GLOBAL GOVERNANCE OF CAPITAL - Demos · 2019. 12. 17. · Democratizing the Governance of Capitalism 9 The Great Reversal 10 III. Global Governance and Political Power 12 Global Governance

GLOBALGOVERNANCE OF CAPITAL

A Challenge for Democracy

robert ku t tner

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Dēmos is a public policy organization working for an America where we all have an equal say in our democracy and an equal chance in our economy.

The author wishes to thank the Rocke-feller Brothers Fund for supporting this research. Particular personal thanks to program officer Tom Kruse of RBF and research assistant Emma Stokking, and to Lori Wallach of Public Citizen, Kevin Gallagher of Boston University, John Evans of TUAC, Damon Silvers of the AFL-CIO, Gerry Epstein of the University of Mas-sachusetts at Amherst, Lance Lindblom formerly of the Nathan Cummings Founda-tion, Robert Ross of Clark University, and to Heather McGhee, Tamara Draut and Lew Daly of Dēmos.

TA B L E O F C O N T E N T S

Preface 1

I. Introduction 3

II. The Historical Context 5Public and Private Law 7Democratizing the Governance of Capitalism 9The Great Reversal 10

III. Global Governance and Political Power 12Global Governance and Anti-Democracy 14

IV. Key Institutions of Postwar Global Governance 15The Uruguay Round the WTO 16The View from the Global South 19South-South Civil Society and Advocacy 20The U.N. and the Quest for Heterodoxy 21The ILO: Advocacy without Enforcement 22The OECD and TUAC 26The Ambiguous Role of NGOs 27

V. Mapping Regimes of Global Governance 29The Gold Standard: Binding Conventions and Protocols 29Human Rights and Soft International Law 34The Problem of Due Process 37The Problem of Extraterritoriality 38

VI. International Governing Bodies 39The Basel Committee on Banking Supervision 39Privatized Regulation: the Case of ISDA 40International Associations of Regulators 41Opaque Governance: The World Trade Organization 42The World Bank, IMF and Monitoring by NGOs 42

VII. “Multi-Stakeholder” Processes and Monitoring Regimes 45Certified Coffee 47Sustainable Forestry 48Labor Standards 49Citizenship, Politics and Civil Society 52

VIII. Case Study: Extractive Industries 54Global Climate Change 55Resource Transfer 56Blood Diamonds 59Extraction, Pollution and Corruption 60Industry Public Relations: The Equator Principles 63A Role for Regional Governance 67

IX. Conclusions 68Appendix 70Chart I 70Chart II 71Endnotes 74

1 • global governance of capital

P R E FA C E

G lobalization as presently structured is corrosive of political democracy and specifically of the ability of citizens and national governments to harness a market economy for a broad public good. This tilt, from

democracy to often predatory capitalism, operates along several dimensions.

For better or for worse, the locus of the polity—active citizen-ship and representative democracy—flourishes at the level of the nation state. There is neither global government nor global citizen-ship. While there are institutions of global “governance” that are sometimes binding on nation-states, these institutions tend to be even more vulnerable to capture by economic elites than national governments. And while there are robust institutions of global civil society in the form of NGOs, they tend to have less leverage at the global level than at the national level due to the absence of global cit-izenship. The norms and rules of transparency and due process that allow citizens to influence policy-making at the national level are far less developed internationally.

As national democratic governments have ceded authority to trans-national agreements and treaties, for the most part the sub-stantive effect has been to move rules and policies away from the managed form of capitalism that characterized the postwar era and back towards laissez-faire. Politically, the impact has been to reinforce the political and economic power of corporations and banks, globally and nationally.

There are exceptions to this generalization, but for the most part they tend to take the form of treaties negotiated by national gov-ernments, with the force of domestic as well as international law, and that reflect the normal give and take of national democratic politics. Despite the absence of true global government or global citizenship, some institutions of global governance do create space for civil society to operate and make demands. Some progress has been made, particularly in areas of human rights and more modest environmental challenges such as depletion of the ozone layer.

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But on the most urgent issues, such as speculative and reckless finance, or the crisis of global climate change, global institutions have been either largely captured by elites or have proven too feeble to make serious progress. The consequence is that democratically elected governments are less able to pursue broadly shared economic goals of opportunity, security, decent living standards, and sustain-ability—as well as the political goal of safeguarding democracy itself. Thus our question remains: how can we reclaim democratic govern-ment in an age of globalization and often predatory capitalism? This paper takes stock of the diverse arenas where these issues play out and offers some insights about where and how democratic citizen-ship and regulation of the market can make progress.


I . I N T R O D U C T I O N

How do citizens influence the governance of the global economy? As commerce and finance have become in-creasingly trans-national, the mechanisms for their gov-ernance must logically follow. Otherwise, the economy

increasingly reverts to laissez-faire, ignoring the lessons of the past century about the hazards of unregulated predatory capitalism.

It takes a polity to regulate the market, and for the most part the necessary locus of polity and civil society is the nation state. A global civil society is growing but far from complete. There is neither a global polity not global citizenship. Thus the question: must global-ization weaken democratic counterweights to the market?

In principle, national governments could collaborate or create transnational forms of governance so that as corporations and banks become global, regulation follows. But in practice, globalization creates political opportunities for industry and finance to evade or undermine regulation and to play off nations against each other in search of the friendliest, most lightly regulated and taxed venue. This increases corporate political influence. The process is cumulative. As commerce and finance outrun the writ of the nation state, the realm for policymaking is narrowed. So the stakes include not only the living standards and environmental conditions of ordinary citizens, but democracy itself.

This paper maps the several areas where governance of the economy operates or purports to operate at a global level. At best, this governance is fragmentary, incomplete, often opaque, and more vulnerable to capture by affected industries than comparable governing processes in a democratic nation state. Our goal in this report is to gain insights about which sectors, regulatory regimes, and strategies by civil society organizations expand opportunities for citizens to engage public issues and thereby promote democracy as a process and sustainable human development as a goal.

In general, global institutions of governance tend to be less pene-trable by citizens than domestic democratic institutions, for several interlocking reasons. There is no global state, hence no global democracy. Though institutions of quasi-governance do exist, they are far less evolved than domestic ones. Such concepts as transpar-ency and due process of law are rudimentary if they operate at all. Global governing institutions tend to be partial and substantially

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captured by elite groups. Some areas of global intercourse are subject to attempted global governance; others are nominally covered but corrupted; and still others not addressed at all. For the most part, the formal constituent units of global governing institutions are states, not citizens. To the extent that these institutions are heavily lobbied, global business groups tend to be better organized and mobilized than global NGOs.

The contest for influence occurs at the level of both global and domestic governing institutions, since most policies for the global economy originate with national governments. In some cases, NGOs are able to influence the design and operation of global governing bodies. However, as regulatory questions are removed from the direct responsibility of the democratic state and shifted to global bodies that are politically accountable only at two or three levels of remove, they are more easily privatized, captured or otherwise insulated. As a general rule, in the absence of true global govern-ment or global democratic citizenship, the shift to global governance tends to advantage elites at the expense of democratic accountability to citizens.

Yet there are islands of constructive progress. It is too soon to know whether these are cumulative. Global civil society has made some headway in advancing universal human rights. Some of the new global regulatory regimes, as in the case of the environment, are less than two decades old, and gaining influence. Some agencies affil-iated with the U.N. have made genuine efforts at transparency and at welcoming the participation of civil society. Often, NGO’s have had to barge in, but the rise of the Internet has functioned as something of a leveler.

This paper will address the dynamics of how this democratic erosion and adaptation occurs, and will analyze different kinds of global governing regimes and strategies for civic influence. It will go into greater detail on critical areas of global regulation of capitalism, including finance, labor, and the environment.


I I . T H E H I S T O R I C A L C O N T E X T: F R O M S O V E R E I G N T Y T O D E M O C R A C Y T O G L O B A L I Z AT I O N

What, exactly, do we mean by global governance? His-torically, the global architecture of relations among nations has been mainly about matters of state, and only secondarily about commerce. Over the

centuries, the de facto international system has reflected the power and ambitions of empires, the making of war and peace, the role of religion in alliance systems. Yet a good deal of actual conflict among states has also been about economic questions—access to mineral wealth, fertile farmland, the pursuit of colonies and trading routes. The rules of commerce have also been the subject of treaties and norms among nations, dating back to the modern trading states of the 14th and 15th centuries, and before that, to antiquity. It is only in the last century or so that democracy has had a place in this story.

Normatively, we could say that the modern international system requires global governance for four broad reasons: to reduce the risk of war; to engage problems such as global climate change or public health hazards that cannot be addressed by a single state; to govern a capitalist system that is increasingly global and able to circumvent regulatory efforts at the national level; and to increase the realm of civil society and democratic participation. We should recognize in candor that these statements reflect values. A writer with different values might argue that direct democratic participation has no place in foreign relations—this is the business of states; or that trade is best left to free markets and if globalization frustrates national regulatory measures, then good riddance. Much of the actual legal system that governs commerce across nation boundaries is in fact highly regulated, but via private systems of law that are largely opaque to the citizenry and the business mainly of market actors.

