Prof. Lehmann's presentation
Europe's dilemma in the world of globalization

     This presentation is divided to 7 sub-themes.  The first sub-theme emphasizes the truly significant development that has taken place in Europe for this decade.  During the 90's, the Western European region spread to continent by the rise of democratic governments and market economy, and peace prevailed in the region except, unfortunately, in the Balkan countries.  This followed the destruction of fascism in Southern Europe during the 70's and the symbolic collapse of communism in Eastern Europe during the late 80's to early 90's.  This 20th Century was the century of agony and pain.  Two wars were fought by Europe and in Europe.  What Europe has experienced and achieved since 1914 is where the heart of Europe is and where the origin of Europe lies.  Europe used to be described as a museum piece, but this major transformation in the '90s proves the continuity of Europe as a major global player in the coming 21st Century.

     The second sub-theme is the deepening of integration and globalization measures in Europe.  The unification of European currencies is well underway, despite skepticism.  The European Market has shown the highest level of integration, with its economic sphere expanding globally.  Market integration will create a huge single market with a population of 300 million, and 20% of the world's production.  Although some uncertainties remain in the introduction of the Euro, adding one more core currency will present a positive factor for world economy.

     In terms of languages, English has become, essentially, a universal language, not only within the European region but also in the world.  English is practically becoming the language of Europe.  The ongoing process of European integration comes as a welcome news.   In trade and economic problems, Europe used to be in turmoil, with vast differences of opinions.  Today, however, the voice of Europe is unified, and the integration is progressing further in terms of regulatory measures and administrative management, most of them in Brussels.

     The third sub-theme is, unfortunately, the negative aspects of integration.  First of all, apart from the progress in economic integration, Europe still embraces political diversification with significant disparity existing in the region, and lacks a common identity.  Secondly, despite the solid progress in integration, there is no leadership.  No strong leader has emerged. When the political situation is stable, it is not necessary to have a strong leadership.  In the case of the Balkan conflicts, however, Europe failed to take a leadership.  For other global problems, as well, the lack of leadership will obstruct early improvements, and increase the difficulties in resolving problems.

     The fourth sub-theme is the need to search for a European model of governance.  Continental Europe and the European Union have some social problems such as an extremely high unemployment rate, and the rejection of immigrants.  At the same time, these represent social anxieties.   Another major social problem is the aging of a society.  The conventional European governance model became outdated because of these problems.  Even the society considered as the top of welfare nations has collapsed.  In this sense, Europe has lost direction at the moment and faces the problem of a governance.  Nonetheless, the rewriting of the European political map is ongoing, such as the emergence of left-wing coalition government, social democracies, and the government of moderates.  Four major European countries were painted to pink, red, green, etc. in a political sense, symbolizing the occurrences of major changes and important developments which were unthinkable 10 years ago.  In the coming decade, the political map of Europe may be filled with these colors.  What does this mean?  Currently, we explain such political phenomenon as the selection of the third way, a different way.  The third way, however, does not have much in it yet.   European electorates and representatives are in a way searching for future solutions, and, I believe, the third way may consist in part of such a search.  A European society is a society where social system and environmental responsibilities may have a greater weight, and these problems will continue to be very important in such a society.

     The 5th sub-theme is the expansion and dissociation of a gap between nations and businesses.  Corporations and the business community in Europe already have adopted an American way, while European nations themselves mostly refused to adopt the American capitalism.  This is where a large disparity remains.  Extensive merger and acquisition activities ongoing among European corporations all over Europe may lead to the creation of a new business sphere in Europe.  However, European nations themselves totally incline toward domestic politics.  Corporations value markets, while governments mistrust markets.  The distance between a globalized corporation and a domesticated government is widening further.

     The sixth theme is what kind of a society will come as post-modern, and what is the role of a government in such a society?  Post-modern societies are emerging in Western Europe and neighboring nations.  Such a trend has been strengthened and accelerated with the revolutionary development of information technologies and electronic communications technologies.  As a result, nationalism and its symbolic system of military drafting are disappearing fast.  Nationalism is crumbling from its bases.  Emerging instead are multi-polarism, diversification, individualism, localism, loyalties to multiple subjects, world-ism, and others, giving the characteristics of post-modern societies.  In pre-modern and modern societies, nations embraced many establishments within.  Currently, the sphere of nations is multi-polared and multi-sided with each having its own influence over the domestic politics of a nation.  NGOs, for example, have grown extensively in the European society, bringing a very interesting phenomenon from the political point of view.

