Building Humane Advances and Institutions post Covid-19: the Need for a Global Federation

Arvind Ashta
Professor of Finance at the Burgundy School of Business in Dijon, France and member of its research centre CEREN

Covid-19 gave us time to think about creating a new world. We saw that money was available or could be made available to reduce human suffering. If it could be done then, surely it can also be done in good times. Many started reflecting on how we can improve society, build a better world, a more humane world, which better takes into account the needs of individuals, society, and the planet. Sometimes they called it the Great Resignation, millions of people considered altering their lifestyle from a work centred one to something more balanced, more useful, and more pleasureful. In this article, we take a look at some of the major challenges today and how we can create a more equitable, more humane society.

The major challenges since Covid-19

When we think of global challenges today, we consider immediately the 17 Sustainable Development Goals (SDGs) adopted by the United Nations Member States in 2015, focused on the economy, society, and environment. However, in recent times other priorities have come up which are taking away our long-term focus and need immediate reparation.

The first is geopolitical. Under this heading, we can list the Ukraine-Russia crisis, the US-China rivalry, the mercenaries from Russia replacing the old colonial powers in Africa, and many others. All this is leading to protectionism and de-globalization. The Ukraine-Russian conflict has led to mass migration, unemployment, inflation, reduced purchasing power, reduced access to basic necessities. At a more global level, the conflict has led to financial sanctions, increase of commodity prices and supply chain disruptions. While it may eventually lead to more concentration on renewable energies, the immediate impact has been to continue use of fossil-fuels and nuclear generation. It has disrupted years of internationalization of firms, both Russian firms in Europe and European firms in Russia, thus leading to hardship for their employees. Research shows that the 2014 Russian-Ukraine conflict reduced trust and trade even with regions not directly affected by the conflict.                                                                                                                                              The second is absorbing technological change. One example is artificial intelligence, which often improves predictive power and therefore improves opportunities. There have been many other incredible breakthroughs in recent years in many areas, such as digital transformation and health services. Much of the conflict between China and the USA can be attributed to this race to be the leader in the technologies of the future. The use of these technologies means that productivity will go up and we may need less labour. This then will create unemployment for those who do not adjust fast to changes. Feeding and accommodating all these people will create strains on the existing social security systems. In addition, the users of artificial intelligence often don’t understand the logic hidden in a black box and they need explanations. As a result, there is a lack of trust between humans and AI which may lead to misuse or disuse. In short, we need to consider whether technological advances can be humane and beneficial to society and social integration, rather than divisive and confusing.

The third, often a consequence of the first two, is economic. Under this heading, we can regroup events such as the supply chain crisis arising from Covid, but exacerbated by the wars and economic sanctions. This required firms to rapidly find other sources of supply in other countries, leading to shortages and long delivery times. Other fallouts have been inflation and high interest rates that no longer reflect sound economics. Economies such as Egypt, which were highly dependent on Ukrainian and Russian grains, have witnessed high inflation, currency depreciation, and increased debt. We can also consider increased poverty, because of Covid-19. This poverty then reduces aggregate demand and stifles development. If technology leads to more unemployment, economic problems will increase.

The fourth, perhaps a consequence of the other three, is social, even sociological. Under this heading, we can group inequalities between countries and within countries. These inequalities have risen sharply as a result of Covid, when millions got displaced. Such displacements are also a result of the wars, and we can see that today Germany has more Ukrainian immigrants than Syrian. This then brings us to the important sociological problem of aging, exacerbated by the improved technologies, and the need for immigrants. If both Germany and Japan are now open to immigration, it is with strong reluctance. In many European countries, nationalism is rising in consequence. This then creates a feedback loop with de-globalization. It has long been recognized that there is a two-way relationship between economic institutions and social institutions. However, technological change can add to the social problems not only through the mediation of economic change but even directly.

Many of these social challenges are included in the SDGs, but since Covid-19 we have lost a lot of progress in meeting these goals. In addition, we have lost the focus on environmental goals, a fifth major challenge. Some of this is coming back as the US seeks to become the leader in green investments, as much for ideological reasons as for economic and geopolitical dominance.

Factors to be Considered in a Humane Response to the post-Covid Global Challenges

Responding to these challenges requires understanding the complex interlinkages of some of the challenges that have been summarized above. Moreover, a humane response to these challenges would require prioritizing fairness, altruism, and caring, according to the GLOBE study of 62 societies. A humane leader, according to this study, shows compassion and generosity. This caring needs to focus on inclusivity, diversity, and environmental impact in scrutinizing technological advances. This would then require creating institutions that oversee and control technological advances.

These institutional responses cannot function if they cannot respond to geopolitical tensions, economic fallout, or social repercussions. The social repercussions include problems of divergent ethics, biases, and continuing stereotypes that may disproportionately impact certain sections. 

The inclusion that we need is political, economic, and social. Political inclusion means that people from all backgrounds are represented and may participate in discussions that impact them. Thus, diversity in governance will become increasingly important. At a global level, we need institutions that have a multilateral outlook. Economic inclusion means that everybody can contribute to economic activity. It also means that technological advances are diffused in a way that everybody can access and afford them, even those who are marginalized or disabled. Social inclusion means that different parts of society are all given equal opportunities to develop their competencies and capabilities.

For considering the environmental aspects, we need to understand the impact of the technologies on the resources and energy used in the development and implementation of the new technologies. This can also be linked to geopolitical tensions. The Ukraine-Russia conflict has caused a lot of human loss of lives as well as material damage. Reconstruction will again create environmental damage. The recent earthquake in Turkey has demonstrated that public governance and certifications have failed to ensure that the buildings were capable of resisting earthquakes. The same would be true of environmentally friendly certification. 