Looked at through this lens, global governance is far short of a coherent or comprehensive system. It is a patchwork--“pieces of the frame” to borrow a metaphor of John McPhee. The global security system is still primarily the project of nation states, though some of the international and regional agencies through which the process operates do allow and even invite participation by civil society. The United Nations and its several specialized agencies create venues into which civil society can insert itself with varying degrees of

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success. Global mechanisms to address common hazards range from binding international treaties that have the domestic force of law to ad hoc efforts to define a common understanding and regulatory regime.

In the study of history, law and political science, it is often observed that as monarchs consolidated power, the state gained a monopoly on the legal use of force. In many societies, autocratic sovereignty evolved into political democracy, sometimes by abrupt revolution, other times by gradual though contentious reform. In the past 150 years, this shift not only conferred multiple rights on citizens, but also enabled the democratic state to pursue a regulated or managed form of capitalism—precisely because the state was both sovereign within its realm and democratically accountable to its people. The evolution from autocracy to democracy also created a politics in which states were pressed by popular constituencies to temper the excesses of markets—their instability, inequality, predation, and toll on the environment—for the greater benefit of citizens.

Some scholars have even observed that former monarchies made the most effective social democracies, because the state had managed to consolidate and centralize power before it was diffused to the citizenry.1 The state was strong enough to regulate the market once that became a democratic objective. The United States, by contrast, was never a monarchy. As a federalist democracy further complicat-ed by separation of powers at the national level, the U.S. has a decen-tralized governing system with multiple veto points. It has a struc-tural bias against activism, by constitutional design. In regulating capitalism, a relatively fragmented or weak state faces more political obstacles and typically must broker more compromises. There is less countervailing democratic power to offset the power of economic elites.

The political and institutional challenges that have faced citizens within a nation state in trying to regulate markets are magnified as capitalism globalizes, because the rudimentary instruments of global governance are far weaker, more fragmented, and less democratical-ly accountable than even the weakest national federation. However, there is more than one form of globalization. The rules of global commerce and finance in the early post-World War II era were much friendlier to managed markets within and among nation states. A different form of globalism remains possible today, a point made by such civic coalitions the Global Social Forum.


Public and Private LawStates, going back to the Roman Empire, created and diffused

systems of public law. Since antiquity, these coexisted with private legal systems that were initially codified by the Romans, and then with the sacking of Rome, continued more informally as norms. The rediscovery of Roman law in the Middle Ages and the increas-ing influence of canon law created a mixed system that varied by territory. Alongside the legacy of public Roman law and church law, the trading culture of the late Middle Ages created a Lex Mer-catoria—a system of common law for merchants, that included the sanctity of contracts and the creation of generally recog-nized standards for property rights across national borders. In some places, such as England and some French and Italian states, merchant law could be enforced in the royal courts.2

Throughout the era of expanding state sovereignty, there remained substantial delegation of authority to private entities. These entities often blended capitalism and colonialism, such as the Hudson Bay Company, the Dutch East India Company, the British railroad concessions in 19th century South America, or the original land grant by King James I to the Virginia colony in 1606. Near-ab-solute power was delegated to private potentates who had charters from the crown. In the evolution of states and markets, privatized commercial law and the common law coexisted with statutory law even in states with strong sovereigns. It was not a one-way story of private law giving way to public law.

The state often acted to facilitate purely private commercial and financial activity. For example, the first “creditors’ club”, a London cartel organized to help European investors enforce terms of repayment on third world countries, The Corporation of Foreign Bondholders, dates to 1838.3 States often helped private creditors get their money back by threatening invasions or negotiating conces-sions whereby revenues from customs receipts or railway fares would be collected, extraterritorially, to repay European creditors. This was an early form of global, commercial governance, with private rules and interests enforced by states on behalf of investors.

One of the most fundamental extraterritorial functions of public law was to guarantee and protect ownership of private property as it crossed national borders in commerce. Nowhere was this more vividly demonstrated than in the era of slavery, when a slave trader could buy slaves in Africa, underwritten by a British, Portuguese, or Dutch merchant, for sale in America, knowing that his ownership of the human cargo would be respected and guaranteed by several gov-

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ernments as it crossed the seas, should the issue ever be raised in any court of law. What was true of slaves was true of lesser commodities. So the global reach of private property law, enforced by states, is not a new phenomenon.

The earliest explicitly transnational governments were empires. The first modern attempt at international governance was the 1815 Concert of Europe, the effort by the great powers of that era to restore the pre-Napoleonic order and deal with new challeng-es to the status quo collaboratively and systemically—and not at all democratically. The Concert’s key constituent members were monarchs; the whole point was to repress revolutionary outbreaks of democracy. A century later, in an era of democratic aspiration, The League of Nations, similarly, was mainly about war, peace, and terri-torial sovereignty. A few nascent organizations such as the Red Cross or the International Labor Organization, representing what today would be called civil society, were loosely attached to the League, but they were sideshows.

Throughout modern history attempts at explicit global gover-nance have been primarily about the high politics of war and peace, and only incidentally and recently about human rights, environmen-tal protection, or the social regulation of capitalism. Mark Mazower’s recent authoritative history, Governing the World, devotes only one chapter to efforts to govern capitalism. He comments that what has occurred since the 1970s is more like global deregulation. “Thanks to the financialization of the American domestic economy, which became a vast recycling mechanism for global financial surpluses passing through Wall Street, unfettered capital flows became the new norm.”4

There is a French school of political economy known as régu-lation (pronounced à la française) in which “regulation” does not refer to a set of explicit government rules for the market (as in the American usage) but rather to the entire system by which commerce and finance are organized and structured.5 A key insight of this way of looking at the rules of the game is that regulation of capitalism is often substantially private. At the risk of oversimplifying, the form of globalization that was created after World War II deliberately sought to promote a managed form of capitalism at the national level; while the brand of globalization that has operated and intensified since the 1970s, has facilitated the privatization or re-privatization of the structuring of laissez-faire norms and rules.


Democratizing the Governance of CapitalismIn a somewhat idealized and oversimplified rendition of demo-

cratic progress, we might say that as absolute monarchies evolved into democratic polities in fits and starts beginning in the late 18th century, citizens came to exercise increasing influence on laws and public policies. Both the common law and private commercial law could be revised by statute. As private questions became public ones, their resolution became more transparent and accessible to demo-cratic deliberation. Issues of what constituted property and the rights of property could be subjected to popular contention. The property right to pollute or to exploit child labor could be constrained for the collective good by state action.

This historical period of evolution of the democratic state coincided with the development of modern capitalism. By the late 19th century, struggles to regulate the terms of a market economy went hand in hand with struggles to expand the franchise and broaden the compass of democracy. The apex of this expansion of political democracy and regulation of capitalism occurred in the Western democracies in the era between the 1940s and 1970s (starting in the 1930s in the United States). Some commentators of the era imagined the gradual expansion of the realm of democracy—from political democracy, to social democracy to economic democracy.6

In the period right after World War II, there was a harmonic convergence of several forces that made it politically and institution-ally possible in the Western democracies to substantially regulate capital, promote a system of managed markets, expand democracy to the social realm, and broaden economic prosperity and security. Laissez-faire had disgraced itself in the great crash of 1929, the democracies had defeated the dictatorships in the War, and govern-ment was credited with rescuing the economy. Even in laissez-faire America, the state enjoyed an unusual degree of prestige. In the U.S., financial elites had lost substantial political power. In formerly fascist countries and in occupied Europe, financial elites were partly discredited by collaboration with Nazis. There were no economic libertarians in mainstream Western European politics, only variants on sponsors of managed capitalism. The experience of the Great De-pression, the War, and the perceived threat of the Soviet Union led center-right parties as well as social-democratic ones to embrace a regulated welfare state. The postwar Bretton Woods institutions, the International Monetary Fund and the World Bank, were intended to create space for domestic governments to pursue policies of full

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employment, insulated from the deflationary effect of private specu-lative finance.

During this era, the United Nations was launched, both as a more robust global quasi-governing institution than the failed League of Nations, and as an exercise in realpolitik, frankly recognizing that keeping the global peace required the collaboration of the great powers. Somewhat in contradiction, it represented both the dem-ocratic wish and acknowledgement of the geo-political reality. The U.N. was conceived at the apex of wartime cooperation between the U.S, the U.K. and the Soviet Union, amidst hope that the alliance could continue into the postwar era. The creation of the Security Council reflected the realist view that, in power terms, some member states were “more equal than others.”

But before a postwar global architecture could cohere, based on the 1945 twin premises of great power cooperation and support for a highly regulated form of capitalism, two events intruded. The Cold War created a rupture between the USSR and the West, leaving the U.N. more as an instrument of the U.S. strategy of containment with intermittent Soviet vetoes. And three decades afterward, the consensus in the West in favor of managed capitalism gradually gave way to a reversion to laissez faire. The international institutions such as the IMF and World Bank, as well as the aborted Interna-tional Trade Organization (later the General Agreement on Tariffs and Trade), which had been created to facilitate a mixed economy, became engines of economic liberalization.

The Great ReversalA dramatic shift began in 1973, which led to the current era of

global governance in service of neoliberalism and resurgent license for the private corporation. The benchmarks include the collapse of the Bretton Woods monetary system in 1971-73, the turn back towards market-fundamentalism (neoliberalism) in the late 1970s, the use of the IMF and World Bank to enforce economic liberalism rather than facilitate managed capitalism, and the creation of the World Trade Organization and regional agreements like NAFTA to liberate private flows of capital and goods and weaken domestic regulation in the name of freer trade. All served to shift governance decisions to venues that were located largely outside the realm of democratic citizenship.

