DECENTRALIZED GLOBALIZATION CYCLES AND TRENDS

Series 2

By

Dr Olga Magdalena. Lazin 

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CIVIC ENGAGEMENT, CIVIL SOCIETY and PHILANTHROPY in the USA, ROMANIA AND MEXICO

By OLGA M. LAZIN

Living in the United States has put me in a great position of perspective. This is why I had to leave my country of origin, beautiful Transylvania behind, and my parents. And this was

excruciatingly painful for us, and for my own community in Romania. So I decided I keep my country, and my new adoptive country to a higher standard, and ask more accountability from

Despots in power.Ironically Trump turned out to be a despot, nazi style president himself.

Socialism, communism, fascism and Nazism are all but dead now. They have failed miserably. But they have been replaced by what is merely another more watered down form of collectivism that may be called "interventionism." Indeed, interventionism is the predominant economic system in the world today.                                         Contrary to the doctrine of laissez-faire capitalism, in the real world there are prolonged periods when market forces cannot self-correct in time to best serve the common good. Resulting social instability can only be corrected by government action.The crisis of statism, which I define as ownership of all means of production by the state, plus the fantastic pace andthe rise of ultra-Liberalism which opposes all intervention in the “free market, as well as the recent development of what I call Decentralized-Liberalism (as suggested in the Soros quote above) provide the context for this book in which civic society proposes intervention in the market to ease the blows of globalization.

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The double recession we are crossing through, in 2008, and now in 2012, the “double-dip” recession requires new thinking and favors George Soros’ common good interventionist state theory is winning hearts all over the globe.                            Although since the process of rapid globalization begun (since the 1980s with Reagan and Thatcher) has been widely studied and the new role of civil society has been addressed, serious analysis about the legal framework for civil society has been ignored.                             My contribution is to remedy this failure of analysis to the Mexican and Romanian case studies in an era of globalization. Especially since the collapse of the Berlin Wall, thousands of NGOs have sprung up. Many have hoped in vain to receive funds from domestic donors, but merely by their existing they are not eligible to receive funds from abroad. Most of these aspirations have been in vain because the lack of any global philanthropic standard for giving in these countries.              As globalization is about creating global standards, ironically this happens only in the profit-making side (like banking, accounting, transfer pricing etc.).              Much of the literature on NGOs has recognized that the NGOs can serve as an antidote to the state power, but has failed to realize that without funding, NGOs are toothless.              Regrettably, the literature has neither defined how NGOs fit into the structure of each societies in any country nor how a legal framework that exists in the US for making tax-deductible donations can support civil society.This proposal is organized in two major parts:              In order to understand the globalization of the nonprofit side, I will also analyze the existing free trade blocs.Here are my chapter's titles:              I. The Globalization of Free Trade Blocs.

II. Globalization of Nonprofit Funds. The Mexican and Romanian Cases.              III. The Fourth Sectors of the Society              IV. Why the US Mexican Model is Important              V. Why Romania is Interested in the Mexican Model?              VI. The impact of "Open Society Foundations" on Civil Society

VII. The Case of Mr. José Mireles Malverde of Mexico  

The Globalization of Free Trade Blocs              Beginning in the 1980s, processes of creating globalization through creation of free trade blocs based upon the free flow instantly of information, communication, and funds not only brought

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pressures to bear on statism but made clear to the world that the failures of excessive central power could no longer be hidden behind the rhetoric that state ownership was being carried out in the name of the masses.

The opening of the world trade has broken down old barriers and boosted development of global civic society to prevent or limit dictatorships although many critics of globalization have argued that it moves people into poverty. They failed to realize that there is a positive side to it. The breakdown of trade barriers and the rise of telecommunications has enabled the rise of civil society.

They are both against statist power. It is the rise against the state that stunted civil society in the world. Bitcoin is now being promoted by Blockchain, a Non-profit in the United States, only to avoid governmental interference from the FED, and so is the Ethereum and the Electroneum, crypto-currencies rising as an alternative to the American Dollar. All one needs is a computer and you can trade or mine for these currencies online, in the privacy of your own home.

In its expansive phase, the state rose against real nations who wanted to associate against the amorphous system of state domination and voluntary servitude, trying to create alternative cultures, independent public spheres and attempting to change and confront official structures.                            The processes of economic globalization, which have included pressures on countries to end protectionism and to adapt to the information revolution, had highlighted the increasing crisis in community life as the world's systems of state ownership proved to be inefficient, corrupt and bankrupt. Ironically, many observers wrongly see the decline of statism as being the cause of crisis in community life, not the result, as I will show here.

One Romanian politician, Teodor Melescanu is rightfully arguing that the globalization process benefits small, underdeveloped countries, if these countries know how to tune into the globalism’s benefits and profit from the recent possibilities and developments in telecommunications and networking.[1]

Initially the weapon of Cold War rivalry, technology in its nascent computer networking form, has actually propelled the digital industry age and therefore one of the main forces of globalization, the information technology. Ironically, the “Seattle Man” protesters were called against IMF and World Bank policy, are sending “political information” via Internet using the most important major globalization tool, that is the web, against corporate power.  https://www.udemy.com/course-manage/edit-curriculum/?courseId=58782

   

Globalization and Its Evolution from a Nascent Form4

                Globalization of trade goes back to the sixtieth century when sailing ships left Europe to find exotic items such as sugar, spice, and silk. Such trading led to mercantilist "unfree" trade between mother country and colony, the latter being prevented from industrialization so that it could supply raw materials to be processed in the motherland. Such restrictions eventually led to the Liberal idea of free trade, which had already used smuggling to largely defeat free trade by the 1830s.                            The 100-year globalization of free trade was halted after the fall of Wall Street as the stock-trading model of capitalism. The result was extreme nationalism that attempted to seal off national borders from the vagaries of capitalism's booms and busts. Tariffs were erected to promote national industry, which soon joined with the government and some foreign investment in an unholy alliance to split the high profits that resulted from not having to face foreign imports, let alone worry about instituting expensive product improvement and quality controls. Too, the industrial model was based in huge plants and heavy output such as tractors, tanks, and cement.                            The rise of Neo-Liberalism and the newest era of free trade came early 1980s when smuggling could no longer obviate the ire held by national consumers. With the possibility of consumers being able to buy inexpensive and more modern goods that really worked, they refused to believe any longer that they were "disloyal to their nation" if they managed to purchase foreign goods.                             New trade blocs have come to define themselves in terms of inter -bloc trading, not intra -bloc as had dominated thinking from the 1950s through the 1970s.              I will take up here the following free trade blocs: European Union, NAFTA, Mercosur, the Visegrad countries, and The Economic Cooperation in the Black Sea.              The technology revolution made it possible to break isolation of police states all over the world.              Marketization and privatization are preconditions of a mature civil society.              As economic questions have come to dominate political ones,[2]the rejection of the old command economy in all East Central European countries has taken place. The major alternatives today are marketization and privatization. There is still widespread acceptance of the interventionist role of the state, not only in the social, but also in the economic areas, as the state is still perceived as the main author of economic changes and not the enterprises themselves.

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              Contrary to the belief that the global economy ignores 'marginal' countries serious strides have been made in the economic integration in the region by the spread of global telecommunications.              Most (except for Albania) East Central European countries have joined a free trade bloc.              In this thesis I will delve into the actual major free-trade blocs namely: NAFTA and the European Union compared, MERCOSUR and CEFTA (Central Eastern European Free Trade) also known as the Visegrad countries. 

Emerging World Trade Blocs: The North American Free Trade Area and the European Union Compared

 The European Union is becoming the blueprint for free trade in the world. In the Europe of tomorrow, France intends to set an example of social and political model in the necessary adaptation to the world as it is by "deepening" and "widening" in the same time.On EU institutions the real battle will be between small and big countries, as Britain, France, Spain and Germany want to redress the over-representation of the small countries.              The European single-currency, the euro is coming into being as scheduled by 1998. By 2002 the euro will be fully deployed in all member countries.              There are signs that budget deficits will be a problem for Germany and France for 1997 under the Maastricht criteria for entry of 3% of GDP.              Receiving millions from the Brussels pot are Greece, Portugal, Ireland, parts of Spain and Southern Italy. The beneficiaries of the Union grant system (any region of the EU where the income per head of population is under 75% of the average has a claim on the grants available) will then be Hungary, the Czech, Slovak Republic and Poland.              If the number of countries will be big enough to make the euro possible, Europe would be fit for globalization despite unsolved problems with its social security systems.              As the world moves into large trade blocs, the two most important to date are the North American Free Trade Area (NAFTA), and the European Union (EU), formerly known as the European Community.  To begin, this study compares the key legal and policy aspects of the two blocs and outlines the salient features of each.  The remainder of the essay presents quantitative data on NAFTA and the EU as well as additional relevant data on Japan, Eastern Europe, and other world trade units.  The analysis focuses first on population, GNP, GNP/C, and exports, as measured by export share of GNP.  The EU and NAFTA are then compared with respect to economic strength, geographic coverage, and competitive potential.

In 1994 twelve countries belonged to the EU: Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, and the United Kingdom. 

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Joining January 1, 1995, were Austria, Finland, and Sweden.  In a nationwide vote Norway's population rejected its government's late 1994 bid to become the sixteenth member.

NAFTA comprises the United States, Mexico, and Canada.  Argentina, Costa Rica, Chile, Colombia, Venezuela, and other Western Hemisphere countries are seeking membership. Free Trade "Fever" 

With the process of "globalization" in which national trade and finance seek to form mutually beneficial alliances, freeTrade agreements among nations are reaching a fever pitch.  The magnets and models for free trade are NAFTA and the EU.

Countries either seek to join NAFTA and the EU or follow these models in forming their own free trade agreement (FTA) leading to a free trade area (FTA, depending on the context).  In the Western Hemisphere most countries want to join NAFTA, except Brazil, which is leading a movement of its partners in the misnamed Mercado Comun del Sur (Mercosur).  As of January 1, 1995, MERCOSUR became almost a full customs union, and seeks by the year 2005 to create an FTA such as NAFTA.  MERCOSUR does not expect to become a common market such as the EU until the first or second decade of the twenty-first century.  In the meantime, it might better be called the "Mercado del Sur, " omitting the concept of "Comun."

A common market is much more ambitious than a simple FTA.  It goes beyond free trade and investment flows to require all member countries to live under the same laws and regulations.  The EU has been successful in providing for educational and labor mobility among its members.  Yet the EU includes aspects that have yet to be achieved: a common currency, foreign policy, military command, and police activities.

Although there is much discussion of FTAS, comparative analysis of the provisions that govern them is almost nonexistent.  Furthermore, there is little consistently comparable data on the size of FTAs in terms of their population, wealth,per capita wealth, and trade flows among partner countries and with other FTAS.                This study presents baseline data essential for understanding how the EU and NAFTA models differ in purpose and size.

The provisions of the EU and NAFTA, called the NAFTA model (Trump has unilaterally changed its name to US-MEXICO Canada Agreement in 2019) mainly involves freeing trade and investment flows, although it also provides, in a limited way, for the movement of professionals among its three countries.  Meanwhile, the EU, knowing that it is losing markets in the member countries of the North American Free Trade Area, now seeks to recover access to these markets by signing free trade agreements.  In February 1995 the EU authorized negotiation with Mexico

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to create an EU-Mexico FTA. (For details, see the preceding chapter in this volume, "Mexico as Linchpin for Free Trade in the Americas.")

See Tables Bl, B2, and B3 present data on population, GDP, GDP/C, and export share in GDP for the EU, Eastern Europe, and NAFTA, in STATISTICAL ABSTRACT OF LATIN AMERICA, series 32). 

Also, in SALA, Vol. 32, Table B4 shows population, GDP, and GDP/C for major world trade blocs.  Table B5 indicates the relative importance of the major trade blocs, using the United States as a reference point.  Table B6 profiles the economies of the United States, Japan, Germany, the United Kingdom, Canada, and Mexico, according to selected indicators.One of the members of the EU, reunited Germany has the largest population (81 million inhabitants).  Italy and the United Kingdom follow, virtually tied at 58 million.  Germany's population is 207 times that of Luxembourg, the smallest European country, with a population of 389,000.  And Germany's GNP is 134 times that of Luxembourg (Table Bl).

Given such disparities in population size, is it "fair" that voting rights in the EU give undo weight to small countries? (For shares of voting rights, see Appendix A.) Despite its small population, Luxembourg has the highest GNP/C in the EU (US$ 35,260) and the highest export share of GNP (94 percent).  Spain, in contrast, has a larger population (39 million) but the EU's lowest export share of GNP (17 percent).  Clearly, weighted voting rights are not as arbitrary as first glance might have us believe.  In any case, countries with the largest populations together constitute a "qualified" (decisive) majority.  In 1994 it took 23 "minority"' votes to block the majority.  It now takes 26 votes to constitute a blocking minority.'

Six countries in Eastern Europe seek to join the EU: Bulgaria, the Czech Republic, Hungary, Poland, Romania, and the Slovak Republic.  Among these, Poland has the highest GNP (US$ 75 billion), much higher than EU member Ireland (US$ 42 billion). Poland, however, is weak in exports, which amount to only 19 percent if its GNP.  Hungary's GNP/C is 54 percent higher than that of Poland, owing to its previous leadership position among the former Communist countries in carrying out economic reforms (Table B2).

The relationship of Poland to  "smaller” countries is interesting.  Although Poland has four times the population of Bulgaria (9 million), it has the lowest export share of GNP  (19 percent).  Bulgaria has the second largest export share of GNP  (45 percent), after the Czech Republic, which leads both Poland and Bulgaria in export share of GNP (58 percent) and also in GNP/C (US$ 2,440) compared with the rest of the Eastern European countries.

With regard to Romania and the Slovak Republic, the two poorest countries seeking to join the EU, the lackluster economic performance of Romania is particularly noteworthy.  Romania's GNP (US$ 24.9 billion) is more than double that of the Slovak Republic (US$ 10 billion), yet the two countries export the same percentage of GNP (28 percent). Romania's trade with Eastern

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Europe collapsed in 1991 along with the Council of Economic Assistance for Eastern Europe (COMECON) trading organization. 

Subsequent growth in trade with the West has been slow, and current-account deficits of more than US$ 1.2 billion have been recorded each year from 1991 through 1994.  Romania's population is four times larger than that of the Slovak Republic (5.3 million).               

