NEW     GLOBAL ECONOMIC GOVERNANCE

 

 By John Langmore and Shaun Fitzerald, University of Melbourne (2011)

The remarkable growth in the extent of international economic integration in recent decades has far outpaced the existing capacity for global economic governance. The intensification of globalisation has increased the inadequacy of the institutions of global economic governance and their policies. This became especially apparent during the Global Financial Crisis, also known as the Great Recession, which began in 2008 and the destructive effects of which still continue. The crisis showed that contemporary national and international economic institutions could not achieve stability let alone other goals. In fact, some of the policies multilateral economic institutions have been commending during the last thirty years contributed to the contagion which spread globally from the US where the crisis began. The frequency and speed with which economic problems in one country spill over to others indicates the importance of strengthening international institutions sufficiently to ensure that they are capable of taking swift, effective corrective action.

Enhanced global economic governance would be a key component of renewing the dominant discourse in international political economy. The most cost-effective national economic policies work partly because they are of benefit to other countries, but many are only possible if other countries adopt them too. For example, if all countries collaboratively introduce expansionary macroeconomic policies these then become mutually reinforcing, without damaging asymmetrical externalities. The most widely recognised example amongst economists is that of “beggar-thy-neighbour” tariff increases. When introduced to protect national manufacturing or agriculture, they do so at the expense of reduced global trade, with the aggregate effect being the retardation of economic recovery everywhere.

read full paper here » » »

In Ralph Pettman, (Ed.), forthcoming, A Handbook of International Political Economy, World Scientific Publishing, Singapore

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ECOSOC postponed a resolution to establish a Panel of Experts on economic affairs

by Bhumika Muchhala, Third World Network, September 2011, New York

Informal negotiations on an ad hoc Panel of Experts reveal a sharp lack of consensus between North and South United Nations members, with a final decision by the General Assembly postponed until 2011-end. Economic and Social Council (ECOSOC) negotiations held at the UN in Geneva in July on the creation of an ad hoc panel of experts did not result in a decision to establish such a panel as an integral part of the follow-up to the UN’s 2009 conference on the world financial and economic crisis. 

Instead, a decision by ECOSOC was postponed to December of this year, when the UN General Assembly in New York will conclude its discussions and events on global economic governance. While this is not an optimal result, it preserves the space for a continuing dialogue on a panel of experts which would offer economic policy opinions from a different lens than that of the G20 and which would address the outcome of the 2009 UN conference on the crisis. A dialogue will maintain the possibility of a positive outcome to create such a panel even though the European Union and the United States opposed its establishment.

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Civil society calls for establishment of UN panel of expert

Social Justice in Global Development initiated a letter, signed by more than 100 civil society organizations and NGO networks, to the ECOSOC calling for the adoption of a G77 resolution to establish an expert panel on economic issues at the UN. This resolution on the “establishment of a panel on the world financial and economic crisis and its impact on development” was finally adopted at the ECOSOC at the end of July. But the EU and the US succeeded in weakening it a lot. They reduced it to 3 paragraphs and postponed the decision to establish the panel to December, when the UN General Assembly concludes in New York, after all those UN discussions and events on global economic governance referred to in the resolution have taken place. A copy of the resolution is also attached.

                                                                                     See letter with all signatures  ›››

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Third World Network Statement on Global Governance at the UN General Assembly in June 2011

by Bhumika Muchhala, Third World Network June 2011, Geneva

As stated in the report of the Commission of Experts of the President of the General Assembly on Reforms of the International Monetary and Financial System, published on September 21, 2009, the recent crisis should be seen as an opportunity to engage in necessary reforms. Historically, moments of crises often provide a rare chance for fundamental reforms that would otherwise be impossible. But there is also a danger that existing power structures will seize hold and use the crisis for their own benefit. This would reinforce existing inequalities and inequities with an even greater concentration of economic and political power than existed before the crisis. 

It is thus of utmost importance that the United Nations member states take charge of its rightful mandate of global economic governance through the strengthening of the ECOSOC apparatus, the actualization of the follow-up processes to the June 2009 UN financial crisis conference, as well as through other means.

