CIAO DATE: 05/02

Georgetown Journal of International Affairs

Volume 1, Number 1, Winter/Spring 2000

 

Globalization and the Demands of Governance
by Princeton N. Lyman

 

Globalization has ushered in sweeping new trends that challenge traditional concepts of governance. International organizations will have to adjust to these new challenges, for they are not currently equipped to address them effectively. U.S. multilateral diplomacy must adjust as well, although there is resistance within the American political psyche to do so.

As the world’s only superpower, the United States approaches international agreements differently from other countries. It is caught between the comforting reliance of its own overwhelming power, and the imperative of leading the international community into a system that protects and enhances American interests. The United States is not wrong to be wary. Contemporary international mechanisms of governance are hardly paragons of efficiency or neutrality. But the new global threats to American interests are no longer easily addressed through unilateral action. The new threats cut across borders, defy national controls, and pay no respect to relative national power. They demand new forms of governance. International governance does not mean international government; rather, it is effective management within a system still based on independent nation–states. The United States is the only country with the power and resources to help create these new forms of governance. Without active American engagement and leadership, the twenty–first century may be a very messy, unhappy place.

Beyond Finance. The term “globalization” is often used to describe the rapid growth of interdependency and connection in the world of trade and finance. This growth has been phenomenal. In 1978, trade accounted for nine percent of the world’s GDP, compared to 24 percent today. Thirty percent of the growth experienced in the United States over the last six years comes from expanding markets overseas.

International financial transactions have exploded even more dramatically. Every day more than $1 trillion is exchanged in foreign transactions. This is enough to finance the entire world’s trade an investment for a year. Much of this $1 trillion thus goes into short–term loans or speculative currency transactions.

These trends have changed the nature of the debate about economic growth. In the spirit of Francis Fukuyama’s dictum about the end of history, democracy and market economies have become the mantra of economic policy advice for industrialized and developing countries alike. Previously, official aid flows to developing countries far outstripped private financial flows. Today, 85 percent of financial flows to developing countries come from private sources and only 15 percent from aid. Advocates of development policies seek to tap into this major explosion of trade and private financing.

Nevertheless, there is much more to globalization than expanding trade and financial flows. There are other trends driven by the same explosion of technological capability that have facilitated the financial changes. Globalization of communications is one such trend. According to Walter Wriston, the flood of real–time data has transformed the international economy more fundamentally than simply the movement of goods and finance. “For the first time in history, rich and poor, north and south, east and west, city and countryside are linked in a global electronic network of shared images . . . Ideas move across borders as if they did not exist. Indeed, time zones are becoming more important than borders.”

The consequences of these globalizing trends demand a fundamental reordering of the world. James Rosenau presents the issue in terms of the need to develop a new worldview.

Such a worldview should recast the relevance of territoriality, highlight the porosity of boundaries, treat the temporal dimensions of governance as no less significant than the spatial dimensions, recognize that networking organizations have become as important as hierarchical ones, and posit shifts of authority to subnational, transnational, and non–governmental levels as normal.

Worrisome Trends. The need for a new worldview is heightened by worrisome global trends that accompany those taking place in finance and technology.

Migration. Today, 120 million people in the world live in a country other than that of their birth. Most move from one developing country to another. However, migration pressures have created political tensions in Europe as it now faces sociopolitical demands from the millions of foreign workers that live there and who continue to enter. Countries like Egypt and the Philippines promote the export of workers as remittances from these workers dwarf other sources of finance. In the case of the Philippines, worker remittances amount to three times the amount of foreign aid. Migration will not dissipate any time soon as population levels continue to grow in developing nations.

Civil War and Refugees. Despite general peace among nations, the number of civil wars has grown dramatically. In the 1990s, fifty–eight armed conflicts ranked as humanitarian emergencies compared to five in 1985. The number of people affected in these wars are enormous, with civilians comprising 90 percent of the casualties. The ramifications of such internal wars are global. Fifteen million refugees and twenty million internally displaced people stretch the resources of neighboring countries and international agencies. Expenditures on UN humanitarian emergency programs now exceed funding for the UN’s Development Program. The United States spent as much on relief aid for victims of genocide in Rwanda as it provides annually in aid to all of sub–Saharan Africa.

