Reinventing global governance—
for humanity and equity
What area of policy is most important for hospital patients, rioting and looting in the Reinventing global
managing globalization? Harmonizing global streets, rising unemployment and declining
competition and free market approaches with school attendance. This has become the worst governance is not an
steady and expanding support for human setback to the global economy since the 1930s. option—it is an
development and human rights in all coun- For developing countries there have long
tries, developed and developing. This is at the been losses from the inadequacies and imperative for the
heart of a new perspective, a new global ethic, inequalities in global governance. Some result 21st century
a new approach to globalization. And it from weaknesses in global markets for capital
requires a range of actions, from the broad to —and some from restricted access to devel-
the specific. oped country markets for exports and tech-
Reinventing global governance is not an nology. Restrictions on migration are still a
option—it is an imperative for the 21st cen- major contradiction with the principles of the
tury. The preceding chapters have spelled out open global economy and one with a high cost
possibilities for human development—and the to developing countries. Human Develop-
pitfalls. They have also spelled out the failures ment Report 1992 estimated the total cost of
of governance in getting the most from the denying market opportunities to developing
opportunities—and in avoiding the pitfalls. countries as roughly $500 billion a year,
The costs of these failures are much larger almost 10 times the amount they receive each
than generally realized. Consider the output year in aid.
losses from the East Asian crisis and its global With the Asian crisis in 1998, the need for
repercussions. Over the three years from 1998 fresh thinking about global governance has
to 2000 these are estimated at nearly $2 trillion. again been recognized. Initially, the crisis was
These losses are: attributed to weaknesses of domestic policy
• About 2% of global economic production and action within the countries affected, even
in these years—and more than the combined though only months before the same countries
annual income of Sub-Saharan Africa, the Arab had been hailed as Asian “miracles of develop-
States and South Asia. ment”. But the need for changes in interna-
• Enough to double the incomes of the poor- tional governance is now widely accepted, and
est ﬁfth of the world’s people. the international community has begun to seek
• About twice the additional ﬁnance solutions with renewed vigour.
required over the next decade to achieve the Even so, the debate on international
goals of basic education, primary health care, reform is:
family planning, nutrition, water and sanitation • Too narrow in scope—usually excluding
for all. human development as an objective, under-
• Well over 10 times the $170 billion mobi- playing the importance of employment and
lized internationally to prevent the economic environmental sustainability and largely
slowdown. neglecting economic and social rights.
And as chapter 1 made so painfully clear, • Too geographically unbalanced—dominated
the cold statistics of economic loss convey few by the concerns of the industrial countries, with
of the human costs—interrupted treatment for secondary attention to the emerging and large
REINVENTING GLOBAL GOVERNANCE—FOR HUMANITY AND EQUITY 97
economies. The poorest and least developed The entire structure rested on the Charter of
countries are largely neglected. the United Nations, one of the most remarkable
• Too driven by the economic and financial and pioneering documents of the 20th century.
interests of the rich countries—often those of The far-seeing principles of the UN Charter
the G-7, sometimes just the G-1. were reinforced three years later in the 30 arti-
Is it too ambitious to think and plan more cles of the Universal Declaration of Human
boldly? Recall the remarkable vision and Rights (boxes 5.1 and 5.2).
human concerns of the 1940s, when the United Fundamental rethinking of policy and gov-
Nations and Bretton Woods institutions were ernance is again required. It must be broad and
created. At that time full employment was a key fair, and it must restore an integrated approach
objective, along with: covering social as well as economic issues. Key
• Fulﬁlment of economic and social rights. priorities:
• Measures for economic stability, including • Putting human concerns and human rights
stability of commodity prices. at the centre of international policy and action.
• An integral view of the United Nations and • Protecting human security and reducing
Bretton Woods institutions. vulnerability on a worldwide scale.
• Narrowing the extremes of inequality
between and within countries.
Keynes’s vision for global governance • Increasing equity in negotiation and struc-
The architecture of international gover- (SDRs), but these constitute less than 3% of tures of international governance.
nance set up after the Second World War global liquidity today. • Building a new global architecture for the
was in several respects more advanced than Keynes placed the burden of adjustment 21st century.
that of today. on both surplus and deﬁcit countries, even In short, reform driven by concern for peo-
• There was an integral view of the envisaging a penalty interest rate of 1% a
United Nations and Bretton Woods insti- month on outstanding trade surpluses. In
ple, not for capital.
tutions, working together as part of the practice, deﬁcit nations (mostly developing
whole UN system. countries) have had to bear the main bur- PUTTING HUMAN CONCERNS AND RIGHTS AT
• Economic and social rights were key den of adjustment—except for the United THE CENTRE OF GLOBAL GOVERNANCE
objectives. The UN Charter emphasized States, which can avoid adjustment because
that “conditions of stability and well-being its deﬁcit serves to supply dollars needed for
are necessary for peaceful and friendly liquidity by the global system. The IMF now Changes in international governance are
relations among nations” and “all mem- exercises some monetary discipline only on needed so that the international system does
bers pledge themselves to take joint and developing countries, which are responsible much more to support, and much less to hin-
separate action in cooperation with the for less than 10% of global liquidity. der, international, national and local actions for
organization for ‘promoting’ higher stan- The international trade organization, as
dards of living, full employment, and con- envisaged by Keynes, had functions far human development. Five speciﬁcs:
ditions of economic and social progress beyond the present World Trade Organi-
and development.” zation. Keynes’s international trade organi- STRENGTHEN GLOBAL ETHICS AND
• The International Monetary Fund and zation was not only to maintain free trade RESPONSIBILITY
the World Bank were to be complemented but also to help stabilize world commodity
by a third body, an international trade prices, essentially through buffer stock
organization. arrangements. Global governance with a human face requires
• Full employment was a basic goal, to be Keynes went even further. He recog- shared values, standards and attitudes—a wide
supported in all international economic nized that the long-term international prices acceptance of human responsibilities and
operations. for commodities must be ﬁxed in relation to
obligations. Those values include respect—for
Keynes went much further than the gov- both the economic conditions for efﬁcient
ernments of the time were prepared to production and the human conditions for life, liberty, justice and equality. And they
accept. He proposed a fund with access to proper nutritional and other requirements include tolerance and mutual caring.
resources equal to half of world imports. to ensure a decent standard of living among Such values underlie the UN Charter
The IMF today controls liquidity equal to primary producers (a principle that Keynes and the Universal Declaration of Human
less than 3% of world imports. He envis- recognized would also apply to producers
aged the IMF as a world central bank, issu- of manufactured goods).
Rights. They now need to be translated into
ing its own reserve currency (Bancor). In the Direct concern for nutrition and decent the principles and practices of global gover-
1970s the IMF was permitted to create a living standards has yet to be incorporated nance. How? With a strong political com-
limited amount of special drawing rights into the principles of international trade. mitment propelled by public awareness and
Source: Keynes 1980. support (see the special contribution by Ted
98 HUMAN DEVELOPMENT REPORT 1999
BRING PRINCIPLES OF HUMAN DEVELOPMENT ADOPT REGIONAL AND GLOBAL AGREEMENTS
AND SOCIAL PROTECTION INTO THE TO PREVENT RACES TO THE BOTTOM
CONCEPTS AND PRACTICES OF GLOBAL
ECONOMIC GOVERNANCE International bargaining can be tough—and in
the heat of the moment minor or major conces-
Global competition and market efﬁciency are sions may be made in wages, labour standards
the big objectives of current efforts to restruc-
ture global economic governance. Important,
but they are too narrow internationally, just as The successes and failures of global governance since 1945
they would be nationally. Global governance
Although political negotiations never per- countries, from commercial banks lending
needs to incorporate human development pri- mitted full realization of the international with little overall control or supervision.
orities for people in all parts of the world—for economic and political architecture as orig- Welcomed at the time, it was later seen to
poverty reduction, equity, sustainability and inally proposed, its practical impact was have laid the foundation for the major debt
human development. remarkable. From the late 1940s to the early crises and adjustment problems of the
1970s world economic growth was faster, 1980s.
