It was once believed that the nation state was in decay, a dirty carcass polluting the ever-clear waters of the free market. From Frederich Hayek's now infamous The Road to Serfdom to Francis Fukuyama's The End of History and Jeffrey Sach's pioneering efforts to open up flailing state-run economies of South America and Eastern Europe to the market economy, it seemed the nation state was being reformed out of a job.
It was the free market, not government, that should do the hard work of allocating resources and governing the terms of trade between disparate cultures across the globe. The Keynesian-inspired governing ethos of the post-World War 2 period seemed but a blip, and the belief that governments should play a strong role in managing the economy seemed not only antiquated but downright dangerous. The same logic was in turn applied to the mother of all state institutions, the United Nations, which has been routinely ignored in recent times by the U.S. and its handmaiden, Australia, as an ineffective mechanism for dealing with the important business of bilateral free trade.
How times have changed.
The defining challenges of this century - climate change and resource scarcity - have catapulted the governing institution of the state back into the driving seat. This was nowhere more evident than in Bali this week, as the world's nations sought to define a 'road map' for a new, post-Kyoto agreement on global carbon emissions reductions. Far outstripping the numbers of environmental campaigners at the event were the thousands of business executives calling on their governments for tough action on climate change.
What corporations are demanding is the regulatory certainty of mandatory emissions reductions, which, by quantifying the true cost of carbon, will not only bring some certainty to their business planning, but establish some clear parameters for what UN Secretary-General Ban Ki-Moon describes as "a new age of green economics". Moving to a post-carbon economy is going to take massive global investments in clean-tech innovation, the likes of which will make the recent tech-boom seem mere child's play. What business is saying is the incentive for that investment has to come from some accurate price-tags being placed on the cost of carbon, which will in turn redirect global demand toward clean energy sources.
So how are those prices to be set? By the invisible hand of the free market, which will determine the true cost of this dirty pollutant? It would seem not, as witnessed why the presence of the business execs in Bali. Rather it's through the ability of nation states working collaboratively under the auspices of the United Nations that a true price can be set.
That the world now needs its governments to lead the way is a view even the staunchest of free market proponents like Thomas Friedman, author of The World Is Flat, now seem to endorse. Speaking to Grist about the potential role of the media in raising environmental awareness, he said "We can write about it seven days a week, but if the bully pulpit isn't talking about it, it's very hard to get a national movement. Nobody has a bully pulpit more influential than the president. When he talks about Social Security, everyone in the country is talking about it. The New York Times and The Washington Post are not going to start a movement. $4-a-gallon gas will. People would have no choice but to change their behavior. In reality, most people don't change when you tell them they should, they change when they tell themselves they must."
The need for governmental institutions to set the terms of trade for this new age of green economics is often described as requiring 'leadership'. That leadership, it is in turn argued, should be 'based on the science', and not on economics or the outcomes of a party's pre-polling. Christian Kerr of Crikey.com has rightly pointed out some of the fundamentally anti-democratic assumptions underpinning calls for this kind of leadership. This Friday he wrote that Rudd would not, and should not, agree to mandatory targets because 'Rudd is a social democrat':
"We need to recap what was in those civics lessons that you slept through. Politics is all about compromise. Compromise in the best possible sense - a settling of differences in which each side makes concessions.
You heard this all in social studies class years ago, but it's worth repeating. Parliaments are made up of representatives of varying interests. Varying interests who have all agreed to pursue those varying interests under the one set of rules - law. Parliaments exist to talk things through. True, a lot of crap gets spoken. Hour after hour of passionate debate is settled with votes where nobody betrays any independence of mind and everybody follows the party line. But it's better than the other options... [like] violence or dictatorial fiat."
Climate change is now, without a doubt, the defining challenge of this generation. Curbing greenhouse emissions to prevent the globe from warming to more than 2 degree above pre-industrial levels is not, however, the stuff of political compromise. Governments may be in the driving seat right now, but the assumption that they should act both as elected representative of varying interest groups and on the basis of what the science says here will, over the coming years, become increasingly untenable. Which logic will prevail?
It's no surprise that climate activists like George Monbiot get called communists when they spell out exactly what actions 'the science' tells us are required to prevent catastrophic climate change. Mandatory cuts will not be achieved by all nation states delicately balancing 'varying interests', and they may not bode well for all advanced economies of the first world either. Tough decisions await our leaders in the coming years ahead.
Welcome to the new politics of climate change.