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Sunday, December 5, 2010

INTERNATIONAL (GLOBAL) GOVERNANCE

INTERNATIONAL (GLOBAL) GOVERNANCE

1.Introduction

The international or global system of transnational actors where we all belong has not been a mere system of interaction where each act in accordance with its own choices and preferences per se.Infact it has been deliberate product of our wisdom rather than a steady process of evolution into maturity.Much spark and dubious debate has been spent behind it.Much blood has been poured on it.Yet it seems unfulfilled and incomplete.There are ups and downs in the existing international institutions which dictate world economic governance.
Global governance or international governance is the political interaction of transnational actors aimed at solving problems that affect more than one state or region when there is no power of enforcing compliance. The modern question of world governance exists in the context of globalization. In response to the acceleration of interdependences on a worldwide scale, both between human societies and between humankind and the biosphere, world governance designates regulations intended for the global scale.
Economic governance constitute very important element of the global governance.There have been dramatic changes in the balance of economic power in world politics for the last few decades.When that economic power lay mainly in North America and Europe,and the rest live in abject economic powerlessness,the simple concept of economic governace acquires wider significance.
Global economic governance is the set of norms and institutions along which rules are generated to manage the global economy. It involves four categories of actors: intergovernmental organizations (IGOs), states, non-governmental organizations (NGOs) and businesses. Northern states collectively have the capacity to veto all decisions of all IGOs.Given that the global status quo is broadly in the interest of the North in a short to medium-term perspective; this veto capacity is a major stumbling block to cope with the global scourges of poverty and environmental degradation.
The North’s veto capacity at the decision stage reverberates throughout the policy process. Upstream, it curtails the agenda and especially the policy options, since it is not worth spending time debating reforms that will eventually be vetoed anyway. In some IGOs, particularly those dealing with finance, this fact of life have generated a culture where it is not appropriate to raise policy options that are not “politically feasible”. Downstream, the North’s veto capacity at the decision stage sometimes jeopardizes the implementation of policies that have been adopted. In some IGOs, particularly the UN, the agenda is much more opened and the North is often unwilling to completely veto action on issues for which public opinion strongly supports the notion that “something ought to be done”. Hence decisions are taken with high objectives but few resources, such that their implementation is bound to fail. The way Northern states control decisions, and hence the whole policy process, varies across IGOs.
Institutions are sets of rules that govern human interaction. The main purpose of many institutions is to facilitate production and exchange. Examples of institutions that affect human prosperity by enabling production and exchange include laws, business organizations and political government. Economic governance research seeks to understand the nature of such institutions in light of the underlying economic problems they handle. One important class of institutions is the legal rules and enforcement mechanisms that protect property rights and enable the trade of property, that is, the rules of the market. Another class of institutions supports production and exchange outside markets. For example, many transactions take place inside business firms. Likewise, governments frequently play a major role in funding pure public goods, such as national defense and maintenance of public spaces. Key questions are therefore: which mode of governance is best suited for what type of transaction, and to what extent can the modes of governance that we observe be explained by their relative efficiency?
As a process, governance may operate in an organization of any size: from a single human being to all of humanity; and it may function for any purpose, good or evil, for profit or not. A reasonable or rational purpose of governance might aim to assure, (sometimes on behalf of others) that an organization produces a worthwhile pattern of good results while avoiding an undesirable pattern of bad circumstances. Perhaps the moral and natural purpose of governance consists of assuring, on behalf of those governed, a worthy pattern of good while avoiding an undesirable pattern of bad. The ideal purpose, obviously, would assure a perfect pattern of good with no bad.
Politics provides a means by which the governance process operates. For example, people may choose expectations by way of political activity; they may grant power through political action, and they may judge performance through political behavior. Conceiving of governance in this way, one can apply the concept to states, to corporations, to non-profits, to NGOs, to partnerships and other associations, to project-teams, and to any number of humans engaged in some purposeful activity.

