Piero Ostellino


Following World War II, a new international system arose, characterised politically by the primacy of the large, liberal, democratic countries that had emerged as victors from the war, and financially by the dollar as the reference currency. This new system developed as a result of several factors. One was the breakup of the Soviet Union as a global power, the immediate direct effect of which was to downgrade the Russian Federation to the level of “emerging power”. This in turn spelt the end of the US-USSR strategic and military bipolarity, which, until 1991, had stabilised the political system according to the logic of a balance of fear but which in fact had given the United States, the sole remaining major power, a hegemonic role in terms of politics, economics and finance. A third factor was the triumph and diffusion of capitalism and the market economy. One observer actually defined the new situation in philosophical terms as “the end of history”, convinced that this situation would last indefinitely and result in a new and independent historical cycle. Fortunately, history has not ended.

Nonetheless, the nature of the international system is vastly different now from what it was in the aftermath of the Cold War. China, India, Brazil, South Africa and other countries whose strong growth rates, sweeping internal economic transformations and considerable impact on global trade have elevated them to “emerging powers” have breached the walls of this system, turning it into an (imbalanced) “asymmetric, multipolar” one. As some of the old asymmetries persist, the emerging powers are now calling for a greater say in global economic and financial decisions. In looking for recognition of their own increased influence on such decisions, they are in fact seeking the definition of a new structure and a new balance of power. In other words, they are demanding the reformulation of the international system and the birth of a new one. This raises two questions for us today. Firstly, what role will the “emerging powers” play in adapting the global balance to the new reality? Secondly, what will the resulting “new world” look like?

Personally, I don’t believe that China and the other “emerging powers” stand to derive any direct advantage or even any greater global weight from “multilateral supervision” of the five major currencies; or from “coordination between partners with different interests, expectations and value systems”; or from “monitoring of the most influential economies and a crisis alarm system, with strict discipline”. Indeed, I believe that such suggestions, which are rooted in history and Keynesian theory, do not fit well with their competitive, ever-expanding economies for two reasons. Firstly, these suggestions reflect the same illusion of a global monetary regulator that underpinned the creation of the International Monetary Fund as a kind of global bank around which the individual currencies would rotate like planets, regulated among themselves by a system of more or less fixed exchange rates – giving the United States the leadership role that is now criticised and questioned in the old system. Secondly, these suggestions would end up harming those same “emerging powers” that would have everything to gain from an “open international society”, that is, free competition between economies and currencies whose exchange rates are global prices reflecting those of the various market areas. Moreover, I do not see how a fixed exchange rate system regulated by a central world entity, albeit consensually, would function if not by means of a sanctioning mechanism in the hands of a power whose currency acts as a point of reference – this seems less practical today than previously.

Instead, I think that the international market presence of the “emerging power” economies – which are independent in terms of production and finance, and are highly competitive compared with those of the industrially developed countries – could have two positive effects. Above all, their presence would provide a strong stimulus, especially to the economies of the industrially developed countries, to adjust and restructure, giving up once and for all the production of labour-intensive goods that can no longer compete with products from the “emerging powers”. Secondly, the same “emerging powers” – as historically occurred in the European production system after the first industrial revolution – would naturally be pushed by their own development to gradually orient their economies towards capital-intensive production. They would do so either by acquiring new technologies from countries that are industrially more advanced or by developing internal research. Re-imposing artificial checks on the spontaneous dynamics of different societies would not benefit anyone, least of all those who are lagging further behind.

Governance and government run the risk of being the same thing in a different way: the rationalist ambition to govern the course of history, harboured by someone who claims to have the necessary knowledge, ability and power. But no-one – not even in the abstract ideology of collectivism, whether national or international – has knowledge that is not subject to error. History is made up of many such individuals, all rationally pursuing their own interests and ideas (their own idea of happiness), irrationally and “unconsciously” producing a rational order (Hayek). Trial and error is the only rule to follow. Residual caution (or hypocrisy) suggests not referring any more to government as the word is too reminiscent of the Leviathan state. But the intentions behind the word “governance” are the same – namely, the exercise of a programming power to regulate and manage the disorder that comes from above, but which, for the same reason, conflicts with the force that ought to produce growth, development and freedom: social spontaneity. Keeping a check on spontaneity is the ambition of any power and the result is always excessively costly compared with the modest gain to be made in terms of growth, development and, above all, freedom. The rule of law – that is, the national and international regulations designed to ensure that the pursuit by any party, whether an individual or a country, of their own idea of happiness (in the general sense) does not interfere with others’ rights to do likewise, and thus harm them – is one thing. Governance, the programmed regulation and management of the individual and collective will, is another. The “plurality of situations, wishes, desires, traditions and objectives” is such that it cannot be confined in one single global design. On the contrary, it is the true force that drives the history of humankind and that is neither predictable nor plannable. The great industrial revolution at the end of the 18th century and the first half of the 19th century spun out of all control and caused a considerable amount of injustice, interpreted by the likes of Karl Marx. And yet, at the same time, it allowed humankind to make unprecedented progress. It is to capitalism and freedom that we owe the world in which we live, a better world than before. It is capitalism and free markets that have pulled 400 million Chinese and 200 million Indians out of poverty, as well as millions of South Americans and South Africans. By the same token, the deterioration in welfare and excess of legislation, regulations, licences, permits and prohibitions and so forth – created by an increasingly intrusive political power in the rationalist illusion of managing and governing change – has brought the modern state to the brink of failure and bankruptcy. This may cost us a great deal, especially in Europe, the continent of Enlightened rationalism (France), as compared with the land of empirical and sceptical Enlightenment (Scotland). In other words, we need rules that prevent everyone from harming others but which do not stifle the imagination, creativity or desire. We need to restore the proper relationship between freedom and responsibility, as there is no freedom without responsibility and the responsibility imposed by law (by force) runs counter to freedom.

Piero Ostellino is a former editor-in-chief of the Corriere della Sera

Piero Ostellino is a former editor-in-chief of the Corriere della Sera

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