Global Governance: updated December 2017
International Cooperation on Trial
The horrors of the Second World War provoked unprecedented determination to establish a global framework of international cooperation. Under the auspices of the United Nations (UN), new international institutions were established to govern cross-border issues, initially focusing on peace and human rights, before targeting stability of the global financial system and the expansion of world trade.
The governance of these international bodies reflected an uneasy compromise between principled democracy and desire of the victors of the conflict to call the shots. Whilst the UN General Assembly and its specialist agencies offered equal voting rights to every country, the all-important UN Security Council retained powers of veto for US, UK, France, Russia and China. Governance of key financial institutions such as the World Bank and IMF was weighted in favour of the richer countries which underwrote the investments.
Inevitable dissent over this profile of global governance coalesced into two broad factions. Richer countries, obsessed with optimising economic growth, rail at the power of the majority to prioritise the needs of low income economies and reducing global poverty. Principles such as the transfer of financial and technology resources from richer to poorer countries come under constant attack by the former.
The US has been the most strident critical voice, refusing to participate in the UN Convention on Biological Diversity and, more recently under President Trump, giving notice of withdrawal from the landmark Paris Agreement on climate change.
The very different perspective of the world’s poorest countries observes that their right to development has been impeded by undemocratic global governance. They argue that the international rules for conduct of a globalised economy have been created by the dominant participants, inevitably offering few favours to those yet to gain a foothold. Regulations for international trade, investment, tax and intellectual property rights are the principal examples of economic injustice, too often blind to national development goals and individual human rights.
For example, whilst economic and digital integration powered by private capital has advanced at lightning speed, political globalisation moves at snail’s pace. In more than twenty years since the fall of the Berlin Wall, governance structures of the World Bank, IMF and the World Trade Organization (WTO) have remained largely unchanged.
Control of policy and senior appointments is dominated by the richer countries; governance continues to be driven by economic power rather than democratic principles. The UN Conference on Trade and Development (UNCTAD), established in 1964 to strengthen the voice of developing countries in international trade negotiations, has been deprived of resources necessary to sustain its role.
Poorer countries therefore argue that strong nation states remain more powerful than global institutions established for the common good. They point out that 69 of the world’s top 100 economic entities are corporations, answerable to no electorate. Horizons of accountability have become incompatible with the global consequences of actions. International finance in particular has moulded an earthly paradise from the stardust of globalisation; too big to fail, too complex to regulate, and too mind-blowingly lucrative to care.
The fitness of these international institutions to manage the forces of globalisation is therefore no longer taken for granted. Belated recognition of current global governance shortcomings emerged in the Sustainable Development Goals, approved by world leaders in 2015. Target 10.6 calls for “enhanced representation and voice for developing countries in decision-making in global international economic and financial institutions.”
Sustainable development has until recently resembled an El Dorado of modern times, a vaguely charted dream of everlasting prosperity, towards which its adherents travel hopefully. A more robust blueprint may finally have come to fruition, with the endorsement of a specific range of Sustainable Development Goals by the UN General Assembly in September 2015.
What is Sustainable Development?
The concept of sustainable development emerged from anxieties that accompanied the triumphant rise in living standards enjoyed in developed countries during the second half of the 20th century.
Encapsulated in the Club of Rome’s 1972 publication, The Limits to Growth, this unease sprang from two painful realities. It had become clear that the life-sustaining role of the biosphere was at risk from open-ended consumption of natural resources. And yet the urgent cause of sustainability could not be isolated from the desperate need of poorer countries for economic growth, on a significant scale.
The interconnection of these two issues was thoroughly examined in the 1987 landmark report, Our Common Future, produced by the World Commission on Environment and Development. The Commission’s Chair, Gro Harlem Brundtland, wrote in the foreword: “the ‘environment’ is where we all live; and ‘development’ is what we all do in attempting to improve our lot within that abode. The two are inseparable.”
In championing a new global mission of “sustainable development,” the report grasped the nettle of a definition:
Sustainable development is development that meets the needs of the present, without compromising the ability of future generations to meet their own needs
Political action followed at the UN Conference on Environment and Development in Rio de Janeiro in 1992. Popularly known as the “Earth Summit”, the Conference approved Agenda 21, an action programme for sustainable development in the 21st century.
World leaders also approved the Rio Declaration, a set of principles to guide future multilateral environmental agreements. These include the “polluter pays” principle, the precautionary principle, the right to development, and the principle of common but differentiated responsibilities between rich and poor countries.