There are many competing explanations for why this reversion occurred. The Bretton Woods regime of fixed exchange rates anchored by the dollar was probably unsustainable once other


nations fully recovered from the War and required more of a money supply (though the alternative of a global currency was never pursued.) As corporations faced a more turbulent environment and diminishing profits, they pushed back harder on the social and regulatory constraints of the postwar global settlement. The OPEC price increases set off inflationary cycles that further destabilized the postwar order. The relative influence of these several, reinforcing factors are worth a paper (or book) of their own, but what is unmis-takable is that the shift to neo-liberalism at the global level served to further weaken democratic constraints on multinational corpora-tions and global private finance.

This shift had profound procedural and substantive effects. Proce-durally, the effect was to make governance decisions less transparent and less amenable to influence by civic participants, and more vul-nerable to regulatory capture by affected industries. Global gover-nance re-privatized many areas of regulation that had been subjected to democratic deliberation domestically. Substantively, the effect was to weaken the regulation of capitalism generally.

Economists continue to debate whether this shift was a gain for “efficiency,” defined as the most productive use of resources. The case for efficiency gains is mixed, at best; the West grew at a much faster rate and attained full employment during the era when capitalism was more tightly managed, though there is argument over whether these rates could have been sustained. Many underdeveloped nations, especially in Latin America, grew faster and more equitably in the era prior to economic re-liberalization. Beginning in the 1970s, Asian nations achieved rapid growth by embracing state-led development at a time when most of the West was abandoning it. But there is no doubt that the shift back to freer markets was a loss both for equality of wealth and income within national polities as well as democratic participation.

During the same period, however, new issues arose that could not be solved by a single country, no matter how progressive or democratic its politics or policies. The most pressing of these was the threat to the natural environment. Greenhouse gas emissions and the resulting existential threat of climate change are a global problem, as are other environmental challenges ranging from de-forestation to air and water pollution. So even though many shifts of policymaking from the nation state to the global arena are anti-democratic, many critical issues are irrevocably global. The challenge is to make these issues as democratically accountable as possible.

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I I I . G L O B A L G O V E R N A N C E & P O L I T I C A L P O W E R

W ithin the nation state, democratic government is able to identify areas where the market requires rules. Such rules are required due to a wide set of market failures ranging from underinvestment in public

goods to overinvestment in pollution, as well as the need to establish anti-monopoly and anti-fraud rules so that markets can operate ef-ficiently even in their own terms. Public policies can also counteract the myopia of markets when it comes to investing in and compen-sating labor, as well as making up for broad macro-economic failures and periodic financial crises. Since public goods require resources, nation states also devise tax policies. And, obviously, within demo-cratic polities, governments are accountable to their citizens.

In principle, national rules apply equally to corporate actors based offshore. But the very fact of intensified global commerce weakens the capacity of states to set and enforce rules for markets. It weakens the reach of democracy relative to the power of commerce. When trade is freed from regulatory constraints and the rules of trade are used to prohibit some forms of domestic regulation, the dynamics of global trade and capital mobility change power relations and create opportunities for corporations to undercut national rules. Height-ened globalization creates new lacunae where rules are either weak or non-existent or are the opaque creations of private actors them-selves. The tendency of banks and corporations to re-privatize public law, which has accelerated within nation-states since the 1970, has grown even more expansively at the global level (see below.)

In the usual analysis of how globalization weakens the capacity of nation states to regulate and of citizens to hold corporations ac-countable, what is often left out is the political feedback loops. The agenda for the WTO was set primarily by financial and corporate elites. “The non-traditional” areas of trade rules created by the WTO in turn reinforced the power of these same elites, giving them increased political power within nation states and often increasing legal power against states.

These feedback loops include:

• The space for policy action is narrowed. A cumulative


weakening occurs in the capacity of democratic polities to solve national problems, which in turn deprives nation states of legitimacy and credibility in the eyes of their citizens.

• International tax and regulatory competition deprive democratic polities of both resources and capacity to regulate markets; this process then feeds on itself, creating greater opportunities for tax- and regulatory arbitrage.

• As international regulation is increasingly privatized, entire areas of governance are removed from democratic participation, either domestically or globally. A single model is imposed on all nations.

• With global deregulation of markets, center-left parties (the custodians of the model of managed capitalism) are deprived of the ability to deliver for their constituents. They often respond defensively by making alliance with business and financial elites, becoming part of the pressure for even more globalization, shifting the political center of gravity to the right. Even after an epic financial collapse, few western nations today have major parties that function as a true opposition to the elite consensus on global laissez faire. Those governments that try to resist laissez-faire are punished by speculative financial markets, which deters others from trying.

• The failure of the nation state to effectively regulate capitalism feeds into the enhanced claims of the need to further liberate global markets, or at least to use “market-like mechanisms” to achieve social goals, on the premise that the nation state is a relic that has been overtaken by market efficiency.

Thus the effects of globalization on governance of capitalism and on democracy itself are self-reinforcing. In Gunnar Myrdal’s term, the causality is circular and cumulative.

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Global Governance and anti-Democracy If one looks deeper at how the usual process of governance

actually functions, democratic governance of capitalism is more difficult to achieve at a global level, especially when we are talking about mandatory regulation with the force of law, for three core reasons.

First, the enactment of most law at the national level requires merely a parliamentary majority. Even the United States, with its multiple legislative veto-points and super-majority requirements, can enact such laws as the Clean Air Act or the Glass-Steagall Act, and the standards are binding, including on foreign corporations that operate within the United States. By contrast, the adoption of a binding global convention or treaty requires unanimity of major nations, most notably the participation of the United States, or its legal force is dramatically weakened. This simple fact creates a bias in favor of inaction, or weak action, or action that accommodates or even enhances the power of financial elites.

Second, nation states have a well-established enforcement apparatus of the state that includes regulatory agencies, civil and criminal actions by government, and private litigation enforceable by courts. State enforcement is a potent institutional ally of the political forces pursuing regulation of markets. The enforcement counterpart at the global level, where there is no state, is far weaker, more of a patchwork, more vulnerable to industry capture, and requires civil society groups to devote immense monitoring resources in a grossly unequal contest.

Third, the process of domestic legislation has formal mechanisms of democratic participation that are relatively transparent. These include legislative hearings, administrative rulemakings that are open to citizens, freedom of information laws, public legislative debates, and judicial review, as well as political accountability of elected officials after the fact. At times, these norms are honored in the breach; secret deals are made, citizens are outgunned by the power of industry groups--yet the democratic process does allow breakthroughs in which publics can be mobilized and David sometimes beats Goliath. The global counterpart is far less trans-parent or participatory, and far more decisions are made by elites behind closed doors.


I V. K E Y I N S T I T U T I O N S O F P O S T WA R G L O B A L G O V E R N A N C E

Bretton Woods, 1944.The original conception of the International Bank for Reconstruc-

tion and Development (World Bank) and the sister International Monetary Fund (IMF) at the Bretton Woods Conference of 1944 was to facilitate the construction of a managed form of capitalism—a full-employment mixed economy—at the level of the nation-state. The core idea, shared by architects John Maynard Keynes of the U.K. and Harry Dexter White of the U.S., was that the speculative pressures of private trans-national finance aggregated to a deflation-ary effect generally and led to destructive competition to devalue currencies. Private money markets put pressure on nations that ran payments deficits to contract their economies. The Bretton Woods vision included capital controls, limits on private speculations, generally fixed exchange rates--and pressure on surplus countries to expand. In Keynes’ original draft, countries with payments deficits could borrow at will from the IMF, discriminate against “surplus” countries, and the Fund would create its own currency.

In a much toned-down final version, at the insistence of the United States, there was no ability to borrow at will, no punishment of surplus countries (i.e. the U.S.) and the dollar in effect replaced the proposed IMF currency. Yet the controls on speculative private finance remained, as did the fixed exchange rate system; and the IMF was committed to supporting a regime of full employment. The World Bank, in the early years, turned out to be less important than the Marshall Plan, but it too was committed to full employ-ment and economic recovery and expansion. A sister institution, the proposed International Trade Organization, whose blueprint sought to reconcile full employment with liberal trade flows, was never ratified.

With the shift to neo-liberalism and the embrace of the so called “Washington Consensus,” both the Fund and the Bank became agents of the old orthodoxy—free capital movements, austerity rather than expansion as the cure for imbalance; and the imposition of deflationary policies in return for the extension of credits that went mostly to pay interest on old debts, leaving the debtor nation more indebted than before. The prevailing wisdom about the need for controls on speculative flows of private capital reversed by 180 degrees.7 The Bank often became a partner to private development

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projects, and emphasized large infrastructure investments that often ran roughshod over environmental concerns. The impact of the Bank and the Fund was especially pronounced on Third World counties. The consequence was a succession of crises, in which the “search for yield” by investors in affluent countries led to a roll-er-coaster of capital inflows and outflows, with damaging impact on the real economies of target countries.

