5

vis Western influences in Russia. The conflict between Pan-slavism on the one side and the so-called Westerners on the other side has been going on in Russia since about the years after eighteen hundred or so. At that time, namely after the final defeat of Napoleon, Russia has been the strongest continental power inside Europe. The Czarist regime was ultra-conservative and reactionary. The era of enlightenment which started already in the 17th century and swept over most Western and Northern European countries and also over North America, did never really reach Russia - with the non-effective exceptions of parts of the intelligentsia, which therefore were subdued by the Czars and as well later on by the Communists.

It seems necessary to bear in mind that Russia, all over the 19th and also the 20th centuries, did not develop civil rights of the individual, nor did it develop a legal culture of public law, nor did it develop the

6

roots for the political culture of division of powers or
of democracy. Nor did Russia develop a modern
economy based on private ownership, on private
farmers, on private entrepreneurs, on open markets
and on a dependable legal and judiciary system. It
seems to me that the great French author Alexis de
Tocqueville was right when he, around 1835/1840 or
so, emphasized the fact that in a certain way Russia
has condensed all the powers inside its society into
one human being, namely the Czar. Tocqueville is
mostly remembered for his prophecy about America
and Russia both of them destined to rule one half of
the globe. Well, one hundred years later, it looked as
if that prophecy had come true. Today, another half a
century later, the picture has changed considerably.
But this is not the end of history.

Coming back to the structure of the Russian
society or economy at the end of the 19th century: At
that time, despite several steps of reform, Russia still

7

had in the main an agricultural structure, politically
characterized by an absolutist regime, the great
masses of the population living in rural circumstances,
stamped by the landed gentry. Of course, one did
have some manufacturing industries as well, for
instance textile industries in Moscow, some coal and
steel in the Donets basin, for instance shipbuilding,
shipping and foreign trade in Petersburg, also in
Odessa. But a general upswing of manufacturing
industries did only happen as late as the very last
decade of the 19th century. At that time, there did
hardly exist any entreprenerial bourgeosie, mostly
were the manufacturing industries owned by parts of
the nobility. Financial industries were absolutely
underdeveloped and, by the way, they still are.

When Lenin took over in 1917, the extent of the
industrial proletariat was still very limited despite the
armaments efforts during World War I, the
agricultural proletariat still was by far outnumbering

8

the numbers of people employed in manufacturing.
This situation did change only very slowly during the
period between the two wars. It is true that then the
numbers of people employed in heavy industries and in
manufacturing did grow at an hitherto unusual pace,
but the factories were owned and run by the state. It
was the state bureaucracy or the party bureaucracy
(which practically speaking was one and the same
thing) that decided what to produce and how much;
the bureaucracy decided to whom to deliver the
products, it decided the prices; and it decided the
projects and provided the financial means. Banks
were not really necessary, except for carrying out
some payments, otherwise, one did not need banks.
Also private saving was not necessary and, by the
way, it was not even possible. Also a functioning
inland revenue system and a functioning tax system
were superfluous due to the price dictate; the income
side of the state budget stemmed from the surplus
which was provided by the prices fixed by the state.

9

This system of a pre-planned command-economy was continued during the enormous effort to modernize and extend the industrial production during World War II and also during the forty years of the Cold War with the West. When Gorbachev started perestroika in the late 1980s, there still was no single private entrepreneur. There was no entrepreneurial experience, there was no competition, there was no experience with what competition requires from participants, there was no legal framework for private ownership, nor was there any legal framework for private corporations and private companies. All industries were still state owned and state managed, also of course the banks and practically speaking agriculture as well.

On the other hand, Russia had in the meantime created a great number of first-class scientists and first-class engineers who in the main served the

10

defense industries and as well space fare. You will
remember that they were the ones who put Sputnik
into orbit even earlier than the Americans. They
were first class people. Their products were of high
quality, but they were not really needed by consumers
or society. Of course the military industrial complex
did get - and demanded! - financial support from the
government and directing assistance as well. It needs
to be understood that there have been only very, very
few side effects for the benefit of the civilian
economy, which was absolutely different from the
situation in the United States of America. First-class
scientists, first-class engineers, chemists, etc., but
almost no positive side effects for the civilian
economy!

