Governance Thesis Paper

8/8/2019 Governance Thesis Paper

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Private & Public Governance

November 1, 2010

Final Thesis Paper

Thesis Question

What inherent flaws of governance result from functioning in a monetary economic system,

and how does this system contribute to various societal problems and global challenges?

By Markolf von Ketelhodt

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Table of ContentsThesis Question..........................................................................................................................................1Thesis Statement........................................................................................................................................3Introduction................................................................................................................................................3The role of governance and political-bureaucracy in a monetary economy..............................................3The problems and limitations of governance and bureaucratic politics within a monetary economy.......5The role of money and banking systems..................................................................................................10Conclusion:..............................................................................................................................................12A Resource Based World Economy and existing 'real-life' innovative projects that are possiblealternatives to our current systems that are in place................................................................................12

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Thesis Statement

The role of governance within a monetary economic system has served humanity well as a guiding

platform for social, industrial and economic growth and development. However, humanity now has the

technological and intellectual resources to transcend the traditional role of governance within economic

systems, to create a more sustainable world. The true governing power within monetary economic

systems lies in monetary policy, not elected politicians and government officials.

Introduction

This paper explores the inherent limiting aspects a monetary economic systems has on social

development and how the role of governance and bureaucratic politics presently contribute to these

limitations. This paper explores the general concepts of governance and bureaucratic-administrative

politics and how these function within a monetary economy, and discusses the limitations and problems

associated with them. Possible alternatives that could resolve various problematic factors of our current

societal framework will also be explored.

The role of governance and political-bureaucracy in a monetary economy

To begin with discussing the thesis statement, it is vital to understand and define what governance,

bureaucratic politics and a monetary economy are, and how modern society functions in terms of the

private and public sector.

Modern societies means of operation is largely divided between two sectors; the public sector

and the private sector. The public sector consists largely of government institutions whilst the private

sector is mainly run by private groups or individuals. 1 Public services are those services that

governmental institutions provide to the general public and are largely financed through taxation. These

services include trash disposal, the sewage systems and on a larger scale health care systems and public

education. It is important to realize that the boundary between the public and private sector is not a

1 Website: http://www.bized.co.uk/educators/level2/busactivity/activity/intro15.htm , sourced September 13, 2010

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clear cut, defined boundary. Blurring between the sectors occurs in a number of different ways.

Privatization or etatisation, deregulation or re-regulation, marketisation or collectivization as well as

incorporation or corporatization are all factors that significantly influence the boundary between the

private and public sector. 2

Governance falls under the public sector and is the act of governing in terms of decisionmaking, granting power, problem solving and verifying performance, preferably to enhance and

encourage positive outcomes. The act and responsibility of governing can fall under one individual or

the whole of humanity. In political terms, governing can fall under various forms; either democratically

elected, enforced dictatorships or communistic governance, Islamic governance, non-profit governance,

etcetera. 3 Ideally, the role of any government can be summarized to assist in defining the most humane

and appropriate ways to manage environmental and human affairs. 4Besides ensuring and enforcing a

safe and comfortable environment for the citizens within the nation, a government is also responsible to

safeguard and secure the nations people from external threats or enemies.

It is clear that there are various forms of governance, but traditional functions of governance

include three main concepts: hierarchy, markets and networks. Hierarchy primarily consists of a top-

down form of accountability in state bureaucracy.

The concept of networks in governance concerns the relationship between the public and private

sector, also known as PPP (Public-Private-Partnership) or with collaboration of community

organizations. 5

Markets involve the role of the market mechanism where competition serves to allocate anddistribute resources, and acts as a incentive for technological and social development. The function of

the market mechanism and its operations generally fall under government regulation but predominantly

function within the private sector. 6

Bureaucracy is the combined structure of various organizational branches of the government,

private corporations and other interest groups that aim to regulate governmental decision making and

procedures. Max Weber describes the bureaucracy as a ''rational'' way for society to organize itself;

they are found not only in government but throughout society. 7

2 Week 2 Power Point Presentation about the Blurring of the boundaries between the Private and Public Sector, by F. vander Meer, September 14, 2010

3 'The Best That Money Can't Buy ', Jacque Fresco, 2002, 714 'The Best That Money Can't Buy ', Jacque Fresco, 2002, 85 Public-Private Partnership, http://ppp.gov.ie/ , sourced October 28, 20106 Wikipedia, Governance, http://en.wikipedia.org/wiki/Governance , last modified on 7 October 2010, sourced on October