Until recently social and welfare policy economic stability greater and unemploy- A second major international commis-
were matters for national action. With global- ment lower than in any comparable period sion was established, the Brandt Commis-
ization, this has been changing. In the indus- in history. Moreover, more than 70 coun- sion. Its report in 1980, North-South: A
trial countries global economic competition is tries moved from colonial status to political Programme for Survival, showed how
independence, most achieving economic industrial and developing countries could
putting welfare states under pressure, as chap-
growth rates during the 1960s higher than share in actions and transfers to stimulate
ter 4 showed. In many developing countries ever before and often higher than ever since. growth in developing countries as a way to
education, health and the more limited range Of course, the structures of global gov- achieve a more dynamic global economy.
of welfare provisions have come under even ernance were far from perfect. The cold war But little of the message was implemented.
greater pressure. Structural adjustment poli- polarized many operations. Inﬂation was Instead, the global emphasis shifted to
often high. The terms of trade of many pri- what countries must do on their own, espe-
cies have often cut back primary health care mary producing countries fell. The poorest cially in implementing liberalization and
and basic education, with reduced subsidies and least developed countries became more adjustment. The need for complementary
and increased charges restricting access to marginalized. Various international efforts action by the international community was
these services for poor people. introduced changes in global governance to muted. Debt in the poorest developing
tackle these problems. countries rose rapidly, commodity prices
At the same time the institutions of • The International Development Asso- fell, and aid remained far below commit-
global governance have leaned hard on ciation was established in 1960 to expand ments, especially for the least developed
national governments to adopt their pre- the ﬂows of concessional ﬁnance to poor countries.
ferred systems of social protection—mar- countries. There followed a lost decade for devel-
• UNCTAD was established in 1964 to opment in most of Latin America and Sub-
ginal for the International Monetary Fund,
improve the analysis and negotiation of Saharan Africa. Per capita income fell in
social safety nets for the World Bank and a trade and development issues. more than 40 countries in the two regions,
broader and more pragmatic range of social Nonetheless, global governance was often with serious human setbacks for large
policy options and mechanisms for other UN recognized to be inadequate, especially for parts of the population. School enrolment
agencies. Human development policy, as the developing countries. A high-level ratios fell in 20 countries.
international group, the Pearson Commis- None of these results can be blamed
promoted in the Human Development sion, was established to propose ways to entirely on the inadequacies of global gov-
Reports, is an example. improve aid and development policy. It ernance. But the fact remains that since
But a broader, more coherent set of inter- reported its recommendations in 1969 in 1980 the majority of countries in Sub-
national principles is required—as some gov- Partners in Development. Saharan Africa, many in Latin America and
In 1971 the United States abandoned most of those in transition have experienced
ernments are beginning to recognize. Such
the Bretton Woods system of ﬁxed disastrous failures in growth, often with
principles should be built on: exchange rates. In the mid and late 1970s, serious increases in poverty and setbacks in
• Economic, social and cultural rights as well after two decades of declining oil prices, human security. Although there have been
as political and civil ones. the price of petroleum almost quadrupled, some improvements over the 1990s, per
• The goals and commitments of the global shifting global income distribution in capita income in some 40 developing coun-
favour of the oil-producing countries. The tries is still less than it was 20 or more years
conferences of the 1990s. suddenness of the adjustment set back the ago. The economic decline in many of these
• Democratic and equitable governance, global economy. Output in the OECD countries has already been much worse than
globally and nationally. economies fell. There was a surge in ﬂows anything felt by the industrial countries dur-
The World Bank Group and the IMF need of petro-dollars to non-oil developing ing the Great Depression.
to explore how these principles are brought Source: Haq and others 1995; Rodrik 1999.
into their policies and operations.
REINVENTING GLOBAL GOVERNANCE—FOR HUMANITY AND EQUITY 99
and environmental regulations. One way to ties more seriously. Mattel, the toy-producing
avoid these pressures is to establish regional enterprise, and Disney World, the entertainment
frameworks of minimum standards and to giant, have codes of conduct for their plants in
strengthen regional agreements to work within Asia. Mattel is the only multinational corporation
them. Labour standards need to support the abil- in China that has won the Social Accountability
ities of people to provide care for their families 8000—a certiﬁcate of workplace standards that
and communities—not to have global competi- Asia Monitor, a watchdog NGO, calls for. Disney
tion undermine them. Mercosur and the Euro- has done more than 10,000 inspections to ensure
pean Union have taken steps in this direction. proper working conditions for its workers in Asia.
Such agreements, carefully deﬁned, can raise Codes of conduct have moved from vague
living standards and protect the environment, promises to detailed rules, with the best codes
without setting back employment or discourag- now monitored by outside auditors (box 5.3).
ing foreign investment. Collective regional action But multinationals should be socially respon-
Multinational can ensure that the decisions are based on the sible from the beginning, not only after having
corporations need to be needs of people in the countries concerned. been caught neglecting responsibilities. Codes
of conduct should also be developed for banks
brought within the frame DEVELOP A GLOBAL CODE OF CONDUCT FOR and ﬁnancial institutions, covering secrecy and
of global governance, not MULTINATIONAL CORPORATIONS — AND A risk assessment.
GLOBAL FORUM FOR THEIR MONITORING Incentives and publicity can help. The
just the patchwork of Council for Economic Priorities, a US-based
national laws, rules and Multinational corporations are already a dom- NGO, gives annual awards and public recogni-
inant part of the global economy—yet many of tion to Fortune 500 companies demonstrating
regulations their actions go unrecorded and unaccounted. exceptional performance in community part-
They must, however, go far beyond reporting nership, employee empowerment and gender
just to their shareholders. They need to be equity, environmental stewardship, social mis-
brought within the frame of global gover- sion and human rights.
nance, not just the patchwork of national laws, But multinational corporations are too
rules and regulations. important and too dominant a part of the global
Because of the activism of NGOs and other economy for voluntary codes to be enough.
institutions of civil society, many multinational Globally agreed principles of performance are
corporations are taking their social responsibili- needed for:
Partnership with the United Nations
Even as communications, transportation and new global challenges resides outside govern- to address global issues, protect the environment,
technology are driving global economic expan- ment. eliminate poverty, empower women and pro-
sion, headway on poverty is not keeping pace. All of these trends point us towards the need mote children’s health. And the United Nations
It is as if globalization is in fast-forward, and the and potential for public-private partnerships. needs the support of all sectors—business, gov-
world’s ability to understand and react to it is in These kinds of partnership are urgently needed as ernment, NGOs and the philanthropic world.
slow motion. government assistance is cut even as the demands Secretary-General Koﬁ Annan is doing all
But there are promising signs. and needs for international cooperation grow. that he can to make the United Nations a bet-
First is the ascendance of new means for While the private sector, trade and investment ter, more responsive and more open institution.
global progress—the emergence of a more hold promise for broad progress in the future, too It is up to the rest of us to join him in rededi-
vibrant and engaged civil society. The private few countries and sectors are beneﬁting from cating our support for the United Nations and
sector is another growing force for progress. globalization. Worldwide economic progress its efforts to create a more peaceful, prosperous
Private investment in developing countries now must address sustainable human development. and poverty-free world.
dwarfs foreign assistance as a source of That is why the UNDP and its UN colleagues
resources for progress. are ever-more important. All those who care
On the other hand, governments are about the world around them must care about
financially and politically challenged as never and support the United Nations. The United Ted Turner
before. And increasingly, the expertise of Nations is the place where nations work together Founder, CNN
100 HUMAN DEVELOPMENT REPORT 1999
• Human concerns—to ensure compliance • Interactions in professional groups.
with labour standards and human rights. • Parliamentary, religious and other groups
• Economic efﬁciency—to ensure fair trade committed to strengthening international
and competitive markets. understanding and exchange.
• Environmental sustainability—to avoid And these are just a start (box 5.4).
degradation and pollution.
Also needed is a global forum to bring PROTECTING HUMAN SECURITY IN
multinational corporations into open debate ECONOMIC CRISIS
with other parts of the global community—
unions, NGOs and government. The results The biggest human setbacks of the past two
could be practical and positive. The ﬁrst major years emanate from the Asian economic crisis.
conference hosted by the UK-based Ethical The crisis has already stimulated strong sup-
Trading Initiative, in London at the end of port from the World Bank and the UN system
1998, brought together hundreds of people in response to human needs in the countries
from a range of companies, trade unions and
NGOs to discuss fair trade issues and company BOX 5.3
codes of conduct. Six of the nine UK compa- Social auditing of multinational corporations
nies among the top 100 multinationals now The demand for social auditing—a thorough tionals. Nike has said that it would arrange
have codes in draft. In the space of a few years, check as to whether multinationals are living for inspections of all its plants worldwide.
the fair trade movement and the promotion of up to their social responsibilities—is on the At the same time Nike has raised the salaries
rise. In addition to emerging social auditors, of workers hurt by currency devaluation,
fairly traded products have gone from the mar-
accounting ﬁrms such as Deloitte & Touche, increased its minimum working age to 18
gin to the mainstream in promoting labour PricewaterhouseCoopers and Ernst & Young and switched to less toxic glues. Mattel has
rights, and retail sales of fairly traded goods are are also carrying out social auditing. also worked hard. Independent auditors
worth more than $250 million in Europe alone. Last year 1,500 inspections were done in have paid visits to its factories and those of
This could be replicated at the global level in the Guangdong province of China, where its suppliers, and local activists play a role in
there is a large concentration of multina- its social auditing.
Source: OECD 1999a.