Despite these expenditures, political trends do not bode well for refugees. The Democratic Republic of the Congo is currently engulfed in a civil war that has as much to do with refugees as anything else. The future of that country is uncertain at best. In the Balkans, Montenegro barred Albanian refugees from its territory during the fighting in Kosovo, and Germany has pressured Serbian and Croatian refugees to return home under uncertain conditions. The United States rejected the UN’s pleas when turning back Haitian boat people in the early 1990s. Asylum for refugees is under assault.

Growing Income Inequality. Persistent and growing economic inequality is another facet of globalization. World consumption is twice what it was in 1975 and six times that of 1950. The income ratio between the world’s richest 20 percent and the poorest 20 percent was thirty to one in 1960; today it is more than sixty to one. Twenty percent of the world’s people in the highest income countries account for 86 percent of total private consumption expenditures, while the poorest 20 percent account for a mere 1.3 percent. For energy consumption, the figures are 58 percent versus 4 percent. And in this age of international communication, the richest fifth have 74 percent of all telephone lines, the poorest have 1.5 percent; the top fifth make up 93 percent of the world’s Internet users, the poorest fifth make up 0.2 percent.

Environmental degradation also poses grave threats to the poor, which are at least equal to, if not greater than, those posed to the rich. Those in water–stressed countries are primarily the poor. Degradation of forests occurs mostly in developing countries, while the products are largely sold to industrialized nations. The World Bank lists twenty–two nations as having severe water problems and eighty nations with serious ones.

Meanwhile, globalized finance lifts only a few. While private financial flows have been rapidly increasing to developing countries, outstripping aid, twelve countries alone accounted for more than 80 percent of those flows. Of $206 billion in private financial flows to developing countries in 1997, only $2 billion went to the least developed. The sheer disparities in size pose a major threat to the poorer countries in this age of capital account liberalization. The Bank of International Settlements (BIS) points out that a hypothetical shift of one percent of equity holdings by institutional investors away from domestic equities in the Group of Seven (G7) countries would represent only slightly more than one percent of total market capitalization. But a shift of the same amount of funds from equities abroad would be equivalent to 27 percent of market capitalization in Asian emerging economies and over 66 percent of Latin American equity markets. The BIS did not even measure African economies.

As South Africa’s President Thabo Mbeki noted wryly in his address on globalization to the Non–Aligned Movement in 1998, “A slight turn by the sleeping elephant, to make itself more comfortable, can result in the complete annihilation of the entire universe of a colony of ants.”

The Rise of NGOs. As the international community seeks to come to terms with these more disturbing trends, and others like them (infectious disease, international crime, drugs), a new entrant on the scene adds both potential and complexity to the challenges of governance. This is the growth of non–government organizations, operating not only within states but increasingly across them to influence both governments and international bodies.

NGOs led the way to the Ottawa treaty to ban land mines. They played a critical role in the negotiations over an International Criminal Court, virtually cowing some governments. According to UN Secretary General Kofi Annan, we are seeing the creation of a global civil society.

Even if an international organization like the UN is committed to more openness to NGOs–and not all are–the sheer logistics are daunting. The UN has a system for accrediting NGOs to participate in its work, requiring a careful review of each organization’s character and bona fides. But today, the system is swamped with thousands of applications, and these organizations are demanding not only accreditation but more access, more speaking time, more equality with member states, and more influence.

The growing presence of NGOs, on the other hand, offers the potential for new forms of public–private partnerships. We see these in the World Commission on Dams, the public–private partnership beginning on vaccines for AIDS and other diseases, and in environmental programs.

Superpower Ambivalence. The United States’ response to the trends of globalization as regards governance–and in particular the role of international organizations–is at best ambivalent. Despite its almost overwhelming power, the United States has found it expedient to seek support from other nations and from international institutions for a variety of efforts such as the Gulf War, peacekeeping in Bosnia and Kosovo, counterterrorism, and the fight against AIDS. There is recognition as well that global trends call for even greater degrees of international governance. At the same time, there is a strong body of opinion within the United States that is opposed to, or at least fearful of, the ramifications for sovereignty. There is a current of distrust, according one critic, of giving power to supranational organizations run by unelected bureaucrats.

American public opinion adds to this ambivalence. As polls show, the great majority of Americans want and expect their country to play a leadership role in the world. Americans support the UN, and indeed support foreign aid and other international undertakings. However, further studies show that these same Americans are convinced that the United States already does more than its share. American troops make up less than 5 percent of UN peacekeepers, but the public estimates the participation to be at an unacceptable level of 20 percent. The majority of Americans believe we should provide about 5 percent of our GDP for foreign aid and believe aid is fifteen percent of GDP. In reality, foreign aid accounts for less than one percent of GDP, one of the lowest percentages of all the industrialized countries. Americans do support involvement in international activities and institutions, but are wary of overextending the country’s commitments.

