4

Institutions and Organizations: Constructing the Social Foundation

Introduction

A good society naturally provides a wide range of larger and smaller life options and the freedom to choose among them. It is appealing precisely because there is such diversity of opinion and belief as to what constitutes the good life, the kind of life that each of us would like to live. The good society is not a recipe for any one concept of how life should be lived so much as it is a society flexible enough to accommodate the peaceful coexistence of many alternative concepts, one that also facilitates making changes in our own life path if we come to desire such a change, for example, with age and accumulated experience. What the good society offers is not a world without constraints. Human beings do not seem to do well, be happy, or feel fulfilled in a free floating environment without structure or boundaries, a world where anything goes. Instead it offers true freedom: the freedom to choose your own constraints, set your own rules, create your own structure, as long as the path you follow does not deny that same freedom to others. That includes the freedom to voluntarily be a part of institutions or organizations (such as churches) that do require a certain set of rules to be followed, or noncoercively choosing to adopt a more rigid set of secular behavioral constraints that have been advocated by others but seem appealing to you.

Institutions involve defined societal “rules of the game,” prescriptions for “the way things are to be done,” and related practices and relationships. Institutions – and organizations of various sorts – provide much of the infrastructure on which a society is built. They play key roles in determining the shape of that society, separately and in the many complicated ways in which they interact with each other. Having already discussed how some of the key attitudes that color thinking and drive behavior affect the feasibility of constructing and sustaining a good society, we now turn our attention to the nature and function of already existing underlying institutions and organizations that could be modified or restructured to better support it.

Institutions, Organizations, and Practices within the Good Society

Work

By “work,” economists generally mean an activity in which time and effort are exchanged for money. They typically imply that work is an unpleasant activity (it has “negative utility,” generating discomfort or pain rather than pleasure) that people will only freely choose to do if they receive a high enough rate of pay to compensate them. While it is clear that some types of work generate positive “psychic income” in addition to the money income they provide, for the most part, work is viewed narrowly as a purely economic exchange. This view of work suggests that more pleasant jobs, all other things being equal, should pay less in terms of money than less pleasant jobs. Since more pleasant jobs pay more in terms of “psychic income,” they should not need to offer as much additional money pay as jobs which are dangerous, boring, or unhealthy – that is, jobs with unpleasant work characteristics or environments. Although it is difficult to keep all other things equal in this case, the fact is this doesn't usually seem to be true. More dangerous jobs often do pay a risk bonus, but on the whole it is the most interesting, most pleasant, most creative, and most nonmonetarily desirable jobs that offer the highest wages. Examples include managerial jobs at or near the top of the organizational hierarchy in a business, government, or the nonprofit sector; professional jobs such as those of architects, lawyers, medical doctors, and university professors; and the work of popular entertainers, writers, and athletes. It is not that everyone in these relatively creative, nonmonetarily desirable positions is exceedingly well paid and showered with benefits – that is certainly not true. But compared to the pay, benefits, and conditions of work done by a typical factory worker, truck driver, restaurant employee, hospital orderly, nurse, office worker, and the like, these positions almost always have considerably higher pay and benefits, more room for creativity, more control over how the work is done, and generally better working conditions.

Work is actually much more than a simple economic exchange. It is a complex activity with potentially powerful impacts on our bodies, our minds, and our social relationships for better or for worse. Because of its obvious implications for the cost of production and therefore the profitability of employers, the impact of the physical, mental, and sociological work environment on worker performance on the job has long been a subject of study. Much less attention has been paid to the impact of the work environment on the physical, psychological, and social well-being of workers on and especially off the job. Given the percentage of their waking hours that people employed full-time spend at work, it should be no surprise that what happens at the workplace during those hours has a substantial effect on their broader lives and those of their families.¹

The negative nonmonetary aspects of a particular type of work may be the result of purely physical strain: heavy muscular exercise, assaults on the senses (eyestrain, exposure to excessive noise), discomfort due to postural problems (long periods of standing or sitting in one position), or repetitive motion disorders (such as carpal tunnel syndrome, which results from repeating the same physical motions over and over again). The strain may also be mental or emotional such as boredom caused by performing extremely simple or repetitive tasks hour after hour, or the anger and stress created by an unreasonable, overbearing boss. But work can also have positive and desirable nonmonetary aspects. It can be creative, challenging, or educational; it can be emotionally and intellectually fulfilling, even to conveying a sense of meaning, purpose, and direction. At least some aspects of work are typically social activities, involving interactions with other people that offer opportunities to gain a broader perspective on life and may lead to forming lasting friendships.

Even those who recognize that work is more than a mere money-for-labor exchange tend to focus more on the characteristics of the immediate work environment and the way work is done than on the type of output that is produced as a result of that work. It is usually taken for granted that workers are more or less indifferent to what they are actually producing. But that is not always true. Apart from any other characteristic of their jobs, people who are involved in producing a good or service that they (and perhaps others) see as making a strong positive contribution to society are likely to feel a sense of pride in what they are doing. And people who are participating in producing a good or service about which they have deep internal doubts are likely to experience mental and emotional stress way beyond that created by their working conditions. It may actually be impossible for some of them to avoid being adversely affected even if they try. Most of us seem to have a need to believe we are contributing to the world in some positive way. When, for reasons of narrow economic interest or expediency, we try to suppress that need and participate in producing goods or services that we believe (or even suspect) have a seriously negative impact on our society or the wider world, we are almost always damaged, especially in the long run. That need, it seems to me, is one of the most important assets of humankind. It would be wise if we learned to cherish and pay attention to it rather than spending so much time and effort trying to override it, or to avoid even thinking about it.

There is some evidence that people do care about the kind of product they are producing. This is clearly illustrated by the kind of work they volunteer to do, when there is neither coercion nor pay involved. Purely voluntary work is typically altruistic or other-directed. This kind of work tends to be performed at hospitals, nursing homes, schools, and other care facilities, or at organizations supporting medical research (e.g. the American Cancer Society) or religious charities. Volunteer work is also common in political campaigns or for “cause-oriented” organizations, such as environmental or peace groups, and in “culturally oriented” organizations that work for the furtherance of art, music, theater, and so on. While these organizations often do have some paid positions, they are rarely well-enough funded to pay all the people who work for them well and often depend on volunteers to fill out their workforce. Their ability to attract volunteers is also clearly not just a matter of people being prone to volunteer their time and energy to work at organizations that find themselves in dire financial straits. After all, when profit-oriented businesses (even small businesses) fall into difficult financial times they do not generally attract hordes of volunteers. Nor is it that the actual work the volunteers do is necessarily fascinating and creative. Much of it is fairly routine. But apart from all other considerations, if people believe that the product that an organization produces is meaningful and beneficial to society, they are far more likely to offer to volunteer their time and energy to work for it.²

Building the good society requires that we take into account not only the need for jobs that pay well enough to provide for a decent material standard of living but also the work that provides people with as many of the nonmonetary benefits that work is capable of producing as possible.

Conventionally, work has had obvious importance as a means of acquiring money with which to buy goods and services. Beyond this, in very materialistic societies a paying job is in itself a source of personal worth. Being involuntarily unemployed for an extended period of time is therefore not only a problem of lack of income, it also seems like a kind of judgment that you have nothing worthwhile to contribute to society. Money transfer programs, such as unemployment compensation, may help cope with the income problem, but they do not mitigate the sting of the feeling or the label of diminished self-worth. In fact, being on the public dole – and so returned to the status of a dependent child in the eyes of both the person unemployed and the wider society – may increase feelings of worthlessness. Reemploying the long involuntarily unemployed person at work that pays at least a living wage deals with both the problems caused by the lack of income and those caused by the feelings of worthlessness. It is therefore a generally superior policy to just giving them money. But both problems can also be dealt with separately by supplementing a program of money transfers (like unemployment compensation) with opportunities for meaningful unpaid volunteer work.³

Another way of thinking about this is that it is not a job as such that is necessary or desirable for an individual, but rather the positive aspects of its three components: psychological (creativity, satisfaction, self-worth); sociological (interpersonal contact, a sense of belonging, social status); and narrowly economic (the income that serves as the means for satisfying material needs or wants). While economists tend to take an unduly narrow and unrealistic view of work as a pure wage–labor exchange, others – including labor leaders – often take the overly broad and equally unrealistic view of jobs as indivisible packages. Union leaders often fight to maintain jobs that may be physically draining, unhealthy, and unsafe, in order to preserve the necessary flow of income to union members. Historically, much of the opposition to the mechanization or automation of parts of the work required has come from this side of the aisle. If instead the goal were seen of one of maintaining or increasing income, achieving healthy and safe work environments, and having the right to share in the meaningful and useful work of society, their struggle would take a very different form, one which would be more to the point. Conventional paid work jobs are not necessarily what people need to be better off, but rather some practical means for achieving the psychological, sociological, and economic benefits of good work. These do not have to come in one package from the same single source.