STRENGTHEN THE GLOBAL COMMITMENT TO
People’s expanding awareness of their connec- Globalization without Poverty—a European initiative
tions with the wider world is part of globaliza- The Council of Europe, with 40 member Europe, that extreme poverty and social
tion. Securing political support for more states, recently launched Globalization exclusion are a denial of human rights.
humane global governance will depend on without Poverty. This initiative brings One initiative, the Global Forum on
together national governments, intergov- Poverty Eradication, has been inspired by
increasing that awareness even more—and on
ernmental organizations, NGOs, parlia- the work of the Forum of the Poor in
making people conscious of their being citizens mentarians, local authorities, the media Thailand. It aims to listen to—and learn
of the world, not just their countries. and communications agencies in joint from—the experiences of the poor, both
Many things already contribute to a sense efforts to renew the commitment in Europe in Europe and in the South. Its goal is to
of global responsibility: to global poverty eradication. The perma- develop an agenda for action that will
nent North-South Centre of the Council of contain recommendations and proposals
• Education, especially the opportunity for Europe, based in Lisbon, is the secretariat on how extreme poverty can be eradi-
young people to learn about the lives and situ- for these efforts. cated and especially on how societies can
ations of people in other parts of the world. The campaign aims to promote the idea be mobilized to achieve this goal.
• The media’s treatment of international of social inclusiveness in Europe and new By emphasizing poverty eradication on
concepts of global citizenship that focus on a global scale, the forum attempts to offset
news and events, explaining them from the
the rights and responsibilities of citizens liv- ideas of personal insecurity and “Fortress”
viewpoints of other countries. ing in a global society. Some initiatives, such Europe as a response to European inward-
• Networks of NGOs, such as the Third as the Action Week against Poverty, will be ness in thought and action. The campaign
World Network and the UN-NGO Forum. Europe-wide; many others are national or message: “Europe is not a planet, but part
local. The project aims to remind people, in of One World, and that creates both
• Trade union activities focusing on global
line with the overall policy of the Council of opportunities and responsibilities.”
• Opportunities to study abroad and to travel Source: Human Development Report Ofﬁce.
and work with people from other countries.
REINVENTING GLOBAL GOVERNANCE—FOR HUMANITY AND EQUITY 101
directly affected. More important for the long • Removing the requirement that countries
run, it has stirred a major rethinking of the liberalize capital accounts as a condition for
improvements needed in global governance to borrowing. The extent and phasing of capital
avoid recurrence and further contagion. account liberalization should be a matter for
each developing or transition economy to
REDUCING FINANCIAL INSECURITY decide on the basis of its needs and capacities.
International pressures for abrupt or prema-
Extremes of vulnerability are a systemic prob- ture liberalization have often proved counter-
lem of ﬁnancial liberalization on a global scale productive.
and call for new global measures of prevention • Incorporating standstill provisions into
and preparedness. Already the economic costs the rules for borrowing from the interna-
and human consequences of these setbacks add tional ﬁnancial institutions. These would give
up to an important agenda of priorities. countries under ﬁnancial pressure the right to
collective action could be Developing and adopting new interna- delay debt servicing.
tional codes of conduct for banks and ﬁnancial • Developing regional and subregional ini-
institutions, improving information and trans- tiatives to support monetary and ﬁnancial
reserve funds, parency and enhancing international ﬁnancial management. Stronger regional collective
supervision and regulation are all part of the action could be stabilizing—pooling reserve
new consensus. So is recognition of the IMF’s funds, strengthening ﬁnancial monitoring,
monitoring, maintaining need for increased ﬁnancial resources to enable maintaining open trade even under pressure.
it to act more quickly and preemptively as The experience of Western Europe, from the
open trade even under
lender of last resort. Such resources could be Payments Union in the early postwar years to
pressure obtained by increasing government ﬁnancial the euro today, underscores the value of such
commitments to the IMF, enhancing the use of arrangements.
IMF special drawing rights (SDRs) or selling • Increasing technical support. The cost of
some of its gold holdings. processing all the information required for
Those who balk at the political difﬁculties ﬁnancial negotiation and decision-making is
of getting agreement to such measures should very high for small and poor countries. The
recall the risks and costs of not doing so. The international institutions have a special respon-
willingness of the United States to act as lender sibility to help countries gain rapid and easy
of last resort to Mexico in 1994–95, and the access to such information and analysis.
speed of its support, did much to limit the
depth and contagion of the Mexican ﬁnancial P ROTECTING PEOPLE DURING PERIODS
crisis and to achieve rapid recovery. Money OF CRISIS AND ADJUSTMENT
alone is not enough, however. Financial sup-
port must be accompanied by economic Time and time again when under economic
reform and restructuring—taking account of pressure, countries ﬁnd themselves sacriﬁcing
human goals, not just economic and ﬁnancial the needs of their children on the altar of eco-
ones. nomic orthodoxy—cutting schools, clinics and
hospitals to balance their budgets and pay their
P REVENTING FUTURE FINANCIAL CRISES debts. The challenge is greatest in poor coun-
tries, where the coverage of schools and health
The financial crises of the 1990s have been services is already limited. By cutting the invest-
systemic—with finance surging in and out of ment budget, countries ease the pressures on
countries at a speed and volume beyond the both capital and recurrent accounts—but at
capacity of any country on its own to control. the cost of postponing the vital goals of health
In addition to the measures to reduce ﬁnan- and education for all.
cial insecurity, poor countries need special sup- This spotlights the importance of adopting
port. A recent UN task force on ﬁnancial long-run human goals—and maintaining
architecture proposed various measures to help progress towards them, with international sup-
prevent further crisis and contagion, including: port to make this possible. Countries should be
102 HUMAN DEVELOPMENT REPORT 1999
encouraged to set goals and dates for achieving Special actions are needed to deal with traf-
universal access to education and health—as ﬁcking in women and children and smuggling
set out in the World Summit for Social Devel- migrants and ﬁrearms.
opment, in other global conferences of the The media, NGOs and other institutions of
1990s and in the Development Assistance civil society have played an important role in
Committee goals for the 21st century. At a min- uncovering the untold story of human trafﬁck-
imum, all countries should be encouraged to ing and forcing action. Needed now are more
make some progress towards these goals each formal international processes of reporting and
year—no matter how severe the economic reviewing actions. Also needed are interna-
pressures. tional negotiations between labour-sending
Stronger international support is needed and labour-receiving countries and with inter-
for protecting people in crisis. The way indus- national organizations. Such negotiations
Culture, community and
trial countries respond to a ﬂood or earthquake should lead to codes of conduct both for
within their borders is instructive here. It labour-sending and for labour-receiving coun- human security are
would be unthinkable and politically unaccept- tries, laws for eliminating exploitation of
able in an industrial country today to allow a migrant workers and violations of their human
natural disaster to leave citizens without health rights, and severe penalties for trafﬁckers (box often undermined by the
services or children without schooling for years 5.5). The UN Convention for the Suppression
invasions of globalization
on end. Yet this happens often in developing of Trafﬁc in Persons and the Exploitation of
countries. A lender of last resort for social pro- the Prostitution of Others, approved by the
tection would thus be useful—perhaps as a spe- General Assembly in 1949, focuses on trafﬁck-
cial window of the World Bank. ing as a criminal commercial enterprise. Only
70 countries have adopted this convention.
REDUCING OTHER CAUSES OF HUMAN
INSECURITY P ROTECTING CULTURAL DIVERSITY
Threats to human security are being exacer- Culture, community and human security are
bated by globalization in other ways. Three intertwined—but too often undermined by the
threats show the range of actions required. invasions of globalization. The World Com-
mission on Culture and Development recog-
CONTROLLING GLOBAL CRIME nized the broad principle of protecting cultural
diversity while encouraging cultural exchange.
The virulent synergy between globalization Balancing the two is difﬁcult and controversial
and organized crime calls for new global —but countries wishing to protect their cul-
instruments to back national actions and con- tural heritage need to be permitted to do so.
trol the international links. An international Four examples of actions:
convention against transnational organized • Regional and private efforts could encourage
crime is under preparation. Among the key much more two-way cultural communication—
measures: so that ﬁlms, music, literature and television pro-
• Encouraging cooperation in law enforce- gramming ﬂow between and within developing
ment and surveillance, with support for regions, not just to them from industrial countries.
advanced investigative techniques. • Policy-makers have to rethink state, com-
• Enhancing international judicial coopera- munity and international institutions and poli-
tion, including the transfer of cases from one cies to permit local populations to choose their
jurisdiction to another and the use of video- languages and way of life. At the same time
conferencing for cross-examination. institutions should be created that encourage a
• Obliging states to develop effective pro- dialogue between leaders of different cultural
grammes for protecting witnesses and legal groups to negotiate exchanges and promote
professionals. better mutual understanding.
• Criminalizing money laundering and devel- • An international forum could be held on
oping cooperative actions to track and prevent it. international violence and pornography—
REINVENTING GLOBAL GOVERNANCE—FOR HUMANITY AND EQUITY 103
whether in videos, television programming or tries, both good and bad, should be more clearly
interactive games and services—and on national recognized, so that policy can protect and
efforts to moderate and control these activities enhance their cultural and economic ﬂowering.
and safeguard children from their inﬂuence.
