The Congress of the Socialist International in Sao Paulo adopted the document "Governance in a Global Society" as the basis for its work on global policy issues. The SI agreed, as proposed by its President, to specify and update its proposals on the issues of the reform of the United Nations, the reform of the International Financial Institutions and trade and social rights. High Level Working Groups and experts from SI member parties prepared these proposals. The SI is presenting them to the global public as its contributions to the debate taking place in the year 2005, especially in view of the United Nations Leaders Summit in September and the General Assembly. The SI will consider and evaluate the results of these events and further develop its positions and proposals for the global agenda.
Key Issues and Challenges
Despite unprecedented global economic growth over the last two decades, including very rapid growth in previously very poor countries such as China and India, the world remains far from achieving the Millennium Development Goals, solemnly adopted by world leaders at the beginning of this new century during the meetings of the United Nations General Assembly in September of the year 2000. While it is quite true that hundreds of millions of people are being lifted out of extreme poverty by the spreading of rapid technical progress facilitated by international trade and investment, large numbers of people remain trapped in extreme poverty and are practically excluded from the process of global growth. Poverty remains an overwhelming problem in the least developed countries with per capita incomes well below USD 1000, but it is also widespread in the lower middle and middle income emerging market economies. The full empowerment and equality of women remains far from being achieved. Chronic insecurity, violence and a high incidence of disease affect billions of people throughout Asia, Africa, the Middle East and Latin America. The recent Tsunami disaster in the Indian Ocean poses an extra challenge to the international community with the damage caused likely to devastate the poorest people in the surrounding region.
Insecurity, inequality and social exclusion are not confined to developing countries. Social problems remain acute even in the richest countries, despite unprecedented technical capacities and know-how. While extreme poverty is rare, chronic job insecurity is widespread and the process of globalisation has brought with it a new feeling of disempowerment as local and national politics seem unable to affect global events and as economic and financial forces seem to be evolving in a "global space" beyond the sphere of action of national democratic politics. Unemployment is a major problem, particularly in Europe. Moreover the combination of demographic factors, the often labour saving nature of technical innovation and global competition makes it increasingly difficult to maintain the social welfare state built by progressive forces in advanced economies.
One problem of renewed and central importance for international progressive forces and the socialist and social democratic parties belonging to the Socialist International (SI) is how to build more solid links bringing together progressives from poor, middle income and richer countries. Right-wing populists are trying to fuel old style nationalist and often racist sentiments particularly targeting lower income groups in the richer countries. Job insecurity linked to the fear of outsourcing or trade competition has the potential of undermining feelings of solidarity among labour across international borders. Socialists and other progressives from all countries of the world have the difficult but essential task of explaining how short-term conflicts of interest can and should be overcome with the objective of building a world economy and global institutions which work for the long-term benefit of all within a framework of global democratic governance where market forces are accompanied by public policies that promote stability and redistribute income to generate more equitable and inclusive outcomes. Some of the key issues that face us in this context are the following:
- How to renew and strengthen the United Nations so that it can be the effective and legitimate overarching framework of global governance and promotion of peace not only in the political and security domain but also in the economic, social and environmental domains. Economic instability and inequalities in development are among the main causes of insecurity in the world. It is therefore necessary to have a preventive approach of economic security on an international scale.
- How to link political and economic global governance. How to ensure that the Bretton Woods institutions and the World Trade Organisation, which are at the heart of the international economic system, become truly part of a more legitimate and more democratic system of global governance, while preserving those functions which they may be performing reasonably well and being careful not to unnecessarily create new bureaucracies or bureaucratic layers.
- How to mobilise the global resources needed to allow us to reach the Millennium Development Goals in the most cost effective way and taking into account the special needs created by the Tsunami disaster. This natural catastrophe has stirred consciences around the world to support humanitarian emergency aid. This mobilisation of public opinion gives an opportunity to relaunch the debate on the necessity of cooperation and development aid in an ever more interdependent world.
