Summary
The Hague Institute and the Stimson Center facilitated an online expert discussion on “Global Economic Governance and Averting Financial Crises”.
This took place between 24 March 2015 and 5 May 2015.
The online expert consultation ‘Expert E-Consultation on Global Economic Governance and Averting Financial Crises’ ran for six weeks from 24 March to 5 May 2015. Moderator Erin Jackson circulated a discussion prompt posing three questions for each phase of the discussion. A summary of the expert interventions made in response to the six questions posed during the e-consultation is provided below.
The Expert E-Consultation was facilitated by Sara Burke (Friedrich-Ebert Stiftung-New York), Harris Gleckman (Center for Governance and Sustainability, University of Massachusetts Boston), Richard Ponzio (The Hague Institute for Global Justice and Commission on Global Security, Justice & Governance).
Responses were received, with thanks from:
Adriana Abdenur
Danny Bradlow
Peter Carter
Arthur Domike
Martin Edwards
Christina Fidan
Jesús Marcos Gamero Rus
Dr. Richard Gragg III
Craig Murphy
Ejeviome Eloho Otobo
Jana Simonova
Phase I of the e-consultation ran from 24 March to 14 April 2015 and focused on the social impacts of the international financial and trading system, democratic participation of social movements, and the proposed Sustainable Development Goals.
- If global justice is understood to be social justice, as Thomas Pogge[1] argues it must be, meaning it is an assessment of the social impact of institutions and rules rather than a judgment of individual behavior, we need to ask whether the system and institutions of global economic governance we have in place can be relied on to produce social justice and universal social goods for the world’s people. What, in your view, are the main social impacts and outcomes of the international economic, financial and trading systems? Are they consistent with social justice?
A general opinion expressed by the experts was that present international economic, financial and trading systems are not consistent with social justice, and are platforms for the increment of inequality, world poverty, violations of human rights, and degradation of the environment. Experts agreed that social impacts and outcomes disparities are preferential to those economies fully integrated into the established dominate systems and their architects. The current system creates the most favorable environment for the richest of the world, transnational corporations and the most influential nations. It was put forward that the outcomes are designed and implemented by those in charge of the world’s major corporate and banking entities, and the governments that protect these actors, led by the USA and the European Union.
Experts differed on the precise causes of this inconsistency. One cause is that EFT systems are focused on growth in economic terms and slow to acknowledge accountability for their social and environmental impacts. It was stressed that the main institutions of global economic governance were not designed to tackle the issues of social justice. While there has been marked evolution in the institutions, tackling social impacts has been incidental rather than pivotal to their work. In regards to development, lingering distortions in the trade/finance regimes exacerbate inequalities but have become immune to key debates about development.
Suggestions put forward were in favor of shifting the focus of the current system. Development must be re-defined more broadly so as to address the regime biases built into the present architectures for trade and finance. The EFT systems must also be redesigned in terms of changing the focus from the GDP growth and short term profitability to long-term prosperity, sustainable development and social wellbeing.
- Social movements such as those present at the World Social Forum have become increasingly sophisticated about linking local issues to issues at the regional or global scale, and that includes in their conception of justice. Yet often, those who are most aggrieved by injustices originating with or enforced by the global economic system have inadequate means of organizing or representing themselves, particularly in the institutions at the global level. Given the demands for greater democratic participation expressed around the world, what in your view is required to ensure that our institutions of global economic governance register the concerns, not only of governments and powerful interests, but also of these movements?
This was recognized as an extremely important question. Responses from the experts were mixed. One contributing factor that was raised that most states, even if democratic, are unlikely to accept citizens or CSOs participating in international forums in their own rights rather than through their governments. Another was a warning against ‘spatial trickle down’ economics: the idea that, if you generate a bubble of economic dynamism, it will radiate outwards fixing other underdevelopment problems. Civil society groups stand little chance to have real impact on emerging institutions if they are dominated by authoritarian states. In addition, it was noted social movements and their causes suffer a huge disadvantage in competing for policy primacy.
Several suggestions were put forward in response to these problems. First, given that it is difficult for international institutions to establish which social movements/CSOs are in fact representative of public opinion, it was argued that participatory systems of global economic governance will need to incorporate both formal and informal (for example, social media and protest) channels of communication and interaction with decision making procedures. It was also recommended that pressures to prevent these institutions from leaving out civil society should increase now rather than wait for institutional redesigns. This should come not only from civil society itself, but also from global drives at creating development frameworks, such as the SDGs. Finally, two possible paths were put forward to integrate social justice into the work of institutions of global economic governance: by explicit incorporation of social objectives into those institutions or by intensified pressure from civil society organizations on those institutions. It was noted that the institutional challenge is that any Commission proposal at the international level would run against the current exclusion of civil society from domestic monetary and economic policy bodies.