     In today's Europe, nations have lost most of their roles.  No longer do they have the power in economy, politics, society, intellects, and ethics.  We have not been able to fathom a new role of a government.  In such a new type of society, one asks what kind of roles nations will take.  We are still in a situation where no one knows what kind of authority will rise to a power.

     The seventh sub-theme is governance models patterned in three types.  Before discussing the patterns, let me say that globalization cannot be reversed.  The globalization here is heterogeneous globalization.  Globalization is not equal to homogenizing societies.

     There are three major types of governance models.  One is an American market hegemony model, an American way of governance.  This model places the utmost importance on the trust of a market.  The second model is a social order model based on a new neo-Confucianism, another form of a governance.  The third one is the post modern governance model of Europe.

     Among them, the American market hegemony model has emerged as the most promising at this point.  However, those risen always fall.  Japan's growth was too rapid, and she is currently suffering the pain of descent.  American market hegemony may eventually disappear.   The cost of maintaining a non-regulatory market system, such as those seen in the United States, may increase to reach the level unacceptable to many.

     The second model of neo-Confucianism is the Asian system of orders, and its confidence has been declining as Japan fell deeply into a deep recession.  Other East Asian countries also have experienced economic crises.  Their crises were not only the crises of economies but also the crises in concepts.  How much political justification will there be in these countries to have Asian values and authoritative/orderly governance of these countries?  This particular governance model seems to be receding.

     The post-modern model of Europe rejects a pure market economy.  It represents a type of social non-order.  Since this model developed from historical experiences in Europe, it could hardly be transplanted to other global setting, at least not so simply.

     In view of a governance, the scenes of global governance embrace heterogeneous elements, integration of various systems and, in addition, lack of a healthy and orderly framework as its characteristics.  If we are to seek order in a society, we may be disappointed in terms of a global governance.

     Currently, the world is in the process of a transformation.  It will be necessary to manage non-order well, rather than to attempt the creation of a social order.  Global market will surely integrate rather than separate.  However, there may be frictions in a system of crosscut regions, with large centrifugal forces setting in politics.  In the future, social and environmental issues may become a big battlefield.  The relationship between societies and multi-national companies may increase global tensions.  To manage global tensions well may be the most important and most urgent challenge.   Whether we are political organizations, companies, or opinion leaders, we can say the same.

Dr. Donahue: The Craftsmanship of Designing the System of Heterogeneously Integrated World

     The world economy will eventually integrate through system designs, creating a brand new system.  To restructure conventional systems is a political action and such systems will be systematized to public purposes.  The well-designed system will require a system structure that conforms to common values and objects, and corresponds to broader contexts of managing a system.

     To build such a systematic structure will require expert knowledge.  For example, an expert such as a philosopher to assess basic values, a politician to determine and prioritize objectives, and a social scientists to understand actions and broader contexts.

     Particularly specialized systems are an economic regulatory regime and a market regulating regime.  These fields require specialized system designs, due to the enormity of the stakes, and market powers that will be strengthened or weakened.  Sometimes, system intervention may take away from or weaken market power.

     Let us take the metaphor of house, fire and furnace for the system design in economy. "House" can be a society or culture, and "fire" a market.  When fire can be controlled and contained, it can warm a house.  If it becomes uncontrollable, however, it can burn down a house.  An organization needs to direct fire using a correct method.  It must consider how to minimize risks and maximize warmth.  By making the best use of market vitality, we may be able to diminish risk and avoid destruction.

     The most special case of all is to design cross-border economic systems.  It is a tremendously large task.  A "house" in this case, has a complicated structure and involves a group of houses.  Residents of these houses have varied preferences and priorities.  "Fire," called international market, may burn up unexpectedly or be turned down.  The world's market is currently integrating rapidly.  Whether they are OECD countries or developing countries, their prosperity will rely on market forces.  This means that there is an increasing need for designing a loosely-integrated global economic system.  For the last 40 to 50 years, we continued such efforts.

     With regard to the governance of the world economy, we can take up to six models.  The first model is a market with no regulations.  This may please a type of theorists called non-interferencists, but may end up bringing a catastrophe.  There are many who fear a market without regulations, and present a strong resistance. Fear will arise on concern for cultural hegemony, loss of equity between sovereigns and nations, and the destruction of a market-oriented system.

     The second model can be called a supremacy model.  It may be too simple a word to describe an international system design, but it is the case in which a system is designed in a way that conforms to the interests of one superpower or a group of superpowers.  Recently, the United States is considered to become a controlling country.  Today's market has greater power and more and diversified participants, so the reality of this supremacy model is diminishing.  Nonetheless, OECD and other special groups may inevitably have a large influence.

