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Economic Forum: Panel considers civil society’s involvement in issues of global financial governance

Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
January 2001
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Edwards on IMF-NGO dialogue

Globalization has many dimensions—economic and social, political and environmental, cultural and religious—that affect everyone in some way and that have therefore attracted considerable attention in civil society. The term “civil society” has entered the global financing dialogue at all levels. Do the wildly disparate groups who claim to represent civil society have an impact on international financial policies? Should they? If yes, how can they best contribute to the effective, equitable, and democratic operations of global finance? Warwick University’s Center for the Study of Globalization and Regionalization has teamed up with the United Nations (UN) University to study these questions; their Civil Society and Global Finance Project has brought together 20 leading civil society organizers, officials of multilateral institutions (including the IMF and the World Bank), and academic researchers to investigate the role of civil society in the governance of global finance. Seven of the core members of the project discussed their findings at an Economic Forum on that topic at the IMF on April 5.

“While there’s little doubt that a strong civil society is valuable for democracy, there is considerable debate about organizations that claim to represent civil society,” moderator and project participant Thomas Dawson, Director of the IMF’s External Relations Department, said in his introduction. The speakers described that debate and other general issues surrounding civil society involvement in questions of global financial governance, assessed its benefits and dangers, and suggested future steps to maximize the benefits and minimize the shortcomings of civil society involvement in global finance.

Civil society achievements

“In one way or another, civil society matters,” declared Albrecht Schnabel, Program Officer of the Peace and Governance Program of the UN University and co-director of the project. Countless civic associations have undertaken initiatives to change and shape global laws and institutions, he continued, and in response most major international governance agencies have established special mechanisms to interact with those civil society bodies and actors, creating, in essence, “enlarged multilateralism.”

Jan Aart Scholte, of the Center for the Study of Globalization and Regionalization, and the other co-director of the project, pointed out that despite the advantages of financial globalization, its inadequate governance has created problems with respect to efficiency, stability, human security, social justice, and democracy. Civil society organizations—local and global, formal and informal, radical and supporters of the status quo—address these issues.

These groups earn their legitimacy in a variety of ways, he continued. It may come from their collective knowledge and expertise (performance legitimacy); it may come because they advance the participatory and publicly accountable character of the government (democratic legitimacy); or it may come from their role as global conscience (moral legitimacy).

To date, these groups have most obviously influenced questions of transborder debt problems of the poorest countries (debt-relief initiatives), multilateral development bank projects (dams, pipelines, roads), structural adjustment lending (by the IMF and the World Bank), commercial global finance (proposals for a Tobin tax on foreign exchange transactions and so-called ethical investing), and global financial architecture.

How have they done this? Scholte listed seven positive outcomes of the activity of civil society organizations: heightened public awareness of global finance and its governance; increased participation of stakeholders otherwise excluded from the policy process on issues that affect them; critical, creative debate on policy issues; increased transparency in financial markets and the governance institutions that regulate them; greater accountability in those institutions; enhanced welfare—especially important in situations where financial difficulties create economic and social fallout; and, finally, increased legitimacy of global financial governance.

But, he noted, there is another side. When civil society organizations are uncivil, use harmful means to pursue dubious goals, do not represent their professed constituency, have poorly conceived and inept campaigns that contribute to low-quality input, and are undemocratic organizations that limit participation, consultation, transparency, and accountability, they only detract from effective governance.

Regional civil society effectiveness

Kamal Malhotra, Senior Civil Society Advisor, Bureau for Development Policy, UN Development Program, discussed the experience of civil societies in Asia. Citing examples in Thailand, Indonesia, and the Philippines, he found that they had advanced the cause of democracy, expanded economic and financial literacy, linked activists with academics, used grassroots data to monitor the social impact of crises, and promoted alternatives to official national development strategies.

In contrast, the civil society movement is a non-starter in Russia, in the opinion of Nodari Simonia, Director of the Institute of International Relations and World Economy and Presidium Member of the Russian Academy of Sciences. Civil society groups that flexed their reform muscle during the perestroika period lost their independence under the Yeltsin regime, he claimed. Bureaucratic capitalism and paternalistic politics took over, an independent middle class failed to develop, and Russia never reached social or political consensus. Rapid decentralization has led, Simonia asserted, not to democratization but to “feudalization.” Western-funded groups attempt to fill the gap left by the lack of indigenous organizations, but Russians neither accept them nor find them relevant. The Russian population is indifferent to the problems of global finance, he added, and decisions are made at the elite level, with minimal input from civil society.

Future roles

What role will civil society organizations play in the future? Already, international financial institutions are more open to an official role for them in development practice and even, minimally, in development policy commentary, said Alison Van Rooy, Senior Fellow at the North-South Institute. Instead of quieting the civil society organizations, however, this will encourage them to pry the door open still further. Street demonstrations, she said, do have a positive aspect because they motivate and energize reformers.

She presented three possible scenarios for the future. The most likely is a change of target from the Bretton Woods institutions to trade organizations, as economic literacy becomes trade literacy—a move, she added, that will frustrate would-be reformers of the international financial institutions who will have lost an ally—or to specific subjects such as public debt, the Bank for International Settlements, the role of export credit agencies, and others. The second scenario is a change of discourse: international financial institutions will merely reform their vocabularies, not their policies, and although rhetorical changes can eventually sway practice, the process is very slow.

Least probable (but the most optimistic outcome) is a change of institutional mechanisms—that is, the civil society organizations will engineer some measure of oversight over intergovernmental financial activities. If the UN General Assembly, she said, had more control over the work of the international financial institutions, civil society organizations would not only have a stronger voice, but the question of legitimacy would move from the organizations’ own strategies and movements to what nation-states are doing to represent civil society appropriately internationally.

International financial leaders now focus on stability, pointed out Nancy Birdsall, Director of the Economics Programs at the Carnegie Endowment for International Peace, but if they better represented the global population affected by their decisions, their focus would shift to dimensions like fairness and effectiveness. Because poor countries are poorly represented in global finance, she said, we have a “democratic deficit.” What’s more, the poor within the poor countries are not represented in their own governments—a double whammy. Thus, the civil society organizations of the United States and Europe (the “North”) are most effective when they lobby their own democratic governments to take certain positions within the international institutions. In contrast, activists in developing and transition countries (the “South”) find their best tactic is to target the institutions directly—or even lobby the northern governments. Birdsall said she wants to see civil society organizations in the North focus on the issue of representation in the international financial institutions and work, first, to strengthen the technical capacity of civil society organizations in the South and, second, to help build the democratic structure in which the concept of civil society can flourish.

The panelists and other participants in the Civil Society and Global Finance Project address these and other issues in a series of papers that will be published as a book within a year. Abstracts of the papers are available at the project’s website: www.warwick.ac.uk/csgr/projects/civilsoc.html A transcript of the forum will be available on the IMF’s website (www.imf.org).

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