Because the all-too-hasty perestroika created
enormous budgetary deficits, the government took
recourse to printing money and opened up the avenue
for a crippling inflation. The rest of that story is

11

known well enough. The only part of the economy
that still was functioning well was the defense
industries. But the defense industries could earn
money only by sales to foreign countries, they could
not earn money within their own state. Selling
military products to foreign countries was indeed what
they did - and what they are still doing. But at the
same time, it seemed almost impossible, particularly
for political reasons, to convert parts of the defense
industries into civilian productions. Also was it very
difficult to privatize the big industrial complexes in
the fields of oil, gas, electricity, heavy industries,
manufacturing, etc., because one was anxious not to
sell out to foreign capitalists and because domestic
private capitalists did not exist, at least none who had
gained and collected considerable private capital in a
legitimate or in a legal way.

The social situation was aggravated by the
shortage of houses due to the repatriation of almost a

12

million Russian soldiers who so far had been serving outside Russia on the soil of the East of Central Europe (for instance, on the soil of East Germany) and on the soil of Central Asian Republics. They also had to allocate those Russians who fled back from former Soviet Republics which now had become sovereign non-Russian States.

To sum it all up: When perestroika started, there were hardly any entrepreneurs or managers who did have any experience in operating within an open market or any experience in competing with others, any experience in marketing, etc. There were no trade unions which deserved that name. There did not exist a functioning inland revenue system nor did there exist an adequate system of taxation. Nor did there exist a functioning judiciary system which was capable of settling disputes. Altogether, there did not exist any valuable economic experience, not to speak of traditions. There was no experience or training as

13

to how an open society and an open economy can
work.

So far, the three Baltic Republics, the Czech
Republic and Hungary were much better equipped for
the transformation process, much better equipped due
to their historical heritage, than was Russia. Also
Poland was partially better equipped for the
transformation process than was Russia. And
certainly were the coastal provinces of China better
equipped for a transformation process than all of
Russia.

The Chinese example does, in my view at least,
deserve a qualification. The standard of living of more
than one thousand million Chinese, at the time when
Deng Xiaoping's leadership started off, was much
lower than the standard of living of three hundred
million Soviet citizens. I am talking of the end of the
seventies, 78, 79 and 80. Nevertheless, over the last

14

twenty years the Chinese transformation process has
been much more successful than the Russian. It seems
to me that there are three reasons for that. Firstly, in
China there still did exist some entrepreneurial
traditions and memories in trade, shipping, financing,
manufacturing, memories still vivid in the coastal
provinces, from Tientsin to Shanghai and to Hong
Kong, and Kanton. Secondly, Deng - and also later on
Jiang Zemin and Zhu Rongji - undertook his transition
operation in a very cautious, very gradual manner,
starting with a few so-called special economic zones in
coastal provinces in the beginning. They have been
progressing only one step after the other, very
cautiously. And thirdly, they did have the assistance
of fifty million overseas Chinese; a great deal of them
living in Taiwan, but not only in Taiwan, not only in
Singapore or Hong Kong, but also in Indonesia, in the
Philippines and in other places. These people have
maintained contacts with mainland China. They have
maintained contacts with their relatives in mainland

15

China and quite a few of the overseas Chinese are confident enough to invest considerable parts of their private fortune, of their private capital, inside the old mother country.

By contrast, the Russians tried to do it all at once, there were no entrepreneurial traditions and also did there not exist any overseas Russians who might have been able and willing to invest part of their fortune in the old mother country Russia. Instead some well meaning foreigners but also some not so well meaning speculators did import capital into Russia. And the West, particularly the International Monetary Fund and many Americans, advised the Russians to open up their borders for Western credits, not only from state to state, not only from central bank to central bank, or from the IMF to the central bank of Russia, but open up their borders also for private capital and private money. The inclusion of short-term money was the most serious mistake in advising the Russians.

16

Foreign short-term money could be withdrawn also at
very short-term.

It was in fact withdrawn at very short-term. The
consequence was that after a few years the Russian
debtors could not pay back their debts, in many cases
they could not even pay interest. So the IMF had to
come to rescue. But then these rescue operations
(particularly the very last one, of around 4 billion
dollars) did not provide Russia with fresh money; but
in effect they did bail out Western creditors who
otherwise would have lost a lot of their capital.

In my view, most of Western economic advice to
Moscow has been of rather questionable merit. And
much of present Western criticism of Russia's
economic, financial and domestic behavior, much of
these criticisms are being voiced from a solid base of
ignorance and in some cases ignorance plus
arrogance.

17

If one looks back into the 19th century, and also into the 20th century during the Bolshevik period, one finds that Russia never was keen on accepting Western advice or Western ideologies or behavior. The present American high-handed criticisms do only reinforce those old anti-Western suspicions among Russians. And if these criticisms are being served in a cocktail of which another ingredient is American self applause for having won the Cold War and having defeated Russia, and a third ingredient of that cocktail being demonstrative lack of respect for the great Russian nation - after all, a nation of almost one millenium of national history and national legacy - then such cocktail becomes totally unpalatable for some Russians and not just for Communists or former Communists. Such cocktail could as well serve to revive Russian nationalism and even lapsing back into expansionism.

