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Rankin: Constructing an Extranational Social Wage

The events of the last few days in East Timor show, perhaps even more clearly than the recent war over Kosovo, the limitations of the nation state in the modern world. In our system of nation states, no responsibility exists for the provision of security in disputed territories such as East Timor .

Meanwhile, Auckland is about to host the leaders meeting of APEC (Asia Pacific Economic Cooperation). Can APEC lead the way to the creation of extranational solutions to security, development and environmental problems?

As an economic summit, APEC is really about the meeting of three of the world's six or so economic nations. Economic nations are defined by capital flows. New Zealand is economically linked to the USA through a debtor-creditor relationship. An economic nation is able to be self-sufficient in capital, and trades with other economic nations on the basis of comparative advantage. Free trade between economic nations makes good sense, but is not essential. Textbook free trade is a form of economic cooperation, and it works best when a sm all number of nations of similar stature pursue coordinated monetary, fiscal and labour market policies.

There are two kinds of extranational trade. International trade takes place between economic nations, under rules of mutual respect. Intraregional trade, on the other hand, is trade outside of political nations but within economic nations. Intraregional trade within economic nations is no more th an an extranational extension of interprovincial trade.

APEC is about economic cooperation between three economic nations: East Asia (capital nation Japan), China, and America-Pacific (capital nation USA). It is also about forging links within the participating economic nations. Thus, for New Zealand, APEC is about cooperation with the other nations t hat form the periphery of the American-Pacific economic zone: Canada, Australia, Mexico, Peru and Chile. (Perhaps, also, the Philippines belongs in the American-Pacific zone, given its financial and cultural links to the Americas. Similarly, East Timor has a "Latin" and Christian history and cult ure.)

We can create a new international economic order if we come to acknowledge the reality of extranational economic sovereignty, and develop the world's economic nations from their present inchoate structures.

New Zealand's trade with the USA really represents what the classical economists called "the town and country trade". Thus, functionally, trade between New Zealand and the United States is the same as trade between Southland and Auckland, or between Tasmania and New South Wales. Why do Southlanders or Northlanders not concern themselves with their provincial balance of payments? Why is it that free trade between Invercargill and Auckland is not controversial? (There was no free trade between Victoria and New South Wales last century.) Why do we allow capital and labour t o flow freely between New Zealand's provinces?

The reason is that we provide nationwide collective goods. Northland has given up part of its sovereignty in return for a share of a New Zealand wide social wage. Social wage goods include public education, collectively funded health services, income support, and security. The nation state provid es all New Zealanders with security from invasion (through our armed services) and internal security (through our police force).

Despite a shared social wage, there is economic inequality between Northland and Auckland; between Southland and Wellington. The national social wage doesn't remove inequality; it doesn't in itself convert a poor province into a rich province. But it does ameliorate inequality. Northland would be much poorer if Northlanders had to pay rent and interest to capitalists resident in Auckland and Wellington, yet received no compensating social wage goods.

Trade and capital flows within the American-Pacific region conform to the town and country model. This phenomenon of a domestic economy outgrowing national borders was recognised in Europe, with the advent of the European Economic Community, now the European Union (EU). EU members remain nations in the fullest political sense of the word. The French people will always be French. European Union does not make them German or Irish. Nevertheless, they share a significant part of their once exclusive economic sovereignty.

It is no longer appropriate for New Zealand to see its options as either "free trade" or "protection". Instead, New Zealand's trade policy needs to work towards the creation of an extranational social wage. The European Union compensates its provinces through a system of subsidies, privileges and synchronised law. The interest payments that flow to the metropolitan centres of the EU are offset by social wage payments that flow, net, from metropolis to hinterland.

New Zealand, Australia and Canada need to cooperate with South American and Pacific nations to create an American-Pacific development zone that includes but is not dominated by the United States. That would mean creating the conditions through which collective goods and services could be supplied on an equitable basis throughout the region.

Such a social wage would offset the imbalances of payments that currently exist in the Western Hemisphere. At present, the American-Pacific economic nation functions much like an old-fashioned empire. Imperial 'tribute', in the form of interest, transnational profits and human capital flows into California, New York and Boston.

In my vision of the global economy of the future, there are just six economic nations. Each of the world's approximately 200 political nations belongs to an economic nation. Those six economic nations would probably be China and India plus 'commonwealths' based on the capital (creditor) nations o f Europe, East Asia, North America and Arabia. Each economic nation has equal stature. All provide collective goods and services for their member nations.

How would humanitarian problems like Kosovo and East Timor be resolved in a world divided into six commonwealths of equal stature? In each case, the peace would be kept by peacekeeping security forces acting under the authority of the economic nation as a whole. Kosovo would be Europe's problem. Serbia's "political sovereignty" would not be an issue. Security, as a collective economic good, would reflect the regionwide sovereignty of an economic nation.

East Timor, if a member of the East Asian commonwealth, would be made secure by the security forces of East Asia, and not just those of Indonesia. If a member of an American-Pacific commonwealth, then it would be our duty to put an end to the local or national militias that deny security to the T imorese people.

If some kind of ethnic or sectarian violence were to break out in Southland tomorrow, the New Zealand nation would take responsibility, even if there was a risk of casualties. On the other hand, if the Wellington government was to commit or endorse genocide or ethnic cleansing on the people of So uthland, it should then become the responsibility of the appropriate extranational security force to intervene.

Security, poverty and conservation are extranational economic issues. We can solve them by recognising the differences between economic and political nationhood, and by constructing an extranational social wage. Effective world governance does not require a world government.


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