- How to view the issue of "policy conditionalities" attached to foreign aid and credits (notably to IMF and World Bank supported programmes). How to balance the need to ensure the effective and transparent use of development resources, and the need to avoid aid dependence and moral hazard, with the need to respect the sovereignty of and the democratic process in recipient countries. Policy conditionalities have often provoked the rapid disengagement of both the state and public authorities, the dismantling of public services and structures, as well as the weakening of the state’s administrative capacities in numerous countries. How to act to promote social sustainable development in these conditions? Good governance must not be synonymous either with privatisation of public services without an overall strategy, which guarantees these services for the poorest, or with hyperliberalisation of economies that lack the required regulatory and supervisory capacities.
- How to deal with excessive capital market volatility and large public debt burdens affecting many emerging market economies. What role should the Bretton Woods institutions and the regional development banks play in these economies. Do the IMF and the World Bank need more resources and if so for what precise purpose? If debt affects the macroeconomic and growth performance of emerging countries, and so limits the margins of manoeuvre of their governments, the problem is even greater and more threatening for poor, highly-indebted countries. For these countries, debt is simply accounting which cannot be recovered. A differentiated political approach is then indispensable in the international treatment of public debt. Continued work and progress towards alleviating the debt burdens of both the poorest countries as well as of the highly indebted emerging market economies remains urgent.
- How to ensure that the Doha Round of Trade talks becomes truly a Development Round while also defending the needs and interests of working people in the advanced economies. One of the main problems which we must respond to is that of the reform of the WTO, which, in successive rounds, has progressively enlarged the field and pre-eminence of commercial standards, and caused a hierarchical system of standards (commercial, social, health, environmental…) through the jurisprudence of its Dispute Settlement Body which often does not reflect the true priorities of humankind.
These are some of the key issues facing progressive forces in the area of global economic governance, reform of international institutions and the nature of global economic policies.
The key challenge for the Socialist International, as well as its member parties and organisations on regional and state level or progressive civil society movements close to socialist and social democratic parties, is to come up with analysis and solutions that widen the limits of the possible and provide courageous and internationalist longer term perspectives, without however, losing touch with national political realities and the requirements of economic feasibility and effectiveness. The work of the SI should be leading the mainstream of the national parties when it comes to global governance and global sustainable and equitable growth issues. But there should be solid bridges to national party programmes and national leadership. Our papers or manifestos should benefit from the explicit support of national party leaders, and positions taken, while at times more advanced or advocating more rapid and radical reform than what appears feasible from a national standpoint, should be in line with what progressive governments when in power are willing to actively support. A better and more equitable globalisation with global governance that appeals to citizens across the world must increasingly be built on democratic politics that are able to be active across borders.
Another very important component of this new global political space is to be found in regional and international NGOs and in what we can call the "Porto Alegre spirit". The dynamism, idealism and imagination of civil society must have a political outcome, however, and interact with the political parties to lead us somewhere. Herein is the importance of the SI. To have real results and be effective this global or regional (today European, tomorrow Latin American, Arab, African or Asian) political space must remain rooted in and linked to national politics.
In the past century, progressive forces built the national state and formulated social policies so that markets and private enterprise would function in a framework that promoted greater equity and provided security to the most vulnerable while supporting growth and full employment. Globalisation makes it necessary that in the 21st century the progressive left builds these equity, growth and security promoting policies at regional and global levels and creates the political space to make this possible within a democratic and legitimate framework.
