, own one-tenth of the land, and have only one-hundredth of the world’s income (United Nations 1993; Rowbotham and Mitter 1994).

Growing social demands, population imbalances, gender differences, and constraints on the access to basic services will tax to the limit the capacities of most developing-country governments, development-cooperation institutions, and international organizations. New conceptions of social policy and new institutional arrangements will have to be developed to cope with the growth in social demands.

Environmental sustainability

During the last several decades, we have began to reexamine our views on the linkages between human beings and nature, primarily because we have gradually realized that it is no longer possible to ignore the growing impact of human activities on the biophysical environment. As a result, environmental concerns have risen to the top of the international public-policy agenda. There is now greater awareness of how the regenerative capacities of natural ecosystems impose limitations on human activities, as well as of the dangers of the uncontrolled exploitation of natural resources (fisheries, forests, land, rivers) and the overloading of the capacity of the Earth to absorb waste (air and water pollution, acid rain, toxic and nuclear wastes).

The contemporary concern with environmental sustainability can be traced to the warnings issued during the 1960s and 1970s about the negative impact of the patterns of economic growth pursued by the high-income countries. Rachel Carson’s description of the destruction caused by chemical pesticides in the early 1960s created considerable controversy and forced a reexamination of agricultural practices in the United States (Carson 1962). The spectre of a shortage of natural resources was raised by Limits to Growth, a report of the Club of Rome, whose publication preceded by a few months the quadrupling of oil prices by OPEC in 1973 (Meadows et al. 1972). In subsequent years, other authors and organizations — such as Lester Brown at the Worldwatch Institute and Gerald Barney in The Global 2000 Report — raised similar concerns and sought to inform citizens in the industrialized nations about excessive energy consumption, unsustainable agricultural practices, toxic wastes, and similar issues (Brown 1984; Barney 1980).

These concerns were extrapolated to developing countries, with a focus on the effects of rapid population growth. In many instances, particularly during the 1970s and early 1980s, these preoccupations were seen as a form of “environmental colonialism” (De Almeida 1972). It was argued that the preservation of the environment is primarily a responsibility of developed countries, that the high-income countries developed the practices that pollute the environment, that they use a disproportionate share of natural resources, and that they are trying to prevent developing countries from achieving economic growth and high standards of living. To a large extent, these views were responsible for the rather limited advances of the 1972 Stockholm United Nations Conference on Environment and Development.

During the 1970s, Ignacy Sachs and Maurice Strong introduced the idea of “ecodevelopment” and suggested strategies and policies to harmonize environmental and economic-growth objectives (Sachs 1977, 1980). Our Common Future, the Brundlandt Report, of the World Commission on Environment and Development (WCED 1987, p. 1), put forward “the possibility for a new era of economic growth, one that must be based on policies that sustain and expand the environmental resource base” and offered specific recommendations at the national and international levels to achieve this. But it is also clear that the opportunities to achieve development while sustaining and expanding the environmental resource base are not unlimited and that the scope for taking advantage of what have been called “win-win” situations in environment and development may be rather constrained (Cairncross 1991; World Bank 1992b).

It is now widely accepted that the problems of environmental sustainability and resource use are closely related to population growth and poverty in the developing countries, as well as the often wasteful consumption habits of rich nations — one-fifth of the world’s population living in the rich countries consume more than 80% of the world’s resources (Durning 1992). Moreover, as they grow and industrialize rapidly, the large developing countries may considerably increase the pressures on the environment; for example, carbon dioxide emissions in China and India nearly doubled between 1980 and 1992 and reached 3450 t in the latter year, out of a world total of 21350 t (World Bank 1997d). Major changes in values and institutions in both groups of countries will be essential to seriously addressing the problem of environmental sustainability.

From a broader perspective, ideas about the relationship between environment and development have evolved gradually over the past five decades. From a primordial dichotomy between “frontier economics” and “deep ecology,” other paradigms — environmental protection, resource management, and ecodevelopment — have evolved in a progression that involves a greater integration of economic, ecological, cultural, and social systems in the definition of development and the organization of human societies (Colby 1990). In particular — as testified by several reports, public statements, and projects financed by international organizations — the transition from concepts and ideas to strategies, policies, and practices to harmonize objectives for the environment and economic growth has accelerated since the early 1980s.

An important milestone in the incorporation of environmental sustainability into development thinking and practice was the adoption of Agenda 21 at the 1992 Earth Summit in Rio de Janeiro, a wide-ranging world program of action to promote sustainable development. However, the negotiations during that conference exposed the divergence of perspectives between industrialized and developing nations on approaches, strategies, and policies to achieve sustainable development. Questions of lifestyles, national sovereignty, barriers to trade, and financial assistance, in addition to access to less polluting technologies, are now at the centre of the international debate on sustainable development (UNCED 1992; IDRC 1993a, b). Five years after the Rio Summit, more than 65 heads of state gathered in New York at the United Nations’ Rio+5 Conference to assess the progress made on the 1992 agreements. Although some advances were made, such as the Basel Convention on hazardous materials, the overall progress on significant sustainable-development issues (such as assistance from industrialized countries) has been deemed rather unsatisfactory and disappointing.

