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Solutions to new global challenges: thinking the unthinkable

A Note by the Director (Ditchley 2002/14)
 
6-8 December 2002
We met at Ditchley over the weekend of 6-8 December for what was something of an experiment.  Drawing our participants from the Governors and Advisory Council members of the Foundations which make up the Ditchley family on either side of the Atlantic, we examined three fundamental and interlinked issues:  the future of liberal democracy;  the future of liberal free market economics and the future of sustainable development.
Our conference was dedicated to the memory of The Honorable Cyrus Vance who, by his intellect and character, had contributed so much to the development of Ditchley.  We also took the opportunity to celebrate Ditchley’s 40th anniversary with an expression of deep appreciation and affection for our founder, Sir David Wills, and for the contributions made by other members of the Wills family over the years.
In a first look at the way in which liberal democracies were now performing we acknowledged that they had taken centuries to evolve in developed societies.  We had perhaps underestimated the challenge of transferring such a system to emerging democracies.  We also thought that the mature democracies were at times delivering a faltering performance.  Measured by the proportion of people voting in elections or becoming members of political parties, there appeared to be no cause for hubris.  And, added one participant, if we were not confident about democracy in our own countries how did we expect to export democracy to others.  We examined whether nation states were an essential framework for democracy and divided between those who were inclined to agree and those who thought that by building up loyalties and inflaming ethnic and other passions, they were part of the problem.  In general it seemed that small democratic countries had a better record in satisfying the aspirations of their citizens.
We went on to try to identify what the essential elements in a democracy might be and concluded that there were no universally applicable models.  Institutional arrangements could differ substantially without ceasing to be democratic.  Nowadays, however, the criteria for democracy went wider than in the past.  Although Athens and 18th Century America were democracies, some of their characteristics would be unacceptable today.  We would now expect a democracy to give equal rights to all, regardless of race, sex or social category.  The central element, we thought, was the ability of “the people” to change their leaders without violence.  The underlying consensus for this could be expressed as the “rule of law”, a system to which all consented.  We also thought that a fair electoral system, a free flow of information, a system of checks and balances to curb the abuse of power, and protection for the losers in the political battle as well as for other minorities, were important elements.  In addition, some thought that a certain minimum access to national wealth, property, education and health were necessary to enable a citizen to participate effectively in democratic politics.  This, argued others, meant that there was a direct connection between democracy and liberal market economics, which itself, was essentially democratic since it provided choice to the consumer.
Applying these elements to established democracies, we were inclined to see a number of problems.  The first was not so much apathy as political disengagement.  Single issues articulated by NGOs and direct action were now increasingly popular, particularly among the young.  Group rights were being advanced against individual rights.  Respect had diminished for politicians and political institutions and voters were inclined to believe that politicians did not understand their concerns or were incapable of delivering what they wanted.  A further difficulty was thought to be the media which seemed more concerned with personalities than policies.  The increasing power of money in the political process was also thought to be a problem for both the established as well as the emerging democracies.  Change in social systems was a slow iterative process while the speed of change overall in the modern world was very rapid.  Finally, one participant observed that we should analyse to which institutions, if any, the alienated had migrated and we should never overlook the anger of the marginalized and dispossessed.  At the end of this review there was no general consensus as to whether liberal democracy in mature democracies was in a crisis or whether it was in an evolutionary phase.
We examined the situation in emerging democracies and agreed that they lacked some of the traditions on which they could build.  We thought this meant that patience was necessary with the, at times stumbling, progress made by the new democracies.  They did not take kindly to too much prescriptive advice nor were they impressed by the double standards, both political, in supporting authoritarian regimes, and economic, in protectionism over agriculture etc in the WTO, practised by the established democracies.
Solutions, were as always, more difficult than analysis.  Some argued that in established multicultural societies we needed to find ways of persuading people from different backgrounds who wished to retain their cultural identities that they shared common interests, rights and obligations with fellow citizens from different communities.  Almost inevitably we turned to education as a way of resolving these difficulties while acknowledging that there was no single institutional reform which would fit all mature democracies.  Other ideas included greater delegation of decisions and their implementation, without losing overall democratic control.  In emerging democracies like those in Central and Eastern Europe including Russia, we thought that the critical moment was breaking through the crust of dictatorship.  The priority should be to develop institutions which embodied the essential elements of democracy.  These institutions could take a variety of forms and would not necessarily be a complete copy of those in the existing democracies.  In the poorer countries we thought that poverty, ignorance and disease were more pressing problems but even these were more likely to be tackled effectively when accompanied by political reform.  The task was more one of offering those countries an adaptable “tool-kit” with which to deal with their own problems.