The legacy of high inflation and modest growth accounts for the Romanian currency's minimal purchasing power.  It is unlikely that Romania will become a full member of the EU within the next ten years .3

How can the Slovak Republic, with its small population and weak economy, hope to compete in an expanded EU? Although its population is only 5 million and its GNP is only US$ 10 billion, the Slovak Republic has the same high level of exports relative to GNP as the Romania.The Five Constituencies of the European Union

Given the disparities in population, GNP, GNP/C, and export share of GNP, the countries of the EU form five "constituencies" (see Figure B: 2).1.              The "Core": France and Germany.  Belgium, the Netherlands, and Luxembourg, too close geographically and too small economically to avoid being drawn into the orbit of power, are appendages of the Core. (In 1951 France and Germany founded the European Coal and Steel Community, the precursor of the EU, to rebuild war-torn Western Europe.) 2.              The "Free Traders": Great Britain and Denmark (members of the EU since the early 1970s). Britain is leading the way toward establishing a common market for goods, services, capital, and people while trying to prevent the rise in Europe of any singularly powerful country. 3.              Greece, Portugal, and Spain: These poorer, newly democratic members seek to modernize their economies to protect against a resurgence of authoritarian rule.  The admission of these countries into the EU in the 1980s widened the gap between

Rich and poor countries, the latter including Ireland and to some extent Italy.4.              Eastern Europe: the Czech Republic, Hungary, Poland, and Romania.  The countries of Eastern Europe freed themselves from Russian rule after 1989 and view admission to the EU, proposed for 2000 by Germany, as insurance against the resurgence of Russian authority in the region. 5.              European Free Trade Association (Austria, Finland, Norway, and Sweden): These countries, except Norway, have realized that they cannot afford to be left out of an expanding EU.  Austria may even become part of the Core constituency.  For at least the next decade Norway has petroleum and fish for export to non-EU countries, giving the country a feeling of

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confidence that it does not need its neighbors as much as they need it.  Furthermore, the fact that Norwegians defeated by slightly more than 50 percent the government initiative to join the EU can be traced to the votes of the relatively large agricultural and fishing populations, both fearful of submitting to common market policy that would limit food production subsidies and open Norwegian fishing beds to the EU. The urban sector, some of which also voted against joining the EU for fear of losing social benefits, has been disadvantaged by Norway's failure to join the EU, and some large Norwegian manufacturing companies are relocating their main offices to the EU, thus weakening the drive to modernize the economy

In view of the diversity of the five groups, disunity in the Union comes as no surprise.   Two coping models have emerged to manage the divergent interests: (1) the British model seeks to give more or less equal weight to the concentric circles depicted in Figure B:2, encouraging cooperation among the diverse constituencies; (2) the German-French model favors moving forward with monetary union and a unified foreign policy focused on the center circle in Figure B:2, the Core.  The notion that Britain may resist France and Germany and refuse to join the EU monetary union prompted this comment in The Economist:

If Britain stays out, only to change its mind later [as it did about the EU], its leaders may seem as silly as Churchill now seems, for this comment on the founding of the European Coal and Steel Community 43 years ago: "I love France and Belgium but we must not allow ourselves to be pulled down to that level.” 6

 Population totals (Table B4) for NAFTA and the EU are now about the same: NAFTA,

363.3 million; EU (15 countries), 368.8 million (1992 data). Within the EU, Germany's economy is the strongest, followed by France and Italy.  Among all countries in the two trade blocs, the United States has the highest GNP andthe highest GNP/C within NAFTA.  Overall, Luxembourg has the highest GNP/C.

With respect to export share of GNP, Mexico ranks lowest in NAFTA (14 percent) and Greece places last in the EU, with 23 percent.  Even Romania and the Slovak Republic rank above Mexico, with 28 percent each.

The index calculated in Table B5 shows the relative economic strength of major trading units.  For example, Mexico has one third of the population of the United States, but Mexico's export share of GNP is only 5 percent of the U.S. export share of GNP.  The table also shows why Japan, a single country that has established a web of trade dependency worldwide, is often seen as the economic "enemy" of both NAFTA and EU.  Japan's GNP/C is 21 percent higher than that of the United States.  Many countries have formed implicit trade blocs to compete with Japan and its accumulation of world trade capital.  NAFTA gives the United States, Canada, and Mexico the opportunity to expand international trade at Japan's expense.

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In the Western Hemisphere, the GNP of the United States far exceeds that of other countries of the hemisphere, with the exception of Canada, whose GNP is 84.3 percent of the U.S. total (Table B5).  Although the population of the EU is 48 percent larger than the U.S. population, its GNP/C is only 89 percent of the U.S. figure.

Mexico has established itself as the linchpin for free trade in the America S7 despite the fact that its population is only one-third that of the United States, its GNP 5 is percent of the U.S. amount, and its GNP/C 15.3 percent of the U.S. figure.  The NAFTA framework, along with the "defeat" of the Chiapas rebels in the August 1994 national elections, has increased the attractiveness of Mexico for U.S. investment.

Mexico's new free-trade pact with Nicaragua (The News, September, 1997) will provide for new jobs and investment. The pact would provide Nicaragua access to 90 million dollars in credit programs to promote trade between Mexico and Central America, including expansion of Nicaragua's export beef industry.Most recently trading options with Italy and the European Union were discussed. These will go into effect in 1998.  The Mercosur free trade bloc of South America also expects to sign a preferential trade agreement with Mexico by years end (The  News,  "Mexico Pact Raises Nica Export Quotas", September 21, 1997)

Mexico and Israel plan to sign a free trade agreement by early 1999 (The  News,  "Mexico Pact Raises Nica Export Quotas", September 21, 1997, p. 32.)

     The index of population and economic strength in Table BS shows that in relation to the

GNP/C of the United States, Mexico ranks higher than Mercosur by 3.5 percent, while Germany, with a population about equal to the U.S. population, has 95.7 percent of the U.S. GNP/C, raising the average for the EU to 80 percent of the U.S. GNP/C.  This analysis is carried a step further in Table B6, adapted from a comparison published regularly by the New York Times of NAFTA (Canada, Mexico, and the United States), the EU (represented by Britain and Germany), and global competitors (represented by Japan).

The bottom line for global competition is shown in the manufacturing wage gap (Table B7).  The Western European countries with the highest average hourly wage in manufacturing (1993 data) are forced to complete under the burden of a wage of US$ 21. 

In Japan and the United States the figure is  $16.  The Asian "tigers" (Taiwan, Singapore, South Korea, and Hong Kong), however, average about US$ 5 per hour.  These data illustrate Mexico's status as an attractive locale for the establishment of manufacturing plants,

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with its US$ 2.41 hourly manufacturing wage.  Likewise, Eastern Europe, where the hourly manufacturing wage is US$ .90, is Mexico's future counterpart for the EU.  Germany has already moved important manufacturing funds into Romania, for example, but the EU has yet to establish a formal relationship with Eastern Europe comparable to Mexico's position in NAFTA.  In general, Eastern Europe (except the Czech Republic) awaits the opening of its economies, which remain largely nonmarket (see Appendix B).

NAFTA is more equitably positioned in terms of internal wage gap between countries than is the EU.  For NAFTA, the U.S. manufacturing wage rate is 6.8 times higher than the Mexican rate.  For the EU, the present gap between the highest wage (Western Germany) and the lowest one (Portugal) is 5.4 percent, but the potential gap, once the EU expands into Eastern Europe, is 36.6-an amount equal to the difference between Western Germany and Bulgarian wages.  Equity is not the only issue, however; in this case, inequity may help Eastern Europe attract capital in the competition for ever cheaper manufacturing sites in an era of globalization.              Under the NAFTA model, the process of opening markets to free trade will occur over 15 years (Table B8). Eastern Europe, in contrast, faces a much more difficult mission of nearly immediate integration into the EU.  In keeping with the gradual removal of trade barriers, Mexico has eliminated duties on all U.S. and Canadian products not made in Mexico, that is, on 43 percent of its purchases from Canada and the United States.               Although the data suggest that Mexico purchases most of its goods from the United States (63.4 percent in 1992) and very little from Canada (1.0 percent), the reality is that much of the Canada-Mexico trade is "lost" statistically when it passes through the United States, where the transactions become incorporated into U.S. trade data. (See the preceding chapter in this volume.)

Under NAFTA the United States immediately eliminated duties on nearly 50 percent of Mexican imports and Canada did away with tariffs on 19 percent of its imports from Mexico, including a complete opening to Mexican textiles  (thread, cloth, and clothing), which in 1992 reached about US$ 17 million in value. (Mexican textile exports to the United States were 56 times greater.)

Conclusion

When NAFTA and the EU are compared with respect to their framework and policies, geographic scope, and leadership, three significant points emerge.1.              Unlike NAFTA, the EU allows individuals, both workers and students, to move about freely among the member countries.  In addition, a goal of the EU is eventual unification under one currency, a common foreign policy, and military coordination.

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•              NAFTA has the potential to expand beyond Mexico into Latin America.  The United States and Mexico have extensive trade experience in the region, in comparison with the EU's lack thereof in Europe.  Also, Mexico has entered into several multilateral and bilateral agreements that make expanded trade possible.  Canada has far to go however, in establishing trade relations beyond those with the United States.  And both the United States and Canada face formidable competition from Japan.  Under Mexico's leadership in bringing about the integration of the Americas, however, NAFTA is well positioned to compete with the EU, as it takes its first serious steps to develop relations with MERCOSUR. 3.              One country, the United States, functions as the "core" for NAFTA, whereas France and Germany comprise the EU core. 

Meanwhile, expansion of the EU into Eastern Europe isdelayed not only by the slow process of creating market economies with modern laws and credit systems but also by Russia's argument that inclusion of former Warsaw Pact countries in NATO could signal a new Cold War.              The European Union is becoming the blueprint for free trade in the world. In the Europe of tomorrow, France intends to set an example of social and political model in the necessary adaptation to the world as it is by "deepening" and "widening" in the same time.On EU institutions the real battle will be between small and big countries, as Britain, France, Spain and Germany want to redress the over-representation of the small countries.The European single-currency, the euro is coming into being as scheduled by 1998.              It has been decided in April 1998 how many member countries would be included in the first round of the monetary union. Hungary has been the first to be accepted. There are signs that budget deficits will be a problem for Germany and France for 1997 under the Mastrich criteria for entry of 3% of GDP.              Receiving millions from the Brussels pot are Greece, Portugal, Ireland and parts of Spain and Southern Italy. The beneficiaries of the Union grant system (any region of the EU where the income per head of population is under 75% of the average has a claim on the grants available) will than be the Czech, Slovak Republic, Poland and Hungary.If the number of countries will be big enough to make the euro possible and that Europe would be fit for globalization despite unsolved problems with its social security systems.   

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The Visegrad Countries (CEFTA.) New accessions The Central European nations of the Czech and Slovak Republics, Poland, Hungary and most recently Romania, are actively seeking integration and generally viewed as leaders in the process of transition from central planning to market-based economies. There are prospects of the accession of the Visegrad countries to the European Union in the long run (Rudziecki, Conquest of Paradise:   7). Having still not fully recovered from fourty years of socialist rule, Poland and Slovakia are the most likely to first join the European Union. As a well functioning market economy is the main entry condition, the biggest success. As competition heats up between the member countries, the Czech government claims they are better prepared for the accession than the rest and avoids using the Visegrad label and considers the CEFTA label more appropriate,But two World Bank economists say that while these nations havecome a long way, the four -- known as the Visegrad countries -- areplagued by "weaknesses" in such critical areas as property rights and contract enforcement.              Writing in the current issue of the World Bank/International Monetary Fund magazine "Finance and Development," World Bank Central European division chief Michel Noel and consultant/financial analyst Michael Borish say that to ensure the continued growth of the private sector all four "need to push forward with reforms."State ownership is still significant in both the banking and industrialsectors in all four countries, they say, and "Poland and the SlovakRepublic, in particular, need to accelerate privatization."Without question, the two economists point out, these four countrieshave led the entire region in opening up the private side.              The Czech Republic has seen its private sector increase from 11percent of GDP (gross domestic product) in 1989 to about 60 percent in 1995. Private sector employment jumped from 16 percent of the workforce in 1989 to 65 percent in 1995, with the number of private jobs estimated at about 3.2 million.              In Hungary, the private sector share of the economy climbed from 20 percent in 1989 to 70 percent of GDP in 1995, with about two thirds of the Hungarian labor force now working in the private sector.              In the Slovak Republic, the private sector share of GDP rose from 27 percent in 1991 to 62 percent in 1995 while private sector jobs nearly quintupled from 1990 to 1995, reaching 1.2 million.And in Poland, the private sector share of GDP rose from 28 percent in 1989 -- the highest in the region at the time primarily because ofprivate agriculture under communism -- to just 59 percent in 1995,with the private sector accounting for 66 percent of the country's

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labor force in 1995, compared with 47 percent in 1989.But even in these successes there are problems.              In Slovakia, for example, private sector growth has been concentrated in one sector of the economy -- services -- and in just one region --Bratislava. Economists say that private sector growth since 1994 has been "slowed by policies that, despite the growth of export industries, have encouraged a gradualist approach to privatization."

In Hungary, they say, private sector growth is also primarily in the service sector and that now nearly 75 percent of Hungary's GDP is generated by financial, legal, consulting, tourism, entertainment and other "nonmaterial" services.              The economists say that private sector growth in Hungary has been "stunted" by high tax rates, high inflation and heavy government borrowing.              Overall, the economists say the Visegrad countries have madeprogress in equalizing the status of private and public property andimproving protection of property rights. However, they mention, "property rights continue to be undermined by tenancy laws that restrict the rights of property owners, incomplete property registries and weak legislation governing collateral."They write that in all four, "tenancy laws distort rental markets andmake repossession of mortgaged property difficult." Title to urban and agricultural property is "often uncertain because of incomplete and inaccurate records, multiple pledges on the same property, andunsettled claims arising from demands for restitution and fromtransfers" among state entities.Similarly, say the economists, all four countries have improved theircommercial codes, but that "institutional weaknesses" such as ashortage of adequate courts and underdeveloped procedures for theprivate resolution of contract disputes, are undermining contractenforcement.The flow of credit to the private sector has also been "mixed" withinthe four nations, say the economists. New lending to the privatesector is growing, although public sector borrowing is growing fasterin all except the Czech Republic, where the private sector got 65percent of total outstanding credit in 1995. In Hungary, Poland and the Slovak Republic, on the other hand, private sector credit was at the low end of the scale -- between 32 and 46 percent.

