Global Governance or World Order

Global Governance: ways to manage common affairs The Commission of Global Governance’s definition: “Golobal governance is the sum of the many ways individuals and institutions, public and private, manage their common affairs. It is a continuing process through which conflicting or diverse interests may be accomodated and cooperative action may be taken. It includes formal as well as informal arrangements that people and individuals have agreed to or perceive to be in their interest”

Global governance is not a global government; it is not a single world order; it is not a top-down, hierarchical structure of authorities, rules and mechanisms, formal and informal, existing at a variety of levels in the world today. Pieces of GG: arrangements and activities to deal with issues and problems. They include international rules of law, norms or “soft law”, and structures such as formal international intergovernmental organizations (IGO’s) and arrangements.

Global governance: cooperative problem-solving arrangements Since the 1990’s popularity of this concept Liberals claim that global governance has become a prominent feature of global politics since the 1990’s as a responce and an attempt to shape the process of globalization An important aspect of global governance has been the growth in the number and importance of IO’s Liberals claim that since the WWII states demonstrated a capacity to solve their common problems through different arrangements, such as IO’s, norms and rules. To support this claim usually the examples of the EU and the Washington Consensus institutions are being used

Liberal claim Liberals claims that the international system has developed into an international society Hedley Bull: from international anarchy to an anarchical society Although anarchical, it has certain rules and based on certain norms

The Bretton Woods System IMF, 1947 The International Bank for Reconstruction and Development (IBRD), better known as the World Bank, 1946 General Agreement on Tariffs and Trade (GATT), 1948 World Trade Organization (WTO) in 1995

IMF To provide global economic stability To promote free trade To oversee the international monetary system To maintain stable exchange rate To provide finance in times of instability to countries in crisis All currencies were fixed to the value of the US dollar The US dollar was convertible to gold at a rate of 35 dollar per ounce

World Bank Provide loans for countries in need of reconstruction and development The Marshall Plan was more effective in the post-war reconstruction The World Bank’s main area of activity is aiding and assisting development

GATT To promote free trade by bringing down tarrif barriers and non-tarrif barriers by promoting rules of free trade among nations

From classical liberalism to Keynesianism The Bretton Woods system was constructed to promote an open and competative international economy However, since we have IO’s at the center of this system, which aims is not only to promote, but also to oversee this system and stabilize it in times of crisis, it means that creators didn’t believe in classical liberal economic theory according to which markets are perfect and there is no need of regulation

Keynesianism: regulated market economy Markets are not perfect In times of fluctuations there is a need of governmental involvement in economy Governments intervene by expanding spending, regulating taxation and lowering interest rates Thus governments promote growth and keep unemployment low Not Keynes, but the USA was constructor of the Bretton Woods Don’t forget that in the final analysis Keynesianism is an economic theory which backs free market economy (but with some portion of regulation)

The USA as a constructor of the Bretton Woods After the war the US needed to sustain domestic growth levels High welfare standards could only be provided by international trade There was a need to promote open trade, stability in international economic system, reconstruction and development Europe and Asia had to be open=free from influence of the Soviet Union Security Strategy: to prevent any single power’s domination in Europe and Asia Just like there was a need to promote international free trade for a growing British economy in the 18th century Theories follow practices

“Structural power of the US” (Robert Cox) Dollar as the world currency The global predominance of American financial markets US control of the IMF The US is predominant in the other international economic institutions, the World Bank and the World Trade Organization

“Golden Age” of the world economy: 1950’s, 1960’s OECD member states growth rates: 4-5% a year What was the contribution of the Bretton Woods to this growth is not clear National Keynesianism’s contribution, stimulation of domestic growth The growth was stimulated by high and permanent military expenditure The international economic stability was provided by American hegemony

Turmoil in the 1970’s “Stagflation”: economic stagnation and rising unemployment In 1971 the US abandoned the system of fixed exchange rates In this context leaders of the major industrialized countries started to meet on a regular basis By 1975, the Group of 7 was formed (G-7) An attempt of creation of a “New International Economic Order” failed (alternative world order in favor of developing countries)

From Keynesianism to market fundamentalism Change of IMF and World Bank roles and policies Liberalization of financial capital: most Western countries removed control over the movement of currency in and out of their borders. The result: a vast and ever-growing supply of capital that could move freely The 1980’s: emergence of market fundamentalism The 1990’s: the Washington Consensus

Changing role of the IMF It was created to oversee the international monetary system by granting loans to countries experiencing temporary balance-of-payments deficit In the case of severe balance-of-payments instability currencies could be devalued But generally the background of stability should be fixed exchange rates The 1970’s: from fixed exchanged rates to floating exchanged rates The IMF focused on lending to the developing world

Development and IO’s The change in the World Bank’ role Subordinate position to the IMF’s leading role From an alliance-based system to an integrated system Promotion of borrowing in the Third World , debt crisis G-7 decided to ensure the repayment From an import-substitution model to an export-oriented model From regulation to de-regulation Not development, but growth

Structural adjustment A reduction in government expenditures through the removal of subsidies The privatization of government-owned industries and services The removal of restrictions on the way of free trade The deregulation of economy The promotion of foreign investment The devaluation of exchange rate in order to encourage exports and reduce imports

Liberalization Privatization Deregulation and fiscal discipline

Structural power of the IMF Conditionality Reviewer of macroeconomic situation At stake are WB money and other creditors’ money

The Washington Consensus and an expansion of liberal international economy 1989 1991 Transformation and transition Managing of crises 2008 crisis The rise of the rest