Some countries, however, completely rejected the concepts of Western democracy.  In this category, we thought, came China, North Korea, Iran and a number of countries of the Middle East.  While having no duty to impose political change on these countries, it was nevertheless a Western interest that change should come and thereby reduce hostility that threatened the West, either directly or indirectly.  In those circumstances, we were inclined to think that the policy followed with the Soviet Union of containment and exercising influence where opportunities arose (including selling our ideas better) might be the best we could do. 
In considering the free market economic model we reached a consensus that no superior economic theory had emerged and that this model had materially improved the standard of living of many millions of people around the world in the past decades.  We also agreed that none of the advanced economies had followed a completely free market model since they had concluded that the consequences were politically and socially undesirable.  Different societies applied the model in different ways in accordance with their culture and tradition.  For example, the fact that 40m Americans did not have health-care cover was acceptable in the USA but would be unacceptable in the EU.
Having accepted that a certain amount of government intervention and control was the norm, we looked at areas where the free market model appeared to be failing.  One participant thought that while it was necessary for governments to control markets, trouble normally arose when governments themselves intervened in the market as operators in their own right.  We identified a number of failings in relation to the operators of the free market economy in industrialised countries and categorised them under the headings of moral, social, risk allocation and environmental.  In moral terms we mentioned Enron, WorldCom, Tyco and others.  Disclosure and an appropriate regulatory framework was thought to be the most effective way of influencing corporate behaviour.  The analogy of a self-correcting pendulum was suggested for market distortions.  Others thought that progress had been a case of two steps forward followed by one backward.
The link between the free market and environment provoked an interesting discussion.  Some argued that the market was not an efficient instrument for measuring ecological costs, most of which were involved with public goods like air, water etc.  Others maintained that this was an incorrect analysis.  What was needed was to “internalise the externalities” – to include in the market price the true cost of the allegedly free public goods.  If that were to happen then the market could become a force for ecological protection and even improvement. 
Throughout our discussion we were frequently confronted by the question of international control to take account of the international dimensions of free markets.  We looked at the existing international trade and financial institutions and the role they had played but thought that “moral hazard” and systemic risk presented problems in an international framework which were difficult to reconcile with the theoretical model of free trade.
As far as the less developed world was concerned, there was general agreement that a rapid and abrupt move to the free market economic model could prove damaging.  One participant commented that the industrialised economies discriminated against the emerging economies.  While free movement of goods, services and capital were strongly advocated, free movement of labour from the less advanced economies was equally strongly resisted.  Many thought that improvements needed to be made to the political, social and business infrastructure, with an accent on education, before free market economies could produce benefits for the many and not just the few.  We also thought the elimination of agricultural subsidies in the advanced economies would be a specific move of great benefit to many countries, particularly in Africa.
Our consideration of sustainable development produced a rich discussion which ranged across bio-diversity, energy, water, resource depletion and climate change.  At the outset we were told that human driven changes to our eco-system were now equivalent to the great forces of nature and that accelerating change was not sustainable.  We noted the large and increasing additions to the world’s population and its effects on our water resources.  It was claimed that our damaged planet was getting poorer rather than richer and that a good guiding principle should be that we should live on the earth as if we meant to stay.  We coined the term “anthropocene”  to describe the age in which we were living to indicate the impact humankind was now having on the environment.  Some sceptical voices were raised.  Given the extreme complexity of the systems involved, forecasting outcomes was fraught with uncertainty.  Population growth might be reversed by an epidemic etc.  However the general view was that environmental degradation was a significant threat to liberal democracy and freedom, and ultimately to human existence.
