In search of clarity

Dr Ngaire Woods (picture University of Oxford)

Two interesting papers have been published by the left of centre think-tank Policy Network as part of its Progressive Governance conference, currently underway in London. The two papers – “Global challenges: accountability and effectiveness” by David Held and “From intervention to cooperation: reforming the IMF and World Bank” by Ngaire Woods – look at different aspects of global governance but do so in a rather roundabout way. They could be more concise and clear, if I am allowed to suggest such a thing, if they took more of an interest in federalism.

David Held, who is co-director of the Centre for the Study of Global Governance at the LSE, looks in his paper at the current state of global governance and highlights a series of problems with it, including the difficulty of defining which issues are domestic and which international, the inertia of the system of international agencies, the absence of a clear division of labour between those agencies, and the lack of accountability of the system as a whole.

Now, any reader of this blog is likely to agree with that analysis. The problem is the definition of the solution.

David Held writes that:

“The story of our increasingly global order is not a singular one. Globalisation is not, and has never been, a one-dimensional phenomenon. While there has been a massive expansion of global markets which has altered the political terrain, the story of globalisation is far from simply economic. Since 1945 there has been a significant entrenchment of universal values concerning the equal dignity and worth of all human beings in international rules and regulations; the reconnection of international law and morality, as sovereignty is no longer merely cast as effective power but increasingly as legitimate authority, defined in terms of the maintenance of human rights and democratic values; the establishment of new forms of governance systems, regional and global (however weak and incomplete); and the growing recognition that the public good—whether conceived as financial stability, environmental protection, or global egalitarianism—requires coordinated multilateral action if it is to be achieved in the long term (Held 2004). These developments need to be, and can be, built upon.”

Now, I think that is a rather long way round to the subject to federalism. Contained within his paragraph are the need to rethink the meaning of sovereignty – to make it an expression of democracy rather than achievement – and to look at how collective action can be taken more effectively. If he were to use the terms and the concepts of federalism, I think he would get to the solution more quickly and more clearly.

Ngaire Woods, professor of international political economy at Oxford University, essentially falls into the same trap. In her paper, she analyses the institutional structures of the IMF and the World Bank to ask why they are not more credible (and thus effective) and what kind of institutional changes would boost their credibility. The argument that they were designed the way they are in order to win the confidence of the Americans at the end of the second world war is a good one, and she seeks to use the same tool – confidence – to engage the wider world in the IMF’s decision-making in the future.

In doing so, though, she persists in the error that was imbedded in the Bretton Woods system at the outset. At the time, in 1944, they thought that, in the IMF, they were building a bank, and so structured it like a bank. Countries paid in funds as though they were shareholders, and acquired votes according to their share capital. Other countries paid in funds because they were paying interest on loans received and therefore did not receive share capital. But the IMF is not a bank, it is an instrument of government. The voting arrangements were rigged at the outset and remain rigged to this day. Yes, that rigging was needed in order to win the confidence of the American government, but it does not make sense to rig the voting system differently now in order to win the confidence of other governments, as long as the voting system basically remains rigged.

To interpret both the institutional needs of globalisation in general, and of the IMF and World Bank in particular, it is necessary to think beyond a world of states into a world of multi-level governance. David Held, to his credit, is doing this, but is making rather harder work of it than he needs to if he neglects the insights and understandings that federalism brings.

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