Instituted in 1992 and effective from 1993, CEFTA comprises the following countries: Czech Republic, Poland, Slovakia, Slovenia and Hungary, and most recently Romania. Romania has signed in 12th of April through the Central European free Trade Zone that is going to be a complete free trade zone by 2000-2001 (Mediafax, April 1997)[3]. For the industrial and

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agricultural goods taxes will be gradually lowered by 1998 (Rudzieski, 1995). Trying to catch up with the pulse of globalization of free trade markets is Romania, which joined CEFTA in April 1997.              The issue causing the most anxiety for EU decision-makers is the archaic agricultural structure in the region that would cost the Union a substantial amount of money to bring to Western standards.The cheap labor force is a mine gold for Westerners who are flooding in with investment. As long-standing negotiations have begun in 1995 for admission of Hungary Poland, Czech and Slovak Republic in 1999. The Economic Cooperation in the Black Sea                             Besides the European Union, NAFTA, MERCOSUR, the Visegrad countries, The Economic Cooperation in Black Sea area (BSEC) was set up in 1992, at the initiative of Turkey, with the participation of eleven countries: Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russian Federation and Ukraine. BSEC initiated fields of cooperation with Mercosur and relations with the EU and problems concerning sea and river transport and reorganization of commercial exchanges have been recently discussed in Bucharest.[4]                            All countries have to cope nowadays with the globalisation of free trade. Flexibility is replacing the old immutable order, as adaptability is the major value. The growing integration of the world economy has been in general an engine of mutual enrichment in the form of access to overseas markets and has hoisted wages. Yet some Western and East-Central European countries are seeking to protect themselves from the adverse consequences of change showing a particular propensity for support on acquired rights and entitlements in the workplace, as France, Sweden and almost all East Central Europeans. One symptom is that the structure of welfare state damages job creation. Countries with more flexible labor markets do better in their fight against unemployment and lowering tariffs within continuously enlarging free trade blocks is beneficent for their economies. Striking a balance between state protection and freedom of action is the model for future development in a globalized economy. 

Mercosur and The Integration of the SouthAmerican Economies

If the strongest example of Globalization to date is found in NAFTA and the EU, which push standardization, the weakest example is that of MERCOSUR. Although MERCOSUR claims implicitly to develop in the mold of Globalization, in our view it represents Closed Globalization. Too many Brazilian leaders are proposing to use Brazil's tariff-protected

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MERCOSUR market to dominate an internally-oriented South American market that inhibits world competition. Although those same Brazilian leaders claim that they favor joining the U.S.-Mexico proposed Free Trade Association of the America (FTAA), the realization that Mexico would be the bridge between north and south.

In implicit opposition to MERCOSUR, Mexico is using bilateral agreements with Latin American countries to lay the basis for the FTAA, a basis that the USA can not help to build because it is trapped in petty partisan political struggles between the Republic Party and Democratic Party. In the meantime, Mexico has signed FTAs with Venezuela and Colombia, Chile, Bolivia, Costa Rica, and is developing such a union with the Caribbean and Central America.

The rise of Globalization is complicated by two major factors. First, the nationalist antipathy to foreign direct investment and inflow of portfolio funds has vanished almost everywhere at once and there is not enough private capital to meet all the demands for it. The change of world

  As How the World Bank and the IMF had been building the infrastructure in many poor countries around the world, has changed, putting more into education, stopped building bridges, dams and roads, which is very short sighted.               The process of economic integration between Brazil and Argentina that began in the mid 1980s has become the most successful attempt at regional integration in modern Latin America. This process has contributed to a fundamental departure from previous regional antagonisms and has foster higher levels of economic interdependence. In 1991, Argentina and Brazil were joined by the smaller neighbors of Uruguay and Paraguay establishing the Southern Common Market or Mercosur.                            Mercosur's members, with a population of more than 200 million people, represent over 55% of the total economic activity of Latin America and its most industrialized region. Mercosur has a diversified and modernized manufacturing industry and has excellent prospects in the agribusiness and mining sectors. The consensus that Mercosur's initial stages had been successful and the already high levels of intraregional trade led Chile and Bolivia to join Mercosur as associate members in 1996. Peru and the Andean Group, the other south American trade group, have began talks on a formal agreement to be negotiated with Mercosur, an event that would link South American economies in an unprecedented manner.

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              Mercosur has survived the unpredictability of hyperinflation, disci mil exchange rates, and sharp fluctuations in demand and production. Moreover, institutional support continued despite drastic changes of government and a profound turn in the strategy of integration. The evolution of Mercosur can be divided in three stages: the sectoral agreements of the 1986-89 period of bilateral protocols; the transition to Mercosur from the Buenos Aires Act of 1990 until the establishment of an imperfect custom union at the end of 1994; and the period of consolidation and expansion initiated in 1995.              In reviewing the evolution of regional integration since 1986 we also analyze the main tools implemented in this process. I begin by placing the origins of regional integration in a Latin American and global context, and then follow to evaluate the first phase of integration under the Program of Integration and Economic Cooperation (PICE). The second part focuses in the debate over which strategy of integration to adopt and in the difficulties and imbalances on the road to a custom union. Finally, I suggest some short and medium term policy objectives for consolidating Mercosur and address the dilemmas of expansion. I - The Foundational Years               Technocrats and policy makers alike have advocated economic integration between Latin American countries since at least the 1950s. The United Nations Economic Commission for Latin America (ECLA), under the leadership of Raul Presbich, begun advocating the expansion of intraregional trade together with policies of import substitution industrialization. The creation of the Latin American Free Trade Assosiation (LAFTA) in 1960, sought to foster greater economic integration between South American countries and Mexico. The twenty years that followed the creation of LAFTA, brought only modest progress. Between 1960 and 1980, intraregional trade expanded from 7.9% of total trade to only 13.8% in 1980. In an effort to resuscitate the integrationist project, LAFTA became the Latin American Integration Association (LAIA) in 1980.              The debt crisis that erupted at the beginning of the 1980s brought to an end an expansionary cycle propelled since the 1940s by import substitution policies. Intraregional trade hit a bottom low in 1985 at 8% of world trade, and it was not until 1989 that the region regained the levels achieved nine years earlier. The burden of the foreign debt sharply decreased the ability of Latin American countries to pay for imports, and although the recession allowed for a favorable balance of trade, it also made extremely difficult to comply with the necessary fiscal restrictions.              During the second half of the 1980s, Latin American countries seeking to overcome the crisis, begin to adopt adjustment policies designed to stimulate the economy through an increase in exports. As the pressures brought about by the foreign debt begin to ease and governments

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experience moderate success in the implementation of stabilization measures, intraregional trade began to grow again. This process was also stimulated by an important return of capital that had flown away during the debt crisis, which allowed for the financing of a large deficit in the current account and an increase in international reserves. In addition, a slowdown of the economies in the industrialized nations at the end of the decade led to a reduction in the demand for Latin American products and an increase in protectionist measures from these markets. In 1994 intraregional exports between LAIA was three times bigger than in 1985. The Program of Integration and Economic Cooperation, 1986-1989               It is within the previously mentioned context of economic uncertainty that the governments of Brazil and Argentina decide on 1986 to establish the Program of Integration and Economic Cooperation (PIEC). The PIEC intended to establish a framework for the emergence of a common market by promoting a gradual process of integration based on a series of commercial agreements in selected sectors of the economy. These agreements, established in the form of protocols, demanded a low level of coordination required to define the scope and exemptions to the process of trade liberalization, and to agree on rules to avoid unfair competition and unwanted triangulation’s. This selective and gradual process, lacking definite timetables and specified objectives, sought to achieve intra-industry arrangements and to modify the asymmetries present in bilateral trade since the beginning of the 1980s.               In addition to an increase in the general level of bilateral trade, which was very low before 1986, the PIEC also addressed Argentina's concern of a continued trade deficit with Brazil, and the inter-sectoral specialization of trade in which Argentina exported agricultural and food products with little value added, and Brazil manufactures of industrial origin. The PIEC chose to concentrate on the capital goods sector, which members believed offered significant opportunities for attracting investment and fostering cooperation.              The primary sector was thought to be unable to create intra-sectoral equilibrium and growth. Additional benefits of the capital goods sector included the stimulus that could have for the rest of the economy, and the high degree of government autonomy over this sector, composed mainly of small and medium size firms.               The PIEC originated under favorable macroeconomic conditions. The 1986-87 period represents a moment of high compatibility in the political and economic arenas. Both countries were new democracies trying to implement stabilizing economic programs (the Austral Plan in Argentina, and the Cruzado Plan in Brazil), and were seeking a common policy in the GATT and ALADI rounds of negotiation. During 1986, Brazil experienced a strong GDP growth of 7.6%

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and Argentina grew by 6.1%. Plans designed to curb inflation were also initially successful. In Brazil inflation was reduced from 228% in 1985 to 58% in 1986, while Argentina's inflation shrunk from 385% to 82% during the same period.              The goals of the PIEC were severely constrained after failing plans pushed the economies into a recession. By 1988, the economic conditions under which the PIEC had to operate became very difficult. The problems of the Cruzado Plan and the troubles with the level of reserve deposits led to an increase in import restrictions in Brazil, which undermined support for further integration. Between 1985 and 1990 GDP in Brazil grew by an average of only 1.7% a year, and in Argentina by only 0.1% a year.              Rising inflation and exchange rate fluctuation compounded this. Inflation in the 1985-89 period averages 444% for Argentina and 383% for Brazil, almost twice as bad as the 230% for the rest of Latin America. The difficulties that aroused from the lack of continuity in macroeconomic policy at the end of the Sarney and Alfonsin presidencies also contributed to a loss of momentum. The economic team of both countries gradually moved apart, divided primarily by their approach to the foreign debt. While Brazil was declaring a moratorium on debt services, Argentina was closing a deal on a stand-by credit and a loan to cover for losses on export revenues.              Despite the severity of the economic problems in Argentina and Brazil, the PIEC contributed to several important developments. Bilateral contacts in many important sectors were originated. Between 1986 and 1989 agreements were negotiated in the areas of capital goods, food production, wheat, iron and steel, energy, biotechnology, nuclear energy, automobiles and transportation. A modest liberalization of trade begun in the second half of the 1980s. Brazil began to restructure its tariffs in 1988-89, and in 1990, the list of ban imports was abolished. Local content rules for intermediate and capital goods were still maintained, as it was a ban for 47 computer related products. In Argentina, the value of industrial output subject to restrictions was reduced from 62% to 18% during 1987-88. the remaining licensing restrictions were eliminated between 1989 and 1990.               Total bilateral trade significantly increased and almost doubled during this period. Most of this growth was from Argentine exports that gained access to the Brazilian market for the first time. The greatest progress in bilateral trade was achieved in the capital goods sector, automobiles and food products. Although short from original expectations and despite a lack of investment and different industrial policies, the capital goods sector captured a greater share of trade at 13%. In the food sector, 500 products were added to a list of zero tariff between 1986 and 1990, and in 1988 Brazil became Argentina's most important export market for wheat, capturing over 26% of wheat exports. Of significant importance was the growth of industrial exports from Argentina that increased in 1989 to almost half of total exports to Brazil from 20% in 1985. In the

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steel and iron sector, preferential arrangements led to a steep increase in Argentine exports of 894% to reach $59 million dollars in 1989. Brazil's exports of steel and iron followed an irregular pattern but maintained a surplus at $194 millions in 1988 and then down to $87 millions the next year.               The PICE generated significant changes in the relationship between the economies of Brazil and Argentina but fell short of achieving a clear success. The project lacked the instruments and policies to allow for a reconversion of the productive sectors and did not go far in implementing industrial or technological programs of complementation.               As the decade came to an end, presidential elections and domestic conflict dominated the political agenda in both countries. Lack of investment, a crippled public sector and unprecedented high inflation continued despite several attempts to revive the economy.               At the end of these two administrations that had to struggle with the return to democratic rule and the aftermath of the debt crisis, further integration lacked the enthusiasm of the 1986-87 period. In addition, it seemed as the coalitions in power were going to be ousted, contributing to greater uncertainty about the development of further bilateral commitments. The process of regional integration had to wait until after the presidential elections to regain importance and direction. II - The Transition to MERCOSUR, 1990-94               The new coalitions that arrived to power after the Argentine and Brazilian elections had to take on the major task of achieving economic stability and renewed growth in a fast changing international context. Changes in world politics significantly affected policies for regional integration. After the end of the cold war, it seemed that power competition between nations had shifted its center of gravity from the political-ideological realm to the economic realm. Two sets of events in particular affected Argentina and Brazil. On the one hand, the competition for investment posed by the emergent markets of Eastern Europe, protectionist policies in the agricultural markets of the industrialized nations, and the rise of China and East Asia in world trade, threatened the position of the South America in world markets. On the other, the success of the European integration, the proliferation of trade blocs, the United States Initiative for the Americas, and Mexico's early moves towards a North American Free Trade Agreement, gave support to regional integration as an important tool to compete successfully in the world economy.               A crucial factor that distinguishes the process of integration in this decade is the unilateral liberalization programs that began to be implemented in South America. Argentina

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began to liberalize the economy in 1987 and accelerated after Menem's arrival to power in 1989. Brazil began with a program of liberalization of trade under Collor in 1990. Although there are differences between these programs, unilateral liberalization helped to re-inforce the flow of regional trade and to diffuse sectoral opposition to preferential arrangements between both economies. The betterment of conditions of access to regional markets induced by unilateral liberalization, allowed for particular sectors to identify payoffs derived from the integration process, and led to the formation of coalitions of support.               The simultaneous implementation of preferential agreements and market oriented policies of trade liberalization induced a revision of the strategy of integration. Integration within the latter context has been called open regionalism. Under this strategy, unilateral liberalization and preferential agreements are seen as reinforcing each other. This is opposite from previous attempts at preferential agreements in protectionist regimes of import substitution industrialization that permitted influential sectors of the economy to block integrationist attempts. Moreover, as Bouzas noted import substitution programs of regional scope demand the ability to negotiate and coordinate policies to structure and redistribute costs and benefits that exceeds the technical and political capacity of closed economies.               The new strategy of open regionalism still allowed for different interpretations. Integration in an open economy can be thought as an intermediate step leading to the convergence between preferential and general liberalization. Under this scenario, preferential treatment to regional states acquires a temporary status to be followed by general openness generated by ever growing free-trade areas. This has been the traditional view from the United States regarding integration in the western hemisphere and the most narrow interpretation policy makers derived from orthodox economic theory. This commercialist view of integration that concentrates on trade growth, suggests that regional groupings can stabilize the region helping to smooth the transition towards the globalization of the local economies.               An alternative position to the previous view approaches integration as a complex interaction between the benefits of international competition and regional complementation. Greater competition leading to improvements in quality, price and variety of goods can be derived from a commercial policy towards third countries. In an expanded regional market, economies of scale, better resource allocation and the development of specialization should lead to the benefits of complementation: employment growth and greater income.              This strategy needs not only a precise and effective margin of preference with low barriers to third countries, but should also avoid frequent and sharp fluctuations between members currencies, while seeking to harmonize policies for industrial and technological