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New publication on the UN and Global Governance

by Barry Herman, Graduate Program in International Affairs, The New School, New York

This paper asks how the world of sovereign countries should arrange itself to address global and international economic, financial, social or environmental problems. The current system of institutions and arrangements, informally led by the Group of 20, as convoked by the United States, is hardly ideal. The paper proposes a “pragmatic” alternative with multiple checks and balances, but able to reach timely and effective decisions on the full range of international policy issues. The paper concludes noting that dissatisfaction with current arrangements has reopened intergovernmental debate; it is not the same as undertaking reform, but it is a start.

                                              See full paper at:   http://gpia.info/files/u706/Herman_2011-07.pdf

In 2008, as the financial crisis in the United States spilled over its borders and threatened a global economic breakdown, it became increasingly clear that a collective international response was needed. No international body existed that could organize such a response. The informal Group of 8 (G8) no longer had enough available economic muscle. The Security Council of the United Nations had no mandate in the economic sphere. The United Nations General Assembly was far too unwieldy to mobilize quick action and the Executive Board of the International Monetary Fund (IMF), in which all member countries are represented albeit inequitably, had a more limited and routine function. The President of France proposed opening the G8 to five additional countries with which the Eight had started a dialogue at head-of-state level, making for a “G13”. The President of the United States countered with a proposal to upgrade a modest discussion forum of 20 finance ministers and central bank governors to a  leaders’ forum. Thus, the new “G20” was born (Herman 2008). At their first meeting in November 2008 in Washington, D.C., the G20 leaders agreed to undertake a coordinated global economic stimulus and start a process of international financial reform. The stimulus helped stop a global economic recession from becoming a global depression, but initially promising plans for the international reform of financial regulation were weakened and postponed.

Advocates of the G20 tout it as a more appropriate and more effective forum than the G8 (see, for example, Bradford 2009, Kirton 2010), but that seems faint praise. Surely, the world can do better. This paper asks, what do we mean by better? Actual reforms in global economic governance are inevitably compromises between an intended ideal or vision and the changes that reforming decision makers will tolerate. They are the result of the differential power of governments that are making the changes and the pressures they are under to reach compromises. But what is the ideal toward which they should work? That is, acknowledging that nations are what they are, that politicians are what they are, what might a system of global economic governance look like if the negotiators were under inexorable pressure to design a new system?

                                                                                                               Download paper ››› 

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The role of the United Nations in Global Economic Governance

By Yilmaz Akyüz, Special Economic Advisor, South Centre

How can policies pursued by specialized agencies mutually reinforce each other in support of equitable, rapid and sustained economic and social development?

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The UN, the EU and the international financial and debt crises -A Global Partnership for Development in the twenty-first Century?

Key speakers were Barry Herman (New School, New York/ former UN staff), Verena Winkler (former Eurostep) and Eva Hanfstaengl (SocDevJustice).

Millennium Development Partnership Goals are not on track in 2011, in particular in aid and trade. In addition, many countries remain vulnerable to debt crises, including in Europe. An international mechanism for comprehensive, timely and fair debt workouts is needed and can be created if governments are willing. Not having such a mechanism is part of an overall global economic governance problem. There are various reform proposals and initiatives which could improve the situation.  See link to a PowerPoint presentation by Barry Herman first presented to NGO groups in Hamburg  and later to NGOs in Berlin, organized by the NGO "ONE".
                                                                                                          See presentation >>> 

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More Coherence, but How? The Institutional Predicament of Coherence

by Barry Herman (Ph.D., University of Michigan) is Visiting Senior Fellow at the Graduate Program in International Affairs of The New School in New York

The global crises of 2008-2010 forced recognition that global survival depends on more effective international cooperation. Decisions are made by states and national legislation is required to turn international agreements into laws that bind non-state actors, which national courts will enforce. A largely ineffective and politically weak multilateral system could not cope with the crisis. G20 was created to solve the coherence problem. We need a new system for coherent and effective global policy. This new system should be developed that earns the confidence of the people in rich and poor countries, of labor and capital, of public and private sectors. The following scenario envisages a world of “global governance” but not of global government. 

Proposal for a new system: Two-level structure: New specialized international institutions would address technical policy issues, such as in rules for international trade or cooperation for international financial stability. A new Global Governance Assembly (GGA) should determine the overall principles that guide these aforementioned institutions, and the priorities in terms of resolving conflicts among them. 

