PHA-Exchange> Re: DFID White Paper and Global Governance

[claudio at hcmc.netnam.vn]

from <David.Woodward at neweconomics.org>:

> Last week, DFID (the UK development minstry) published a White Paper
> entitled "Making Governance Work for the Poor", which includes a section
> entitled "Creating an International System Fit for the 21st Century".
> Sadly, despite a very strong collective line from UK NGOs during the
> "consultation" process, the text falls a very long way short from what
> is required in the way of reforming the IMF and the World Bank - and
> fails even to mention the WTO!
> 
> Attached is a response from Jubilee Research @ nef (the new economics
> foundation) to this, which will soon also appear on the Jubilee Research
> web-site at www.jubileeresearch.org. The White Paper itself can be found
> at
> http://www.dfid.gov.uk/pubs/files/whitepaper2006/wp2006section5-whatyouc
> ando-endnotes.pdf.
 

Hot Air and Cold Comfort: 
The DFID White Paper on the International System

David Woodward, Jubilee Research @ nef (the new economics foundation)

July 2006

The Section of DFID¡¦s White Paper entitled ¡§Creating an International System 
Fit for the 21st Century¡¨ starts very promisingly. The very title embodies a 
recognition that we do not have such a system at present. This is echoed in 
the first paragraph:

¡§Much of today¡¦s multilateral system ¡V including the UN, World Bank, IMF, and 
the EU ¡V was created after the terrible destruction of the Second World War. 
These institutions have served the world well, but the challenges we face in 
the 21st century are very different to those of 60 years ago.¡¨

Of course, this does rather imply that the international system was fit for 
the second half of the 20th century ¡V a view which might be questioned by the 
victims of the debt crisis, the financial crises, structural adjustment 
enforced liberalisation and privatisation, commercial globalisation, 
environmental destruction, escalating conflict, etc, etc. But let that pass. 
After all, actually recognising the system¡¦s failings in the 20th century 
would raise the question of why they had been steadfastly ignored for decades 
until 2006.

And the White paper is hard-hitting in its criticisms. ¡§Some parts of the 
international system¡¨, it says ¡§have become either too complicated and 
inefficient or simply do not work at all. They must change. We will use our 
resources and influence to encourage reform.¡¨ At last! Some of us have been 
telling the government that for years, if not decades.

In particular, ¡§The UN¡¦s role in development needs to be radically reformed.¡¨ 
It should, it seems limit itself to two roles: conflict prevention, resolution 
and humanitarian assistance; and developing international agreements and 
standards. And ¡§If the UN is to do these tasks effectively, reform is needed. 
UN agencies and programmes must be rationalised, and merged where necessary.¡¨ 
No holding back here ¡V whole organisations will be abolished, offices sold 
off, and staff made redundant or transported half-way round the world. But 
then, as the global environment is wrecked by our relentless pursuit of a 
perversely mistaken economic paradigm, humanitarian assistance alone will keep 
an ever-growing number of international civil servants in jobs: ¡§As a result 
of climate change, [the humanitarian system] will need to respond to 
increasingly frequent disasters¡¨. And sadly, the White Paper¡¦s recommendations 
on economic policy (more of the same) aren¡¦t going to do a lot to change 
that....

If that¡¦s the fate of institutions which are merely inefficient and all too 
often ineffectual, what lies in store for the IMF and the World Bank, which 
have been responsible for this ideologically- and commercially-driven model ¡V 
which have failed to solve the debt crisis for a quarter of a century, imposed 
structural adjustment policies, privatisation and trade liberalisation, 
thereby creating the ¡§lost decade for development¡¨ in the 1980s, and then 
cutting the rate of poverty reduction by a further three-quarters in the 
1990s? What of the institutions which initiated policies which saw poor people 
losing their livelihoods and being priced out of education and health care, in 
the name of neoliberal ideology and debt-servicing? 

They, it seems, for all their lack of meekness, are to inherit the Earth ¡V or 
at least the Southern five-sixths of it. As the UN scales back to its two 
remaining functions, the IMF, the World Bank and the regional development 
banks, it appears, are to take over responsibility for development entirely. 

But surely they¡¦ll be made fit for the 21st century? Well, the regional 
development banks will: ¡§the Asian and the African Development Banks, in 
particular, need significant organisational change to serve their members 
better¡¨. And the IMF and World Bank? Well, they ¡§must do more to support 
developing country priorities and not impose economic policy conditions in 
areas like privatisation and trade liberalisation¡¨. 

