Scientific Re... >> Global Value ... >> Content

Scientific Research
Reform of Global Governance: Priorities for Action
2017-03-11 17:13

Reform of Global Governance: Prioritiesfor Action

 

Many of today’s international institutionswere created at the end of World War II, more than 60 years ago. Since thenthey have responded in many significant ways to the challenges arising duringthe second half of the 20th century, including decolonization, the end of thecold war, global security, environmental threats, and global poverty. Eventhough many new global and regional organizations were added since 1945—whenthe United Nations was created and the Bretton Woods organizations opened theirdoors—very little has been altered in the basic structure of these globalinstitutions.

 

Global institutions are not working wellindividually and as a group. For example, the global institutions at the coreof the international system, such as the United Nations, the InternationalMonetary Fund, the World Bank and the G8 Summit are, to varying degreesfragmented, unrepresentative and ineffective, and generally suffer from ancorosive decline in their legitimacy. They are increasingly fragile and unableto address the global challenges of the 21st century.

The creation of legitimate globalinstitutions involves multiple goals: First, the institutions must be representative.Second, the institutions need to be effective. Third, collectively theinternational institutions need to serve as an effective global governance system.Finally, the international institutions should offer opportunities for nationaland international leaders to forge coalitions for action and reform.

 

What is needed is strategic guidance,vision, and leadership for institutional and summit reforms identified here,taken together, these factors can create a global governance system able toachieve the focus, coherence and coordination required to meet globalchallenges. The creation of a global governance system which reflects the neweconomic and demographic realities and responds effectively to new globalchallenges of the 21st century is urgently needed to help avoidcrises and create a better future.

 

Among the global changes, four are mostprominent:

First, a new balance of demographic andeconomic powers is emerging. By 2050, 3 billion more people will be added tothe world’s current population of 6 billion, most of them in the developingcountries. Moreover, if China and India continue their rapid economic growth ofrecent decades, as they seem poised to do, they will surpass most, if not all,of the current industrial countries in economic size. Global institutions needto reflect the changing demographic and economic balances in the way they aregoverned.

Second, global interdependencies haveexpanded dramatically with rapidly growing trade and capital flows, as well asin the energy markets, in health, migration and illicit drugs, and in theenvironmental and security arenas. Global cooperation is needed in all theseareas if major opportunities and risks are to be managed effectively.

Third, there are increasing links amongthese global issues. Stove-piped global institutions, operating onissue-specific mandates, will not be able to deal with theseinterrelationships. Institutions need to work effectively across sectoral andthematic lines.

 

Finally, new and growing global risks haveemerged that need urgent attention, including global financial imbalances,energy insecurity and global warming, and threats of global epidemics.

In the face of these changes, globalinstitutions are not working well individually and as a group. The UnitedNations and the UN Specialized Agencies, the International Monetary Fund, theWorld Bank and regional development banks, the World Trade Organization, theWorld Health Organization, and the G8 Summit—to mention only the most visibleamong the global institutions—are to varying degrees fragmented, unrepresentativeand ineffective, and generally suffer from an erosive decline in theirlegitimacy. They are increasingly fragile and unable to address the globalchallenges of the 21st century. Their legitimacy is further undermined by twofactors: First, inaction afflict many key global problems, including deadlockedtrade negotiations under the Doha Round, persistent global financialimbalances, global warming, and deadly conflicts. Second, there is a stalemateon reform in most global institutions, despite repeated initiatives torestructure them. As a result, what we have today is an international systemcomposed of an array of international institutions fulfilling discretemandates. What is needed is strategic guidance, vision, and leadership forinstitutional and summit reforms identified here, taken together, these factorscan create a global governance system able to achieve the focus, coherence andcoordination required to meet global challenges.

Looking ahead it will be essential thatreforms of the global institutions break this deadlock. This policy briefsummarizes the current prospects and priorities for reform in a number of keyglobal institutions. We focus on the IMF, the World Bank, the UN, and the G8Summit. Other important global institutional challenges could and should beaddressed. But these institutions are at the core of the international system.