In addition to concerns about the environment at the national level, truly global environmental problems emerged in the 1980s. The depletion of the ozone layer and the threat of climate change, often referred to as “global warming” or “the greenhouse effect,” have underscored the possibility that human activities can cause irreversible environmental damage. However, despite expanded research efforts, considerable uncertainty and controversy remain regarding global environmental problems and, in particular, climate change. Average temperatures have been rising throughout the globe, and it is now beyond reasonable scientific doubt that human activities are having an effect on the climate. But it is very difficult to unequivocally determine the extent to which humans are responsible for this global-warming trend, primarily because of climatic variability, the various possible sources of atmospheric temperature change, the shortness of the monitoring record, and the nonuniform character of changes over the planet (IPCC 1996).

Regional changes in climate may be more important than global changes, particularly in economic and social terms. Some areas may even get cooler while others get warmer, with the aggregate average showing little or no change. The rise in sea level accompanying polar or overall warming will have a more severe impact on low-lying and island countries; tropical and temperate zones will see major changes in precipitation patterns; mountainous and polar regions may see glacier coverage receding; and ocean currents may experience major shifts. In the last analysis, the fact that deviations from familiar climatic patterns may become larger is of greater importance (Sagasti and Colby 1993). This means that severe, unusual events (hurricanes, floods, precipitation patterns, monsoon seasons, and droughts) will probably become both more extreme and more common. All of these changes will have major economic, social, and political implications, as demonstrated by the unusually severe appearance of the El Niño global weather phenomenon in 1997–98, which altered weather patterns all over the world and caused major destruction.

The supply of fresh water for a growing population is another global environmental question particularly central to the prospects for human development and welfare, one that may spark international conflict in the coming decades. United Nations estimates indicate that by 2025 “two thirds of humanity will face shortages of clean freshwater” (Work in Progress 1998, p. 1). The impact of a growing human population on the world’s oceans, rivers, and lakes has been considerable in terms of pollution and imbalances between urban and rural water supplies. Population growth alone has determined that “per capita water supplies as we enter the 21st century are one third lower than they were in 1970” (Work in Progress 1998, p. 24). There is a clear potential for international conflict in this area, as waterways often cross several countries and water supply is intimately linked to a number of environmental factors. In fact, disputes over water rights have already become a very real issue in regions such areas the Middle East and in the European nations on the Danube River.

The international and global dimensions of environmental change have led to proposals to redefine national security in environmental terms (Mathews 1989; Myers 1989). Another consequence of the greater importance of environmental concerns is that international economic relations, particularly commerce and trade, will become increasingly linked to environmental issues. Similarly, access to development cooperation and to finance from international institutions will be more and more conditioned on adopting meaasures to protect the environment. Moreover, some industrialized countries — notably Japan and Germany — are positioning themselves to compete in what will be one of the most dynamic markets of the future, environmentally sound technologies. Being able to provide environmentally friendly technologies is rapidly becoming a source of competitive advantage in the global search for new markets (Rath and Herbert-Copley 1993).

Culture, religion, and ethical concerns

One of the striking features of the contemporary scene is the degree to which questions of a cultural nature, which were usually neglected or given scant attention at the international level, have acquired renewed importance. After a brief interlude in the late 1950s and early 1960s when sociological and cultural explanations of development held sway (Hagen 1962; Lerner 1962; McClelland 1962), most of the post-World War II period has been dominated by economic perspectives and accounts of the way to improve the human condition.

Samuel Huntington put forward the prospect of a “clash of civilizations” as the dominant force in international affairs in the transition to the 21st century, suggesting that the great divisions and dominating sources of conflict will be cultural (Hutington 1996) and that “culture and cultural identities, which at the broadest level are civilizational entities, are shaping the patterns of cohesion, disintegration, and conflict in the post-Cold War world” (Huntington 1996, p. 20; see also Huntington 1993). Other authors have advanced cultural explanations of economic and political success, arguing that contemporary analysts tend to underestimate culture as an essential factor shaping society (Inglehart 1990). Some economic historians now even argue that “the most important influence on a nation’s responsiveness to change probably is its social attitudes, religious beliefs, and culture” (Kennedy 1993, p. 16).