• New partnerships between governments, P RESERVING THE ENVIRONMENT
corporations, private voluntary associations and
other stakeholders should be developed. The Despite widespread public support for envi-
effects of global markets on local cultural indus- ronmental action, the driving forces of global-
ization still put proﬁt before environmental
protection, preservation and sustainability. The
Global crime—the international response international body charged with building a
bridge between environmental and trade pol-
The risk to the positive aspects of global- law enforcement budget may not seem a
ization posed by the growth of global orga- high priority, but short-term savings may icy, the World Trade Organization’s committee
nized crime has been recognized at the result in heavy long-term costs. on trade and environment, has focused mostly
highest levels: it was on the agenda for the The second principle is effective and on ﬁtting environmental concerns into existing
G-7 meeting in Birmingham a couple of appropriate regulation. When a political trade regimes, not on seeking a true synergy
years ago. Such recognition is critical, system changes from a centrally planned
between environment and trade as equal policy
because the response to global crime must economy or a police state to a liberal, free
be global, not national. market, democratic society, there are huge objectives. The committee sees its role as limit-
Con men operating out of Amsterdam pressures, from within and from the inter- ing unilateral state actions in the name of envi-
sell bogus US securities by telephone to national community, to remove oppressive ronmental protection to protect the trading
Germans; the operation is controlled by an regulations; but there is less push to replace
system—not as creating a paradigm shift from
Englishman resident in Monaco, with his them with the sort of legal framework and
proﬁts in Panama. Which police force institutions that have grown up over cen- a negative trade-environment relationship to a
should investigate? In which jurisdiction turies in societies that have long had such positive one, a relationship that promotes sus-
should a prosecution be mounted? There political systems. This is a dangerous mis- tainable trade, investment and growth.
may even be a question about whether a take. The committee has focused on some impor-
crime has been committed, although if all For example, encouraging an indige-
the actions had taken place in a single coun- nous banking system is an important devel-
tant questions: Should WTO members agree on
try there would be little doubt. opment goal, and bank secrecy legislation general exemptions for trade-restricting mea-
The ﬁrst principle of a global response to may seem a good short cut. But without a sures in multilateral environmental agreements?
crime is cooperation. Law enforcement strong bank regulatory framework, and an And how can eco-labelling schemes be pro-
agencies, police, prosecutors and intelli- institution with the muscle to impose it, the
tected and not classed as non-tariff trade barri-
gence services need to work with their oppo- result will be a ﬂood of dirty money followed
site numbers across borders, breaking down by bank failures. The end result is bailout ers? But other issues demand attention: How
what is often generations of suspicion and costs for the central bank and loss of inter- can trade measures encourage countries to
even enmity. This is not easy, but there are national market credibility for the future. remove the perverse subsidies for energy, chem-
precedents at the national level. A crime in Similarly, privatization without a strong icals and water that distort trade and damage the
the United States may be investigated by system of corporate law, and a judicial sys-
city, state or federal police; among the fed- tem that is an effective administrator and environment? And how can they lead countries
eral agencies may be the Federal Bureau of guarantor of its application, becomes a lot- to internalize the environmental costs of pro-
Investigation, the Drug Enforcement tery. Sometimes a sound enterprise, a good duction? Why not establish a “green round” on
Administration, the Secret Service, US Cus- local partner and management team, and international trade to coordinate joint actions on
toms and the Internal Revenue Service. consistent government regulation align to
eliminating environmentally damaging subsi-
These groups do not always get on with each produce a spectacular investment success.
other, but they have learned to cooperate to But more often cronyism in the privatiza- dies and internalizing environmental costs?
attack crime that cuts across their jurisdic- tion process and abuse of minority share-
tions and competencies. holder interests lead to failure, and the local NARROWING GLOBAL GAPS
Part of the suspicion that law enforce- courts offer little hope of redress.
ment agencies in the developed world have Comparing the goal of increasing eco-
of their counterparts elsewhere is based on nomic freedom with imposing new bureau- Nearly 30 years ago the Pearson Commission
corruption. The trafﬁc policeman in Mex- cratic contraints is an unequal battle. But report began with the recognition that “the
ico, the customs ofﬁcer in Nigeria, the pros- the liberalization of the economic and widening gap between the developed and the
ecutor in Russia may all face a choice political system must march in lock-step developing countries has become the central
between operating honestly or feeding their with the growth of laws and the institutions
family. When compared with the needs of that administer them. New freedoms bring
problem of our times.” Today, global inequali-
education and health care, support for the new responsibilities. ties in income and living standards have reached
grotesque proportions. The gap in per capita
Source: Helsby 1999.
income (GNP) between the countries with the
104 HUMAN DEVELOPMENT REPORT 1999
richest ﬁfth of the world’s people and those with trial countries and the poorest and least devel-
the poorest ﬁfth widened from 30 to 1 in 1960, to oped countries.
60 to 1 in 1990, to 74 to 1 in 1995. The marginal- As Professor Jan Tinbergen, the ﬁrst Nobel
ization of the least developed countries contin- Prize winner in economics, wrote a few years
ues, accelerating as a result of the Asian crisis. ago, “there should also be redistribution at the
Narrowing such gaps is the unlisted item on international level through development co- Extremes of inequality
the global agenda. Extremes of inequality per- operation. . . . As the world economy becomes
permeate and poison
meate and poison globalization and polarize increasingly integrated, so the redistribution of
many reasonable and desirable attempts to world income should become similar to that globalization and polarize
manage it better. The issues of global inequal- within well-governed nations” (Human Devel- many reasonable and
ity are too fundamental to be swept under the opment Report 1994, p. 88).
carpet. On the eve of the 21st century, with the desirable attempts to
newfound awareness of globalization’s possi- P ROMOTING FAIRER TRADE ,
manage it better
bilities, new approaches are needed: ESPECIALLY FOR THE POOREST COUNTRIES
• Taking consistent international actions to
support faster growth, and adopting stronger Both developing and developed countries
measures to support pro-poor growth in poorer need to do more to ensure greater beneﬁts for
• Removing constraints on poor countries in BOX 5.6
trade, investment and technology. Renegotiating Lomé—one size doesn’t fit all
• Refocusing aid to support poverty reduc- For almost 25 years this pioneering treaty of market access to Europe, reversing transfer
tion, especially in the poorest and least devel- development cooperation guaranteed the of payments from some ACP countries to
oped countries. African, Caribbean and Paciﬁc (ACP) the European Union.
states ﬁnancial aid and preferential market Under these plans, free trade areas, pri-
• Accelerating debt relief for the highly
access to Europe. The current Lomé con- vate investment and conditionality may
indebted poor countries. vention will expire in February 2000. The replace preferential market access and
These proposals are not new, but they are European Union and 71 ACP states are unconditional ﬁnancial aid. The European
rarely pursued with the energy and resolve engaged in negotiations to renew it. Union intends to maintain Lomé prefer-
required, nor with the clear recognition that the The first of four treaties under this ences for the 41 least developed ACP coun-
framework was signed in Lomé, the capi- tries. But the 30 other developing countries
extremes between the richest and poorest tal of Togo, in 1975. It started out with may be given the choice of forming a free
countries are counter-productive for the very high ideals. Its fundamental principles trade area with the European Union or
process of globalization. One of the main rea- called for equality between the partners, joining the General System of Preferences.
sons globalization stalled in the early 20th cen- respect for their sovereignty, mutual What can be done?
interest and interdependence and the • Europeans must not abandon their
tury was rising global inequalities.
right of each partner to determine its own commitments to the ACP states. They
Pro-poor growth is needed—both for political, social, cultural and economic should realize that Lomé applied one set of
reducing poverty and for making growth a policy options. policies to 71 different countries. This one-
stronger and more indigenous process. Particu- The European Union is suggesting sub- size-ﬁts-all approach eventually did not
stantial changes to the Lomé convention. work. A renewal of the Lomé treaty must
larly important is accelerating growth in the
European policy-makers argue that Lomé therefore recognize the political, economic
poorest and least developed countries, with did not work. They say that the convention and cultural diversity of the ACP states.
growth rates of at least 3% per capita main- did little to pull the ACP states out of • Previously, ﬁnancial support was given
tained for three decades. An important step poverty. Moreover, European policy prior- as a lump sum to ACP governments. A
would be to establish an international transfer ities have shifted. Donor fatigue, new part- future Lomé treaty should direct resources
ners in Eastern Europe and budgetary to promote speciﬁc sectors or to build insti-
mechanism to encourage resource ﬂows to poor constraints due to the strict Maastricht cri- tutions. This can be achieved only when
countries—through private investment and teria contributed to a change in European donor and recipient countries cooperate
through purposeful allocation of global rev- attitude towards the ACP states. In addi- closely.
enues derived from taxing pollution or charging tion, the European Union claims that Lomé • The European Union should pursue a
is not in accord with the rules of the World mix of policies. Free trade areas can bene-
for use of the global commons (see below).