Governance: some terms and principles

Good governance encompasses many elements and processes. It involves setting good policies, programs and regulations, which then have to be translated into legislation, implemented and enforced. Rules and regulations have to be predictable. They must be clear, known in advance and uniformly and effectively enforced. The capacity of organizations to implement and enforce policies and programs is an issue in itself. The government introducing the policies needs to be accountable to the people through a transparent and participatory process so that refinements to policies and programs can evolve and lead to progress and development overtime. The important elements and processes of governance follow.
Policies -The objectives or desires set by government.
Legislation -The rules or laws that give effect to the policies.
Institutions- The formal rules (legal) and informal rules (culture, codes of conduct,etc) that determine the incentive structures in society that shape the behaviour of individuals and hence determine outcomes.
Organisations- The groups – either government or non-government – that implementand enforce the policies and rules.
Capacity building -Enhancing the capacity of organisations to discharge theirresponsibilities in an efficient and effective way.
Predictability -Results primarily from laws and regulations that are clear, known in advance, and uniformly and effectively enforced.
Accountability -The obligation to give answers and explanations covering one’s actionsand performances to those with a right to require such answers and explanations.
Transparency -The free flow of low-cost information that is understandable, reliable and timely.
Participation- Every citizen having a voice in the decision-making process, including the poor and the vulnerable.
Four of these – transparency, accountability, predictability and participation – are what the World Bank and the ADB describe as the four pillars of good governance. They argue that good governance involves three sectors – the state, the private sector and civil society – whoseinteraction is critical for achieving balanced socioeconomic development and for nation building.
Governance can also be considered in terms of economic, legal and civil elements. Sometimes different elements of governance are featured in an aid program, yet there is an enormous amount of overlap, which makes it difficult to give priority to one over another. For example, bankruptcy laws are clearly part of legal governance. But various credit markets and the economy cannot function well without sound bankruptcy laws, making them essential to economic governance. Another example would be social safety nets, which are part of civil governance. They have a large impact on incentives and hence economic performance. The overlap and interaction of elements of governance mean that the real impediments to development can have deep roots.
The concept of governance has been adopted by not only the World Bank, but also to a somewhat lesser extent, by the IMF, the WTO, and various UN initiatives. Governance however, can be conceptualised in four different ways, of which the Post Washington Consensus (as conceived by international organisations) is the most sanitised version. Global governance as the enhancement of effectiveness and efficiency in the delivery of public goods – The Post Washington Consensus is based on such a conceptualisation. This view ignores the fact that states are not only problem solvers but also strategic actors concerned with power, politics and norms of justice and legitimacy.
What is meant by economic governance?
At first is what might be termed the policy paradigm, which can be explained as the theoretical or conceptual basis - or model - for the conduct of policy. Its focus is on identifying and correcting microeconomic market failures and government failures (especially time inconsistency), dealing with them in a quite interventionist/activist manner, with the underlying ambition to strengthen market forces. Key characteristics include a belief in the neutrality of monetary policy and relatively restrictive fiscal policy.
The second dimension of economic governance can, loosely, be labelled as approach to policy making, comprising the nature of policy processes (such as the formulation of rules or restrictions on discretion), the degree of legal codification of the policy machinery, whether targets or benchmarks are employed and the character of decision-making.
Third is the institutional mix which concerns the division among the different tiers of government and the split between governmental and other forms of governance, including agencies or forms of self-regulation by private actors.
A fourth dimension is more political in character, is accountability and legitimacy, embracing not just the mechanisms through which institutions of governance are held to account, but also the different facets of legitimacy. At issue here is not only whether mechanisms exist, but whether they function effectively in ensuring that economic governance is consistent with political preferences.
Fifth, and related to the fourth category, is the issue of transparency and communication which bears on governance from two quite distinct perspectives. The first is provision of information that allows the agency of governance to be held to account and can thus be interpreted politically. The second is communication strategies that inform economic agents subject to the policy area about the stance of policy in a way that is conducive to optimal behaviour. For example, central bank transparency has come to play a pivotal role in the conduct of monetary policy. Communication also encompasses the transmission of information from the governed to the governing agency, including how receptive the latter is prepared to be in responding to emerging signals.
A sixth component of the economic governance framework is the range and scope of participation by different actors in policy-making. Among the key aspects of this are where effective ‘ownership’ of the policy area resides, how different constituencies are heard (for example, formal consultation or informal lobbying), whether there are either effective vetoes or provisions for constraining the autonomy of the decision-making body, and the means by which competing positions are reconciled.
The term “economic governance” is of more recent vintage, and it remains a concept in search of a clear and widely accepted definition. A quick look at a number of papers on this topic available on the Internet (not including the many dealing with international economic governance) reveals that authors are reluctant to define the concept and tend to concentrate on narrow aspects of economic governance (e.g. property rights, contracts, regulatory functions, corruption, fiscal management, or overall macroeconomic policy). Much of the economics literature is highly theoretical and mathematical, as exemplified by a recent paper by Dixit (2001), who, helpfully or not, tells us that “almost all economic transactions need governance”
USAID/LAC’s recent paper on “Rethinking the Rural Economy in LAC” (USAID 2001:5, footnote 1) defines economic governance as: the enabling environment within which the economy functions [; it] implies the need to ensure stable, transparent and predictable rules and regulations that encourage competition and equitable access to public services. Economic governance is achieved through a country’s public and private sector institutions that exert a determining or guiding influence in or over how individuals, enterprises, and/or countries carry out economic transactions.
Another definition of economic governance, presented by an advisor to USAID/LAC, considers it as a “concept . . . [that] refers to those parts of a country’s public sector and private sector institutional infrastructure that exert a determining or guiding influence in or over how individuals, enterprises (businesses), and/or countries carry out economic (broadly) and commercial (narrowly) transactions” (Byrnes 2001:38). For the public sector, the “institutional infrastructure” is said to comprise (1) policies (including laws and regulations) that influence economic, financial, and commercial transactions; (2) the organizations through which policies are implemented; and (3) the tools (procedures, practices, and technologies) used to formulate, implement, and evaluate policies. Again the focus is primarily on microeconomic policies, with macroeconomic policies included as well by implication.
In addition, the concept of economic governance should give more emphasis to the regulatory functions of government, particularly in the financial sector and in situations of market failure (e.g. those that result in environmental damage) and of market-size limitations that preclude the establishment of a sufficient number of firms to ensure competitive behavior.