Even international institutions like the World Bank, previously known to focus exclusively on economic and social questions, are beginning to pay attention to cultural questions (Serageldin and Taboroff 1994). In addition, the rise of religious fundamentalism and fierce ethnic rivalries, which have reemerged in violent form throughout the world, are a powerful reminder of the renewed and growing importance of the largely neglected nonmaterial and cultural dimensions of development.

Three powerful cultural forces are shaping the international scene in the transition to the 21st century: the growing importance of religious values and the rise of religious fundamentalism as a main driving force in economic and political actions in many parts of the world; the tensions between pressures to homogenize culture, attributable to the pervasive influence of mass media, and the desire to preserve cultural identity; and the emergence of moral and ethical issues at the forefront of choices about inter- and intragenerational equity, particularly in relation to human rights, the environment, income distribution, and poverty reduction.

The revival of religious and spiritual concerns has been a characteristic of the last two decades of the 20th century, which have witnessed the renaissance of Islamic values in northern Africa, Central Asia, and the Middle East; a revival of the Orthodox Christian Church in Eastern Europe and the former Soviet Union; the spread of evangelical churches in Latin America and other developing regions; a surge in the popularity of the Roman Catholic Pope; the growing influence of Christian fundamentalism in North American political life; and the renewed interest in mysticism and Oriental religions, often associated with “New Age” movements that eschew rationality. All of this points to the fact that, probably because of the overriding concern with improving material well-being and standards of living, the spiritual dimensions of human development have been neglected during the mostly secular post-World War II period (Beckford 1986; Macy 1986; Wright 1986; Barney et al. 1993; Johnston and Sampson 1994; Ryan 1995).

As a consequence of the globalization and pervasive influence of mass media — a direct result of technological advances in telecommunications during the past two decades — two contradictory cultural forces can now be seen at play. On the one hand, there are pressures to standardize (Westernize?) aspirations and cultural values throughout the world, but there is, on the other hand, the desire to reassert individuality and preserve cultural identity (O’Neill 1993). These two contradictory forces create cultural tensions and emotional stresses, particularly in developing countries, where the images of affluence brought by television programs from high-income nations contrast sharply with the harsh reality of mass poverty and the fact that those worlds of plenty are simply unattainable for the vast majority of the population.

Fernando Fajnzylber coined the term “frustration space” to describe the area between the rising curve depicting the number of television sets per 1000 inhabitants and the declining curve depicting the minimum urban wage in Latin America during the 1980s (Fajnzylber 1992). This frustration space has continued to expand as the gap between rich and poor widens and access to mass media, particularly television, increases throughout the developing world. For example, in Peru there were 52 television sets and 159 radio receivers per 1000 inhabitants in 1980; by 1993, when real urban wages had dropped to about one-half of their 1980 level, the corresponding numbers had nearly doubled to 99 and 253, respectively.

Moral and ethical questions, once the province of academics and religious activists, are finding their way into public debates on the rights of future generations in relation to sustainable development and on a variety of other issues, such as racism, abortion, corruption, arms proliferation, crime prevention, and drug traffic. A renewed concern with human rights throughout the world has led many to question the principle of nonintervention in the internal affairs of states where governments do not respect basic human rights (ODC 1992; Damrosch 1993; Brauman 1995; Ramón Chornet 1995). Finally, reversing the trend that prevailed during the 1980s, equity considerations are finding their way into the political agenda of many industrialized and developing countries at the same time as the moral and ethical aspects of economic behaviour have begun to receive greater attention (Dasgupta 1993; Nussbaum and Sen 1993). However, this does not mean that solidarity, compassion, and concern for the well-being of others have become the guiding principles of national and international policy-making.

Changes in the cultural sphere indicate that a new set of issues has been added to the international agenda. These include the need to consider the views of religious leaders in national and international institutions, the importance of taking into account the impact of the transfer of information and of mass media images, and the need to incorporate ethical, moral, and human-rights issues into the conduct of international affairs.

Moreover, the 1998 arrest of former Chilean dictator Augusto Pinochet in the United Kingdom and the possibility of his being tried for human-rights abuses have set the stage for a new era in which such crimes are not committed with impunity (Lagos and Muñoz 1999; Slaughter 1999).

Governance and democracy

A host of issues related to governance — that is, to the ways power and authority are exercised in pursuit of economic and social objectives — have acquired great prominence throughout the world since the end of the Cold War. The broken spell of East-West confrontation, which kept most of us mesmerized by the relentless struggle between communism and capitalism, and the victory of the West, market economics, and democratic politics have forced us to wake up to the reality that there are many kinds of capitalism and many types of democratic regimes.

