At an IIFT seminar recently, the Director of Research in their faculty asked me a pertinent question on global governance and the role of diplomacy, which set me thinking. Are the five main global governance institutions, the World Bank, the International Monetary Fund (IMF), the World Trade Organisation (WTO), the World Health Organisation (WHO) and the United Nations Security Council (UNSC) performing as planned?
All these major post–World War creations have a global mandate, and the challenge is to formulate political and economic strategies to improve the daily lives of the international public citizen. How far they have succeeded is a moot question, after more than half a century of their existence. It is a very topical issue today, and yet it is often swept under the carpet.
A forthright comment I got was: “WTO, WHO, IMF, WB and even UNSC reflect a 20th-century power architecture struggling in a 21st-century multipolar reality. The vacuum they leave behind is already being filled by decentralised economic and governance experiments.” Hence, a deep dive into each.
Global governance, with its complex architecture, has multiple objectives, including preventing conflicts, stabilising economies, stimulating economic development, expanding trade and commerce, safeguarding public health and protecting global security. Experts believe that the very structural conception of these institutions is flawed, as it is exclusive and not inclusive.
Top-down decision-making is rampant, and being far away from global systemic reality, they are failing. Perforce, they have to function through national governments, but they have not been successful in establishing strong links to achieve the desired results. Weak accountability and failure in meeting the demands of civil society are causing a lack of visibility of the benefits of such international giants in the lives of the common man. Hence, it is not incorrect to say that these five pillars of post–World War global governance have failed to achieve their foundational mandates, as they have not adapted themselves to the realities of the 21st century.
What were the objectives for which they were set, what impediments they are up against, and what reformist agenda can be suggested for each?
World Bank: A Global Financial Institute
While the avowed objective of this international bank is to remove poverty, trillions of dollars of loans have not achieved a poverty-free world so far, and in many countries, this poverty ratio has worsened. About 9 per cent of extreme poverty globally by 2030 is the technical prediction. Experts believe that the World Bank favours the elite and hence creates inequalities, neglecting marginalised groups. Its loan portfolio shows scant evidence of pro-poor lending, and its relevance to the common man appears negligible.
The top-down approach in the World Bank translates into symbolic assistance rather than an attempt at “systemic poverty alleviation”. It is often argued that the World Bank has neglected environmental and social safeguards and overlooked the qualitative long-term impact of its actions on poverty reduction.
Protagonists of the World Bank may argue that several roads, hospitals, waterways, power projects, irrigation channels and schools have been constructed with its assistance, especially in Africa, where capital is scarce, and to some extent, they are right. Even its knowledge leadership and capacity for impact evaluation have resulted in real gains in many continents. However, analysts counter by saying that success has happened only where the project design was correct, procurement procedures were followed, local corruption was eradicated and priority for the poor was the focal point.
However, where long-run weaknesses in project outcomes are evidenced, the World Bank has not kept its flag high. Donor biases are visible, and the political influence of the biggest shareholder, the USA, has stalled effective achievements. Large loans have also resulted in sovereign debts. Where such borrowing has been mismanaged, future generations are burdened. The World Bank’s stringent social safeguards, put in place in the recent past to protect communities from displacement, succeed only if national governments are in tune with them. The gist is that large “Macro targets have superseded immediate social spending gains."
Reforms start with an open, merit-based selection of its President, and community consultation must be mandatory at the design stage of the project so that an interactive process begins and implementation becomes smoother. Linking credit decisions to measurable outcomes, followed by independent evaluation of projects based on stage-wise disbursements, can prevent repeated failures.
Some have advised that public debt stress testing must be done before approval so that clear debt management plans can be put in place. Decentralising technical assistance can tailor projects to local needs and speed up implementation. Finally, the need to listen to low- and middle-income countries and cater to their anti-poverty requirements must be structurally actualised through transparency on voting coalitions and the rationales for project approval.
What About The IMF?
The purpose of the IMF is to instil fiscal discipline for long-term stable governance and prevent major financial crises. It has succeeded in most cases where currencies have collapsed and international finance could reach promptly and effectively to stabilise the economy. However, experts point out several flaws in its functioning. For example, the IMF failed to spot or warn about the Asian financial crisis of 1997 and the global financial crisis of 2008.
Short-term rescue by the IMF is stated to have deepened divides, especially inequalities, as there is a disconnect between its macro goals and the human welfare it is supposed to support. Social costs very often undermine human development. In the public domain, data exist for a hundred countries where human rights outcomes for the poor have worsened through subsidy cuts and job losses engineered by IMF policies. Its bias towards its creditors is often stated as its biggest weakness.
Its voting power structure, based on quotas, is heavily tilted towards the G7, and the rest are forgotten. No wonder it has persisted with loans to Pakistan on the USA diktat, despite being recognised as a terrorist nation. In fact, some economists believe that the IMF has no binding “pro-poor mechanisms”, and hence its decisions are counterproductive for the common man. Finding that its “cure has been painful”, the following urgent reforms are suggested:
The IMF must empower itself to conduct fearless and critical surveillance of those economies that clearly show systemic risks. The urgent need to create distributional assessments before approving fiscal consolidation measures is imperative, so that social safeguards can be institutionalised. The most potent idea is to remove the de facto European control over its leadership and give more voice to the Global South.