The goals and prospects of globalgovernance reform

The creation of legitimate globalinstitutions involves multiple goals: First, the institutions must be representative,meaning they must give an adequate role to the major countries of the globe. Atthe same time, they should give small countries an effective voice, so as toprovide them with protection for their interests and to avoid driving them outof the global governance system and becoming “spoilers” or “rogue states.”Second, the institutions need to be effective, i.e., show results intheir mandated tasks, be responsive to changing global needs, and acttransparently and accountably. Third, collectively the internationalinstitutions need to serve as an effective global governance system,i.e., act cooperatively and consistently across institutional boundaries and inthe spirit of subsidiarity (assuming as global functions only those that reallydo need global action, i.e., cannot be handled nationally or regionally).Finally, these international institutions should offer opportunities fornational and international leaders to forge coalitions for action andreform, which requires the engagement of key players – especially heads ofstate – to work together to address the overarching global issues of the day.

Of course, meeting these objectives willnot be easy. So, it is no wonder that reform initiatives of internationalinstitutions have been difficult to put in place. Nonetheless, some recentmovement, albeit small and halting, gives some hope that more significantchanges might be possible. A key question now is whether the energy that seemsto have been injected recently into the global governance reform process willbe maintained and accelerated as a matter of gradual and deliberate progress,or whether it will fall prey to the forces of stalemate–a stalemate that couldperhaps be broken only by a major world crisis. It was, after all, the crisisof World War II—in part an outcome of the failure of global governancefollowing World War I—that led to the creation of the current structure, whichis now ossified after 60 years of existence. Gradual reform to address theurgent global challenges is much preferable to acting in response to crisis. Wetherefore summarize below what we see as an ambitious, yet realistic, agendafor reform in the IMF, World Bank, UN and G8.

IMF reform – uncertain progress

After the 1997/8 East Asia financial crisis,substantial progress was made in establishing sound macro financial policiesaround the globe (with the exception of the serious imbalance between the UScurrent account deficit and the surpluses of East Asia). As a result, the needfor IMF funding has dramatically shrunk for now. However, as the disturbancesin the global financial markets during the summer of 2007 have made clear, theneed for the IMF’s macro surveillance, financial sector advice, and stand-byfinancing capacity remains. Unfortunately, the IMF suffers from a legitimacydeficit because of an out-dated distribution of ownership shares andvotes—giving too little to the rapidly growing emerging economies, especiallyin Asia, a restrictive leadership selection process, and an unsustainable wayof financing its operations.

At the IMF/World Bank Annual Meetings inSingapore in September 2006 some initial progress was made in rebalancingshares and votes by giving small increases to China, Korea, Mexico, and Turkey.Now the challenge is to make sure the process continues with a seriousadditional rebalancing of shares and votes. This should include the restorationof so-called “basic votes” for small countries, to provide a protective minimumfloor under the shares and votes that each small country may hold.Strengthening the financial base and the surveillance functions for the IMF arealso under consideration. The IMF/World Bank Annual Meetings in October 2007will show whether process along these lines is likely.

In addition to these important and urgentsteps, others are needed for the IMF truly to reform itself. An unrestricted,merit-based selection of the Managing Director, a strengthened focus on itscore mandates, and a reduced number of directors’ seats on its executive boardare important ways to strengthen the effectiveness of the IMF and enhance itslegitimacy beyond the rebalancing of its shares and votes.

These reforms will mean that some IMFmember countries, especially the Europeans as a group, will see theirlong-standing and now outsized influence reduced. A key question is how to helpthese countries accept this reduction. One way would be to combine the reformwith a large increase in IMF quotas so that no country looses absolute numbersof shares. This is, in any case, justified in view of possible financing needs,should a new global financial crisis erupt. Beyond this, however, in view ofthe significant loss of European voice in the IMF, we have advocated a “grandbargain”. This would involve, first, the US giving up on its veto right at theIMF and the World Bank in exchange for the Europeans giving up shares, votes,and chairs. Second, the US would give up its prerogative to name the World Bankpresident, combined with the Europeans foregoing that right at the IMF. Parallelchanges could be made at the regional development banks (which would meanconcessions by other countries, including Japan). Finally, it would be helpfulto break the traditional parallelism in IMF and World Bank share allocations,since, as we argue below, there are good reasons to have the European donors(along with other large donor countries) retain a greater voice in the Bankthan in the IMF.

