PHA-Exchange> DEEPENING DEMOCRACY AT THE GLOBAL LEVEL

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From: <pambazuka-news-admin at pambazuka.org>

 DEEPENING DEMOCRACY AT THE GLOBAL LEVEL
> Extracts From Chapter 5 Of The Human Development Report 2002.
http://www.undp.org/hdr2002

  > Although globalization has vastly expanded the demands on global
institutions,  it has also heightened a crisis of legitimacy and
effectiveness. Large parts of  the public no longer believe that their
interests are represented in
> institutions such as the IMF, World Bank, UN Security Council and WTO or
that  the institutions are adequately accountable for what they do.
Representation and accountability have always been weak in these
multilateral institutions.
> But today the weaknesses are glaring because the institutions are being
called  on by their powerful members to intrude much more deeply into areas
previously  the preserve of national governments especially in developing
countries. Over  the past two decades these institutions have increasingly
prescribed and  required structural and institutional reforms. For example,
in the 1980s  countries that borrowed from the IMF and World Bank were
required to meet 6-10  performance criteria  and in the 1990s, some 26.
>
> Efforts to deepen democracy in international institutions must confront
the  realities of global power. Powerful countries will inevitably invest
more  energy and political capital in institutions that enable their power
to be  exercised. Once they are members of an elite club, countries are
reluctant to
> lose that power or see it diluted by opening to new members. This explains
why  proposals for reform always encounter stiff resistance. And that is why
broad  acceptance of the principle of democratization has translated into so
little  progress at the level of specific proposals.
>
> Although developing countries are deeply affected by the decisions of
institutions such as the IMF, World Bank and WTO, they have little power in
their decision-making. There is an unavoidable democratic deficit in
international organizations because people do not get to directly elect (or
> throw out) their representatives. This would be true even if all member
countries of international organizations were flourishing democracies. [...]
> That said, however, the democratic deficit does not rule out improving the
representativity of international organizations.
>
> The role of developing country governments in global governance needs to
be bolstered through changes in formal representation. This is a necessary
(albeit  insufficient) condition to redress the existing bias in
international
> organizations. [...]
>
> What is needed is to rewrite the way seats and votes are allocated within
international organizations, to better recognize the increased stake of
developing countries. Their cooperation and commitment to international
agreements is vital if any international organization is to succeed in
managing  globalization.
>
> For this reason the old rules about representation are no longer viable or
desirable. Put bluntly, the IMF and World Bank will not be able to do their
jobs effectively if they remain tied to structures that reflect the balance
of power at the end of the Second World War. In the past 55 years their
roles and
> duties have changed beyond recognition, as have the expectations of their
vastly increased membership.
>
> Nearly half of the voting power in the World Bank and IMF rests in the
hands of  seven countries (the U.S., Japan, France, U.K.,Saudi Arabia,
Germany, and the  Russian Federation) . This voting power is exercised in
the formal decision-
> making bodies - the executive boards  - of each institution.
>
> Equally important are the informal influences and traditions that shape
the  work of these organizations. These informal processes further weight
the scales  in favour of industrial countries. For example, the heads of the
World Bank and
> IMF are chosen according to a political convention whereby the United
States  and Europe nominate their candidate for each, respectively. Other
countries and  critics rightly brand the process as undemocratic and
insufficiently  accountable.
>
> Yet more profoundly, the institutions are often criticized by academics,
industrial country NGOs and developing country analysts for basing their
economic advice and policy conditionality on a narrow worldview that
reflects
> the interests of their most powerful members. In particular, they are
widely  perceived as being overly accountable to their largest shareholder,
largely through informal influences such as the location and staffing of the
organizations and their susceptibility to pressure on select issues.
>
> These concerns about who the IMF and World Bank represent have been
heightened  as the institutions have begun to prescribe policies over an
ever broader range
> of issues. [...] The new role of the IMF and World Bank highlights the
need for  deeper participation by their borrowers: developing countries.
>
> A primary source of contention relates to the shares of developing and
industrial countries in decision-making. Members of the IMF do not have
equal  voting power. Voting weights are based on two components. Each member
has a set  of 250 basic votes that come with membership. The second
component is determined by economic power. Votes accompany country quotas
that reflect the  economic strength of countries. Since the formation of the
IMF there has been a
> major imbalance in the evolution of the two sources of voting power.
>
> Basic votes have declined dramatically as quotas have increased. The share
of  basic votes in voting power has declined from 12.4 % to 2.1% . At the
same  time, an additional 135 countries have become members, including many
> transition economies.
>
> During this period the basic nature of the IMF and World Bank has changed.
They  were created at the end of the Second World War as institutions of
mutual assistance. The IMF would provide resources to any country facing
temporary
> balance of payments difficulties. The World Bank would help channel
investment  to countries for postwar reconstruction and development. This
sense of mutual assistance has changed in the intervening years.
>
> Today the IMF and World Bank lend exclusively to developing and emerging
economies. Furthermore, their loans are linked to conditions that
increasingly impinge on the domestic policies of the state. The result is a
new kind of
> division between creditor countries on one hand, who enjoy increased
decision-making power and have used it to expand conditionality, and
borrowing countries  on the other, who view conditionality as externally
imposed. This can be  particularly worrisome when there is considerable
division of opinion on that  policy advice, and when the risks associated
with the policy advice are borne  almost exclusively by the people of the
borrowing country. [...]
>
> There is now greater recognition of the need for the World Bank and the
IMF to  increase the representation of developing countries. They could do
so in a number of ways.
>
> First, by increasing the proportion of basic votes allocated to each
member.
> [...] Second, by enhancing the voice of developing countries within the
institutions. Formally, all members of the IMF and World Bank executive
boards  are supposed to appoint the institutions  presidents.  But by
convention, Europeans select a candidate for director of IMF and the U. S.
government
> selects the head of the World Bank.[...] A selection committee for such a
post  would enable broader participation and transparency.
>
> Another step would be increasing the number of seats for developing
countries on the executive boards. At present executive directors from
developing countries represent large constituencies and have minimal input
on policy  formation. [...] Third, by making the institutions more
accountable for their
> actions, not just to their board members but also to the people affected
by  their decisions. Governments are held accountable through a variety of
social,  political and legal institutions. These institutions must also be
used to make
> global financial institutions more accountable. Specifically, this means
ensuring transparency and monitoring and evaluating their rules, decisions,
policies and actions. [...]
>
> To be effective, the results of all of these evaluations must be
published,  followed up and investigated, and necessary changes undertaken.
This is particularly important for large organizations suffering from
considerable  inertia.
>
> Without publication of independent assessments of what organizations are
doing,  it is not only difficult for the public to judge how well or poorly
an  organization is undertaking its responsibilities, it is also impossible
for  outsiders to offer support to insiders who recognize the need for
change. By
> publishing critical reports, institutions can catalyse public attention
and  external pressure for change, helping to overcome inertia or vested
interests within the organization. [...]