Reinventing Global Governance

By John C. Hulsman, Ph.D., and Rem Korteweg, Ph.D.

The Disastrous Present

It is time to face facts; the institutional organizations that buttressed the post-1945 system are simply not working anymore. Whether one is a starry-eyed advocate of these organizations being the pivotal fulcrum of global governance, or warily views them as the haven of bossy, unelected technocrats trying, without having the requisite power, to force specific norms on the rest of the world whether one is pained by their failure or cheered by itthe descriptive analysis must be the same. The apologists for international institutions once said that a post-Cold War world, freed of superpower competition, would allow these organizations to flourish. This has demonstrably not been the case. Instead at every turn the Bretton Woods institutions and others exhibit terminal dysfunction.

The United Nations continues to be a grave disappointment. Driven by new great power rivalries (with China as well as Russia often blocking or more often watering down western resolutions), the UN Security Council (UNSC) seems even more sclerotic than during the bad old days of the Cold War. Worse, the Councils membership does not remotely reflect the power realities of 2010. What sort of time warp is the UN living in wherein India, Brazil, Germany, and South Africa do not have permanent seats? So long as there is this massive global power disconnect, do not expect the rising powers to take the UN very seriously.

Membership issues are also the base problem of the G8/G20. Longremoved from its heyday of the mid-1980s, when the Plaza Accord between Japan and the US truly regulated (the then) the worlds greatest currencies, todays G8 is an institution in search of a raison detre. This club of great western economic powers (plus Japan) is too small to in todays more diffuse geo-economic world, to be able to regulate much of anything. As is so often true of these institutions as

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they lose relevance, the G8 instinctively (and disastrously) tried to expand its issues mandate, hoping to happen upon a new reason for being. In this manner, the G8 proclaims to take an interest in almost everything; as a result it is important in almost nothing.

But if the G8s narrow membership is its fatal flaw, the G20 (its replacement) has a diametrically opposed problem; its membership is much too broad. While it is refreshing to see the G20 focus on a specific themeglobal geoeconomics and tending to the aftermath of the Great Recessionand while its membership (including as it does China, India, South Africa, Brazil, and other rising powers) actually reflects the messy headwaters of multipolarity, reaching quick, decisive outputs is next to impossible amongst its very large membership. It is hard to think of getting twenty individuals to agree on an ice cream flavor, let alone coercing a score of countries (coming from very different economic situations) to agree to regulate anything of substance. Instead bland communiqus are agreed to, networking proceeds apace, and solemn promises are intoned that progress is being made and everyone looks forward to meeting again.

And nothing much gets done.

The Bretton Woods economic institutions are in no better shape. Not only are the IMF and World Bank showing their age, the Washington consensus they have underwritten for so long is presently under definite intellectual threat. These financial institutions offered long-standing one-size-fits-all remedies (that states in financial peril are bailed out in return for tied help involving austerity budgets, privatizations, and promises of clean government). This is being challenged by the greatest rising power of them all.Beijing.

In fact, over the past two years, China has alone distributed more aid to developing countries than either of the two veteran agencies set up for this purpose. But Chinaitself a zealous guardian of its sovereigntyexacts no pledges of good government from would-be beneficiaries. If aid is tied at all to the developing world, it is in the requirements that the recipients use Chinese firms to

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complete aid projects; but corruption, rule of law, and how the developing states actually organize their own economies, are matters of indifference to Beijing. It is little wonder that much of the world prefers Chinas non-terms to the (perceived) neo-colonial lecturing of technocrats in far off Washington.

Equally dismally, as is true with the UN and G8, the voting weights of the IMF and World Bank reflect a bygone era; why should China take the IMF seriously when (until recently) its voting weight was less than the Benelux countries? So in terms of both ideology and membership, neither Bretton Woods institution looks fit for purpose at the dawn of the far different multipolar era.

Nor has the World Trade Organization (WTO) lived up to its promise. Rather, like waiting for Godot, the next comprehensive global free trade round is always just beyond the next hill, but never actually reached. Instead, regional trade deals (whose preference system often distorts global trade) are proliferating in the absence of a comprehensive deal. The present uncompleted Doha Round has been so long in the making that a dangerous dynamic is emerging: decision-makers the world over are getting used to the fact that global free trade has passed its high water mark, despite the fact that past rounds have brought economic liberation to millions.