Any activity requiring labor, time, and effort with the goal of producing a good or service is “work,” whether it is paid or unpaid, pleasant or unpleasant. Defining work as any activity involving human beings in the production or distribution of goods and services, independent of pay or pleasure, liberates our thinking. Work is important, pay is important, but the two do not always have to be tightly connected. Rather, there are two separate problems: providing people with the means to satisfy their material needs and wants, and providing them with the positive psychological and sociological benefits of work. These problems may be solved jointly through well-paid good work, but they don't have to be. There are other possibilities.

In a good society, we should strive to make work healthier and more enjoyable as well as more productive. Some would argue that focusing a serious amount of attention on trying to make workplaces more pleasant and work itself more enjoyable is a chimera. Work is supposed to be unpleasant: if it's pleasant, it isn't really work. Yet this is not true even from a conventional economic standpoint: it is the characteristics of the product, not the sweat and strain of the workforce that made it, that make a good or service valuable. The good or service makes the same economic contribution whether or not the workers enjoyed the act of producing it. At the same time, it isn't actually true that the nature of the process by which a worker creates a product never has any effect on the value of the finished good. Joel Yudken points out that we often prize craft products more highly and willingly pay more for them precisely because of the personal effort and skill that the craft worker has embedded in the good. This can even be true if the good, viewed more objectively, has the same characteristics as one produced by a less personal, more mechanized process.⁴

In any case, the economic purpose of work is to produce, not to punish. I am not arguing that we should turn all workplaces into country clubs or day spas. There is work to be done, and the efficiency with which it is done matters. But there is plenty of scope for making work environments and processes more positive for workers without giving up much if any efficiency. In fact, it is likely that making the right changes will not only better protect, even enhance, the mental and physical health of workers but will also stimulate the creativity and increase the productive efficiency of the workforce.

Education

There is a key difference between information and knowledge. Information is raw numerical or qualitative data (whether or not it is aggregated or summarized), while knowledge is the understanding of how the different pieces of information logically fit together and what they mean. Still only a few decades into the computer and telecommunications age, we are already overwhelmed with information. Far more people have access to far more information than ever before in human history. But it is not clear that we know what all this information means or can make sense of what is happening in our human world any better than generations past. Having access to oceans of information does not by itself tell us what is really going on.

The role of educational systems is to (1) convey the knowledge that we have accumulated over the years, not simply to expose us to information; and (2) teach us how to evaluate, analyze, and integrate information, knowledge, and ideas. That begins with teaching the “facts” about how the world works (to the extent that we know them) and the logical theories that connect them to one another. There are lots of facts and theories to know, and it is important to know them. Yet education should not be thought of as a process of simply transferring the storehouse of accumulated knowledge to students as passive recipients. It is instead primarily a process of developing their ability to think. Learning how to think includes learning how to identify and solve problems, which in turn includes knowing how to formulate a problem, pose questions that guide us toward the key issues we should focus on, gather available information that bears on those issues, and use our creativity, our ability to recognize patterns, and our general analytic capabilities to work our way toward a solution. The fact is our deeper understanding of the world as well as our continued progress depend as much and possibly more on learning how to think than on learning what to think.

Many thousands of years ago, the earliest true humans (homo sapiens) probably had about the same mental processing capabilities that we have, but they couldn't do much of what we can do (fly through the air, communicate over very long distances, etc.) because they didn't know what we know. We are so much more capable than they were not because we are smarter but because we are working with a much larger knowledge base. Of course, the knowledge base (both technological and nontechnological) needs to be passed on so that each successive generation can make more progress by standing on the shoulders of the previous generations. That is certainly one critical function of education. On the other hand, learning how to think is even more important to both effectively solving the problems that currently confront us and keeping the process of knowledge accumulation vital and alive.

Education is often touted as a solution to problems as diverse as racism (and other forms of ethnic prejudice), criminality, economic inequality, and national economic development. While broad-based access to education has a key role to play in dealing with all these problems, it is not magic. For example, educating a much broader swath of the population to a higher level can and should be part of any program of economic development in low-income countries. Yet that alone will not make development happen. Worse than that, raising the level of education of the population almost inevitably raises their expectations of a more prosperous life. If it is not accompanied by programs to create better jobs that allow people to satisfy those expectations, it can produce feelings of anger and frustration in a population that can lead to dangerous social and political stress. Similarly, education can be helpful in combating racism, but it is a mistake to think that this kind of often deeply entrenched sickness of the heart will just fade away in the face of more “book” learning. The racial integration of schools helped to reduce racism in the US, not so much because of what children were being consciously taught, but mainly because it placed children of different racial groups in a situation in which it became normal for them to repeatedly encounter each other in a common context that allowed at least some of them to see past the color of their skins and get to know each other as people.

Both education and propaganda have potentially positive roles to play in making progressive social change. Propaganda has developed a bad name largely because of the ways it has most commonly been used, but is not inherently a bad thing. The basic difference between education and propaganda is that education is an appeal to knowledge, logic, and intellect, whereas propaganda is primarily an appeal to the emotions. I am convinced that human beings cannot fully understand any real human problem (such as domestic violence, war, poverty, or hunger) unless we understand it both intellectually and emotionally. Education can help us understand it with our heads, propaganda with our hearts. A well-made documentary video can do both at the same time.

Taking full advantage of the ability to choose among many options for lifestyle and life direction that is at the core of a freedom-maximizing good society requires knowing what those options are and understanding what kind of life they lead to. Making wise choices that will lead to living what any given person considers a good life for herself or himself requires a combination of intellectual and emotional understanding. Education, in and out of the classroom, can be very important to the development of our rational selves, but it needs to be supplemented by the emotional learning that comes from exposure to a wide range of human relationships and experiences. No matter how rich and varied a life any of us lead, it is only one life and is therefore limited in the breadth and depth of emotional experience we can directly contact. So it is important for us to be able to learn, both intellectually and emotionally, from the experiences of others.

Of course, to some extent, we all do this quite naturally already – through the media of movies, books, television, radio, and the Internet – and through our daily conversational contact face-to-face with other human beings. That is all to the good. The media are potentially powerful tools for intellectual and emotional teaching and learning. Under the right conditions, real face-to-face contact with other people can be an even more powerful tool, if we approach it with an open mind and an open heart. We can draw on their experiences, see the world through their eyes, relate to what they feel or felt, and so live at least parts of many lives. It takes some doing to gain this kind of insight. More is required than just active listening. It requires at least mentally projecting yourself into the experience that you are trying to understand.

In Harper Lee's wonderful novel To Kill a Mockingbird, the lawyer Atticus Finch tells his daughter Scout, “You never really understand a person until you consider things from his point of view… until you climb into his skin and walk around in it.”⁵ There are a variety of ways to do that, one of which could be called “extending an experience”. The best way to explain this idea is through an example. I grew up in a relatively calm and peaceful suburb of New York City which was not all that ethnically diverse. I was never directly exposed to any form of significant overt racial or ethnic discrimination during my childhood. Even so, I became a teenager during the turbulent years of the civil rights movement in the US and had a basic intellectual understanding of the issues at hand. But I knew I did not really feel them personally. Then one evening, I went out to a local restaurant for dinner with a group of about five or six of my friends. We were all seated at one table, more or less in the middle of the restaurant. No waiter came to our table. We sat there waiting for about half an hour, then we began to stop the waiters randomly passing by us and asking them to take our order. Every one we stopped told us tersely that ours was not their table and went about serving all the other customers. There was obviously some simple mistake made in table assignments. But as I sat there, I began to think that I might be able to learn something by extending this experience. I told myself, “Suppose the reason we are not being served is the color of our skins, the shape of our eyes or our ethnicity; that we could sit there all evening and no one would ever come to take our order.” The more I thought about it, the angrier I got. The experience was admittedly an extremely pale shadow of what it means to face the insult and unfairness of racial or ethnic discrimination. But concentrating on and extending it in my mind helped me to develop at least the very beginnings of some real emotional understanding.

Another example. A few years after becoming a professor, I was doing a lot of research into issues involving nuclear weapons and the Cold War nuclear arms race between the US and the Soviet Union. After a time, I came to have a pretty good understanding of the key technical and political dimensions of nuclear weaponry, but I knew I didn't have a good enough emotional understanding of the human meaning of nuclear weapons. So I arranged a trip to Hiroshima and was privileged to meet with a retired Japanese professor, Ichiro Moritaki, who lived there and had been on the outskirts of the city on the morning in August 1945 that the US attacked Hiroshima with an atomic bomb. In six hours of one day, he took me all over the city and relived with me what he saw, thought, felt, heard, and smelled in the early days after the bombing. As he explained all this to me, to extend the experience, I consciously tried to imagine that those words he was saying to me to describe his experience were words I was saying to someone else to describe an experience I had had. I can't say that I came to understand the emotional meaning of nuclear weapons anywhere near as well as did Moritaki or the other actual survivors of the attack, but I did travel a short but meaningful way down that road. It was such a powerful emotional experience for me that it was months before I could even talk to anyone else about it.

