The "Reaganization" of Global Governance?

(Apologies for multiple postings).

I don't normally draw my IPE commentary from the pages of _USA Today_; normally, I prefer that my journalism be informative rather than pretty.  Nevertheless, I want to draw the list's attention to the attached article by Lester C. Thurow.  It ran in _USA Today's_ online edition of this morning.

While I hardly wish to embrace all of Thurow's arguments, e.g., his embrace of the "race to the bottom" thesis, this piece is one of the few commentaries I have seen that recognizes the need for forms of global governance that link a number of issue areas.  I appreciate his acknowledgement that "[i]t is not possible to say that WTO should handle global trade while some other agency (usually left unspecified) handles these other legitimate concerns" like environmental issues, labor standards, and human rights."  From my point of view, management of these issues requires institutional responsibility for them to be centralized in such a way as to force necessary trade-offs among competing goals--gains from trade versus damage to the environment, the needs of the international economy versus individual rights, etc.  Without such centralization, either one set of goals must dominate the others, or the various international organizations must work at cross-purposes with one another.

The kind of global governance I am talking about need not take the form of a "global democratic government" of the kind that Thurow is talking about.  It might take the form of the strengthening of existing international regimes, like WTO.  The important thing is that the institutional capacity for governing the collective affairs of global society must exist.  

What is occurring now, I fear, is not the development of additional institutional capacity, but the destruction of what capacity exists.  Consider the recently published report of the Meltzer Commission on reform of the international financial institutions, prepared at the request of the U.S. Congress.  There are aspects of the report that should certainly give heart to those concerned about heavily indebted developing countries.  The commission recommends that "the International Monetary Fund, the World Bank and the regional development banks should write-off in their entirety all claims against heavily indebted poor countries (HIPCS) that implement an effective economic and social development strategy in conjunction with the World Bank and the regional development institutions."  Furthermore, it argues that "the United States should be prepared to increase significantly its budgetary support for the poorest countries if they pursue effective programs of economic development."

Nevertheless, some of the commission's other recommendations concern me.  Under the report's proposals, the IMF's lending operations would be limited to the provision of short-term funds to solvent member governments that had exhausted the possibilities of borrowing through capital markets.  It would cease lending to countries for long-term development assistance (as in the case of Sub-Saharan Africa) and for long-term structural transformation (as in the case of
post-Communist transition economies). The Enhanced Structural Adjustment Facility and its successor, the Poverty Reduction and Growth Facility, would be eliminated.

The World Bank would become a "World Development Agency" with a reduced role as a lender.  Along with new regional development agencies that would replace the regional development banks, this World Development Agency would be precluded from financial crisis lending.  The agencies would concentrate on providing global public goods including "treatment of tropical diseases and AIDS, rational protection of environmental resources, tropical climate agricultural programs, development of management and regulatory practices, and inter-country infrastructure."  The World Development Agency would provide technical assistance to the regional development agencies.

The Commission recommends that the World Trade Organization's quasi-judicial rulings be prevented from overriding national legislation on health, safety, environment, and other regulatory policies.  "Rulings or decisions by the WTO, or any other multilateral entity, that extend the scope of explicit commitments under treaties or international agreements must remain subject to explicit legislative enactment by the U.S. Congress and, elsewhere, by the national legislative authority."

While many might take comfort from some of these recommendations, I find myself uncomfortable with its emphasis on privatization and decentralization of the international financial system.  It has sometimes been suggested (e.g., in Rosecrance 1986) that the debt management regime serves a purpose analogous to that of a "social welfare program" for developing countries.  If there is any merit to this argument, I am concerned that in the Commission's work smacks of a "backlash", analogous to Reaganomics in the United States, aimed at "getting the global public sector off the backs" of U.S. banks and taxpayers.

REFERENCES

Report of the International Financial Institution Advisory Commission.  Available online at http://phantom-x.gsia.cmu.edu/IFIAC/USMain.html

Rosecrance, Richard.  The rise of the trading state : commerce and conquest in the modern world.  New York: Basic Books, 1986.





(From _USA Today_, Wednesday, April 12, 2000, online edition, available at http://www.usatoday.com/news/comment/ncguest1.htm).