18

It is not uncommon in the world that governments who are unsuccessful at home do take refuge to aggressive foreign policies. Many governments have done so and there does always exist the temptation to make up for domestic failure by foreign political or even military successes.

At least since Ivan the Terrible, Ivan Grozny, at least since then have the Russian Czars steadily enlarged the territory of their empire. They called it collecting of Russian soil, which certainly has been a misnomer, most of the soil had not been Russian before they conquered it. This has lasted since let us say the middle of the 16th century to the end of the 19th century. Collected were Finland, Poland, many other territories in the East of Europe, collected were great parts of Central Asia, all of Siberia and even Alaska. I remember to have seen, north of San Francisco, a so-called Russian river, that seemed to me was the most southern point to which the Russians

19

got on the Pacific side of what nowadays is the United
States. They later on sold Alaska for a cheap price.

Russia did reach its greatest geographical
extension at the beginning of the 20th century, or you
might as well say at the end of the 19th century, with a
few little and unimportant exceptions. If one does
compare the territorial status of Russia today with the
situation a hundred years ago, then in the later course
of the 20th century, particularly in the 1990s, they
have lost enormous parts of what formerly had been
the territory of the Russian Czars. They have lost
great parts due to the fact that 16 non-Russian
nations have acquired or regained their national
sovereignty. Good for them, very good indeed for
Finland or Poland or the Baltic Republics, just to
mention a few. But if you look at it from a Russian
nationalistic point of view, what an enormous loss! I
would like to mention that the only newly acquired
territories have been South Sakhalin in the Pacific

20

and the city of Kaliningrad, in what formerly was East Prussia.

If one hopes that Russia will not try to reconquer some of those territories and their inhabitants, that had belonged to Russia at the end of the 19th century, then it seems advisable not to provoke Moscow, but do deal with that giant country with caution and with prudence, and with all the respect that is due to a world power. A world power Russia will remain to be, however long her present economic and domestic weaknesses may last (they might last 25 years or even longer). There might happen several severe crises on their way. There might not develop a Western European type of democracy, instead there might evolve a system of rights and duties of the individual that differs considerably from European or American ideals or ideologies. And certainly will the socioeconomic evolution take a very long time because it can be mastered successfully only if and when it is

21

operated in a piecemeal fashion, one step after the
other; even if the present situation is not very inviting
for a stepwise, a piecemeal-wise operation.

Right now and already over the decade of the
1990s, the American attitude vis-à-vis Russia is
ambiguous and ambivalent and unsteady - very much
like the American policies that deal with China. China
will be the third world power in the 21st century. The
European States and also the European Union would
in my view be well advised not to permit themselves
to be dragged into superfluous, because ideologically
inspired tensions or conflicts with Russia nor with
China. On the other hand, there is neither realism nor
is there responsibility on the side of those Europeans
and Americans, who dream of including Russia or
including at least the Ukraine into the European
integration, be it an economic or political or even
military integration. Such ideas are either
romanticisms or geostrategic megalomania.

22

What we can do is to be a dependable partner in
diplomacy, trade and finances, to be helpful if being
asked for assistance. But please let us avoid any
paternalistic or patrimonial attitudes, because Russia
is a heavily injured and therefore touchy world power.
It is a power that stretches over eleven time zones,
from the Pacific Ocean to the Baltic Sea. The
greatest part of it is in Asia. It is in Asia where the
bulk of Russian hidden mineral treasures still wait for
exploration and for exploitation; permafrost will not
for all times remain to be an unsurmountable obstacle.

There is little use and little to be gained, if we go
on to urge Russia to follow Western recipes. Putin
and others after him will have to find their own ways.
Certainly will their ways differ considerably from
Scandinavian ways or from West European ways and
also will they differ from American ideals.

Helmut Schmidt

JUL 27 2001

July 24, 2001

A couple of days ago I had a long conversation with my old friend Dr. Henning Voscherau (you might probably have met him in former years; he has been the Mayor of Hamburg over a decade, nowadays 60 years old, a member of the Federal Executive of the Social Democratic Party). Voscherau reported at length over long private conversations which he recently has had with Wladimir Putin and also with Zhu Rongji.

In essence: Putins feels to be delt in a dishonest way by the west and his humiliation might lead to some emotional reaction in the future.