But the end of the Cold War is not the only reason why questions of governance have become important in rich and poor countries, regional and international organizations, and even corporations and civil-society organizations. During the last two decades, a gradual change has been occurring in the roles played by the public sector, the private sector, and the organizations of civil society. In Europe and the United States — as well as in Eastern Europe, the former Soviet Union, and in many developing countries — thousands of public enterprises have been privatized, and the provision of many public services has been contracted out to private firms. This has been, in large measure, a response to the growing share of total government expenditures in the GDP of most countries — particularly of the industrialized nations, which has more than doubled since 1960 and now stands at about 45% of GDP (World Bank 1997d). During the 1990s, the role of the state has been reexamined from the perspective of improving accountability, responsiveness, transparency, openness, and institutional capabilities. As a result, after expanding relentlessly for decades, the public sector has come under pressure to become smaller, stronger, and more efficient.

In addition, NGOs and other civil-society organizations focusing on human rights, the preservation of the environment, poverty and hunger reduction, the delivery of basic social services, humanitarian relief, and consumer rights, among other issues, have become important players on the national and international scenes. All of this has altered the division of labour between the public, the private, and the social sectors in the provision of what were until very recently considered public goods and services (Nerfin 1987; Picciotto 1995). As a result, the governance debate incorporates a host of new issues going well beyond public-sector reform.

Therefore, governance has become a subject of concern for society at large. Good government is no longer an exclusive concern of the public sector; it has also become a preoccupation of private enterprises and civil-society organizations (trade unions, professional associations, environmental groups, advocacy groups for human rights and for all sorts of other causes, grass-roots movements, religious organizations, neighbourhood associations), as well as of international institutions and development-cooperation agencies.

The salience of governance issues has also been reinforced by the impact of technological advances in telecommunications, mass media, and information processing, which are changing the nature and functioning of representative democracies (Council of Europe 1981; Rosell 1993, 1994). These advances were instrumental in hastening the demise of one-party rule in Eastern Europe and the Soviet Union, opening up the possibility of direct forms of democracy in which citizens may change the roles of their state representatives, and in creating a more open and transparent setting for politics everywhere.

In the industrialized nations, several political events have led to what has been perceived as a widespread crisis of governance in the early and mid-1990s. Corruption scandals have undermined public trust in the political system in France, Germany, Italy, Japan, Spain, and the United States; for the first time in recent memory, right-wing armed militias brought terrorism to the heartland of the United States; xenophobic political groups emerged in France, Germany, and the United Kingdom; and constitutional crises and conflicts surfaced in Australia, Canada, and Japan. The spread of organized crime and drug traffic throughout Europe, Japan, and North America — not to speak of Central Asia, Eastern Europe, and the former Soviet Union — has also generated insecurity and fear and has made the task of governing more difficult.

Through the ballot box, citizens in rich countries have expressed their dissatisfaction with the ways their economic and political systems function, as is evident from the setbacks experienced by traditional and ruling parties in Asia, several countries of Europe, and even in North America. The crisis that the decades-old welfare state is experiencing in practically all advanced economies, primarily because it is becoming financially unfeasible, has added to the sense of insecurity and instability that is breaking the social compact between the state and civil society and between governments and the citizenry in these countries. The need to balance economic flexibility and social cohesion in the transition to the 21st century has prompted calls to reorient the welfare state, renew the decision-making and participatory processes, and improve systems of governance (DAC 1996, 1997b).

Governance problems have intensified in developing countries because of the sharp contrast between the growth in social demands and the capacity of the institutional frameworks — including the institutions of the state, the private sector, and civil society — to process and satisfy them. As indicated before, during the 1980s and 1990s, this has coincided with attempts to redefine the roles of the public and private sectors and markets and states in fostering economic growth, social justice, and environmental sustainability. Government failures in economic-policy management, productive activities, and provision of social services — added to renewed confidence in the positive role that market forces can play — prompted the international development community to pay greater attention to the ways power and authority are exercised through state institutions in pursuit of development objectives. This was brought sharply into focus by the extreme cases of poor governance in collapsed states such as Afghanistan, Cambodia, Liberia, Rwanda, and Somalia. In addition, civil-society organizations and particularly grass-roots movements have shown in many parts of the world that they can provide basic social services to the poor, especially in situations in which government agencies and the private sector are either incapable of providing such services or uninterested in doing so.

Governance and good government have also emerged as areas of concern for international development organizations during the last two decades. Throughout most of the post-World War II period, development assistance focused primarily on investment projects in infrastructure, agriculture, industry, and the social sectors. However, by the early 1980s, it became clear that many of the projects supported with external technical and financial resources failed to yield the anticipated rates of return. One reason was that investments were made in highly distorted policy environments, which prevented benefits from materializing. By the end of the 1980s, most developing countries had accepted the need for policy reforms and sought a better balance between market forces and state intervention. These developments underscored the importance of the government’s capacity to formulate and manage policy reforms, as well as the capabilities of the private sector to assess the impact of the policy environment on enterprise performance (CCSTG 1992; World Bank 1992a).