27, 2010.7 Pearson; Politics in America, http://wps.prenhall.com/hss_dye_politics_6/27/7114/1821356.cw/index.html , sourced

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Various models, policies and laws are developed in an attempt to ensure that a governments

actions are desirable for the general public and do not fall victim to corruption, political infighting,

favouritism such as nepotism, among other degenerations. But laws, policies and political models are

just guidelines to preferred outcomes, and often do not resemble reality at all. Woodrow Wilson, the

28th

president of the United States was aware that the political models hardly ever come close to theconditions of reality. Wilson's political-philosophical ally, Max Weber, a famous economist, historian,

lawyer and sociologist noted that a real bureaucracy will always be less optimal and effective than his

ideal type. 8 Both Weber and Wilson were advocates of the so called 'Formal-Legal Model'. In today's

society, the administrative relationship within bureaucratic politics, only partially resembles the

Weberian and Wilsionian models characteristics. 'Modern' models such as the Village Life Model , the

Functional-Village Life Model , the Adversarial Model and the Administrative State Model all influence

the reality. These models are frameworks that aim to control the behaviour between political office

holders and civil servants, and hence government activities in general. 9

Both governance and political-administrative bureaucracy work together and act as the

controlling and regulating authority of modern society. One thing that is often missed when exploring

the nature and role of governance and bureaucracy, is in what context and in what environment they

exist and function in.

All of the historic, as well as present day, governing bodies and bureaucracies function(ed)

within a economic framework that use(d) barter, money or credit as a mechanism to trade goods and

services. At present, the world economies use money, in form of different currencies as the generallyaccepted medium of exchange. This is exactly what a monetary economy is; a society's economy

where products and services are traded in exchange for money. 10

The problems and limitations of governance and bureaucratic politicswithin a monetary economy

The development of the economic systems throughout history has served humanity well and evidently

resulted in the extraordinary technological progress, which excelled during the industrial revolution. It

October 23, 20108 Wikipedia, Bureaucracy, http://en.wikipedia.org/wiki/Bureaucracy , sourced on October 23, 20109 Representative Government and Top Administrative Officers: A Comparative Historical Approach to political-

administrative relations , Caspar F. van den Berg, Frits M. van der Meer, Jos C.N. Raadschelders, page 1310 Investor Dictionary, Monetary Economy, http://www.investordictionary.com/definition/monetary-economy , sourced on

October 27, 2010.

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also increased the standard of living in numerous countries, increased global awareness of other

cultures and can in essence be described as globalization. This predominantly benefited the western

nations, or so called Economically More Developed Countries (EMDC's).

Even with all the good that economic and technological developments brought, humanity at

large still suffers greatly from various problems that still persist; unemployment, hunger, victims of war, victims of curable diseases, over population, environmental changes, unequal distribution of

resources, exploitation of less developed countries by stronger nations, deforestation, poor sanitation,

lack of safe drinkable water, and the list goes on. All of these problems should be the number one

priority for governments to solve on a national and international level, but where there is no profit to be

made, there is little incentive to lend a helping hand.

Besides the fundamental 'natural' problems that face humanity, many problems arise from the

monetary economic system it self. Jacque Fresco, a social engineer and industrial designer explains that

all of the world's economic systems socialism, communism, fascism, and even our free enterprise

capitalist system perpetuate social stratification, elitism, nationalism, and racism, based primarily on

economic disparity. According to him, as long as a social systems uses money or barter, people and

nations will seek differential advantage by maintaining their economic competitive edge or by military

intervention. 11 The main problem is that in a monetary economy the aim is to generate profit and the

concern for the well-being of people and environment is always second. This is true for all institutional

levels, from governments to private corporations.

In his book The best that Money can't buy Jacque Fresco points out the flaws of the currentsystems as follows: Governments enact various laws in an attempt to control and manage society. He

argues that everyone is screaming for laws that would relieve hunger, poverty, oppression, corruption,

war and scarcity but the answer lies not in laws, but in removing the conditions that are responsible for

creating the problems in the first place. A law can not solve any problems, for if it could, there'd be no

more crime. Instead laws aim to manage or avoid problematic human behaviour. He also argues that

when a nation creates laws to regulate human behaviour, the majority of legislators are unaware of the

factors responsible for the need of these laws. 12

Furthermore, Fresco finds no evidence of deliberate planning, by any government to design a

sustainable and workable social system that would improve the lives of everyone .13 No government

11 'The Best That Money Can't Buy ', Jacque Fresco, 2002, 3112 The best that Money can't buy Jacque Fresco, 2002, pages: 71-7413 The best that Money can't buy Jacque Fresco, 2002, pages: 71-74

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asks: 'how do we get rid of poverty?', 'how do we eliminate hunger world wide?', 'how do we eliminate

crime altogether?', etcetera. These are technical problems, which demand technical solutions, and the

problem herein lies, that the technical solutions that could solve most problems, often do not generate

any profit. Technicians, engineers, sociologists, biologists, psychologists, scientists in general, are those

who seek out to identify a problem and then aim to solve it. Lawyers, politicians, business men andwomen, and government officials have never been taught to solve problems and are not paid to do so.