In an outpouring of global commitment, inconceivable in contemporary insular politics, the 1992 Earth Summit additionally put signatures to far-reaching Conventions on climate change, biodiversity and desertification. This was a fleeting moment of faith in multilateralism, of belief that nations could unite under the banner of sustainable development to create a better world.
From MDGs to SDGs
The Sustainable Development Goals (SDGs) evolved as the centrepiece of the 2030 Agenda for Sustainable Development adopted by the UN General Assembly in September 2015. The SDGs merged the ambition of the 2012 “Rio+20” conference on sustainable development with the need for a successor to the Millennium Development Goals. The MDGs had been the UN’s flagship programme for reducing global poverty up to 2015.
The detailed content of the SDGs observes the strategic framework created by a UN High Level Panel comprising the heads of government of Liberia, Indonesia and UK. The Panel decreed that “after 2015 we should move from reducing to ending extreme poverty, in all its forms……and we have to integrate the social, economic and environmental dimensions of sustainability.”
These aims represented important advances over the MDGs which sought only to halve global poverty and which were weak on environmental issues. Goals that envisage the elimination of social injustice are significant in that they embrace the human rights principle of universality. They will also be extremely difficult to achieve.
The outcome was 17 Goals and 169 Targets, reinforced by a popular mantra to “leave no one behind”. There are Goals to end poverty and hunger by 2030, Goals to achieve gender equality for all women and girls, and Goals to provide universal access to primary and secondary education, safe water and energy. Unlike the MDGs which engaged only developing countries, both rich and poor countries will participate.
There has been criticism that the high number of Goals reflects the prevailing weakness of multilateral negotiations to reach agreement on focused priorities. The vast range of indicators to measure progress, currently numbering 232, also imposes a formidable challenge for the capacity of national statistical offices, even in richer countries.
A counter view might observe that the baseline state of the planet and its inhabitants is so far adrift of the concept of sustainable development that a comprehensive agenda becomes essential.
Further criticism focuses on the mismatch between such an ambitious set of Goals and the absence of solid proposals to finance their astronomic costs. Despite a major UN Financing for Development Conference in Addis Ababa in July 2015, almost every announcement about finance for the SDGs continues to be suffused with wishful thinking.
Accountability for achieving the promises of Agenda 2030 is viewed as very weak. National commitment to Agenda 2030 and the SDGs is non-binding. Individual countries are responsible for devising their own policies to attain the Goals. Progress reporting is voluntary.
Concern about slow progress has already been expressed in The Sustainable Development Goals Report 2017, compiled by the UN Statistics Division. Much will depend on governments, municipal authorities and corporations being held to account by domestic civil society, a process currently being suppressed in many countries of the world.
A more positive view points to the re-integration of human rights within a platform for human development, however reluctantly the topic is introduced into negotiations. Also reaffirmed in Agenda 2030 are the Rio Principles, an important set of guidelines for sustainable development drawn up in 1992. These include the principle of common but differentiated responsibilities between richer and poorer countries.
In pursuing the endgame for negotiations on the SDGs and climate change in a single year, the UN took the risk that both would collapse in confusion. Instead, these 2015 agreements present a mutually supporting and inspiring vision of how we can secure a future for people and planet.
The lesson of history is that nation states flounder in their efforts to tame the forces of globalisation. Only the most effective forms of global governance can exploit or resist its momentum for the common good.
Globalisation is defined by the integration of people, goods, finance, knowledge and culture throughout the living world. Each of these dimensions of globalisation has advanced since the dawn of civilisation, at a pace determined by the available technologies for transport and communications.
The impact of globalisation on middle class families of fully developed economies is no longer considered remarkable. A significant proportion of consumer goods are imported from Southeast or East Asia; simple enquiries about banking or insurance may involve a call centre in India; affordable opportunities for international travel and education are available and a globetrotting executive can sustain family intimacy through social media tools.
These illustrations of globalisation are broadly positive in their effect on individuals, creating space for personal fulfilment, stimulating wealth and encouraging cross-cultural experience. However, the more disruptive social, economic and environmental consequences of globalisation in the modern era have exposed the limitations of nation states to work together on the global stage.
Accelerated in the modern era by computing power, satellite technology and the efficiency of container shipping, globalisation has drawn attention to itself on account of its far-reaching consequences.
The 1990s slide towards greater poverty and environmental breakdown, together with the dilution of powers of developing countries to manage their own affairs, led to a strong public reaction against global bodies deemed to be responsible. Although the activists became known as the anti-globalisation movement, their grievances were equally vehement on capitalism, corporate power and US economic and cultural imperialism.