Trade Organization. ﬁt sectors that can compete. More vulnera-
Another would be to create an international If the European Union’s plans are ble sectors, such as agriculture, should
task force to focus on possible actions to implemented, a large group of ACP states either receive ﬁnancial aid or be temporar-
address the widening gaps between rich and may experience a massive deterioration in ily exempted from trade liberalization.
poor countries, including setting time-bound Source: Kennan and Stevens 1997.
goals for narrowing the gaps between the indus-
REINVENTING GLOBAL GOVERNANCE—FOR HUMANITY AND EQUITY 105
developing countries in trade, improving mar- lations governing food safety, animal and plant
ket access and the terms of trade, especially for health and the safety of farm workers need to be
the poorest and least developed countries (box implemented in ways that minimize the risk
5.6). Trade liberalization can beneﬁt develop- that they will be used as protectionist
ing countries, and they should in principle be measures—say, by:
willing to engage in new multilateral negotia- • Devising multilateral standards and
tions. But before new global trade talks start, encouraging the spread of mutual recognition
developing countries must be assured that pre- and equivalency agreements.
vious agreements and promises will be kept. • Requiring product labels that include the
The Multi-Fibre Arrangement must be elimi- origin and attributes of each product.
nated, as promised by developed countries. • Ensuring credible regulatory agencies that
And the use of antidumping measures against are separate from those responsible for farm
the poorest countries must be curbed. support programmes.
Speeding the elimination of domestic agri- International support to help poor coun-
cultural support and export subsidies in the tries expand agricultural exports would offer
industrial countries would help ensure access triple beneﬁts. It would encourage production
to markets for agricultural products. And regu- in areas of the world with many comparative
advantages and much lower use of fertilizers
and pesticides than is typical in industrial coun-
Developing countries and trade— tries. It would help maintain crop and seed
active participation in the millennium round diversity. And it would encourage exports and
production as a step towards economic devel-
Five years after the end of the Uruguay seem to have overused their right to pol-
opment in poor countries.
Round, preparations for a new round of lute. If they want to continue to do so,
multilateral trade negotiations are under developing countries could link these A new round of trade negotiations—the
way. Negotiations might deal not only with property rights in trade negotiations and millenium round—is in the works (box 5.7).
the reduction of tariff and non-tariff barri- demand compensation. An aggressive Much is at stake, and developing countries need
ers in such critical areas as textiles and agri- pursuit of property rights could yield the to be ahead of the issues, not behind them.
culture. They could focus also on non-trade developing countries both potential eco-
issues such as environmental and labour nomic benefits and negotiating leverage.
standards and competition rules. • Win-win: environmental concessions REDUCING THE DEBT OF THE POOREST
Developing countries need to under- and trade liberalization. Broadening the COUNTRIES
stand these developments, be ahead and negotiating agenda to include issues such as
not behind them, identify areas of key inter- the environment does not have to be disad-
Slow progress in tackling the accumulated debt
est and help shape more forcefully the vantageous to developing countries. It can
global trade structure. Trade liberalization also open opportunities. Countries with of the 41 heavily indebted poor countries
can, after all, be a win-win situation. signiﬁcant environmental assets (rain (HIPCs) is one of the clearest examples of how
Developing countries could consider forests in Brazil, Cameroon, the Democra- globalization has been failing the poorest and
these policy and strategy options for the tic Republic of the Congo, Costa Rica,
least developed countries (box 5.8). For several
next round of multilateral trade negotia- Indonesia, Malaysia, Thailand) could make
tions: concessions to achieve beneﬁts in other years most commentators have agreed that the
• Review and implement existing agree- areas. In exchange for protecting or even debt of these countries is excessive and
ments before new agreements. Before rebuilding rain forests, developing coun- unpayable. Yet the actions have so far been
negotiators talk about such issues as envi- tries could ask OECD countries to level the minute in relation to the needs.
ronmental or labour standards, they need to playing ﬁeld in trade, investment or
make sure that all parties keep the commit- antidumping measures.
The debt burden has undermined growth,
ments made in the Uruguay Round. For • Together, if you can. Developing health and education. Only 2 HIPCs have
example, OECD countries need to imple- countries need to get better organized achieved growth rates of more than 2% per
ment the Agreement on Textiles and Cloth- and negotiate in groups. Their political capita since 1980, while 9 did so between 1965
ing to free developing countries from the leverage increased during the Uruguay
and 1980. Debt service payments exceed annual
regime of the Multi-Fibre Arrangement. Round. Today, developing countries
• Talk about all property rights. Prop- account for 30% of world trade. Regional expenditure on health and education in 9
erty rights include intellectual property or sectoral alliances may help developing HIPCs, and they exceed health spending in 29,
rights as well as rights to emit carbon into countries increase their standing in trade including 23 in Sub-Saharan Africa (table 5.1).
the atmosphere. Many rich countries negotiations. Tanzania’s debt service payments are nine times
Source: Whalley 1999. what it spends on primary health care and four
times what it spends on primary education.
106 HUMAN DEVELOPMENT REPORT 1999
Under the HIPC initiative, it takes six years especially for expanding basic health and edu-
for a country to become eligible for debt relief. cation and raising growth rates.
This period should be sharply reduced, by half or
more. The debt sustainability ratio—the amount A MULTILATERAL AGREEMENT
of debt that is deemed manageable by an ON INVESTMENT — FOR PEOPLE
indebted country—must also be lowered, from
200–250% of a country’s annual exports to 100% Negotiations on the Multilateral Agreement on
or less (table 5.2). Debt payments are deemed Investment collapsed—a casualty of unrecon-
bearable at 20–25% of a country’s annual ciled differences of philosophy among devel-
exports. This should be reduced to 10% or less. oped countries. More serious was the secrecy
In short, the poorest countries need more sup- surrounding the negotiations and the failure to
port and more breathing space to restore growth bring in all the countries involved. Negotiations
and accelerate human development. on a new agreement must start with a more
The sum required to fund the HIPC initia- equitable process and clearer acceptance of the
tive has been ofﬁcially estimated at $7 billion— need to achieve equitable results not just for
less than 5% of the $170 billion mobilized for capital—but for people.
East Asia and Brazil (though it is needed on The process of negotiating the agreement
grant not loan terms). One argument against will determine its success. Talks need to be
faster debt relief is that the resources for it open. Participation of developing countries
would have to come from other concessional and of civil society is crucial. National treat-
funds, “robbing Peter to pay Paul”. This need ment of capital must be tied to the concept of
not be. Debt relief for the poorest countries sustainable development. Most-favored-nation
could and should be ﬁnanced from new and principles for investment do not preclude
additional resources. These could come from
sales of IMF gold or new allocations of SDRs— BOX 5.8
even from special contributions, just as for the Debt—a need for accelerated action
bailout of the Long-Term Capital Management External debt continues to be a heavy burden period of six years of good performance
fund. By the test of human development, Sub- for developing countries. In 1997 the total before eligibility should be reduced to
Saharan countries and the other HIPCs deserve debt of developing countries reached almost three years or even less, provided debtor
more support. $2.2 trillion. Hardest hit have been the 41 countries work closely with the World
heavily indebted poor countries (HIPCs), 33 Bank and the IMF and follow agreed
of them in Africa. Their debt burden, $245 principles.
MORE AID , BETTER ALLOCATED , billion in 1996, drains public budgets, • In some cases partial or total debt for-
MORE USEFUL absorbs resources needed for human devel- giveness by the Paris Club is also needed.
opment and inhibits economic growth. Denmark’s cancellation of developing
Although ofﬁcial development assistance Since 1980 the debt of the HIPCs has country debt worth $635 million and Ger-
more than tripled, two-thirds the result of many’s debt initiative are leading examples
(ODA) has fallen since 1994 (table 5.3), there arrears unpaid or earlier debt. Moreover, the for OECD countries. Other industrial
are some signs of recovery. Six donor countries nature of debt has changed. In 1980 more countries have forgiven debt arising from
of 21 increased their ODA in 1997, Canada and than half of all debt was owed to private earlier aid support—but not all.
the United Kingdom by the most. And four creditors—in 1997 barely a ﬁfth. Today’s • Showing how debt payments squeeze a
debt crisis is about ofﬁcial debt—increas- country’s capacity to provide education
continue to exceed the 0.7% of GNP target by
ingly debt owed to multilateral institutions and health to all its children would help to
an easy margin—Denmark, the Netherlands, such as the International Monetary Fund bring home to the general public the wider
Norway and Sweden. The increases will help and the World Bank. The shift from private signiﬁcance of the debt problem—and the
offset the much faster decline in aid budgets in debt to ofﬁcial and multilateral debt opens urgent need for action.
the door for policy-makers to ﬁnd solutions • Cancellation of all debt of the most
relation to other public expenditures.
to the debt crisis. impoverished developing countries is the
Implementing the commitments to the least • An acceleration of debt forgiveness objective pursued by the Jubilee 2000 ini-
developed countries remains one of the highest under the HIPC initiative is essential. Too tiative. Sponsored by many churches and
priorities, especially the commitment that each few of the poorest countries are eligible NGOs, the initiative links the year 2000
donor allocate a minimum of 0.15% of its GNP under the initiative, which may leave some with the biblical concept of debt
countries in a very tight spot. The envisaged forgiveness.
to these countries. Few of the poorest countries
have much chance of receiving substantial for- Source: UNCTAD 1998b; UN 1998b.
eign direct investment, so they depend on aid,
REINVENTING GLOBAL GOVERNANCE—FOR HUMANITY AND EQUITY 107
codes of conduct for big corporations. Gov- deal from technology’s breakthroughs.
ernments must retain full discretion to set envi- • Global governance of intellectual property
ronmental and labour standards. rights under the agreement on Trade-Related
Aspects of Intellectual Property Rights, or
NARROWING TECHNOLOGY GAPS TRIPS, must be broadly and fully reviewed to
create a system that does not block developing
In an era of sweeping technological advance, it countries from knowledge or threaten food
is inexcusable that human poverty should per- security, indigenous knowledge, biosafety and
sist—and that the technological gaps are widen- access to health care.
ing. Poor people and countries need a better • The TRIPS agreement must recognize the
rights of local communities to their traditional
and indigenous knowledge—and encourage
Eight heavily indebted poor countries, 1995 fair and just compensation for the use of this
Public expenditure knowledge.