Ultimately, building humane advances and institutions requires ethical, responsible, inclusive, and impact-oriented decision-making, as well as appropriate controls. By considering the needs and experiences of all individuals and environmental impact, we can create a more equitable and sustainable world. With the rapid evolution of myriads of technologies, it means creating a multitude of institutions that examine these issues of inclusivity and accessibility for each change. Besides being representative of diversity, these institutions need to be transparent and accountable. They need to be honest and open about the procedure of approval for the diffusion of technology and be able to show that they are not influenced by special interest groups. A major problem is taking responsibility for the unforeseeable negative consequences of technological advances. These unintended consequences can include harmful or addictive behavior. Finally, the technology should be able to enhance the quality of labor, rather than reduce it.

While it would be easy to suggest that the technology be designed in this manner, it is unreasonable to expect that creativity can be controlled. Rather, it is how technology is applied and diffused that needs to be controlled to reduce barriers to social inclusion. Responsible technological advances and institutions require a commitment to continuous education. This means requiring people, including the disabled and the marginalized, to stay up to date on the latest innovations and be willing to adapt themselves to the change. For many people, this means instituting a cultural change of experimenting.

Meeting Global Challenges: the Case for a Global Federation

Having set the tone on what we consider humane, I would now like to argue the case for a global federation. It is not being suggested that this is the only way to resolve all problems nor that other solutions will not be useful for addressing specific problems. For example, the humane entrepreneurship theory claims that a proliferation of humane small and medium enterprises could solve the world’s employment problems by creating 40 million jobs. Educators feel that this can be done by imparting education where we can cultivate the potential of students and provide them with a connection to their self, humanity and the planet, through the inclusion of meditation and inter-subjectivity in the education curricula. All such initiatives are welcomed, but in this essay I stick to this one suggestion of a global federation. Many of the advantages of federalism have been discussed two centuries ago in the Federalist Papers, and more recently elsewhere, but the recent global challenges make it even more necessary. I will argue how a global federation would help to face the post-Covid challenges: reduce geopolitical tensions, technological exclusion, economic inequalities, social injustices, and environmental degradation.

The estimates of casualties in the Ukraine-Russia war differ, but all sources agree that at least a hundred thousand lives have been lost and that several million people have been displaced. All of this is thoroughly inhumane, and would be unnecessary if the world were organized in a global federation with the military falling under the exclusive competence of the federal level. Certainly, civil strife may continue, but at least war between States would be reduced. Thus, in this respect, the world would become more humane.

Large geopolitical issues such as economic dominance often create races to bring about new technology. This can lead to unsafe technology. Worse, it can stifle the creation of new technology as one country blocks the imports from and exports to the other country. Of course, the other country is forced to reciprocate. Other countries would then decide which superpower country they would align themselves with. All this would be unnecessary in a federation where the gains of technological change are shared through appropriate mechanisms. Moreover, control of technology and its appropriate diffusion would also be cheaper since a single body could study this instead of several institutions in each country. The essential requirement of such a federation is to be democratic and have diverse participation at the global level to ensure a multilateral perspective to solving problems.

Economic inequalities have risen after Covid. Clearly, there is a huge difference in the average income per day of the lower-income countries ($5.55 in ppp terms) and that of the high-income countries ($151.05 in ppp terms). The average income per day in Burundi ($ 2.14 in ppp terms) is lower than 2% of the average in the higher income countries. Not fixing these inequalities, where such information is now public, would be inhumane.  

A global federation is glued together if there is a mechanism of fiscal federalism where everyone gains. Economic inequalities between countries would reduce if there is a mechanism of redistribution from rich countries to poorer countries. Moreover, if corporate taxation is uniform, there would be no need for complex transfer mechanisms to shift profits. Some formula of unitary taxation could also ensure that profits are shared with resource-rich developing countries instead of transferring all the profit abroad. With higher tax revenues in developing countries, public officials could be better paid, reducing their tendency to corruption.

If minimum wages were set equitably all over the world, social divisions would reduce. Similarly, fair labour practices would be set all over the world, based on best cases. If there is only one currency, with repatriation allowed automatically, capital would flow based on productivity and resource availability. Sovereign risk would reduce. Environmental dumping would reduce. Thus, it would no longer make sense to move factories from one State to another if environmental laws were the same with the same penalties for environmental damage.

Concluding remarks

We have argued that the major challenges in this post-Covid period are geopolitical, technological, economic, social, and environmental. We need to build a response to these challenges that is humane, and good for individuals as well as for society. We have argued that a global federation would help to ameliorate the situation. The necessity of such a federation was highlighted by Covid-19, where people in developed countries received many vaccinations, but significant percentages of the population in poor countries received no vaccination at all. The Ukraine-Russia conflict has made it even more urgent. Knowledge of federalism, its ability to reduce strife and create a more humane world is lacking. We need more researchers to engage in this field and more universities to offer courses in this field to diffuse this knowledge. Business schools should introduce a study of federalism as part of a course on geopolitics and show that it would reduce corporate risks coming from war, increase global aggregate demand by transferring money to people who need to consume more, and increase the mobility of capital by increasing the resilience of firms.

It would be good if the role of the United Nations can be enhanced in this direction by removing the veto powers of the five permanent members of the Security Council. This is the biggest obstacle to its efficacy. Many other modifications are surely required, and future research could look into this.