This is helpful as far as it goes. But what are ¡§areas like privatisation and 
trade liberalisation¡¨? Presumably this leaves the whole arena of macroeconomic 
policy up for grabs. And how about health policy, education policy, investment 
policy, agricultural policy and labour policy? Are they ¡§like privatisation 
and trade liberalisation¡¨? In any case, how much policy space will there 
really be for developing countries on trade liberalisation, as the WTO 
juggernaut roles on? Or, for that matter, privatisation, as its tentacles 
extend into an ever wider area with an ever more tenuous connection with 
international trade in any meaningful sense? And even without policy 
conditionality as such, IMF and World Bank ¡§advice¡¨ in ¡§areas like 
privatisation and trade policy¡¨ can be, shall we say, fairly robust¡K.

Otherwise, ¡§the IMF must continue to change in order to better meet the needs 
of poor countries¡¨. ¡§Continue to change¡¨? Not a lot of radicalism here. No 
mention even of the possibility that the Fund like to try and change a little 
faster than it has over the last 60 years, to make up for having fallen 
decades behind the real world. ¡§The IMF should focus more on macro-economic 
policy advice, and less on structural issues like privatisation and trade 
liberalisation where its track record has been mixed¡¨ (a charitable view, one 
has to say¡K). And it ¡§should provide advice to fragile states that is tailored 
to the challenges they face¡¨. Now there¡¦s a novel idea ¡V providing advice to 
countries that is ¡§tailored to the challenges they face¡¨. Why ever didn¡¦t they 
think of that before? OK, so this only applies to ¡§fragile states¡¨ ¡V but with 
the Fund and Bank given free rein to run development, that will soon include 
practically all of the South anyway.

The World Bank should ¡§play a leading role in providing more long-term, 
predictable funding for developing countries¡¨, ¡§find new ways to work with 
middle income countries¡¨, ¡§help tackle the global challenges facing developing 
countries ¡V focusing urgently on a financing framework for clean energy and 
adaptation to climate change¡¨ (only right, given its contribution to creating 
the problem in the first place, that it should help to limit the damage ¡K.), 
and ¡§use its position and expertise to forge a new international framework to 
help developing countries tackle corruption and improve their governance¡¨.

Indeed! After all, doesn¡¦t the World Bank itself have the perfect model of 
governance for developing countries to follow ? A model where votes are 
weighted according to income, so that a small rich minority have a permanent 
majority of the votes; where the richest member not only has a veto on all 
major decisions, but always gets to appoint the President unilaterally, with 
no need for consultation or scrutiny, even in the face of bitter public 
opposition from both experts and civil society; and where the President so 
appointed can, as one of his first acts as President, unilaterally decide to 
sack the person responsible for allegations of corruption, and replace him 
with someone who has herself been implicated in a major corruption scandal, as 
part of a hand-picked cabal of dubious cronies in key positions at the most 
senior level?

It sounds so perfect.... What better model could there be for the governance 
of developing countries, and what greater expertise on good governance than 
the institution that operates it? And what other institution but the Bank 
could provide that expertise? Apart from the IMF, of course, which is surely 
the only other institution in the world to share this extraordinary system.

But, as the White Paper also says, ¡§If [the IMF and World Bank] are to remain 
relevant in a changing world, we believe they must reform.¡¨ Indeed they must! 
Even the White Paper, for all its criticisms of the UN, recognises that ¡§The 
UN¡¦s legitimacy is unparalleled. This comes from its universal membership and 
unique responsibilities for peace and security, sustainable development, human 
rights and international law.¡¨ Unparallelled it is ¡V particularly by the IMF 
and World Bank. But the White paper¡¦s authors seem less inclined to comment on 
why they don¡¦t reach a similar level of legitimacy, despite membership which 
is almost as universal. Surely it can¡¦t have anything to do with their 
exemplary governance structures¡K.. 

So how should the Fund and Bank be reformed? ¡§Developing countries need more 
influence in the World Bank and IMF. They are weakly represented on both 
Boards, where voting rights are decided by financial contributions. This 
balance must change.¡¨ No mention of the fact that financial contributions are 
not voluntary, but the result of a negotiated stitch-up among the major 
shareholders ¡V the developed country governments. After all, for all the 
highly sophisticated formulae that go into the calculation of IMF quotas, it 
isn¡¦t just a coincidence that the UK and France just so happen to come out 
with exactly 107,635 votes each¡K.

Nonetheless, ¡§if their members demand it, both institutions should be ready to 
change how members are represented, and how decisions are made ¡V for example 
through greater voting rights for poor countries¡¨. But only, it seems ¡§greater 
voting rights¡¨ (not necessarily very much greater rights, let alone equal 
treatment), and only ¡§if their members demand it¡¨. The UN is to be downsized 
and rationalised, and to have its functions curtailed regardless of its 
members wishes. But the Fund and Bank need take one small step towards basic 
democratic principles only if their members demand it. And, in assessing the 
strength of these demands, no doubt their wishes, like their votes, are to be 
weighted by wealth¡K.