Long-delayed quota reforms must reflect the economic rise of China, India and Brazil, so that they get greater voting power and contribute to equitable governance. Faster, flexible instruments of financing, which ensure anti-corruption monitoring but do not entail punishing schedules, are the tightrope that needs to be followed. Transparency in its programme schedules, assessments of its conditionalities and prominence to social impact reviews are other important suggestions.
Can The WTO Solve Disputes?
While there is no gainsaying the fact that the WTO was meant to facilitate trade and commerce and reduce trade wars, the fact is that it has become unproductive in its impact. Very often it is blamed for prioritising corporate interests, leaving vulnerable groups unprotected. Weak leadership has resulted in the collapse of the dispute settlement mechanism.
Stalled reforms have hit food security and the supply of affordable medicines. Global price shocks and market volatility find no cushion in the WTO. Its tilt towards rich nations is reflected in intra-country inequalities. In countries like India, farmers and political groups blame WTO rules for agrarian stress. The gist of the arguments against its existence is that benefits from the WTO are diffused and indirect, while costs are visible, and hence its daily relevance is negligible.
The first priority remains restoring the appellate dispute settlement mechanism promptly so that its decisions can be enforced in all member countries. The Doha Round logjams have to be broken by amicably considering difficult issues like digital trade, fisheries subsidies and climate-related trade rules, by creating and accepting plurilateral agreements on these matters.
Sectors such as skills, income support and rural safety nets need to be provided with major liberalisation packages. The WTO must reinforce the concept of special and differential treatment for LDCs. Finally, the WTO must focus on least developed countries for technical assistance so they can negotiate with capacity and enforce their rights.
Health Of The WHO
While it coordinates global health responses to protect public health rights for all, this institution is also showing its multipolar irrelevance. The primary reason for this is its weak enforcement and its politicised guidance. The time lag between spotting an emergency and designating it as a public health emergency of international concern is large, as it has no independence to investigate.
The vaccine-access failure during Covid and its neglect of the poor are highlighted as its major drawbacks. It lacks the authority to achieve results and hence has elite-driven agendas, with marginal health gains for the majority. Technical guidance and effective coordination are most important for its success, but the reality is that its recommendations seldom see the light of day. Critics, therefore, argue that its practical relevance in daily life is questionable, and reforms are urgently needed if it has to meet grassroots realities.
Movement of the WHO’s budget from “voluntary earmarked donations” to a minimum amount of unearmarked funding, so that donor favouritism is avoided and larger objectives are met, is the primary reform. The WHO needs to strengthen its legal infrastructure and provide legal safeguards to ensure “verified surveillance” and “equitable allocation mechanisms”.
A rapid verification team is also mooted, which has the capacity and capability to investigate global outbreaks promptly and comprehensively. Its advisory inputs need to be transparently disclosed so that conflicts of interest are curbed. Some experts suggest the creation of a global health security fund to finance stockpiling and the equitable distribution of all essential medical supplies.
Can The UNSC Maintain Peace?
It is credited with arranging large peacekeeping operations in the most troubled territories of the globe. It was created as the final authority for maintaining global peace and security. The whole world knows that power politics and lack of accountability have severely undermined its relevance. Critics argue that the UNSC has been sans reforms since 1965, and its archaic structures serve only national agendas rather than global security.
The primary reason for this is its lack of consistency in protecting millions who need assistance, as was seen recently in Syria, Ukraine and Gaza. Some perceive this as an ultimate betrayal of the UN Charter. The veto power provided to the five nations, and the complete inelasticity in expanding the UNSC to reflect global realities is torturing its very existence. Paralysis of action cannot become a norm when genocides are taking place, human rights abuses are common, conflicts abound in all corners of the world and citizens face unaddressed violence.
If the UNSC is unable to discharge its obligations when most required to do so, then its sheer existence is at stake. Hence, the P5 should not be allowed to use the veto power when genocide or war crimes take place, because its very existence becomes meaningless then. Secondly, and very importantly, the UNSC cannot remain a “first five” club but needs to expand to cover all continents and all large nations whose voices reflect the voice of the majority.
South Africa, India, Germany, Japan and Australia are knocking on the doors of the UNSC for legitimate entry. Keeping the door closed is closing its very meaningful sway over world security. It should allow the UNGA to take up humanitarian references when called upon to do so. Finally, peace is about promptness, and hence the UNSC must have the capacity for rapid deployment of forces to intervene and maintain peace wherever required.
Global governance is undoubtedly at a crossroads today. Urgent reforms are required in all five major institutions. Radical transparency, rebalanced operational procedures, focus on social wants and needs, primacy of international legal issues and realistic representation of the globe are vital levers to ensure that these governance models become a stabilising force rather than a destabilising one.
For this, each of these institutions must realise that they are imperfect and that they cannot remain in political compromises. Such compulsions do not reflect the real realities of human welfare on the ground. Perform or perish is the writing on the wall.
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the publication. |
