Helsinki Process, World Social Forum, Mumbai, Intia, 18.1.2004

What is the Helsinki Process?

The Helsinki Process on Globalisation and Democracy was launched at the initiative of the Finnish Government in cooperation with the Tanzanian Government early 2003. The aim of the Helsinki Process is to launch a proactive effort to develop new solutions to the dilemmas of global governance. These new solutions are sought through an open and inclusive dialogue amongst the major stakeholders.

The aim of the Helsinki Process is to increase democracy and equality in international relations. In doing so, the Helsinki Process wishes, to foster the involvement of Southern perspectives and civil society in forming global policies. Additionally the Helsinki Process aims to empower coalition building in order to promote the necessary changes in global governance. The Helsinki Process will seek political support from a variety of actors, including other governments, non-governmental organizations, and the private sector. One of the tasks of the Helsinki Process is to provide one channel for follow-up for the ILO Commission on the Social Dimensions of Globalisation, co-chaired by the Finnish and Tanzanian Presidents.

The Helsinki Process is based on the work carried out by the Helsinki Group on Globalisation and Democracy as well as three Tracks. The Helsinki Group is a high-level international body that aims to produce pluralistic and innovative proposals for solutions to the key problems of globalization and its effective, democratic governance. The Group members come from different backgrounds and constituencies, but they are committed to seek cooperative solutions to global challenges. These challenges include both tangible economic and political issues and the need to reform international institutions to be better able to address these problems. The Group is co-chaired by my Tanzanian colleague, Minister Jakaya M. Kikwete and myself.

The Tracks are high-level expert groups which work on specific issues in global problem solving. The Track on New Approaches to Global Problem-Solving discusses a range of issues from failed states to new strategies to international cooperation. The Track on Global Economic Agenda addresses issues from global public goods to the financing of the burning health crisis. The third Track, on Human Security examines how proceed from Responsibility to Prevent and Protect and how to address the human insecurities experienced by the most vulnerable: children, women and those suffering from illnesses. The individuals in the Tracks represent know-how from all major stakeholder groups.

The Helsinki Process favours multilateral approaches over the unilateral exercise of power. Obviously, these two approaches are intertwined, but multilateralism tends to be more effective, because it is more legitimate in the eyes of most governments and recognizes the relevance of non-state actors and processes. But multilateralism is only a mode of inclusive cooperation. Therefore, it has to be given substance and rooted in common goals and values. These global values can be derived, first and foremost, from the UN Charter and the Universal Declaration of Human Rights, and they were reaffirmed in the Millennium Declaration. These are the corner stones of the Helsinki Process. It builds on a broad community of values that consists of participation, cooperation, inclusiveness, and non-discrimination.

The Helsinki Group will start its work in the end of this month. The Tracks have worked already for some months and are expected to complete their works in a report by the end of this year. The report of the Helsinki Group – by May 2005 – and the Tracks will be discussed in the second Helsinki Conference, early September 2005 (7th to 9th Sept 2005) where you all are welcomed to discuss and evaluate the work of the Helsinki Process. Additionally there is an opportunity to influence the work of the Helsinki Process through sending comments (note the website and by participating at various events in the following two years. Your inputs and comments – also in this dialogue in Mumbai – are warmly welcomed. Our aim is to ensure that the Helsinki Process lives up to its values of being open, inclusive and empowering.

The most serious substantive problems faced by the international community concern the risky consequences of the state failure on the one hand and poverty and vulnerability on the other. Moreover, social polarization and political fragmentation obviously interact and reinforce each other. In a sense, the ongoing transformation hints to the erosion of national states and economies and the emergence of more complex, and often more unstable political and economic formations. It is not far-fetched to suggest that a new type of international society is in the making. The Helsinki Process aims to create practical and feasible policy recommendations that can be adopted and promoted by various actors in this challenging context.

The mixed effects of globalization

The start of the current internationalization process or globalization if you prefer, goes way back to the middle-age in Europe, to the birth of capitalism and to the new cultural and scientific attitudes of the renaissance.

Since then international trade and investment flows have grown to unprecedented levels. By the end of 1990s world exports in relation to world GDP had increased to about four times higher than hundred years before. During the last few decades world economies have become more interdependent than ever before.

The discussion on globalization is often concentrated on the economy, quite understandably. But there are important social, cultural and political aspects as well, which in fact, cannot be separated from the economy or vice versa.

