The Challenges facing Developing Countries in their International Relations

4. Global Governance without Politics: The Limits of the Post Washington Consensus

Richard Higgott, Director, ESRC Centre for the Study of Globalisation and Regionalisation, University of Warwick

Abstract: Recognition of some of the worse excesses of globalisation, such as destabilisation and inequality, is quite recent. The shift from the Washington Consensus to the Post Washington Consensus is the most visible manifestation of this realisation. This presentation analyses the imperatives generated by the crisis of globalisation. It finds that the recent response by International Financial Institutions (IFIs) to manage the international economy through the Post Washington Consensus, inadequate and potentially disruptive. The presentation argues for the incorporation of political factors, to make the emergent global public domain relevant to the problems caused by globalisation. In this politicisation, not only the frequently included NGOs, but also states, will need to play a critical role.

The East Asian crisis of 1997 clearly demonstrated the dangers of globalisation. The crisis also generated the realisation in international policy circles, that governance was critical for the efficient functioning of international markets. A narrow definition of globalisation is utilised here – the tendency towards international economic integration, liberalisation and financial deregulation beyond the sovereignty of the territorial state. Governance is distinguished from government, and is identified as operating in the public domain. This public domain is still in its nascent stages, but even IFIs with traditional economistic approaches to the international economy, have recognised its importance.

The interest of IFIs in governance is evident in the Post Washington Consensus. The vocabulary of IFIs was dominated by words like liberalisation, deregulation and privatisation, in the years of the Washington Consensus. Recent additions to the vocabulary are representative of the change – hence civil society, social capital, capacity building, governance, transparency, a new international economic architecture, institution-building, and safety nets form part of the ‘global public policy’. The evolving Post Washington Consensus represents a qualitative break from the past, and is a response to the issues raised rather dramatically by globalisation in 1997.

Prior to the economic downturns of 1997, there existed little appreciation of the adverse effects of globalisation. This triumphalist view of globalisation derived from economistic, technology-driven definitions of the process, and ignored some important political and theoretical considerations. Politically, globalisation has unequal effects, and its adverse effects have even more marked since the economic crises of 1997. Theoretically, the excessive optimism and parsimony of liberal economics led to the oversight of non-economic aspects of the policy process. These political and theoretical omissions by liberal economic theory in the past, have allowed the exacerbation of the adverse effects of globalisation. Consequently, the first post-Cold War ‘crisis of globalisation’ is underway. More groups have recognised that the pursuit of free market and reduced compensatory domestic welfare (seen formerly as an appropriate state response to encourage the forces of globalisation), is a potent combination to catalyse radical responses from the dispossessed. The socially disintegrative effects of liberalisation will need to be mitigated with the assistance of the state.

Drawing upon the dynamics of globalisation as described above, it is possible to identify three reasons why governance issues have acquired such unprecedented importance today. First, and somewhat cynically, governance allows IFIs an escape route from the intellectual corner into which their adherence to economistic free trade ideals had forced them. Second, governance suggests ways of dealing with the new conditions of globalisation, even without government. Third, governance is an essential term for understanding the transnational processes that require institutional responses and for identifying non-traditional actors that will play an important part in governance. As such, the concept of governance has an agenda-setting purpose as well, that extends policy beyond the traditional activities of government at the international level.

The concept of governance has been adopted by not only the World Bank, but also to a somewhat lesser extent, by the IMF, the WTO, and various UN initiatives. Governance however, can be conceptualised in four different ways, of which the Post Washington Consensus (as conceived by international organisations) is the most sanitised version. Two conceptualisations are elaborated below Global governance as the enhancement of effectiveness and efficiency in the delivery of public goods – The Post Washington Consensus is based on such a conceptualisation. This view ignores the fact that states are not only problem solvers but also strategic actors concerned with power, politics and norms of justice and legitimacy.

Global governance as enhanced democracy and accountability – The development of a public sphere that acts as a site for the incorporation of civil society actors into the policy process to ensure legitimisation. However, the economic policy community is still reluctant to recognise that markets are also socio-political constructs that require legitimacy with the civil society. Another problem is the identification of the constituents of civil society. As conceptualised by existing IFIs, this second understanding is seen at best, as a second variable.

The adoption of terms such as ‘global public policy’ as opposed to global governance, reflects the increasing acceptance of the first definition. In doing so, the governance agenda has avoided key questions of power, domination, resistance and accountability. Hence, the Post Washington Consensus raises the same problems as the Washington Consensus – it attempts to be no less homogenising than its predecessor, and employs similar, universal measures of efficiency and effectiveness. In this respect, the Post Washington Consensus is too limited.

The attempt to close the ‘participation gap’ by incorporating non-state agency, also raises problems. It marginalises the international bargaining power of developing states, through the privileging of civil society and international organisations, while also attempting to enhance the position of states as mediators between their societies and the forces of global change. The new conceptualisation is hence, likely to be seen as largely North driven and will suffer from the same lack of legitimacy as the Washington Consensus. It is also likely to exacerbate the problems of globalisation further, if it does undermine the power of developing states. This is because the state continues to be crucial for three reasons. First, despite their visibility, NGOs and other non-state actors do not share the legitimacy of the national state as the repository of sovereignty and policy-making authority. Second, NGOs are often less democratically accountable than the states and inter-state organisations they act to counter. Third, implementation of resolutions emanating from global negotiations remains the function of national states. In other words, states remain crucial in the functioning of international markets, and the Post Washington Consensus (like its predecessor) runs the risk of undermining some states.

The ‘softening and widening of the Washington Consensus’ is a significant step forward, but it is unlikely to address the justice, poverty and inequality questions on the international agenda. North-South conflicts will persist with such a conceptualisation, perhaps even get exacerbated. To deal with the problems that it seeks to address, the concept of governance will have to include variables of both politics and the state.

The collapse of the ‘new public domain’ was highlighted by Chairperson, Ngaire Woods, in the context of the WTO and the Seattle Round. How should a workable public domain be envisaged? The speaker responded by referring to multilevel governance – a movement upward as well as downward. For instance, developing countries favour more issue-specific forums rather than the WTO, to deal with issues of human rights and labour. Such issue-specific forums may be complemented by regional forums that deal across issues. Both movements form part of the process of identifying the scope and method of governing the new public domain.

In response to another question on trade-offs between effectiveness versus justice and democracy, the speaker admitted that there are no readymade answers. But governance processes today are ill-equipped to find the balance, until they factor in the critical variable of politics. The problems of globalisation are principally about how, who gets what i.e. power and politics. NGOs may play an enabling role for the marginalised in this process, but they are just as often, neither democratic nor accountable to the people they claim to represent. Hence the importance of defining the agenda with consideration to politics, and bringing the state (particularly the marginalised states of the South) into the evolving public domain.

(A closely related paper - `Global Governance and the Public Domain’ can be downloaded from www.warwick.ac.uk/fac/soc/CSGR/wpapers.html)

The rest of the seminar series:
Introduction
The Politics of Aid and Conditionality by Stephen Jones
International Investment Treaties, Valpy Fitzgerald
Good governance and the MDBs, Christina Biebesheimer
Global Governance and the Post Washington Consensus, Richard Higgott
Intrusive Regionalism, Amitav Acharya
Regionalism in the Middle East, Louise Fawcett
Aiding Democracy Abroad: Lessons from the late 1980s-90s, Thomas Carothers
Developing Countries and the International Financial Architecture, Ngaire Woods
Humanitarian Intervention, Thomas Weiss