Adonis Diaries

Posts Tagged ‘mode of governance

How Globalization can function adequately for the poorer countries? (Mar. 24, 2010)

            Joseph Stieglitz, Nobel Prize for economics, had written a book in 2002 “The great disillusion” where he critiques the function and ideological unilateral rules of the games of the international institutions such as the World Bank, the International Monetary Fund, and the World Trade Organization.  I already published reviews in two parts of the book; this post focuses on Stiglitz’s recommendations for the international institutions (supposed to be public institutions) to reform in order to give a chance for Globalization to coming effectively to the rescue of the developing States. Thus, in order for world economy and financial stability be the norm then three urgent reforms are needed.

            First, the international institutions such as the World Bank, the International Monetary Fund, and the World Trade Organization have to focus on collective global problems that require collective participation.  For example, when global market economy is not running satisfactorily; when one State harms others and gets away with it (no indemnisation procedures) then there are over production of certain commodities and under production of others. We have to tackle defense spending that does not generate any public benefits.  For example, public education sectors must be financed by international institutions since private sectors have failed to consider that urgent facet in states’ economy.  For example, we have the environment, oceans, atmosphere, CO2 emissions and the other harmful gases, sanitary challenges and discharges, clean water sources, diffusion of contagious diseases, famine, and natural calamities are becoming global problems that require global resolutions and cooperation.  All the global problems are interrelated: poverty leads to degraded environment and deforestation which in return increases poverty.  There are financial interventions that are beneficial locally in reducing local pollution.

            Second, the mode of governance such as control, management, decision making and administration of international institutions has to be drastically reformed.  The economic and financial interests of developed States have established unilateral set of rules and regulations on how to be applied globally without any serious input from the concerned parties in the developing countries. Developing States were targeted for hegemony behaviors. For example, in the IMF administration it is the finance ministers of the developed States and their central banks governors who are presiding as decision makers. In the World Trade Organization it is the ministers of commerce in the developed countries that run the show: they have particular perspective in matters of global trade.  Who has the right of vote in these international institutions? The poor States and the workers have no representatives in these institutions to offer pertinent alternative feedback as to their difficult situations. The voting rules and representation around the table of decision makers have to be reformed drastically.  The fact is that the IMF is rich because it is the developing countries that are reimbursing their debts at high interest rates.

            At least, reforms in the structures of official direction in the IMF and WB can help in the short term. For example, African delegates should be allowed to participate and be listened to even if they still cannot vote. Participation in meetings can aid the developing State representatives gather pertinent information and intelligence on world problems may partially fill the gap in intelligence dissemination. The IMF and WB should invest in developing “think tanks” institutions in the developing countries in order for their representative to be at par with ongoing discussions.

            Third, transparency within the international institutions administrations have to be made public since they are public. Public pressures should be directed toward greater transparency in management and decision processes; on time data should be available for the concerned parties and not only for the multinationals and the developed State governments. There is urgent need to open the working environment to independent and free press and researchers of developing countries.  Transparency is best catalyst to encouraging democratic tendencies in developing States and fair availability of information in a timely fashion.

            Thus, favoritism in behavior and focus on the interests of the richer States must be examined and expressed by the public before conditions escalate to global problems. As deliberations in international institutions become accessed directly to larger audiences, instead of being held in closed chambers, then the environmental challenges and the interests of the poorer sections in world societies will be heard and discussed openly. The current decision processes are not critiqued and analyzed by the public on a timely manner: it is generally too late to critique wrong decisions before they are applied.  Public access to timely information and intelligence would pressure the IMF and WB to reconsider their debatable economic assumptions and ideology; so far, what is decided is restricted on “what is good to the financial institutions”.  Mass protests in World Forums were mainly targeting the secrecy and opacity of the decision processes. So far, the disseminated information by the current structures of the international institutions is viewed with great suspicion by the poor States; so far, reforms were lukewarm and basically the kind of talked intent for reforms but not effective in practice.

Part Two: “The Great Disillusion”; (Mar. 24, 2010)

Joseph Stieglitz, Nobel Prize for economics, stated in his book “The Great Disillusion, 2002”:

“Today, Globalization is not working; not for the poor of the world and developing States; not for the environment; and not for world economic stability.”

Although it is no longer feasible to abandon globalization, its management must be reformed according to greater consensus on the rules of the game that needs to be revisited for it to work.

Globalization has functioned relatively well in the Far East of Asia by promoting trades and technological exchange and transfer.

It also brought great successes in health progress and in galvanizing civil societies toward dynamic social justice and greater transparencies in policies and administration.

So far, the real culprits for the failure of globalization were the international institutions such as the World Bank (WB), the International Monetary Fund (IMF), and the World Commerce Organization (WCO).  Why?

These institutions fixed the rules of the game unilaterally to the profit of the developed States and specifically the USA: the US imposed options for recovery to other developing States that it had rejected for its own economic development.

Although these international institutions are public institutions they in fact are not accountable but to the Central Banks Chiefs and the corresponding ministers of the leading economic and financial States.

Thus, the international institutions that were meant to rescue faltering developing countries functioned mostly according to the interest of the industrial and developed nations.

There is great need for serious reforms to the financial structure and management practices.  Debates are demanded to be more open in World Forums.

Until now, it appears that the international institutions are not serious in engaging any reforms: they simply changed their discourse to mentioning “poverty” more often.

Financial interests dominated the ideology of the IMF as economic interests dominated the World Commerce Organization. The same as the IMF feels not concerned with the poor (its focuses is on banks crisis), and the WCO is ready to sacrifice everything to trade facilities for the rich nations. For example, environment and fishing industries that kill many varieties of fishes such as turtles and small fishes are considered as collateral damages.

The greatest challenge is in the mind of the institution structures because they simply reflect the state of mind of those they are responsible to. Their theses do not enjoy any consensus.

For example, the governor of a central bank starts his day by worrying of inflation statistics and not on its effects on the poor.  The minister of trade and commerce worries on export numbers and care less of pollution indexes.

There is a need for a functional economic global system vision such as it was extended by Adam Smith and Karl Marx.

Many States have better standard of living per capita than the USA and they still have much lower inequalities and far better health care systems.

It is how State governments intervene in the market that makes the difference in matter of health, unemployment, adequate retirees’ compensations, and social justice for all.

The performing States ensure high quality education, convenient infrastructures, independent efficient legal systems and regulations, technological development and innovations.

It is important that economic structure differ among States: some States have strong syndicates and others have high levels of debts among enterprises. Thus, alternative resolutions for financial and economic aid should be tailored made to economic structures in order not to penalize the entire society and the poorer of the poor.

The next post will provide details on reforms for collective global participation in the international institutions, the mode of governance of these institutions, and further transparency in their management and decision processes.




January 2021

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