Towards Comprehensive Reforms
A renewed United Nations
The report by the High-Level Panel on Threats, Challenges and Change commissioned by UN Secretary-General Kofi Annan and chaired by former Prime Minister Anand Panyarachun of Thailand was published in December 2004. It included a comprehensive analysis of security issues and proposed a global code of conduct in the domain of political and economic security, cross border interventions and peace promotion. It also proposed reform of the Security Council with two separate variants both aiming at enlarging the Security Council. The panel did not reach consensus on a preferred option of Security Council reform. Much of what is proposed is close to the spirit of what is contained in past SI documents and resolutions. The issue of how to enlarge the Security Council and how to deal with the nature of the veto rights inherited from the immediate post World War II period is a central aspect of UN reform and needs special attention. The fact that consensus could not be reached within the High-Level Panel is an indication of how difficult and controversial reform UN Security Council reform is going to be. And yet, without such reform, progress on global governance is not really possible. The scope and the responsibilities of the Security Council also bring to bear on economic and social questions at this time, but, in practice, it does not practically ensure an adequate treatment of these issues. It may be preferable for the Security Council to be centred on its essential missions for international peace and security, so that the prevention and promotion of international economic and social security can be dealt with in another international and multilateral authority: the Economic and Social Security Council or, as the SI has proposed, a Council for Sustainable Development, or, as the PES has proposed, a Human Development Council.
A new United Nations Economic and Social Security Council, Council for Sustainable Development or Human Development Council
The creation of a new UN Economic and Social Security Council (UNESC) or a Human Sustainable Development Council at a higher level of political effectiveness and influence than the current ECOSOC has been proposed by the SI, as well as the PES, and many progressive civil society organisations, as well as special task forces on global issues and individual intellectuals such as, for example, Joseph Stiglitz. Indeed, it does not appear possible to envisage a simple strengthening of the role of ECOSOC without major and radical reform. We hope to see a real and meaningful departure in the undertaking of economic, social and environmental issues. There is now a clear need to discuss how such a UNESC could be inserted into the follow up discussion of the High-Level Panel recommendations, or how it can be discussed and what exactly the functions and prerogatives of the UNESC should be, how it should be constituted, how the relations between the UN Security Council and the UNESC on the one hand, and the relationship between the Bretton Woods institutions as well as the WTO and the UNESC on the other hand, should be organised. There is probably a consensus among progressives who are actually in government that the UNESC should have a strategic and high level guidance role rather than one that would replace or duplicate the roles of the management and boards of the Bretton Woods institutions and of the WTO. Discussion is needed also on the role of country groupings such as the G-7 and the G-20. The G-20 is clearly an advance on the G-7 and a greater role for the G-20 is desirable. The nature of these prospective relationships should be discussed in detail. It may be possible to define the respective roles of the G-20 and ECOSOC in such a way that they mutually strengthen and complement each other, and, over time, lead to something equivalent to a UNESC. One area of particular significance is the process by which the heads of the international institutions are appointed.
Globalisation is a reality presenting us with both great opportunities and also serious dangers. It is necessary to produce a coherent international institutional strategy to accompany globalisation, maximise its potential benefits and minimise the risksand costs associated with it. The United Nations remains the most legitimate and representative institutional framework. It is therefore indispensable to place institutions of regulation and economic governance within this framework. In these matters, realism necessitates proceeding in stages. The first could be to formalise and institutionalise the G-20, as a prefiguration of the UNESC or Council for Sustainable Development, as we wish to call it : a future political international authority of regulation, prevention and arbitration between specialised international institutions. This should be done with the required institutional and political ‘’bridges’’ to ECOSOC. In this, necessarily slow and ongoing process of creating a new framework for economic and social regulation, we propose that the first significant decision which would be transferred to this authority would be the appointment of the Presidents of the large international institutions, in particular the IMF, the World Bank and the WTO and of all UN specialised institutions within a competitive, open and merit based process.
It would then be advisable to define the precise forms of the reform of ECOSOC leading to a UNESC. We propose that representation in the Council should be based on "regional" constituencies, and include voting rules based on the requirement for qualified majorities: the weight of each grouping being determined by several demographic, geographical and economic criteria.
