With increasing international economic integration, it has become popular to argue that we need more and stronger global institutions to deal with new problems that have been overwhelming the existing national and global institutions. The recent plethora of proposals to reform existing institutions, such as the International Monetary Fund (IMF), the World Bank, and the Bank for International Settlements, and introduce new ones (for example, the Multilateral Agreement on Investment and the World Financial Authority [WFA]) reflects this trend.
In my view, what is more urgent is not setting up more global institutions (the WFA may be a partial exception here) but changing how the existing institutions work.
On one level, this would require a change in the decision-making structure of major global institutions. At the moment, none of them are run “democratically.” The most powerful of them, the World Bank and the IMF, are run on the one-dollar-one-vote principle, while in the ostensibly more democratic United Nations, the most powerful countries have formal veto power. The WTO may be formally more democratic than the UN, as it does not give veto power to any country, but in practice the more powerful states have disproportionate influence, and its dispute settlement mechanism is beyond the financial and human-resource capabilities of the developing countries. Needless to say, the actual structure of a “democratic” alternative decision-making structure is debatable (for example, one-person-one-vote on a global scale? one-country-one-vote? qualified majority voting by countries as in the European Union?). Nevertheless, making decision-making structures in existing global institutions more democratic is the necessary first step, if we want to see them adopt more “progressive” goals that take into account the interests of the less powerful countries (and indeed of the less powerful in the advanced countries).
It would be naïve to assume that such changes in decision-making structures alone can do the job. Whatever the structure, if decision makers are ill-informed, the best policies won’t result. We need a much more open intellectual environment than what is currently offered by the “establishment” academia and mass media.
Two essential elements need to be part of the debate on the future of the global economy if it is to become more “informed.”
FIRST OF ALL, we need to question the widespread assumption that the driving force behind globalization is technological change—cheaper communications and transportation—that cannot, and should not, be “politically” influenced. Historical evidence suggests that politics rather than technology ultimately shapes the patterns of globalization in a given era. Over the last two centuries, technology progressed more or less constantly, but the degree of globalization of the world economy fluctuated wildly. The world economy was a lot more glob...
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