Two other uniquely important (and uniquely western) institutions are also in a good deal of difficulty: the North Atlantic Treaty Organization and the European Union. These cornerstones of Western power both seem unwilling or unable to quickly adapt to the demanding rigors of the twenty-first century. For NATO years of enervating debates about burden sharing and power sharing were always trumped by the growl of the Russian bear next door. To paraphrase Benjamin Franklin, it was always better to hang together than to hang separately, however paltry were European commitments to the common defense.

But without the cement of a unifying enemy, two major problems came to plague the alliance, one old and one newly minted. As was true for other organizations, NATO has spent a decade and a half looking for a new mission following its triumph in the Cold War. Early arguments that NATO must go out of

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area or go out of business, and starry-eyed desires to make NATO the new global sheriff have given way to the realities of Iraq (where the alliance politically divided amidst much acrimony) and Afghanistan (a hard slog for which almost no one retains any enthusiasm). While the mission in Kabul will surely be seen through until 2014, given severe (and unthought-of) economic strictures on both sides of the Atlantic, the alliance fighting another war of choice is almost inconceivable. But if NATO does not go out-of-area, many of its strongest supporters say it will simply no longer have any reason for existing.

NATOs second problem is the return of the old ghost of burden sharing. Decades of American groaning did not change the basic arithmetic that Washingtons European allies did not contribute as much as America to the common defense, even as a percentage. Now with a once-in-a-generation economic crisis and the lack of a common enemy, this difference has become a chasm. In 2010, according to NATO, the US spent around 5.5% of its GDP on defense. Amongst great European powers, only Britain and France even met the alliances relatively paltry target 2% of GDP goal for spending, with Poland spending just under 2% Germany an unserious 1.3%, and Spain and Italy remarkably even less.

Increasingly, given Americas own economic woes and the lack of a common enemy, many in America are questioning why NATO ought to be maintained for free-riding, rich economic competitors. Europe has every right (given its own economic problems) to spend what the Venetian Republic did on defensenothing. But that is a choice, a decision to matter less across the board globally in order to shore up badly hit European economies. Ominously, in turn America may match this shrug as to the common defense, with a corresponding lack of interest in defending Europe from a nonexistent enemy.

Likewise, the most successful international institution, the European Union, has fallen upon hard times. Often seen as Europes ticket back to global great power status, the current sovereign debt crisis has Brussels fighting for its economic and political life. By championing the disparate euro projectwhereby a common currency was built without corresponding common fiscal and taxation

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structuresthe rather nave thought was that over time Europes economic outliers (such as Greece, Portugal, Italy, and Spain) would adopt German-style fiscal rigor, beginning to march in lockstep with Berlin. Instead, the outliers used their new far stronger currency to go on a spending binge; they adopted Germanstyle social programs without German-style productivity.

At the same time German and French banks blindly lent money to the profligates, assuming somehow it would all come right in the end. To put it mildly, it hasnt.

Instead a sovereign debt and banking crisis has morphed into Europes greatest political crisis, wherein northern states such as Germany are experiencing bailout fatigue (How many more times do we need to use our money to bail out the spendthrifts?) just as southern states such as Greece experience austerity fatigue (How many decades do we have to experience a drop in the cost of living to bolster German and French banks that made very bad lending decisions?). In both cases, there is little talk of the European solidarity that was supposed to undergird the European experiment. In the words of the great Johnny Mercer, somethings got to give.

But the EU, for all its bluster, has not been the primary player in this game, even as the European ideal has been the primary casualty. Rather than being a major player in its own right, the crisis has revealed Brussels to be a Wizard of Oz type figure; long on bluster, if rather shorter on the ability to do much of anything. Instead, Germany (first and foremost) as well as the ECB and IMF have played the major roles. But when it comes right down to it, the EU has been the arena for the powers to meet and discuss, if far less of a player in its own right.

The Beginnings of an Answer

But in the EUs trials and tribulations, lies perhaps the beginning of an answer. For too long discussions about international institutions have taken on a romantic, utopian tone: either they were seen as the magic elixir for avoiding war in the future, or they were evil, faceless Bond-villain entities, intent on erasing by

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stealth countries sovereignties (a view previously much held in America, though now more held in China).

