Global Governance or World Order

Global Governance: ways to manage common affairsThe Commission of Global Governance’s

definition:“Golobal governance is the sum of the many

ways individuals and institutions, public and private, manage their common affairs. It is a continuing process through which conflicting or diverse interests may be accomodated and cooperative action may be taken. It includes formal as well as informal arrangements that people and individuals have agreed to or perceive to be in their interest”

Global governance is not a global government; it is not a single world order; it is not a top-down, hierarchical structure of authorities, rules and mechanisms, formal and informal, existing at a variety of levels in the world today.

Pieces of GG: arrangements and activities to deal with issues and problems.

They include international rules of law, norms or “soft law”, and structures such as formal international intergovernmental organizations (IGO’s) and arrangements.

Global governance: cooperative problem-solving arrangementsSince the 1990’s popularity of this conceptLiberals claim that global governance has become a

prominent feature of global politics since the 1990’s as a responce and an attempt to shape the process of globalization

An important aspect of global governance has been the growth in the number and importance of IO’s

Liberals claim that since the WWII states demonstrated a capacity to solve their common problems through different arrangements, such as IO’s, norms and rules. To support this claim usually the examples of the EU and the Washington Consensus institutions are being used

Liberal claimLiberals claims that the international system

has developed into an international societyHedley Bull: from international anarchy to an

anarchical societyAlthough anarchical, it has certain rules and

based on certain norms

The Bretton Woods SystemIMF, 1947The International Bank for Reconstruction

and Development (IBRD), better known as the World Bank, 1946

General Agreement on Tariffs and Trade (GATT), 1948

World Trade Organization (WTO) in 1995

IMFTo provide global economic stabilityTo promote free tradeTo oversee the international monetary systemTo maintain stable exchange rateTo provide finance in times of instability to

countries in crisisAll currencies were fixed to the value of the

US dollarThe US dollar was convertible to gold at a

rate of 35 dollar per ounce

World BankProvide loans for countries in need of

reconstruction and developmentThe Marshall Plan was more effective in the

post-war reconstructionThe World Bank’s main area of activity is

aiding and assisting development

GATTTo promote free tradeby bringing down tarrif barriersand non-tarrif barriersby promoting rules of free trade among

nations

From classical liberalism to Keynesianism The Bretton Woods system was constructed

to promote an open and competative international economy

However, since we have IO’s at the center of this system, which aims is not only to promote, but also to oversee this system and stabilize it in times of crisis,

it means that creators didn’t believe in classical liberal economic theory

according to which markets are perfect and there is no need of regulation

Keynesianism: regulated market economyMarkets are not perfectIn times of fluctuations there is a need of

governmental involvement in economyGovernments intervene by expanding spending,

regulating taxation and lowering interest ratesThus governments promote growth and keep

unemployment lowNot Keynes, but the USA was constructor of the

Bretton WoodsDon’t forget that in the final analysis Keynesianism is

an economic theory which backs free market economy (but with some portion of regulation)

The USA as a constructor of the Bretton WoodsAfter the war the US needed to sustain domestic growth

levelsHigh welfare standards could only be provided by

international tradeThere was a need to promote open trade, stability in

international economic system, reconstruction and development

Europe and Asia had to be open=free from influence of the Soviet Union

Security Strategy: to prevent any single power’s domination in Europe and Asia

Just like there was a need to promote international free trade for a growing British economy in the 18th century

Theories follow practices

“Structural power of the US” (Robert Cox)Dollar as the world currencyThe global predominance of American

financial marketsUS control of the IMFThe US is predominant in the other

international economic institutions, the World Bank and the World Trade Organization

“Golden Age” of the world economy: 1950’s, 1960’sOECD member states growth rates: 4-5% a

yearWhat was the contribution of the Bretton

Woods to this growth is not clearNational Keynesianism’s contribution,

stimulation of domestic growthThe growth was stimulated by high and

permanent military expenditureThe international economic stability was

provided by American hegemony

Turmoil in the 1970’s“Stagflation”: economic stagnation and rising

unemploymentIn 1971 the US abandoned the system of

fixed exchange ratesIn this context leaders of the major

industrialized countries started to meet on a regular basis

By 1975, the Group of 7 was formed (G-7) An attempt of creation of a “New

International Economic Order” failed (alternative world order in favor of developing countries)

From Keynesianism to market fundamentalismChange of IMF and World Bank roles and

policiesLiberalization of financial capital: most

Western countries removed control over the movement of currency in and out of their borders.

The result: a vast and ever-growing supply of capital that could move freely

The 1980’s: emergence of market fundamentalism

The 1990’s: the Washington Consensus

Changing role of the IMFIt was created to oversee the international

monetary system by granting loans to countries experiencing temporary balance-of-payments deficit

In the case of severe balance-of-payments instability currencies could be devalued

But generally the background of stability should be fixed exchange rates

The 1970’s: from fixed exchanged rates to floating exchanged rates

The IMF focused on lending to the developing world

Development and IO’sThe change in the World Bank’ roleSubordinate position to the IMF’s leading roleFrom an alliance-based system to an integrated

systemPromotion of borrowing in the Third World , debt

crisisG-7 decided to ensure the repaymentFrom an import-substitution model to an export-

oriented modelFrom regulation to de-regulationNot development, but growth

Structural adjustment A reduction in government expenditures

through the removal of subsidiesThe privatization of government-owned

industries and servicesThe removal of restrictions on the way of free

tradeThe deregulation of economyThe promotion of foreign investmentThe devaluation of exchange rate in order to

encourage exports and reduce imports

Liberalization PrivatizationDeregulation and fiscal discipline

Structural power of the IMFConditionalityReviewer of macroeconomic situationAt stake are WB money and other creditors’

money

The Washington Consensus and an expansion of liberal international economy19891991Transformation and transitionManaging of crises2008 crisisThe rise of the rest