The growing importance of democratic governance has highlighted the importance of “social capital,” which, according to Robert Putnam, consists of such features of social organization as the patterns of stable connection between individuals and the moral resources available to the group, including trust, shared norms, and networks of civic engagements. Over time, social capital can improve the efficiency of society by helping people to overcome the dilemmas of collective action that can hinder cooperation. The availability of social capital explains the institutional success and the high degree of cooperation found in some societies, as well as the prevalence of democratic forms of governance: “building social capital will not be easy, but it is the key to making democracy work” (Putnam 1993, p. 185). Although Putnam focused on the patterns of social organization along the North-South division in Italy, recent work has shown that in developing nations, too, social capital can lead to higher incomes, better quality of social services, and increases in well-being (World Bank 1997d).

The policy reforms of the last decade and a half in developing countries have had important negative social consequences, such as an increase in the number of poor people, cuts in the provision of basic social services, and increased unemployment, the severity of which was not anticipated in the early 1980s. According to Ernest Stern, a former senior official of the World Bank,

we at the World Bank — and everyone else, I believe, underestimated the political difficulty of protected adjustment. Economists here and elsewhere often tend to believe that we need only do our analysis, reach our conclusions, and write a report; the rest will follow. We do not have much experience with the political processes of change. We fail to give weight in our own thinking to the fact that structural adjustment means a major redistribution of economic power and hence of political power in many of the countries undergoing this process.

(Stern 1991, p. 4)

Without interventions to ameliorate the impact of policy reforms, including macroeconomic stabilization, trade liberalization, deregulation, and privatization, social conditions worsened in many developing countries. This prompted a renewed concern with the political sustainability and feasibility of economic reforms, focusing attention on the ways governments exercise power and authority. Therefore, the need to marshall political support for economic reforms, the precarious nature of new democracies, and the need to have legitimate and effective mechanisms for citizen participation have all highlighted the importance of governance in the poor regions of the world (Sagasti et al. 1995).

Even though serious concerns about the nature of the democratic regimes have emerged in the developing regions, it is clear that the new international political context has altered the balance in favour of democratic forms of governance (Schmitz and Gillies 1992; Slater and Bennis 1990; Diamond and Plattner 1993; Held 1993; Diamond 1995). Without the justification of East-West conflict, it has become more difficult for Western countries to accept authoritarian rule in the developing world. Statements like “they may be bastards, but they are our bastards,” when referring to pro-Western dictators, and distinctions between “friendly authoritarian” and “hostile dictatorial” regimes have become much harder to make (Kirkpatrick 1979). With the collapse of one-party regimes and the spread of democratic practices, former East-block countries are in no mood to support authoritarian regimes that violate human rights in the developing countries, even if they could afford it. Finally, advances in information and communications technologies have also helped in furthering democratization processes, giving citizens greater access to information, bypassing traditional methods of censorship, and putting new channels of communication at the disposal of rulers and citizens.

In short, the new international context places extraordinary demands on the capacity to legitimately, fairly, and effectively exercise power and authority. At the national level, governance has become an exceedingly difficult process of mediation between interests and aspirations that have their roots both within and outside a country. New global and international phenomena have appeared in full view, and for many of these phenomena there is no precedent for international cooperation, let alone willingness to surrender sovereignty — particularly for the more powerful countries (CCG 1995; Falk 1995; Righter 1995; South Centre 1996).

The knowledge explosion and the knowledge divide

Scientific advances and technological innovations are at the root of the complex transformations that have taken place during the last half century. Since World War II the products of scientific research and technological innovation have become more and more deeply enmeshed in all aspects of human activity, to the extent that many see a “knowledge society” as having emerged during the last several decades. This has profound implications for the organization of human activities and will radically modify relations between workers involved in the production and distribution of knowledge and those engaged in various forms of manual labour (Machlup 1962, 1980; Drucker 1968, 1994; OECD 1996).

Four features of science and technology merit particular attention as we enter a new century: the changes taking place in the conduct of scientific research, the increasingly systemic character of technological innovation, the emergence of a new “technoeconomic paradigm,” and the persistence of the knowledge divide. All of these have a profound impact on the prospects for developing countries and for the future of development cooperation.

In the five decades since World War II, knowledge has grown at an astonishing pace. The explosive growth in knowledge has been described by David Linowes in the following terms:

It took from the time of Christ to the mid-eighteenth century for knowledge to double. It doubled again 150 years later, and then again in only 50 years. Today it doubles every 4 or 5 years. More new information has been produced in the last 30 years than in the previous 5,000.

(Linowes 1990)

The growth of scientific research, supported by advances in information and computer sciences, has been primarily responsible for this explosion of knowledge. There have also been increased interpenetration and cross-fertilization between scientific research, technological innovation, and the commercial exploitation of research results.

