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The Global Agenda Council on Institutional Governance has as objective to analyse three sets of challenges and to provide feasible recommendations to address them:

  1. the rise of deglobalization and its consequences;
  2. the reshaping of global governance as power shifts in the world economy;
  3. how existing global institutions could work better.

During the 2011-2012 term the Council met regularly, including by teleconferences, at the Abu Dhabi Summit, in smaller groups at workshops organized by the Chair, and at Davos. The plan for 2012-2013 is to continue the workstream by teleconference; at least once to bring members together in a workshop co-sponsored by the Blavatnik School of Government at the University of Oxford; and to come together at the 2012 Summit on the Global Agenda in Dubai at which the Council will finalize a report on deglobalization and its consequences for global governance.

Context

The new need for global governance

The rise of emerging economies creates a need for stronger global rules and cooperation. The new globalizers are spreading their production, trade and need for raw materials across all continents. They are becoming dependent on global rules that ensure secure access to markets. Yet existing mechanisms of global governance are not entirely fit for their purposes. The poorest countries in the world, further impoverished by the 2008 financial crisis, need a more robust global governance to ensure that globalization spreads benefits farther and more equitably. In all regions of the world, countries are now weighing up and relying more upon alternative national and regional strategies. One consequence is deglobalization in several sectors. To quote a recent article in The Financial Times, “it’s clear that the gears of globalisation are going into reverse”.

Insights

Public Private Partnerships are not the answer

To put it in the context of global governance, networked governance is not an answer: emerging economies do not like the informal networks and private standard-setters that sprang up during the 1990s and 2000s as a way to ensure global action even when international institutions were slow and bureaucratic. The likes of Brazil, China, Russia and India prefer engaging globally through formal institutions. This is because they are strongly state-centred and global governance does not allow them to play to their (perceived) comparative advantages. Equally, it reflects their long-held determination to protect their own sovereignty in their engagements in international institutions. Further challenging the rise of “network governance” is the fact that in several domains, informal networks have proven ineffectual in ensuring that the harshest downsides of globalization are mitigated. Even the G20 – the ultimate network – is now being seen as toothless and ineffectual.

Deglobalization comes with a huge price tag

In the 21st century, countries are making pragmatic choices about how best to secure their economies and borders. If bilateral or regional arrangements look more secure, they will opt for those and their populations will support them in so doing. The consequences for stakeholders vary. Deglobalization may harshly affect those without the resources or political organization to use alternative national, bilateral, or regional means of protection.

Conversely, for some emerging economies, in the short-term at least, deglobalization may seem an attractive alternative to multilateralism. It may permit more freedom and control over relations with other countries, pursued bilaterally and in new regional forums. For global businesses, however, deglobalization creates barriers that are costly and an impediment to globally scaled production and delivery. To quote a recent Citigroup Annual Report, “deglobalization will increase legal, regulatory and managerial costs, negatively impact global capital and liquidity management and potentially impede global strategy”.

 International institutions are vital

The rise of emerging economies thrusts international institutions – with all their defects and problems – into the spotlight. It reinforces the challenge to make these institutions work. They need to be seen by all as truly global agencies, not as instruments of the US and Europe. They need to be more efficient and effective in ensuring that globalization is inclusive. They need to work in harmony with regional organizations. Recent history suggests that in some cases regional cooperation will be preferred by countries – such as when Botswana turned to the African Development Bank for a loan in 2009 (rather than the too-slow World Bank), and the recent ECOWAS intervention in Mali in 2012 (absent all international organizations). This in turn may push international agencies to improve themselves. Overall, international organizations will be pushed to reform harder and faster than ever before by competition from new regional organizations and by their need to seek new funding from a wider group of stakeholders, especially emerging economies. Even the successful and stronger regional organizations need international agencies – as exemplified by monetary arrangements in Asia and in the Eurozone where each region relies on IMF conditionality and support.