Every once in a while all of us have experiences we can “extend” to help us develop a broader emotional understanding of the world beyond our own direct life experiences. This, combined with the increased intellectual understanding of the world that comes from a solid broad-based education provides a strong and durable foundation on which to build the good society.

Tenure

In recent years, the institution of “tenure” has come under increasing attack in organizations of higher education in the US. The essence of tenure is a commitment by the college or university to continue to employ the faculty member granted tenure except under the most extraordinary circumstances. It is typically granted only after the faculty member has spent years (often five or six years) demonstrating his or her ability to be a sufficiently productive academic to merit this commitment. The decision of whether or not to grant tenure is generally a multistep process involving both high-level administrators and fellow academics who are already tenured at the institution. It is a peculiar process in that if tenure is not granted, the faculty member involved is usually required to permanently leave the college or university within a year. In some ways, it is a bit like having to choose between marrying someone or shooting them. Tenure is not absolute. It can be abrogated in situations where the employer falls into extreme financial distress or the faculty member commits a serious crime or a massive violation of professional ethics. And it is a one-sided commitment. Accepting tenure doesn't in any way bind the faculty member to stay at the granting college or university.

On the face of it, this unusual grant of job security seems an anachronism, a special privilege in a market-based economy where most employees are continually subject to lay off or other forms of job loss at any time, largely at the discretion of their employer. Critics of the tenure system argue that it allows, and perhaps encourages, academics to “fall asleep,” to cease to put real effort into their teaching and research once they have cleared this hurdle. And there is no doubt that it sometimes has this effect. But it is important, even vital, to a freedom-maximizing good society to protect a group of people trained to think carefully and critically about issues of real public importance. To a degree, tenure protects them against economic retaliation by their employers or the government. They are then freer to develop their critical analysis of existing behavior or policy and make it public, even when it is at right angles to prevailing beliefs. They must be free to air well-researched and analytically sound alternative points of view, even though they may be unpopular – especially when they write or say things that make the society's more powerful people uncomfortable. Finding the best path forward is often a matter of being willing to consider a wide range of solidly based alternative opinions. Tenure is one way to encourage those academics who have something to say that is constructive, but unpopular (within their fields or among the wider public), to go ahead and say it.

Unfortunately, though the tenure system does in theory help create such a protected group ready to work on the problems that most trouble society, it does not always have that effect in practice. Getting tenure, especially at the more prestigious colleges and universities, requires demonstrating the ability to get enough written work published by the more mainstream and “higher ranked” academic journals and book publishing houses in the relevant field. After years of trying to do work that fits within the frequently narrow criteria established by the gatekeepers at these academic journals and presses, young academics often lose the fire to do more speculative and creative work on problems of greater importance. They have been trained by the tenure process to focus much of their effort on making only incremental contributions to well-defined issues considered to be legitimate areas of inquiry within their field. So rather than being liberated by finally getting tenure, they continue to do the kind of work they have been conditioned by the tenure process to do.

Of course, not everyone falls into this hole. There are plenty of tenured academics who make good use of the protection that tenure gives them to take their work well beyond conventional boundaries and to speak out on public issues of importance that have some connection to their work. Some of them would do this even without the protection of tenure, but there is little doubt that the institution of tenure swells their numbers, to the great benefit of the wider society. It is also worth pointing out that the incremental work most academics do is far from worthless. It can aggregate into substantial progress within their fields. The trouble is that it often misses the key insights and shifts of perspectives that are needed to breakthrough to more effective solutions to the problems we face.

The nature and extent to which these matters are a problem for society varies among academic fields. It does not necessarily take the same shape in the physical sciences and engineering as it does, for example, in the social and behavioral sciences. While the institution of tenure itself does not guarantee the existence of a class of well-trained analysts willing and able to speak out on issues of societal significance, its absence would certainly be a serious obstacle to effectively mobilizing this talent. Developing and mobilizing such talents is particularly important to the vigor and vitality of a good society. It deepens and broadens the public discourse, activating the power of the collective human mind to find the answers to the problems that trouble us.

Religion

Most of us seem to feel the need for some sort of spirituality in our lives, something that connects us to things beyond our senses, beyond the physical world that surrounds us. We have developed a very wide array of belief systems, organizations, and practices to service this need. Many, but certainly not all, of these belief systems and practices center around the idea of one or more immortal supreme beings, with powers and capabilities that far exceed those of ordinary humans. Virtually all of them set forth a philosophy of what life is about and how life should best be lived. Whether they are God-centered, nature-centered, or secularly humanistic, I will refer to them as “religions,” meaning belief systems that are based primarily on passion and faith as ways of knowing, rather than on pure logic. They have affected and continue to affect our lives in many ways, for better and for worse.

It is indisputable that religious beliefs have played an important role in driving war and other forms of violent conflict; it is equally indisputable that religious beliefs have been an important source of the commitment to helping the poor and disadvantaged and an ongoing driver of the search for peace and justice. Religion has, at different times and in different places, been responsible for bringing out some of the best and most lofty, and some of the worst and most condemnable human behavior. It has been a powerful force in motivating people and in shaping human societies.

Within the realm of organized religions today, the most critical distinction is between traditions that are and those that are not likely to generate war, terrorism, or other forms of violent confrontation. What matters most is not the distinction among Muslims, Christians, Jews, Hindus, Buddhists, and the like; it is the difference between fundamentalist religious fanatics of all faiths and the vast majority of their other adherents.

The fanatical religious fundamentalists within any type of organized religion see themselves as utterly distinct from the fundamentalist fanatics of any other religious stripe, but in fact they have a lot in common. They share a willingness, in some cases, an eagerness to die for the “cause”. They promulgate unforgiving and strictly enforced codes governing sexual behavior that somehow always seem to be interpreted to justify the suppression and subjugation of women. They advocate censorship and tight control in the service of keeping their culture “pure”. In other words, they try to guarantee that the ideas and religious practices to which their people are exposed are “uncontaminated” by other thoughts, beliefs, or points of view.

I want to be clear that I am not arguing that all religious fundamentalists are fanatics. All those who believe in a strict and literal interpretation of their own religious tradition are fundamentalists, but only a small minority of them are fanatics. It comes down to a matter of tolerance and respect. No matter how committed one may be to his or her own faith, no matter how deeply that person believes it is the only “true path,” if that individual respects the right of others to believe and openly practice differently without harassment, interference, or recrimination, then he or she may be a fundamentalist, but is certainly not a fanatic.

A freedom-maximizing good society guarantees religious freedom as part of the more general concept of freedom of thought and belief. Religious freedom, like all other freedoms, is subject only to the constraint that its exercise by one person cannot interfere with the freedom of others. Under the “big tent” of a good society, there is plenty of room for fundamentalists, just as there is plenty of room for nonfundamentalist believers, agnostics, secular humanists, and atheists. And they are all free to try to convert others by means of noncoercive “friendly persuasion”. But there is no room for religious fanatics who try to force others to change their beliefs or practices, or who attempt to impose their religiously based laws on the wider population, especially by means of violence or the threat of violence.

There are two major reasons why it is important to keep religion separate from the state. The first is to prevent the state's power, particularly its coercive mechanisms, from being used in any way that has the effect of advantaging (or disadvantaging) any particular religion or its adherents over the followers of any other secular or religious belief system. Requiring the state to be neutral with respect to religion does not deny the importance of religion but rather removes a potentially major obstacle to the exercise of freedom of religious belief. The second reason is the protection of the leaders of the secular state from being forced to follow the teachings of any particular religion in making policy that significantly affects the lives of its citizens, some of whom do not adhere to that religious tradition and may even have opposing beliefs. It is a basic tenet of a freedom-maximizing society that the law makes illegal only those activities that significantly interfere with the freedom of others. The law is not and should not be seen as the arbiter of morality. The lawmakers therefore should be free of the temptation to impose the particular moral code of any given religion on everyone in that society.

Religions, in the broad sense I have defined them, have a powerful influence on our concepts of right and wrong, of what behavior is moral and ethical and what behavior is not. Morality and a sense of ethics are very important components of the trust, stability, and security that make it possible for people to negotiate the many-sided interactions of complex human societies and live a good life. They retain their importance in a good society as guides to proper behavior, even though the freedom-maximizing character of such a society prevents their enforcement through the legal code. A good society separates the concept of ethics and morality from the concept of legality not to disdain the former but to recognize the existence (and legitimacy) of a wide range of moral and ethical codes that are compatible with living a good and fulfilling life while allowing others to do the same. Although the formal governance structure of a good society should be secular and separate from religion, religions have a valuable role to play in the good society.

