Friday, May 29, 2015

The age of open financial imperialism

Nate Silver’s piece on FIFA and how it should be either reformed or broken up is a remarkable piece of journalism. It is not remarkable by what it says about how a soccer governing body should be run. It is remarkable by what it says about how global governance should be in the future. As I wrote in my yesterday’s blog it was always wrong to regard the issues surrounding FIFA as a mere problem of corruption in sports.  It is a much broader issue as to whether in the new globalized world small counties and ordinary people should have a voice or not.

            So I will not discuss obvious soccer-related incoherencies in Nate Silver’s piece. The piece illustrates that a combination of good statistics with lack of knowledge of history, produces useless results. It is as if one were to study today’s racial wage gap in the US without knowing that there ever was slavery.

            But let us consider the key part of Nate’s idea. He thinks that a new FIFA should be formed of the countries that bring most money to the current FIFA and the rest should be left out in the cold. Let the poor countries with awful soccer turfs, with these miserable human creatures that cannot pay $100 per game, stay out on their own, and keep on playing their game on dirt fields, not seen on TV screens or by anyone else except their neighbors. In the  meantime, we the new rich and shiny FIFA will come to the game in our Audis and Mercedeses, and play on the impeccable fields full of fun commercials, and shall flood every TV screen of every nation in the world.

The  importance  of countries reflects, Nate says, how much money they bring to FIFA. If a country is rich, populous and lots of people watch the World Cup, and thus add to FIFA’s revenues, then that country should matter more. OECD is big and rich enough to go it alone.

            The matters of global governance which have been, since the foundation of the international organizations, based on the principle of one-country one-vote (indeed slightly modified in some cases as with UN Security Council’s permanent members) would be entirely overhauled. In Nate’s world, international organizations’ voting structure should be based on the rule one unit of GDP = one vote. He thus openly introduces into global governance, income as its sole metric.

There are two, I think, defensible metrics in global governance. The first is the standard one, from the League of Nations until today, of each country counting in principle the same. The other would be an extension  to the global  level of the existing national voting rules where each individual counts the same. The problem with that  metric is not only that it would lead to the domination by just a few  countries, but that it  makes sense only when individuals themselves have a chance to cast a vote. If we could have all Chinese  and all Americans take individually a vote on an international issue, that would be fine. But such a system cannot be organized at the current stage of development (although in the future, and especially thanks to the Internet, perhaps it could).

            But a totally unacceptable global metric is the one Nate is proposing: Money. As simple as that. I am  not surprised that he proposed it so baldly because it is an idea that has been in the air for a while. Rich people are annoyed that UN seems to give too much power to small countries. In an era when money alone matters, would it not make more sense to get rid of these obstreperous small countries and just let a couple of rich and powerful nations decide all? After all, this is exactly what G7 is doing. Then we have a G20 which is a slightly more democratized version of G7 but is still based on the same principle that the affairs of the world should be managed by a small moneyed elite. And of course we have the World Bank and the IMF where that principle, one dollar = one vote, was enshrined at the organizations’ founding and still broadly reflects relative income ratios from 70 years ago.

            Notice that when we introduce GDP as the base of one’s international importance, that means that every individual in the world implicitly has a voting power that is equal to the GDP per capita of his/her country. So some 100 people in Congo would have the same voting power as a single American. This is, according to Nate Silver, the idea around which the new global governance should be based.

            At the level of the nation-state, this idea logically entails weighted voting where each person vote would be proportional to his/her income or taxes paid (this existed in the past: in many countries there was an income census for the right to vote). It would just legalize the plutocracy which  those who have read the heavily empirical  books by Martin Gilens (“Affluence and influence”) and Larry Bartels’ (“Unequal democracy”) know already exists in the United States. As Gilens shows, the elasticity of politicians’ responsiveness to the concerns  of the rich is very high. (A simple way of saying this is that the politicians vote in accordance with the wishes of the rich.) But when it comes to the middle class (the 50th percentile of the income distribution) or the poor, the politicians’ responsiveness is close to zero. In other words, whatever the concerns of the middle class (so long as they are not the same as the concerns of the rich) politically, they do not matter.

So Nate has simply decided to project to the global level what currently exists (although only in practice, not legally) in the United States, or differently to take Romney’s view that 47% of US population that does not pay federal income tax should somehow be disenfranchised.  

Until some twenty years ago, the world was structured (at least in principle) around two simple rules: within nations: 1 person = 1 vote; at the international level: 1 country = 1 vote.  Globalization requires some changes in the latter. But surely, it would be thoroughly regressive, although not in discord with the spirit of our age, to go both nationally and globally to the new single rule, as proposed by Nate: 1 dollar = 1 vote.

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