Making Global Economic Governance Effective

Hard and Soft Law Institutions in a Crowded World

Marina Larionova, John Kirton

• Publisher: Routledge
• Year: 2016
• Print ISBN:
  9780754676713
• eBook ISBN:
  9781317102366
• Topic: Politics & International Relations
• Subtopic: Political Economy
• Index: Politics & International Relations

Today's world is crowded with international laws and institutions that govern the global economy. This post-World War II accumulation of hard multilateral and soft plurilateral institutions by no means constitutes a comprehensive, coherent and effective system of global economic governance. As intensifying globalization thrusts many longstanding domestic issues onto the international stage, there is a growing need to create at the global level the more comprehensive, coherent and effective governance system that citizens have long taken for granted at home. This book offers the first comprehensive look at this critical question of international relations. It examines how, and how well, the multilateral organizations and the G8 are dealing with the central challenges facing the contemporary international community, how they have worked well and poorly together, and how they can work together more effectively to provide badly needed public goods. It is an ideal reference guide for anyone interested in institutions of global governance.

PART I
Introduction

Chapter 1
Introduction, Arguments and Conclusions

John Kirton, Marina Larionova and Paolo Savona

The Challenge

Today’s world is crowded with international institutions governing the global economy. They come in a vast number and diversity of forms. At the center stand the 1944 Bretton Woods bodies – the International Monetary Fund (IMF) for finance, and the International Bank for Reconstruction and Development (IBRD) and World Bank for development. They are closely followed by the 1947 General Agreement on Tariffs and Trade (GATT) that became the World Trade Organization (WTO) in 1995, a host of United Nations (UN) bodies – notably the United Nations Conference on Trade and Development (UNCTAD) of 1964, the United Nations Development Programme (UNDP) of 1965 and a galaxy of functional organizations such as the United Nations Education, Science and Cultural Organization (UNESCO) of 1945 and the World Health Organization (WHO) of 1948.

Since the creation of this Bretton Woods–UN system in the 1940s, its formal, hard law, broadly multilateral, heavily organized bodies have been joined by a cornucopia of softer, informal institutions with smaller membership, lighter legal obligations, less bureaucracy and a greater reliance on open, flexible, voluntary approaches (Kirton and Trebilcock 2004). Among such bodies engaged in global as opposed to geographically regional governance, the pioneer is the Organisation for Economic Co-operation and Development (OECD), formed in 1961 to deal with a wide range of macroeconomic, microeconomic, social and development concerns. It was joined by the International Energy Agency (IEA) in 1974. These Atlantic-centered global bodies are accompanied by a host of even more informal institutions, such as the Bank for International Settlements (BIS) and the Group of Ten (G10).

At the center of this emerging alternative system of global economic governance stands the G8 club of major market democracies. First formed in 1975 and anchored in an annual summit of the leaders of its major power members, this G8-plus system is now replete with G7 and G20 finance ministers’ and central bankers’ forums, ministerial institutions for trade, development, environment and energy, and a galaxy of often invisible official-level bodies below. Since 2008, the leaders of the G20 have also begun holding summits.

This post-World War II accumulation of hard multilateral and soft plurilateral bodies has now created an institutionally crowded world. But as the 2008 US-turned-global financial and economic crisis dramatically revealed, it by no means constitutes a comprehensive, coherent or credible system of global economic governance. Indeed, there are no genuinely global intergovernmental multilateral organizations of consequence dedicated to such critical domains as energy, investment competition policy or critical components of the complex world of finance. In some areas several bodies claim control of a single policy space, such as food and agriculture with the Food and Agriculture Organization (FAO), the World Food Programme and the International Fund for Agricultural Development. And in the middle, existing bodies such as the FAO reach out to assert authority over ungoverned realms such as forestry and fisheries to deal with them in their own skewed way.