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development and for investment. The greatest source of certainty regarding the margin of preference between members is the establishment of a common external tariff (CET).              The latter understanding of integration as a development strategy results in a preference for a custom union over a free trade area. Three factors in particular, give support to this position. First, the elimination of the diverse barriers for intraregional trade reduces administrative and production costs and leads to better resource allocation.  Second, a custom union is better positioned to generate intra-industry integration and gives greater certainty to access the extended market and to the development of regional economic policy and investment. And lastly, a customs union entails increased power for members that can negotiate in world markets as a block. The interplay of these elements, in principle, should lead to the creation of trade, both intraregional and total trade, and not to trade diversions.              Therefore the Buenos Aires Act, signed in July of 1990, established a new methodology of integration based on a general and automatic liberalization of trade leading to zero tariffs to intraregional trade by December 31st 1994. Although the Act allowed for the sectoral agreements of the past, the process of integration was now focused on the elimination of barriers to trade.              This new strategy was formalized in the 1991 Treaty of Asuncion that incorporated Paraguay and Uruguay to the integration process and legally created MERCOSUR. At Asuncion, MERCOSUR members lunched the Program of Trade Liberalization that implemented a linear and progressive reduction of intraregional tariffs and agreed on the elimination of non-trade barriers. The implementation of the Treaty of Asuncion resulted in four years in which intra-MERCOSUR tariffs were lowered by 7% every six months.               Instead of the positive lists of goods that the PIEC had allowed to be liberalized, the new strategy adopted negative listing that included temporary exemptions to the rule.              This automatic and linear reduction of intra-MERCOSUR tariffs made the evolution of the domestic economy of members increasingly influential in determining the volume and direction of the flow of regional trade. As a consequence, the politics that condition the competitiveness of the different sectors of the economy became an important part of the agenda of negotiations (Motta Veiga 95).              The coordination of macroeconomic variables and the level of harmonization of microeconomics policies intended in the Asuncion Treaty became difficult to implement. As countries become more interdependent, the asymmetries between them demand attention to coordinate policies of promotion and the national regulatory framework. This is a complicated process considering there is a trade off between the structural relationship of the economies that belong to a preferential trade agreement and the necessity/capacity to harmonize policies. Without high interdependence there is little demand for coordination, and without harmonizing policies is difficult to expand the structural relationship between the economies (Porta 96).

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              These elements became all the more important after the 1992 summit at Las Leoas, when Mercosur members decided on the establishment of a custom union to begin in 1995. This move gave less than three years for the four nations to agree on a CET.               During the transition phase, the different development of the economies of Argentina and Brazil made bilateral relations difficult and threatened the consolidation of the custom union by the last day of 1994. The Argentine economy grew almost four times faster than that of Brazil. The cumulative real GDP growth between 1991 and 1994 was 10.5 % for Brazil and 40 % for Argentina. Inflation was reduced drastically after the Convertibility Plan applied in Argentina brought it down from 171.6 % in 1991 to 24.9 % the next year and then kept falling to 4.1 % in 1994.              The opposite happened in Brazil were the average inflation jumped from 440.9 % in 1991 to over 1,008 % in 1992 and then doubled the next year to end at 2,244.5 for 1994, the year the Plan real was lunched. In addition, the development of the exchange rate between the Argentine and Brazilian currencies followed different paths.               After convertibility, Argentina fixed the peso with the dollar and experienced a reevaluation of the currency that had an important effect on the flow of trade. Between September of 1991 until August of 1994, Argentina accumulates a trade deficit with Brazil, partially compensated at the end of 1992 with ad-hoc agreements over grains and oil (Lavagna 96).               Since the end of 1992, the automatic process of linear liberalization was complemented by a parallel process of ad-hoc intervention that sought to compensate for the asymmetries produced by the lack of coordination. These ad-hoc interventions were prominent in the automobile, machinery, electronics, pharmaceutical, paper, iron and steel, and textile sectors.              The asymmetry of macroeconomic variables previously mentioned resulted in an unbalanced distribution of costs and benefits that led to sectoral dissatisfaction and unilateral restrictions in Argentina.              The Treaty of Asuncion included a safeguard clause that could be used until 1994 to temporarily lift the preferential treatment negotiated if it was proved that a massive inflow of imports was threatening to cause serious problems. Between 1991 and 1994 Argentina utilized this mechanism ten times against Brazilian imports. Argentina also adopted non-tariff barriers such as the elevation of a statistic tax to Brazilian products from 3% to 10% in October of 1992 and anti-dumping measures in 1994. After 1993, when the average tariff for Argentina had surpassed that of Brazil, negotiations resulted in concessions to facilitate the export of Argentine energy, wheat and wheat flour. The vacuum provided by the lack of sectoral or regional

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reconversion and adjustment designed to smooth the transition towards a custom union was filled by these ad-hoc measures.              During the transition period, the economic establishment of Argentina had serious reservations about the future of the Brazilian economy and voiced support for a Chilean strategy of multilateral liberalization and preference for an association with the United States. After President Clinton failed to received fast track authority to negotiate Chile’s inclusion into NAFTA from a Congress reluctant to approve further free trade agreements, Argentine preference for NAFTA faded away.              At the same time that the NAFTA option became less probable, Mercosur continued to make members’ economies more interdependent and politically committed to the fulfillment of the custom union.              Despite a context of divergent economic performance during the transition phase, a series of factors contributed to diffuse the costs of integration. The availability of abundant external financing until the end of 1993 reduced the conflicts generated by the uneven flow of trade. External financing and the simultaneous process of automatic liberalization of trade with ad-hoc interventions, helped to improve the management of sectoral pressures arising from the rapid growth of intra-Mercosur trade (Bouzas 96).               Between 1990 and 1995, intraregional trade grew from 15% of total trade to almost 19%. In 1994 Brazil became Argentina's number one export market, capturing over 20% of total exports. Argentine exports to Brazil increased at an annual rate of 32%, while Brazilian exports to Argentina did so at 44% annual average. During this period Argentina became Brazil's third market for exports and imports, after the European Union and the United States. This rise in intraregional trade has gone hand in hand with the growth of total trade. Mercosur's exports to the rest of the world continued to grow. Also, total imports for Mercosur have been greatly outstripping the growth of exports (180% vs. 50% in 1990/95).

The markets open by intra-group liberalization helped the exports of manufactures, specially cars, car parts and machinery. This had been an important goal when the process of integration began in 1986. By 1995, the first year of the custom union, almost half of Argentina exports to Brazil, and almost 85 % of goods sent in return were manufactures. Much of this intra-industry trade resulted from a methodology of integration that favored intra-sectoral complementation in oligopoly industries.              The flow of trade within these sectors was characterized by managed trade agreements fostered by the private sector. These sectoral agreements provided firms with a way to lessen the effects of preferential liberalization.              The extended market offered opportunities for rationalization and specialization, particularly to large firms with better lobbying capacity and in search for protection from the

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process of liberalization. The Treaty of Asuncion already provided a special treatment to the automotive industry. The agreement stipulated quotas for the free trade of finished vehicles and car parts, together with additional quotas for automobiles. Although the automotive sector was an important part of the domestic industrial policies of Brazil and Argentina, coordination was limited to the regulation of bilateral trade. In fact, the only officially approved agreement on complementation was in the iron and steel industry.              After the Real Plan was lunched in the second half of 1994, Brazilian currency began to increase in value and Argentina again experienced a trade surplus. The renewed growth experienced by the Brazilian economy during 1994, and the appreciation of the currency after the Real Plan of stabilization, exerted great influence and offered incentives to other members to continue negotiations for the CET. During the first year of the Plan Real (7/94 to 7/95), the peso depreciated by 20% with respect to the real (Ferrer 96).              In summary, the different evolution of the economic programs generated macroeconomic and sectoral imbalances leading to an almost chaotic treatment of conflicts “as they surfaced”. Although the Mercosur’s methodology in transition to a custom union came short of achieving a high degree of complementation or harmonization between members’ economies, it nevertheless deepened integration commitments.              Intra-Mercosur trade grew six fold between 1985 and 1995, at an average of 22% each year. During those ten years, intraregional trade jumped from 5% to 20% of world trade. Presidential summits and numerous contacts between high and medium level officials was well under way by the time the CET was reached. The difficult negotiations over a CET and the constitution of a custom union demonstrate the importance that all Mercosur members assigned to the fulfillment of the integration agreements. III - Consolidation and Expansion               Mercosur began to function as a custom union on January 1st, 1995. The common external tariff (CET) applied covered 85% of goods and had an average of 14% and a maximum of 20%. The other 15% of trade has different national tariffs that range from 0% to 35%. The exemptions to the norm were in capital goods, computer related equipment and telecommunications. Tariffs on capital goods were to converge at 14% in the year 2001, while computer and telecommunications equipment should do the same at 16% on the year 2006. There were also national lists that included some products temporarily exempted from the CET.              Mercosur has led to the convergence of administrative norms regarding product sanitation procedures and on the treatment of bi-national companies. The opening of offices of representation, the purchase of stocks, the establishment of subsidiaries and the creation of joint ventures have incentive cooperation in the private sector. Net foreign direct investment in

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Argentina and Brazil has been growing since the beginning of the PIEC and total almost 40 billion dollars between 1987 and 1996.              Brazilian companies, larger and with greater international experience, have been more active in penetrating the extended market. In addition, intraregional trade continued growing and by 1996, the Brazilian state of Sao Paulo had displaced the United States as the largest single destination for Argentine exports.              Mercosur has also helped to consolidate the political gains of military détente, denuclearization, and democratization. The denuclearization agreements reached in the first half of the 1990s represent a remarkable change in Southern Cone politics.              The Brazilian-Argentine Agency for Accounting and Control of Nuclear Materials (ABACC), a bilateral institution to overview a joint accounting and inspection regime, has been in effect since 1991. Argentina and Brazil now conduct joint military exercises, something unthinkable twenty years ago. Soon both militaries will begin peacekeeping training.              Mercosur was a decisive force in preserving Paraguay from returning to military rule after a rebellious general threatened President Juan Carlos Wasmosey in 1996. In April of that year, Mercosur’s foreign ministers arrived in Asuncion and threatened the general with diplomatic and economic isolation. It is a prerequisite for members of Mercosur to have democratically elected government.              One of the first problems found by the Mercosur after the establishment of the custom union was aftermath of the collapse of the Mexican currency in December of 1994. The large amount of capital pulled away from Latin America, hit the region hard. Argentina, with the peso fixed by law at par with the dollar, was hit hardest, experiencing a decline in GDP of -4.6%. Since 1996 both economies have been in low gear, with a 3.5% GDP growth for Argentina and a 3% growth for Brazil.              The next objective for Mercosur will be to deepen the commitment to the common market. Mercosur still needs to address several important elements if it is to reach a true common market. Some of its most immediate are: the harmonization of custom procedures; standardizing and streamlining rules and regulations; improving transport links; the non-tariff trade barriers that affect intraregional competitiveness; and labor and tax regimes. Customs procedures, including rules of origin, are easier issues to resolve. Non tariff barriers to trade offer greater difficulty because these are difficult to detect and because of the constant changes in legislation and regulations demanding agreement (Bouzas 96.)              The need to promote a convergence of standards and regulations will contribute to the practical implementation of Mercosur’s objectives..              Brazil’s primacy in Mercosur is similar to that of the United States over NAFTA. This structural situation has made Brazil the main force behind the shaping of Mercosur. Brazil, reluctant to cede sovereignty, wants a wider, rather than a deeper, union. Argentina, in turn,

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favors a European Union style of integration and included the authority of supranational institutions in the 1994 Constitution.              In 1990, President Menem suggested, and President Cardoso agreed, on the need to discuss the probability of a common Mercosur currency. For the smaller countries of Paraguay and Uruguay, there is little choice but to follow the steps of their main trading partners, although they clearly prefer a deeper union with no rapid expansion that can threatened their competitiveness. The first enlargement of Mercosur came in 1996. Chile was the first country to be admitted as an associate member on mid 1996. Bolivia soon followed and also became an associate member that year. Peru and Canada have requested association to Mercosur in 1997.              A crucial objective for Mercosur’s future will be to strike the right balance between the sovereignty of the nation state and the need for common market institutions. Brazil wants to see Mercosur’s methodology of integration to continue with a minimal of supranational institutions, and with decisions taken by consensus.              

This is certainly an innovation from the previous Latin American experiences of excessive bureaucratic apparatus and little ability to generate real economic integration. But the lack of a stable and effective mechanism for dispute settlement has high costs.              So far, Mercosur’s decision-making power rests with the inter-governmental Common Market Council, made up of the foreign and finance ministers of the four members.  In reality, no Mercosur bureaucracy exists, aside from a tiny secretariat in Montevideo. The most important and controversial decision have been resolved by the Presidents themselves in their twice a year meeting. The costs of this choice for “presidential diplomacy” is that even smallest disputes have tended to escalate and ended up being settle by the national presidents.

Venezuela is no longer taking active part in MERCOSUR, due to its political and economic crisis, since Maduro is not recognized as president anymore.

              The establishment of the custom union have not stopped Brazil from acting unilaterally in several occasions. The costs of rapid trade opening in Brazil, like earlier in Argentina, have led to intermittent domestic pressure for selective protection. This is no longer the case, in 2019, when the matrix has rearranged itself under new updated rules.