The White Paper does say robustly that ¡§the practice of picking the heads of 
both institutions based on nationality should end¡¨. This is, I suppose, a step 
in the right direction. No longer would an Australian hand-picked for the 
World Bank Presidency by the US President have to suffer the indignity of 
having take US citizenship ¡V as James Wolfensohn did when he was appointed by 
Bill Clinton. But the real point is not the nationality of the appointee, but 
the nature of the appointment process . Until there is a democratic and 
transparent process in which all the members of the Fund and Bank have an 
equal say, the fundamental problem will remain.

The White Paper also recognises that ¡§there also needs to be greater 
transparency in the way that the World Bank and IMF operate¡¨. But apparently 
this means only that ¡§more World Bank analysis should be disclosed¡¨. Thanks, 
but I¡¦m not sure the quantity of World Bank analysis is the real problem with 
transparency. Personally, I think we see quite enough World Bank analysis 
already. Now, an improvement in the objectivity of the Bank analysis which is 
made publicly available ¡V that would be different¡K.

But the real issue of transparency is that we are not permitted to know what 
has been said in the Executive Boards of the IMF and the World Bank ¡V not even 
what our Director has said in our name, or how he has voted on our behalf (or, 
more accurately how he has said he would have voted if there had 
hypothetically been a vote. After all, if the Board actually voted, even the 
IMF and World Bank might find it slightly embarrassing to keep the vote 
secret!) Even our efforts to access this information under the Freedom of 
Information Act have been blocked. Nothing about that in the White Paper. But 
then, that¡¦s something the UK government coula actually do something about if 
it wanted....

And finally, how about the WTO? What does the White Paper have to say about 
the organisation which sets the terms of international trade ¡V central to 
development in the current economic paradigm ¡V through ¡§Agreements¡¨ forced 
through by developed country governments through political and economic 
pressure , which operate exclusively by limiting the freedom of action of 
governments, which cover an ever-greater area, far beyond trade policies, and 
which once signed are backed by sanctions, apply in perpetuity and are 
virtually impossible to amend?

What indeed! The WTO is not mentioned once. It isn¡¦t even listed among the 
acronyms.

One might have a little more faith in the White Paper if it showed some 
recognition of the reasons for the failings of international organisations. 
Why, after all, have UN organisations become so ineffectual? Could it have 
something to do with their largest and richest financial contributor 
deliberately falling years behind with its subscriptions to almost every 
organisation in the system, then using the resulting financial leverage (and 
its political clout) to cancel part of the arrears it has accumulated? And 
with the resulting under-funding of the institutions, their dependence on 
discretionary financing from vested interests (including, yes, the US 
government) which threaten to withdraw funding the moment they step out of 
line, and the need to allocate staff to fund-raising at the expense of core 
activities?

Or could it perhaps be the (increasing) regularity with which developed 
countries ¡V particularly, but not exclusively, the US ¡V throw their weight 
around to secure the appointment of often inappropriate, unqualified and/or 
incompetent individuals, occasionally corrupt or with clear conflicts of 
interest, to head these institutions, while blocking those with support from 
developing country governments and civil society? Or their proclivity for 
intervening with the heads they have appointed to get respected staff members 
sacked for saying anything which conflicts with their commercial interests, as 
recently happened to the WHO representative in Thailand? 

How about the duplication in the system? Who was it who insisted that UNAIDS 
be created as a separate institution from the World Health Organisation? And 
that the Global Fund to Fight AIDS, Tuberculosis and Malaria should be 
established as a separate institution from both? That wasn¡¦t the UN¡K.

And how did the IMF and World Bank get into the business of micro-managing 
developing country economies through policy conditionality in the first place? 
Why did the IMF stray away from its mandate into ¡§structural issues¡K where its 
track record has been mixed¡¨? Why has the Fund¡¦s (and, one might add, the 
Bank¡¦s) policy ¡§advice¡¨ to developing country governments not been ¡§tailored 
to meet the challenges they face¡¨? All this can be laid fairly and squarely at 
the door of the developed country governments which run both the Fund and the 
Bank, through their weighted votes and their appointment of the institutions¡¦ 
heads. And why have such archaic neo-colonial governance structures persisted, 
turning them into an instrument by which rich governments run poor countries? 
Because the instutionalised power of the developed country governments has 
allowed them to make damned sure it stays that way. And the White Paper seems 
a fairly clear indication that the current UK government isn¡¦t going to be the 
first to break ranks....

So what should the White Paper have said about all this, if the UK was 
really ¡§strongly committed to working through the international system to 
reduce poverty in developing countries¡¨ and was really determined to ¡§use 
[its] resources and influence to strengthen the international system for this 
purpose¡¨? 