One of the most positive aspects of globalization is the gradual extension of common ethical principles. This is demonstrated by the growing ratification of UN declarations. One important political aspect, which has changed during the last few decades is the growing preponderance of representative democracy. Principles such as pluralism, alternation of power, division of the state powers, democratic elections of authorities and recognition of the right of minorities are becoming more generally accepted world-wide. We can say that democracy has spread further in the world than ever before, but at the same time we can also observe growing discontent towards formal democracy. Millions of people are feeling being left out from the political decision making. Let it be in developed countries or in the developing world where the de facto exclusion of large parts of population is much more marked. There is also a growing feeling that forces and events, which shape our lives are beyond the reach of the control exercised by democratic governments. Part of the blame is put on the globalization of the economy.

It is important to make some clarifications as one speaks about globalization of the economy. Technological development has shrunk time and space in a dramatic fashion. This has occurred through improvements in transport as well as in information and communication technology. This is a fact. This development enables increasing globalization of the economy. It is almost impossible to stop technological and scientific progress, and for most of us, it is undesirable.

But,liberalizing trade and financial flows is a policy choice. There are possibilities and conscious decisions to be made. Globalization of the economy is not any superior force, which cannot be controlled. There are, of course, alternatives. It is not possible to turn back the clock and return to the local economies of the past, but it is possible to direct market forces in a way that they produce more desirable outcomes. Only the most ideological fundamentalists do not admit that markets left alone, produce harmful social effects.

We can say that the current process of globalization is incomplete, unequal and characterized by a deficit in governance.

The income gap between rich and poor countries has widened during the last 200 years. In the beginning of the 19th century per capita income in Western Europe was about three times that of Africa. By the end of 1990s rich countries had an income level about 20 times higher than that of the poorest region, Africa. According to the UNCTAD, the share of developed countries of total world income increased from 73% in 1980 to 77% in 1999. During the last 50 years, we cannot observe any convergence in the international income levels. There is also a general tendency towards growing inequality within many individual countries. This trend has increased since the 1970s.

It seems that the proportion of people living in poverty has decreased in many countries during the last few decades. However, one must also look beyond the relative poverty figures, since the actual amount of people in poverty in many countries has increased. Poverty, unequal income distribution and other injustices are sources of social and political instability and therefore undesirable for development of any society. Sub-Saharan Africa is the area where all in all the trends are still to the worse, while India is an example of a development where significant parts of the middle class are better off at the same time as vast groups of people are being marginalized.

A large part of the globalization of the economy is limited to industrialized countries themselves. Trade between firms of developed countries themselves account for more than half of total world trade. Most notable change in the structure of world trade during the last few decades was the growth of the share of Asian developing countries. Latin America slightly recovered its position in the 1990s, whereas Africa became ever more marginalized in world trade flows.

The expansion of international operations of firms, foreign direct investment, has been extremely fast since the 1980s, not to mention the growth of portfolio investment. According to UNCTAD, world foreign direct investments were 10 times higher in 2002 than in 1980. Most of this activity is taking place within industrialized countries. About two thirds of the world FDI stock is in developed countries. However, developing countries have also attracted a growing number of foreign firms to their territory in search for natural resources, cheaper labor or new market opportunities.

It could be said that the globalization of the world economy is spearheaded by 64.000 transnational companies, which have about 870.000 subsidiaries around the world. Largest of these companies are almost exclusively from industrialized countries. From the 100 largest transnational companies in the world, calculated by their assets, only four originate from developing countries: Hong Kong, Mexico, Singapore and South-Korea.

Most developing countries have done considerable efforts during the last couple of last decades in trying to integrate themselves into the world economy. However, for most much has not changed since the famous Argentinian economist doctor Raúl Prebisch formulated his theory of deteriorating terms of trade in the 1940s and 1950s. Most developing countries are still mainly producers of primary goods and there is a quite clear tendency of deterioration in prices of primary goods vis-a-vis those of manufactured goods.

We can leave the academic debate around terms of trade aside, the fact is, that volatile and low prices of primary goods are causing a lot of problems to governments, firms and people of developing countries.

All economic schools of thinking agree that technological progress is at the heart of increasing productivity and higher growth. And the truth is that one of the main global asymmetries is the strong concentration of technological progress in the developed countries. The problem is, as Prebisch stated , that the diffusion of technology is slow and irregular.

Some developing countries have opted for integration to the world economy through manufacturing assembly inspired by the success stories from East Asia. Replication is impossible or at least very difficult. Strategies based on cheap labor and free trade zones offer some jobs, but not much more. Tax revenues are nil and links to the local economy are rare. Recipes for success stories are not found from text books or dogmatic theories, they are often mixes of policy measures composed of orthodoxy and heretics. We should allow space for local tailor-made pragmatic solutions.