Organizational Design and Institutional Practice

It is often argued that government is inherently inefficient because it lacks the drive, self-interested motivation, pressure, and discipline that lie at the core of successful, profit-oriented private sector business. Government should therefore be narrowly focused and kept as small as possible in order to minimize its potential for getting in the way of the ongoing activities and new initiatives of the private sector. More than that, privatizing as many of government's functions as possible is a good idea. Private, profit-oriented business is seen as a model for the design of a wide variety of human organizations and activities that will help to make them capable of really getting things done and done well. Government would be more efficient and effective if it were run like a business, so the argument goes. So would educational institutions and religious organizations.

But there is a reason why the structure and practice of business, government, educational, and religious organizations evolved differently. They have very different roles to play in society and operate in very different contexts. No one single design or set of practices could possibly be best for all of them. Market-oriented businesses are organized to generate new wealth by producing and selling products that meet the society's needs for material goods and services, and are aimed at earning profits for their owners. Government is established not to generate new wealth or earn profits, but to provide stability and the social, legal, and economic infrastructure critical to the quality of life of those who live in the polity. Educational institutions have the mission of conveying (and enhancing) the knowledge base of society and teaching each new generation how to use our advanced brains to better understand the world so that we can better solve the problems that confront us. Good systems of governance or education require an organizational environment that is much looser, more flexible, and freer of constraints than would be tolerable in a strictly profit-oriented business. And religious institutions are self-consciously aimed at nourishing our need for spirituality and moral guidance, rather than producing things that are focused on enhancing our material standard of living or expanding our secular knowledge base. They try to direct our focus inward, upward, and beyond the physical realities of day-to-day living.

Because a particular organizational design and set of practices works best for profit-oriented business is no guarantee that it will work well – or even tolerably – for the necessarily very different environment and objectives of a government, educational institution, or religious organization. The different organizational designs and modes of operation that have evolved for these different institutions are not interchangeable. They look different and work differently because they are different. It makes as little sense to run a church, a school – or a government – like a business as it does to run a business like a church, a school, or a government.

NGOs and Civil Society

The strength and durability of democracy is greatly enhanced when it is accompanied by a vibrant civil society. Civil society is neither government nor business, but rather an independent set of institutions, informal relationships, and traditions that promote trust; a sense of wider community; and a shared obligation for building a better common future.⁶ Civil society occupies the political space created when the power of the state is restricted by the process of democratization. Making use of the freedom to speak and organize for direct action or to influence the policies of the state or the private sector, the institutions of civil society become critical to assuring that the public has enough political leverage to nourish and support the maintenance and expansion of democracy and freedom. The development of a strong civil society serves as a buffer against the power and authority of both the state and the business sector. It facilitates and amplifies alternative grassroots sources of power and influence.

The institutions and organizations of a vigorous civil society are potentially of great value in assuring that the voices of those who do not have privileged access to the corridors of power can still be heard. By joining or otherwise supporting NGOs organized to represent the policy directions they favor, individuals whose voices would otherwise be easy to ignore are more likely to get a hearing for these alternate points of view, even when they are in the minority. But it can also be important when they are actually in the majority. There are many situations in which the interests and preferences of a large part of the population run counter to those of much smaller political or economic elites, who always seem to be able to make their voices heard. The same mechanisms of civil society can help prevent elites from running away with the policy process in a democracy, which they would otherwise be able to do, despite the fact that they are in the extreme minority.

Nonprofit nongovernmental organizations (NGOs) created by the people of a country are the formal institutions of civil society. They come into being for a wide variety of reasons: to help those who need help; to raise public awareness of social inequities and political injustices; to further a social or political cause through education and peaceful civil action. In a truly democratic society, such organizations can be freely formed and operate independently of control or coercion by business or government. They can be a real “force multiplier” for people who care about a particular issue or set of issues. By gathering relatively little bits of financial and other forms of support from those who have strong opinions but are not able to set aside the time from the daily demands of ordinary life to work on these problems, NGOs can concentrate their interest and give them greater influence in the public arena.

Grassroots NGOs are also an important force in helping to apply pressure for a greater degree of transparency of both governmental and private sector institutions. When pressed for critical information on a public issue of importance, governments, for example, sometimes produce lengthy and complicated reports purposely written to be barely intelligible to the general public. Where there is an active and vibrant civil society, NGOs focused on the issue at hand can mobilize nongovernmental expertise to interpret the sometimes nearly incomprehensible language that is common in such documents, distill the essence of the analysis, and present the key points in a way that any reasonably educated person can understand. Then, crucially, the relevant NGOs can use these “translations” to inform the general public, build support for or opposition to the proposed projects or policies, and bring the issue back to government decision makers with the force of organized public opinion behind it. In countries with a vital and active civil society, the exercise of preparing these translational documents can be a touchstone of the democratic process.

Obviously, NGOs should also be held to high standards of transparency themselves. It should be easy for anyone interested in knowing to find out what sources of funding are supporting any given NGO, as well as the sources of any other form of support they receive. This is particularly useful in helping people to distinguish between real grassroots NGOs and those organizations that have the appearance of NGOs but are actually established and supported by a small number of powerful corporations or individuals to further their own narrowly focused special interest agendas (so called “astroturf NGOs”), discussed earlier in Chapter 1. It is also important that NGOs that do receive funds or other forms of assistance from large groups of smaller donors be held to account for the ways in which that assistance is put to use, including easily available up-to-date descriptions of the projects in which they are engaged. That is to assure that people are able to evaluate the activities of any particular NGO, so they can judge whether it represents causes or interests they want to begin to or continue to support. A vibrant civil society will include contending NGOs that represent a wide range of interests and perspectives on the issues of the day.

The informal relationships and traditions of civil society are also important. Democracy requires open civil discourse with tolerance of, if not respect for, the expression of opinions which may not only be critical of the government, but with which many of the people of the nation may disagree. Shouting down or shutting out those who express contrary opinions is not so much precluded by government or formal civil institutions as it is inhibited by the culture and traditions of open civil discourse. Such norms, conducive to the free and open exchange of ideas, are a key part of the sociological infrastructure of a good society.

Interacting with the World

Free Trade and Globalization

“Globalization” is the term which has been commonly used for the latest phase in the ongoing process of increasing worldwide economic, political, and cultural integration. Its most ardent cheerleaders claim that globalization will inevitably lead us to a world of unprecedented prosperity, where borders don't matter and all of us have the same opportunities to succeed in life. Its most skeptical detractors contend that it is destroying cultural, political, and social diversity, creating competitive pressures that drive wages down and worsen working conditions for an increasing proportion of the earth's labor force, and in the process, ruining the global environment. And then there are also those who argue that the whole phenomenon is grossly exaggerated, that the world was more economically integrated a 100 or more years ago, and more politically integrated in the late nineteenth century.⁷

Global interconnectedness is, in fact, an important feature of modern life. But it is not necessarily the result of an elitist grab for power nor the herald of a new era of global conscientiousness and cooperation. It is instead the natural outcome of a broad trend of widening and thickening human interaction that has been going on for thousands, if not millions of years. As the technologies of transportation and communication improved over many millennia of human history (and prehistory), formerly isolated groups have more and more come into contact. They increasingly traded with each other, learned from each other, and all too often, fought with each other. In the course of doing so, the exchange of goods, ideas, and practices broadened; intensified; and became more critical to them. Like the earlier stages of this process, the most recent globalization stage has been facilitated by improvements in the technologies of transportation (such as supertankers and jumbo jets) and communication (such as smartphones and the Internet) that had their origins in the late nineteenth century and underwent explosive growth during the twentieth and early twenty-first centuries. In a sense, some form of globalization was virtually inevitable, given human curiosity, greed, and technological prowess.⁸ But that does not mean that the particular form of globalization we have today was or is inevitable. We do not face a simple choice of either embracing it as it is or rejecting it. We can and should instead change the shape of globalization to make it more supportive of the building of better societies around the world.

There are still today vast inequalities of opportunity as well as of outcomes (such as wealth, power, and income) around the world, though inequalities of opportunity may be less dependent on pure geography today than in times gone by. The opportunities available to individuals remain very much a matter of socioeconomic class, and increasingly a matter of skill level. While individuals with comparable levels of skill are in more direct competition across borders than ever before, access to the means of acquiring comparable skill is still far from universal. An engineer in India may be more able to compete with an engineer in the US for a particular piece of work now than in the past, but not every Indian (or American) who has the desire and potential to be a good engineer has an equal chance of getting the necessary education.

The most recent phase of economic globalization, which is reshaping our twenty-first-century world, is in large part consciously driven by the liberal ideology of free trade. The idea that uncontrolled, unregulated, and unobstructed trade across national boundaries increases economic well-being had its origins in the eighteenth-century writings of Adam Smith. It was then refined and taken to a new level in the early nineteenth-century writings of economist David Ricardo, who developed a theory of international trade called “the theory of comparative advantage”.