Decision-making procedures: dual voting systems: Decisions should generally be taken by a dual voting system demanding for a specified majority of the number of states voting and a specified majority of weighted votes by economic significance. This voting system makes small states count and the importance of big states is adequately reflected as they have to pay more of the bill. 

The new system should have a 15-member Global Council as an affiliated body of the GGA. It would include large state members that are elected for 10-year terms and another group elected for two-year terms, with appropriate geographical distribution. The Council would address inconsistencies among specialized institutions and deal with complex economic and political emergencies, including social and environmental emergencies. It would be subject to review by the GGA.

                                                               read more and download full PowerPoint presentation >>>

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High-level United Nations Conference on the World Financial and Economic Crisis and its Impact on Development in June 2009 adopted an Outcome Dokument on reform of global financial governance

by Eva Hanfstaengl, SocDevJustice 2011

On June 26, in New York, the high-level United Nations Conference on the World Financial and Economic Crisis and its Impact on Development adopted unanimously an official "UN Outcome Document" that opens a door - even if only a small one - to a possible UN role in the reform of global financial governance. The preparations for the UN conference, however, were not without severe difficulties. The run-up to the conference highlighted sharp differences between Southern nations, which want to give the United Nations more say in tackling the financial crisis, and Western governments, who prefer to conduct their business within the Group of 20 (G-20) nations. Until now, global financial and monetary issues have been the responsibility of the International Monetary Fund and the Group of 8 (G-8), relying on the expertise of the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board, both of which include central banks and treasuries hailing largely from developed nations. However, with the present financial crisis having originated in the North and posing untold negative consequences for the South, political pressure has ramped up on the developed world to include other voices in mitigating this disaster. Impacts of the crisis, such as slowing growth rates, rising unemployment, and declining budgets are beginning to affect developing countries. Developing countries, including the poorest countries, therefore claim that everybody should have a stake in financial regulation. It is in this context that the demand for this global conference on reform of the financial and monetary system emerged. 

                                                                                                              read full article >>>

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More Coherence, but How? The Institutional Predicament of Coherence

by Barry Herman (Ph.D., University of Michigan), Visiting Senior Fellow at International Affairs of The New School in New York

The global crises of 2008-2010 forced recognition that global survival depends on more effective international cooperation. Decisions are made by states and national legislation is required to turn international agreements into laws that bind non-state actors, which national courts will enforce. A largely ineffective and politically weak multilateral system could not cope with the crisis. G20 was created to solve the coherence problem. We need a new system for coherent and effective global policy. This new system should be developed that earns the confidence of the people in rich and poor countries, of labor and capital, of public and private sectors. The following scenario envisages a world of “global governance” but not of global government. 

Proposal for a new system: Two-level structure: New specialized international institutions would address technical policy issues, such as in rules for international trade or cooperation for international financial stability. A new Global Governance Assembly (GGA) should determine the overall principles that guide these aforementioned institutions, and the priorities in terms of resolving conflicts among them. 

Decision-making procedures: dual voting systems: Decisions should generally be taken by a dual voting system demanding for a specified majority of the number of states voting and a specified majority of weighted votes by economic significance. This voting system makes small states count and the importance of big states is adequately reflected as they have to pay more of the bill. 

The new system should have a 15-member Global Council as an affiliated body of the GGA. It would include large state members that are elected for 10-year terms and another group elected for two-year terms, with appropriate geographical distribution. The Council would address inconsistencies among specialized institutions and deal with complex economic and political emergencies, including social and environmental emergencies. It would be subject to review by the GGA.

                                                               read more and download full PowerPoint presentation >>>

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Strengthening global economic governance

by Eva Hanfstaengl, SocDevJustice 2011

One central question for the global discussions today is: how can the UN help strengthen global economic governance? After the financial crisis in 2009, governments and civil society see the need for substantial improvement in the coordination of global economic policy. Global economic integration has outpaced the development of the appropriate political institutions and arrangements for governance of the global economic system. The global financial and economic crisis requires an unprecedented global response. We need policies that can build just, participatory and sustainable societies. This requires far-reaching reforms of the international financial architecture, which cannot be decided by the G-8 nor G-20 alone, but needs response from the entire international community.  

                                                                                                              read more >>>

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