Finally, Americans worry about problems inherent in international bodies such as organizational structures that distort influence. Under the UN system of one vote per country, countries that contribute little to the budget can make decisions that could be costly to the United States, which contributes 25 percent to the UN budget. Furthermore, the credibility of the UN is called into question when countries like Iraq and Cuba sit on the UN Human Rights Commission.

UN Phobia. United Nations reform reflects American ambivalence toward international organizations. The United States has led reform of the UN and its specialized agencies, arguing that without reform the UN risks becoming marginalized and losing political support. As Madeleine Albright has remarked, the United States is the UN’s harshest critic and its best friend.

As a result of U.S. prodding, in the past two years the UN has produced no–growth budgets throughout the system for the first time in a decade. At the same time, it reduced personnel by nearly 10 percent, streamlined the Secretariat, strengthened internal oversight, and improved the coordination of its many development programs. There is no doubt that the reforms have improved the efficiency and credibility of the organization. Furthermore, most members believe that payment of the more than $1.3 billion of U.S. arrears would go a long way toward facilitating the U.S.–backed reforms. The Congress finally passed legislation in 1999 to pay a significant part of these arrears, though laden with conditions that other UN members resent and may resist.

The United States has had a similarly mixed response to the UN’s role in the growing number of internal wars and humanitarian emergencies. Beginning in the 1990s, the United States stressed collective responsibility and international involvement. From 1991 to 1998, UN peacekeeping exploded, with the number of peacekeepers and the peacekeeping budget more than tripling.

The failure of UN peacekeeping in Somalia, Bosnia, and Rwanda, however, produced a backlash in the United States. This resulted in widespread criticism of multilateralism, evidenced by Congress’s refusal to appropriate funds for peacekeeping operations. The backlash led to other criticisms of the UN, and other arrears to such organizations as the World Health Organization and the Food and Agricultural Organization.

The United States now views each new UN peacekeeping proposal with a wary eye. It insists that peacekeeping funding be strictly confined to military or police activities only, and rejects a more holistic approach involving economic reconstruction and conflict resolution. The United States has insisted on short time frames, early exit strategies, and tight financing. Even when having won on all these points, America has not always provided its share of the funds. In 1998 the United States succeeded in limiting the mandate, size, and time frame of a small peacekeeping operation in the Central African Republic. Nevertheless, Congress thought that the Central African Republic was of no strategic importance to the United States, and refused to appropriate the American share.

Even more provocative to other nations, America now looks to the United Nations to implement in the former Yugoslavia the holistic nation–building task that the United States has rejected elsewhere. Already with U.S. urging, the United Nations has spent more than $600 million on peacekeeping in Bosnia and Croatia to support the Dayton Accords. The cost of the Kosovo operation was estimated at $500 million for the first three months. African nations responded with anger as they saw their own hopes for large UN peacekeeping in the Congo or Sierra Leone command lower attention from the Security Council and, in particular, the United States. In response, Washington belatedly supported a six–thousand–person peacekeeping force for Sierra Leone and a major UN operation in East Timor.

In other areas, signals from Washington are similarly mixed. Although it championed the concept of “sustainable development” at the Rio Summit in 1992, the United States did not fulfill its first–round funding commitment until 1998. America worked assiduously to obtain agreement at the Kyoto conference on greenhouse gases, but strong opposition in Congress and a blistering ad campaign (targeting “the UN treaty”) make ratification of any such treaty problematic.

The negotiations to create an International Criminal Court (ICC) further exemplify America’s mixed support for international organizations. Washington encouraged the creation of a more permanent institution–rather than the ad hoc tribunals established for the former Yugoslavia and Rwanda–as a more effective deterrent to war crimes. However, it also wanted protection against politically inspired actions against U.S. servicemen and women abroad in sensitive situations. Despite some accommodation of its concerns, Washington refused to endorse the treaty that would have created the ICC. As a result, the United States found itself outside an endeavor it had originally championed.

