How to Change the Global Governance System. Interview with David Woodward

 

Interview with David Woodward, on the occasion of the online launch of Development 53.1 'New Institutions for Development'. 

During our interview I found it very interesting to hear your views on how the current global governance system still reflects colonial values and institutions. In particular, how richer countries have used their dominance in the IMF and World Bank to maintain the financial dependency of low-income countries, introducing policy conditionalities and keeping considerable control over almost area of their governments. Again, as in colonial times, these policies have been designed by outsiders, with limited understanding of the internal economic, social and political dynamics of the countries concerned. All this has had an incredibly negative effect on the achievement of sustainable human development by low-income countries, especially because in applying these policies, the interests of the majority of the local population have been secondary to economic considerations. In your article you list eight ways to reform this international governance system.

Q: The proposal for a global Parliament is particularly innovative. Can you explain to us how this Parliament would work and how it would be elected?

A: In terms of day-to-day operations, I would see a global Parliament as operating in a similar way to a national Parliament in its supervisory (though not its legislative) role. It would debate key issues in plenary, providing broad guidelines as guidance for international institutions, while specialized committees would ensure the accountability of such institutions through regular hearings with senior officials and issue-focused inquiries. The Parliament could also usefully select the heads of international organizations, advised by the relevant specialist committee (filling a conspicuous gap in the current system); and representatives on decision-making bodies could be selected and held accountable by the Parliamentarians from the countries they represent. Every country should have at least one representative in the global Parliament, countries with more people having more (but representation rising less than proportionally with population). Elections should be based on a proportional system, either nationally or (in larger countries, especially with federal national systems) regionally. Ideally, the members of a global Parliament should be directly elected by the people of the country which they represent. Given the global nature of the Parliament, elections could legitimately be conducted (not merely monitored) by an international organization established for the purpose, and accountable to the Parliament itself. This should arguably be a condition for a country to be represented in the Parliament. As well as helping to ensure free and fair elections, this would help to increase domestic pressure for democracy in undemocratic states and the local capacity and institutional infrastructure necessary to hold democratic elections. In practice, it seems possible that direct election would not be feasible in the short term, in which case indirect election (by members of national Parliamentarians and/or local elected bodies) might be necessary — either in certain countries or for the Parliament as a whole. However, this should be viewed as an interim arrangement pending the establishment of a direct election system.

Q: Another interesting proposal that emerges from your article is the use of global taxation to finance international aid. How could these measures be implemented?

A:  This would depend entirely on the nature of the tax — and is rather beyond my area of expertise. In the case of a currency transactions tax, my former nef colleague Stephen Spratt and Rodney Schmidt of the North-South Institute have demonstrated how such a tax could be levied through the international clearing system through which all exchanges of convertible currencies ultimately pass. In other cases, the key issue is enforcement. Ultimately, national governments are able to enforce taxation through their monopoly of legitimate force — itself financed by tax revenues. There is no monopoly of force at the global level. Rather force is concentrated in nation states; and no-one is likely to support the idea of a single all-powerful global army. At the global level, legitimacy must therefore substitute for force. While it is at best a very imperfect substitute, it is nonetheless important: in representative democracies, most people pay their taxes, not because of the threat that someone will come to their door with a gun and make them, but because of a tacit acceptance of the legitimacy of the tax, and of the decision-making processes through which the tax has been imposed. Legitimacy can be conferred on global taxes by requiring them to be approved by the global Parliament — and enhanced by requiring a specified super-majority (eg. 60 percent of votes). Even then, however, legitimacy would need to be complemented by careful consideration of the incentives facing those who are to pay, collect and enforce taxes. If action cannot be forced, then incentive structures must be created which lead to the desired outcome. The key role of international regulation in the airline industry suggests that a global approach might also be feasible here (and possibly shipping), although enforcement would require action by national governments. The most effective approach might be to impose obligations to pay on airlines and shipping companies, while requiring governments to deny access to their ports and airports to those companies who do not pay. The latter requirement could not be enforced; but if enough governments complied, the financial impact on the companies concerned through their exclusion from certain territories could be sufficient to ensure that they paid. In the case of carbon taxes, the easiest approach would be to assess actual and prospective emissions at source (coal mines, oil/gas rigs, etc.) and impose levies on the companies concerned. However, the approach suggested above would be less viable: while international transportation necessarily crosses borders, and having a less than global market is a substantial competitive disadvantage, this is not the case for fossil fuels. It is enough for a producer to have a sufficient market, domestically or internationally, to sell its output. In the case of a GDP levy, the need for action by national governments is still greater, as governments would be due to pay themselves, from their own revenues. (In this case, however, setting the rate at 0.7 percent would strengthen legitimacy, by reflecting a long-standing commitment on the part of developed country governments which only a handful have ever fulfilled.) In such cases, some form of sanctions against non-compliant governments would seem essential. Two possible approaches come to mind, although both have limitations. The first would be to curtail the role of non-compliant governments within the global governance system itself — although the potential effectiveness would be limited by the envisaged shift of powers from governments to populations and Parliaments. (Limiting participation in the Parliament would be counterproductive, as it would undermine the legitimacy of subsequent decisions, including decisions on global taxes.) The second approach would be to follow the WTO model in sanctioning action by other countries against non-compliant governments. This might include, for example, allowing compliant governments to impose trade restrictions on non-compliant countries, withdraw recognition of their intellectual property rights, etc. As in the WTO, this would suffer from a problem of asymmetry as between larger and smaller economies. (If the US places trade restrictions on imports from Burkina Faso, this will have a much greater effect than if Burkina Faso imposed trade restrictions on the US.) But the problem would be much less severe in the present context, as the right to impose sanctions would extend to all compliant countries, and not only to a single complainant. Clearly, there is more work to be done in this area — and some of it may well be underway even now. But it seems equally clear that there is the potential to make at least some headway towards global taxation if we put the necessary effort into finding ways to make it work.

Interview by Laura Fano Morrissey

Click here to read the abstract of David Woodward's article in Development 53.1

 

David Woodward is Fellow at the New Economics Foundation (nef) and co-founder of Economic Governance for Health.

Photo: qbubbles