Since the acquaintance between Voscherau and Putin goes back many years, stemming from times long before P. came to the top, P. appears to have been unusually

Helmut Schmidt

Hamburg, 20.8.2001

**Who governs the world in the 21st century?**

As regards the title-question in your program, let me try to be a bit more **modest**. No professor nor even the most advanced computer can give you a prognosis covering the globe over a full century. And I am neither a knowing-it-all-professor nor a computer, but only

2

an ordinary citizen, just a has-been
political leader and – even worse – a life-
time economist. Therefore I will limit
myself to touch upon some of the
phenomena which I do expect for the
next couple of decades.

I.

Because any forecast, be it related to
the weather or the economy or the
tennis-tournament at Wimbledon, has to
start from the facts and the tendencies
of the present. Let me start by hinting to
ten of the factors that foreseeably

3

enough will have a major impact on the
<u>future:</u>

1. You have to expect that the <u>global population</u> will continue to grow at the present pace which has no precedent in the 19th or any earlier century. Mankind did number 1 1/2 billion people in the year 1900, but a hundred years later, by the year 2000 the figure had risen to beyond 6 billion. Within a few decades <u>into the 21st century</u> we will trespass 9 billion human beings. The space that is

4

available per person will further shrink.

This population explosion is in the main
happening in Asia, in Africa and in Latin America. We will therefore have to
expect more local or regional wars,
international as well as intrastate, so-called civil wars in these three continents!

2. Global warming is highly likely to continue, although we don't as yet have reliable forecasts as to the velocity of the increase of temperature. We do as

5

well not have as yet reliable forecasts as
to the climatic and physical living
conditions in certain areas - for
(due to) instance the rise of the level of the
oceans or changes in the major oceanic
currents. But we have to expect that
global warming might in its effects
intensify the afore mentioned conflicts.

3. Population growth plus climatic
   (plus wars) changes will cause <u>growing tendencies</u>
   <u>for migration.</u> Europe and North-
   America will ever more become

6

attractive for potential immigration,
whether legal or otherwise.

4. At the same time, globalisation of information and of technology will continue. During the last two decades the number of human beings, whose lives directly or indirectly are under strong influence of economic globalisation have doubled, due to the opening of China and to the liberation of almost 30 states which hitherto had been dominated by the Soviet

7

leadership and had been closed off from
the global economy. It is unclear,
whether and to what extent quite a few
of the developing countries will as well
open up to fuller participation in the
global economy.

5. But recent experiences suggest that only strictly organized developing countries can economically and socially benefit from globalisation.
South-Korea, Taiwan, Singapore, Hong-Kong and as well the People's Republic

8

of China did well under strict one-party-
rule. One might – with some reservation
– call these examples economically
enlightened dictatorships. On the other
hand a greater number of developing
countries tried to establish democracy,
but failed economically or politically – or
both at the same time. The collapse of
the Soviet Union was in the main due to
the abrupt introduction of both
perestrojka and glasnost over night.

9

6. Clearly a number of relatively new, _non-traditional security problems are looming large_ over the horizon, like international drug traffic, international organized crime and also terrorism, small arms traffic, Aids, BSE, foot and mouth and other diseases.

7. The _emphasis of national governments on strong military capabilities is still uninterrupted._ This goes as well for the developing countries, were on average the military expenditure is many times

10

higher than the development aid (ODA),
which they receive. It is also true in the
field of nuclear weapons and other
means of mass destruction; within the
last 5 decades the number of nuclear
weapons states has increased from one
to presently eight – its further increase
seems rather likely. The technologically
far advanced countries are undertaking
strong efforts to qualitatively improve
most of their military capabilities.

11

8. At the demise of the Soviet Union some people, f.i. in the U.S., thought of a new era in the global power constellation; they foresaw an end of the balance of power-game, America remaining as the only superpower and even expected a so-called "peace dividend". But today it is obvious China is to be respected as a worldpower, still Russia as well, maybe later on as well India and Brazil.

Japan will at least figure as an economic and financial world power. The same

12

seems likely in regard of the European Union, although it will take at least all the three oncoming decades until we in the EU will truly arrive at one common foreign and security policy.

In other words: To maintain peace between the major powers of the world will as well in future necessitate the sense *and* will for balance and fair compromise – plus highly skilled diplomacy.

13

9. The _globalisation of information_ will also need diligence. Beside its undeniable advantages we must as well expect new forms of crimes; also globally dominant or even monopolist networks are thinkable; they _might become capable to originate worldwide political or ideological campaigns, also mass psychoses_. The Europe-wide emotions at the car accident and death of a hitherto disputed English princess, created by the electronic mass media, has given us a foretaste, as well as the

14

TV-pictures of injured and dead humans
in Kosovo, the latter were useful for
stimulating public opinion to agree to
military intervention against Serbia.