For the European postwar generation it is easy to see that the EU alternative (and international institutions in general) seemed a magic respite from the charnel houses of the world wars. It is also understandable that America as the greatest power in the world would often be suspicious of institutions (often run by foreigners) that tried to limit its power, even if in the name of worthy causes like collective defense and economic liberalization. But with the passing of the postwar generation, and with the dawning of the very different multipolar era, the time has surely come for less emotional views from both sides.

Global realists must separate themselves from cheerleaders who see international institutions as the primary force in global politics (which they are not and never have been) and denigrators who see them as worthless. Both points of view are more theology than anything connected with analytical reality. Instead, international institutions are what they have always been; arenas for great powers to work together as well to (peacefully) contest one another. But starting from this realist, less fevered approach is the only way to get to new, and useful answers as to how to reinvent global institutions.

If this sober, realist strategy for reforming global governance is to amount to anything, a rough, non-mechanistic modus operandi must be agreed to by the majority of global policy-makers who see international institutions as neither the worlds salvation, nor its primary curse. Such a decision-making menu ought to be able to bring along both utopians and skeptics, as both will continue to believe the world works in the way they wish it to. Skeptics must concede that if international consensus can be reached within a global institutiongiven that global problems require scale, heft, and some vague form of legitimacydoing things institutionally is best. As such, trying for this form of multilateralism (even if skeptics believe it rare) is best.

However, cheerleaders must concede that just because institutions fail to reach consensus, the great powers of the world will not just take their ball and go

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home. Instead, regional institutions, concerts of great powers, coalitions of the willing, and yes, on rare occasions individual states with overriding interests, will act in the absence of international agreement.

Such a decision-making menu compromise ought to suit almost everyone. For those that believe international organizational consensus (arduous as it is to attain) can be painstakingly reached, the agreement of skeptics to genuinely attempt to do so will be seen as a major victory. Likewise, for those who chafe at institutional stalemate for pressing crises being the excuse for non-action, the real world acknowledgement that states will not ultimately (except in very rare cases like the EU in some competencies) cede their sovereignty to outside institutions will be viewed as a great step forward. In both cases, cheerleaders and skeptics will see that their view of the world has been validated, which ought to be the basis for this decision-making compromise to politically endure.

Other necessary reinventions

So armed with our novel new philosophy of international institutions, and equipped with the grand compromise between cheerleaders and skeptics over a realist global decision-making structure, a few further agreed upon principles are necessary to reinvent global institutions.

Membership matters, and in two central ways. Here the G8/G20 continuum is useful. Western states should be leery of placing much faith in organizations whose membership is too small to accomplish their stated goals. While the G8 may still have real utility as a western caucus that can reach common positions ahead of more fraught G20 meetings, its claim to be able to regulate global economic conditions is the call from another era; its members today simply lack the economic heft to do so, even if they all agree on a policy. Organizations such as the G8 should be seen for what they are, but never be confused with being central to reinventing global institutions.

But if a too-limited membership is the Scylla, the Charybdis is placing too much faith in institutions that require too many members to agree to a given

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policy. That is why in practice the UN should be largely honored.and ignored, as agreement (other than the watered down output usually arrived at) is unlikely on anything important given great power diffusion in the new era. Efforts should be made to reach such Herculean concords, as the reward for bringing along most of the world for a given policy is so great. However, acknowledging the reality that such agreements will occur only once in a blue moon should also temper spending too much time over agreements that will never be struck.

However, within organizations with large memberships there is an important caveat; what the EU boringly calls the variable geometry of advanced cooperation. The West should work especially hard to favor institutions that allow for some of its members to press ahead given a specific policy, if the others abstain rather than veto action. Such institutional flexibility should be encouraged at all costs, as it is a way through the thicket of requiring an often-unrealistic unanimity. International Organizations that develop this halfway house for action are likely to be increasingly effective and should become favorites of western decision makers.