Another important area of economic governance comprises public- and private-sector actions to reduce corrupt practices and other types of criminal activity against persons or property, all of which add to business costs--thus reducing competitiveness--and deter new investment.
Yet another area of economic governance consists of policies that determine the allocation of expenditures on physical infrastructure (especially roads, electric power, and irrigation) and services such as agricultural research and extension. Decisions in these areas have important effects of how broad-based the process of rural development will be.
Finally,the concept of economic governance should also encompass public-sector social policy, as well as private-sector actions to promote social development. Particularly relevant are activities that have a direct bearing on the formation of human capital--a key asset needed by the rural poor to escape from poverty. Public and private programs in education, workforce training, health, and nutrition are especially important in this respect.

2. Objectives

In this unit we will explore the relationship between governments, governance, and the global economy. We will consider how states are impacted by global markets, and the role international financial institutions play both in regulating global market and prompting economic integration. Advances in telecommunications technology and transportation infrastructure in the last century have facilitated unprecedented cross border flows of goods, services, capital, and ideas. Barriers to trade and investment have come down, production and capital have become more mobile, and the current global economic crisis reminds us of just how interdependent the world’s financial markets are. At the end of the course you should 1) have a solid understanding of key theories of international political economy and the relevant structures of global economic governance 2) be in a position to apply this knowledge to current events in order to construct analytical arguments about the pros and cons of globalization and the effectiveness and legitimacy of the mechanisms used by states and intergovernmental organizations to manage trade, financial markets and economic development

The course is based on the preliminary idea that the present global economic governance has been a compendium of factors comprised of various state actors as well as non-state actors.The interaction among all these actors constitutes somewhat a complex process.There are many upward and downward tendencies in the interaction process.A thourough understanding requires what constitute the present global economic governance.It is not very easy for common man to understand what does it actually mean.