10. This leads me to my last example of
existing tendencies which will have an
impact on our common future, namely
the **forecast of a clash between**
**civilisations**. Certainly the danger of a
general clash between Islam and
Western civilisation cannot be ruled out
as unthinkable. But it would be an

15

unexcusable mistake to think of such a
clash as being unavoidable and thereby
make the forecast of a possibility into a
self-fullfilling prophecy.

In other words: Under the
circumstances of the ever higher
density of the worlds population and
ever higher interdependence, religious
and ideological tolerance and respect
for the others beliefs becomes an
indispensible necessity.

16

## II.

If we compare the beginning of the new
century with the beginning of the 20th
century we can observe new chances
and new challenges at the same time.
Some of the old dangers will continue to
exist, but others may wither away – like the
danger of global war. A couple of
decades ago the Club of Rome has
lamented loudly about future
catastrophies; many young people
professed their „Angst“ and somebody

17

called the whole era the „Age of Anxiety“.

Today we find a much more positive mood, particularly in Europe, in the US and also f. i. in China. But the dream of one common world governance has outlived the end of the student revolt of 1968. Historically the dream is much older. After World War I the League of Nations was one first attempt. After 1945, again under American leadership, the UN and its Security Council was a

18

new start. The UN and all its affiliate
organisations over more than half a
century have not done badly; but they
are all together far from what could be
called "global governance". The
criticisms of the UN, of the Worldbank,
the International Monetary Fund (IMF),
the World Trade Organisation or the G8
are manyfold. Some criticisms are
perfectly legitimate. Some of the Non-
Governmental-Organisations (NGO's)
have good cases - like for instance
Amnesty International.

19

But some NGO's and some of the organized international protestors at Seattle or Genoa tend to evolve from theoretical idealism into violence; some may in the end even become terrorists.

They blame multinational corporations and economic globalisation for all severe shortcomings in the world. But they have not so far come up with any realistic recipes. Their utopian proposals could only be implemented by

21

illustrative example the last Irish
referendum; the Irish gladly are
receiving enormous financial help from
the EU but they have refused the further
enlargement of EU because it would
mean a reduction of Irish net receipts.

Democratic leadership in the age of
<u>globalisation, particularly</u> collective
<u>international leadership towards Global</u>
<u>Governance, is much more difficult</u> than
<u>democratic leadership has been in the</u>
<u>age of the sovereign nation state.</u> For

22

being successful as a <u>collectively acting</u>
<u>international</u> leader in the era of
television, you may know your goal, you
may know the necessary ways and
means, but you need to convince the
majority of your <u>national</u> public,
meaning that you - on top of it all - have
to be a fairly impressive television actor.

Often enough TV is enticing political
leaders into opportunism. I was not
amused when I watched an American
president siding with the protestors at

23

Seattle against WTO, an institution of
global governance in which his own
(against himself) were,
country exerting much of the
leadership. And I as well think it was a
bit more of opportunism than realism
when in September last year 187 heads
of State and of Government at the so-
called UN-Millenium summit declared
their resolve "to halve by the year 2015
the proportion of the worlds people
whose income is less than one Dollar a

day". (Let me add parenthetically: except
in case it should calculate the decay of
the purchasing power of one dollar).

24

High hopes at the beginning of a new
century are quite normal. To achieve the
goals one will have to use the existing
institutions and procedures plus their
improvement and reforms or
replacement plus additional ones. So far
the world is governed in the main by
national governments, only partially by
<u>global</u> institutions, partially by
multilateral and also bilateral treaties.
One might call it a multi-level-
governance or a governance of variable
geometry.

25

### III.

The best working global institutions are still the international regulations of all traffic in the air and on the high seas; they serve their limited purpose outstandingly well.

The by far most important global institution is the UN, including its Security Council and the General Secretary. It has endured the long decades of cold war, serving peace

26

reasonably well – despite and even with
the help of the inevitable right to Veto by
a few big powers. But it has to be noted
that not only two powerful multilateral
Alliance-Systems but also a great
variety of bilateral and multilateral
treaties have served the abstention from
hot warfare quite successfully, for
instance the Non-Proliferation-Treaty
(NPT), also ABM (at least so far), SALT,
the Testban-Treaty and so on.