We elaborated a series of actions which might be taken to help in the fields under discussion which included the establishment of a private international organisation (perhaps modelled on the North American Nature Conservancy) to preserve habitat and protect biodiversity which was important given the destruction of 95% of all organisms in the Permian age;  investment in a large number of alternative “clean” energy projects to lessen the impact of energy consumption on the environment with the goal of giving “clean” energy a competitive advantage over current environmentally damaging sources;  introducing support pricing mechanisms to help with current water supply problems and investing in alternative clean water technologies to develop affordable solutions to water quality problems;  to seek to change values (eg environmentally friendly lumber) to help with resource depletion.  Finally, while noting that the science available was still uncertain, many believed that a prudential approach to climate change was desirable, possibly through the creation of an international organisation with the same scope as the WTO to coordinate action on a wide range of issues.  Counterbalancing the WTO with a “WEO” was described as a false dichotomy by one participant who thought that the market could be harnessed to environmentally friendly goals.
When we came to review the ground we had covered, some were inclined to regret the absence of truly radical thinking.  Were we not simply applying familiar models to global problems?  Should we not have ranged more widely, for example by seeking to establish how the global institutions we had recommended could be made democratically accountable and controllable.  Another participant suggested that we were living at the end of an era and that a fundamental change of ethos and values would be needed before we were able to cope with global environmental challenges which were now emerging.  Throughout, however, there appeared to be agreement that both politically and economically there was not a single sustainable model but almost infinite variations on the themes of democracy and free market economy.  We noted that, perhaps perversely, while doubts might have been expressed about democracy, we appeared to have no hesitation in recommending it to others.  We had identified flaws in market economics, but nevertheless thought the system robust and responsible for increasing the standard of living of millions of people in developing economies.  We noted the enormous impact IT was having on our economies, societies, and ultimately on our environment and considered the question of the hidden connections, the threads running from the bottom up through the issues we had been discussing.  There was need for flexibility in our attitudes and institutions and an awareness of the timescales involved.
I am grateful to all those who took part and contributed from their knowledge and experience to our discussion.  It is not often at Ditchley a link is made in the same conference between the difference (small) between the genetic make-up of a mouse and a man and the political theories of the 17th and 18th centuries.  The conference was a fitting tribute to Cyrus Vance and a good way to mark Ditchley’s 40th Anniversary.  It has, I hope, given us ideas for later Ditchley conferences and some new connections and possibly friendships between the Ditchley Foundations.  My thanks go to Crispin Tickell for chairing such a diverse conference in a way which allowed for a controlled explosion of ideas. 
This Note reflects the Director’s personal impressions of the conference.  No participant is in any way committed to its content or expression.
 
 
PARTICIPANTS
Chairman  :  Sir Crispin Tickell GCMG KCVO
Chancellor, University of Kent at Canterbury;  Senior Visiting Fellow, Harvard University Center for the Environment;  Director, Green College Centre for Environmental Policy and Understanding;  formerly:  Permanent Representative to the UN, New York (1987 90);  Member, Government Task Forces on Urban Regeneration and Near Earth Objects;  author;  a Governor and Member of Council, The Ditchley Foundation
CANADA
Mr James C Baillie
Counsel, Torys LLP;  non-executive Chair, Independent Electricity Market Operator (Ontario) and Corel Corporation;  Director, Sun Life Financial Corporation;  Director, Canadian Ditchley Foundation
Professor Paul Boothe
Professor of Economics and Director, Institute for Public Economics, University of Alberta;  Director, Institute for Public Economics (1997-99);  Deputy Minister of Finance and Secretary to Treasury Board for the Province of Saskatchewan (1990-01);  member, Programme Advisory Committee, Canadian Ditchley Foundation
