Adrian Hewitt, ODI
Sir John Thomson
Lord Desai argued the case for global governance, by which he meant a 'framework of rules' designed to encourage good behaviour and discourage bad. 'Governance' was not the same as 'government'. Nevertheless, governance implied more than simple coordination: it required incentives and punishments, agreed democratically by participating states. On this definition, 'bits and pieces' of a governance structure could be found in the modern world - for example, the UN Security Council, the Bretton Woods institutions, GATT, the Bank for International Settlement, the ILO and similar institutions. Most, however, suffered from asymmetry in power and control between rich and poor countries, institutionalised through voting structures: they failed the democratic test. On this basis, the WTO marked a major step forward because it had real authority, whilst at the same time meeting the criterion of one nation - one vote.
Lord Desai then turned to the specific case of global financial governance. The task here was not to subvert the market, which would inevitably produce winners and losers, as well as a certain degree of volatility, but rather to avoid irresponsible behaviour by players in the market. In this connection, the main problem arose with portfolio investment (often 'mal-investment') rather than with foreign direct investment. Lord Desai made a number of specific suggestions: (a) the creation of a genuine world central bank, a central bank of central banks, to act as international lender of last resort - this could be based on the Bank for International Settlement, and take on responsibility for global banking regulation and for setting rules on capital adequacy; (c) establishing a pool of credit to relieve the financial distress of developing countries, in the order of $US 40 - 50 billion, as recently suggested by President Clinton; (d) setting up a global version of the US Federal Deposit Insurance Corporation, to guarantee bank deposits (in the US case, this was up to $US 100,000); and (d) a tax on international capital flows, designed, as (formerly) in Chile, to reduce the longer capital was held in a country.
Sir John Thomson agreed in general terms with Lord Desai's definition of governance as a framework of regulation, but thought it might be appropriate to talk of multiple frameworks, rather than a single framework. He argued that complexity was the leading characteristic of the times, and that the 'international community' was characterised by multiple players, operating in different arenas: the term referred not only to national governments, but also to international organisations, NGOs, multinational companies, the media, religious bodies, as well as powerful and influential individuals.
In thinking about reform of governance, at least in a UN context, the key priority was probably on the economic and social side. The UN charter was a remarkably good document, and the Security Council worked reasonably well. However, the Economic and Social Council was handicapped by its large size (54 members), and by the lack of correspondence between voting majorities and financial resources: those who agreed to programmes were not the same as those who actually had to pay for them. Various reforms were possible. Sir John thought that in general there needed to be more UN technical bodies developing international rules, even if these sometimes appeared arbitrary.
Lord Judd summarised both the principles and practical recommendations adopted by the Commission on Global Governance, of which he had been a member. The Commission had put individual human rights, the notion of social justice, and the rule of law at the heart of its work, recognising the importance of civil society, and taking a broad view of economic as well as political security. This led to specific proposals, especially for UN reform: for wider participation in the UN, for example by holding a Global Forum for civil society prior to the General Assembly; for better directed management of the global environmental commons, perhaps through the Trusteeship Council; for more active involvement in conflict resolution and the control of arms; and for new forms of funding, for example by taxing speculative capital flows, satellite slots, or the use of air corridors. The Commission recommended the establishment of an Economic Security Council in the UN, to which the Bretton Woods Institutions should be in some sense accountable.
Looking back on the work of the Commission, Lord Judd thought that perhaps it should have made a stronger case for market intervention in pursuit of the common good, especially in the realm of social infrastructure. He also felt that the group should have spoken out even more strongly on conflict management, particularly on the abuse of human rights in internal wars. Recent events (particularly the Kyoto conference on global warming and the negotiation of the Multilateral Agreement on Investment) illustrated the imbalance of power in the world. International agreements had to belong to global society as a whole. It was not just a question of creating a level playing field: all players needed to be brought to a level of fitness which enabled them to play effectively.
Finally, Lord Judd argued that the US had a special responsibility to lead reform of global governance. There was a risk that the UN would come to be seen as a sub-contractor to Washington in an era of Pax Americana. The US should consider that they might not always occupy this position, and should take the lead in reforming the system.
The discussion covered several areas: the role of the state versus the individual and the corporation in the new global environment; possible reform of the UN Security Council; the myth of democracy in the WTO; and the role of NGOs in representing people. Cutting across these issues, the central concerns were the need (a) to put questions of economic governance at the heart of the debate, and (b) to achieve fair representation of developing country interests in economic governance. Pessimists pointed to the unequal voting power of rich and poor countries in the Security Council, to the relatively weak position of poor countries in the WTO, and to their effective exclusion from discussions in the OECD about the Multilateral Agreement on Investment, as arguments that governance was unsatisfactory. Optimists argued that there were positive features: the Security Council was more representative than might at first appear, the WTO had shown itself capable of imposing sanctions on the US, and the MAI, if it ever materialised, would have the effect of constraining some aspects of multinational behaviour. Even optimists agreed, however, that there was more still to be done.
This event discussed the case for global governance -designed to encourage good behaviour and discourage bad.