 More efficient and effective institutions are within reach

A transformation in global governance is possible and starts with reform within each existing international agency. Leaders of international organizations can make a difference without any further international negotiation or agreement. The heads of institutions can (1) refocus their institution and cut down its mandates; (2) upgrade staff; (3) be held personally accountable for their performance; (4) explain and reveal the finances of their institution; (5) work more effectively with the private sector; (6) build partnerships for results. Too often the heads of international organizations are hiding behind their global membership instead of maximizing the scope of actions they can take: it is time that they were held more directly to account.

 More representative and trusted institutions are within reach

The 2008 crisis and the Eurozone crisis have rebalanced power away from the hearts of these crises – the United States, the United Kingdom, and Europe. Yet these countries are still clinging to their special privileges in the international institutions – even as they seek to use them more than ever before (to deal with their own crises). The BRICS and the G7 countries need better information and collaboration across the two groups so as to press forward with the reform agenda agreed in 2010 and beyond. As voiced at the 2012 spring meetings of the IMF and World Bank: “Support from China, Russia and Brazil is critical to strengthening the firepower of the IMF”: a new dialogue with emerging economies is needed to ascertain what it would take for these countries to feel the same sense of “ownership” of international institutions as the older powers feel.

Our proposals

The Global Agenda Council on Institutional Governance has three proposals:

  1.  A report on deglobalization, examining where it is (and where it is not) occurring and with what consequences;
  2.  An ongoing push for multilateral institutions better to align their governance and management with the contributions and needs of their stakeholders;
  3. A performance index for the heads of international organizations: constructed and applied by a network comprising members of the Council, other World Economic Forum stakeholders, and the evaluation units of the organizations.

Key obstacles to making progress on these issues:

  • Lack of cross-sectoral and cross-national analysis of deglobalization.
  • Complacency about the need to reform international institutions.
  • Lack of champions for a performance index.

Impact: What steps has your Council taken to promote its recommendations?

International Discussion: A special panel was convened as part of an international conference at the University of Oxford – The Innovation Imperative: Challenges of Government Conference, December 2011 (Oxford University). The Conference was attended by 200 people. The Global Agenda Council did a special panel on global governance, comprising three of its members:

Ngaire Woods (Dean of Oxford University’s Blavatnik School of Government) presented an overview of the issues. This was followed by contributions from two Council members who had been unable to join discussions in Abu Dhabi, joined by special guest Mthuli Ncube (Chief Economist of the African Development Bank).

Gabriella Ramos (Chief of Staff, Secretary-General’s Office, OECD): As the OECD’s chief of staff and “Sherpa” to the G20, Dr. Ramos has played a critical role in designing and leading strategic multilateral initiatives to navigate the current global financial crisis. She presented the implications of the work of the Council, for the management of the Eurozone crisis, and for global inequality.

Gideon Rachman (Financial Times): As Commentator of the Year in Britain’s Comment Awards in 2010, Rachman presented the challenges to the Council’s recommendations, focusing in particular on growing competition and tensions among states and its potential to undermine the existent global governance structures built after World War II. A lack of leadership will make cooperation improbable and the management of globalization and inequality impossible.

Cross-Council discussions on Eurozone crisis (in Abu Dhabi, and then at Davos): This cross-council project was the suggestion of Council Chair Ngaire Woods, who worked with the Chairs of other Councils to bring together a group of informed experts in Abu Dhabi and subsequently to respond to the ongoing Eurozone crisis. The result was a set of fruitful discussions and a report produced and published on VOXEU. For this Global Agenda Council the discussions highlighted each of the dimensions and insights listed above – each of which has been explored and discussed by the Council.

Media engagements on the topic by Ngaire Woods (Chair):

  • The Guardian Open Weekend Keynote Debate
  • BBC World News TV (12 appearances)
  • BBC World Service Radio (4 interviews)
  • China National Radio
  • BBC Radio 4 (5 appearances on The Today Programme)
  • BBC Business News
  • Australian Broadcasting Corporation

Engagement with the G20 (UK, France, and Mexico): participation in meetings in London with the Prime Minister’s office, in France with the G20 preparatory team, and with the Mexican G20 organizers.

Disclaimer

The opinions expressed here are those of the individual Members of the Council and not of the World Economic Forum or any institutions to which they are affiliated.