These decisions raised serious concerns in other members of Mercosur. First, in 1995, Brazil suddenly elevated tariffs on some car imports; the following year, it required textile imports to be paid for within 30 days rather than 180; and lastly in 1997 when Brazil, concerned with a

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mounting trade deficit, limited credit to pay for imports. All Mercosur members were eventually exempt from these measures, but only after difficult and sometimes embarrassing negotiations.              Brazil has also shown flexibility. It did not insist on a weighted voting system inside Mercosur and agreed to a lower CET than originally thought. Since the 1995/96 recession in Argentina, Brazil has had a trade deficit with the rest of Mercosur. The opening of the Brazilian market to Argentine lubricants on May of 1997 was a decision long-awaited for in Buenos Aires. This measures allows for 100 to 150 million dollars of exports, that would give Argentine companies 10% market share in Brazil.              Brazil has powerful motives for wanting a strong and committed Mercosur. While Brazil’s weight in world trade has been declining for years, south American markets represent the fastest growing market for Brazilian manufactures. Brazilian companies have been the best suited to take advantage of the expanded market and to prepare themselves for worldwide competition. It is also true that Mercosur adds diplomatic weight to regional interests.              Mercosur members now negotiate their commercial relations to third countries as a block. Mercosur’s diplomatic role has visibly increased since the first years of integration. Mercosur signed an agreement with the European Union in December of 1995 that sets a tentative target for free trade by the year 2005. The EU is Mercosur’s largest single source of external trade and investment.              The Free Trade Agreement for the Americas (FTAA), if such an project is to be achieved, will be based on an agreement between NAFTA and Mercosur. This means that a precondition for FTAA will be an understanding between the United States and Brazil. Brazil is interested in preserving an open, multilateral world trade. Brazilian exports markets are well diversified, as the direction of trade in 1995 shows: 27% went to the EU; 21% went to NAFTA; and 18% to Asia.              The discrepancies between the United States and Mercosur over the steps to achieve a FTAA surfaced again in the 1997 meeting of foreign ministers from the western hemisphere. The US pressure Mercosur to open markets, without a compromise to reduce the domestic agricultural subsidies the greatly affect Latin America. Mercosur and private business associations from Latin America proposed a modality of negotiation based on three steps: first, to facilitate business transactions by eliminating non-trade barriers; second, the harmonization of technical standards; and finally a reduction of tariffs.              The United States insisted on the opposite sequence of steps. The United States, through Commerce Secretary, W. Daley, conditioned the lifting of trade barriers for such products as textiles, fruit juices, footwear and cigarettes, to Brazilian agreement on a negotiation over tariff reductions for Mercosur. Brazil answered with a call to gradual consensus. Finally, at this meeting no agreement was reached. 

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IV - Conclusion               Mercosur’s first and foremost challenge will be to maintain macroeconomic stability and growth while keeping an open trade regime. Mercosur is still short of a full fledge custom union. The effective implementation of the CET is still being worked out and free access to intraregional markets continues to be affected by a number of local regulations.              The discussion over trade in services and negotiations over the mobility of labor have not even began.Further implementation of the CET could give raise to discussions over the redistribution of custom procedures. Notwithstanding its lack of institutionalization, Mercosur is a success story in economic integration between developing countries.              The future of Mercosur depends on the simultaneous transformation of the economies of Argentina and Brazil, and on the advancement around this progress, of Paraguay and Uruguay. The formation of a homogeneous pole of industrial and technological supremacy on Brazil threatens the prosperity of all members. The managed trade agreements have had greater importance for Argentina, particularly those in the wheat, oil and automobile industry. Mercosur offers Argentina the possibility to re-industrialized, change its traditional pattern of exports, and foster technological improvements.               Mercosur’s consolidation will allow their members to become more competitive in world markets. It will also give greater diplomatic pulling to the region. This is already evident in the negotiations over a FTAA. The enlargement of Mercosur to include other countries into free trade agreements is already under way. The dynamic growth of intraregional trade has persisted for the last twelve years and it will probably continue for a few more.              Unlike the European Union, Mercosur has lacked a supranational bureaucracy in charge of administrating the process of integration. Mercosur’s reliance on contacts between high level officials and presidential meetings, intended to avoid excessive demands on national governments.              Nonetheless, the growth of interdependence between Mercosur members demands attention to the establishment of a dispute settlement mechanism and to the specification of members’ rights. the eventual implementation of fair practice regulation and a safeguard clause will demand the establishment of some sort of supranational institution. this is a difficult arena of negotiations, where Mercosur members have been particularly cautious.              The convergence of macroeconomic performance since 1994 did not modify the divergent approach to fiscal and monetary policy in Argentina and Brazil. The lack of mechanisms for coordination demands attention to the exercise of better communication between officials and to greater transparency in domestic objectives affecting the union at large.

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              Although the parity between the Argentine and Brazilian currencies appears to be an important determinant of the flow and direction of trade, coordination over this issue seems unprobable in the short-term.              The harmonization procedures should try to eliminate the distortions to competition created by public policies that influence the advantage of particular sectors. The technical competence and judicial objectivity of some kind of supranational institution should replace the presidential ability to make political deals. Instead of regional funds or a Mercosur parliament, what the union needs is an institution, such as a regional tribunal, with powers of arbitration similar to those of the World Trade Organization.              The progress achieved by the process of integration since 1986 has been unprecedented in Latin America. Mercosur’s accomplishments extend beyond impressive growth of intraregional trade, to include the formation of a custom union, the coming together of private businesses, and a common external policy. The future requires Mercosur to simultaneously deepen their commitment and enlarge their membership. [5]              Within the next twenty years, a free trade area in the western hemisphere will probably be established. Mercosur’s new role as a regional model for integration and as a global trader will give South America greater diplomatic power to negotiate a favorable insertion of the region in the international economy.

Conclusion               The global economy links together the world community. The flow of cross-border funds is private now - no government is involved, therefore the bureaucracy is eliminated. Movement of both investment and industry has been facilitated by information technology.              Individual consumers are therefore more global in orientation . All these four I's work just fine on their own, nation states more often just get in the way (given their own troubles) and state intervention is absent. Unfortunately, Donald Trump thinks that the United States should sell more than we buy.

It is all the side, the supply jobs that are being created that benefit the Californian economy in a big way, ever since NAFTA has been passed under Clinton. Region states are Hong Kong, or the Kansai region around Osaka, or Catalonia - where real market flourishes - global solutions correspond to the more focused geographical units. The rise of the super-regions as true natural business units in today's global economy.               In today's borderless world, lines of demarcation on the political map are irrelevant as the currents of global economy punishes twinging countries by diverting investment and

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information elsewhere. The question that arises is what are the consequences of the globalization? What are the fissures it provokes?               Nobody argues more forcefully than Roderick that the world economy faces a serious challenge in ensuring that international economic integration does not contribute to domestic social disintegration. The three major sources of tension between globalization and social stability that pose a challenge to the architects of the globalization remain: the transformation of the employment relationship, conflicts between international trade and social norms, and the pressures brought to bear on national governments in maintaining domestic cohesion and social welfare systems.-//-------------------------------------------------------------------------- Olga Lazin

   

Chapter IIGlobalization of Nonprofit Funds: Mexico and Romania

 This work focuses on Mexico's NGO legislation and its unique nonprofit standing as having achieved mutual recognition by the U.S.  Treasury department thus facilitating the flow of funds. Romania aspires to follow the Mexican model of working closely with the U.S. treasury to facilitate the inflow of U.S. funds.                           The years 1917 and 1989 offer the benchmarks for understanding the rise and eclipse of centralism, analyzed here in case studies for Romania in Eastern Europe and for Mexico in Latin America. World statism was generated simultaneously by the Mexican Revolution's Constitutional Model of 1917 and the 1917 Russian Model of Revolutionary Terrorism, both of which encouraged the rise of state monopoly that distorted economic, political, and social systems. In Russia and Mexico one-party political and economic systems came to define the dimensions of statist corruption that became prevalent in so many countries worldwide.                            With the problems of excessive centralism manifest by the 1980s, statists in Mexico and Romania took very different paths to save their power. In the Mexico of 1983, the new President Miguel de la Madrid began to bring to a halt the expansion of state power by beginning to permit large private land holdings of production for export even as he began to close or sell some money-losing factories and service companies.              In Romania of 1983, the brutal dictator Ceausescu (1963 to 1989) attempted to deepen his control, thus accentuating the crisis in statism that within six years saw his bloody fall.

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Ceausescu's drive to increase state income by expanding food exports to the world caused crisis in central government financing of local welfare as well as shortages of staple goods needed by the masses. Thus, Ceausescu's dictatorship of extreme state centralism of power at the national level left Romania's thousands of communities in poverty, with civil society unable to think for itself after 40 years of failed central planning.                            In Mexico, by 1983, the statist solution had left civil society and communities in poverty, albeit , as in Romania, with subsidies from the central government to support the country's corrupt one-party political system. With the collapse in demand for oil and raw materials owing to the world downturn after the Arab oil embargoes and quintupling of energy prices in the 1970s, Mexico was unable to borrow international funds, thus "bankrupting" efficient private industry as well as highly inefficient subsidized statist enterprises. Subsequent shrinkage of subsidies caused increasing crisis in the living standards for the thousands of Mexico's communities in which the only basis for funding had been the central government. With the decline in size of state economic power, then, the state itself has barely been able to cope with the series of recurring economic collapses caused by earlier central government mismanagement of nationalized industries.                            Incapacity of the statists to maintain their corrupt systems changed dramatically after the fall of the Berlin War in 1989. The unmasking of the Soviet system and its 1991 collapse revealed it to be a negative development model, not ideal model that ideologues believed to have existed. Now free to act, anti-statists unleashed rapid change in the old Communist World.                            As central government has been "downsized" to end its economic distortions, civil societies and its communities (figurative as well as literal) in all countries subsequently have faced a shortage of what little funds centralism had allocated leaving a shortfall in the safety net in relatively wealthy countries such as the USA and Sweden. Even the rich Germany faces the need to cut welfare benefits in order to reduce its labor costs or see the further flight of factories to such countries as Romania.                            "Anti-statism" in Mexico and Romania took different routes from 1989 to 1997. In Mexico, anti-statism started under de la Madrid but it was very timid, namely through deregulation. President Carlos Salinas de Gortari (1988-1994) was aided by events in Russia, which paralyzed his opposition and permitted acceleration of decentralization of state activity as well as sale and closure of inefficient industry. Another important aid was the rise of civil society in the 1980s as it had to cope with problems clearly beyond government to solve.  A series of events like the rise of independent civil movements, beginning with student's revolt of 1968,  and the women's rights movement, continuing with the mobilization of the entire population to provide relief from the devastating 1985 earthquake that hit Mexico city (Sáiz, México 75 años   de Revolución, 1988, p. 564.) In trying to reconstruct the city, housing, providing medical care,

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employment, the civic organizations took their own decisions and sometimes they just went beyond and ignored the government.                            Romania, meanwhile, officially took the view from 1989 to 1997 that some statism could prevail, albeit in disguise. Although Ceausescu was overthrown and executed, those actions may have been led by his cronies, who sought to save themselves from the growing anger of the populace.                            Simultaneously, the globalization of free trade markets espoused since the 1980s by U.S. President Reagan and UK. Prime Minister Margaret Thatcher gained force by 1989. The Reagan-Thatcher policy drew upon the  jet passenger and air cargo shrinking of geographical distances (triumphant in the 1970s) to capitalize on the instant telecommunications via private telephone, fax, and computer (triumphant in the 1980s) to breakdown national barriers. Those barriers have become increasingly irrelevant with the rise of Internet connectivity and the privatization of airline and telephone communication systems triumphed in the 1990s.               The Concomitant Rise of Civil Society and the Role of NGOs To match the demise of statism, civil society has arisen in its own right to assume growing importance depending on the country, the USA providing the strongest example mainly because the state never gained the power that it came to hold in Europe and England.                           The basic notion of civil society is that the people can and should prevent the state from becoming authoritarian by keeping watch on it while at the same time demand that it work properly for the general population.  By definition civil society should also develop non-state activities.              World War I and world economic depression between 1929 and 1939 had set the rise of civil society in Western Europe and the USA back.  To face these emergencies, state power was seen as necessary for political and economic defense. In the USA, the New Deal’s mixed capitalism and its expansion of state activity offered an alternative to the rise in Europe of statist fascism and statist communism.                            In Eastern Europe, the Western concept of civil society had only partially penetrated by the early twentieth century. There, however, it existed in widely varying degrees ranging from incipient democracy in Poland to monarchy in Romania. In the latter, civic responsibility was exercised by the nobles and the small middle class.                            Expansion of civil society in Eastern Europe, which was disrupted by World War I and remained weak during world economic depression of the 1920s and 1930s, saw its basis for action decapitated by coordinated German-Russian actions and German invasion by the

34

early 1940s. Both Germany and Russia ruthlessly suppressed civil society. Germany did set up the Vichy France government but it was a fake civil society designed to win acceptance of German occupation.                            With victory over Germany in 1945, Russia set out to break nascent civil society by Stalinizing Bulgaria, Czechoslovakia, Poland, Romania, and Hungary. Thus, Bolsheviks and some Socialists conducted a deliberately destructive and brutal campaign to liquidate associations, independent trade unions and artisan guilds, community groups, churches, and social movements (Tismaneanu, 1996, p.63). Among other values, the communists erased the notion of noblesse oblige and middle class social responsibility as they broke both the nobility and the bourgeoisie.                                          Because World War II had expanded the role of the state in all spheres worldwide, the post-war era in the West had to contend with reinvigorating civil society. By the second half of the 20th century, the concept of quasi-autonomous government organizations (QUANGOs) emerged in England, but most recently the QUANGO has come to be seen as seriously flawed, because it operates without the oversight of the central government or the responsibility to report to NGOs.  The NGOs implicitly solves the English dilemma now faced by countries such as Romania,[6] wherein the QUANGO is responsible neither to the government nor to the citizenry. In establishing a space separate from the government but responsible to the citizenry, the NGOs mediate between citizens and state.                            In society’s four sectors, NGOs constitute the fourth.[7]NGOs are autonomous free associations of individuals and groups who may or may not depend on income from the state (society’s first sector) or from private individuals and businesses (the second sector) and which may or may not depend entirely on volunteer participation and/or paid staff. NGOs usually attempt to register with the government in order to achieve a tax-free status that allows them to receive donations deductible against the income of the donors--hence the incentive to donate. NGOs include grant-making and grant-receiving foundations as well as not-for-private-profit operating organizations such as hospitals, orphanages, universities, and churches.                            It is important to distinguish between the NGO and the QUANGO. Where the NGO falls into the first sector of societal organization, the latter falls into the first sector because it is dependent upon and reports to government and because it operates autonomously with its own budget. The QUANGO often involves activities such as operation of national museums, schools, and research institutes that compete with NGOs for funding. The U.S. Agency for International Development prefers to fund NGOs and not QUANGOs but face problems in doing so because governments in Eastern Europe are short of funds to operate the QUANGOs thus try to channel funds to them. For this reason, governments often make the registration and operation of NGOs difficult, thus reducing competition for funds.              That civil society defines the

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sphere of activity separate from the state clearly emerges in the burgeoning literature on the role of citizens in East Central Europe.  Recent books have theorized in different ways about how civil society is defined by the dynamic of and tensions between the state and non-state activity. These authors include Ernest Gellner (1994), Jean L. Cohen, (1992), Andrew Arato (1992), and Adam Seligman (1995).                            In this literature the strand of the civil society tradition that is most relevant in Eastern Europe is the one that calls for intellectuals to oppose the ruling intelligentsia who blindly support statist power. Its main feature is that it separates civil society sharply from the state. That is why it was so attractive to intellectuals who have not wanted to end the state's heavy hand that too often stands for the status quo rather than change. The majority of Eastern European political dissidents (such as, Miklos Haraszti, Kis Janos, and Victor Orban) argued that civil society, in its traditional forms, has been endangered by collectivism,  etatization of social structures, and regimentation.[8]                            The so-called intelligentsia who sought simple communist solutions justified its role as the 'vanguard of society.'  They helped the communists to construct a new class of bureaucratic apparatchik and ruling elites later defined as nomenklatura [9]In the meantime, humanist intellectuals who questioned power and opposed censorship were allowed to go on working in peripheral positions, but only so long as they did not overtly challenge the state’s authority.                            In its early stages, the intelligentsia who helped the communists preach to the workers that nationalization would benefit the masses justified the process of collectivization and heavy bureaucratization.  This type of “associatedeness” resulted in the destruction of intermediary networks. Thus, the complicity of the statist-oriented intellectuals helped destroy the societal networks that promoted civic articulation between the state and society.  In destroying the interstitial “tissue” of the social construct in different degrees in all Eastern European countries, pro-state intellectuals did so because they knew that civil society threatened the very nature of the communist ideology upon which they fed, literally and figuratively.                             Although, when the communists had seized power in the Eastern Europe of the late-1940, anti-state intellectuals (including writers, philosophers, and sociologists) had theorized about idealistic future society, that impractical approach later gave way to realism about how to make day-to-day life livable. For example the Polish dissident Adam Michnik, one of the founders in 1978 of KOR, called for a strategy of "self-organization" in the Community for Social Self-Defense. This dissident movement was established originally to provide legal and material assistance to the families of workers imprisoned after the 1976 strikes[10]. Later KOR became the base for a strategically coherent movement of mass organized protest that would become Solidarity.