It requires specialized knowledge. Students will leave the course understanding how the global economic system is managed, how the current form of this management has evolved, and the major theories that explain this evolution. Students will know how the central global economic institutions operate, and the controversies that surround their actions.
The course will discuss the understanding how the global economic system is managed, how the current form of the management of global economic governance has evolved, and the major theories that explain this evolution. Students will know how the central global economic institutions operate, and the controversies that surround their actions. It makes attempt to acquaint with different issues around which international economic relations revolve and provide with a better understanding of a range of topics that shape and affect the international economic governance.
This unit has well elaborate syllabus content which specifically specifies the nature of present global economic institutions,the nature of exchange between global south and global north etc.,The students were advised to study various international institutions dealing with monetary policies,decision making powers,etc.,

The global economic governance has been an outcome of man’s wisdom and heritage. The erosion of the United Nations system has become a familiar theme in recent years. But who could have anticipated that at the end of the century, the Bretton Woods system of multilateral agencies would also be mired in a very serious crisis.

The Bretton Woods institutions, founded in 1944, began with missions quite distinct from their latter-day involvement with North-South relations. The IMF was conceived by John Maynard Keynes and Harry Dexter White, the two pillars of the Bretton Woods meeting, as the guardian of global liquidity, a function that it was supposed to fulfil by monitoring member countries’ maintenance of stable exchange rates and providing facilities on which they could periodically draw to overcome cyclical balance of paymentsdifficulties.
The rise of OPEC, however, made World Bank aid and foreign aid less critical to many of the leading countries in UNCTAD and the Group of 77 (G77), since they could gain access to massive quantities of loans that the commercial banks were only too happy to make available in their effort to turn a profit on the billions of dollars of deposits made to them by the OPEC countries.
The legitimacy of the International Monetary Fund (IMF) is today at an all time low, with many influential voices even in the North calling for its abolition.
Moreover, after the collapse of the third ministerial in Seattle, the future of the World Trade Organization (WTO) is uncertain. Reform of both institutions is now the demand in all quarters, drowning the formerly loud calls for UN reform. However, before addressing the question of reform or transformation of these very influential institutions, it might be useful to analyze the evolution of their relations with the Southern project of development as well as their relations with the United Nations development system.
UNCTAD has been rendered impotent by the WTO, which came into being following the signing of the Marrakesh Accord in April 1994 and which put in force the agreements concluded during the eight-year Uruguay Round of the General Agreement on Tariffs and Trade (GATT). Indeed, the WTO, with its enshrinement of the principle of free trade as the organizing principle of the global trading system, represents the defeat of everything that the South fought for in UNCTAD (e.g., getting fair prices via commodity price agreements and the institutionalization of trade preferences for Southern goods owing to their underdeveloped status, etc.).
Moreover, in the late seventies and early eighties, in the view of right-wing circles, the UN had become the main vehicle for the South's strategy to bring about the New International Economic Order. According to one right-wing think tank, the governments of the South devoted "enormous time and resources to spreading the NIEO ideology throughout the UN system and beyond. Virtually no UN agencies and bureaus have been spared."13 Especially threatening was the effort by the Third World to "redistribute natural resources" by bringing the seabed, space, and Antarctica under their control through Law of the Sea Treaty, the Agreement Governing Activities of States on the Moon and Other Celestial Bodies (called the "Moon Treaty"), and an ongoing UN study and debate over Antarctica.