     The third type of model is the renouncing of market integration.  The model is to abandon an attempt to build a proper furnace, and splash water on a fire.  The attempt may lead to the building of trade barriers and financial controls, as well as placing more restrictions on the flow of information and labor.  The argument for this type of model continues to appear frequently, yet it is still a low voice.

     The fourth type of model sounds good to the ears.  It is the orderly borders.  It means to have pressures filtered through using a filter called domestic systems, while benefiting from global market.  However, it is a very difficult issue.  Filtering through may not present a problem, but where are we to draw the line of equity and fairness?  It will be a very complex process to adjust the interface necessary for determining the line of equity, and may present risks of a non-regulatory market and the renouncing of integration.

     The fifth type of model is a cooperative network.  It is to make an adjustment between governmental actions.  Although this system is domestic, a minute adjustment is to be done to such a system.  Examples of this network include the Bazer Agreement and EU's common approval of domestic rules.  This model of a cooperative network requires work on mediation, compromises, and adjustments to adjust systems. Also, it will lead to never-ending tension between internationalists and those focusing more on domestic policies.

     The sixth type of model may lack practicality and reality, yet be the purest model of all.  It is the model of deep integration.  It will establish truly common organizations and systems.  It will share objects and values.  It is the dream of internationalists, and some may be achieved but frequently disappointed.

     The assessment standards in assessing these six models, or their alternatives, have four sides.  First is whether they are efficient and effective.  Whether the organization and system truly enable the achieving of objectives, and if they have necessary resources and authorities.  The second assessment standard is the adaptability.  Does the system design allow fulfillment of the wishes of supporting bodies which support and consign the system?  The third assessment standard is whether it is solid and endures various shocks.  Can it self-adjust to different objectives and targets?   The fourth and most delicate standard is concerning justification and legality.  In terms of justification, the requirement grows higher.   Justification is not only that the system is accepted by the supporting bodies or whether considered beneficial, but also whether the system can have sufficient power to even ask for sacrifices.

     Each model presents advantages and disadvantages in different assessment standards.  For example, the hegemony model has strong points in efficiencies but it is weak at justification, and solidity.  It can be said, for example, for IMF, World Bank and WTO.  It has been said that America has too strong a foothold.

     The orderly border model presents strong justification, but has various problems in efficiencies.  For example, this model may present a risk on the system itself, making a very risky balance of too much or too little control over the global market.  The next model of inter-governmental cooperation network can be effective.  The world integrated non-uniformly may bring practical adaptability.  However, what lacks the most in this model is justification.  Such an inter-governmental network may not have a big base in each nation's culture, so it will not be accepted readily,  nor will it be able to enforce actual sacrifices.  Now, deep integration's biggest demerit is the justification.  Excluding exceptional cases such as international economic regulations, the model lacks proper justification.  Different cultures may allow the introduction of a common system, but will maintain it in different ways.  The World Judicial Court may be one example of this model.

     Now I would like to comment on an American approach.  Many say American philosophy is not easily understandable.  Especially in the case of system designs, the American approach may confuse some people.  A norm and system design of other countries are considered to be arisen organically, while the American system design arises for very abstract and intellectual works.

     The American constitution can be taken as an example.  It was made after cutting off the American cultural roots from England 210 years ago, and is still in force in America. Historically, Americans have shown enthusiasm in designing systems based on analysis.  They prefer abstracts and look for it.  American people are aware, and strongly believe in, such general rules.  When the people establish a system, they strongly believe in logic in terms of controlling market force.  On the other hand, they tend to disregard variance in conforming to cultures.  This can lead to self-rationalization and self-deception.  However, the system will be enduring and perpetual.  This means more strong points.  For example, the system is open minded, and it is open to contemplate upon what kind of a system to design, what concept is desirable, which incentive it will bring, and what kinds of responsibilities are required to explain a system.  The disadvantage of an American approach may be the tendency to dispose of good measures if they are not the most appropriate ones.  Furthermore, Americans tend to consider that a simple cultural request is usually for the benefit of a particular stakeholder with less justification.

     In conclusion, the arising question is "how can we make a "furnace" of strong economic system?"  Currently we cannot see how, and to create such a furnace will require about 200 different elements.  To build a global market system, we need to incorporate various cultural facets. Otherwise a solid system will never appear.   In consideration of works ahead, we find the past works as too easy and childish.  There may be failures in the short term.  However, we will be able to avoid the worst-case scenario, as well as the arrival of turmoil and isolationism, due to global economic experiments.  Whether in trades, investments, or financial flows, the most appropriate form of global governance will be required more strongly in the future.  Its system design will require extensive endurance.  Today, we are facing the time of transition and transformation, and we need to continuously build new structure for many years to come.