They are paid to generate profit through managing problems. Crime, corruption and misbehaviour on

commercial or individual levels, can be managed by creating and enforcing laws, but cannot be solved.

Unequal distribution of resources is the main cause for individuals to commit a crime, and laws

cannot solve the problems of (financial) inequality. If a person is hungry and has no money, no capital

to trade in order to acquire food, he or she will be forced to steal, no matter what laws are in place. The

task to solve the problems of crime and other unfavourable behaviour, is that of sociologists and

psychologists, not politicians. The first thing that behavioural biologists learn, is that the environment

an organism lives in, shapes and influences the behaviour of it .14 If there is a scarce amount of food in a

chimpanzee cage in a zoo, the animals will fight each other in order to secure enough food for them

selves. The same applies to chimpanzees in the wild. So its not the cage or the jungle that is the only

factor that constitutes the nature of the environment, but the availability of resources is an integral part

of the environment. This example of how scarcity influences behaviour is not only true for

chimpanzees.

Furthermore, in a monetary economic system, crime is a multi-billion dollar industry. Privatelyowned prison systems, guards, private security companies, police, lawyers and judges all function and

earn a living through managing crime. Eliminating crime all together, would put a lot of these people

out of business. Crime, as harsh as it might sound, creates jobs and it almost seems 'unprofitable' to

eliminate crime all together.

In a monetary economy, or one could even say, a monetary environment, where artificial value

is assigned to natural resources, goods and services, scarcity will always be an integral part of the

environment and unfavourable behaviour of those who are less fortunate will persist and is a natural

consequence. The worst thing that occurs within a monetary economy, is that scarcity is often

encouraged and maintained, and if something cannot be sold, it is thrown away instead of given to

14 EMBO Report, Science & Behaviour, The biology of behaviour: scientific and ethical implications ,http://www.nature.com/embor/journal/v8/n1s/full/7401012.html , sourced October 30, 2010

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those who might need them. A good example of this is when many food products from Africa were

destroyed because they could not be flown into Europe, due to the volcanic eruption in Iceland.

Furthermore, if something is scarce, the price or value of the good or service rises, hence more

profit can be made. This is part of the economic laws of 'Supply & Demand', and corruption occurs

when supply is manipulated so that profits can be increased.This is especially dangerous when a specific industry has a monopoly over a good or service.

These problems are commonly associated to the private sector, which is misleading. The private sector

and public sector work together, especially when it comes to the natural resources. The blurring

boundaries between the private and public sector, also contribute to the unclear nature of these

problems.

If a government can make more money on oil, by holding a monopoly for it, it will do so and do

anything deemed necessary to keep its position of power. This is corruption in its most fundamental

form. Not only is a monopoly over resources dangerous, but a monopoly over a currency is just as, if

not more dangerous as it perpetuates corruptive behaviour, encourages scarcity, financially cripples

already weak nations and can even lead to international conflict.

The US Dollar is a good example of exactly this, and shows how unfavourable behaviour of

governments and large corporations is motivated by keeping a competitive edge over other nations on

the international market. In the article Macroeconomic and Geostrategic Analysis of the unspoken

truth, William R. Clark discusses the implications that the petrodollar has on global trade and

international relations.The petrodollar is a term that was coined in 1973, by Ibrahim Oweiss, a professor of economics

at Georgetown University, and describes US-dollars that are used to buy or sell petroleum from OPEC

nations (Organization of the Petroleum Exporting Countries), which include Iraq, Angola, Iran,

Ecuador, Nigeria and many others .15

It is common knowledge that whenever one buys oil, gold, platinum or other natural resources

on the international market, the exchange is always done using the US dollar. To explain how this came

about requires a book in itself, but what it implies is that the US dollar essentially monopolizes global

trade.

