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Governing globalisation
Monday, 08 September 2008 23:27

We all look to government to help us whenever there is a problem -- like an international conflict, financial crisis, natural disaster or even an oil spill in the Gulf of Mexico.

In reality, we always need government, although big companies try to push government aside in good times.  Economists have always recognized that markets are not perfect.  These market failures can be tackled at either the local, national, regional or global level.

Markets do not supply public goods like law and order or financial stability.  That is because no-one can be stopped from benefiting from this public good ("non-excludability"), and when one person benefits from this, it does not reduce its availability for other people ("non-rivalry").  Government is also necessary for managing common goods like the world stock of whales or dolphins or the global climate.  They would be decimated if the private sector were left to its own devices.

Another example of market failure is when individual actions have spillover effects which are not captured in market prices ("externalities").  Pollution is an example of a negative externality, while research and development can provide benefits to people who did not undertake the research (hence the need for intellectual property protection).  Some societies may want their governments to pursue non-economic objectives, like income equality.

Government actions to correct these market failures and better manage globalization can take place at different levels of government.  A local government might be best placed to handle local pollution.  A national government is best placed to conduct a nation's defense policy.

Regional groups of government can play an important role in handling problems of a regional nature.  The European Union has provided, amongst many other things, a single market for its member countries.  ASEAN and NAFTA are also providing a free trade environment for their member countries.  Regional development banks like the African Development Bank, Asian Development Bank and Inter-American Development Bank complement the activities of the World Bank in fighting poverty, a "public bad".

To deal with global market failures, truly global collective action is necessary.  And with the globalization of our economies, the range of issues requiring such global collective action has grown immensely -- issues like fighting terrorism and maintaining international peace, financial stability, climate change, eradicating poverty, maintaining open markets for trade and investment, developing global standards for policy-making, fighting international crime like money laundering and human trafficking, infectious diseases, and so the list goes on.

The international community has established a whole range of international organizations to help undertake such global collective action.  The most prominent organizations are: (i) United Nations – it works for world peace through its Security Council.  Specialised bodies of the UN system deal with health, culture and education, environment, climate change, etc.  (ii) International Monetary Fund tries to maintain global financial stability.  (iii) World Bank, together with regional development banks, fight poverty.  (iv) World Trade Organisation negotiates trade liberalization and solves trade disputes.  (v) Organisation for Economic Co-operation and Development produces policy standards and guidelines for national policy makers.

On top of this has been the G7/G8 which has acted as a steering committee for the international community for the past three and a falf decades.

But much of this "international architecture" was constructed immediately after World War 2, and therefor reflects the Cold War structure of the world.  The weight of European countries in these organizations now vastly exceeds their economic weight.  Japan is underepresented.  And emerging economies, especially from Asia, are substantially underrepresented.  Some initiatives have been taken to make the system reflective of the world of today.  But these have been mainly token changes.

The G7 is simply anachronistic, based on the implicit assumption that it is for the advanced Western countries to rule the world.  In the 1990s, it was enlarged to include Russia, a vain sign of hope and encouragement.  Progressively, it developed its own outreach to major emerging countries.

The global financial crisis brought into disrepute the whole "Western brand".  Major emerging countries could no longer be excluded from the pinnacle of global governance.  So, the G20 formula (created for finance ministers and central bank governors after the Asian financial crisis) has been used since late 2008 as the world leaders' steering committee for the global economy.

At the same time, global and national governance has progressively become "multi-stakeholder".  Different stakeholder groups – business, labour, civil society and academia -- are increasingly active as partners of government in national policy-making.  These stakeholders can help governments identify public goods and externalities, and also help them design appropriate policy actions.  Large foundations like the Gates Foundation are major public policy actors in their own right.  Actions to address international environmental problems have been mainly pushed by civil society organizations, as was the case for land mines.  Civil society organizations (CSOs) can also express public concerns about globalisation.