Professor John F Helliwell OC
Professor of Economics, University of British Columbia (1971-);  Professor of Canadian Studies, Harvard University (1991-94);  author;  member, Programme Advisory Committee, Canadian Ditchley Foundation
Dr Chaviva Hošek
President and CEO, Canadian Institute for Advanced Research (2001-);  formerly:  Senior Advisor and Director of Policy and Research, Office of the Prime Minister of Canada (1993-2001);  member, Programme Advisory Committee, Canadian Ditchley Foundation
Dr Michel G Maila
Bank of Montreal (1983-):  Executive Vice-President and Head of Risk Management Group (2001-);  a Director and Treasurer, Canadian Ditchley Foundation
The Hon Barbara J McDougall OC
President and CEO, Canadian Institute for International Affairs;  director, Council for Canadian Unity;  formerly:  Minister of State for Finance;  for Privatization;  for Employment;  for Immigration;  and for External Affairs;  member, Programme Advisory Committee, Canadian Ditchley Foundation
Mr Grant L Reuber OC FRSC
President, Canadian Ditchley Foundation (1989-);  Senior Adviser and Director, Sussex Circle (1999-);  Economic Adviser to Prime Minister of Lithuania (1991-92);  Bank of Montreal:  President (1983-87);  Deputy Minister of Finance, Canada (1979-90);  a Governor, The Ditchley Foundation
Mr Ronald S Ritchie
Founder and first President, Institute for Research on Public Policy;  Member of Parliament and Parliamentary Secretary to the Minister of Finance (1979-80);  CEO, Canadian Depository for Securities (1983-86);  author;  Chairman, Canadian Ditchley Foundation;  a Governor, The Ditchley Foundation
Mr William B P Robson
Senior Vice President and Director of Research, C D Howe Institute;  Canadian Liaison Officer, British-North American Committee;  author;  member, Programme Advisory Committee, Canadian Ditchley Foundation
Mr William Watson
Associate Professor of Economics, McGill University, Montreal (1977-);  Editorial pages editor, Ottawa Citizen (1997-98);  Editor, Policy Options politiques, Institute for Research on Public Policy, Montreal (1998-2002);  author;  member, Programme Advisory Committee, Canadian Ditchley Foundation
FRANCE
M François Lagrange

Chairman, National Commission for Privatisation (1998-);  President, Institut National de la Propriété Industrielle (Patent Office);  Conseiller d’Etat;  Director, Centre for Information and Research on Modern Germany (1984-);  author;  a Governor, The Ditchley Foundation
UNITED KINGDOM
Sir Michael Angus DL

Chairman:  Whitbread plc (1992-2000);  The Boots Company PLC (1994-);  formerly:  Chairman, Unilever PLC (1966-92);  Deputy Chairman, British Airways (1989-) (Director 1988 );  President, Confederation of British Industry (1992-94);  a Governor and Member of the Council of Management, The Ditchley Foundation
Dr John Ashworth
Chairman, The British Library (1996-2001);  formerly:  Pro-Vice Chancellor for Metropolitan Affairs, University of London (1991-92);  Director, London School of Economics and Political Science (1990-96);  a Governor, The Ditchley Foundation
Sir Rodric Braithwaite GCMG
Chairman, Moscow School of Political Studies;  International Advisory Board of Sirocco Aviation International;  formerly:  Ambassador to Russia, Georgia and Armenia (1988-92);  Prime Minister’s Foreign Policy Adviser and Chairman of the Joint Intelligence Committee (1992-93);  Managing Director and Senior Advisor, Deutsche Bank AG London (1994-2002);  author;  a Governor, The Ditchley Foundation
Professor Peter Hennessy
Attlee Professor of Contemporary History, Queen Mary and Westfield College, University of London (1992-);  formerly:  Visiting Professor of Government, Strathclyde University (1989-);  author and broadcaster;  Chairman, Kennedy Memorial Trust (1995-);  a Governor and member, Programme Committee, The Ditchley Foundation
The Hon Peter Jay
Writer and broadcaster;  Supervising Editor, Banking World (1986-) (Editor, 1984-96);  Director:  BPCC, later Maxwell Communication Corporation (1986-89);  Mirror Holdings (1986-89);  Pergamon Holdings (1986-89);  Economics and Business Editor, BBC (1990-2001);  a Governor, The Ditchley Foundation
Sir John Kingman FRS
Director, Isaac Newton Institute for Mathematical Sciences, Cambridge (2001-);  formerly:  Professor of Maths, University of Oxford (1969-85);  Vice-Chancellor, University of Bristol (1985-01);  a Governor, The Ditchley Foundation
Mr Anthony Loehnis CMG