27

As yet there does not appear any
necessity to change in principle the
existing system of the UN and of the
global constellation of security
institutions. But a few recent events can
lead to future complications. On the one
hand the military intervention by NATO
against Milosevic's Serbia was a clear
violation of the UN-Charter. It was
argued that for urgent and
overwhelmingly imperative
humanitarian reasons one had to act,
although the Security Council had not

28

taken a vote to do so. One can only hope
that this action will not serve as a
precedent for the future; otherwise the
Security Council may become obsolete
and the violation of international treaties
may once again become fashionable.

On the other hand the US have
announced their intention to build a
National Defense against Missiles
(NMD). This requires either a re-
negotiation of the ABM-treaty or its
termination. It will in any event change

29

the security situation of the world
powers. It might contribute to a closer
security cooperation between China and
Russia. In any event, changes of the
multifaceted global security institutions
seem inevitable.

It is forseeable that the US will for the
next two or more decades have a
considerably greater weight in collective
global governance than during the cold
war. It will require tact and skill to avoid
the attitudes of hegemony. Most of the

30

existing global institutions stem from
American initiatives and leadership
(only the OECD, the Helsinki final act
plus OSCE and the G7/8 summits are
noteworthy exceptions). It could lead to
a deplorable chaotic situation if the US
would choose to either abondon the
institutions which they have instigated
to dominate them.

IV.

The World Bank has always been
dominated by Washington, to a

31

somewhat lesser degree also the
<u>International Monetary Fund (IMF)</u> and
the GATT (nowadays called <u>WTO</u>).

These three institutions of world
governance have great influence over
developing countries and countries in
financial crisis. A <u>redefinition of the
tasks of the IMF</u> - which has lost its
original purpose to maintain a global
system of fixed exchange rates already
30 years ago - into the direction of
supervision of the globalized financial
markets and the highly speculative

32

behaviour of some of its participants appears desirable. Until today the IMF mainly acts as an ever ready lender of last resort for sovereign states, but *is it acting* indirectly as well as a rescue for related loans and credits by private Western financial corporations. Such rescues *are* advantageous for Zürich, London, Frankfurt and Wallstreet, but by no means is it perfect global financial governance. It seems likely to me that the IMF can and will be reformed within the next 20 years.

33

I am much less confident about *the World Trade Organisation*. It has done much to globally liberalize trade. BUT it has provoked also the creation of so-called Free Trade areas, which have chosen to efficiently protect some of their industries, particularly agricultural production. This is true for the USA, for the EU and for Japan – much to the disadvantage of a number of developing economies, which could offer cereals and other foodstuff at much lower

34

prices. The still very powerful OPEC-
Cartel, in collusion with a small number
of globally active oil corporations, is
another violation of the principle of free
trade. On top of it you have a number of
unilaterally imposed trade sanctions.

All the offences against the enshrined
principle of free trade are due to national
egoisms – committed either by national
governments or by democratic
majorities inside sovereign countries.

I am fairly convinced that democracy

35

in the nations of Western civilisation will last in the 21st century, I cannot nourish great hopes that national egoism will wither away. Still, I like to register the fact that the Brussels Commission of the EU has recently been able to prevent a giant merger in a foreign continent that was threatening to create a market domination by one company.

Nevertheless, there is no great hope for a global governance over fair competition in global markets.

36

The G7 summits, nowadays G8, have never really been an institution of global governance, although it may appear otherwise, which misinterpretation is due to their overloaded agendas, their pompous statements and their ridiculous public relations- and TV-circus. They will also in oncoming decades not become a powerful institution, unless they come back to the original practice, namely meeting far away from press and television, at a secluded valley or island, just the chiefs

37

plus their foreign and finance ministers.

Such rather personal and intimate exchanges are indeed useful – because none of the heads of government is a seasoned diplomat, all of them will speak plainly, all will be left on their own. They will learn thereby and understand, especially those who are new in office. Of course it is highly desirable to include China, also India and as well Brazil.

V.

38

Summit-meetings do nowadays abound,
whether as UN, G8 or WTO or NATO or
every six month EU, a waste of effort.

Even
Much greater is the waste, the gap
between costs and effectiveness, in
most permanent global institutions.

They abound of bureaucrats and
bureaucratic red tape and are
characterized by the absence of

✓ democratic control. The democratic
deficit of any global body is in fact
unavoidable. Therefore anybody who
favors more powerful institutions for

39

global governance, ought to be aware of
the lurking Leviathan, namely the
evergrowing selfish and tyrannical but
de facto uncontrollable bureaucracy.

But still, many people do believe in
additional global controls lest otherwise
**globalized capitalism** will emerge as the
ultimate regent of the whole world.