CSOs can also act as a watchdog of government, including intergovernmental organizations.  Is the government clean or corrupt?  Is it keeping its promises?  These stakeholders provide a dimension of participatory democracy which can complement representative democracy.  In a healthy democracy, there should be more than elections.  There should be a continuous dialogue between citizens and government.  And these stakeholder groups can facilitate such a dialogue.  But some CSOs receive financing from business (BONGOs) and are not fully transparent in their financing.  Further, not all CSOs are left wing, good natured organisations -- some CSOs represent extreme right wing and even terrorist movements.  In a similar vein, business and labour groups can make an important contribution to governing globalization

In the same way that parliaments and legislatures provide a check and balance on national executive branches of government, parliamentary oversight of the multilateral system at the global level is also being progressively expanded.  Parliamentarians can provide useful input and add to the credibility of the international organizations.  Organisations like the Inter-Parliamentary Union, NATO Parliamentary Assembly, Parliamentary Assembly of the Council of Europe, and the Parliamentary Assembly of French-speaking countries play a useful role here.

Most regrettably, global governance is riddled with paradoxes, such as:

.  There are many very obvious global problems, for which solutions are ready at hand, but for which the world's leading countries are either incapable or unwilling to reach agreement.  To name just a couple, there are the conclusion of the Doha Development Agenda trade negotiations, and a possible successor to the Kyoto Protocol on climate change.

.  Legislatures in many large countries, especially the US and China, often see international organizations as an encroachment on their national sovereignty, rather than being a useful tool to solve global problems.

.  Many of the world's leading countries leave international organizations under-resourced or weakened, greatly impairing their ability to fulfil their functions.  Budgets are cut, efforts to modernise and reform organisations get blocked, and some countries bi-pass international organizations.

.  European countries are fighting strenuously to maintain their present degree of over-representation in international organizations.  The most prominent examples are the UN Security Council where France and the UK maintain permanent seats, and the IMF/World Bank where European countries have excessive voting power.

.  In East Asia, there is a move to create more regional organizations like a possible Asian Monetary Fund, in part because the Asian countries feel mistreated by global organizations like the IMF.  But the IMF and some of its major shareholders have resisted proposals for such regional organizations, while at the same time not giving Asia bigger space at the table of the IMF.

.  Settling of old scores is too often on the agenda, for example when China blocks Japan's attempts to gain a permanent seat on the UN Security Council.

.  The international architecture is not very well suited to the world of today.  Some international organizations are not well adapted to the world of today like UNCTAD which has been struggling to find an effective role for itself.  There are arguably some gaping holes with the possible need to create a World Environment Organisation, a World Migration Organisation or even a World Taxation Organisation. 

.  Some governments use international organisations when it suits them, and ignore them when they want to.  This weakens government as a player in the global scene.

One concluding observation is that while enterprises, CSOs and the media function very effectively at the international level, government does not.  It may be the weakest institutional link in the global scene.

Governance of globalization is not what it should be, and could even put at risk the political sustainability of globalization. 


United Nations -- www.un.org.

World Health Organization -- www.who.org.

United Nations Educational, Scientific and Cultural Organization -- www.unesco.org.

United Nations Framework Convention on Climate Change -- www.unfccc.int.

United Nations Environment Programme -- www.unep.org.

International Monetary Fund -- www.imf.org.

World Bank -- www.worldbank.org.

World Trade Organisation -- www.wto.org.

Organisation for Economic Cooperation and Development -- www.oecd.org.

Asian Development Bank -- www.adb.org

African Development Bank -- www.afdb.org.

Inter-American Development Bank -- www.iadb.org.

European Union -- www.europa.eu.

Association of Southeast Asian Nations -- www.aseansec.org

Bill & Melinda Gates Foundation -- www.gatesfoundation.org

NAFTA Secretariat -- www.nafta-sec-alena.org.

G7/G8 -- www.G7.utoronto.ca.

Inter-Parliamentary Union -- www.ipu.org

NATO Parliamentary Assembly -- www.nato-pa.int

Parliamentary Assembly of the Council of Europe -- www.assembly.coe.int

Parliamentary Assembly of French-speaking countries -- http://www.francophonie.org/L-Assemblee-parlementaire-de-la.html

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