Global economic and financial institutions, both formal and informal, are likely to become the focus of intense political dynamics. Developed countries trying to get major developing countries to agree to arrangements that may effectively preserve developed country dominance; developing countries maneuvering for stronger influence and role in existing institutions while at same time trying to carve greater space for themselves.
Calls from developing countries for reforms of global financial and economic institutions (World Bank, IMF, WTO) by increasing developing country voice and participation have been long-standing The financial crisis provided additional stimulus from the South for reforms in the IMF and the World Bank (but at the same time, gave renewed sense of mission and new lease on life to these institutions as the North sought to revive these institutions)

7. Glossary / Keywords.

Bretton Woods Systems-the Bretton Woods system of monetary management established the rules for commercial and financial relations among the world's major industrial states in the mid 20th century. The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.

Governance-Governance is the activity of governing. It relates to decisions that define expectations, grant power, or verify performance. It consists either of a separate process or of a specific part of management or leadership processes. Sometimes people set up a government to administer these processes and systems.

Economic Governance-the concept of economic governance should give more emphasis to the regulatory functions of government, particularly in the financial sector and in situations of market failure (e.g. those that result in environmental damage) and of market-size limitations that preclude the establishment of a sufficient number of firms to ensure competitive behavior
Global North- the North is home to four out of five permanent members of the United Nations Security Council and all members of the G8. "the North" mostly covers the West and the First World, with much of the Second World. The expression "North-South divide" is still in common use, but the terms "North" and "South" are already somewhat outdated. As nations become economically developed, they may become part of the "North", regardless of geographical location,

Global South-is a socio-economic and political division that exists between the wealthy developed countries, known collectively as "global North", and the poorer developing countries (least developed countries), or "global South." Although most nations comprising the "North" are in fact located in the Northern Hemisphere (with the notable exceptions of Australia and New Zealand), the divide is not wholly defined by geography while any other nations which do not qualify for "developed" status are in effect deemed to be part of the "South."
Good Governance-Good governance is an indeterminate term used in development literature to describe how public institutions conduct public affairs and manage public resources in order to guarantee the realization of human rights. Governance describes "the process of decision-making and the process by which decisions are implemented (or not implemented)". The term governance can apply to corporate, international, national, local governance or to the interactions between other sectors of society.
Non-State actors-are actors on the international level which are not states. The admission of non-state actors into international relations theory is inherently a rebuke to the assumptions of realism and other "black box" theories of international relations, which argue that interactions between states are the main relationships of interest in studying international events.

Inter-governmental organizations-is an organization comprised primarily of sovereign states (referred to as member states), or of other intergovernmental organizations. Intergovernmental organizations are often called international organizations, although that term may also include international nongovernmental organization such as international non-profit organizations (NGOs) or multinational corporations.

United Nations- United Nations (UN) is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and the achieving of world peace. The UN was founded in 1945 after World War II to replace the League of Nations, to stop wars between countries, and to provide a platform for dialogue. It contains multiple subsidiary organizations to carry out its missions.
Human Rights- are the "basic rights and freedoms to which all humans are entitled." The doctrine of human rights aims to identify the necessary positive and negative prerequisites for a "universal" minimal standard of justice, tolerance and human dignity that can be considered the public moral norms owed by and to individuals by the mere virtue of their humanity
Peace Keeping-is defined as "a unique and dynamic instrument developed as a way to help countries torn by conflict create the conditions for lasting peace.
Security-is the degree of protection against danger, loss, and criminals. A form of protection where a separation is created between the asset and the threat. This includes but is not limited to the elimination of either the asset or the threat. In order to be secure, either the asset is physically removed from the threat or the threat is physically removed from the asset.
Millennium Development Goals- The Millennium Development Goals (MDGs) are eight international development goals that 192 United Nations member states and at least 23 international organizations have agreed to achieve by the year 2015. They include reducing extreme poverty, reducing child mortality rates, fighting disease epidemics such as AIDS, and developing a global partnership for development.

M F N- most favoured nation (MFN) is a status or level treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must, nominally, receive equal trade advantages as the "most favored nation" by the country granting such treatment. (Trade advantages include low tariffs or high import quotas.) In effect, a country that has been accorded MFN status may not be treated less advantageously than any other country with MFN status by the promising country.

Prepared by Biju P R,Assitant Professor in Political Science,Govt Brennen College,Thalassery.

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