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                            The emergence of several independent organizations began implicitly to challenge the state power such as the Polish chapter of Amnesty International (ROPCiO, the Polish acronym), the Nationalist Confederation for Independent Poland, and the incipient Free Trade Union, each with their own publications.                            In Czechoslovakia, two important political dissident thinkers emerged by the late 1970s. Vacláv Havel called for people to "live within the truth," independently of official structures, and even to ignore the official political[11]. Vacláv Benda called on population to "remobilize" within the civil society.[12] The break with the régime was implicitly contained in dissidents’ rhetoric, but it never reached maturity under these repressive regimes. Only later did it constitute itself into a serious challenge to the state.                            In Hungary, philosopher György Konrad argued in his 1976 book Antipolitics   that all power is antihuman, and therefore so is all politics. He called for destatification and an antipolitical, democratic opposition in his analysis of the issues of transition in East-Central Europe.                            By the late 1970s the so-called remobilization of the population (especially including intellectuals) to work for the good of the state had run into trouble in Eastern Europe, as can be seen in the social and political science literature from Hungary. Studies of that time begun to observe the cleavage and interaction between the official and the alternative or “second society.”[13]                            The emergence of an embryonic civil society in the 70s and the 80s with semi-autonomies and semi-liberties were possible mostly in the relaxed communist environment like that of Kadar, or Edward Gierek's Poland, but it could never develop into a truly autonomous alternative.                            Political stirrings in Eastern Europe took off gradually, then, first in rather ensconced forms such as "flying university" lectures and writings in Samizdat publications.[14] Later came participation in informal self-educational groups. The rise of organizations that pursued independent activities and the assumption of individual responsibility first became evident in Poland where the churches led in creating independent space for thought[15].                            Championing the national rejection of communism, KOR and Solidarity in Poland embodied a full-fledged and convincing alternative to the communist regime, contributing to the collapse of communist ideology even before the system imploded politically and economically in 1989[16].                            Rise of alternative society beyond the reach of authorities had eroded the credibility of the ruling communists, implicitly destroying the monopoly of the state over the society and individuals.  Such society had shown a spark of life after the 60s, provided the civil nuclei that eventually became a serious challenge to the state.[17]

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                            In Czechoslovakia, political activists seized upon Chapter 77 of the Helsinki Human Rights Accord to anticipate a new type of politics.[18] They used Chapter 77 to demand human rights, open dialogue and plurality of opinions as well as alternative structures, all of which eventually subverted the communist ideology at its weakest spots. Chapter 77 bolstered demands for free speech, free press, freedom from arbitrary search and seizure, freedom of movement, and judicial recourse against illegal arrest by the police and military.                            In Romania, Ceausescu’s extreme repression stunted intellectual protest against abusive state power. Only few individuals such as Mircea Dinescu, Paul Goma, Doina Cornea, and Radu Filipescu took the risk to openly protest the regime in the late 70s, and no organized urban socio-political activity took place in the 1980s. [19]                            Once the communists lost power in Romania, Iliescu promulgated Law 42 in 1990 as his “moral duty” to reward those who had helped defeat the dictatorship. The problem that arose, however, was that former communists bribed their way into the reward system, thus creating division and distrust in society and setting back the rise of consensus which needed to make a qualitative shift from collectivism to individualism.

 The Romanian Case                            The Ceausescu dictatorship (1965-1989) has left the country in total chaos. Under the Iliescu regime (1990-1996), debate about modernization of civil society came to life, but effective results were not possible to achieve without the development of a new legal framework[20].                              From 1990-1993, civil society benefited from pent-up demand and expressed itself in an explosion of activity, which simultaneously differentiated and politicized itself during the relative vacuum of power as Iliescu sought to establish his power. This initial explosion was partly the consequence of the fact that political independence was in a sense political opposition and partly an inclination toward a populist "bottom-up" approach to democratic development.[21]                            The first three years of Iliescu’s period were marked by the rise of Western-style NGOs, most hopeful that their mere existence would bring foreign grants. Romanian NGOs involved free association of autonomous persons who volunteered to help raise funds to take up the immediate decline in state social benefits. Only a few NGOs were able to gain foreign funding for their plans, which called for, among other things, the teaching of democracy, the operation of orphanages, and the networking of ethnic groups.                            By 1992 the profile of NGOs revealed an open separation between political advocacy groups and civic advocacy organizations. All NGOs, however, undertook qualitative changes in their activity to achieve "institutional development, capacity building, and sustainability" (Samson, 1996: 129), the goal being to make the NGOs viable and effective.

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                            The problems of Romania’s nascent civil society are complex.  First, there are too few competent leaders to staff both government and NGOs so that Romania can compete effectively in the globalization process.  Second, NGO leaders are tending to move into politics and business. Nevertheless, notes Dorel Sandor (1994,) there is a chance that at least some of those who leave the NGOs will use their influence to support the nongovernmental sector. [22]                            Although in Romania the pre-communist 1924 Law 21 on charities has been reinstated in the 1990s, it does not regulate in a specific manner the nongovernmental bodies. Law 21 only provides a general, vague legal framework and no categories to encompass modern institutions or communities. This permits corruption and produces misunderstanding of what civil society is meant to be.[23]                            Crystallization of NGOs in post-communist Romania demonstrates the viable capacity of response to the challenges of transition. Having initially appeared when the state was impotent and withdrew, clusters of nonprofits and civil actors spontaneously filled the gap in an effort to overthrow of crumbling old regimes.                            But the revolutionary changes seem to presuppose only very quick extra-institutional mobilization. The transition of 1990-1992 allowed the re-emergence of an entire spectrum of voluntary organizations, groupings, and movements in the public life of East European societies. The voluntary sector is part of the “fourth sector” of societal organization (following to the state sector, the private, the mixed private and government sector) varies significantly from country to country in terms of its scope, institutional type and mission. 

My Participant Observers View at the Decentralized and National Levels in Romania during the fieldwork I have completed in Romania in eight years had been very fruitful.              In my role as participant-observer of social life as a folklore student in the Department of Maramures during University years in Romania from 1983 to 1991 and since 1992 in my subsequent travels in Eastern Europe and Russia on behalf of PROFMEX,[24] I have been able to compare the impact on civil society of the destatification and privatization processes.              What is striking to me is my personal experience as a student of rural folklore is to realize that the peasants of Northwestern Romania were bound together in matters of common self-concern. The peasants took decisions and solved by themselves societal problems in so called "claca". The "chopping tactics" of the socialist polity, did not always destroy but reinforced individualistic energies in most Romanian villages.  The primary loci of resistance to collectivization at the village level, however, does not provide a model for transition of Romania to a modern pluralistic society, but does suggest that  socially-based rural civil society is difficult to destroy because of its dispersed nature. Thus, my observations directly contradict those of Buchowski.[25]

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              My travels after 1991 took me throughout Romania and especially to the capital and other urban areas. I realized that the NGO sector then in formation had two levels: the well-organized foreign foundations with well defined objectives (such as the Soros Foundation, with offices in the regions of Romania) and the Romanian voluntary interest organizations that were then that coagulated to solve immediate local issues. The latter are what the Romanians call "form without foundation" or original versions of not-for-private-profits that not only transfer the western models, but are mainly based on genuine social projects, according to Steven Samson.[26]              At the national level, countries such as Romania have to create the true diversity of organizations that operate with crosscutting and overlapping purposes. The latest law no. 32 of 1994 is not in accordance with the requirement of necessities of reasonable functioning of civil associations.[27]                            Even with imperfect law, the concept of civil society now implies some kind of formal autonomous organization, made up of thousands of constituent associations and charities organizations that compete with the state.                            Some non-governmental organizations and think-tanks keep check on the power of the state (the Center For Political Studies and Comparative Analysis, the Romanian Helsinki Committee, the Romanian Society for Human Rights (SIRDO), the League for the Defense of Human Rights (LADO), Liga Pro-Europa, Anti totalitarian Association - Sighet, The Academy for Ethnic Studies, in Sighet, the Civil Protection Maramures, the Titulescu Foundation, and the Association of Lawyers in Defense of Human Rights (APADO), Academic Foundation, while others make demands on the state it to pave the roads, extend electricity to villages, install telephones etc. Yet these foundations/organizations are specialized and act as watchdogs to make sure that the state fulfills its promises.                            What is evident from my consultations in Eastern Europe is that since 1993, after the initial post-revolutionary enthusiastic phase has passed, international assistance and donations have trickled into the region at such a slow rate that NGOs are disheartened. Without a tradition of being able to raise funds in their own country, NGOs that mushroomed in Croatia, Bulgaria, Hungary, the Czech and Slovak Republics, Poland, and Romania in general have not received funds from abroad, as they had hoped.                            The most acute problem faced by Eastern Europe’s NGOs, then, is that of financing of their activities as they seek a place in the new institutional order. Since privatization pace is, generally too slow, the access of NGOs to private or corporate funding is not there and the law is not modernized to make it feasible.[28]                            Given that the relatively well-funded Soros foundations of Eastern Europe have concluded that foreign funding will not come in the near future, if ever, in 1995 they determined at their regional conference in Estonia to look inward for funding.[29] This decision was ironic

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because Soros has given his foundations in Eastern Europe fifteen year before his funding ends. In the meantime, Soros, who has been the lone consistent funder, is already shifting his available funds to other battles such as legalizing marijuana in the USA and helping illegal immigrants to the USA to legalize their status and to become citizens.                            Given the shortage of funds, some philosophers and practitioners of nonprofit activity are looking to the volunteering of time, not the volunteering of money, and they are narrowing the scope of their activity to moral influence rather than charitable activity.[30]

More specifically Eastern Europe's border areas, where the anti totalitarian sentiment was much stronger, non-governmental associations (such as Alma Mater Napocensis, Cluj-Napoca, the Academy for Study of Ethnic Conflict- in Sighet- Romania) have sprung up to prevent and buffer ethnic tensions. Some NGOs have succeeded as in Hungary and Romania (Soros Foundations For An Open Society) by trying to eradicate ethnic hate by publishing minority publications, such as Korunk in Transylvania.                            Katherine Verdery, who, very much in the de Toquevillean tradition, argues that the concept of civil society is linked to the political processes and has become, in the Romanian case, interrelated to that of reconnecting to the democratic Western European values. [31]Her point is that ruling political elites, which have achieved symbolic capital through “resistance-based suffering”, still dominate the public sphere, thus overshadowing other forms of a pluralist civil society. In some ways civil society still revolves around national symbols and symbolic values.              Romania, the former Soviet anchor of COMECON policy for the south of Eastern Europe, now seeks to join NATO as the anchor for the EU border on the Balkan states. 

The New Ethnic Role for NGOs in the Region               NGOs now seek to play a major role in resolving ethnic tensions. Ethnic problems are exacerbated by the fact that most of the countries are heterogeneous in their ethnic and religious composition. In Bulgaria, for instance, about 1 million of the 9 million inhabitants are Turks; Romani account for  some 700.000 and another 400, 000 are Muslims.  In Romania, the shares of population are Hungarians 7.1%, Romani 7%; in Czech Republic Slovaks are 3%,  and Romani are 2.4%. In Slovakia, Hungarian are 10.7%, Romani 1.6%, Czechs Moravian, Ruthenian more than 2% [32]What is considered the next "hotspot", the Kosovo province (Turkey) is comprised of 90% ethnic Albanians.              Where once existed the monolithic non-recognition of ethnic differences sector as espoused by the Soviet optic, since 1989 there has been radical change to multidimensionality.