Director:  J Rothschild International Assurance Holdings plc (1992-);  St James’s Place Capital plc (1993 );  Bank of England:  Executive Director (1981-89);  a Governor and member, Council of Management, The Ditchley Foundation (1992-) (Chairman, F & GP Committee, 1993-)
Sir Christopher Mallaby GCMG GCVO
Managing Director, UBS Warburg;  Ambassador to Germany (1988-92);  to France (1993-96);  Trustee, the Tate Gallery (1996-2002);  Chairman, Trustees of Somerset House;  a Governor, The Ditchley Foundation
Dame Pauline Neville-Jones DCMG
Chairman:  QinetiQ Group plc;  International Governor, BBC, and Chairman, Audit Committee;  formerly:  British Diplomatic Service;  foreign affairs advisor to Prime Minister John Major;  Chairman, Joint Intelligence Committee (1991-94);  a Governor, The Ditchley Foundation
Baroness O’Neill of Bengarve CBE FBA
Principal, Newnham College, Cambridge (1992-);  member, Human Genetics Advisory Committee (1996 );  Chairman, Nuffield Foundation (1998-);  formerly:  Member, Nuffield Council on Bioethics (1991-98) (Chairman 1996-98);  author;  a Governor, The Ditchley Foundation
Dr Diana Walford
Principal, Mansfield College, Oxford (2002);  formerly:  Deputy Chief Medical Officer of England;  Member, Board of Management, London School of Hygiene and Tropical Medicine (1989-);  Director, Public Health Laboratory Service (England and Wales) (1993-2002);  a Governor, The Ditchley Foundation
UNITED STATES OF AMERICA
The Hon John Brademas

President, Emeritus, New York University (1992-);  President, NYU (1981-92);  Member, 86th-96th Congresses (1959-81);  House Majority Whip (1977-81);  Chairman, American Ditchley Foundation;  a Governor, The Ditchley Foundation
Mr Francis Finlay
Chairman and Chief Executive Officer, Clay Finlay Inc (1982-);  formerly:  Head of International Investment Department, Morgan Guaranty, New York;  Adjunct Professor, Columbia University Graduate School of Business (1981-86);  Governor, London Business School;  a Director, The American Ditchley Foundation
Mr James F Hoge Jr
Editor, “Foreign Affairs”, Council on Foreign Relations (1992-);  a Fellow, John F Kennedy School of Government, Harvard University (1991-92);  Member, Board of Directors, and Chairman of the Advisory Council, The American Ditchley Foundation
Professor A E Dick Howard
White Burkett Miller Professor of Law and Public Affairs, University of Virginia School of Law;  formerly:  counsel to General Assembly of Virginia;  consultant to US Senate Judiciary Committee;  a Director, American Ditchley Foundation;  author
Mr Sawar A Kashmeri
Co-founder, publisher and CEO, ebizChronicle.com, Inc (2000-);  formerly:  St Louis University:  founder:  Aerospace Engineering School’s computation Center;  Niche Systems Inc (1985-2000);  Fellow, Foreign Policy Association;  member, Advisory Council, The American Ditchley Foundation
The Hon Donald F McHenry
Distinguished Professor in the Practice of Diplomacy, School of Foreign Service, Georgetown University;  President, IRC Group;  Ambassador and Permanent Representative (1979-81) to the UN;  Trustee:  Mayo Foundation;  Brookings Institution; Columbia University;  Chairman of the Board, Africare;  a Director, The American Ditchley Foundation
Mr George M Newcombe
Partner, Simpson Thacher & Bartlett, New York:  Head, Palo Alto, California (1999-);  Member:  Board of Visitors, Columbia University School of Law;  Board of Overseers, New Jersey Institute of Technology;  The American Law Institute;  Board of Directors and Secretary, The American Ditchley Foundation
Mr John J O’Connor
Vice Chancellor and Secretary, The State University of New York (1996-);  president, State University of New York Research Foundation (2000-);  Foreign Policy Association;  Executive Director, The American Ditchley Foundation
Justice Frank Sullivan Jr
Justice, Supreme Court of Indiana (1993-);  Indiana State Budget Director (1989-92);  Executive Assistant for Fiscal Policy to Governor Evan Bayh (1993);  member, Advisory Council, American Ditchley Foundation
Professor Richard H Ullman
David K E Bruce Professor of International Affairs, Woodrow Wilson School of Public and International Affairs, Princeton University;  formerly member, Editorial Board, The New York Times;  Member of the Advisory Council, American Ditchley Foundation
UNITED KINGDOM/UNITED STATES OF AMERICA
Professor Robert M Worcester

Chairman MORI (Market & Opinion Research International);  Visiting Professor of Government and Governor, London School of Economics & Political Science;  Visiting Professor, Graduate Centre of Journalism, City University (London);  Chairman, Executive Committee, Pilgrims Society of Great Britain (1993-);  a Governor, The Ditchley Foundation