Keynote Speech: Kemal Derviş, UNDP Administrator

Jack Morton Auditorium, 805 21st Street, NW, Washington, DC
Friday, November 4, 2005, 9:00 AM

Speaker

• Kemal Derviş, Administrator of The United Nations Development Programme

Media

Keynote Summary

On Friday, November 4th 2005, Kemal Derviş, UNDP Administrator, was keynote speaker at the GWCSG and GRN sponsored conference "The Challenge of Globalization: Reinventing Good Global Governance."

"It’s the topic of the day!" Kemal Derviş announced, holding up the most recent issue of The Economist magazine to the assembly of experts, researchers, students and professionals. The weekly that Mr. Derviş displayed to the early-rising—and likely somnolent—audience was cleverly titled "Tired of Globalization?" The audience awoke with a laugh, and so commenced a day-long conference addressing "The Challenge of Globalization."

Proceeding with few notes in hand, Mr. Derviş spoke to conference members who would attend a series of panel discussions on the topics of Global Human Security and Development, Global Health, and Global Trade and Investment. Mr. Derviş’s speech would carry throughout the day as a diverse group of experts, theorists, scholars, and practitioners offered their own insights on the challenges created by globalization.

The keynote resonating throughout the conference was that "We are indeed witnessing, and living in, a new and very important stage in global history." With that message, Mr. Derviş opposed the argument that globalization is a cyclical process. Proponents of the cyclical view cite periods in history such as 19th century trade liberalization and Pax Britannica as phases of increased globalization. Protectionism following the First World War marked a reversal in the globalization process which was only to cycle into a new era of globalization after the Second World War under the auspices of GATT.

Opposing the cyclical view of globalization, Mr. Derviş noted dramatic changes in the areas of trade, finance, and political-economy that demonstrate an increasingly integrated world and a far departure from any cyclical process of expansion and contraction.

"The Globalization we are experiencing today is by nature different from the kinds of globalizations which the world experienced before...this is really something that is here to stay, that is different, and that we have to adjust to and manage in a very different way."

Today, commerce between nations is supported and accelerated by "truly global and highly integrated" financial systems—systems which are themselves speedily evolving with the technological bounds of the last decade. Those changes are, in turn, causing the economic landscape to shift. Vast sums of money are transferred across the globe in the time it takes to click a button. Markets and societies once considered peripheral are now joining the centers of economic growth as finance and investment pour into developing countries. Economic growth used to be concentrated in the northern hemisphere. Now, in this increasingly integrated world, countries like India, China, and Brazil are beginning to experience their own growth.

"Until about 20 years ago, all the centers of technological innovation, surplus accumulation, and major industrial strength were in the north—Europe, North America, Japan. This is now changing very, very rapidly. There are emerging southern poles of growth—in China, Korea, India, and to some degree, even in South Africa, Brazil and parts of Latin America which really didn’t exist before."

Technology is not only allowing goods, services, and capital from different parts of the world to flow together. Economic globalization has been accompanied by the "soft globalization" of thoughts and ideas. The internet has enabled an exchange of ideas and opinions which cannot be compared to any previous age. Images and information are instantly transmitted to a global audience.

"The sharing of knowledge, the immediate communication that takes place...The inequality, the problems, what is happening in the world is so visible today—so much more visible than it has ever been... [There] is no comparison. We are in a different world, globalization is real, it is here to stay, and we are not just dealing with a cyclical phenomenon.

The maturing political-economies of advanced countries also designate a new place in global history. "Capitalism is very different today—people were still adjusting to markets in the mid 20th century." Balancing the harsh, and often inequitable, allocation of unfettered markets with redistributive and regulatory policies, nations achieved what Mr. Derviş called a "social-liberal synthesis." The synthesis of social and liberal principles established models of acceptable tradeoffs between market outcomes and government intervention. Since these social-liberal models were developed through democratic processes, they received general acceptance and legitimacy throughout much of the world.

"In a deep sense, the history of the 20th century is the history of embedding markets in the political systems of advanced countries... What made markets acceptable, what made capitalism acceptable, broadly speaking, was that [markets] were embedded in the democratic institutions and mechanisms of democratic redistribution and regulation...

...All these mechanisms created what I called the "social-liberal" synthesis whereby society overall agrees that this is the basic framework—that you have markets, that you have private ownership and private capitalism, but you also have strong government, large government that regulates and redistributes."

The dramatic changes which accompany this new stage in global history present a variety of challenges. Speaking in a university setting, it is fitting that Mr. Derviş presented such difficulties as largely conceptual in nature. One of the greatest difficulties lies in applying established frameworks to global phenomena. The key challenge in this case is applying the social-liberal models of advanced countries to global political-economics. Another general problem comes from the lack of a simple, conceptual framework capable of comprehending the complex nature and processes of global institutions. A final difficulty mentioned lies in squaring fundamental democratic notions with the economic reality of powerful nation-states.

Conceptual difficulties are especially acute in the realm of political-economy, where the most difficult challenge is applying social-liberal models on a global scale. That is, the balance achieved at a national level by advanced countries between market outcomes and government intervention needs to be applied globally. This political-economic challenge is most apparent in global financial markets where regulatory and redistributive policies are largely absent.