Subsequent failures of IMF policies, most notably in the East Asia currency crisis of the late 1990s, coupled with push-back from civil society organizations, had only partial success in persuading the Fund to give more latitude to divergent and home grown develop-ment paths. Free capital flows with license for speculators remained a core principal of the new global financial system and its domestic counterparts. By the early 2000s, the defensive strategy of East Asian countries was to bank large hard currency reserves and to avoid en-tanglement with the Fund.8 The Fund’s basic neo-liberal orthodoxy came to the fore again in the euro crisis after 2009, with the Fund serving as a key player in the so called Troika (The European Commission, the European Central Bank and IMF) that imposed austerity regimes on peripheral European nations. Since 2012, the Fund itself and its chief economist, Olivier Blanchard, have broken ranks and been critical of excessive austerity. In its governance, the IMF remains largely beholden to its largest shareholders, namely rich nations whose governments share the essentially neo-liberal view. Procedurally, the nominal openness of the Bank and Fund to dialogue with civil society groups has led to only marginal reform. The major players are national governments and the private banks that rely on the Bank and Fund to certify the “soundness” of national policies and to refinance private debts and help bankers collect them.

The Uruguay Round and the WTOA pivotal event in this history of the spread of neo-liberalism was

the diplomacy that led to the creation of the World Trade Organi-zation in 1994. Prior to the Uruguay Round of trade negotiations, launched in 1986, the main business of the predecessor General Agreement on Tariffs and Trade (GATT) was the negotiation of re-ciprocal reductions in tariffs. Issues involving other national barriers to trade, such as quotas, subsidies, theft of intellectual property, etc., were left to bilateral negotiation and regional blocs such as the European Economic Community (later the EU). Nations were by and large free to pursue their own strategies of economic develop-


ment. The main pressure from financial elites of the developed North came via the IMF, World Bank, and U.S. Treasury to open national financial systems and capital markets as a condition of receiving assistance. This was a key tenet of the Washington Consensus.

In the agenda leading up to the Uruguay Round, the round’s sponsors blurred legitimate measures to address “non-tariff barriers” to trade such as quotas and cartels with more far reaching efforts to use trade to export the ideology and policy package of neoliberalism. A variety of so called non-traditional measures formed the heart of the new WTO, including standards for trade in services (financial liberalization), greater openness to private investment, harmoniza-tion of technical standards, rules for subsidies, government procure-ment, intellectual property protection, and competition policy.

All of these were intended to define various forms of regulation of markets as barriers to trade, thus constraining purely domestic economic policy as well as trade policy. Unlike the GATT, the WTO provided for binding dispute resolution. It represented global gov-ernance with real teeth. Taken together, the new standards and the new degree of enforcement led to a formula for corporate-led glo-balization, and the reduction of the democratic sphere of national sovereignty.

Creation of the WTO had two major consequences, for regulation and for diverse paths to development. Ordinary health, safety, and environmental regulation could be and sometimes were defined as barriers to trade—as if laissez faire were the norm and departures from it were illegitimate constraints on private property rights—despite the fact that the laissez-faire premise had been discredited by the catastrophic events of the interwar period and rejected by the postwar policy consensus. Economic strategies that had been con-ventional for the wealthy countries at earlier stages of their own de-velopment, such as using subsidies, tariffs, the power of government procurement, public ownership, targeted industrial and regional development policies, could now to be denied to both developing and advanced countries, as improper restraints of private commerce. Global rules of trade, in sum, were used as an end run around national political democracy and regulation of markets.

Even more remarkably, nations such as the United States, which fiercely guarded sovereignty when it came to resisting treaties on human rights, labor rights, or even relatively non-controversial agreements such as the convention on the Law of the Sea, eagerly delegated sovereignty to the WTO when the purpose was to help multinational corporations evade state regulations, including their

august 14 • 18

own. One can almost identify a rule of thumb: The U.S. resists giving

up sovereignty when the purpose is the exposure of its practices in human rights, labor rights, or environmental practices to interna-tional scrutiny and law and welcomes subordinating sovereignty when the effect is to liberate finance and commerce in the U.S. and abroad from binding national rules. This double standard speaks volumes about how power is exercised. Indeed, the U.S. has been more willing to constrain its own behavior on sensitive issues of national security, via arms control treaties, than to bind its labor and environmental practices via international law.

The WTO measures interacted with the new neoliberal norms of regional trade deals like NAFTA and an increasingly free-market oriented European Union (both of which also delegated national sovereignty to supra-national entities or treaties), the demands of the IMF and World Bank, new policies of the Organization for Economic Cooperation and Development (OECD) to promote neo-liberalism, the global aspirations of banks and translational corporations, and the domestic deregulation policies of the United States. All of these created pressures to create a new financial and economic-development order that was not only far more biased in favor of laissez-faire but also far less amenable to democratic accountability. The new global rules both narrowed the space for national policy and left little role for direct participation by civil society.

Typically, the agenda setting for a round of trade negotiation is dominated by major nations, with multinational corporations and banks as full partners, but with no significant role for civil society. In the recent negotiations to create a Trans-Pacific Partnership (TPP) and a trans-Atlantic trade deal (T-TIP), both modeled on NAFTA but with intensified rights for private investors, large corporations got access to negotiating documents, while civil society organiza-tions that might be critical or hostile were not invited to the table. Agendas were set primarily by corporate actors, and then advanced by governments. These proposed agreements are less about reducing tariffs, which are already low, than about expanding the rights of corporate players to define an enlarged category of social and economic regulation as illegal barriers to trade. The process of ratifying trade deals is itself an end-run around democratic process, involving an up-or-down “fast track” vote on a complex document negotiated in secret that cannot be amended. The contrast between efforts to achieve global standards on trade and on environmental


protection or human rights is all too revealing of where the real power lies.

The View from the Global South For the most part, the institutions of global governance created

after World Wars I and II were created by and for the “great powers,” though newly independent Third World nations endeavored to build countervailing institutions and power centers. The immediate postwar was marked by the creation of a bloc of non-aligned powers at Bandung in 1955, the decolonization of the Indian subconti-nent and south Asia, as well as most of Africa, the effort by several emergent trading nations in Asia to chart their own economic paths with substantial state-led industrialization, and a diversity of growth strategies in Latin America. During this period, global governance remained firmly in the hands of the U.S. and its allies and their proxy institutions such as the World Bank and IMF, against the backdrop of the Cold War. Virtually all of the major international organiza-tions reflected the dominance of the U.S., both diplomatically and ideologically.

Yet within this hegemonic system, there was some room to maneuver. Several nations did succeed in pursuing development models that, while not explicitly socialist, were antithetical to the neo-liberal model. The norms of the IMF, World Bank, OECD, and later the WTO made this process more difficult, but far from impos-sible. Some of the fastest growing economies, notably China, Japan, South Korea, Indonesia, and sometimes Brazil, among others, suc-cessfully defied the orthodoxy in one respect or another. Only when a nation got into payments difficulties, often because of financial trends that originated in the core nations, did it fall prey to the neo-liberal demands of the international financial institutions and their client commercial banks.

The recognition of the greater presence of the Global South in international bodies and ad hoc gatherings has been slower in coming. With the shift from the G-7 and G-8 (including post-Soviet Russia) group of wealthy nations to the more representative G-20 in 2008, more Third World nations became part of the governing club, at least in principle. Once again, this process was mainly government-to-government, with little room for direct engage-ment by civil society. NGOs and labor organizations were given the opportunity to participate in ancillary events related to G-8 and G-20 summit meetings, and through ongoing organizations such as TUAC (the Trade Union Advisory Committee to the OECD), with

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some marginal and scattered successes in influencing agendas. For instance, the partially successful initiative on significant sovereign debt relief for Highly Indebted Poor Countries (HIPC), grew out of publicity and lobbying efforts such as the Jubilee 2000 coalition, which successfully enlisted British Prime Minister Tony Blair and then President Bill Clinton to add Third World debt relief to the agenda of the G-8.

The creation of the World Social Forum (WSF) in 2001 in Porto Alegre, Brazil, as a counterweight to the dominant neo-liberal ideology as expressed by the annual World Economic Forum at Davos, has allowed for strategizing, networking, and publicity of a very different world view or views, but with only very partial impact on official ideology and agendas. Insurgent regional and national governments have been important partners in these efforts to strengthen global civil society as a source of countervailing influence. (The first WSF gathering in 2001 worked closely with the Porto Alegre government, then led by the Brazilian Workers Party, which later became the party of Brazil’s national government.) The UN has participated via UNECSO since the beginning, lending legit-imacy to the WSF. For the most part, despite this sort of expansion of global civil society, agenda-setting for major trans-national diplomatic initiatives has remained the province of the major gov-ernments and their corporate allies. At the same time, the burgeon-ing of international civil society organizations has sometimes given concerns of the Global South additional leverage, both vis-a-vis in-ternational governing bodies and in negotiations with corporations, banks, and governments of wealthy countries.

South-South Civil Society and AdvocacyIn this contest to create institutions of countervailing power to the

governments of the major industrial nations, the trans-national cor-porations based in the global North, and the substantially captured institutions of global governance, NGOs that articulate a perspec-tive of the South can punch above their weight. These include both networks and free-standing groups like the South Centre, which does research, advocacy, issue development and networking on a broad range of trade, development, environmental, and finance issues. Some broader coalitions include the Third World Network (TWN), with offices in Ghana, India, Switzerland, and Uruguay, as well as affiliated organizations in 13 countries. TWN works on the entire range of economic, social and environmental issues that affect Third World development.