Resource Mobilisation for Development and Global Public Goods
Following the Zedillo Report on Financing Development and the Monterrey Conference in March 2002 in Mexico, there is a widespread consensus worldwide and across the boundaries of political families that there is a need to approximately double the amount of resources devoted to development and global public goods in the economic, environmental and social domain from about USD 50 billion a year in the late 1990s to about USD 100 billion a year until 2015 and beyond. How can this USD 50 billion increase be achieved? It seems quite clear that a politically plausible increase in the aid budgets of the rich countries, while part of the solution, will not be sufficient to attain the Monterrey objective. Complementary initiatives are needed which should also be more global in nature and driven more clearly by global equity objectives than bilateral aid which remains tied to foreign policy related objectives of donor countries. The SI, as well as many other progressive organisations, have proposed steps towards some forms of international taxation to finance global public goods and the fight against poverty. At various times these proposals have included environmental taxes (a tax on carbon emissions), financial transaction taxes (variants of the Tobin tax), taxes on the sale or production of armaments, and "global" surcharges on corporate taxes. An alternative way to mobilise resources would be development oriented issues of Special Drawing Rights (SDRs); such an approach has received wide support even on the board of the IMF (close to 77 per cent) but needs 85 per cent of the weighted votes of board members and has so far been unable to receive the support of the United States and of a few other countries. The Landau Report commissioned by the French President provides interesting support for these ideas. In 2004, the UK’s Gordon Brown proposed the creation of an International Finance Facility which would be allowed to frontload development assistance by borrowing against the guarantee of future aid budget resources of rich countries and thereby provide the finance needed to achieve the MDGs within the time period set as a global objective. It is now time for the SI to offer clear support for a combination of these proposals capable of mobilising the additional USD 50 billion without further delays. A "package" will be the most appropriate outcome since it is unlikely that any one measure on its own will be sufficient. As international finance facilities open up new perspectives for financing development while risking bringing the burden of debt on future generations; as public aid for development must be strengthened and reformed; as the introduction of an international tax, beginning with a tax on fuel, would also contribute to the settlement of the IFF, the combination of these three would appear to be the most appropriate response. The SI, the PES and progressive forces throughout the world should mobilise to get governments to take the practical and legal steps needed to achieve the goals set in 2000 with respect to the MDGs. It would be very timely and useful to formulate a global MDG resource mobilisation action plan and try to have it formally adopted at the UN General Assembly meetings of September 2005, leaving us 10 years to achieve the MDGs. This should be coordinated with the proposals for the creation of the UNESC which could offer a coordinating umbrella for the resource mobilisation efforts. We propose that these projects be advanced by all progressive forces at a common meeting in September 2005.
International Financial Institutions, Development Resources and Conditionality
The conditionality attached to the financial resources coming from the IMF, the World Bank and other IFIs is at the heart of the development policy debate. There is an overwhelming feeling in the developing countries as well as among progressives and socialists in the advanced countries that these policy prescriptions and conditions have often been in the past too closely linked to the ideological world outlook of the neo-liberal right, the political interests of the G-7 countries who dominate the boards of the IFIs and to the economic interests of the world of large private banks and corporations. On the other hand it should be clear that conditionality cannot simply be abolished. The rich country taxpayers have an understandable desire to ensure that the resources they provide to the less fortunate countries are used efficiently and are not wasted or diverted by narrow élites or government bureaucracies in the developing countries. Progressives in particular want to insist on good governance, reduced expenditures on armaments and priority to projects and programmes that benefit the less privileged. It is neither realistic nor even desirable to ask that conditionality be simply abolished. What is needed, therefore, is a kind of policy conditionality that has the broadest developmental objectives and that is formulated by a process which can be considered legitimate and democratically grounded. The approach taken by the PRSPs (poverty reduction strategy papers) with emphasis on good governance, participation of all stakeholders and social issues in the context of the low income IDA eligible countries over the last few years, represents progress and deserves the support of progressive political forces worldwide. The fact, however, that there has been no progress in reforming the high level economic governance of the international system has constrained this progress and prevented increased legitimacy of the whole policy formulation process which in terms of the most essential issues remains narrowly managed by the G-7. In time the creation of a UNESC with strategic guidance functions and the power to appoint the heads of agencies could constitute a real breakthrough towards greater legitimacy at the top of the international system. Another parallel avenue of progress should be the strengthening of the G-20, where major developing countries are members, although the G-20 remains a self-selected group rather than a fully inclusive structure. A greater consensus among progressives is needed on the role of conditionality, the legitimate ways of formulating policy prescriptions and conditions, and the governance structures that can lead to such legitimacy.