The essence of Ricardo's argument is that the labor, capital, and natural resource endowment (including such things as climate and geographic location) of each country is somewhat different, giving it an advantage relative to other countries in producing certain types of goods and services. If each nation specializes in producing those goods and services that it is best at producing – and trades for the other goods and services its people want and need – not only will the largest total world output of goods and services be produced, but each nation individually will also be better off than if it tries to produce all the goods and services its people want on its own.

Although this argument has its intricacies, the basic proposition is easy enough to accept. After all, it is obvious that we are all better off as individuals by being able to “specialize” in doing the things that we do relatively well (our “comparative advantage”) and “trade” for the other things we need than we would be if each of us had to do everything for ourselves. Being a neurosurgeon, a janitor, a machinist, a manager, a teacher, allows us to specialize and become better at performing a relatively narrow range of tasks, and then to use the money we are paid for doing that work to buy all the other goods and services we need (and can afford) that have been made by other people who also specialize in a relatively narrow range of tasks. If each one of us had to teach ourselves, provide our own medical services, build our own houses, make our own clothes, grow our own food, etc., we clearly would have a lower material standard of living than we do now. For people, this is true on a local or global basis. Why should it not also be true for nations?

As an underpinning of and justification for the present phase of liberal economic globalization, the theory of comparative advantage is not on solid ground. For one thing, it doesn't consider that freezing trade patterns according to the pattern of comparative advantage that exists at any point in time tends to prevent the kind of structural economic change that is critical to real economic development, especially in less developed countries. Raising education levels, improving the skill of the labor force, and adopting updated technologies are vital to making progress in economic development. Yet they all can and do change comparative advantage. Investing the time, money, and effort needed to accomplish them will not be encouraged if nations are restricted to producing the same kinds of goods and services they have produced efficiently in the past, and must give up moving into new areas of economic activity in which they will almost certainly not be very efficient to start. If South Korea, for example, had taken this theory's advice in the 1950s, it would have remained a largely lower-income agricultural nation rather than the industrial and technological power it has become.

Ricardo's theory also postulates a world in which economic activity is carried out by firms that are engaged in fierce competition with each other, whereas much international trade today is carried out by large multinational corporations (MNCs) that sometimes explicitly or implicitly collude, and in any case, come closer to the economic model of monopoly than that of intense competition. Not only do these large global corporations dominate world trade, but a substantial amount of what we call international trade in our day and age actually consists of transfers internal to large multinational firms whose subsidiaries are located in different nations – by some estimates, between 30 and 50%.⁹ This is far from the picture of the nature of international trade that underlies the theory of comparative advantage. A world of markets dominated by firms with considerable monopoly power is not a world in which competition will thrive.

Expanding markets to the global scale raises both economic and political concerns. If global markets are dominated by large MNCs, many of the economic advantages of free trade are lost. The free market system depends on competition to keep firms disciplined and efficient, to keep costs low and product quality high. In the absence of strong competition, the lack of trade barriers does not by itself enforce either efficient production or innovation. In addition, because economic power and political power are fungible in many ways, large multinational firms are not merely economic enterprises. They also represent considerable centers of potential political power and influence whose actions could affect the outcome of elections (as well as other processes that determine who governs) and distort government policymaking to their advantage. As I argued in Chapter 1, the political process, especially the democratic political process, is likely to work better in the absence of high concentrations of economic power, and very large corporations represent high concentrations of economic power. Globalization can promote the further growth of firms capable not only of affecting politics within their home countries but also of reaching across the globe to influence the political process in every country in which they operate. That is another good reason for concern about the path that globalization takes.

It is also important to point out, however, that the mere fact of globalization does not require that large monopolistic MNCs dominate economic relationships or unduly influence the political arena. It is perfectly possible, though not particularly easy, for governments to agree to jointly and separately set up “rules of the game” that allow for globalization that does not facilitate the degeneration of the international marketplace into a playground for a relatively small number of dominant firms. Among the most obvious of these is a serious antitrust policy to break up huge firms into smaller more competitive pieces. Even if there is some loss in narrowly defined efficiency (e.g. higher unit cost) in the process, the benefits of assuring more competition and less economically based concentration of political power seem likely to be far greater than the costs.

The National Security System

We tend to think of security in terms of military forces and their support systems. The security of a nation in this view derives from its power to use or to credibly threaten to use military force to compel those we see as acting against our national interest to change their behavior. While military force has a role to play in facing down external threats, the fact is national security is not primarily a matter of military power, it is primarily a matter of relationships.

The proposition that security is primarily about relationships is easy enough to illustrate. During the whole of the Cold War, the American military spent a great deal of effort and trillions of dollars building weapons and structuring forces to deter the Soviet Union from attacking the US or its major allies with nuclear weapons. During much of that time, both France and Britain had enough nuclear capability to deliver a devastating, perhaps terminal attack against the US. Yet we spent little or no time or resources worrying about or preparing for a British or French nuclear attack. The reason for this difference is obvious. The relationship between the US and the Soviet Union was hostile, while the relationship between the US and Britain or France was friendly. And when the Cold War finally ended and the relationship between Russia and the US became much more cordial, very few Americans – in or out of the military – continued to worry all that much about a Russian nuclear strike. Yet the Russian military remained every bit as capable of destroying the US as it had been during the Cold War. It still is, and now that the relationship between Russia and the US has been deteriorating again for years, we are getting increasingly worried once again about the Russian nuclear threat.

Furthermore, the US has never been all that concerned about the substantial nuclear arsenal of Israel, a nation with which it has close ties, but went to war in Iraq in 2003 citing what turned out to be mistaken fears that the hostile Iraqi government was trying to develop weapons of mass destruction. And today the US and its allies are worried about the tiny nuclear arsenal of a hostile North Korea and the possibility that a hostile Iran may someday acquire nuclear weapons. Relationships certainly are central to security.

There are great advantages, both economic and political, in reducing our reliance on the threat or use of military force for security in favor of relying primarily on much less expensive and far more effective means of achieving peace and security by recognizing and mobilizing the power of economic relationships. The challenge of applying an economic approach to national and international security is to define a set of conditions that will structure economic relationships so that they generate strong positive, self-interested incentives for nations to manage conflicts short of war. That task, along with working out policies and institutions capable of creating those conditions, is at the core of my book, The Peacekeeping Economy.¹⁰

To make their greatest contribution to national and international security, economic relationships must be structured around a few basic principles that define the character of economic peacekeeping. The first and by far the most important of these is that the relationships must be balanced and mutually beneficial.

Principle I: Establish Balanced, Mutually Beneficial Relationships

There has been a long-standing debate as to whether economic relationships prevent or provoke war. In fact, economic relationships can do either. Which they do depends crucially on the nature of the relationships, not just the extent of the activity. Unbalanced, exploitative relationships tend to increase the number and severity of conflicts; balanced mutually beneficial relationships tend to reduce them. A relationship is “balanced and mutually beneficial” if its benefits flow to every participant and there is a rough equality between everyone's contribution to the relationship and the benefits they get.¹¹ Unbalanced, exploitative relationships are those in which the flow of benefit is overwhelmingly in one direction and does not correspond to relative contribution.

There is some interesting evidence from the field of experimental economics that people intuitively understand the importance of treating others fairly in economic transactions, if only out of self-interest. The Ultimatum Game is a one-time, two-person game in which one party (called the “Experimenter”) sets up the game by providing a sum of money (say $100) to begin the game and the other person playing the game (known as the “Proposer”) makes an offer to divide that money with the final player (known as the “Responder”). The Proposer offers to divide the money in a specified proportion, say 60%–40%, or 90%–10%. If the Responder accepts the offer, the game is over and the money is divided the way the Proposer suggested. If the Responder does not accept the offer, neither the Proposer nor the Responder gets anything.

Standard economic theory would predict that as long as the Proposer offers the Responder any money, the Responder would accept the deal because that way at least the Responder gets something. If the deal offered by the Proposer is turned down, the Responder gets nothing. But after running this experiment many times in various countries under various conditions, the researchers noted that rather than trying to get a very lopsided deal, the majority of Proposers offered the Responders 40%–50% of the sum of money, and about half of the Responders rejected any offer below 30%.¹² We can't be sure whether most Proposers made a balanced offer out of a belief in fairness or out of pure self-interest. (Were they trying to do the right thing or were they just trying to ensure that the offer would be accepted?) But it is very clear that half the Responders preferred to walk away empty-handed rather than accept an offer they considered really unfair.

Even if everyone is gaining something in an unbalanced relationship, the fact that the vast majority of benefit flows elsewhere is likely to irritate those who receive less than they contribute. There is little or no incentive for them to work at resolving whatever conflicts might arise in the relationship, economic, or otherwise. If they come to see disrupting the relationship as key to rebalancing it or replacing it with a better relationship with a different partner, they will be ready to raise the seriousness of those conflicts – in extreme cases, even to the point of war. The revolution that gave birth to the US is one of many examples of the power of economic exploitation (in this case, as a result of the British trade monopolies) to provoke antagonisms that can lead to war.