After violent clashes at a World Trade Organization (WTO) meeting in Seattle in 1999, subsequent gatherings of G8 world leaders and international financial institutions retreated to inaccessible and remote locations, encircled by massive security operations.
The 2008 financial crisis revived anti-globalisation sentiment, but from a rather different perspective. Replacing the Seattle focus on injustice experienced in the developing world at the hands of global governance, contemporary protests – such as the Occupy Movement – are concerned for the poor everywhere, the 99% disadvantaged by economic globalisation. Oxfam research concludes that “eight men own the same wealth as the 3.6 billion people who make up the poorest half of humanity,”
Winners and Losers
The economic benefits of greater international trade and investment tend to be distributed unevenly. Concerns about global inequality, especially since the financial crash of 2008, portray globalisation as a zero sum game, in which the winners in our interdependent world may gain their prosperity at the expense of the losers.
This negative perspective points to the loss of traditional factory jobs in US and Europe, undercut by low wage economies led by China. It might equally point to the failure of African agriculture to modernise, its more promising crops undercut by imports from US and European farmers, whose government subsidies might have been blocked in a fairer global trade regime.
Meanwhile, the economic opportunities presented by globalisation have been optimised in Southeast and East Asia where many countries have achieved the dual goals of eliminating extreme poverty and facilitating a dynamic business environment. The capital-owning classes in the West are also seen as winners of globalisation, enjoying real increases in asset values in spite of, or possibly even as a consequence of the banking collapse of 2007/8,
However, the broad international picture sees most low income countries as falling behind. Despite the rise in foreign trade and investment over the last thirty years, the number of people living in extreme poverty in sub-Saharan Africa increased by 113 million between 1990 and 2013, the most recent year for which reliable data is available.
Whereas internet technology has revolutionised our capacity for knowledge and interaction, swathes of South Asia and Africa provide no electricity, let alone computers. Whereas the global supply chains of our supermarket culture deliver exotic year-round affordable foods, over 800 million people in the developing world experience hunger.
For a long period, the post-1945 growth in prosperity ensured that the economic tools of globalisation enjoyed mainstream political support. Now, those comforting theories that rising wealth “trickles down” or “floats all boats” are losing credibility, whether between richer and poorer countries or within a single country.
Contemporary globalisation is therefore blamed for the unaccustomed stagnation of living standards amongst large sections of European and North American societies. Although many economists challenge this analysis, pointing instead to the role of new technologies and the absence of adequate retraining programmes or welfare safety nets, the political backlash against labour migration and free trade holds up the mirror to public opinion.
No greater damage could be done to the creed of globalisation than the extensive state support for failed western banks that prevailed for years after the crisis. World leaders continue to convey a sense of helplessness at the sheer complexity of the interdependent world created by globalisation. Artificial monetary measures such as quantitative easing and negative interest rates have unknown consequences.
There are many signs of globalisation in retreat, none more dramatic than the UK public vote to withdraw from the European Union, the world’s most ambitious economic and political integration of nation states. In the US, there is a backlash against international outsourcing of back office functions and mass production. The association of cyber-crime, trafficking, terrorism and super-bugs with porous borders adds to the woes of globalisation.
Traditional US enthusiasm for trade agreements has abruptly reversed with the election of President Trump. Instead of celebrating low prices of consumer goods, many workers now blame international competition for stagnant wages and loss of jobs in traditional manufacturing industries. Features of contemporary trade agreements, such as investor-state dispute settlement, appear to bestow corporations with powers normally the domain of national governments.
Despite these setbacks, globalisation has avoided a knockout punch. No credible alternative global economic model emerged, even when the world’s investment banks were at the mercy of public opprobrium. Anti-globalisation sentiment has missed its golden opportunity.
International Development Model
Mainstream economic theory presents globalisation as a positive force in the search for an international development model to narrow the divide between rich and poor countries. This model perceives our world as a global village with shared goals, governed by common rules, with exceptions designed to offer a helping hand to countries struggling to modernise their economies.
The reality has seen too many underdeveloped countries excluded from the rewards of globalisation. Strategic priority sectors within manufacturing and agriculture require state support through subsidies and protective tariffs, together with protection from volatile foreign capital. This has been the historical international development model for most of the world’s major industrialised countries.
The grievance of today’s developing nations is that global regulations for trade, investment and intellectual property rights deny them this critical policy space. They argue that richer countries have pulled up the drawbridge behind their economic success by imposing a model that emerged through the 1980s known as the Washington Consensus.
This “neoliberal” or “open market” model favoured a diminished role for government through privatisation of state-owned enterprises, downward pressure on social spending alongside deregulation of barriers to foreign trade, investment and capitalist enterprise.