The policies of conditionality cannot instantly solve the complexity of economies and societies, whose development is multidimensional in character. Progressives should propose a reform of these policies starting by taking into account the Indicators of Human Development. These indicators, published each year by the Human Development Council, and their evolution could be used explicitly as a criterion of adjustment for public commitment to development.
International Capital Markets and Emerging Market Debt
Another important and related part of the debate on the role of the Bretton Woods institutions has to do with financial crisis and stabilisation programmes in middle income emerging market countries carrying high public debt burdens such as Brazil and Turkey, as well as several other countries, particularly in Latin America. Many emerging market economies have been very adversely affected by the "surges and droughts" in volatile international capital flows. Those with high debt ratios accumulated over the past are of course particularly vulnerable. As the domain of financial markets has become truly global, there is a clear need for a global regulator as well as a global crisis manager and at times lender of last resort, just as national financial markets have been in need of a Central Bank and a financial regulator (which in some countries is again the Central Bank, while in others this responsibility is carried out by a special regulatory agency). Moreover the financial and debt related problems of many emerging market economies are not short-run but long-run in nature.
The following questions need to be addressed, therefore: what should be the respective roles of the IMF and the World Bank in regulating international financial markets? Should one consider the creation of a new international financial regulation agency which would allow the separation of the regulatory function from that of providing emergency finance? Or is it preferable for the IMF to continue fulfilling both functions? Should the IMF have more resources for crisis management given that the relative size of IMF resources with respect to the size of the global economy has sharply diminished? If progressives believe that markets can only function well if effectively regulated, are or should the Bretton Woods institutions be the global regulators? Given the long-term nature of the debt problems of many emerging market economies, should there be a more long-run and growth oriented approach taken by IMF programmes, rather than the emphasis placed on short-term stabilisation as the IMF’s mandate? Insisting on a short-run approach and only short term resources often requires politically unrealistic and socially costly fiscal policies - so supporting a longer term growth oriented approach would seem worthy of support, but what changes are needed for the IMF to be more effective and more legitimate in pursuing such an approach? It is also important to carefully consider the respective roles of the IMF and the World Bank in this context.
The precise answers to these questions should emerge from an open and broad debate involving national legislatures as well as global civil society. Specific recommendations should be based on the outcome of such a debate rather than imposed from above.
Alongside institutional reform, there is also the need to mobilise a greater amount of resources which the emerging market economies can deploy for poverty eradication. Resources provided to emerging market middle income countries for growth, poverty reduction and debt reduction programmes should contain a modest element of concessionality. Proposals for a Sovereign Debt Reduction Mechanism (SDRM) formulated by the management of the IMF for emerging market countries, which have been shelved because of opposition by the US and other shareholders, should be revived. The provision of larger resources for Bretton Woods institutions supported programmes should be linked to specific governance reforms in these institutions, including linkages to the new UN Economic and Social Security Council, if the latter can be created. These are some of the most important issues and questions related to the work of the IMF and the World Bank in middle income countries which require practical and actionable answers. It is time for the SI, the PES and other progressive networks to formulate answers that are concrete, that can find sufficient political support to lead to practical reform and that can generate policies that can truly help many emerging market economies grow out of their debt problems in a lasting way and with broad based participation in the benefits of growth.