These and other loose networks, such as Our World Is Not For Sale, not only provide an opposition viewpoint in the diverse insti-tutions of global governance and enrich the infrastructure of civil society in the South, but they help rally global public opinion and are able to intervene at moments of opportunity such as the Seattle protests of 1999 or the 2001 U.N.-sponsored conference on racism at Durban, and the regular Porto Alegre meetings of the World Social Forum. To the extent that some governments of the Global South such as Brazil or Malaysia often play dissenting roles in the rule-set-ting for the global financial and trading system, these centers and networks can be part of strategic coalitions that also include allied NGOs based in Europe or the US. They not only intervene in global fora, but help fashion an alternative ideology of global human devel-opment, and challenge the oft-stated premise that the self-interest of wage workers in the global North is necessarily at odds with that of the poor in the global South.

The U.N., its Specialized Agencies, and the Quest for Heterodoxy While the Security Council was designed as the instrument of

the great powers and the General Assembly to represent all member states, some of the most fertile development of issues and mobili-zation of democratic constituencies have occurred at the level of specialized agencies and ad hoc organizations that report to the General Assembly or to the Secretary General. These agencies have no explicit governing power, but they often create venues for civil society to exercise influence. The more powerful and better-funded agencies that are part of the global governance system, such as the IMF, World Bank, and World Trade Organization have reflected and reinforced the economic orthodoxy of free movement of capital and goods as well as environmentally insensitive forms of development. But at the same time, their very existence and nominal commit-ment to transparency has created opportunities for salutary citizen backlash.

While the IMF, World Bank and WTO have substantially func-tioned as instruments of western states and western financial interests, several smaller UN affiliated bodies reflect a more heterodox set of viewpoints, and have served as useful venues to develop and launch public issues. For instance, the UN Develop-ment Programme (UNDP) and the U.N. Conference on Trade and Development (UNCTAD) have been sympathetic to a more human development-oriented approach shaped by poor countries’ concerns. UNCTAD’s various reports and conferences have served to help civil

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society groups to network, to lend legitimacy to more diverse views, and to launch non-traditional issues. The Economic Commission for Latin America and the Caribbean (ECLAC) has served as an important counterweight to neo-liberal orthodoxy, essentially func-tioning as a think tank for governments pursuing more independent policies. Among the older agencies, UNESCO, UNICEF, and the ILO, among several others, insert a social perspective onto a world agenda dominated by issues of national security and commerce.

The ILO: Advocacy without EnforcementFounded in 1919 as an affiliate of the League of Nations, the In-

ternational Labor Organization and its secretariat, the International Labor Office (both somewhat confusingly abbreviated as ILO) is one of the most venerable of the specialized U.N. agencies. It is emblem-atic of both the strengths and weaknesses of this form of global gov-ernance. The ILO is organized as a tripartite body, bringing together business and labor, as well as government, though its outlook tends to be pro-labor. The ILO grew out of demands from nascent trade union organizations for a seat at the table and reflected the tripartism that was already in the air in the period after the First World War. Within the limitations of its structure, the ILO is as close as it gets to a voice for labor within the international system. In addition to doing extensive research on labor conditions, the ILO has promulgated 188 “binding” conventions on labor rights and related human rights (most of which have not been ratified by the United States) as well as 199 non-binding recommendations. The machinery for enforcing even the binding conventions is weak. They have been ratified by dozens of nations that routinely repress labor rights with impunity.

In 1998 the delegates to the ILO’s annual conference designat-ed eight (later expanded to twelve) conventions as “core labor standards” and initiated a campaign for universal ratification. The conventions address workers’ rights to freedom of association and collective bargaining (Conventions 87 and 98), child labor (Con-vention 138), non-discrimination in employment policies (Conven-tions 111 and 100), and forced labor (Conventions 29 and 105). The original eight core standards have now been ratified by most member states (including several that run roughshod over labor rights.) But despite the adoption of these core conventions by most nations, as globalization of production has spread, the conditions of labor in both the Third World and the more affluent countries has deteriorat-ed and the assault on trade unions has intensified.


Source: ILO

The ILO machinery adds up to an elaborate jurisprudence, much of which is honored mainly in the breach. Every aspect of it depends heavily on action by member states, most of which accept the ILO norms as aspirations but not necessarily as policies. Unlike the WTO, the ILO has no independent governing or standard setting authority with the force of domestic or international law. For example, the ILO allows complaints from both member states and workers and their representatives. If a worker group or member state files an ILO complaint against another member state, the ILO may create a three-person Commission of Inquiry to investigate and write a report on its findings. The offending state is then obligated to make a formal response. But if it refuses remediation, there are no consequences. The point is that this jurisprudence is largely voluntary and has done little during the near century of the ILO’s existence to change actual labor conditions. ILO member states include governments that routinely suppress freedom of association and fundamental worker rights.

Nonetheless, these conventions have a certain moral authority and the ILO has been useful as a quasi-enforcement body in the rare cases where labor provisions have been added to trade agreements. The European Union, for example, offers “Community Prefer-ence” (reduced tariffs via the Generalized System of Preferences) to trading partners that agree to abide by certain commercial norms,

Fundamental and Governance Conventions

C087 152

163C098

177C029

174C105

171C100

172C111

166C138

177C182

200

C081 143

107C122

52C129

134C144

Number of Ratifying Countries

20 40 60 80 100 120 140 160 180

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and one of the conditions is the adoption and enforcement of core labor rights as defined by the ILO.9 The E.U. has relied on the ILO to monitor whether nations seeking or obtaining Community Prefer-ence are in compliance.

In a world where trade unions are chronically understaffed, the ILO also provides back-up resources, networking opportunities, and technical expertise from a perspective generally friendly to expansion of worker rights. It has staff to help governments draft labor laws. Its reports expose working conditions, publicize labor rights, and promote workforce development initiatives. The ILO also sponsors high-profile commissions, conferences and reports.

Under recently retired Director-General Juan Somavia, a Chilean diplomat exiled by the Pinochet dictatorship and the first head of the agency from a Third World nation, the ILO became somewhat more audacious and proactive. In 2003 the ILO, with the encour-agement of UN Secretary-General Kofi Annan, created the World Commission on the Social Dimension of Globalization, chaired by the presidents of Finland and Tanzania. The Commission’s report, “A Fair Globalization: Creating Opportunities for All”10 is a model document that suggests a very different brand of global commerce and governance. It is also useful for demonstrating that global labor and social standards need not play off workers in the developed and developing world, but can elevate both. These recommenda-tions are, of course, voluntary. Under Somavia, the ILO also for the first time conducted joint initiatives with the WTO, enlisting then WTO director-general Pascal Lamy for the first time as a cautious supporter of the concept of social norms in trade.11 In July 2013, the Bangladesh Accord between global union federations and global fashion brands (see below), following a building collapse that killed more than 1,100 Bangladeshi garment workers, was established. The governing body is comprised of three union representatives, three corporate representatives, and the chairman and tie-breaker is from the ILO. In one instructive case, which was very much an exception to the usual pattern, the U.S. government explicitly relied on the ILO to report on whether a nation was in compliance with labor provisions of a trade deal, also a rarity. The nation was Cambodia. In 1993, the Clinton Administration sponsored the North American Free Trade Agreement, a deal highly unpopular with the labor movement and much of the Democratic caucus in the U.S. Congress. When Clinton came back for new authority in 1997 to negotiate more trade deals, the House rejected his request. So the Adminis-tration began discussions with the unions to see what kind of labor


provisions might win their support. The Administration was partic-ularly eager to make a trade agreement with Cambodia, which was just emerging from its gruesome civil war and needed access to U.S. consumer markets.

In that era, textile and apparel imports were allocated according to a national quota system, known as The Multi-fiber Agreement. In year-long discussions with Clinton officials, leaders of the U.S. apparel and textile union, UNITE, proposed a novel approach. As part of a U.S.-Cambodia trade pact, the Cambodian government would enforce workers’ rights to organize and join unions. The Administration, looking for an olive branch for the labor movement and aggrieved Democrats in Congress, accepted the idea—and won support for new trade-negotiating authority. The bargain relied upon the ILO, not quite to certify compliance but to write periodic reports on Cambodian labor practices.

Under the U.S.-Cambodia Bilateral Textile Agreement, signed in January 1999, Cambodia received a bonus export quota to the U.S. if its labor practices were found to be in compliance. Thanks to the agreement, Cambodia’s clothing exports increased from $26 million in 1995 to $1.9 billion in 2004, representing 80 percent of its indus-trial exports. Wages increased and unions not only gained a foothold in the apparel industry but were able to negotiate contracts with major hotels such as Raffles. But under another trade pact negoti-ated under auspices of the General Agreement on Tariffs and Trade (GATT) and later the WTO, the entire Multi-fiber quota system was gradually phased out over a ten-year period ending in 2004, and fashion brands were freed to look for the cheapest producer worldwide. Freed from quota constraints, China quickly became the world’s largest exporter of clothing other nations cut costs to match China’s price, and the United States gave up its leverage to reward Cambodia for respecting labor rights.