- Taken together, proposed UN Sustainable Development Goal 16, to “Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels,” and 17, to “Strengthen the means of implementation and revitalize the global partnership for sustainable development,” outline the degree to which the emerging global consensus aspires to greater democratic participation, in the case of Goal 16, and financing the new agenda, in the case of Goal 17. What is your assessment of the proposed SDGs as a framework to provide access to and monitor ongoing progress toward economic and social justice?
It was first put forward that the SDGs face a number of contradictory pressures: convey to the world that the SDGs will change the world, while also stating that this requires no additional resources from governments or changes to the UN system. The experts presented both optimistic and pessimistic outlooks on the SDGs. On one hand, experts noted the explicit incorporation of social justice goals and objectives in the SDGs as an important step forward in the global effort to promote social justice issues. On the other hand, pessimism was expressed about the possibility of using the UN and its agencies to reach the SDGs. The SDGs are seen by some as vague and inadequate to provide access to and monitor progress. Resulting from the intergovernmental negotiations, there is space for national and non-governmental initiatives.
Others viewed it as too soon to be able to answer this question. It was noted that it is possible that the MDGs have had minimal impact on the outcomes of the past 15 years but have had a substantial impact on the thinking of policy makers. It is possible that the SDGs will have a more significant impact on promoting economic and social justice, but regardless of their utility as an assessment framework, they have great potential as an advocacy tool for social movements.
Generally, the UN sustainable development paradigm must be fully democratic rooted in the strategic goals and objectives of social justice. It was suggested that, on the part of governments and the private sector, no line of the SDGs should be accepted without a clear way to upgrade the organizational capacity of the UN and finances necessary for countries to address the issue. On the governance side, it was put forward that each SDG should be assigned to at least two intergovernmental bodies to break up the over-specialization of the existing intergovernmental system. Each intergovernmental body should be expected at least biannually to evaluate the implementation of all of the SDGs. ECOSOC should then be expected to advise all actors what needs to be undertaken before the next evaluation.
Phase II of the e-consultation ran from 14 April to 5 May 2015 and focused on the G-20, the reform of ECOSOC (or potential for an Economic Security Council) and bridging the gap between traditional and non-traditional global economic governance actors.
- The G20 as a Leaders Forum has been an important step forward in coordinating a global response to the spread and deepening of the recent global financial crisis. However, as a member of the Commission on Global Security, Justice & Governance, Professor José Antonio Ocampo, has pointed out, this self-appointed ad hoc body has not attained legitimacy equivalent to that of a representative institution in a well-structured international governance framework. What reforms are needed involving, for example, in the G20 but also vis-à-vis the United Nations (New York), the IMF (Washington), and the Financial Stability Board (Basel), to increase participation and transparency in international decision-making—by both states and non-state actors—to prevent future cross-border financial shocks and to sustain global economic growth and job creation?
In response to this question, some experts expressed the opinion that global crises are inevitable and noted that periodic financial collapses have always been a part of complex economies. The challenge is not avoiding crises but anticipating them and seeking to minimize their impacts.
Responses relating to the G20 were mixed. One expert said the G20 lacks transparency, and that countries need to be held accountable for the fact that MAP processes are not released to the public. It was also put forward that the G20 may be something that could not be replicated the next time there is a crisis. There was some agreement that the G20 does not have the legitimacy that comes from being a representative body in a well-structured governance framework, however the outcome legitimacy of the body was highlighted in that it helped prevent the global crisis from being much worse and its work on reforming financial regulation has resulted in substantial changes in financial regulation. However, the G20 was seen as ineffective in promoting sustainable growth, reforming the governance of the IMF, or making the FSB more transparent. It was suggested that the G20 may lose some of its limited legitimacy over time and it may not be an appropriate body for resolving the next crisis. On a positive note, the G20 has included non-traditional actors in the discussion about sustain global economic growth, bringing ideas to the table that are often on the periphery of international decision-making processes.