As intensifying globalization thrusts many long-domestic issues onto the international stage, there is a growing need to create at the global level the more comprehensive, coherent, effective governance system that citizens of most countries have long taken for granted at home. Yet the traditional means of producing such an integrated, updated, appropriate architecture for global economic governance have not been at hand. The great Cold War victory of 1989 did not lead to a major peace conference where the victor powers could erase the old order and re-design the international institutional world anew (Ikenberry 2001). Nor did it produce a unipolar movement where a single imperial power could reshape the institutionalized international system in its own image. Even less did the 1989 victory that brought intensifying openness, connectedness and democratization merely extend into an indefinite future the essentially unchanged Bretton Woods and UN institutions and ideals to govern as the dominant center the much changed twenty-first-century world.

The 1989 victory brought instead both a new world of globalization and a new system of global governance to guide it. That system, grounded in the institutions of the G8 with Russia now a full member, was genuinely global in the comprehensive range of issues and geographic space it encompassed and in the increasing inclusion of all the consequential powers in its emerging post-2003 “G8 plus five” core (Hajnal 2007, Payne 2008). It provided genuine governance, in responsively, legitimately and effectively shaping on key issues the otherwise autonomous behavior of countries and other actors, to have them seek and reach collectively desired ends. But for the first time since the modern world of exclusive, territorial, Westphalian sovereign states began in 1648, this new system of global governance was born into a crowded world – one where its predecessor, the Bretton Woods–UN system, had not been blown away by a destructive great power war. The institutions and ideals of a new and an old order thus had to compete, converge and cooperate with each other as they sought to govern this ever more demanding and globalizing crowded world.

Their challenge in doing so was compounded by several factors. First, neither system was created from a single omniscient vision or act of conscious creation to produce a coherent whole. Rather, each was the product of continuing experimentation in response to the defining global challenges arising at any time. Each was thus more a loosely connected global governance galaxy rather than a tightly knit system. Second, both shared the same set of great powers at their core, especially as Russia and then China became increasingly involved with the G8. Third, the two systems were born with antithetical purposes – to preserve the system of sovereign states in the case of the Bretton Woods–UN bodies, and to transform these states into open democracies in the case of the G8. And fourth, they had a very different approach to governance, with the Bretton Woods–UN system relying on universal multilateralism, hard international law and international bureaucracy, and the G8 on plurilateralism, informality and great power leaders and governments instead.

The Scholarly Debate

How and why have these two great galaxies come to cooperate and converge, rather than compete and conflict, to govern the twenty-first-century world? Only recently have scholars taken up this central question of contemporary international relations (Kirton and Trebilcock 2004, Bayne 2004, Fratianni et al. 2005, Kirton 2009a, 2009b). Thus far their work has focused on the clear choice between the two grand alternatives. Here international relations scholars in the liberal institutionalist tradition and its legalization variant have emphasized the many advantages that heavily organized hard law allegedly brings (Abbott et al. 2000). Others operating from realist premises that privilege great power capabilities and choices, or from constructivist insights that emphasize the importance of direct communication, belonging and socialization, have argued for the importance of informal, exclusive, summit-level great power clubs (Kirton 1989, Bayne 2005). More recently, attention has turned to forum shopping, in which states turn to those international institutions and forums that best meet their needs (Drezner 2007). Interest has also arisen in which formal multilateral organizations are acquiring soft law features, such as the summits which the UN system has increasingly mounted for critical concerns such as development and climate change. And many conclude that the G8 could provide better global governance if it became more multilateral by expanding its membership, and more bureaucratic by adding a secretariat of its own (Cooper and Antkiewicz 2008, Ikenberry 1993).

The Contribution of this Book

Yet amidst this upsurge of interest, there have been few theoretically guided, systematic, empirical analyses of how these two great galaxies of global governance actually relate to each other and the results that their various forms of association bring. This book offers the first comprehensive look at this critical question of international relations. It examines how and how well the multilateral organizations and the G8 are dealing with the central challenges facing the contemporary international community, how they have worked well and poorly together, and how they can work together more effectively to provide badly needed global public goods.