For a start, it should have recognised the (continuing) responsibility of the 
developed country governments for the mess that the international system has 
become. It should have called for immediate reform of the IMF and World Bank 
governance systems on the basis of democratic principles generally accepted at 
the national level ¡V not just for some unspecified increase in the voice of 
developing countries from its current pitiful level, and only ¡§if the members 
demand it¡¨, but real democracy, where votes are based on people not wealth.

It should have called on developed country governments to stop using the 
anachronistic ¡§traditions¡¨ of the IMF and World Bank to appoint their heads, 
and, failing this, undertaken to use its position in the EU to represent 
fairly and objectively the views of developing country governments when the 
next Managing Director of the IMF is appointed. And it should have called 
strongly for developed country governments to stop using their political and 
economic muscle to manipulate the appointment of the heads of UN agencies in 
their own interests.

It should have called for more consistent, timely and secure financing of UN 
organisations, and openly condemned countries which fail to pay their 
subscriptions for reasons other than inability to pay. It should have called 
for a block on funding from sources which could constitute a conflict of 
interest, and ensured that the threat of withdrawing discretionary financing 
could not be used to blackmail UN organisations, either by commercial entities 
or by governments. In the longer term, it should have called for a process by 
which international organisations could be financed directly by global 
taxation, to ensure their financial interdependence.

It should also, of course, have addressed the issue of the WTO. It should have 
called for an end to the undemocratic and non-transparent informal processes 
of ¡§confessionals¡¨, ¡§green room¡¨ meetings and ¡§Mini-Ministerials¡¨, to the 
blatant abuse of political and economic power by (mainly) the US and the EU to 
blackmail developing countries into compliance in the negotiation process, and 
to the gross inequality in representation in Geneva, which prevents most 
developing countries from participating effectively in negotiations.

It should have called for observance of the principle established in the 
Preamble to the WTO¡¦s founding Treaty that trade policies should be run in the 
interests of increased well-being and sustainable development, for a 
Secretariat that is genuinely neutral between developed and developing 
countries and not ideologically wedded to trade liberalisation above all else, 
as well as genuine application of the principle of ¡§special and differential 
treatment¡¨ for developing countries (to which it refers in Chapter 5).

At the country level, the White Paper refers to the people¡¦s rights ¡§to have a 
say in what happens in their lives..., to be safe... to earn a decent living 
for themselves and their families... [and] to be treated fairly by their 
government and public officials¡¨ as ¡§aspirations... enshrined in the Universal 
Declaration of Human Rights, and the Millennium Declaration of 2000¡¨. But when 
it comes to the global level, DFID seems to have forgotten that the Universal 
Declaration equally enshrines the right to an ¡§international order in which 
the rights and freedoms set forth in this Declaration can be fully realised¡¨.

The UK government, it seems, thinks that the Universal Declaration only 
applies to developing country governments. It is time for them to recognise 
that the disproportionate power they have exercised in the IMF and World Bank 
for the last 62 years brings with it a commensurate responsibility to act to 
bring about the human right they seem conveniently to have forgotten ¡V to an 
international system which will support other rights instead of undermining 
them.

In short, the White Paper should have called for the application at the global 
level of the standards of democracy we take for granted at the country level; 
and it should have called, strongly and clearly, for the developed country 
governments not only to stop blocking movement towards such reform, but 
actively to support them, and to stop their current abuse of the shortcomings 
of the existing system in their own ideological, commercial and geopolitical 
interests. Then, and only then, perhaps we could take seriously the 
government¡¦s aspiration to ¡§Make Governance Work for Poor People¡¨ and 
to ¡§Create an International System Fit for the 21st Century¡¨.

In discussing governance at the national level, the White Paper says that:
¡§Good governance¡K is about how citizens, leaders and public institutions 
relate to each other in order to make change happen. Elections and democracy 
are an important part of the equation, but equally important is the way 
government goes about the business of governing. 
Good governance requires three things:
„h State capability ¡V the extent to which leaders and governments are able to 
get things done.
„h Responsiveness ¡V whether public policies and institutions respond to the 
needs of citizens and uphold their rights.
„h Accountability ¡V the ability of citizens, civil society and the private 
sector to scrutinise public institutions and governments and hold them to 
account. This includes, ultimately, the opportunity to change leaders by 
democratic means.¡¨

Until we can insert the word international in this extract at the appropriate 
points, and substitute global institutions for governments, and still read it 
with a straight face ¡V even when we get to the last bullet ¡V we cannot claim 
to have good global governance. And, at the global level as much as the 
country level, ¡§good governance is essential to reduce poverty¡¨.







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