There are no solutions that work universally independent of place and time. There are structural differences among countries, which make ”leveling the playing field -strategy” in the world trading system unattractive for less developed countries. These structural differences cause income differences between the North and South, or at least a serious obstacle to their reduction. However, governments of some industrialized nations, international financial institutions and the World Trade Organization (WTO) do not seem to recognize this in an accurate way. The dead end in the WTO negotiations in Cancun is one reflection of the fact that many countries are feeling that their concerns are left unheard.

The situation is slightly different in industrialized countries where the state still has -even if in lesser extent than before- some possibilities to counteract some negative effects of economic globalization. However, it could be stated that individual governments almost everywhere have less control over economic agents: firms and investors. Entire countries are left to the mercy of international markets.

Economic crisis spread their effects from one country into another, sometimes without any real reason. Liberalizing of trade and investment flows has made most countries more vulnerable to the fluctuations of international financial flows. This has imposed the logic of markets on many governments and decreased possibilities to run independent economic and social policies.

Despite what I said above about the power of markets, we should not disregard that there still is some room left for domestic economic and social policy-making. It should be noted, that some may also want to hide their political priorities behind the ”there in no alternative” phraseology. Controlling globalization requires conscious internal policy choices. Employment and social considerations have been left as a secondary priority by many governments as they have emphasized the stabilization of prices. In some cases the costs to the real economy, production and employment, have been underestimated. The possibilities of a more just income distribution have mostly been left aside. A recent study of one African country shows that with the same scale of income distribution as presently in the Nordic countries, the current figures of more than 50 % of the population living in extreme poverty could be reduced to 15 % with the present GNI.

The challenge of the informal sector

When we talk about globalization of the economy we mostly talk about interaction and trade between formal economic agents: firms, governments, multilateral financial institutions and so on. However, there is a huge majority of people who are living outside or in the margins of this formal economy. A huge part of the people of the world are earning their living with self-employment of working in informal firms without protection of the law or social security.

It is not a marginal phenomenon, it is the reality for the majority of people living outside industrialized countries. According to the ILO, informal work accounts for more than half of urban employment in most developing countries. If we also consider subsistence agriculture being informal work, the figures become even higher. According to the ILO well over 90% of agricultural work force of Mexico and India are in informal jobs.

In many developing countries cases the formal economic sector, which has links to the global economy is very thin and large sectors of the society are being left out from the globalization process or they are left with the negative effects of it. Phrases such as ”development with a human face” are nothing else than a lot of nonsense, if we do not take into account how most people live and work.

We must understand how the large informal economies of the developing countries function. How else can we talk about poverty, if we do not understand how most people earn their living. We need more information to be able to draw the attention of policy makers to those most invisible and neglected.

The best way to combat informality, poverty or child labor is to create decent work, to design pro-growth and pro-poor strategies. But there must be some re-engineering of the global economic system so that also less developed countries have realistic chances to succeed in the ever increasing competition, which is taking place.

Only few companies from the developing world have been unable to integrate to the world economy successfully. Activities of low productivity and informality have increased. Without carefully designed national policies there is a danger that those destructive elements brought by economic liberalization can even deepen existing differences and there could be even further pressure on employment and income distribution.

Liberalization of the economy -opening of trade, privatization and deregulation- bring many changes. Successful and unsuccessful adaptation, birth and death of firms, creation and destruction of human capital and technological capacity are two sides of the same coin. Both aspects are present in the structural changes of today. What we need are policies that minimize the negative effects. We should not trust our fate in the hands of faceless markets.

Preserving space for the local spheres

One aspect of globalization is the increasing possibility of civil society actors around the world to be in contact with each other. Some civil society organizations, many of them being present here in Mumbai, are trying to emphasize the right of different communities to preserve their identity and ways of life. The expansion of the market economy inevitably threatens the preservation of social, cultural and economic values of many societies, especially those of indigenous people. Shouldn’t true democracy mean that we have space in our world also for those who wish to live in traditional societies?

We should not romanticize the issue. Many people want to move to the cities and leave their traditional societies and be part of globalization. Some others do not wish to do so. Democracy should mean that people can influence those changes that are taking place in their immediate sphere of life. Democracy cannot work efficiently, if decision-making is taken further and further away without giving people chance to influence their own lives.

When we talk about democracy, we should talk not only about civil rights, but also of democratic access to resources: education, technology, natural resources, land and water. If market forces are left uncontrolled the livelihoods of many are endangered. Increasing monetization and transforming of natural resources into commodities is threatening the environment. People should be empowered to guide their own lives.

Democratic governance the necessary counterweight

Undoubtedly Finland is so far a winner in the globalization process, being a small open economy dependent on international trade and access to foreign markets. In 1950, GDP per capita of Finland was still below that of Argentina and only slightly above that of Chile. The export structure was almost entirely based on commodities: wood, pulp and paper. By the end of 1990s the Finnish income level was already above the average level of the EU. Finland was able to go through a structural change from a primary goods based economy to a high technology producer. Finland as well. Later the role of private sector grew as in many other countries.