Struggles between the administration and Congress are often behind the ambivalence of U.S. foreign policy. A combination of partisan politics, distrust of international agreements, and a compunction to rely on unilateral power led the Senate to defeat the Comprehensive Test Ban Treaty, undermining a fundamental tenet of the multilateral approach to non–proliferation. Congress has not ratified the Convention for the Elimination of Discrimination Against Women, nor the Seabed Legal Authority, each negotiated and supported by the Clinton administration. In each of these cases, a deep suspicion of the impact on U.S sovereignty is at the heart of congressional reaction.

Finding a New Paradigm. Some have argued that what we are seeing today on a global scale is a repetition of events in the United States at the turn of the century. The backlash of farmers, populists, unions, and reformers to the excesses of capitalism of the nineteenth century led to anti–trust legislation, greater regulation of banking and financial institutions, collective bargaining rights, unemployment insurance, and Social Security. A wider global compact was struck after World War II. Ethan Kapstein writes: [T]he logic of 1945...was the conviction that to be successful, international liberalism had to be anchored in social compacts in which national governments provided for the social welfare needs of their citizens in exchange for public support for an open world economy.

The challenge today is to ascertain whether it is possible to create a similar but broader social compact. If one includes nations both developed and poor, with widely different political and social systems, and takes into account the growing complexity of issues, no simple governing structure is practicable. In the financial arena alone, economists like Jeffrey Garten argue that it will take at least a decade to create the new global economic institutions that can play the roles needed in the wake of the latest financial crisis.

Others are more skeptical of such international institution–building. Conservatives, such as Anne–Marie Slaughter, favor the expansion of international markets without the international institution–building that goes with it. Instead, she advocates “trans–governmental initiatives” that foster international cooperation in regulating specific problems, and in the enforcement of resulting regulations. She cites as an example the 1988 agreement of central bankers to establish capital adequacy requirements for all banks under their supervision.

Such "trans–governmental" arrangements would meet some of the challenges of globalization, but not all. They would not resolve the debate regarding the orientation of the economic policy of the IMF. They would not resolve the issue between North and South over growing income inequality. Moreover, they run counter to the growing power of NGOs that lean toward strict internationalization of norms and regulations, rather than regional or smaller arrangements.

For the time being, any such effort to redesign the present system will surely have to be more ad hoc than sweeping. No universal institution, including the UN, is equipped to handle a systemic overhaul efficiently or free from ideological rhetoric. Despite the growing importance of NGOs in the international system, the future responsibility of civil society is unclear. As much as globalization has changed the reach and authority of nation–states, it is still national governments that in the end must make the decisions about new international structures, rules, and regulations.

In the meantime, national governments will have to address the new political space of changing borders between community, national, and international boundaries within which any system of international governance must evolve. James Rosenau has called this space the “Frontier.” He writes:

The problem of governance involves sorting out multiple contradictions. The international system is less commanding, but it is still powerful. States are changing, but they are not disappearing. At certain times, publics are more demanding, but at other times, they are more pliable. Borders still keep out intruders, but they are also more porous. Landscapes are giving way to ethnoscapes, mediascapes, ideoscapes, technoscapes, and finanscapes, but territoriality is still a central preoccupation for many people. How do we assess a world in which the Frontier is continuously shifting, widening, and narrowing, simultaneously undergoing erosion with respect to many issues and reinforcements with respect to others?

The United States is, for better or worse, the leader of this turbulent world. Traditional concepts of sovereignty, national strength, insulation and, indeed, ambivalence, are inadequate for this challenge. The United States is caught up in all the trends of the contemporary world, and often pays the biggest price for crises that occur. It is not possible to seek unilateral protection from international crime, international epidemics, acid rain, global warming, or terrorism. Americans–who constitute 40 percent of international travelers and whose wealth is the target of drug cartels and other criminal activities–will suffer from these threats as much or more than any others.

Therefore, the task of bringing coherence and clarity to an international structure of governance necessarily falls largely to the United States. The task at hand requires finding the means for the international community to manage, rather than govern, the multiple and interactive trends of globalization.

It would be wise not to accept the conclusion of Robert Altman that “markets have emerged as the ruling international authority, more potent than any military or political power.” Markets cannot control hate radio, arms smuggling, the spread of disease, economic inequality, the passion of ethnic conflict and the havoc it produces. Markets alone can neither modulate the volatility of capital nor the deepening of economic inequalities. To face these challenges, we will need international institutions equal to the task and adapted to the realities of the contemporary world.