By 2004, Cambodia’s factory owners were repressing trade unions, hauling union leaders into court and holding them financially responsible for losses due to strikes. Government, fearing a loss of Cambodia’s global market share and no longer having any reward for enforcing worker rights, was siding with the industry. The popular leader of Cambodia’s largest union, Chea Vichea, was assassinated. Between 2001 and 2011, wages in Cambodia’s garment industry fell 17 percent. The ILO’s monitoring program continues, but cooper-ation with it has evaporated. Factories have shifted more workers to short-term employment contracts. Trade union members are routinely fired. Illegal overtime has increased, as has child labor. This

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deterioration has intensified even though the purchasers of garments made in Cambodia are international brands such as Nike, Disney and H&M, all of which have corporate codes of conduct and certifi-cations voluntary NGO programs. Before the ending of the Multi-Fi-ber Quota system and the leverage that it provided, the ILO demon-strated that it could be a very useful part of an enforcement process mandated by a government, in this case the United States.

The OECD and TUACOther powerful international governance bodies that typically

reflect the prevailing view may also create political space for opposi-tion activity. A good case in point is the Organization for Economic Cooperation and Development (OECD). Like the IMF and World Bank, the OECD on balance has been a force for neo-liberalism, par-ticularly in recent years, when it has promoted deregulated labor and financial markets, as well as fiscal conservatism. The OECD has also been a vehicle to promote trade agreements that explicitly undercut managed markets, such as the aborted Multilateral Agreement on Investment (MAI), which was launched in 1995 and withdrawn in 1998 after popular protests. The MAI would have drastically expanded the reach of the 1995 GATS (trade in services) provisions of the WTO to make many forms domestic social and economic regulation a violation of trade norms. The MAI originated in efforts by the financial industry, with the support of several governments, to get via the OECD binding provisions countermanding several forms of domestic regulation that they had not been able to include in the final GATS provision. The MAI was thwarted mainly by the organiz-ing efforts of NGOs.

Among large international governmental organizations, the OECD is unusual in that it has the remnant of a tripartite process that dates back to the era of the Marshall Plan for European recovery. In 1948, the predecessor organization, the Organization for European Economic Cooperation (OEEC) was created as a joint planning agency for Marshall Plan aid. Since its beginnings, the OECD has had both a Business and Industry Advisory Committee (BIAC) and a Trade Union Advisory Committee (TUAC), partly funded by the OECD.

TUAC has become a kind of listening post and key node in the network of NGOs that follow not just labor issues, but also regula-tory, trade, and financial reform policy. TUAC intelligence was key in helping to derail the MAI. Although TUAC is formally attached to the OCED, it has not limited its activities to those under OECD


purview. In recent years, TUAC has helped coordinate civil society efforts to influence the G-8 and later the G-20 agendas. TUAC and its constituency have also opposed austerity as the cure for past excesses of the financial system.

Because TUAC participates at a high level in OECD activities, it is able to influence agendas of conferences and reports. It has also pushed back on the labor-market liberalization efforts of the OECD, worked with friendly governments and the global labor movement to press the OECD to include social criteria, and has involved itself in financial reform efforts. Among other recent activities, TUAC has urged the Financial Stability Board to devise a process for consulting with civil society organizations so that its information is not solely from governments, central banks, and the banking industry; helped provide information to national civil society organizations seeking to influence G-8 and G-20 agendas; and persuaded the OECD to include guidelines for multinational enterprises in its membership criteria. In general, it has represented a social perspective at OECD events, including the annual Ministerial conferences. To the extent that agenda-setting is a key form of power, the OECD’s tripartite structure empowers TUAC and its broad civil society network.

The Ambiguous Role of NGOsAgainst this background of globalized and weakened public gov-

ernance of capitalism there has grown up a profusion of civil society organizations working at both the national and trans-national level. These range from disruptive groups willing to resort to civil disobe-dience, to law-abiding adversarial groups seeking drastic change, to “grasstops” organizations that are essentially fronts for multination-al business—and lots of gradations in between. The abbreviation NGO—non-governmental organization—is a poor term to capture such fundamentally different entities, and even the term itself is tacitly co-optive in that it creates the impression that NGOs are accepted players in a benign system, giving the system legitimacy by demonstrating a quasi-official role for civil society. There is a huge difference, however, between a bland organization partnering with an industry and an insurgent social movement. They do not belong in the same analytical or ideological category.

Today, tens of thousands of NGOs seek to function as counter-weights to the influence of commercial and financial elites. Some work in friendly concert with multinational corporations, others in radical and disruptive opposition to them. Some focus more at the national level to influence the policies of democratically elected

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governments that make policies with global implications. Others operate directly at the international level. Many do both. The regimes that they attempt to influence range from quasi-governmen-tal bodies, such as the IMF and WTO, to voluntary “multi-stake-holder” certification systems, to treaties negotiated by governments, to the UN and its several agencies. But in the absence of global gov-ernment and genuine global citizenship, NGOs that operate globally do so with a structural disadvantage (see the discussion below of certification regimes).


V. M A P P I N G R E G I M E S O F G L O B A L G O V E R N A N C E

W hat follows is a taxonomy of different types of global governance regimes and the role and efficacy of civil society within them. I am organizing these by type of regime rather than by sector of governance,

though some rough correlations emerge. Regulation of finance, for example, tends to be opaque, largely captured, and substantively weak. Creation of certification and monitoring regimes for some consumer goods (but not others) has made some limited progress, but is generally inferior to explicit binding regulation. A few con-ventions with the force of law, such as the Montreal Protocol on the protection of the ozone layer, are exemplary both procedurally and as effective policy. In contrast, global regulation of carbon emissions is noteworthy both for the relative transparency of the process and for the lack of substantive progress.

The Gold Standard of Global Governance: Binding Conventions and Protocols

In 1974 two scientists from the University of California at Berkeley, Mario Molina and F.S. Rowland, found evidence that CFCs used in refrigeration and aerosol spray cans could weaken the earth’s ozone shield, increasing the risk of cancer and eye disease. Despite widespread industry opposition and the advice of conservative skeptics that people should just wear hats and apply more sunscreen, the major industrial nations acted to ban CFCs. In 1985, with the discovery of a dramatic hole in the ozone layer over Antarctica, leading nations agreed to the Convention for the Protection of the Ozone Layer, followed by the 1987 Montreal Protocol.

This was a legally binding international treaty, with the force of domestic law. The chemical industry at first created the usual front group, called the Alliance for a Responsible CFC Policy. But faced with overwhelming pressure from civil society groups and major governments, as well as clear scientific evidence, the industry split. DuPont, a leading producer with reputational concerns, agreed in 1986 to find a substitute for CFCs within five years. The United States, despite a conservative national administration under President Ronald Reagan, took the science seriously, and took the lead in enlisting major nations to reduce CFCs by 95 percent over

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ten to fourteen years. In the end, that was reduced to 50 percent by 1999, but CFCs now have better chemical substitutes, and are no longer widely used. The ozone layer is now expected to heal by about 2050 in a rare success for international environmental governance.12 Note, however, that the decision of a key national government, the U.S., to take the lead was critical.

A binding treaty enforced by member governments is far superior to campaigns by NGOs of publicity, education, pressure, or even certification. It is superior to most global governing regimes, even ones that allow limited participation by civil society, because a binding treaty has the force of domestic law. Several other major protocols, however, have been negotiated and conventions signed, but the United States has refused to ratify most, citing sovereignty. At the risk of repeating myself, I note that sacrificing sovereignty is something that the U.S. does willingly—eagerly—when the impact is to undermine regulatory constraints on capital and commerce.

Among the international conventions signed by most nations but either not signed or not ratified by the US are several core ILO conventions, the 1994 Law of the Sea Convention, the 1998 Rome agreement recognizing the jurisdiction of the International Criminal Court, and of course the 1997 Kyoto Protocol. The 1992 London Convention on Marine Dumping was never signed by the US, but Washington substantially cooperates in its implementation. The rather weak 2004 international seed treaty was not ratified by the United States; nor has the U.S. ratified the 1992 Convention on Bio-logical Diversity, the Basel Convention on toxic wastes trade, or the Stockholm Convention on Persistent Organic Pollutants.

Of major human rights treaties negotiated since 1980, only two have even been signed by the US. These include:

• Convention on the Elimination of All Forms of Discrimination against Women (signed but not ratified)

• Convention on the Rights of the Child (signed but not ratified)

• Convention for the Protection of all Persons from Enforced Disappearance

• Mine Ban Treaty• Convention on Cluster Munitions• Convention on the Rights of Persons with Disabilities • Optional Protocol to the Convention against Torture


One of the relatively few international protocols on human rights adopted by the United States is the 1948 Universal Declara-tion of Human Rights. But even the Convention against Genocide, approved by the UN General Assembly in 1948, and ratified by a sufficient number of nations to come into force as international law in 1951, was rejected by the U.S. Senate for 40 years. My one-time boss, the late Senator William Proxmire of Wisconsin (who set the record for consecutive attendance in the Senate chamber) gave a short speech calling on the Senate to ratify the Genocide Convention every single day the Senate was in session until the convention was finally ratified until 1988. The US did ratify the 1994 Convention to Combat Desertification, but the Clinton Administration had to sneak it through the Senate on a voice vote in 2000, along with a package of non-controversial measures.

Why the outlier behavior of the United States? It is explained by a combination of the influence of traditional isolationist conservatives who either reject the substance of the measures or can’t imagine the United States being subjected to any form of international law, especially measures that might hold the U.S. accountable for breaches of human rights in the name of national security, and the power of business elites who strenuously resist labor, financial, or environmental standards being imposed on their practices, either by domestic or international law.