Enforced as a condition for World Bank and IMF financial support, this corrective economic medicine, often described as “structural adjustment”, is widely acknowledged to have been a disaster. The numbers of people living in poverty and hunger continued to rise through the 1990s. Countries that bucked this trend, such as China and Vietnam, were those that defied the western economic ideology.
The Washington Consensus model remains alive and kicking, having gained fresh notoriety in the guise of austerity programmes imposed on richer countries whose economies were damaged by the 2008 banking crisis.
The development model for poorer countries now advocated by the international financial institutions is more nuanced, not least due to the significant participation of China in Africa’s development programmes. A typical approach seeks to attract foreign investment through the creation of special economic zones, regions ring-fenced with business incentives such as streamlined bureaucracy, low rates of tax and a ban on trade unions.
The price of inclusion in globalisation by this means can be high; foreign investment has limited value to a developing country if no tax is paid, if no skills are transferred to local workers, if domestic businesses are forced to close and if no technologies or intellectual property rights are gained. Loss of national sovereignty is the undertone of globalisation.
New jobs created by this model are often compromised by pressure to drive down wage levels, labour conditions and environmental standards. Corporate social responsibility departments of large western companies are greatly exercised in vetting their production chains for sweatshop labour or environmental abuse.
By 2017 the economic performance of a number of sub-Saharan countries offered cause for optimism. Less clear was the extent to which this may have been driven by the scramble for natural resources rather than sympathetic policies of international financial institutions.
In 2015 the share of world trade in goods and services for 48 Least Developed Countries was less than 1%, according to UNCTAD figures. Such statistics, combined with increasing evidence of the environmental footprint of the rich on the poor, remain a poor advertisement for economic globalisation.
Embarrassed by the global divide, world leaders signed up to a wide-ranging set of Sustainable Development Goals in 2015. Unlike the preceding Millennium Development Goals which concentrated on individual indicators, the SDGs include a Goal to “reduce inequality within and among countries.” This is supported by a further Goal to “promote sustained, inclusive and sustainable economic growth…..and decent work for all.”
These Goals have run into a headwind of political turmoil as the traditional pillars of globalisation are challenged by nationalist sentiment, inspired by the Trump administration. Principled global leadership, international rules with concessions for poor countries are ideals no longer taken for granted. The Doha round of the World Trade Organisation, designed to promote the interests of developing countries, has collapsed.
Technology may have the last say on the shape of an international development model of the future. The opportunities presented by automated production may dampen enthusiasm for low wage outsourced manufacturing and bring the factories back home. The development roadmap for the poorest countries urgently requires an infusion of new ideas.
Resistance to Sustainable Development
The concept of sustainable development was integral to Agenda 21, a programme adopted by world governments at the UN Conference on Environment and Development in Rio de Janeiro in 1992, the “Earth Summit”.
Hopes that national development policies would be suitably modified proved premature. Outright vilification of Agenda 21 by vested interests in the US stoked resistance to sustainable development in the years following the Earth Summit. Elsewhere, the vision enjoyed greater traction but sloppy interpretation of the definition of sustainable development has often permitted the trumpeting of social and environmental rectitude where none was deserved.
In the corporate sector, the classic “greenwash” ploy sanitised one small part of a company’s operations before promoting the entire business as a paragon of sustainable development. This widespread practice has crowded out public awareness of the small but growing number of inspiring examples of companies which strive towards genuine sustainability rather than incremental green gestures.
Presenting green credentials as a veneer – hard to criticise but lacking in substance – extends beyond corporations into all corners of society, including individual households. This has been the curse of sustainable development, limiting its impact in government policymaking.
This constraint is most explicitly apparent in the faltering struggle to combat climate change. The precautionary principle has been tossed aside in the failure of national pledges to cut greenhouse gas emissions to the degree advised by scientists. The polluter pays principle has been misrepresented as the rich polluting countries fail to substantiate their promises to mobilise climate finance.
This debasement of the currency of sustainable development may account for its troubled progress. Assessed by reference to its “three pillars” – economic growth, human development and environmental protection, the period since the Earth Summit presents a mixed report card.
Growth in the global economy continues to destroy the natural ecosystems on which it depends; improvement in human development indicators in many of the world’s poorest countries is compromised by widening social inequality on a global scale. Failure to achieve sustainable progress in social, economic and political contexts may contribute to the current febrile mood towards traditional values and institutions of democracy across the world.
The adoption of a structured set of Sustainable Development Goals by world leaders for the period 2016-2030 represents a real opportunity to invigorate the interpretation of sustainable development and its relevance to contemporary lives.