The institutional settings for the conduct of basic research, applied research, and the development of new products and processes are undergoing significant change, particularly because of shifts in sources of funding and the more prominent role the private sector is playing in financing and conduct of research. Links between universities and industries are being strengthened, collaborative industrial research and technological alliances have become an imperative in certain fields, and venture-capital firms and some specialized government agencies are playing increasingly important roles in providing capital for new technology businesses. These changes have been taking place primarily in the rich countries, although several newly industrializing nations — particularly those in Southeast Asia — are also moving in this direction.

Organizational arrangements for the conduct of scientific and technological activities have changed largely in response to major increases in the cost of basic and applied research, which are also bringing about greater concentration in fields of research in which large facilities are needed and results may take a long time. Certain fields of research have become increasingly dependent on advanced and expensive instruments that, as in the case of chemical synthesis and advanced microelectronics research, combine advances in electronics, materials sciences, optics, analytical techniques, and information processing. The high cost of advanced instruments and financial constraints have been creating a difficult situation for university laboratories in industrialized nations and have effectively put many fields of research out of the reach of the vast majority of scientific institutions in developing countries.

However, advances in microelectronics, computers, and telecommunications have at the same time opened up new possibilities for the active participation of researchers from all parts of the world, including the poorer regions. Not only is there greater access to libraries and other sources of written information, but also it is possible to interact in almost real time with peers from all over the world in electronic conferences and to send data for analysis to centres with more advanced facilities. Although these opportunities are still being explored, it is clear that there is ample scope for developing countries to become actively involved in many aspects of scientific research, even in areas that would appear at first sight closed to them (Salam 1991; World Bank 1998).

The innovation process, which turns the results of research into productive activities, has also changed significantly, particularly in science-intensive industries and services. Innovation is becoming more complex and systemic, as well as more expensive, involves greater sophistication in management techniques, and is giving rise to new forms of appropriation of technological knowledge. As a result, both international collaboration and competition have intensified, and the role of governments in the support of innovation has been transformed.

The systemic nature of the innovation process has at least two manifestations: the complementarity of specific technical advances required to materialize a particular innovation and the larger network of institutions and support services needed for innovation to take place. New technologies are differentiated from old ones by their greater combinative and contagious character, largely because individual advances in information technology, automation, new materials, chemical synthesis, and biotechnology, among many others, cannot be applied on their own without complementary inputs from other technologies. This has become clearly noticeable in automation and computer-aided manufacturing, where microelectronics, computers, telecommunications, optoelectronics, and artificial intelligence are fusing together into an integrated technology system, as well as in fields like aircraft production and the development of new drugs.

The increasingly systemic character of innovation is also reflected in the larger number of actors involved in bringing major innovations to the market. In addition to the firms directly involved in this process, there may also be subcontractors, suppliers of inputs and equipment, laboratories, other organizations providing technological services, management consultants, educational and research institutions, market-research units, distributors, trading companies, financial institutions, and venture-capital firms. All of these are complemented by various government agencies and departments engaged in the formulation and implementation of policies that directly or indirectly affect the innovation process. The concept of “national systems of innovation” has been put forward to account for the growing complexity of the institutional arrangements required to facilitate the innovation process (Nelson 1993).

As a result of the more complex and systemic character of innovation, the costs of incorporating research results into productive and service activities and of bringing new products to the market have been steadily increasing during the past few decades. The higher costs of innovation and the larger risks faced by firms in a more competitive environment have in effect increased barriers to entry in many fields of industry. Paradoxically, the increase in competitive pressures has generated a host of cooperative arrangements between industrial firms, primarily in precompetitive research and marketing. However, only firms with substantive financial or technological assets (including small firms with a focus on specific technology niches) can expect to become players in the game of international technological alliances (Freeman and Hagedoorn 1992; Groupe de Lisbonne 1995).

The more systemic the character of innovation, the more it requires an emphasis on management skills and capabilities. To realize the full potential of new technologies, it has become necessary to introduce innovations in organization and management, a task for which advances in information technology have provided the tools. A well-developed physical infrastructure is also required to support innovation, including a good network of roads and transport facilities, telecommunications and data-transmission networks, reliable electricity supply, access to waste-disposal facilities, and clear-water supply. In addition, it may be necessary to count on advanced repair and maintenance services for a variety of laboratory and industrial equipment.