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The idea is now to accommodate regional differences in development, tradition, local circumstances, and the current state of systemic transformations. As Andras Biro, a Hungarian activist has put it: " For the first time in 40 years we are reclaiming responsibility for our lives.”[33]              In Romania, in the immediate aftermath of the 1989, in several ethnically heterogeneous villages (Bolintin, Casin, Miercurea Ciuc) houses of Gypsy ethnic minority were burnt and heinous killings occurred. On March 15, 1990 the Romanian security in direct complicity with Ion Iliescu brought busloads of Romanians from remote villages to Tirgu Mures. These villagers were told that they were to save Romanians who were being beaten in the city, where the usual March 15 celebrations were in progress. When the busses arrived, the villagers attacked the participants of the celebration and besieged the Hungarian minority’s headquarters. It was there that the playwright Andras Sütö lost his eye. Several Hungarians and Gypsies were beaten and jailed for years. In a gesture of historic reconciliation, the current president Constantinescu has released them (1996). Nobody has ever investigated or publicly exposed this case. The Romanian government (as the local government did not have much power) did not even try to quell the situation. It is ironic that only in the USA, where the Non-governmental sector has almost become an industry, that conferences take place on the events that took place in the Romania but are totally disconnected from the realities in the region.              These 1990 events could happen because autonomous mediating institutions of NGOs did not yet exist to encourage the different ethnic groups to understand each other and to address issues treated individual-to-individual. That is why a new confrontation took place in Cluj and Targu Mures in July 1990.NGOs could play a crucial role in early prevention actions, in bringing locally all the players in practicing dialogue and negotiation needed to diffuse and deter ethnic hatred. As an effective non-official way to solve problems, NGOs facilitate preventive diplomacy. The Eastern European Background and Controversial Impact of Foreign Aid in Romania*definition              To what extent should Eastern European nations be copying or moving toward a Western trajectory of development of nongovernmental organizations? Some “rightist” thinkers demand that their countries return to their own organic evolutionary path with rebuilding of the dimensions of social plurality. [34]They claim that the most basic force is that of ordinary people who decide to take matters into their own hands to improve their conditions or seek basic rights in post-communist East Central Europe The well may be right that people need to rediscover the civic value of associativeness and donating time, but the decline of state expenditure in health and old-age protection is so dramatic that civil society must generate funds. In this age of globalization, funds do not only

42

come from abroad (EU/PHARE or USAID) but also from foreign companies which set up foundations, thus leaving some profits to benefit the host country.              Civil society is the integrative bond needed to maintain coherence and it just begun to function. Even if in a very fragile stage, nongovernmental organizations are trying to help fill the void created by the process of restructuring devastated economies, in a capitalist environment. According to Zbignew Brzezinski, the former U.S. National Security Advisor, it will take well into the 2000s for East European countries to become pluralistic, free-market democracies, mainly because of the failure of East Europeans and Russians to completely demythologize the Leninist ideology.[35]                            Paradoxically, in these cycles of complex statification and destatification, "revolution from above" is needed now, because changes in the nonprofit law can be made only from above. And this refers also to the economic sphere where tax agents have become more efficient at collecting ruinously high taxes, and racketeers become more ruthless in extorting protection money, Eastern Europe's new rich have lost the incentive to seek public recognition for doing good.[36]The state has to step back and has to recognize and allow the NGOs to operate. Incentive should be provided for donations to make them tax deductible. NGOs in Eastern Europe generally limp along pathetically on modest grants from abroad. This shows that the incentive for donation is absent. Now, amid unstable economy, charity workers find internal fund-raising hard to sell. The extension and consolidation of associativeness in organizations' network is mainly articulated by the promotion of the interest of these nuclei vis-a-vis the government.[37]                              Although Dorel Sandor claims that the rebuilding and reemergence of segments of Romanian civil society has played a crucial role in the liberation from communist ideology, other analysts such Cohen and Arato (1992) are skeptical, implying that only 15% of NGOs are active.                            U.S. foreign aid to Romania has been marked by controversy because assistance focused on democracy overemphasized the U.S. political model and focused narrowly on NGOs involved in political education (such as the Democracy Network program). Thus, Carothers has argued that U.S. aid has slowed real political reform in Romania, actually prolonging the agony of the Romanian economic and political system.  By creating harmful dependency relations and not targeting environmental societies, the ethnic associations, religious organizations, cultural diversity, that are real basis of democracy, marked a great leap backward.[38]I am not arguing here that democracy assistance should be discontinued, but commitment should come within Romania, from nongovernmental civic and community groups, trade unions and professional associations. The global movement toward democratic politics, in Carothers’ report, had proved to be very difficult in Romania.

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The Mexican Case 

              Although the term NGO has a complex meaning, in Mexico, as Sergio Aguayo, the head of the Asociation Civil movement, has pointed out, the idea of the NGO tends to be identified with political protests, environmental and human rights groups.[39]Now we know there are NGOs for biospheres, ecology, research centers, protection of abused women: the term is not so limited as the analysts perceive it.              There were various causes to the rise of Mexican NGOs.First during the 1980s, dozens of NGOs tried to accommodate hundreds of thousands of Central American immigrants who arrived fleeing authoritarian governments in El Salvador, Guatemala, and Nicaragua.Second the earthquake of 1985 accelerated mobilized and impelled independent civil movements and NGOs, to become the backbones of the civil society. The same year UNAM created the Defense of the Rights of Faculty and in 1988, the Government of Aguascalientes established a governmental Commission for Human Rights, at the suggestions of different NGOs.              In an effort to provide for a modern legal framework, the Convergence of Civil Organizations was born in the 1990s.Simultaneously more networks of NGOs had emerged with different purposes, and in 1994 they began to play a grand role at national level. One major coalition, the pacto de Guadalajara[40], resulted in offering a workable alternative to public housing politics, literally bringing in the state as a promoting agent in financing housing for underprivileged Mexicans.

The Chiapas 1994 rebellion attracted the focus of civil rights groups and sparked one of the most observed Mexican presidential elections in the country. In both events the NGOs played a crucial role.[41]              In the networking of NGOs that reflects the political culture, then, we can recognize features such as: collective action, consensual decisions and implementation of the agreements through commissions.              The NGOs expanded by incorporating the theme of electoral democracy on the agenda of social change and, for the first time in Mexico's history, mobilized millions of Mexicans along with the members of NGOs.              Nowadays there are more than 400 NGOs in all states, 180 being located in Mexico City. The states of Jalisco, Veracruz, and Oaxaca have the most effervescent NGOs activities.[42]Yet very much like Romania, Mexican NGOs are facing the same problems of financing and a poor philanthropic tradition. But unlike Romania, Mexico has succeeded in designing the first standard for non-governmental law together with the U.S.

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              By adopting and adapting the U.S. model, Mexico has gained more than direct access to the world’s largest pool of funds available from grant-making foundations; it can now encourage U.S. companies investing in Mexico to make donations tax deductible in both countries against their Mexican profits. (Mexico has not yet established the U.S. NPPO “privately” funded by a limited number of donors--[see Chart A, section 4-A-2] that would allow a U.S. company to establish its own NPPO.)              Development of a standard legal framework to facilitate the transfer of non-governmental funds is aimed at overcoming general confusion of meaning in terminology, a problem in both hemispheres.  Globalization of tax-exempt funds is not possible unless all countries speak with the same meaning of terms and model operating procedures for NPPO sectors.              The need is to revise the usage of such important terms as:

NGO (Non-Governmental Organization) sector,which too often is used mistakenly as a code word to coverall NPPO activity. U.S. TEO law sorts out three types of NGOs:              one of which is an NPPO,              the second of which is an ATEO (discussed below),              the third of which is a GONGO or QUANGO                                          (discussed below).NPO (Non-Profit Organization) sector andNFPO (Not-For-Profit-Organization) sector,which wrongly suggest that no profits may be accumulated. In reality, both the taxable and non-taxable sectors can earn profits, but the latter must use them for the good of society rather than distribute them for private gain, as is discussed in Appendix B.  Use of the NPPO instead of NPO or NFPO clearly tells us that profits can be accumulated (as is true for all TEOs).

              Globalization is possible since the 1989 fall of the Berlin Wall and the subsequent collapse of the statist model in most of the developing world. Former command economies such as those of Eastern Europe lack the funds needed to decentralize economic and social decision-making and activity.              The problem facing former statist countries, however, is that decentralization depends upon:

1. establishing civil society needed to provide the basis for democratic politics, and  

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2. generating local funding to make up for the collapse of state expenditure in such areas as education, research, and social welfare.

              The Mexican model for attacking the excessive power of the state is of interest to countries worldwide that seek to:                            (a) privatize industry and land,                            (b) downsize the role of central government, and                            (c)  join into free trade.[43] To this end, the Mexican model stimulates the inflow of both tax-paying and tax-exempt funds from the United States.              Although most policymakers and observers are aware of the free trade agreement methodology for achieving the flow from the United States of FPPO investment funds into Mexico, few are aware of the model achieved by Mexico for attracting the inflow of TEO grantsfrom the United States.              Given the importance of the U.S.-Mexican model, it is unfortunate that U.S. tax law is written in verbiage difficult to understand. Interpretation of American law is problematic because it usually follows U.S. legal jargon too closely to be very clear.  Indeed, this problem has complicated Mexico's adaptation of its TEO legal code that is intended to provide compatibility with U.S. law but does not yet fully do so.              Mexico is interesting to countries trying to break the power of statism because, although Mexico did not prevent the development of a tax-exempt sector as in Eastern Europe, it did discourage the development of modern TEO activity. Mexico is now attempting to undo the state’s direct and intrusively detrimental control over the finances of such TEO activities as health and welfare.              To encourage globalization by developing in former statist countries the model of tax-exempt legislation, then, let us stress that a global NPPOs standard offers outward opening while encouraging:

a.              inflow of massive U.S. NPPO tax free funds needed to rebuild the citizen social conscience and responsibility that was quashed by central planning; b.  establishment of modern tax exempt NPPOs funded by:                            i. tax deductible donations from foreign as well as domestic investors.

                                                  ii. tax free transfers of funds from foreign                             NPPOs

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              In order to optimize income of foundation funds would be optimal that Eastern European countries use the incentive of tax deductibility to require that new domestic private firms and foreign firms contribute a minimum share of their taxable income to establish NPPOs and/or donate funds to NPPOs. This would assure that FPPOs leave a share of their profits in the host country. The amount could be as low as one or two percent.              While many U.S. foundations are assisting TEOs around the world, they do not necessarily focus on the need to change the tax-exempt tax codes of individual countries. Without modern tax codes that mesh around the world with the U.S. standards, such a major NPPO as the New-York based Soros Foundation which is oriented almost solely to Eastern Europe, finds itself to be in the unenviable position of having little competition.                             Competition among TEOs not only diffuses the disappointment and potential political problems arising when funding decisions are made by only one (or even a few) foundations but also gives alternatives for priorities to be funded as well as varying opportunities to grantees.  Competition among NPPOs will be enhanced immediately in Romania as it is already in Mexico by establishing the new legal framework.              To the end of helping countries develop an alternative TEO law that regulates the raising, investing, and granting of tax-deductible funds, it is appropriate here to synthesize and reword U.S.-Mexican NPPO tax law because its concepts constitute the only standards approved by more than one country. Synthesis and rewording is required to make clear the real meanings “hidden” in the U.S. legal jargon of Section 501(c)(3) of the Internal Revenue Code.  Because the U.S. code is at once extensive and complex in its provisions, in the USA the NPPO organizations appear under the code usually called "501C3s."              Charts A and B show how distinctions are made between the “NPPO” type of TEO (see also Table 1) and a special type of TEO called “Activist Tax-Exempt Organization” or ATEO (see also Table 2). The ATEO is not eligible to receive funds from the U.S. GMF.              TEOs are the “fourth sector” of society’s economic organization, in my view, as is shown in Chart A. Although some analysts have called the tax-exempt sector the "third sector," Chart A shows that in reality it is the fourth sector, not the third sector. [44]              Table 1 lists examples of the NPPOs categorized in Charts A and B, and it classifies them by main functions.[45] Although these organizations are often referred to as “NPOs” (Nonprofit Organizations) or NFPOs (Not-For-Profit Organizations), neither of these two concepts is not used here because they misleading state that no profits may be made. The fact is that NPPOs range from foundations to NGOs is shown in Table 1. The former usually makes grants and the latter receive grants, but such activities are not mutually exclusive. Further, all NPPOs may receive donations and earn interest on their investment of donations and grants in saving accounts or into stocks and bonds. 

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Civil society and Its Implications

              Because the concept of civil society is a dynamic concept and thus will always be troubled by contradictions, its connotations must be connected to practical actions and institutions, to all types of sociability, to communities, and to organizations. Civil society must also go beyond the textual discourse of elite groups. Political society is that element in de Toqueville, which constitutes a necessary supplement to dualist models that contrast the state and its citizens.              The experience of some anthropologists who challenge the Western model of civil society yields, on the one hand, the interesting insight that the dualist model wrongly casts civil society and government in completely pure, contrasting categories.[46] On the other hand, their anthropological view is misleading because the core of its argument, as summed up in the epigram by Buchowski at the outset above, is that non-political, especially family life and village mutual self-help groups, offer an Eastern European model to define civil society. They do not tell us how this non-political model can achieve the organization of society at the local level in order to democratically encourage the development of modern ways of life capable of competing in a world reduced in size by instant communications.                 The irony in such an observation as that made by Michael Buchowski is that he himself suggests the fatal flow in communist thinking wherein many in Central European societies long to return to communist society because they seek to evade personal responsibility. He cannot escape this flaw by wondering whether or not Poland is less “civil-ized” since the fall of communism.              Despite the difficulties, Western civil society and its NGO model have gained prominence as a fundamentally flexible and truth-worthy vehicle for the realization of elemental human yearning for self-expression, self-help, and mutual aid. NGOs not only are an instrument of grass-roots independence, but they may perform an essential function of system maintenance by performing socially useful projects. Buchowski’s social society at the village level was not completely stamped out even in Romania where the most repressive regime in Eastern Europe obliterated villages in the south to break “peasant thinking.” While I can partly agree with Buchowski, my participant-observation of village and folk society in Transylvania, which survived the Ceausescu on-slought, contradicts his conclusion that family and local activity can challenge the Western model for development of civil society as it faces rapid urbanization.

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              That the attempt to create new civil society is well underway in Eastern Europe is manifest in the numbers.  As of 1995 I found in Romania 3,000 more NGOs registered than in 1992. As of 1994, Salamon found in Poland several thousand foundations that were registered with governmental authorities, in Hungary some 7,000 foundations and 11,000 associations.[47]              That they can function without new laws and in the face of competition from QUANGOs is not manifest.In the US, the state-civil society distinction was postulated as a democratic norm and perceived as a necessary condition of democracy.[48]    The Changing Face of American Philanthropy              America's non-profit sector is healthy and effective. It is built on a compact between government and citizenry. In 1938 Congress noted that:

“the exemption from taxation of money or property devoted to charitable... purposes are based on a theory that government is compensated for the loss of the revenue by its relief from financial burden ... and by the benefits of promoting the general welfare.”[49]

The contention that abolishing the tax deduction now going on in the US legislative sector is wrong.  Elimination of the charitable deduction under certain flat-tax proposals would not end giving, but would reduce it by substantial amount.              American civic politics is being dramatically transformed by fundamental shifts in philanthropy. Bill Gates has recently set the agenda of wiring the nation's free-library system, which was originally established mainly by the philanthropy of Andrew Carnegie in an earlier era. George Soros is using philanthropy to urge an end to the War on Drugs. Milken and Annenberg are using philanthropy to forge new entrepreneurial activity.[50]              The strength of America’s non-profit sector lies in people's freedom to choose the cause they want to support. As the experiences of the East Central European countries have proved, the government cannot be a better steward of their generosity than the charities they sustain. The non-profit sector is in essence being supported by the government and conscience synthesized, characteristics that lead to the functionality of foundations and civil associations, such as diversification of group interests.The myriad of associations have perfected their strategies for a cosmopolitan community, organized internationally in network forms

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of organization characterized by voluntary, reciprocal, and horizontal exchanges of political information and services.             