World Bank reform – a possible responseto a crisis of leadership and legitimacy

The long-standing debate about the role ofthe World Bank was revived in 2007 during the leadership crisis under itsformer president, Paul Wolfowitz. The World Bank’s traditional leadership rolein global development aid has been eroded for many reasons. As with the IMF,its legitimacy has been undermined by an outdated distribution of shares, votesand chairs, and by the US prerogative to name the Bank’s president. The Bank’srelevance has also been threatened by the decline in demand for its loans bymiddle-income developing countries, by increased competition from many new aidinstitutions for the poorer countries, and by the rise of competing sources ofdevelopment knowledge and advice. Furthermore, the Bank’s supposed lack offocus, depth, and proven development impact has been widely criticized.

Nonetheless, there are plenty of reasonswhy the World Bank should continue to function as a financier and adviser forglobal development. The first and most obvious reason is that the developmentproblems and the challenges of global economic, social, and environmentalissues are ever more pressing. Second, there is no other internationalinstitution which combines the distinct features of the World Bank that make itan instrument uniquely suited for the global challenges of today. Its universalmembership, its comprehensive and cross-sectoral focus, its experience with alarge array of financing instruments, and its high professional and technicalcapacities in the analytical and advisory arenas are unmatched by any otherinstitution on the globe.

Of course, the World Bank needs to usethese capacities effectively. This requires reform. First, the Bank needs anunrestricted, merit-based selection of its president. It also should givegreater voice and vote to recipient and new donor countries, while at the sametime maintaining a lead role for major donors. This could be achieved bybuilding on the fact that IBRD (the Bank’s commercial loan window formiddle-income countries) and IDA (its soft loan and grant window for poorcountries) already have legally separate shares, votes, and boards. For thefuture, IBRD should follow broadly the IMF reforms, while IDA should introducea double-majority voting system that gives the smaller and borrowing countriesa greater voice, while at the same time offering the donor countries(especially the generous European countries) a veto over how IDA resources areutilized.

Second, the relevance and effectiveness ofthe Bank could be improved in various ways. For middle-income countries itshould simplify its lending instruments, provide easier access to sub-nationalgovernment entities, and offer loans in local currency (to avoid undue currencyrisk for borrowers who cannot easily hedge such risks). The European InvestmentBank provides a suitable model for this approach. For the poor countries, theBank should urge donors to channel more of their aid resources through IDA. Forthe support of global public goods – a key role which the Bank needs tostrengthen – a new “Global Public Goods Fund” should be organized to provideincentive-based funding for global public goods around the world. The Bankcould also improve its policy advice by linking its research and analyticalwork more closely with its operational activities. Finally, it needs to improveits operational effectiveness by a focus on key lines of business; by a moresustained engagement for long-term and scaled-up interventions, rather thanshort-lived, one-time fixes; and by pursuing more aggressively partnershipswith other donors, including new official donors, such as China and India, andprivate donors from the foundations and NGO community.

UN Reform – fading hopes for a newbeginning

If reform of the international financialinstitutions is a difficult task, it pales in comparison with the up-hillbattles of UN reform. A major effort to reform the UN system was launched inpreparation for the UN “Millennium+5” Summit of 2005. It included initiativesto broaden the Security Council membership, turn the hitherto dormant Economicand Social Council (ECOSOC) into an effective global economic and social policycoordinating body and streamline the many fragmented UN agencies. Unfortunatelynone of these important goals were attained at the Summit. A more limitedagenda of reform of the development, humanitarian and environment activities ofthe UN was subsequently developed by a high-level panel which reported to theSecretary General in November 2006. The one recommendation which is currentlybeing implemented on a pilot basis is the panel’s “One UN” concept, which aimsto bring together the various UN agencies active in each country in order tobetter coordinate activities. The panel also recommended the establishment ofan ECOSOC leader’s forum, which might serve as a broader summit-level body thanthe G8 for consultations and agreements on global economic and social issues. However,there is for the moment little prospect that this or other far-reaching reformsat the UN, such as Security Council membership reform, ECOSOC reform, or arationalization of overlapping UN agency mandates can overcome the politicalgridlock which unfortunately impedes serious reform initiatives at theinternational body.