External debt On On On • Consumers and producers in developing
As Debt service education health military countries must be protected. Price controls
US$ % of as % of (% of (% of (% of
Country billions GNP GNP GNP) a GDP) a GDP) should be permitted or encouraged on certain
patented products for production by poor
Nicaragua 10 670 19 4 4 2
Angola 12 501 20 .. 4 3 farmers and for basic health and education.
Guyana 2 394 20 5 .. 1 Price controls are especially important for
Guinea-Bissau 1 380 7 .. 1 3
Congo 6 350 11 6 2 3 pharmaceutical products, with treatments for
Mozambique 6 327 9 6 5 5 HIV/AIDS an obvious example.
Rep. of the 13 242 0.5 .. 0.2 0.3 • Governance of global communications—
Mauritania 2 231 12 5 2 3 especially the Internet—must be broadened to
include the very strong interests of developing
a. Data are for most recent year available during 1990–95. countries in decisions on Internet protocols,
Source: World Bank 1998c.
taxation, domain name allocation and tele-
External debt of the 41 heavily indebted poor countries, 1992–96 • Public investment is needed in technolo-
1992 1993 1994 1995 1996
gies to meet the needs of poor people and
countries, from drought-resistant, robust
Total debt (US$ billions) 229 235 247 254 245
Debt service (US$ billions) 10 8 9 12 11
seeds to humidity-resistant, solar-powered
Debt service/exports (%) 21 17 19 20 16 computers.
Debt stocks/exports (%) 461 495 493 431 344
• New funding mechanisms should be cre-
Source: UN 1998b. ated to ensure that the information revolution
leads to human development, not human polar-
ization. Two proposals—a bit tax and a patent
Who gets aid? tax—would raise funds from those who already
(ofﬁcial development assistance in current US$ billions, except where otherwise speciﬁed) have access to technology and use them to help
1988 1993 1994 1995 1996 1997 extend the beneﬁts more widely.
Net ODA 48 56 60 60 58 50
Bilateral 37 39 41 41 39 32 SPECIFIC ACTIONS TO STRENGTHEN THE
Multilateral 11 17 19 19 19 18 BARGAINING POSITION OF POOR COUNTRIES
Net ODA (1995 US$ billions) 61 59 62 60 57 48
Share of ODA to least developed IN GLOBAL GOVERNANCE
countries (%) 28 27 27 28 24 27
ODA to least developed countries 13 15 16 17 14 14
ODA to ﬁve largest recipients Large inequalities of economic power and
China 2.5 3.3 3.3 3.5 2.6 2.0 inﬂuence are embedded in most international
Egypt 1.9 2.4 2.7 2.0 2.2 2.0
India 2.4 1.5 2.3 1.7 1.9 1.7 institutions. Often this is justiﬁed on the
Israel 1.5 1.3 1.3 0.3 2.2 .. grounds that those with the largest stake in the
Bangladesh 2.2 1.4 1.8 1.3 1.3 1.0
outcomes have most to lose—and that they
Source: OECD 1996a and 1999a. must have greater inﬂuence to ensure “respon-
108 HUMAN DEVELOPMENT REPORT 1999
sible” decisions. If stake means ﬁnancial out- nance. Decision-making in international trade
come, this may be true. But if stake refers to the and ﬁnance needs to be more transparent, and
number of people affected, often hurt, this jus- independent evaluations of international pub-
tiﬁcation looks very thin (table 5.4). lic policies can be a ﬁrst step towards increased
Voting arrangements need to be revised—for accountability. The World Bank’s Operations
fairness, efﬁciency and political viability. If they Evaluation Department and the IMF’s inde-
are not, those shut out may change their minds pendent external evaluation of its Enhanced
about the virtues of participating in the system. Structural Adjustment Facility programmes
There must also be some agreement on the need are ﬁrst steps in the right direction. Other
to give much more attention to the interests of the priorities:
poor countries and, over time, to narrow the gaps • Establishing an ombudsman mechanism
between them and the better-off countries. within the WTO, World Bank and IMF to inves-
Improving institutional accountability is a tigate cases of alleged bias and injustice in their
priority in the reform of international gover- operations.
Global institutions and their membership
Share of world Share of world
Institution Membership 1997 1997
P-5 Security Council China, France, Russian Federation, United Kingdom, 40.9 30.6
G-7 Western economic powers Canada, France, Germany, Italy, Japan, United Kingdom, 64.0 11.8
G-10 Western economic powers Belgium, Canada, France, Germany, Italy, Japan, Netherlands, 67.8 12.5
Sweden, Switzerland, United Kingdom, United States
G-22 Western economic powers Argentina, Australia, Brazil, Canada, China, France, Germany, 81.7 64.8
and emerging markets Hong Kong (China, SAR), India, Indonesia, Italy, Japan, Republic of
Korea, Malaysia, Mexico, Poland, Russian Federation, Singapore,
South Africa, Thailand, United Kingdom, United States
G-24 Major developing countries Algeria, Argentina, Brazil, Colombia, Democratic Republic of the Congo, 8.9 34.6
Côte d’Ivoire, Egypt, Ethiopia, Gabon, Ghana, Guatemala, India, Islamic
Republic of Iran, Lebanon, Mexico, Nigeria, Pakistan, Peru, Philippines,
Sri Lanka, Syrian Arab Republic, Trinidad and Tobago, Venezuela, Yugoslavia
G-77 Developing and transition Afghanistan, Algeria, Angola, Antigua and Barbuda, Argentina, 16.9 76.0
countries Bahamas, Bahrain, Bangladesh, Barbados, Belize, Benin, Bhutan,
Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam,
Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, Central
African Republic, Chad, Chile, China, Colombia, Comoros, Congo,
Democratic Republic of the Congo, Costa Rica, Côte d’Ivoire, Cuba,
Cyprus, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt,
El Salvador, Equatorial Guinea, Eritrea, Ethiopia, Fiji, Gabon, Gambia,
Ghana, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti,
Honduras, India, Indonesia, Islamic Republic of Iran, Iraq, Jamaica,
Jordan, Kenya, Democratic People’s Republic of Korea, Kuwait, Lao People’s
Democratic Republic, Lebanon, Lesotho, Liberia, Libyan Arab Jamahiriya,
Madagascar, Malawi, Malaysia, Maldives, Mali, Malta, Marshall Islands,
Mauritania, Mauritius, Federated States of Micronesia, Mongolia,
Morocco, Mozambique, Myanmar, Namibia, Nepal, Nicaragua, Niger,
Nigeria, Oman, Pakistan, Occupied Palestinian territory, Panama,
Papua New Guinea, Paraguay, Peru, Philippines, Qatar, Romania, Rwanda,
Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines,
Samoa (Western), São Tomé and Principe, Saudi Arabia, Senegal, Seychelles,
Sierra Leone, Singapore, Solomon Islands, Somalia, South Africa, Sri Lanka,
Sudan, Suriname, Swaziland, Syrian Arab Republic, United Republic of
Tanzania, Thailand, Togo, Tonga, Trinidad and Tobago, Tunisia, Turkmenistan,
Uganda, United Arab Emirates, Uruguay, Vanuatu, Venezuela, Viet Nam,
Yemen, Yugoslavia,a Zambia, Zimbabwe
a. Cannot participate in the activities of the G-77.
Source: Human Development Report Ofﬁce.