Two points focus the detailed examination that such a subject requires. The first, substantive, one is an emphasis on global economic governance, broadly interpreted to embrace the classic components of finance, macroeconomics, microeconomics, and trade and development, but extending to the newer concerns with energy, information and communication, education and human health. It is in this field that the old multilateral order created its first and still most powerful organizations, the IMF and IBRD. It is where the first plurilateral supplements to this order arose, with the Organisation for European Economic Co-operation, the OECD and the IEA. And it is here where the full-scale alternative of the G8 first appeared in 1975, to deal with the crises of finance, energy, trade and East–West economic relations arising from 1970 to 1975. Economics is also the leading edge of the process of post-Cold War globalization, where the institutional playing field is most crowded, and where recurrent global financial crises now demand new forms of action, association and architecture on the part of all. The great global financial and economic crisis that erupted in 2008, and the emergence of G20 summitry in response, confirm how central this area is (Kirton and Koch 2008, 2009).

The second, institutional, focus is on the G8, especially as it operated at and since the first summit hosted by its newest member, Russia, at St. Petersburg in 2006. The G8’s role as the selective, soft law alternative to the old multilateral order was reinforced when Russia, long both a core member and challenger of the UN system, became a full member of the G8 by hosting a summit of its own. Russia chose as the priority themes for its summit three economic issues where the relationships of the G8 with the old multilateral order were very diverse. In the first field of energy, the G8 had long been central, the plurilateral IEA helpful, and the UN system devoid of a dedicated organization of its own. In health, the G8 has assumed a growing role, while the WHO had long commanded center stage. In education and information, the G8 was a recent entrant, while UNESCO and the International Telecommunications Union stood as pillars of the 1945 UN system and the OECD was active in a broad range of issues in the field. These different configurations of the old, middle-aged and new institutions allow analysts and actors to see how the dynamics of cooperation and competition unfold in each case.

Together this allows for an examination of the G8’s relationship with a large number of multilateral organizations of great diversity in date of birth, number and composition of members, geographic and functional focus, and degree of hard law form. While the G8 provides a constant focal point in the cross-case and chapter comparisons, a few chapters explore the relationship from the vantage point of the hard law multilateral organizations themselves.

The Contributors

To explore this subject, this book combines the talents of established and emerging scholars and practitioners from several scholarly disciplines and geographic regions. It includes political scientists, economists and legal scholars. It combines scholars with those who have been or are practitioners or participants in many of the institutions under scrutiny, notably the G8, OECD, WTO and Commonwealth. It thus enables scholarly analysis to be tested against and refined by a detailed knowledge of how things work in practice on the inside. And it embraces contributors from North America, Europe and Africa, thus permitting a more global perspective on how the international institutions under scrutiny do and should work.

The Contributions

These contributors offer in turn an analytic framework and academic application for exploring the multilateral organization–G8 relationship, the core economic issues of finance, macroeconomics, trade and development, practitioners’ perspectives on this relationship, and the relationship in the extended economic issue areas of energy, information and communication, education and health, highlighted as priorities at the 2006 G8 St. Petersburg Summit, and their convergence at that summit and since.

Part II, “Multilateral Organizations and the G8: Academic Analyses,” provides an analytical framework for exploring the multifaceted relationships between formal, hard law, multilateral organizations such as those of the Bretton Woods–UN system and informal plurilateral soft law institutions such as the G8. It does so at three levels. The first is a general categorization of the full range of possible relationships between the two. The second is a more specific set of propositions about how multilateral organizations (MOs) affect G8 performance. The third is the way the first global economic hybrid hard law but plurilateral organization – the OECD – seeks to enhance global economic governance in relationship with both the G8 and the broader multilateral world.

In Chapter 2, “Multilateral Organizations and G8 Governance: A Framework for Analysis,” John Kirton focuses on the analytic foundations for examining and improving the relationship between multilateral organizations and the G8. In doing so, the chapter takes up five essential tasks. First, it looks at the existing debate and evidence about the relationship between the G8 and MOs, focusing largely on the impact of this relationship on G8 commitment and compliance. These are placed into six schools of thought, which explore the six possibilities of G8–MO cooperation. Second, the author offers an analytic framework which identifies how MOs can improve G8 compliance, using the dimensions of the level, timing and intentionality of the connection. Based on this framework, Kirton identifies 15 contributions that MOs can and do make to G8 governance, at the latter’s preparatory, summit and implementation stages. Third, the chapter identifies ten hypotheses about how MOs’ contributions to G8 governance will arise. Fourth, Kirton tests the first two of these hypotheses against new evidence and analysis from the recent record of G8 compliance, finding varying support for both. Finally, the chapter concludes by presenting policy options about how MOs could assist the G8 more effectively in the process of implementation.