To illustrate the petrodollar cycle it is a good idea to use a simplified example: When a country

like Japan wants to buy petroleum from a OPEC nation, they need to pay them in US dollars. Since

15 Wikipedia, petrodollar, http://en.wikipedia.org/wiki/Petrodollar , sourced October 28, 2010

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Japan does not use the US$ as its own currency, they have to exchange goods and services with

America in order to acquire US$. So they send products like Mitsubishi, Yamaha, Hello Kitty and other

Japanese goods and services to the US in exchange for US$. Now that Japan has US$ it can buy

petroleum from an OPEC nation. After the transaction, these dollars are in the possession of that OPEC

nation, which undoubtedly also has it's own currency and needs to get rid of these dollars. It does notneed to buy petroleum itself, since it's a producer, but can use those dollars to buy gold, platinum or

other resources, or it can choose to save the money in respective banks.

According to John Perkins, author of the international best seller Confessions of an Economic

Hitman, in the case of Ecuador, most of the dollars it earns from petroleum export flows directly back

to the US to pay off its foreign debt 16. Not to mention that most companies that pump oil in Ecuador,

such as Texaco, are US based companies. The petrodollars earned through oil export flow through the

institutions such as the IMF or other international banking systems, and eventually end up back in the

US. Essentially, Ecuador is getting nothing in return for its oil. The headlines of a BBC article from

December 13, 2008, substantiates Ecuador's debt problem and reads: Ecuador is to default officially

on billions of dollars of foreign debt it considers ''illegitimate'', says President Rafael Correa 17.

William R. Clark goes so far to say that this petrodollar cycle was the reason for the war in Iraq,

since Saddam Hussein switched from selling oil in dollars to Euros, and this switch, if replicated by

other OPEC nations would have an immense impact on global trade. If this theory holds any merit, one

can see how a governments behaviour is directly influenced by macroeconomic conditions and

influences geopolitical relations and stability.These problems of global trade do not only concern natural resources, but everything from

clothing production sweat shops in China, to the agriculture sector. Policies like Fair Trade aim to

manage these problems, but again, they cannot solve them.

Further problems arise when blurring between the private and public sector occurs and this is

especially relevant when considering the relationship between Dick Cheney, defence secretary under

the Bush administration and two times running Vice President of the United States, and Haliburton, a

private construction company that is employed in the Iraq war. During the Clinton administration,

Cheney was out of the white house office, but acted as the CEO of Haliburton, in which he still holds a

majority of the shares. One can question whether Haliburton's involvement in the Iraq war, was

16 Confessions of an Economic Hitman , John Perins,17 BBC, Ecuador defaults on foreign debt , http://news.bbc.co.uk/2/hi/7780984.stm , Page last updated at 00:49 GMT,

Saturday, 13 December 2008, and sourced October 30, 2010

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influenced by the position held by Cheney. The fact that private companies are involved in military

conflict in the first place begs the question whether they are aiming to resolve the conflict or prolong it.

Prolonging it, in fact would mean longer business contracts and hence bigger pay checks for these

companies. Blackwater, the largest privately owned 'security' company, Typhoon and other companies

also benefit when armed conflict occurs. Another problem that these companies pose, is that they donot fall under military or governmental accountability. They are private companies, and hence, their

violations of law, must be dealt within the legal system of the country in which the crime was

committed. This is especially problematic, if the country in question does not have a functioning legal

system, and hence atrocities such as those that occurred in Abu Ghraib or Guantanamo Bay, can almost

go unpunished.

In a monetary economy the well-being of the people within any nation is rarely on any

governmental or private organizations list of priorities. The distribution of wealth and resources is and

always will be unequal and poorly managed, simply because of greed and personalistic interest in

accumulating wealth. The problems that are associated with governmental or private institutions are

predominantly rooted in the problems that arise from the use of money. Governance in a resource based

economy would be less prone to support or encourage unfavourable behaviour, because it is/will be

designed to function without the use of money, debt, credit or any form of artificial value that promote

deferential advantage.

The role of money and banking systems

Besides understanding how money is used on a micro-and-macroeconomic scale and how it influences

international relations, it is essential to understand how money is created in the first place and how

governments are involved in this process. Almost all monetary policy is carried out through national or

international central banking systems. In Europe its the European Central Bank which implements

monetary policy, in Britain its the Bank of England and in the United States its the Federal Reserve

Bank. It is important to realize that these banks are not owned or controlled by the government.

The banking systems work in the 'Grey area', the 'blurred boundary' between the public and

private sector. The Federal Reserve Bank, for example is the central banking system in the U.S. and it's

'duties' are to conduct the nation's monetary policy, supervise and regulate banking institutions,

maintain the stability of the financial system and provide financial services to depository institutions,

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One thing is very important to understand, and that is that the behaviour of these international

bankers, of corrupt government officials and CEO's is a bi-product of the environment they function in.