G8 Summit reform – the momentum isgrowing

Aside from reform of the internationalfinancial institutions and the UN system, there are many other importantinstitutions and areas for global governance reform, among them the WTO and theWHO, as well as the environmental and energy areas. But in our view no otherarea is as ripe for reform and as important as is that of the G8 Summit. Weargued in two earlier Brookings policy briefs (BPB #131, April 2004, and BPB#152, April 2006) that the G8 summit has outlived its usefulness as a globalconsultation forum and steering group, especially as the G8’s focus hasincreasingly turned from coordination issues among the group’s members toglobal economic and political issues.

With the changing balance of demographicand economic power in the world it is now painfully obvious that the G8 leavesout essential players who must be at the table if such issues as globalsecurity, financial imbalances, trade negotiations, global environment, globalpoverty, debt and aid, the Middle East, and Africa are to be discussed andagreements reached that can be implemented in a meaningful way. We also notethe growing urgency and interconnectedness of global challenges and thestalemate of reforms of the major individual international institutions.Therefore, the creation of an effective global apex forum is now crucial to thecreation of a global governance system which connects the internationalinstitutions to each other and ensures that they effectively address theinterconnected challenges they face. We therefore proposed that the membershipof the G8 be expanded, perhaps most readily by gathering the same group ofcountries that make up the G20 group of finance ministers.

Since we made these proposals starting in2004, the need for an expanded summit forum has not only become more obvious;there is now a momentum for change. In 2007, under the German Presidency, theso-called “Outreach Process,” under which selected heads of state of non-G8countries were invited to parts of the G8 summits–was converted into the moreformal “Heiligendamm Process,” under which five non-member countries (Brazil,China, India, Mexico and South Africa) will be permanently associated with theG8. Also of note is that the Presidents of France and Russia separately havesince called for a broadening of the membership of the G8 (following earliersuch calls by the now departed Canadian and UK Prime Ministers). It also hasbecome clear that broader leadership forums can effectively push forinstitutional change in individual international organizations, as has been thecase with the G20 of finance ministers pushing for IMF reform.

We therefore now see a much greatermomentum for broadening the G8 membership. It willrequire leadership from key G8 members, especially from the US. Unfortunately,there is little hope that the current US Administration will take up this matter.However, assuming a new U.S. president takes a hard look at the globalrealities in 2009, it will be clear that G8 reform is in the interest of the USas it seeks to address global challenges through broader global partnerships.

Does it matter whether the G8 becomes a G13(with Brazil, China, India, Mexico and South Africa), or whether it is expandedto a G20 (with Argentina, Australia, Indonesia, Korea, Saudi Arabia and Turkeyalso added) or, as some have argued, whether it is replaced by a “variable geometry”of summits. Variable geometry means including different additional countriesover and above a smaller core group, with the additional members depending onthe subject matter under consideration. For us, this is an interesting, butlargely academic question. The main issue is that the G8 needs to be broadened,and any significant expansion (such as the G13) would be a major improvementover the current situation. Whether another option – G20 or variable geometry –would be ideally preferable, is not really relevant, if the G13 option is theonly one that can actually be implemented in the near term.

Conclusion

We see renewed energy in the debates andeven some progress on global governance reform. Whether this pace of change issufficient, or whether it will take a major crisis to bring about fundamentalchanges in the global order and in global governance remains to be seen. Wehope the specific ideas which we presented above can help speed up the gradualprocess. We know from history and bitter experience that global crises causedevastation and suffering. The creation of a global governance system whichreflects the new economic and demographic realities and responds effectively tonew global challenges of the 21st century is urgently needed to helpavoid crises and create a better future.

 



上一条:The State of Global Governance: An Audit
下一条:Global economic governance and economic policy