Challenge of making global capitalism more accountable

The German philosopher Jurgen Habermas believes it will be necessary to create a "global domestic politics" if capitalist markets are to be made democratically accountable following their globalisation over the last two decades.

To put the words global and domestic together in this way challenges conventional wisdom that domestic politics only makes sense within the boundaries of the nation-state. If it is not possible or realistic to extend such accountability beyond those boundaries we will have to become reconciled to a permanent democratic deficit.

This arises from the fact that despite the increasing integration of international markets being brought about by rapidly expanding worldwide flows of goods, services, capital, information and people - a conventional definition of globalisation - the capacity to regulate them democratically has progressively diminished.

Habermas rejects the fatalistic or defensive view that it is too late to reverse the subordination of politics to the requirements of a global society unified by the market. Those who accept that reality say it is necessary to equip people to compete in that marketplace, through education for example, so they can survive and take its opportunities.

That is the kernel of the Third Way programmes, offered by Tony Blair and Bill Clinton, which have become so influential in recent years. The presidential election in the US and looming general election in the UK will ensure these positions have a prominent hearing in months to come. Such political convergence between Europe and the US cuts across the many issues on which their policies and interests normally differ.

A more radical approach would see an attempt, initially at the level of the EU, to recapture political control of market systems by harmonising their welfare, labour market and tax policies.

As Habermas puts it, "the basic question is whether the institutional status quo, in which states balance out conflicting national interests in interstate negotiation, is to be defended even at the price of a race to the bottom, or whether the European Union should evolve beyond its present form of interstate alliance toward true federation. Only in the latter case could it summon up the political strength to decide to apply corrective measures to markets and set up redistributive regulatory mechanisms".

His argument echoes one brought to the centre of European political debate by the German Foreign Minister, Mr Joschka Fischer, last May. He called for a core group of member-states to form a federation as the EU enlarges and changes its decision-making structures. His proposals are not intended to be considered in the current inter-governmental conference, which will conclude with a new treaty at Nice in December. But inevitably they have coloured discussion about it.

This was seen in a speech by the Tanaiste, Ms Mary Harney, on July 21st to the American Bar Association. She said she is against "a more centralised Europe, a federal Europe, with key political economic decisions being taken at Brussels level . . . I believe in a Europe of independent states, not a United States of Europe".

This is in line with Government policy on the IGC, especially as it relates to tax harmonisation. Ireland is distinctive in the EU for its low tax policies, especially on corporate profits. That, of course, has powerfully influenced US investment here.

Ms Harney said that when Americans come here they find a country that believes in the incentive power of low taxation, economic liberalisation, and in essential but not over-regulation - unlike many other EU countries.

While it is necessary to avoid oversimplifying contrasts between the European and American economic models, she said there is an element of truth in them. Whereas the US one is seen by commentators as "heavily based on enterprise and incentive, on individual effort and with limited government intervention", the European way is seen as being built on "a strong concern for social harmony and social inclusion, with governments being prepared to intervene strongly through the tax and regulatory systems to achieve their desired outcomes".

And while Ireland has steered a middle course between the two models, "I think it is fair to say that we have sailed closer to the American shore than the European one". To maintain such an advantage she would favour an EU system that allows individual states freedom to determine their own political and economic destiny.

This was a coherent and intelligent speech, suffused by Ms Harney's neo-liberal vision of economic policy. She is plainly happy with the policy outcome from Ireland's point of view - and not at all concerned by the absence of powers at EU level to apply corrective measures to markets or set up redistributive regulatory mechanisms. Indeed it is precisely such powers that she opposes in the federal vision of the EU's future.

It was not surprising, therefore, that her speech should have been criticised by the Labour Party leader, Mr Ruairi Quinn. He said his party is strongly committed to the European social model. At this point in our history Ireland should become more rather than less European in those respects, rejecting the inequality inherent in the US model.

He welcomed Ms Harney's honesty in providing "proof that substantial ideological differences still exist between political parties in Ireland" - and chided the media and the Government for not provoking more debate on the current IGC, which deals with institutional reform, security and defence policy, and a charter of rights for European citizens.

This is a useful reminder that issues arising in the European debate can bear heavily on Ireland's well-being and differentiate parties according to their overall approaches to them.

It is also a reminder that a "global domestic politics" can cut several ideological ways. Ms Harney is satisfied with a market system that requires minimal regulation and can deliver growth and welfare as exemplified by Ireland. As she put it "what really makes Ireland attractive to corporate America is the kind of economy we have created here".

That requires the EU to stay within its present competences and constitutional structures. Those who wish to move beyond them must decide whether that would suit their political preferences and their definitions of the national and the European interest.