REINVENTING GLOBAL GOVERNANCE—FOR HUMANITY AND EQUITY 109
• Encouraging the involvement, formal or Developing countries can do much more to
informal, of NGOs and non-ofﬁcial profes- strengthen their own bargaining capacity and
sional groups in the discussion and review of positions. Priorities here include:
proposals and policies, especially those affect- • Building and strengthening third world
ing groups underrepresented in the formal and regional collective organizations. There
structures (box 5.9). is no developing country group equivalent to
• Adapting legal aid to provide support to the G-7 or to the OECD, even though at times
and strengthen the bargaining position of weak there have been efforts to strengthen such bod-
countries. Legal aid and capacity-building pro- ies as the G-15, the G-24 or even the G-77.
grammes for the poorest countries could • Using regional economic arrangements
increase the participation of poor countries in to develop and coordinate common positions
international trade and ﬁnancial organizations, in negotiations on economic issues. In Latin
allowing them to establish missions and hire America Mercosur and the Andean Commu-
experienced staff. Some Latin American coun- nity have already proved useful in establishing
tries, backed by two or three members of the negotiating positions during trade talks with
European Union, ﬂoated the idea of funding a the United States, Canada and the European
legal centre to help developing countries pre- Union. In the 1990s the number of regional
pare or defend cases under the WTO’s dispute trade agreements increased signiﬁcantly.
settlement system. Greater efforts are needed, especially in Sub-
• Setting some long-term goals and broad Saharan Africa, to transform regional or subre-
guidelines for narrowing global income gaps gional economic integration schemes into
and securing larger shares of the beneﬁts from strong platforms of common interest.
trade and ﬁnancial agreements for poor coun- • Developing regional initiatives on ﬁnan-
tries and people. cial and monetary matters. Such initiatives
could focus on providing early warning of
ﬁnancial crises, supplementing international
NGOs and global advocacy resources and formulating structural adjust-
During the 1970s activists were urged to NGOs have put pressure on all the UN ment programmes while encouraging a move
“think globally and act locally”. Over the agencies as well as governments to follow to peer review of national programmes and
past 10–15 years a vibrant NGO commu- up on the goals and commitments of the ensuring that the programmes relate more
nity has emerged in the South with a pro- global conferences. closely to recipient countries’ economic and
found impact on development practice and For the Kyoto protocol, NGOs have
thinking. Alternative NGO-sponsored con- been pushing for an agreement that will
ferences took place alongside all the global have a significant impact on global green- • Ensuring stronger professional support to
UN conferences of the 1990s. Activists from house gas emissions rather than one that the poorest and least developed countries in
both South and North joined to lobby gov- settles for cosmetic changes. At the Kyoto negotiations, especially those relating to trade,
ernments and international agencies to give meeting NGOs pressured national gov-
investment and growth prospects and to long-
greater priority to the world’s poor and ernments and multilateral agencies to
marginalized. release a 10-point call for action. The dec- term institutional restructuring. The G-24
In response to lobbying against some of laration forms the basis for ongoing NGO research programme offers some support to
its policies, the World Bank reached out to advocacy and lobbying on climate developing country representatives and deci-
its NGO critics, which now play a much big- change. Similar declarations have been sion-makers in trade and ﬁnance, but it is still
ger role in Bank-funded projects. Other submitted by a group of NGOs from
changes include the appointment of NGO- Eastern and Central Europe. Friends of primarily donor-funded and has no full-time or
liaison ofﬁcers in most Bank country ofﬁces the Earth and the World Wildlife Fund on-site staff. It merits fuller support from devel-
and a greater recognition of the importance for Nature have been active in raising oping countries themselves.
and input of NGOs to the Bank’s work. awareness about how private sector con-
NGOs have also held the Bank accountable cerns appear to be dominating the discus-
to its own procedures and policies. NGO sions on how the protocol is to be
submissions to the World Bank Inspection implemented. They have also raised con- TO BUILD THE GLOBAL ARCHITECTURE
Panels on the Arun III Hydroelectric Pro- cerns that the final outcome will have no REQUIRED FOR THE 21ST CENTURY
ject in Nepal weighed heavily in the Bank’s meaningful impact on greenhouse gas
decision not to ﬁnance the project. emissions.
With the new challenges of globalization, and
Source: Human Development Report Ofﬁce.
the need to ensure stronger action on old prob-
lems and new, the time has come to rethink the
110 HUMAN DEVELOPMENT REPORT 1999
global architecture. Some of the key elements previous decade: high-level global conferences
of an improved international architecture: to establish goals and commitments, internal
• A stronger and more coherent UN system, reforms to increase focus and efﬁciency, the
with greater commitment from all countries. creation of a UN Development Group bringing
• A global central bank. together the development agencies to
• A world investment trust with redistribu- strengthen ﬁeld-level action and initiatives to
tive functions and transfer mechanism. encourage closer working relationships with
• A world environment agency. the World Bank and the IMF.
• A revised World Trade Organization, fairer In parallel with these, the Economic and
and with an expanded mandate. Social Council (ECOSOC) has adopted several
• An international criminal court with a
broader mandate for human rights. BOX 5.10
• A broader United Nations, including a two- Global public goods—the missing element
chamber General Assembly to allow for civil Earlier we thought the ozone layer was out • Transnational actors. In business
society representation. there. But now it is in here, a key issue on and civil society the number of transna-
Earlier Human Development Reports rec- the national policy agendas of most coun- tional actors has been growing. And these
ognized the need for major changes in global tries. The reason is that to avoid further actors are placing more pressure on gov-
depletion of the ozone shield, the use of ernments to harmonize policy—such as
governance if human development was to be chloroﬂuorocarbons has to be reduced in standardizing market rules for banking
achieved on a global scale. The recent crises every country. The same point can be made supervision or recognizing universal hu-
underscored this need and made people and gov- for the atmosphere: energy use has to man rights.
ernments more aware of the case for fundamen- change everywhere to reduce the risk of These trends turn many national
global warming. public goods and bads into global public
tal changes—and more ready to consider them. Conversely, health, employment and goods and bads—and place global con-
New and stronger international institutions equity, previously thought to be quintes- cerns, notably those about the natural
of global governance can be seen as global pub- sential domestic concerns, now ﬁgure on global commons, on national policy
lic goods. At the national level, public goods international policy agendas. Take the 1995 agendas. So, the number of global public
World Summit on Social Development, goods—non-rival and non-excludable—
have been recognized as vital when the market
which focused on issues of poverty, is growing. Non-rivalry means that one
has neither the incentive nor the mechanisms to employment and social cohesion. person’s consumption of a good does not
meet a public need. With growing globaliza- Why this intermingling of concerns and detract from another’s enjoyment of it.
tion, international public goods are now agendas? Non-excludability means that it is difficult
needed for similar reasons (box 5.10). • Open borders. While borders continue and costly, if not impossible, to prevent a
to be important, they have become porous person from enjoying a public good once
This new perspective is much more than a as a result of falling tariffs, loosening capi- it exists. Peace is one such non-rival, non-
change of terminology. To recognize the need tal controls and spreading information excludable public good.
for global goods is to accept the importance of technology. Openness allows global goods Today’s policy-making is ill equipped
actions of global governance beyond the and bads to travel with ever-greater ease. to handle today’s global public good issues.
So, good health, reduced greenhouse gas Three major policy deﬁcits exist:
capacity of individual countries to provide, to
emissions and peace and security in all • A jurisdictional gap—While the policy
establish a rationale for new forms of financial countries matter even more. issues are global in nature, policy-making is
support that countries need to ensure but to • Systemic risks. International financial still primarily national in focus and scope.
recognize also that without special efforts markets produce boom and bust cycles • A participation gap—While we are liv-
such support may not be forthcoming. These and present inherent risks. If global warm- ing in a multi-actor world, international
ing is allowed to proceed, we may face cli- cooperation is still primarily intergovern-
issues become matters for political advocacy matic changes with as yet difficult to mental.
and education on globalization, in which all predict consequences. And if global • An incentive gap—While cooperation
countries have a role and a stake. Five basic inequity continues unchecked, the global works only if it offers a clear and fair deal to
elements are needed in a new international social fabric could come under severe all parties, today’s international coopera-
strain. Because of the growing number of tion is often stalled by concerns about
architecture of global economic governance. systemic risks, the international commu- equity and fairness.
nity faces the challenge of staying within Sustainable, broad-based development
STRENGTHEN THE UNITED N ATIONS SYSTEM , limits (sustainable pollution levels), depends on closing these three gaps—on
GIVING IT GREATER COHERENCE TO RESPOND achieving specific targets (for poverty restocking the toolkit of policy-makers to
reduction) or providing risk insurance (for equip them for cooperating in the provision
TO BROADER NEEDS OF HUMAN SECURITY
countries affected by financial contagion). of global public goods.
Source: Kaul, Grunberg and Stern 1999.