In Chapter 3, “The New Partnership between Multilateral Organizations and the G8,” Marina Larionova explores the debate between competing schools of thought on the nature of engagement between the G8 and other international institutions: G8 governance through the multilateral organizations, G8 governance against multilateral organizations and G8 governance without multilateral organizations. To develop and arbitrate this debate, she puts forward a fourth model based on two assumptions. The positivist assumption is that the G8 and international organizations seek to serve a common cause, and thus should be natural allies. The second, constructivist, assumption is that given the challenges of global governance, the G8 members’ choice of the mode of interaction with the international institutions will rationally tilt toward a “G8 governance in alliance with the multilateral organizations” based on the democratic institutionalism and network of networks models.

Her study of the summits’ documents over the period 1998–2007 reveals that there has been a steady increase in the G8 members’ cooperative actions with the multilateral institutions from 1998 to 2007. Governance through international institutions remains the preferred choice of engagement. But the trend is gradually pushing toward G8 governance in alliance with multilateral organizations. The trend is especially pronounced in the spheres of development, security and health. However, in the more sensitive spheres – security and energy – governance through the international institutions remains predominant. These trends are likely to persist in the current and next summit sequence. They should be considered in forging decisions, building consensus and defining international mechanisms for the summit commitments’ implementation. As the international multilateral institutions’ role, influence and involvement in G8 governance increase, the imperative for their reform and efficiency becomes even more pronounced. G8 members should invest more effort in reforming the international institutions to ensure that the latter have sufficient capacity to act as partners in the global governance process.

In Chapter 4, “Financial Crises, the International Monetary Fund and the G8,” Ivan Savić argues that G7 commitments are a crucial component of international efforts to combat financial crises. The members of the G7 are the source of much of the world’s capital. Through individual action, regular coordination and their large voting shares in the IMF, they effectively regulate and structure the international financial architecture. Moreover, the G7 regularly supports and often supplements the efforts of the IMF to contain and reverse financial crises. Savić examines the relationship between the G7 and the IMF to show how it affects the ability of both organizations to deal with financial crises. Specifically, he examines the influence of the G7 in the IMF and how the G7 coordinates and works with the IMF in crisis response. In doing so, he develops a model of coordination between the G7 and the IMF, discusses the G7–IMF role in global financial bail-outs, including those created in response to the Asian crisis of 1997/98 and the 2007–09 global financial and economic crises.

In Chapter 5, “Finance and Development Compliance in the G8: The IMF and World Bank Role,” John Kirton, Nikolai Roudev and Laura Sunderland ask whether the world’s major powers keep the international commitments they make. To provide an answer, they develop a recently created multilevel model of G8 member country compliance with the finance commitments the leaders make at their annual summit, and test it with an expanded data set of 54 cases from 1996 to 2006. They first examine how G8 leaders as agents deliberatively craft the commitments in ways that embed 12 “compliance catalysts” designed to improve the chances that their commitments will be complied with during the following year. They then explore how the spontaneous work of the G8’s ministerial institution for finance improves compliance. Finally, they assess the distribution of vulnerability and capability in the international system to determine whether agency and institutions act autonomously or are predetermined or overwh...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Contributors
• List of Abbreviations and Acronyms
• Preface
• Acknowledgments
• PART I INTRODUCTION
• PART II MULTILATERAL ORGANIZATIONSAND THE G8: ACADEMIC ANALYSES
• PART III MULTILATERAL ORGANIZATIONS AND THE G8: PRACTITIONERS’ PERSPECTIVES
• PART IV THE ST. PETERSBURG PRIORITIES: ENERGY, EDUCATION, INFORMATION AND HEALTH
• PART V THE G8’S ST. PETERSBURG SUMMIT AND BEYOND
• Appendices
• Index