The changes in the innovation process have mixed effects on the prospects for developing countries. On the one hand, there is the possibility of incorporating advanced-technology components into traditional and conventional technologies in developing countries, that is, “technology blending,” which can lead to more appropriate and higher productivity technologies (Bhalla 1993). On the other hand, the comparative advantage of developing countries is shifting away from low labour costs and natural resources, which is forcing major changes in education and industrialization policies. In addition, the physical and institutional infrastructure required to support increasingly complex innovation processes may well be beyond the existing capabilities of most developing countries, although it must also be kept in mind that a significant proportion of products and services in these countries is produced, distributed, and consumed locally. This may to a certain extent ease the pressures arising from the taxing demands of the innovation processes in more competitive fields.

The interactions of science, technology, and economic growth after World War II can be interpreted as the latest manifestation of a series of cyclical phenomena in the history of economic activity of the last 200 years. Carlota Pérez and Christopher Freeman have proposed the most widely known and accepted interpretation of such long waves of economic activity in recent times. They suggest that the transition from one long wave to another involves changes in the dominant technoeconomic paradigm. A technoeconomic paradigm is a combination of interrelated product, process, technical, organizational, and managerial innovations, embodying a significant jump in potential productivity for all or most of the economy and opening up an unusual range of investment and profit opportunities. A major characteristic of the diffusion pattern of a new technoeconomic paradigm is its spread from initial industries and services to the economy as a whole (Freeman and Pérez 1988).

The organizing principle of each paradigm is to be found most of all in the dynamics of the relative cost structure of all possible inputs to production. In each paradigm, a particular input or set of inputs (the “key factor”) fulfills the following conditions: (1) low and rapidly falling relative cost; (2) apparently almost unlimited ability of supply over long periods, which is an essential condition for the confidence to take major investment decisions; and (3) clear potential for use or incorporation of the new key factor or factors in many products and processes throughout the economic system, either directly or through a set of related innovations that both reduce the cost and change the quality of capital equipment, labour, and other inputs into the system.

The key factor in the technoeconomic paradigm that has now matured is energy (especially oil), whose falling cost, apparent unlimited supply, and widespread use reorganized the production of goods and services at the world level from the 1930s to the 1980s. Transport-related industries (automobiles, trucks, tractors, aircraft, motorized armaments), consumer durables, and oil-based products (petrochemicals, synthetic materials), accompanied by the expansion of the physical and institutional infrastructure to make full use of these products (highways, airports, gasoline distribution systems, consumer credit), set the pace for economic growth during what has also been called the “Fordist mass production Kondratieff wave.” This wave extended through the 1980s and early 1990s and included the 1950–73 Golden Age of economic growth, a period of unprecedented economic and trade expansion following World War II (Maddison 1995).

A new technoeconomic paradigm began to emerge in the 1980s. The microelectronic chip is replacing energy as the key factor, and information and telecommunications industries and services (computers, electronic capital and consumer goods, robotics, telecommunications equipment, optical fibres, ceramics, software, and information services) are taking the lead in the process of economic growth. Satellites, digital-telecommunications networks, and special-purpose computers are providing the infrastructure for the expansion of information and communications services, which will continue well into the 21st century.

This transition has profound implications for the way production is organized in enterprises, for competitive strategies, and even for the institutional arrangements to support productive and service activities at the national and international levels. The well-proven set of common-sense guidelines derived from decades of successful experience in increasing efficiency within the framework of the technoeconomic paradigm based on energy is now giving way to a new set of efficiency principles and practices associated with the new possibilities opened up by the microelectronic chip (Pérez 1989).

As a result, the role that knowledge now plays in all human activities has become so critical that the concepts of development and progress need to be redefined in terms of the capacity to generate, acquire, disseminate, and use knowledge. The presence or absence of this capacity constitutes a crucial divide between rich and poor nations and societies, between those parts of the world in which individuals have the potential to decide and act with autonomy and those in which people are not yet empowered to realize their full potential as human beings (Sagasti 1980, 1988, 1995, 1997a).

Differences in scientific and technological capabilities that have persisted over a long time and are rather difficult to surmount constitute a distinguishing feature of the emerging international order. Scientific and technological capacities are distributed in an even more lopsided way than economic power. The high-income countries of the OECD account for about 85% of total world expenditure in science and technology; China, the newly industrializing countries of East Asia, and India account for a further 10%; and the rest of the world accounts for only about 4% (UNESCO 1996). Moreover, although the average income per capita of the 24 rich countries of the OECD is about 60 times greater than that of the roughly 50 countries classified by the World Bank as “low-income economies,” average expenditures on science and technology per capita in the former are 250 times greater than those in the latter.

The distribution of human resources devoted to science and technology is more balanced: about 50% of the world’s supply of scientists and engineers is concentrated in the OECD countries; 17%, in Central and Eastern Europe and the Commonwealth of Independent States; 15%, in China, India, and the newly industrializing countries of East Asia; and the rest, mostly in the developing regions. However, the fragility and vulnerability of most research-and-development organizations in poor countries, which face the constant threat of losing their best people to institutions and firms in more advanced economies, make it difficult to consolidate and sustain the growth of scientific and technological activities.