The last key conceptual point for reinventing global institutions concerns the greatest single strategic challenge of the age: How to entice the rising powers to become genuine stakeholders in todays evolving institutional architecture. For if the west succeeds here we will continue to live in a semi-norms based world; if we fail we will live in the Bismarckean jungle of pure realpolitik. To do so, certainly the memberships of the various international institutions will have to change rather quickly, to reflect the power realities of 2011, rather than 1945. But beyond allowing the rising rest a seat at the table, often the west will have to learn to genuinely compromise over policy, something it has not had to do much with the non-western world over the past 500 years. But only by changing this ingrained way of thinking, only by the rising powers demonstrably seeing that they tangibly get more out of the institutional system than they presently do, can it survive and thrive in a world where many more voices will have to be heeded.

Conclusion: The Wests Last, Best, Chance

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So here then is a very different outline for reinventing global institutions, by making them fit for purpose for the very different multipolar world. This is the task a reinvented west is uniquely positioned to accomplish, as both sides of the Atlantic find themselves structurally in precisely same boat of relative decline. Having invented the Bretton Woods institutional system at the apex of their power, both Europe and America have a strong vested interest in reforming the present system, rather than by starting anew. This risk should not be underestimated as the popularity of the faddish (and dangerous) League of Democracies illustrates in the West. Elsewhere, new regional organizations are competing with these existing global institutions, as exemplified by ALBA in South America, ASEAN in the Pacific and the SCO in Central Asia. This is neither in the American or European interest. Both sides of the Atlantic conceptually accept this means a change in membership of key institutionsand to the power relationships within these organizationsif they are to survive. In essence, this means that Europe (to a large extent) but also America will have relatively less of a say in how global governance evolves.

Less of a say for sure, but the west still holds the key as to whether it can collectively entice the rising powers to buy into the norms-based institutional system it created 65 years ago. For we are living through the wet cement moment of multipolarity, when the rules and norms of the age are being drawn up; at present, even with its relatively diminishing power base, the west still sets the terms for the global institutional architecture. But time does not stand still. This next half decade (wherein each year power continues to diffuse away from the west to the rest) will tell the tale of whether the west collectively is capable of one last act of self-reinvention, and can through a creative reinventing of global institutions, entice the rising rest to broadly become stakeholders for global governance in the new era.

It is hard to think of a nobler collective project, or a more important one. We close with one suggestion for how to improve the process of global governance. One of the more promising ideas for a reinvigorated architecture is minilateralism (or small multilateralism). The idea is simple. Instead of seeking the broadest multilateral consensus imaginable, or forcibly working through a

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dedicated institution, minilateralism seeks

- paraphrasing Moises Naim who

initially developed the idea - to bring the smallest number of actors to the table needed to have the biggest possible impact on a problem. In others words, its smart multilateralism.

Many of todays transnational problems dont require all UN members to reach agreement, a critical mass could suffice. Along these lines a climate deal need only involve the major polluters. A new anti-proliferation agreement only nuclear weapon states and the major technology providers. A deal on global trade, only the major trading regions. Indeed regional organizations could make deals amongst themselves. Rather than have the EU sit alongside Germany and France at the G20 with ASEAN as an observer, why not have a trade agreement between the two organizations, internalizing the tug-of-war rather than having it slowdown the process at the international level? For the West, minilateralism will have its ups and its downs. And such increased effectiveness comes at a price. The risk is that a truly globalist approach takes a back seat, and in good Animal Farm fashion, that some actors become more equal than others. But what has comprehensive multilateralism brought us but slow and ineffective governance at a time when transnational problems loom larger than ever before? And does it not make sense that those states that have most to gain or to lose, also have a larger say? Such adhoc and flexible arrangements could entice a group of states to reach an agreement thereby creating positive momentum for others to bandwagon. As is true for global institutions in general, the solutions minilateralism comes up with will never be perfect, but the current stalemate in global governance needs to be broken, lest it runs the risk of becoming totally obsolete. For too long the perfect (and impossible) has been the enemy of the good. In the new world we find ourselves in, we simply dont have the luxury of vainly waiting for perfection anymore.

--Dr. John C. Hulsman is Senior Research Fellow at The Hague Center for Strategic Studies (www.hcss.nl) and a life member of The Council on Foreign Relations. Dr. Rem Korteweg is a strategic analyst at The Hague Centre for Strategic Studies.

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