Thursday, October 9, 2008

A Global Economy Needs Global Economic Governance

Mr. Peter Mandelson, the European Union's Trade Commissioner, has written a thoughtful Op Ed (In defence of globalisation, The Guardian, October 3 2008) whose key message—namely, that "a global economy needs global economic governance"—is not only extremely timely, but may, in fact, be broadened in the scope of its underlying recommendation. The process of globalisation is unfolding in the absence of equivalent progress in the creation of an international institutional infrastructure that can support it and enhance its potential for good. There is no global environmental authority; policy in this area is being done via ad hoc approaches involving elements of international cooperation, voluntary compliance, and large doses of hope. In the absence of a body with jurisdiction over the global environment and the associated legal enforcement authority, de facto, the international community has abdicated management of the world's environment to chance and the actions of a few well-meaning states. The global economy has no lender of last resort—there is no reliable, depoliticised mechanism to deal with financial crises. Whether a country gets an IMF bailout or not in the middle of a financial meltdown is a function not of a transparent set of internationally agreed rules, but rather several other factors, including whether the IMF's largest shareholders consider the country to be strategically worth supporting. There is no agency charged with the responsibility for giving legal meaning to the noble principles enshrined in the Universal Declaration of Human Rights. According to the US State Department, there are 44 nations with the capacity to build nuclear weapons—nuclear proliferation remains yet another example of global institutional failure. Major planetary problems are being neglected because we do not have effective, problem-solving mechanisms and institutions strong enough to deal with them. What the latest developments in the financial markets show with sobering clarity is that global crises cannot be solved outside a framework of global collective actions involving supranational cooperation and a fundamental rethinking of the "national interest." Clearly, an integrated global community of nations needs to lay the basis for effective mechanisms of global governance.