What was different about the Montreal Protocol? For one thing, it was approved relatively early in the current era of environmen-tal concern, before the massive corporate backlash set in. More important is the fact that it addressed a very narrow and easily isolated problem, depletion of the ozone shield by CFCs, where both the science and remedy were straightforward and the economic dislocation was limited. By contrast, the implications of the Kyoto Protocol and efforts to create more effective successors are far-flung and far more contentious diplomatically, politically, and economical-ly.

Serious global efforts to reduce carbon emissions, by whatever policy design (a question that poses a whole other set of contentious complexities) would deny the world’s largest developing nations, namely India and China, the means of economic growth that the West used at earlier stages of its own development. During an interim period, a mandatory carbon-reduction treaty could well depress global output generally (though some have contended that reduced material “living standards” is a desirable and necessary condition of saving the planet.) In principle, China could leapfrog

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the West’s entire stage of dirty development using green technol-ogies, and still raise living standards. In the meantime, China is putting online an average of one new coal-fired electric generator a week. China now consumes more than half the world’s coal. And while China also leads the world in production of solar cells and wind turbines, it is adding capacity for dirty development far faster than it is adding renewables. Achieving a carbon agreement that is perceived as fair to Third World counties would probably require substantial transfers of wealth and intellectual property. It would require the West to set binding goals that would be unpopular do-mestically and to radically transform its own economy. All of this is necessary to save our environment. But it is a far more complex challenge and far heavier diplomatic and political lift than banning CFCs. We address the challenge of fossil fuels and carbon emissions in greater detail in the case study below.

Human Rights and Soft International LawCommercial law that is enforceable in national courts and binding

treaties and conventions can be considered “hard” international law. They have the full force of domestic law. Most forms of internation-al human rights law are not as binding, in part because the United States has not ratified most of the protocols and national courts often feel free to ignore it. Nonetheless, soft international law can produce useful leverage in such areas as human rights, labor rights, and in the protection of the environment.

For example, after extensive effort by the human rights community and protracted delay, the U.N. General Assembly in September 2007 approved a declaration on the Rights of Indigenous Peoples. The vote was 143 to 4, with the U.S. voting against. That protocol complements ILO Convention 169 on rights of indigenous peoples (which to date has been ratified by only twenty nations.) Such protocols do not have the full force of domestic law but the UN protocol has proven useful in several cases where indigenous people were in the process of being deprived of their ancestral lands.

In a land demarcation case in Nicaragua, an indigenous community was being deprived of land through a foreign logging concession. Advocates first won the case in the Inter-American Court of Human Rights, a body created under the aegis of the OAS (and which is non-binding). When a Nicaraguan court found in favor of the tribal people, the local court cited the finding of the human rights court. All this occurred in 2001, when the UN protocol was in progress but not finally adopted. But norms of not


stealing native lands “were already part of customary international law,” according to Robert T. Coulter, who directs the Indian Law Resource Center.13

In similar cases in Belize and Suriname, indigenous peoples were able to win rulings in land disputes, in which the local court cited the U.N. Protocol and other international human rights norms. In the Suriname case, the Saramaka people won a ruling holding that mining operations flooded and otherwise disrupted village life:

The lands and resources of the Saramaka people are part of their social, ancestral, and spiritual essence. In this territory, the Saramaka people hunt, fish, and farm, and they gather water, plants for medicinal purposes, oils, minerals, and wood. Their sacred sites are scattered throughout the territory, while at the same time the territory itself has a sacred value to them.14

Civil Society groups such as the Indian Law Resource Center, which works both domestically and globally, are able to use the leverage of “soft” human rights law to make incremental progress in the expansion of norms, and then actually to win legal cases. This is an area of substantial overlap and synergy between environ-mental goals and human rights objectives. For example, the Center has worked with other NGOs to pressure the World Bank and the UNDP to modify their REDD programs (Reduction of Emissions from Deforestation and Forest Degradation.) These programs are well-intentioned efforts to moderate the process of deforestation, while still allowing for logging rights. But protecting indigenous peoples is not part of the mandate of either the World Bank or the UNDP. These bodies initially took the position that, as non-states, they are not covered by the UN Declaration on Rights of Indigenous Peoples (even though the UNDP is part of the UN). Ongoing ne-gotiations involving several international human rights groups are seeking to persuade the Bank and the UNDP that they are in fact covered, and that the REDD efforts should be reconciled with tribal land rights.15

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The Privatization of LawIn parallel with the maturation of the modern sovereign state,

commercial sectors continued to create their own private legal and regulatory regimes. In the early 20th century, conservative national U.S. administrations celebrated standard setting by business trade associations as a benign alternative to government regula-tion. President Herbert Hoover was particularly identified with the movement for self-governing associations, which proliferated with the encouragement of government during Hoover’s tenure as Commerce Secretary in the 1920s. Franklin Roosevelt, though a progressive, saw voluntary cartels under the National Industrial Recovery Act as a way to brake deflation by putting a floor under prices, and supported a form of associationalism (NRA industry codes) in service of progressive substantive policies.

However, in that era the courts took a very dim view of the state vesting agreements of private associations with the power of law, by proxy. The public and its elected representatives were left out of this private standard setting, violating a fundamental Constitutional principle of legislation. In a famous Kansas case, the state legislature, in the Kansas Fire Prevention Act of 1915, had required that “All electric wiring shall be in accord with the National Electric Code,” a standard set by the private National Fire Protection Association. Nothing doing, admonished the state Supreme Court, declaring sarcastically that if the state wanted to enact a fire code modeled on the private one, “it should copy that rule, and give it a title and an enacting clause, and pass it through the Senate and the House of Representatives by a constitutional majority and give the Governor a chance to approve or veto it….”16

In the U.S. Supreme Court’s famous 1935 Schechter case, striking down Roosevelt’s National Industrial Recovery Act, the high court was even more emphatic. The NIRA had authorized industry codes of fair competition, which could be submitted to the president for approval and would then have the force of law. The Court held:

Could it seriously be contended that Congress could delegate its legislative authority to trade or industrial associations so as to empower them to enact the laws they deem to be wise and benefi-cent…..? The answer is obvious. Such a delegation of legislative power is unknown to our law, and is utterly inconsistent with the Constitutional pre-rogatives and duties of Congress.17


Though the Schechter case was been treated as an example of a “conservative” court undermining an activist presidency, looked at eight decades later the case can also be seen as insisting that public responsibilities not be delegated to private forms of law. In the eight decades since Schechter, the privatization of law has intensified both domestically and globally.

For example, though most consumers and workers may be unaware of the deprivation of their rights until a conflict arises, it has become standard corporate practice to require new employees and consumers of a wide array of products to sign standard forms in which they sign away their rights to sue in favor of arbitration regimes that have been created by the corporation for the benefit of the corporation. Extensive research shows that these regimes are far less likely to settle a dispute in favor of the worker or consumer than ordinary courts.18 This is not a new device. The invention of workman’s (now workers’) compensation was devised by industry to keep worker litigation out of court during the progressive era when some courts were newly receptive to worker health and safety com-plaints. But in recent years, more and more law has been privatized, bringing the revolution in social and economic rights that began in the Progressive Era almost full circle to the Gilded Age, when most law that affected workers and consumers was privatized and sharply constrained by courts.

According to Professor Susan Franck, bilateral and multilateral investment treaties, such as NAFTA and the investment provisions of the WTO, give investors what amount to extra-territorial rights to circumvent normal court processes via private arbitration systems.19 These arbitration tribunals, on balance, give power to the corpora-tion at the expense of the democratically accountable state. They are an international parallel to the shift to privatized compulsory arbi-tration domestically.

If privatized law is still partly the exception domestically, it has become the norm globally. As Professor Harm Schepel, a leading authority on privatized global law, has written, “Globalization in-tensifies privatization.”20 He adds that it “has dispossessed the state of its monopoly in lawmaking.” This is especially true in the case of standards.

As of 2005, there were some 49,000 private standards in place in the United States, developed by more than 600 industry trade asso-ciations.21 Most of these standards are not easily influenced by civic NGOs. They are entirely the province of private industry. Though the courts in the Progressive Era and the New Deal held that gov-

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ernment could not delegate its standard-setting authority, in recent decades the regime of private law has gotten around this earlier view by signing memoranda of understanding with the National Institutes of Standards and Technology (NIST) a U.S. government agency that thus gives recognition to standards set privately.

However, at the level of the nation state, the government retains the residual right to override private standards, as the United States has done with standard-setting legislation such as the Occupational Safety and Health Act (OSHA) and the Clean Air Act. At the inter-national level, by contrast, private standard setting is the norm and there is no direct legislative or judicial process for countermand-ing privately set standards that are contrary to the general interest. According to the encyclopedic volume on global regulation and private standard setting by John Braithwaite and Peter Drahos:

As Australians, we note, for example, that for years some of Australia’s air safety standards have been written by the Boeing Corporation in Seattle….Australia’s ship safety laws have been written by the International Maritime Organization in London, its motor vehicle safety standards by Working Party 29 of the Economic Commission for Europe, and its food standards by the Codex Alimentarus Commission in Rome. Many of Australia’s pharmaceutical standards have been set by a joint collaboration of Japanese, European, and US industries and their regulators, called the International Conference on Harmonization.22

Two private global standard setting bodies were given significantly enhanced authority by the Uruguay Trade Round. The International Organization for Standardization (ISO) and the International Elec-tro-Technical Commission (IEC) pre-dated the Uruguay Round. But under the Round’s Agreement on Technical Barriers to Trade, member states of the WTO are required to use (privately set) inter-national standards as the basis of domestic law, unless there is a good reason to claim that such standards are not appropriate.