Balanced economic relationships have the opposite effect. Since everyone gains benefit at least equal to their contribution, out of pure self-interest no one wants to see the relationship disrupted, let alone to take deliberate action to disrupt it themselves. When conflicts occur, they will try hard to settle them amicably. If their partners come under external stress, they have an incentive to help relieve, rather than aggravate the pressure. In this situation, everyone in the relationship will feel more secure, and no one will need to expend extra effort and expense just to keep it going.

Beyond this, when two nations are engaged in an expanding web of balanced mutually beneficial economic interactions, more and more people in both countries have increasing contact as a natural result of engaging in economic activity together. At first these contacts may be stiff, formal, and focused on the business at hand. But people are people, and eventually their social interactions will lead them to begin to know each other better. They may spend more time in each other's country and almost inevitably become more familiar with each other's life circumstances. Sometimes they won't like each other. But more often than not, this increased contact will melt away at least the most extreme stereotypical images they had of each other and lead to greater understanding and empathy. Some friendships will be made, and long-held suspicions – even enmities – are likely to slowly disappear. The context surrounding their interactions will change for the better.

Even when gains are balanced, if the process involved in making key decisions is unbalanced, those with less input and control are likely to feel that they are too dependent on the good will of the others. Knowing that the terms of the relationship are subject to arbitrary, unilateral change creates insecurity and weakens commitment. When decision power is more equally shared, everyone involved has ownership in the relationship. It is their property, not simply a gift someone has given them and can just as easily withdraw. Every participant will be motivated to take care of the relationship, to insure its continuation and success. This cannot help but strengthen the impulse of all participants to find peaceful ways of settling whatever conflicts they have with each other.

This may seem more like psychology than economics, but it is actually a central tenet of free market economics. It is precisely the reason so much emphasis is placed on the institution of private property. Because property is an asset that can provide continuing economic benefits, owners of private property have a strong personal incentive to maximize the flow of those benefits by taking care of the property and using it efficiently. That incentive works greatly to the benefit of the society as a whole. Similarly, because a balanced economic relationship itself is an asset that can provide continuing economic benefits, “owners” of the relationship also have a strong incentive to maximize the flow of benefits by caring for it properly. In either case, that incentive would be dramatically weakened if decisions as to what to do with the assets that affect the flow (or distribution) of benefits it produces were subject to change as a result of arbitrary decisions made in a process over which the asset's owner had no meaningful control.

In a relationship characterized by balanced decision power, all participants have a greater sense of security because they know that they will be directly involved in any decision to change the rules or character of the relationship. (The sole exception, of course, is that any party to a purely voluntary relationship, unconstrained by contractual requirements to the contrary, is free to end their participation without anyone else's consent.) This will not necessarily prevent all changes that at least temporarily reduce their gains or increase their costs. But it is easier for anyone who has been a full partner in deciding to make a change to accept it without undue hostility, even if it hurts. Painful change that is coerced or imposed is an entirely different thing. Again consider the American Revolution. The famous slogan of that war was not “No taxation,” but rather “No taxation without representation” (or alternatively, “Taxation without representation is tyranny”).

When economic relationships are balanced in both benefits and decision power, current gains and the prospect of greater gains in the future create strong self-interested incentives to settle the conflicts that inevitably arise more peacefully.¹³ The strength of that incentive depends on the salience of that relationship to the parties involved. Even if a relationship is balanced, if it is of little significance to either party, the incentive it creates to avoid conflict arising from other causes will be weak. As those conflicts are dealt with successfully time after time, the whole context for thinking about and reacting to conflict among the participant changes. The idea of allowing conflicts to fester to the point of violent confrontation comes to seem more and more absurd. The thought of threatening to go to war against valued economic partners slowly recedes, and war itself may ultimately come to be seen as unnecessary, undesirable, and inherently counterproductive.

Principle II: Emphasize Development

The poverty and frustration of so many of the world's people is a fertile breeding ground for violent conflict. There have been more than 160 wars since the end of World War II, taking more than 40 million human lives¹⁴ – a death toll roughly equal to the number of soldiers and civilians killed in all theaters of combat during World War II, including those who died in the atomic bombing of Hiroshima and Nagasaki. Nearly all of these wars were fought in developing countries. People in desperate economic straits tend to reach for extreme solutions. They are easily manipulated by demagogues. Violent disruption is more threatening to people in good economic condition because they have a lot more to lose. Therefore, emphasizing inclusive and widespread development is important to increasing international security and inhibiting the outbreak of war.

There are many reasons why war erupts, and therefore few grounds for believing that, by itself, even a great improvement in everyone's material well-being would put an end to war. Of course, development done well does provide people with more than economic well-being – it also facilitates, for example, greater political involvement and better access to education. In any case, encouraging inclusive and widespread development is important to giving the largest possible part of the world's population a direct, obvious, and personal stake in avoiding disruptive explosions of violent conflict. Development helps keep the peace by changing the context in ways that strengthen resistance to the outbreak of war, as well as reducing one key factor that can lead to war – the frustration and hostility of those who are economically deprived and politically marginalized.

Principle III: Minimize Ecological Stress

There is no question that competition for nonrenewable resources generates conflict. The desire to gain and, if possible, monopolize access to raw materials and fuels was one of the driving forces behind the force-based colonization of much of the world by the more economically and militarily advanced nations in centuries past. This competition continues to bring nations and groups within nations into conflicts of the most dangerous kind – those in which at least one party believes that the continued economic well-being, political sovereignty, or even survival of its people is at stake.

There is little doubt that conflicts in the Middle East would be much less likely to lead to military action by the major powers if it were not for oil. The considerable difference among the relatively mild reactions of those powers to slaughter in Rwanda and aggression in Bosnia, and their much stronger reactions to hostility in Iraq and brutal war in Libya may have a variety of causes, but the absence of large deposits of oil in Rwanda and Bosnia and the presence of large deposits of oil in Iraq and Libya was certainly one of them. In the twentieth and early twenty-first centuries, the most contentious resource conflicts might have been over oil, but in the mid to late twenty-first century, it may be that they will be over water.

Pollution that crosses borders may not lead to war by itself, but it has already generated considerable conflict and could generate much more. There has been widespread international hostility to the failure of the world's biggest “greenhouse gas” polluters to take seriously the threat posed by the effect that pollution is likely to have on climate change, imposing potentially enormous long-run costs on the global economy. Every additional source of tension contributes to the strain on the international system and therefore to the likelihood that other sources of conflict will lead to the eruption of violence.

Some have argued that the expansion of economic activity itself is inconsistent with maintaining environmental quality. While there is some truth to this, the levels of economic well-being to which the people of the developed countries have become accustomed can be maintained, improved, and extended to the people of the developing nations without even generating current levels of environmental damage. Accomplishing this feat requires (1) a great deal more attention to the efficient use of natural resources; (2) the development and extensive use of pollution-reducing technologies and procedures; and (3) a substantial shift toward qualitative, rather than quantitative economic growth, particularly on the part of the developed countries. Furthermore, working together to reduce ecological stress that can be seen as a mutual threat has the potential to create an atmosphere that reinforces cooperation, helps to defuse hostility, and so adds to security.

Security is important to the quality of life, current well-being, and future prospects of any society. The good society is no exception. The three core principles of economic peacekeeping – establishing balanced mutually beneficial relationships; emphasizing development; and minimizing ecological stress – are the basis for creating a system of economic relationships that will give nations (as well as many subnational groups) strong, self-interested incentives to settle or at least manage their conflicts short of war. That will take us a long way toward building a national and international security system that is both more effective and much less expensive than our present, military-centered approaches. It is also a strategy for achieving security that is wholly compatible with and supportive of the freedom-maximizing, noncoercive character of the good society.

Peacekeeping Economics in Action

The effectiveness of mutually beneficial, balanced economic relationships in keeping the peace is illustrated by the development and growth of the European Economic Community (EEC), forerunner of today's European Union (EU). The EEC began as the European Coal and Steel Community (ECSC) formed by six nations shortly after World War II (1952), with the explicit goal of trying to build economic bonds (especially between France and Germany) to make the outbreak of another war among them less likely.¹⁵ By the mid-1980s, the dozen nations that belonged to the EEC included Belgium, France, Germany, Great Britain, Italy, the Netherlands, Portugal, and Spain. These nations had not only fought countless wars with each other over the centuries (including World Wars I and II), most of them were also major colonial powers that militarily dominated and exploited much of the rest of the world. But the web of mutually beneficial economic relationships that has resulted from the establishment and growth of the EEC/EU (reinforced by a formally enshrined commitment to shared decision making, stimulating development of its relatively poorer members, and improved environmental quality) has so changed the context and incentive structure among these nations that today the odds of these countries fighting a war with each other over the next 50 years has dropped precipitously.