Such fear is indeed plausible. In my
view there are three areas in which
**potentially dangerous effects of
transnational capitalism** are obvious:

40

1. The spread of the <u>ridiculous ideology</u>
that elevates „shareholder value“ into
the one and only principle of
entrepreneurial behaviour can lead to
deep going cultural changes. Mergers
and takeovers normally lead to cutting
jobs. Raiders do not feel guilt to put off
tens of thousands of employees. The
ideology of a managements natural right
to hire and fire is indeed spreading. It
goes against ingrained cultural
traditions in Europe, in Japan and

41

elsewhere. In the end at least the
European democracies will resist a de-
routing of our inherited principles of
social civilisation. But the results in
parts of Asia and Latin America and in
most of Africa may be quite different.

2. The global financial markets are an area
in which private banking
corporations may
become too powerful at the expenses of
democratically elected governments.
We have already seen, about one
decade ago, how a privately owned,

42

highly leveraged speculative investment
fund could force the British government
to devalue sterling. We more recently
have witnessed how another highly
leveraged fund could force the U.S.

Federal Reserve System to come to its
rescue in order to avoid a domino effect
of collapses. The *financial markets and
particularly the traffic in short term
money do need globally applied
regulations* — otherwise some big
private financial houses and
corporations may acquire too much

43

political power. The big banks do not presently govern the world, but they do have the potential to bring a heavy political weight to bear on their national governments.

3. As a European I am also worried about the present advances and spreading of influence of privately owned and managed global information systems, from TV to the internet. We have witnessed f.i. how they created the global psychosis that made millions of

44

people to believe in the wrongly so-
called „new economy“ and buy new
technology stocks at ridiculous prices.
We are also witnessing an owner of TV-
channels becoming the political head of
60 million Italiens.

Global information and propaganda-
systems are indeed capable to exert
economic and political and cultural
influences far beyond their home
country. There is a looming potential for
usurption of parts of global governance.

45

Not so much capitalism as such but
specifically TV- and information-
capitalism may become a global
challenge. It may even develop into a
challenge to democracy.

VI.

One might ask: *What kind and what
degree of global governance appears
desirable?* The answers might differ due
to ones national and cultural
background. As a European I would

46

mention seven points:

1. The desirability to maintain any nations ability to determine its constitution and to decide its own affairs by themselves. Only so far as their national means are not sufficient to solve a problem, due to the transnational specifics of that problem, only in so far is subsidiarily transnational or even global governance desirable.

47

2. Any kind of international and of global authority _should be based on consensus_ and _treaty between sovereign states_.

3. The UN is to be maintained and also _strengthened_. Its Security Council ought to be _the one and only authority that has the right to legitimate the use of military force outside national borders_ – except in cases of self-defense.

48

4. Among the most urgent/of new or improved treaties and agreements/is a new concept for the World Bank and Official Development Aid: O.D.A. ought to be made conditional on a recipient countries efforts to efficiently establish planned parenthood and on the countries limitation of its military armaments and budget.

5. A new concept for the IMF also is desirable; its main future task should be to maintain efficient rules of behaviour

49

and fair order in global financial
markets.

6. A *global compact* is desirable in order
to limit the *emittance of greenhouse gases*
and also other human activities that
contribute to global warming.

7. A *worldwide system* of new or of
improved treaties is desirable in order
to limit *armaments*, This ought to
embrace nuclear weapons and other
means of mass destruction, also means

50

for warfare in outer space, also land
mines, and – most important of all –
curtail the export of weapons,
particularly of small weapons etc. etc.

VII.

So far for the desirable goals. But what
will happen in reality? It is an eternal
problem of mankind that there always is
a great gap between our wishes and
hopes and on the other hand the ugly
reality. Also in the oncoming decades
will the desirable only to a very limited

51

In reality, degree become reality. What is likely to happen during the next 30 years?

My guess is, that we will see many
geografically limited wars. Neither the
UN nor NATO will be able to prevent
them. In the contrary the charter of the
U.N. will many times be violated by U.N.-
member states. The afore mentioned
desirable agreements will partially be
realised but it will take long years, and
several crises will occur along the road.

52

And Sally enough, any
Any sweeping limitation of arms exports
is unlikely.

The population explosion will go on.
Unsufficiently governed overpopulated
developing countries will suffer as
hitherto. Well organized countries will
gain from globalization, as far as they
enable themselves to adapt their
economies to new technologies and new
competitors. The Americans will in
effect dominate in many fields.

53

**America** will for quite some time remain to be more equal than the other world powers. One cannot exclude the possibility that Americans willfully try to exert control over other countries. A cold war between the U.S. and China is becoming thinkable; in such case the EU would be faced with a difficult decision.