"What is happening increasingly is that this model—this social-liberal synthesis—which was built at the level of the nation-state is having a great deal of trouble globally...The financial sector is a very good example... You can’t regulate financial markets unless you have a very advanced form of cooperation by central banks and financial regulators around the world—be that with respect to money laundering, financing illegal activities, tax evasion, or just trying to fight the excessive volatility of short-term flows. You need much more global regulation. National regulation won’t do it...The model of the social-liberal synthesis, [created] at the national-level, needs to be extended to the global marketplace and the global world."

Another important challenge is the need for a new framework of understanding to clarify the role of multi-lateral institutions, their relation to one another, and the ends which they pursue. Confusion regarding the nature of global institutions adversely affects the efforts of those organizations, even in regard to beneficial redistributive measures.

"Debate is highly confused—what is happening at the global level is incomprehensible. The system does not have overall logic, is not well coordinated, and is extremely fragmented. The average educated citizens, let alone the specialists, are confused and lack understanding when asked: What is going on in international cooperation? How does the United Nations interact with the WTO? How do these interact with the World Bank and IMF? What about regional structures?

This is a problem because [lack of understanding] contributes to the gap between the average citizen and the super structure that has been created at the global institutional level. It feeds into the more negative elements of the anti-globalization movement which sees a lot of bureaucratic, elitist structure having very little to do with day-to-day life."

Unfortunately, this conceptual knot is only tightened by the struggle to make the fundamental democratic notion of one-person-one-vote square with the reality of mega nation states—their power, influence and supply of vast resources in the world economy. That is, there are great challenges in harmonizing the decision-making and organization of multilateral processes with the power of nations that command the "lion’s share of the world’s resources."

"We have to reconcile the existence of nation-states with the essence of democracy, the one-person-one-vote principle. On the one hand, you have the General Assembly of the United Nations—it’s wonderful, the whole world is there, they all have voice, they participate. I think it’s one of the great legitimizing strengths of the United Nations. But on the other hand, there are mini-states and there are mega-states which each have one vote. Unfortunately, that situation makes the General Assembly less relevant. Because at the end of the day, people say "ok, well, everybody has a vote, but we can’t really take that as a decision mechanism." The Security Council—the real power—makes all the decisions."

Though theoretical in tone and content, Mr. Derviş was not catering his address to a crowd of university egg-heads. As head of the United Nations Development Programme, Mr. Derviş is awake to the real world of economic hardship.

"Some poor countries are now worse off in the global economy than they ever were, and there is no national social-liberal synthesis to ease the burden...It is not true that free trade will immediately benefit everybody. If we want the world to benefit from the potential of free trade, of greater integration, greater technological spread, and so on...Then we have to find ways to compensate the losers. If we don’t compensate the losers, then the losers will try to block the process and may succeed."

Mr. Derviş is also awake to the real world of ideas, their power, and impact. Summing up his keynote address and the rationale of the GW Center for the Study of Globalization conference, Mr. Derviş noted,

"In the present situation, we are trying to reform without a real conceptual structure, and this is a problem. If we believe in the power of ideas, then meetings like this, seminars, and books—things that look and try to make sense of the whole picture—are critical...But it will take time; it will take your support, it will take academic support, and the support of young people to get there."

About the Speaker

Kemal Derviş

Kemal Derviş started as the new head of the United Nations Development Programme, the UN's global development network, on 15 August 2005. He is also the Chair of the United Nations Development Group, a committee consisting of the heads of all UN funds, programmes and departments working on development issues.

Prior to his appointment with UNDP, Mr. Derviş was a member of the Turkish Parliament representing Istanbul from November 2002 to June 2005. During this time, he represented the Turkish Parliament in the Constitutional Convention on the Future of Europe and was a member of the joint commission of the Turkish and European Parliaments.

From March 2001 to August 2002, Kemal Derviş was Minister for Economic Affairs and the Treasury without party affiliation of the Republic of Turkey, responsible for Turkey’s recovery programme after the devastating financial crisis that hit the country in February 2001. In August of 2002, after the crisis was overcome, he resigned from his Ministerial post and was elected to Parliament in November of the same year.

Kemal Derviş earned his Bachelor and Master’s degrees in economics from the London School of Economics and his Ph.D. from Princeton University. From 1973 to 1977 he was member of the economics faculties of the Middle East Technical University and then Princeton University. In 1977 he joined the World Bank where he worked until he returned to Turkey in 2001.

At the World Bank he held various positions including Division Chief for Industrial and Trade Strategy, Director for the Central Europe Department, Vice-President of the World Bank for the Middle East and North Africa Region and Vice-President for Poverty Reduction and Economic Management.

Kemal Derviş has published many articles in academic journals as well as current affairs publications on topics ranging from mathematical models of growth and social mobility and quantitative models of trade, to European enlargement and transatlantic relations. His latest publication is "A Better Globalization: Legitimacy, Governance and Reform" published by Brookings Press (2005) for the Center for Global Development.

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