>Protesters don’t want global democracy
>
>                  By Lester C. Thurow 
>
>Week-long protests are under way in Washington against the World Bank
>and the International Monetary Fund (IMF). If all goes well - at least, by the
>activists' standards - the demonstrations will culminate in a massive protest
>rally Sunday as world finance ministers gather in downtown Washington for
>the spring meetings of the two financial institutions.
>
>Now is the right time to think about the forces these demonstrators
>represent. 
>
>Anything radically new always creates fear. In this case the new is
>globalization.
>
>Better communications and transportation technologies are in the process of
>dissolving national economies and replacing them with a global  economy.
>This is not occurring because governments or citizens want it to happen. It is
>happening because business firms can make a lot of money by searching the
>world for the cheapest places to make their products and the most
>profitable places to sell their products.
>
>In the rest of the world, globalization is often seen as a dangerous invasion
>of traditional American culture and business practices. It isn't. It is the
>creation of a new set of global practices, much of it made in the United
>States, but just as strange and alienating to many Americans as it is to many
>of those outside of the United States.
>
>That is why both those Americans who protested against the World Trade
>Organization (WTO) last year in Seattle and those who are in  Washington
>now are so upset. Decisions that directly affect their lives are being made
>outside of the United States and without reference to what they would like.
>Their traditional practices are being uprooted just as much as those  in
>France, which is home to the most vocal objectors to the exportation  of
>those "American" practices. 
>
>Globalization is similar to what happened a century ago when electricity and
>the things that went with it (the telegraph, the telephone, the radio)replaced
>the local-regional economies that had existed in America with a new national
>economy. The difference then, of course, is that we already had a
>democratically elected national government standing by to step in to regulate
>this new national economy. Today, there is no democratically elected global
>government ready to regulate this new global economy. Not only does it not
>exist, but also national governments oppose its creation.
>
>National governments do not want to give up their power to control to some
>higher authority. But at the same time, they are gradually losing  their
>controlling powers to a global economy. If a company does not like the
>regulations of some specific country, for example, it simply moves out and
>services that market from an offshore production base. The largest  drug
>company in the United Kingdom recently promised to do so if the U.K. did
>not change some of its attitudes regarding genetically modified drugs.
>
>If a global democracy were to be organized, most of the world's citizens
>would probably vote against it. Very few are willing to live in a world where
>6 billion people get to vote and their own ethnic group is just a  small
>minority.
>
>But some regulation is necessary. Global capitalism requires rules about
>property rights (intellectual and otherwise), the enforcement of contracts,
>equal access to markets and a host of other issues. Concerns about the
>environment, human rights and labor standards are so intertwined with
>global economic rules and regulations that no one can separate them.
>
>It is not possible to say that the WTO should handle global trade while some
>other agency (usually left unspecified) handles these other legitimate
>concerns. The WTO, the IMF and the World Bank are not global
>organizations. They are international organizations, creatures of the national
>governments that created them. If they want to implement their policies, they
>have to ask local governments to enforce their rules and regulations. They
>have no powers independent of those national governments. But today we
>are using these international organizations to make decisions that logically
>ought to be made by a democratic global government that could enforce its
>decisions without reference to national governments. 
>
>The situation raises lots of anxiety and fear. Steelworkers don't like the idea
>that an Asian financial crisis and the IMF's imposed austerity policies can
>cost them their jobs. For many Americans, something isn't working  right
>when the inflation-corrected wages of the median male full-time full-year
>worker go down 3% from 1989 to 1998 (the last year for which we now
>have data) despite a booming American economy. 
>
>The WTO makes decisions that make it impossible for those who love
>dolphins to protect them (Mexican tuna captured in nets that kill dolphins
>cannot be kept out of the U.S. market). The WTO makes decisions that
>make it difficult for those who wish to stop child labor or those who wish to
>enforce labor safety standards to do so. In the WTO's view, those aren't
>legitimate concerns for negotiations. Yet if safety standards aren't enforced
>abroad, they cannot be enforced at home without risking American jobs.
>
>Put simply and bluntly, global trade looks as if it is starting a race to the
>bottom as far as these other issues are concerned.
>
>The fears and anxieties of many Americans aren't imaginary. Yet while the
>demonstrators in Seattle and Washington talk about democracy, or the lack
>of democracy, in the decision-making at the WTO, the IMF or the World
>Bank, they don't really believe in global democracy. The United States has
>less than 0.3 billion of the 6 billion people in the world. A global democracy
>would not be an American-dominated democracy. Instead, Americans
>would be a small minority. 
>
>What they want is "stop the world, I want to get off" - but that is the one
>thing they cannot have.
>
>The tide of globalization is rolling in. Whatever the fears of drowning in the
>deluge, everyone has to learn to cope with it. 
>
>          Lester C. Thurow, a professor of economics and former dean  of
>          Massachusetts Institute of Technology's Sloan School of Management,           
>          is a member of USA TODAY's board of contributors. 
>
--
Jeffrey L. Beatty
Doctoral Student
Department of Political Science
The Ohio State University
2140 Derby Hall
154 North Oval Mall
Columbus, Ohio 43210

(o) 614/292-2880
(h) 614/688-0567

Email:  Beatty.4@osu.edu
______________________________________________________   
'_Sapere aude_'--'have courage to use your own reason'
--this is the motto of Enlightenment--Immanuel Kant,
"What Is Enlightenment?"