To get rid of this unfavourable behaviour, one has to get rid of the environment that encourages and

allows such behaviour to begin with.

Conclusion:

A Resource Based World Economy and existing 'real-life' innovativeprojects that are possible alternatives to our current systems that are

in placeThe visionaries and political ideologies attempt to improve the lives of people by instigating changes

within the established social structures of a monetary economy. The communists aimed to end

capitalism and advocate state-ownership, whilst the Fascists create dictatorships of the rich and

powerful. Democracies attempt to secure international peace and liberate people from oppression by

giving them the power to vote, whilst religious groups aim to spread their beliefs and crusade to

simpler times, advocate family values and the teachings of their charismatic leaders. Non of these take

into account the environment that they all function in. Since all function in the same environment the

behaviour of various groups are all quite similar. Democracies like the US want to spread democracy,

much like Islamic radicals aim to spread Islam.

A proposed alternative to the current systems in place, that aims to eradicate negativedegenerations, is the concept of a Resource Based World Economy, which calls working to improve the

environment itself, by applying the scientific method in accordance with natural law. Promoted and

developed by industrial designer and social engineer, Jacque Fresco, 94 years of age, a resource based

economy is a concept that proposes a system in which all goods and services are available without the use

of money, credits, barter or any other system of debt or servitude. 21 On first glance it may sound quite

idealistic, but on the contrary, this system works by abiding to natural law and using the scientific

method to solve problems. Solutions are arrived at through calculations, evidence and data, as opposed

to personal opinion, political and economical agenda and motivations, or emotional decision making.

The unifying imperative of a resource based world economy is that it regards the world's resources and

technical information as the common heritage of all nations and people, to be used for the benefit of all

and not only the fortunate few. A resource based economy requires a large change in human and21 http://www.thevenusproject.com/a-new-social-design/resource-based-economy

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interpersonal relations so that laws are no longer necessary to control or regulate human affairs. 22 This

can be achieved through devoted and rigorous collaboration of psychologists, sociologists and various

scientific disciplines to work together in setting up and consciously designing a social living

environment that has the human need and necessities at its highest priority.

Instead of making and enforcing laws that would manage certain problems, social engineers andscientists would work towards solving the root of the problems regardless of and unhindered by the

desire to generate profit. Consider the law against driving under the influence as an example: it is

illegal to drink and drive because of the obvious dangers these actions pose to the driver and to

innocent by-standers. The laws against driving under the influence do not solve the problem, since

people still get behind the wheel after one to many beers. Instead of making it illegal with laws, make it

impossible to do so in the first place. The problem is technical, which requires a technical solution.

Instead of using a key to ignite the engine of a car, design a start mechanism that involves a

breathalyser. Most problems within society are technical and require technical solutions, not laws to

solve them.

People will understand that their personal well-being is directly linked to the well-being of the

community. If one consciously designs a environment with the intent to eliminate unfavourable

behaviour, and that motivates humans compassion, empathy and respect towards nature and each other,

a lot of the problems of today could be solved.

The role of governance in a resource based world economy will not be in the responsibility of

individuals who only temporarily serve their country, but would fall under the responsibility of theentire human race. This is where education comes in. A new social design would require a redesign in

our education system.

The entire concept is a post-modern model, which can be used as a guideline to help solve

many of the problems we face today. This is not something that can be achieved over night nor does

Fresco imply that his model is the solution to all problems. The whole concept of a resource based

economy also needs far more in-depth analysis, research and development before it can be applied in

reality. It is but a blueprint for a possible alternative to our current systems of control. Einstein, who

was a personal friend of Fresco, said that one can only solve a problem with a different kind of

consciousness that created it. 23 Law, governance and the bureaucratic administrations of today can

never fully solve the problems simply because many problems that exist today are a result of law,

22 The best that Money can't buy Jacque Fresco, 2002, pages: 6, 71-7423 http://quotations.about.com/cs/inspirationquotes/a/ProblemSolvi2.htm

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governance or economic conditions. Fresco rhetorically asks whether we can grow beyond thinking

that someone has to make decisions for us, and he aims to help creating a society that has a symbiotic

relationship with nature as opposed to a relationship of exploitation and destruction. 24

Word Count: 4507 words (including quotations)

24 The best that Money can't buy Jacque Fresco, 2002, pages: 74

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Documents

Governance Thesis Paper