But, what is perhaps more important are those social policies that were designed to tap all the human potential of the nation. Redistribution of income enhanced economic growth and high quality public education laid the foundation on which competitive information and communication technology industry was built couple of decades later. This process was accompanied by a certain degree of national consensus. It was not a strategy solely of the political and economic elite at the expense of the majority. National development strategies that different countries should be allowed to design, should be built on truly democratic principles. If people are empowered, development strategies can get the commitment they need in order to function.

These are some of the basic features of what has become to be known as the Nordic model of welfare state. There was a time during the 70’ies and up til the mid-90’ies when the onslaught of neo-liberalism made it fashionable to deride the welfare state as having outlived its purpose and becoming a burden in the emerging brave new world order.

Since then the tide has again turned, and the Nordic welfare state has re-emerged as an interesting and relevant model which, far from being a hindrance to success, is recognized as an asset in globalization, as witnessed by the Nordic countries successes in leading the way as competitive information societies.

The belief that strong governments are in contradiction with the globalization of the economy is erroneous. Only controlling of markets, more equal treatment of different groups and universal education are factors, which can help countries and their citizens get the good out of globalization. Otherwise negative effects can surge in forms of environmental disasters, wars and many other ways. There is a need for global social and environmental policies. Challenging questions are how to democratize the global governance and how to redistribute global assets. International financial institutions need more transparency and democracy as well as the recognizing the drawbacks and limitations of neoliberalism. The national level is definitely not enough for achieving a functioning control of the globalization process, but it cannot function effectively without it either. Global solutions must be complemented with national efforts towards democracy and more equal distribution of income, otherwise they will be done in vain.

The way ahead

What is needed is what could rightly be described as a new way forward in the post-Iraq and post-Cancun situations. The post-Iraq situation requires the building of a functioning multilateral system of cooperation to prevent the kind of unilateral action that the war on Iraq represents and restore the principles of common security. And the post-Cancun situation requires the building of multilateral trade negotiations which recognize the equality of the partners involved, particularly from a North- South perspective and pays more attention to the specific situations and requirements of each country.

These are obviously extremely broad issues, which need profoundly new visions to be solved. We are talking of deep-going reforms of our common multilateral institutions responsible for global governance, starting from the United Nations and the Bretton Woods institututions that were created some 50 years ago and up to the more recent creatures like the World Trade Organizations. I won’t go into that agenda at this point, although these broad issues naturally will be dealt with within the Helsinki Process, too.

In stead I would like to emphasize, that besides these comprehensive and all-inclusive solutions, we also very specific and also quite limited concrete initiatives that can function as catalysts for a broader breakthrough in the reform process. This is what we want to make into one “brand” of the Helsinki Process: the elaboration of creative solutions to partial problems that could open the doors for longer leaps forward. Obviously we are particularly interested in your ideas and proposals in this regard.

One dimension of developing a new multilateral system of cooperation is the involvement of the civil society actors – both in the building process and in the functioning of the new multilateral system itself.

I have not come here with ready-made recepies on this. Rather my role here is to listen to your views and ideas on which are the proper principles and forms for involving the non-state actors in the multilateral processes and feed them into the debates of the Helsinki Process.

However, there are two benchmarks for this discussion that I would like to put forward.

Firstly, transparency and accountability should be seen as guiding principles both for the governmental institutions and for the civil society actors. The continuous demands by the civil society for increased transparency in the decision-making of inter-governmental bodies as well as proper availability of information, are completely natural and understandable. There is still much to be done to improve the practices of the institutions in this regard. But in my mind, the same principles should apply also for the different civil society actors. I am not particularly interested in the formal representativity of different NGO’s. Both broadbased mass movements and smaller action groups are legitimate actors in their own right and capacity. But it is in the own interest of the NGO’s thaty they are as transparent as possible about their own constituency: whom (rather than how many) they represent, how they are organized and make their decisions, and how they atre financed.

Secondly, we should make a distinction between participation and decision-making. In governmental and inter-governmental bodies the owners and the decision-makers are, by definition, the governments. This does not exclude us from developing different very direct forms of participation also for the other stakeholders in international cooperation, civil society actors in particular. This could include things like the right to online information on ongoing negotiating processes, the right to table proposals and be heard at inter-governmental conferences. But the governments should remain the responsible and decision-making parties at the negotiating tables. Otherwise we delude the dividing line between the governmental and the non-governmental in a purely confusing manner. And otherwise we interfere with the autonomy and the integrity of the civil society, which anyway are guiding principles for the basic definition of what is called civil society.