Reinventing global governance— for humanity and equity

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					CHAPTER 5

              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
     BOX 5.1
                                                                                                      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
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,
                                                     BOX 5.2
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:

                                                                      SPECIAL CONTRIBUTION

                                                          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.
many ways.
                                                       Source: OECD 1999a.


                                                        BOX 5.4
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
Stronger regional
                             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
strengthening financial
                             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
                                                                                                            intertwined—but too
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.
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
  BOX 5.5
                                                                                                      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
  BOX 5.7
                                                                                                    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
  TABLE 5.1
  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.
  Congo, Dem.
     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-
  TABLE 5.2
                                                                                                                         phony costs.
  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
  TABLE 5.3
  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.

  TABLE 5.4
  Global institutions and their membership
                                                                                                                             Share of world   Share of world
                                                                                                                                  GDP           population
                                                                                                                                  (%)              (%)
  Institution                                          Membership                                                                1997             1997

  P-5        Security Council                          China, France, Russian Federation, United Kingdom,                        40.9             30.6
                                                       United States

  G-7        Western economic powers                   Canada, France, Germany, Italy, Japan, United Kingdom,                    64.0              11.8
                                                       United States

  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
  BOX 5.9
                                                                                                  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
                                                                                                  financial systems.
  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-
                                                                                                  START NOW
  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
                                                     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
                             single Lilliputian.
                                  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