Exclusion of the poorest and the problem of state failure
While most of the middle income emerging market economies face huge challenges and serious social problems, there are nonetheless periods of significant growth in these countries and they do participate in the growth of international investment and trade. Some countries, mostly in Asia, are actually experiencing very rapid growth and modernisation. Many of the poorest countries, on the other hand, particularly in Africa, have been essentially excluded from global growth and do not really participate productively in the international economy. An alarming number of these countries are experiencing what is called "state failure", with governance structures collapsing due to internal strife and violence which has at times taken genocidal dimensions. The policies of structural adjustment, which are sometimes translated into excessive and badly conceived reductions by the State, have then equally been linked with these public bankruptcies. The High-Level Panyarachun Report mentioned above discusses how economic and security aspects are closely intertwined in leading to state failure and to all the associated dangers. The trend has unfortunately been one of an increase in the cases of state failure or near failure. Special problems arise in this context for the Bretton Woods institutions and the United Nations. In many cases peace promoting and peacekeeping interventions of the international community are needed before aid resources can be of any use. There has to be close coordination between economic assistance and peacekeeping. In some cases such as Kosovo and Bosnia and Herzegovina, the international community has actually become a formal custodian of sovereignty which has helped prevent further bloodshed. A lot of economic research has documented the close linkage between very weak economic performance and the degree of state failure. Here again, one must recognise the desirability of international action and the crucial role played by international institutions, while at the same time posing the question of the legitimacy of such international action. A combination of a large increase in development resources with much better local governance and the arrest and reversal of the phenomenon of state failure is needed in most of the world’s poorest countries. It would seem that only a strengthened and renewed United Nations, including a new Economic and Social Security Council, or Council for Sustainable Development that would assure greater legitimacy in the economic domain and spearhead the resource mobilisation effort, could provide an adequate response to the challenge. The SI and other progressive networks should clearly analyse and address the problem of state failure and engineer political support for a more vigorous and preventive UN-led effort to deal with the problem.
An equitable and development oriented expansion of international trade
In addition to this document, the Council of the SI in Tel Aviv has adopted a document on Trade and Social Rights. There is clearly a great deal of overlap between the problems of trade, finance, Bretton Woods and WTO governance, UN reform and global economic policies that should favour a more equitable, inclusive and environmentally sustainable process of growth. The debate about global outsourcing has the potential of undermining the international solidarity among progressive forces and requires urgent attention. Some key points can be stressed in this context, without going into details that are in the province of the other working group’s work. International trade does have the potential to generate more rapid growth worldwide and thereby help fight poverty and raise living standards. An expansion in trade of services and temporary migration linked to the provision of services could provide particularly large global income gains. But, at the same time, an expansion of trade does not necessarily benefit everyone at all times. It can lead to serious disruptions and adjustment problems in developing and rich countries alike. The process of trade expansion, including in the very important areas of agriculture and services, should be managed, therefore, with a view to reducing disruptions and accompanied by social policies that compensate for losses, particularly for the relatively poor. More trade actually needs a more activist state, and not the opposite. The UN Economic and Social Security Council, if and when created, could also play a key guiding and organising role, encouraging better coordination between the WTO and other international institutions, including the IMF and the World Bank, and helping channel the resources that should be complementary to trade liberalisation into adjustment and compensation measures that are needed.
The main question posed here is that of the "hierarchy of standards" (understood as social, commercial and environmental in the main). It is no longer admissible that commercial standards prevail over all the other issues. Now in order to conceive and set up a new hierarchy of standards, it is also necessary to "think of" and set up a new place of arbitration: a "new economic and social architecture". It is in this context that the proposition of an Economic and Social Security Council or Council for Sustainable Development would take on added importance as it could become the key institutional instrument for moving towards a ‘’hierarchy of standards’’ acceptable to humanity as a whole.
The progressive left has always been internationalist in outlook. The acceleration of technological, financial and economic globalisation has made the building of global economic governance mechanisms and structures a top priority so that public policy can accompany and when necessary regulate the operation of markets for the benefit of the greatest number. Greater freedom and democratic development require greater security and more equity. Political, economic, environmental and social security issues are closely linked and proposals for good global governance in all these domains must be considered with these linkages in mind.