**The EU** has created one major crisis for itself by offering membership to a dozen countries without sufficient structural

54

and financial preparation;
disappointments are due to happen. It
will probably take more than the next
three decades until the EU develops into
a world power - but this must not let the
Europeans shrink back. After all the
European integration process, starting
with Jean Monnets Schuman-Plan, has
so far taken 50 years - its completion
might alltogether take 100 years. Don't
be too impatient!

VIII.

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My last remark is addressing you, the highly intelligent young women and men at the Summer School. It is you, who will be faced with growing future problems of global governance. Many of you will become leaders, be it in manufacturing or commerce or financing, be it in academia or in the political arena. You will need a good overview/prior to make decisions which will affect others. They may affect others even beyond your national borders. You may be confronted with the tension

56

between the interest of your corporation
and on the other hand the interest of the
community or the society or country.

You may even be confronted with the
dilemma of national sovereignty versus
global governance.

Growing interdependence means a
growing potential for conflict as well as
for compromise. Nobody is entitled to
exclusively pursue his or her rights and
claims. Every human also does have

57

responsibilities and moral duties. No
leadership without accountability!

And please, do not ever forget the
ancient Roman wisdom which was
relayed to us by Cicero: Salus publica
suprema lex.

HENRY A. KISSINGER

April 19, 2001

Dear Helmut:

I have been meaning to write since receiving from Dr. Plachetka some time ago your suggestions as to whom to invite for our dinner June 20th. Your list makes for a good group, all familiar to me, and there should be no difficulty accommodating everyone. If any additional names happen to occur to you between now and then, please don't hesitate to pass them along.

With warmest wishes to Loki and looking forward to seeing
you,

His Excellency
Helmut Schmidt
Deutscher Bundestag
Platz der Republik
Dorotheenstraße 93
11011 Berlin
Germany

SUITE 1021 • 1800 K STREET, N. W. • WASHINGTON, D. C. 20006 • (202) 872-0300
TELEFAX (212) 753-7248

October 05, 2001

Friday

<table><tr><td>All Day</td><td>Berlin to Hamburg (RON Vier Jahreszeiten, Hamburg)</td></tr><tr><td>All Day</td><td>NMK 8:25 am dep Paris/10:25 am arr NY</td></tr><tr><td>8:00 AM - 8:30 AM</td><td>Breakfast with Dr. Ulrich Cartellieri</td></tr><tr><td>9:00 AM - 2:00 PM</td><td>Hans L. Merkle Symposium (lunch with Helmut Werner) -- @ Grand Hyatt Berlin (Grand Ballroom I)</td></tr><tr><td>2:45 PM - 3:20 PM</td><td>dep Berlin/arr Hamburg</td></tr><tr><td>5:00 PM - 5:30 PM</td><td>Meeting with Dr. Henning Voscherau, former Mayor of Hamburg -- @ HAK's hotel suite</td></tr><tr><td>5:30 PM - 6:00 PM</td><td>HAK receives Countess Donhoff -- @ HAK's hotel suite</td></tr><tr><td>7:30 PM - 9:30 PM</td><td>Dinner with Countess Donhoff by Helmut Schmidt -- @ Schmidt residence</td></tr></table>

Rebecca Jordan

1

8/30/2002 5:10 PM

June 20, 2001 Continued

Wednesday

3:00 PM - 3:30 PM

Meeting with K.H. Lee [Daewoo] -- @ office

Contact: Lee @ TF (011-82-11-9042-7072) or
TF (201-229-4501)
Note: Formerly with Daewoo:
currently with Seoul National University
Attendees: Stapleton Roy

5:00 PM - 6:00 PM

Taped Interview-PBS-TV "Charlie Rose" -- @
PBS Studio, 499 Park Ave. @ 59th Street
(studio on 14th floor)

Contact: Courtney Litz @ studio TF (212-940-1609)
Control Room TF (212-940-1758)
Renee Kaplan @ cellular (646-621-0760)

Note: Courtney meets HAK in lobby

Note: 4:45 pm arrive
5:00 interview begins
ca. 5:30 pm interview ends (could last until 6 pm)
Airs tonight

7:00 PM - 8:00 PM

Meeting with Helmut Schmidt -- @ RH

Note: Lodging @ Four Seasons TF (212-758-5700)
Note: Arrival in NY: 6/19

8:00 PM - 10:00 PM

dinner[stag] honoring Former Chancellor
Helmut Schmidt [business suit] -- @ RH

Contact: Uva Plachetka @ TF (011-49-30-227-71580)

Rebecca Jordan

2

8/30/2002 5:22 PM