More actions have been taken in the past few
years to strengthen the UN system than in any
REINVENTING GLOBAL GOVERNANCE—FOR HUMANITY AND EQUITY 111
new ways of working, including holding joint • For clear agreement on a division of labour
meetings with the IMF–World Bank Develop- among the United Nations, the World Bank
ment Committee and inviting distinguished and the IMF.
specialists to address the council. These have The issues in reforming global governance
been important for enlivening debate and are a good starting point. Because the issues are
improving relevance in ECOSOC—but the so wide-ranging, a joint committee could be set
council still has not been given the status of up at the highest level to steer discussions and
senior decision-making body on economic and negotiations, recognizing that governments
social matters as envisaged by its founders. Col- will probably choose to pursue most matters in
lective decision-making on economic and social existing institutions. But to get legitimacy and
matters remains with a variety of other bodies— balanced representation in the ﬁnal result, the
the G-7, the World Bank, the IMF, the WTO. United Nations will have to be involved in the
Keynes’s original proposal
As a result, global decision-making still lacks overall process and the ﬁnal decision-making.
was that the global coherence and geographic balance, with key
decisions made in different bodies and no clear MOVE TO A GLOBAL CENTRAL BANK
monetary authority should
mechanism to bring the elements together.
have access to resources Various suggestions have been made to rem- Just as countries need central banks, so the
edy this. Earlier Human Development world needs a central bank in the 21st century.
equivalent to 50% of
Reports—and the Commission on Global Gov- The recent establishment of the European Cen-
world imports ernance in 1995—proposed an economic secu- tral Bank demonstrates the perceived need
rity council, with equal numbers of developed among some of the richest industrial countries.
and developing countries and veto powers in A world central bank would help stabilize
each group to build conﬁdence. Some have sug- global economic activity by performing several
gested that the existing ECOSOC should set up vital functions:
an executive committee with delegated powers • Acting as lender of last resort.
for decision-making on certain matters or split • Regulating ﬁnancial institutions and ﬂows.
into two bodies, one for decision-making on eco- • Calming ﬁnancial markets when they
nomic matters and the other for social matters. become jittery or disorderly.
Other mechanisms would be possible, • Creating and regulating new international
depending mostly on what could command a liquidity.
political consensus. Three critical needs: Enlarging the mandate of the IMF would
• For a broad consensus among industrial be one approach, though this would need to be
and developing countries, rich and poor, and accompanied by measures to ensure greater
for a stronger and more open decision-making sensitivity to human concerns and broader per-
process on next steps in economic and social spectives on economic and social policy.
issues of global governance. Another would be to establish a world ﬁnancial
• For national governments to work out authority.
arrangements to harmonize their national posi- The Asian crisis has demonstrated the need
tions and representation in the institutions of for a global monetary authority to have access to
global government. Today, global management much greater ﬁnancial resources. Keynes’s orig-
suffers because many countries lack coherence inal proposal was that the global monetary
between positions taken by their ﬁnance min- authority should have access to resources equiv-
istries (which generally represent them in the alent to 50% of world imports. The US counter-
Bretton Woods institutions), their foreign min- proposal was for 15%. Even with the special
istries (which generally represent them in the efforts during the recent crisis, IMF resources
United Nations in New York) and other min- remain less than 3% of world imports.
istries (which represent them in the World Several mechanisms are available to expand
Health Organization, Food and Agriculture global ﬁnancial resources, including a renewed
Organization, UNESCO, International Labour issue of special drawing rights and agreements
Organisation and other bodies of the United with the main central banks to permit enlarged
Nations). swap arrangements. Quick access to funding
112 HUMAN DEVELOPMENT REPORT 1999
may be as important as the size of the resources The Global Environment Facility (GEF),
available. Procedures to achieve this need to be established in 1991, is a poor cousin to these
explored, such as advance agreements on provi- ambitious plans. Jointly implemented by the
sional lines of credit. World Bank, UNDP and the United Nations
Environment Programme (UNEP), the GEF
CREATE A GLOBAL INVESTMENT TRUST AND provides funding aimed at achieving environ-
TRANSFER MECHANISM mental beneﬁts in four areas: climate change,
loss of biodiversity, pollution of international
There is an urgent need for new mechanisms to waters and depletion of the ozone layer. At Rio
generate additional ﬂows of resources to poor the scope of the GEF’s funding was broadened
developing countries as well as new funding for to include land degradation, primarily deserti-
global public goods. Private investment ﬂows ﬁcation and deforestation, where this is linked
These proposals could
are important, but experience shows two major to the four focal areas. Since 1992 some $2 bil-
problems. First is their volatility, especially lion has been pledged for activities supported improve the operation of
portfolio ﬂows. Second is the tendency for for- by the GEF.
the global economy and
eign direct investment to be concentrated in a Relative to today’s global economy—and
small number of developing countries. In 1997 the global challenge of sustainability—present generate billions of
almost 70% of all foreign direct investment to structures and levels of global support are
dollars a year
developing and transition economies went to minuscule. Needed is a world environment
just 10 countries. agency, possibly developed from UNEP, with
There are several possible ways to generate much larger resources and broader functions:
such additional revenues: • To oversee the global environment, pre-
• Mobilize resources as a by-product of rev- senting reports and posing issues for review and
enues raised from polluter-pays charges on policy-making.
global pollution. • To broker deals.
• Charge rents or royalties on the use of such • To serve as a clearing bank.
“global commons” as under-seabed mineral One important focus of that agency would
resources or radio waves. be to encourage the removal of perverse subsi-
• Introduce taxes on such items as interna- dies and shift the resources released to direct
tional air tickets. support of environmental protection and other
• Implement the Tobin tax proposal—to levy measures (including employment creation). An
a charge on short-term ﬁnancial movements Earth Council study estimated that developing
and restrain volatile ﬂows of short-term and transition economies spend $220–270 bil-
ﬁnance. Some of the proceeds could be lion a year on such perverse subsidies, mostly
invested in poor countries. for energy and water. Some estimates suggest
• Blend concessional ﬁnance with private an even higher ﬁgure. Massive resources are
lending and make the proceeds available as a clearly being wasted, and there is a strong case
third window for middle-income countries. for beneﬁcial reallocation.
Separately or together, these proposals could For its clearinghouse functions, the agency
improve the operation of the global economy would oversee trade in permits for greenhouse
and generate billions of dollars a year. gas emissions, along the lines explored in the
Clean Development Mechanism proposed in the
CREATE A WORLD ENVIRONMENT AGENCY Kyoto and Buenos Aires climate conferences.
Emission rights could be borrowed or lent, but
The Earth Summit in Rio de Janeiro in 1992 esti- not sold—thus keeping the market competitive
mated the cost for developing countries to adopt and avoiding any risk that developing countries
sustainable development practices at $600 bil- might lose long-term control over their rights. In
lion a year, of which $475 billion would need to addition to promoting environmental sustainabil-
come out of their own resources and $125 bil- ity, the clearinghouse would be a new mechanism
lion from new and additional international for mobilizing additional ﬁnancial resources for
resources. developing countries, especially the poorest.
REINVENTING GLOBAL GOVERNANCE—FOR HUMANITY AND EQUITY 113
Environmental governance should also be Achieving a comprehensive global com-
improved—by reviving the proposal that the petition policy might not be feasible, but
Trusteeship Council of the United Nations be progress could be made on several fronts.
given a new mandate to preside over issues • Agreements could provide for interna-
relating to the use and protection of the global tional oversight of the implementation of
commons, guided by concern for the security domestic competition policy rather than for
of the planet. international rules.
• An international agreement could be lim-
MAKE THE WORLD TRADE ORGANIZATION ited to the issue of price discrimination and
FAIRER AND GIVE IT A MANDATE OVER predation, which would allow the elimina-
MULTINATIONAL CORPORATIONS tion of antidumping rules.
• There may be opportunities for increased
People in all parts of the
The World Trade Organization, still on an cooperation through bilateral and regional
world need to join in the upward trajectory following its creation in 1995, agreements where differences in antitrust
marks a major step forward from its predecessor, laws are smaller. A multilateral agreement
debate and to make clear
GATT. It has established a rule-based system for could be negotiated to lay out a set of mini-
their interests and monitoring international trade and for settling mum standards for national policies in areas
concerns disputes. More than 130 countries now belong to of international consensus.
it. And its voting system offers fairer representa- One strong reason for adopting an inter-
tion than that of the Bretton Woods institutions. national agreement on competition policies
But it is far from adequate, given the long- is to eliminate antidumping actions, initiated
term priorities for improving the situation of when countries are deemed to be dumping or
developing countries. And although its playing selling below cost.
ﬁeld is apparently more level, the very unequal
size of the players often pits Gulliver against a ALL THESE ACTIONS BEGIN WITH PEOPLE
Other functions for the WTO need to be The world is rushing headlong into greater
explored in the long run. Multinational corpo- integration—driven mostly by economic
rations are involved in more than 60% of world forces and guided mostly by a philosophy of
trade and dominate the production, distribution market profitability and economic effi-
and sale of many goods from developing coun- ciency.
tries, especially in the cereal, mining and tobacco Much debate is under way—but it is too
markets. About a third of world trade is con- narrowly focused, too geographically unbal-
ducted as intraﬁrm trade within multinational anced and driven too much by economic and
corporations, bypassing altogether the free play financial interests. People in all parts of the
of genuine market competition. The mandate of world need to join in the debate and to make
the WTO needs to be expanded to give it anti- clear their interests and concerns. The
monopoly functions over the activities of multi- process of reinventing global governance
national corporations, including production, must be broader, and human development
working in close collaboration with national can provide a framework for this explo-
competition and antitrust agencies. ration. It is time to change.
114 HUMAN DEVELOPMENT REPORT 1999