Responses regarding the IMF were less positive. It was noted that the IMF’s statements have influence in emerging markets but not in developed markets. While the IMF needs to do a better job of making sure that surveillance brings with it new information, the NGO community needs to pay attention to the content of surveillance. It was advanced that if Article IVs in the developed world had the media attention that they have in the developing world, the influence of IMF policy advice would be significantly enhanced. Part of the loss of the IMF’s legitimacy was attributed to non-implementation of reforms that were agreed upon, as well as minimal “reforms” that in practice did not alter decision-making processes. If the IMF is to maintain relevance, it was suggested that it must engage a wider variety of actors through real reforms, including voting quotas and leadership positions as well as the composition of its staff.
The FSB was seen by some as a work in process and a rather opaque institution. NGOs are pushing them to be even more clear about what they do. It was put forward that the rules being developed under the auspices of the FSB, known as BASEL II, represent an important step in involving a broad range of international economic actors to minimize future financial crises. However, another transparency issue is to which institutions should the BASEL rules apply.
- Enhancing coordination between the UN (ECOSOC in particular) and the Bretton Woods institutions (World Bank and IMF) has been a major subject since the end of the cold war, including the Human Development Report 1994 and the report of the 1995 Commission on Global Governance, which promoted the idea of a UN Economic Security Council. Can ECOSOC be reformed and strengthened to fill this gap in today’s post-2008/9 international financial crises era of increasing concerns about global economic stability? Alternatively, should the Economic Security Council or new ideas, including a Global Economic Coordination Council (see Ocampo and Stiglitz, 2011), be considered?
Some of the experts responded positively to the idea of a new mechanism. It was put forward that the MDGs/SDGs may be creating something of a moral consensus about what exactly should be done in regards to development. Thus, it may be possiblean opportune time to call for something like Ocampo and Stiglitz suggest. It was also stated that the problems with the ECOSOC are probably too severe for it to be reformed sufficiently for it to play a meaningful role. It would be prudent to consider new ideas like an Economic Security Council, which will only be feasible when the current global powers see it in their interest to have more effective coordination of global economic governance. For the meantime, it was suggested the need to develop mechanisms for managing the inefficiencies in the existing arrangements. Others expressed that we need to make the existing institutions more accountable, not create new ones.
Others argued that the idea of an Economic Security Council has not made headway because its creation will upset the existing economic powers and a Global Economic Coordination Council would not fare any better. The G20 was noted as a Global Economic Coordination Council–of-sorts, and given the current global power realities, it was seen as the best that might be hoped for now. Thus, one response suggested two possibilities: make the G-20 serve as a genuine Global Economic Coordination Council or create a forum for the new and existing global economic institutions to really coordinate policy at the level of their Chief Executives.
- There has been an overarching increase in the role and means of participation of important non-state actors—including the private sector, NGOs, regional organizations and local authorities (particularly in megacities)—in engaging with UN bodies and agencies. What tools for engagement are needed to improve communication between the UN and these non-traditional actors in the area of global economic governance, including in the promotion of the Sustainable Development Goals found within the Post-2015 Development Agenda? What role can UN agencies play in being a bridge between traditional and non-traditional (but essential) global economic governance actors?
A few distinct views were presented in response to this question. One participant pointed to the fact that engineering standard-setting bodies such as the IEC, ISO, and most of the national standard-setting bodies, make room for governments and government agencies to sit in as stakeholders on standard setting committees. This was suggested as a standard practice for UN agencies, not only in the traditional standard setting groups, but also in the ISEAL alliance bodies and the newer bodies concerned with regulating the Internet. It was suggested that the UN work to promote traditional voluntary consensus standard-setting (VCSS) norms in all the new parts of global governance that are within the Abbott-Snidal ‘governance triangle’.
It was recognized that the UN is reaching out to, and thinking about, the role of the private sector in the post-2015 sustainability goals. It was suggested that this outreach, not only to the large philanthropic institutions that have become influential in international development but also to private sector firms, has to be institutionalized within the UN development system, through ECOSOC, so that it does not lose steam after the current push to find funding for the SDGs. Another expert pointed out that the UN has a range of partnership and consultative arrangements with the private sector and NGOs that could be pressed to service to promote the SDGs. What is required is to strengthen these frameworks and use them as vehicles for popularizing reports that member states will periodically issue on the SDGs. These forums should be used to encourage both NGOs and private sector entities to extend support to countries where they operate.
[1] Thomas Pogge, Politics as Usual: What Lies Behind the Pro-Poor Rhetoric (Policy, 2010