These nations have not lost their interest in military matters or their willingness to engage in warfare.¹⁶ It is also not as if these countries no longer have conflicts with each other. In fact, they have many, economic and otherwise, some of them quite severe. There was, for example, the sharp split over the 2003 war in Iraq (with the governments of Britain, the Netherlands, and Spain strongly in support and those of France, Germany, and Belgium strongly opposed). More recently and spectacularly in the last few years, there have been very serious disagreements about appropriate policies with regard to the single European currency (the euro), at least within the subset of EU member states known as the Eurozone. And then there is the surprising vote by the British public in 2016 to leave the EU.

The EU nations (including Britain) understand that the network of balanced, mutually beneficial economic relationships they have created gives them a strong stake in finding ways to manage, if not to resolve, the conflicts they have with each other. They simply have too much to lose to let their disagreements get out of control.¹⁷ So they debate, they argue, they shout. But they no longer threaten, or even think about threatening each other militarily, let alone actually going to war. With all its problems, the EU is a clear piece of evidence that peacekeeping economic principles are practical and achievable.

But the EU is not the only example. The US and Canada share the longest disarmed border in the world and have had cordial relations with each other for more than 100 years. Yet in the eighteenth century, the Canadians were the enemy, the loyalists to Britain who opposed the American Revolution. In the nineteenth century, a naval arms race erupted between the US and Canada on the Great Lakes and war was a very real possibility. The subsequent progressive growth of mutually beneficial economic relations between the two countries helped to defuse this enmity. And today, the connection between the two countries is deep and strong, despite a variety of periodic disputes.

National and international security is a very serious matter. We can assume that there will always be some degree of conflict between nations and peoples. Human beings are simply too contentious a species for it to be pragmatic to rely on good will alone to keep us safe. On the other hand, threatening to use or actually using military force is an expensive (in terms of lives and treasure) and often ineffective approach to securing our national and personal interests – one that is also inconsistent with the minimally coercive nature of a good society. Economic peacekeeping, on the other hand, is a much less expensive approach that has the power to create a context in which the incentives for nations (and peoples within nations) to manage their conflicts without the eruption of war are strong, positive, and self-interested. There may be rare occasions when the coercive threat or use of some military force seems unavoidable. But it is entirely consistent with the central proposition of a freedom-maximizing good society that coercion should be used only as a last resort.

Protecting the Web of Life

“This we know: People did not weave the web of life; we are only a strand in it. What we do to the web, we do to ourselves.”¹⁸ This poetic phrase is beautifully concise and effectively captures the essence of the relationship between people and the ecology. Our long-standing tendency to see human beings as something separate and apart from the natural world has made it difficult for us to appreciate the extent to which we are all part of the same whole. Our actions send ripples – and sometimes unintentional shock waves – into the environment which reverberate and return to affect the circumstances in which we live. It is an unavoidable fact of our lives that “what we do to the web, we do to ourselves.”

Creating a good society that is indefinitely sustainable requires that we pay serious attention to the impact of our activities on the ecology that surrounds us. It provides many of the critical resources on which our lives depend, from the air and water and the life forms on which we feed to the abundant minerals, energy sources, and physical climate that condition our life circumstances. We do not need to see the environment as something sacred, something that we cannot touch, to appreciate the wisdom of not setting processes in motion through our own actions that can create disastrous shifts in local or global environmental conditions. It only requires waking up to the realities of the world in which we live.

There is nothing wrong with making use of resources that the ecology makes available to us to sustain and enhance our material standard of living. We do not have an obligation to leave the ecology in pristine condition. In fact we cannot. Living a good life in a good society still means at least some of our normal activities will affect the environment, sometimes negatively. We do not need to feel guilty about that, but we also cannot afford to ignore the need to keep the level of damage we do within the bounds of ecological resilience. The ecology can tolerate, adjust to, and rebound from a certain level of insult without undergoing catastrophic change, that is, without changing in a way that would be catastrophic for us and the balance of life on this planet. But we must keep our eyes on those boundaries and take strong action to avoid crossing them. That is not a particularly easy thing to do.

The current problem of climate change is an important case in point. Climate change and the global warming that is producing it pose a particularly difficult multidimensional challenge. For one thing, there is still a lot of uncertainty as to what precise complex of factors are driving global warming and exactly how climate will change as global warming proceeds. That gives us the urge to wait until we are more sure of ourselves before taking strong and possibly expensive action. But although we are not certain what and where they are, we do know that the environment is subject to thresholds or “tipping points” that can turn a slow, incrementally changing process into a sudden and rapidly surging change. When these thresholds are crossed, our ability to mitigate the situation may largely or even completely evaporate. We also know that there is a great deal of inertia in many environmental processes, which means they cannot be turned on a dime. If we wait too long or act too weakly the problem may continue, and possibly worsen, whatever we do. Most climate scientists now believe that global warming will continue for a number of years before our best efforts to stop it will begin to have any serious effect. This combination of factors means that we cannot afford to wait too long, but rather have to act boldly and strongly now, despite our uncertainties.¹⁹

Even in such a difficult situation, there are still strategies available that have the potential to offer sensible solutions to the problem of what to do. The most obvious is to begin by taking advantage of whatever low-cost options exist that move us in the right direction. For example, we have been so profligate in our use of energy resources that just getting producers to pay more attention to what they are doing will reveal many simple and relatively inexpensive ways to reduce waste. Economists usually assume that if there are ways to reduce cost-increasing waste of resources, profit-oriented businesses will have already found them and put them to use. But attention is a limited resource: managers cannot pay attention to everything at once. If their attention has been focused elsewhere, such as on controlling labor costs, it may first be necessary to institute policies like pollution taxes that draw their attention to increasing the efficiency with which they use energy and other material resources, and so reduce the environmental damage they are doing. Because there is still more uncertainty in the climate change arena than we would like, another approach that makes sense is to seek damage mitigating strategies that are robust and adaptable. Though they may not yield the best results in any particular situation, robust strategies work reasonably well under a wide variety of circumstances and so give us a substantial margin for error when we are uncertain what situation will actually develop. Adaptable strategies also make sense. They do not freeze us into a particular mode of action but allow us to adjust what we are doing as more of the uncertainty clears and we learn more about the situation we actually face.

The air and water know nothing about the arbitrary lines we draw on the earth to mark our national boundaries and separate ourselves from each other. They flow where they will flow. When we pour toxins into the air or water anywhere, they do not stay neatly in place. In the nature of things, properly protecting the environment is a global collective problem, a problem that cannot be effectively solved by any one nation or people acting alone. In order to build a good society that is sustainable over the long term, the people of that society need to look inward and make best efforts to avoid doing more damage to the environment than is necessary. But that is unlikely to be enough. They must also look outward to willingly collaborate with the people of other societies in the kind of treaties and agreements that will support the worldwide collective action needed to most effectively protect the web of life.

The Role of IGOs, Treaties, and International Law

A good society cannot isolate itself from the necessity of having to interact with other nations and societies, many of which might operate with a very different set of rules. There are simply too many compelling issues in this shrinking world that have to be addressed on a global scale in order to be addressed effectively. For example, in addition to climate change and other global environmental problems, there are the problems of terrorism, maintaining international security, dealing with very large numbers of refugees displaced by war and other disasters, the threat of proliferating weapons of mass destruction, and the emergence and spread of deadly viruses and other pathogens. All these are problems that cannot be solved, or even seriously mitigated by any one country acting alone. They require building a degree of cooperation. How can a good society not only participate in but also encourage this process?

As I have earlier argued, it is actually a good thing that there is no overarching world government to foster this global cooperation. From time to time, governments engage in policies or practices that take their countries in social, economic, or political directions that are highly objectionable to some of the country's population. It is an advantage for people to have the option of leaving the country and going to live elsewhere under a different government. Though that is not always an easy thing to do, at least it is possible. If there were a single world government, there would be nowhere to escape, nowhere to hide. As it is, even though there is no world government, the international arena is not entirely anarchic. There are a number of intergovernmental organizations (IGOs), existing treaties, and a body of international law that gives some shape to international governance. Some of the more important IGOs include the United Nations (UN), the World Trade Organization (WTO), the Organization for Economic Cooperation and Development (OECD), and the International Bank for Reconstruction and Development (IBRD, the “World Bank”). It would certainly makes sense to be an active participant in these and other IGOs, some of which are more in tune with the spirit of the good society than others and to try to see that they move in productive directions.