The direct result of this phenomena is also today’s criticism of the IMF and World Bank policies by students, civil society activists, religious groups, environmental groups, organized labor and ad-hoc coalitions which I consider essentially short-sighted.The “civil society” in this case is directing its actions against two driving forces of globalization and standardization that actually promote development. The protests at Seattle and Washington against globalism makes use of publicity tactics –a “social netware”- to generate support abroad.[51]              The movements strength lies in its lack of hierarchical structure, lack of a “head” made it hard to “decapitate”.              This has proved to be a weakness as in the case of the highly praised Zapatista model (campaigned against NAFTA) and its transnational networking linking local activists with media and activists abroad that used increasingly sophisticated techniques, proved to be of no avail ultimately, losing its center of gravity.              Shifting away from the mediating approach, lately, even radical tactics have been adopted, such groups as ELF, representing the ecological movement, intend to inflict financial damages on corporations, since they are unresponsive to their ecological and worker’s needs.[52]Yet without the PC (term coined by the networker Stewart Brand) networking might have remained stuck (the IBM PC launched in 1984, the world wide web, created by Tim Berners-Lee, in Europe). The Net facilitated the social and political liberation in diverse places such as China, Mexico and Myanmar.Extra reading: In my recent book, decentralized Globalization, I am showing how the role of the state has declined in the face of globalizing world trade blocs, which have helped citizens to organize internationally as statist social safety nets have declined the past century. Conclusion; Mexican NGOs have surpassed tremendous barriers, especially during this administration of PRI-ista Pena Nieto, President. Drug lords in cahoots with the administration have been attacking relentlessly all facades of civil engagement, making life impossible in 5 states of Mexico. A leader of civil defense, One hero, José Manuel Mireles Valverde was trying to keep the gangsters out of the community, as he represented the civil guards. It was “The Night’s Templar” Narco group that he was up against for more than 20 years. He fought against Narcos all his life, he armed the Rural Police force too. Nothing was quite as it seemed in 2015, when he was attacked again, this time by governmental forces. Ha had been arrested in 2014 by the federales for violating Mexico’s federal law of fire arms and explosives.

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Valverde’s civic attitude has proven that the Community can unite against the Narcos, and can prevail. He is the quintessential civil society leader of Mexico.One can learn more about his teachings in the 2015 film called “Cartel Land.”This is a very complicated case. Here is the Wikipedia file on Mireles:

The Case Of Dr José Manuel Mireles Valverde

José Manuel Mireles Valverde

Born 24 October 1958 (age 59)Michoacán, Mexico

Other names Doctor Mireles

Occupation Medical surgeonFormer Autodefensa leader

Criminal charge

Detained for violating Mexico's Federal Law of Firearms and Explosives[1]

Criminal penalty

In process

Criminal status

On parole, awaiting trial[2]

Spouse(s) Ana Valencia Chavez[3]

(Divorced)

Allegiance paramilitary self-defense groups

Conviction(s) Violating Mexico's Federal Law of Firearms and

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Explosives

José Manuel Mireles Valverde (born 24 October 1958) is a Mexican medical doctor and former leader and founder[4] of the paramilitary self-defense groups that fought against the Knights Templar Cartel and other drug cartels, in the state of Michoacán and others, in México. Mireles emerged as an important figure within the self-defense militias during the fall of 2013 as self-defense groups were fighting against the Knights Templar Cartel in Apatzingán, Tepalcatepec, and other municipalities on the Michoacán coast. He describes his motivation to participate in the armed self-defense groups as stemming from the abuse of the Knights Templar Cartel against himself and his family – he has himself been kidnapped by the cartel, which has also murdered several of his family members causing him to take up arms in defense of his community of Tepalcatepec.[5]

Early life

Some media outlets state that in 1988 he served time in prison for allegedly producing marijuana, which Mireles has denied stating his imprisonment was for practicing medicine in Michoacán without an active state license.[6]

He traveled to the US where he worked as a social activist. Upon his return, he started some political work and ran for the Mexican Senate in 2006.[7][8]

Involvement in Autodefensas

Mireles states he joined the self-defense group to protect his family against the Knights Templar Cartel, after he was kidnapped by the cartel which demanded money to release him, and also had murdered several of his relatives.[9]

On 4 January 2014, Mireles was injured in a plane crash[10] as he was traveling to the community

of Zicuiran.[11][12][13] It is known that the President of Mexico wanted him dead.

Two weeks later the Mexican Government initiated efforts to control the escalating violence in Michoacán by deploying the Army against both the cartels and the self-defense militias.Initially, a video of a badly wounded Mireles was published in which he urged the self-defense groups to lay down their arms and cooperate with the Army. But subsequently he appeared in a different video in which he stated that the self-defense groups would lay down their arms, but not until the Army had taken steps to secure their safety by curbing the activities of the Knights Templar Cartel,[14] including the capture and/or death of the cartel's top leaders: Servando Gómez Martínez (alias "La Tuta"); Nazario Moreno González (alias "El Chayo"); Enrique Plancarte Solís (alias "El Kike"); Dionicio Loya Plancarte (alias "Tío Nacho"), among others.[15]

Mireles later stated in an interview with Carmen Aristegui that the first message was the result of government officials requesting him to read a message written by them, which they then edited to

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make it look as if he was making the statement of his own opinion.[16][17] The Mexican Secretary of State Miguel Angel Osorio Chong denied that the government had any role in producing the initial message.[18]

In March 2014 some members of the council of Autodefensas distanced themselves from Mireles, stating that he was no longer a member of the leadership nor the official spokesperson of the Autodefensas in Michoacan.Mireles earlier functions were taken over by his former bodyguard Estanislao Beltran alias "Papa Pitufo".[19][20][21]

Other Autodefensas maintained loyal to their former faction, by rejecting Estanislao's leadership, after they realized he was planning on joining the Government Rural forces.

Arrest

On 27 June 2014, Mireles was arrested with 45 other people in Lázaro Cárdenas, Michoacán by Mexican authorities for violating Mexico's Federal Law of Firearms and Explosives.[22] The government had pledged to arrest civilians who were armed and did not form part of the Fuerza Rural ("Rural Force") police.[23]

This action happened one week after a TV interview that was cut short as a consequence of a phone call ordering the termination of the interview, in which Mireles was denouncing the involvement of Mexico's president in the Michoacán irregularities.From prison, Mireles has sent messages to the nation through his former lawyer Talia Vazquez (the current is Javier Livas) and through the Grillonautas YouTube channel. In a message released in 2015, he stated: "Not only Manuel Mireles is innocent, but all self-defense members that had to carry a weapon to defend their home, their family, their property, because there was no one to help them."[24]

In 2016, Mireles issued an apology to the government and his family for the disrespect he has shown official institutions in the country. In a video statement posted on social media, he said, "I want to apologize, through this message, to the Mexican government and its official and unofficial institutions, and its nation-wide structures, for disrespecting them with words or actions, for offending them with my omissions and civil disobedience." Charges against him were dropped by the Attorney General, however Mireles remained in jail.[25]

ReleaseAfter almost 3 years in prison, on 11 May 2017, a federal judge granted Mireles parole after paying a bond of 30,000 pesos, and was conditioned not to leave the state of Michoacán or the country.[26][27]”.

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Many intellectuals I have worked with in Mexico during the past 26 years want to leave the country

because of the constant violence. I have spent 4 months in Morelia, Michoacån in 2001, but back then the

city was super safe and full of tourists, as Morelia is one of the most beautiful colonial cities in Mexico. Dr

José Mireles Valverde is the ultimate freedom fighter.

Bibliography:

[1] Teodor Melescanu, “Noua era a tarilor mici,”Lumea Magazin, 28 Jan, 2000 http://www.lumeam.ro/nr4_2000/noua_era.html [2]  Iván, Berend, Central and Eastern Europe   1944-1993   Detour From the Periphery to the Periphery  , Berkeley, University of California, 1993, p. 218 [3] Mediafax, Bucharest, April, 1997, p. 6, [4] Mircea, Daniciuc, Romania Libera,, Bucharest, 1995, p.5 

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[5] Richard Rosecrane, “The End of War Among Trading States,” New Perspectives Quarterly, February, 1995, p. 9 [6] This analysis of the  QUANGOs grows out of my 1992  discussions with Thomas Carothers  at USAID Mission in Bucharest. Carothers (author of Assessing Democracy Assistance: The Case of Romania, 1996) is concerned that the QUANGO (known in the USA as the GONGO--government organized NGO) offers incentives that NGOs cannot, e.g. connection to the government, free benefits from the QUANGO, etc. [7] Many analysts of charitable activity mistakenly think that the NGO sector is the “the third sector” in society which supposedly has only two others:   the private and public sectors. In reality, the mixed private and state sector constitutes the third sector. [8] Stokes, 1996, passim. [9] Gellner, 1991, p. 495. [10] Jan Jósef Lipski, KOR A History of the Workers’ Defense Committee in Poland 1976-1981, 1985, p. 183 [11] Václav, Havel, The Power of the Powerless, 1990, p. 45 [12]  Vaclav, Benda, The Parallel Polis ,  1978, p. 15 [13] Elemér Hankiss, East European Alternatives, New York, Oxford University Press, 1990, p. 147 [14] Ivan Berend, Central and Eastern Europe   1944-1993   Detour From the Periphery to the periphery  , Berkeley, University of California, 1983, p. 10 [15] Jan Jósef Lipski, KOR A History of the Workers’ Defense Committee in Poland 1976-1981, 1985, p. 90 [16] Jan Jósef Lipski, KOR A History of the Workers’ Defense Committee in Poland 1976-1981, 1985, passim [17] Vladimir, Tismaneanu, *1996, p. 145 [18] Tismaneanu, 1996, p. 144. [19] Griffith, 1990, p. 172

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 [20] Andrew, Arato, 1990, p. 14 [21] Carothers 1996, p. 67 [22] Dorel Sandor, 1994 p. 37* [23] *Lucian, 1994, p. 39 [24] PROFMEX is consulting with the University of Cluj to develop the idea of establishing in Romania foundations that will automatically be recognized by the U.S. IRS, as are Mexican foundations. Such recognition expands the  base of donors and eases the flow of tax exempt funds. [25] Michael, Buchowski, *1996, Chapter 4. [26] Hann & Dunn, Civil Society Challenging Western models, New York: Routledge, 1996, p. 126 [27] Lucian in Regulating Civil Society, 1995, p. 76 [28] Lucian,  1996, p. 70 [29] Regulating Civil Society 1995, p. 76 [30] “Charitable activity,” as defined in the USA (which has the world’s most comprehensive law as well as the largest and most important pool of foundation funds), encompasses what I call the HEW-SEC-L spectrum: health, education, welfare, scientific, ecological, cultural, and literary activity, be it in the USA or anywhere in the world. See the blue-prints project. Ballesteros, Nino, C. , "Rocatti Rechazza las  aberrations de Al", Epoca, México, D.F.,  Octubre 1997,  No. 332, p. 12 [31] Katherine, Verdery, Romania, 1996, p.106 [32] Transitions, Open Media Research Institute, Vol. 7 February 1997, p.4 [33] Salamon, Lester, “Civic Society in Eastern Europe,” Foreign Affairs, Vol. 73, 1994, p. 113 [34] Dorel, Sandor, 1995, p. 36 

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[35] Vladimir, Tismaneanu,  1996, p. 182 [36] *“Difficult Transition,” Los Angeles Times, February, 1997 [37] Sandor Dorel, “Romanian Nongovernamental Sector,”  Regulating Civil Society , Sinaia,, may 11-15, 1994, p. 37 [38] Thomas, Carothers The Learning Curve, Washington, Carnegie Endowent for International Peace, 1996, pp. 92 - 94 [39] Ballesteros, Nino, C. "Rocatti Rechazza las  aberrations de Al", Epoca, México, D.F.,  Octubre 1997, No. 332, p. 12. [40] Jose, Luis Méndez, “Las ONGD hábitat, entr el estado y el mercado,” Organizationes civiles y políticas públicas en Mexico y Centroamerica, México, Academia de investigatione en politicas publicas, Miguel Angel Porrúa, D.F., 1998, p. 166 [41] John, Arquilla and David Ronfeldt, The Zapatista Social Netwar in Mexico, RAND Arroyo Center, 1998  [42] Sergio Aguayo, Las Organizaciones No Gubernamentales de Derechos Humanos en México: entre la democracia participativa y la electoral, Ford Foundation, 1997, p. 14

43. Jose Mireles Valverde in Wikipedia.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Copyrighted Olga Magdalena Lazin, 2017

Thank you for reading my Book! 

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[43]  

Even though Mexico is a small country, it has been able to play a large role on the world free-

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trade stage--see James W. Wilkie and Olga M. Lazin, “Mexico as the Linchpin for Free Trade in the

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Americas,”  in James W. Wilkie et al., eds., Statistical Abstract of Latin America (SALA), vol. 31:2

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(1995), pp.  1175-1203.  On Mexico, the USA, and global trade, see Olga M. Lazin, “Emerging

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World Trade Blocs: The North American Free Trade Area and the European Union Compared,” in

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the same volume of SALA, pp.  1205-1219.

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[44] 

Use of the concept “third sector” is so misleading that it confuses tax writers in former statist

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countries as they seek to move to a nonstatist economy.

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 [45] It is important to note that under U.S. TEO law, the NPPOs given in Charts A and B and in Table 1 are all classified as “501c3s.” [46] Hann and Dunn, 1996, passim [47] *Salamon, 1994, p. 112 [48] The Economist, 18 January, 1997. p. 2.[49] Dorothy Riding, The Economist, April 18, 1997, p. 2[50] Schrage, Los Angeles Times, p. D4.[51] Joseph, Kahn, “Globalism Unites Many-Striped Multitude of Foes,” New York Times, April 15, 2000 

[52] Murphy, Kim, “Disruption is Activists’ business, Hacktivism” Los Angeles Times.

Copyrighted by Olga Magdalena Lazin, 2017.

                             

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