The distribution of the world’s scientific and technological output, measured with the rather imperfect indicators of scientific publications and registered patents, also shows a rather extreme degree of concentration of capabilities to generate modern knowledge. Nearly 80% of world scientific output is produced in nine highly industrialized countries, and Eastern Europe, India; the OECD countries contribute 94% of the indexed scientific literature; and measures of inequality between countries are more pronounced in scientific publications than in income, population, or land. Similar degrees of concentration are found in patent indicators: more than 96% of world patents are registered by Japan, the countries of Western Europe, and the United States (Annerstedt 1993; Shrum and Shenhav 1995).

These imbalances have prompted calls to use the scientific and technological potential of rich countries to address the problems of the poor regions of the world. The 1970 World Plan of Action on Science and Technology for Development, prepared by the United Nations Advisory Committee on Science and Technology, suggested that 5% of research-and-development expenditures in rich countries should be focused on the problems of poor nations, a request that was repeated in many international gatherings in subsequent years. However, with the notable exception of a few fields, such as health care, the mobilization of developed-country scientists to deal with problems found mainly in the developing world has not been very successful.

All this suggests that the scientific and technological capabilities of most developing countries are far too limited to deal adequately with the challenges of economic advance, social progress, and environmental sustainability. With the exception of a few large countries (China, Brazil, India, Mexico) and some newly industrializing countries (Malaysia, Singapore, South Korea, Taiwan) that have built a significant base of scientific and technological activities, low- and middle-income countries do not have the capabilities to generate knowledge or to effectively select, absorb, adapt, and use imported knowledge. Severe resource constraints and growing social demands tend to undermine their long-term efforts to build scientific and technological capabilities. Difficult choices must be made between alleviating poverty in the short term and building capacities to generate and use knowledge in the long term.

The limitations of developing countries are made even more acute by the changes taking place in scientific research and technological innovation. Notwithstanding the opportunities that the change in technoeconomic paradigm and the expanded access to information networks may offer to some developing countries, the increasing costs of research and innovation, the accelerating obsolescence of scientific and technological capabilities, and the growing complexity of the institutional settings for research and innovation are making it more difficult to take advantage of advances at the frontiers of knowledge. As time passes and knowledge continues to increase at an explosive rate, the cumulative impact of imbalances in scientific and technological capacities is likely to create almost impenetrable barriers for those who wish to cross the knowledge divide and mobilize knowledge to improve the condition of the majority of human beings who live in the poor regions of the world.

Concluding remarks

The various trends reviewed in this chapter indicate rather clearly that the context for development efforts has changed radically during the last two decades, particularly since the end of the 1980s. In this new international context, it is not surprising that the habits of thought, practices, and institutional arrangements associated with the decades-old development-cooperation experiment have begun to experience serious difficulties. However, before focusing in some detail on the main features of the transformation that development cooperation is now experiencing, we shall examine some of the interpretations offered to account for these trends and their interactions and will also propose a characterization of the fractured global order to provide a backdrop for development-cooperation efforts in the future.

4. Among the various authors who discuss the features of the emerging international order are Cetron and Davis (1991), Liepietz (1992), Amin (1992), Brown (1992), Hogan (1992), Takahashi (1992), Taylor and Taylor (1992), Carnoy et al. (1993), South Centre (1993), Slater et al. (1993), Singer and Wildavsky (1993), Groupe de Lisbonne (1995), Kennedy (1993), Barney et al. (1993), Davidian (1994), Sakamoto (1994), Kincaid and Portes (1994), O’Brien (1994), Kapstein (1994), Commission on Global Governance (CGG 1995), Holm and Sorensen (1995), Korten (1995), Bressand and Distler (1995), Santos (1995), Saul (1995), Athanasiou (1996), Kaplan (1996), Huntington (1996), Mander and Goldsmith (1996), Castells (1996), and Greider (1997). Return
   
   
5. In a rather prescient statement, Stavrianos (1981, p. 796) pointed out that “the self-evident fact is that if a geologic cataclysm were to remove the Soviet Union from the face of the globe, the deplored ‘hot spots’ and ‘international terrorism’ would persist undiminished.” Return
   
   
6. Matthew Connelly and Paul Kennedy highlighted the fear of uncontrolled migration, indeed of invasion, by impoverished migrants from the poor regions of the world. Inspired by French novelist Jean Raspail, they described the arrival of the first wave of “a million desperate Indians who, forsaking the ghastly conditions of downtown Calcutta and surrounding villages, commandeer an armada of decrepit ships and set off for the French Riviera” (Connelly and Kennedy 1994, p. 61). Return

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