The WTO is an interesting example. It is an international organization able to wield real enforcement powers to back up its decisions. It can invoke multinational economic sanctions to back up the rules that it makes to govern international trade. Any member of the WTO can bring a case against any other member for violation of WTO rules. The WTO can empower a panel of judges to hear both sides of the case, and if the panel finds that a violation has occurred, the decision can be taken to the representatives of all the member governments, who then vote on whether or not to impose economic sanctions on the violator. The WTO has done a lot of work to eliminate trade barriers around the world and encourage freer international trade. But it has paid much too little attention to the impacts of its rules on the environment and on workers. Apart from those who oppose the WTO because they are fundamentally opposed to free trade, other critics of the organization have argued that some of the rules and regulations the WTO has put in place to prevent nations from engaging in de facto protectionism are actually tools that can be used to roll back some if not all of the gains workers and environmentalists have struggled to make. It is beyond the scope of this book to discuss the details of the WTO cases that give some credence to this belief, but even a brief look at the organization's operating principles is quite revealing.

According to the WTO's own literature, “The WTO agreements are interpreted to say two important things. First, trade restrictions cannot be imposed on a product because of the way it has been produced. Second, one country cannot reach out beyond its own territory to impose its standards on another country.”²⁰ The effect of these “two important things” is to open a route to undercut attempts by any country to use the positive economic “carrot” of access to its markets to provide incentives to other countries to behave in ways that better protect the global (or regional) environment. Much of the pollution generated in the manufacture of a product is generated as a result of “the way it has been produced”. Taking away the right to restrict the import of products that have been made by “dirty” processes, when other “cleaner” but perhaps more expensive processes are used by other producers, is tantamount to giving a competitive advantage to those producers who do the most environmental damage. Beyond this, suppose the “dirty” producer is located in a neighboring country and the pollution it is spewing into the air or water is directly degrading the environment of the country which is the recipient of this pollution. In order to give the polluting country a strong incentive to mitigate the problem, the country receiving the “across the border” pollution might want to threaten to restrict or completely block the import of products made in the polluting country. The WTO's insistence that the way a product is produced is not permissible grounds for restricting trade would in this case seriously hamper the ability of the importing country to protect its own environment.

Furthermore, the idea that a country is not permitted to reach beyond its own territory in encouraging environmental protection betrays a misunderstanding of the very nature of the global environment and its human interactions. The air, the water, the flora and fauna do not recognize artificial political boundaries. The living and nonliving natural resources provided by the world's environment are a part of the heritage of all people, and in one way or another, more or less directly affect the well-being of all of us. The fact that the Amazonian rainforest lies wholly within the boundaries of a few South American nations does not mean that its condition has no relevance to the lives of those who live elsewhere. Restrictions by a country on imports that are produced in ways that, for example, destroy the rainforest or threaten endangered species outside its own territory can be perfectly reasonable means for trying to inhibit that destructive behavior.

Of course, the WTO does not prevent and does not claim to have the authority even to inhibit the nations of the world from concluding or enforcing environmental treaties that reach beyond their individual boundaries. But when the WTO sees the environmentally related actions of any country or group of countries as restrictions on the free flow of trade with any other member country that chooses to bring a complaint, it can mobilize the mechanisms it has available to enforce its decisions by bringing sanctions to bear that will pressure the violators of its principles to back off from the “offending” environmental protections they have instituted. It not only has such mechanisms; it has repeatedly and forcefully used them.

The same two principles have a similar effect on the issue of human rights. Taken literally, they would prohibit restricting the import into your country of products made by slave labor, or the labor of young children, or workers forced to labor in terribly unhealthy or dangerous conditions. This would take away an important and potentially powerful tool for putting pressure on foreign producers to stop these heinous practices.

Now the WTO's idea that “one country cannot reach out beyond its own territory to impose its standards on another country” might seem like an international analog to the good society's freedom-maximizing principle that no one has the right to impose his or her own way of living on anyone else. But the fundamental constraint on that freedom-maximizing principle of “live and let live” occurs when the actions of one person coercively limit someone else's freedom. In that case, there is not only justification for trying to change the behavior of the offender, there is an obligation to. If both parties lived within the boundaries of a freedom-maximizing good society, the full power of the law would be available to stop one person from compromising the freedom of another. In the international arena, the problem is more complex precisely because there is no overarching government to apply such law. So the problem is best addressed by working through IGOs or treaties.

In the particular case at hand, the WTO's principles need to be changed to allow the use of unilateral or multilateral trade sanctions to create incentives for producers to move away from inherently dirty processes. This could allow for “equalizing environmental tariffs,” tariffs just large enough to eliminate the cost advantage of producers using cheap but dirty (or otherwise environmentally damaging) processes. When it comes to producers using slave, young child, or seriously abused labor, stronger measures like embargoes are certainly justified.

The good society's commitment to human rights and attention to environmental quality do not end at its borders. It is free to advocate for these matters, to try to serve as a model worth copying, but it is not justified in using force to compel other societies to adopt its principles.

Many seem to believe that international law is not a serious matter, precisely because there is nothing remotely like a world government to enforce it. Without enforcement, international treaties are just pieces of paper that nations violate at will whenever it serves their interest. But there is much more to it than that.

There are many situations in which achieving a desired result requires collective action. Countries may be willing to bind themselves to engage or not to engage in a particular set of actions if – and perhaps only if – they have some assurance that enough other countries will do the same so that their combined actions will effectively mitigate or solve the problem. The problem of global warming and the climate change it induces is a good example. No one country can solve the problems this will cause them by itself, and few may be willing to bear whatever expense they may incur in reducing the buildup of greenhouse gases unless they know that enough other countries are also willing to take the needed actions so that their combined reductions will make a real difference. If they are the only ones to act, they will end up expending their resources and achieving little or nothing. One obvious approach is to negotiate a treaty in which many countries agree to take the needed actions. Even in the absence of another enforcement mechanism, if there is a system of verification that makes the process transparent enough so that they are confident they will know if another country is cheating on their treaty obligations, the fact that each country has a vested interest in maintaining this joint effort will by itself tend to enforce adherence to the treaty. In other words, the threat that enforces the treaty is the threat that the mutually beneficial collective effort will fall apart if there is cheating, and if it does fall apart, the cheater will lose too.

As is true in many collective action problems, there is also a potential “free rider” problem here. If enough other countries sign a treaty to make it effective in, say, reducing global warming by lowering greenhouse gas emissions, some country or countries might refuse to join simply to avoid any costs associated with the treaty obligations, while enjoying the benefits of the actions taken by the treaty adherents. That may not be fair but it is not all that troublesome, as long as the group of countries who decide to “free ride” on the treaty is small and includes only relatively minor contributors to the problem at hand. The treaty will still be effective if there is a strong enough transparency and verification regime to keep all the polluters who signed the treaty convinced that the other signatories are keeping up their end of the bargain.

Since the rise of large MNCs in the early 1960s, the integration of business activities across national boundaries has developed beyond the development of international political or legal systems. In the opening words of Barnet and Mueller's classic 1974 book, Global Reach: The Power of the Multinational Corporations, “The men [sic] who run the global corporations are the first in history with the organization, technology, money, and ideology to make a credible try at managing the world as an integrated unit.”²¹ Large MNCs can to a degree evade political control by playing off the rules of one country in which it has operations against the rules in another. The negotiation by governments of an appropriate international treaty or treaties may have a useful role to play here. One simple example involves the business practice known as “transfer pricing”. Say that an automobile manufacturer has parts of its operation spread across a number of countries. The corporation sets a transfer price at which its subsidiary that makes transmission systems, located in Country A, “sells” those transmissions to its subsidiary that does the final assembly of the cars in Country B. This is not an ordinary market price, it is a price between subsidiaries of the same company, and therefore a price that is internal to the company. For simplicity, assume Countries A and B have the same corporate profit tax rate. Now suppose that Country A decides to increase the corporate profit tax rate on businesses operating within its borders. The auto manufacturing corporation can simply lower the transfer price its transmission manufacturing division (in Country A) charges its final assembly division (in Country B). That will increase the fraction of company profits made by the assembly division in Country B (where taxes are now lower than in Country A) and lower the profits made by its transmission division in Country A (where taxes are now higher than in Country B). This will completely offset the increased tax rate that Country A has established, frustrating Country A's attempt to raise its tax revenues. Overall company profits remain the same, and so does the amount of tax the company pays.

It is perfectly possible, though not particularly easy, to establish an international treaty in which the signatory governments agree to jointly and separately set up regulations that allow them to reassert control over these large global corporations. As discussed in Chapter 2, these should be “rules of the game” regulations that lay out boundaries within which the MNCs must operate, rather than heavy-handed specific and intrusive regulations that attempt to micromanage the behavior of the MNCs. Along with this, it would be helpful to try for an international agreement to seriously pursue antitrust policy, to break up huge firms into smaller more competitive pieces. Even if there was some loss in narrowly defined efficiency (e.g. higher unit cost) as a result, it would be worth that loss to mitigate the MNC-driven tendency toward the degeneration of the international marketplace into one dominated by a relatively small number of very large firms. Since we know that economic power and political power are fungible, this is not just a useful procompetitive economic policy, it is also a policy that protects freedom and democracy from the damaging effects of concentrations of political power.