Much of the standard setting by the ISO and IEC is relative-ly non-controversial and purely technical, and arguably adds to economic efficiency. In the 19th century, railroads famously had different gauges and in World War I captured weapons were often useless because they had different technical specifications. To the extent that there was controversy, it often involved whether a par-ticular standard reinforced the dominance of a particular corporate


leader with a “first-mover advantage” versus an innovator (such as Betamax vs. VHS). But the shift from national regulation, which is amenable to public participation and scrutiny, to private global standard-setting, which is not, is one more case of the distancing of decisions with public consequences from the democratic public.23 And not all instances of privatized regulation are so benign.

The Problem of Due ProcessWithin democratic nation states, an important aspect of the rule

of law is administrative law. In the creation and enforcement of laws and detailed administrative rules to carry them out, national governments typically have well-established procedures. In the United States, the overarching law governing agency rule-making is the Administrative Procedure Act of 1946 (which codified and expanded earlier practices). Under the APA, an agency creating rules to carry out the intent of legislation must publish advance notifi-cation, solicit comment, publish draft rules, and then publish final rules taking into account public comments. It also has the option to hold hearings. In this rulemaking process, genuine public-interest groups may be out-gunned by industry advocates, but at least they may participate and the process is relatively transparent. There is the recourse of tipping off the press to scandalous capitulations by the regulators. By the same token, the rules of courts are very well established, to prevent conflicts of interest, prohibit ex parte contacts or jury tampering, allow public trials, and so on. Domestically, addi-tional transparency is provided by the Freedom of Information Act, rights of discovery in the context of trials, and so on.

At the international level, there is no literally body of governance that has a system of due process remotely as protective of the rights of citizens as the domestic counterpart. Dispute resolution tribunals range from quasi-transparent, such as the WTO, to purely privat-ized and opaque (see below). Agendas are often secret. Conflicts of interest, rather than being prohibited, are often the essence of private capture of a quasi-governmental entity. All of this tends to stack the deck in favor of financial elites; and the more that international law is privatized, the more of a problem it is.

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The Problem of ExtraterritorialityWith increasing re-privatization and globalization of law comes

the problem of double standards in extraterritoriality. As the example of private arbitration regimes noted above suggests, mul-tinational corporations are content to live with extraterritoriality when it serves property interests. But application of labor, environ-mental, and social standards is fiercely resisted as an interference with the sovereign right of developing countries (and their corporate partners) to exploit labor, despoil the environment, avoid taxation and weaken social protections. The enforcement of austerity by the IMF, WTO, U.S. Treasury and European Union in exchange for relief of sovereign debts that were often incurred corruptly for private gain is an emblematic case of the indulgence granted for the approved sort of extraterritoriality.

I had first hand experience with this issue in the 1970s, as a U.S. Senate investigator under Sen. Proxmire, when I conducted the hearings on bribery of foreign governments by U.S.-based corpo-rations and then drafted the legislation that became the Foreign Corrupt Practices Act of 1977. We faced a united front of opposition from corporations on the grounds that this law, prohibiting U.S. cor-porations from bribing foreign governments, would prove a source of competitive disadvantage as well as an unwise and unconstitu-tional extraterritorial overreach. But Congress did pass the law and it was signed by President Carter and upheld by the Supreme Court. It has had modest success in reducing corruption and was the rare case where an extraterritorial law constrained rather than enabled corporate behavior.


V I. I N T E R N AT I O N A L G O V E R N I N G B O D I E S : A W I D E R A N G E O F P R O C E S S E S A N D R E S U LT S

T he global governance landscape includes a broad range of governing and quasi-governing bodies, with differing degrees of open access to global civil society at one end of the spectrum and substantial opacity and/or industry

capture at the other end. This paper is not meant to be exhaustive (which would require a good sized book), but to suggest the range and characteristics of different kinds of institutions.

The Basel Committee on Banking SupervisionA classic example of a governance regime that is nominally public

but effectively closed to direct participation by NGOs and captured by the regulated industry (in this case large multinational banks) is the Basel system for bank capital standards.

The Basel Committee was originally an informal body of senior financial officials and experts that happened to meet in Basel because that is the location of the Bank for International Settlements, the central bankers’ central bank. With the effort to partly harmonize international capital standards beginning in the 1980s, which gained new urgency with the financial crisis of 2008, the Basel Committee became a quasi-regulatory body.

Only central bankers and senior regulatory officials from 17 wealthy nations have representation on the Committee. There is no consultative mechanism for NGOs, the committee’s agenda and deliberations are opaque (though bankers have plenty of access), and its national constituent units are relatively non-transparent, industry-oriented agencies of government—namely central banks and finance ministries. Because the issues are extremely technical and closely held, NGOs tend not to monitor Basel Committee issues the way that many other institutions of global governance are monitored, either via member governments or directly.

After the first two Basel Accords of 1988 and 2004 dismally failed to prevent the abuses that contributed to the 2007-2008 financial collapse,24research subsequently revealed that the Basel Accords actually helped facilitate the financial collapse by leaving large loopholes for “off-balance-sheet” transactions and thus creating incentives for banks to hide liabilities. The first Basel Accord was

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not concerned with safety and soundness at all but was prompted by the desire of banks newly liberated to do business in each other’s countries to have a “level playing field” of capital standards, pref-erably low ones.25 A third Basel Agreement of 2010-11 ostensibly closed loopholes and increased bank capital standards. But under pressure from the financial industry, the Basel committee, meeting in secret, added new loopholes and weakened the standards yet again in December 2012. Basel III allows “risk-weighting,” meaning that for certain classes of financial assets deemed less risky, a bank may reserve far less capital. In Europe, sovereign bonds are deemed riskless and as good as cash for purposes of capital standards, although the cases of Greece, Spain, Ireland, Portugal and Italy demonstrated that private investors view these bonds as very high risk. An accounting fiction that is convenient for the banking industry has translated into speculative pressure against these nations’ bonds and extreme fiscal austerity.

Though capital standards were a key issue in the Dodd-Frank financial reform legislation passed by the U.S. Congress in 2010, this dramatic policy shift by the Basel Commitee was undertaken by a global body, with the consent of key central banks and finance ministries. The fact that the Basel Committee’s name was on the weak standards provided political cover and insulation to national governments. National governments use the Basel standards as the basis for their own regulation of capital standards. Thus, rather than providing an international floor to prevent bankers from doing end runs around national regulation, an international form of gover-nance enabled the financial industry to weaken national regulation. (U.S. financial regulators in July 2013 attempted to impose capital standards slightly more stringent than those of Basel III, thus improving regulatory safeguards but undermining the Basel premise of a level playing field for banks based in different countries.)

Privatized Regulation: The Case of ISDAThe International Standards and Derivatives Association is an epic

illustration of a purely private, international standard-setting body that makes decisions with immense public consequences. ISDA is also afflicted with conflicts of interest. ISDA was created in 1985 by the large trans-national banks that write credit default swaps, primarily as a lobbying organization to make sure that swaps would not be regulated as securities. A closely related secondary purpose was to privatize the process of governing swaps contracts and trans-actions.


A swap is a kind of insurance policy against a security default-ing, though far more complex than ordinary insurance, and issuers typically do not hold adequate reserves against defaults. ISDA reserves to itself the right to determine when a default has occurred. In other words, it is both defendant and judge in its own case.

In the case of the Greek debt crisis, in 2010 and 2011 the IMF and the European Commission were trying to organize a debt relief plan that would be, in effect, a partial, negotiated default—a write down in the outstanding value of Greece’s public debt. ISDA delayed for several months determining whether a partial, negotiated write down would be considered a “default event” for purposes of paying off swaps contracts. While the issue hung fire, Greece’s ability to float its bonds worsened and its costs increased. In the end the ISDA, after reversing itself, declared in 2011 that it would pay the swaps contracts. By then a lot of bonds had been sold off and more damage had been done to Greece; it cost the big banks only about $3 billion. Needless to say, since ISDA doubles as a trade association, lobby, and quasi-regulator, there is no participation from civil society in its deliberations.

International Associations of RegulatorsMany national regulatory bodies (which are themselves

sometimes far from fully transparent) are members of global associ-ations that have standard-setting authority. For example, the IOSCO is the International organization of securities regulators such as the SEC. It has no direct regulatory authority, but its expert panels recommend standards for national regulators to follow, on such issues as credit rating agencies, derivatives regulation, asset-backed securities, etc. There is no formal or informal mechanism for CSOs to play a role and IOSCO provides yet another venue for industry and regulators to interact unimpeded by civic representatives. IOSCO’s work typically includes panels of industry representatives, but no outreach to NGO critics. There are dozens of similar associa-tions of government regulators.

Opaque Governance: The World Trade OrganizationThe WTO is an organization made up of 153 nation states. It had

no consultative mechanisms for civil society in most of its deliber-ations, though, as noted above, under its recently retired Director General, Pascal Lamy, there have been joint initiatives with the International Labor Organization. Its dispute settlement machinery is government-to-government, and its quasi-judicial panels do not

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follow ordinary rules of due process. However, the WTO is the rare international body whose trade agreements require unanimity among its member nations. As a consequence, nations that are opposed to the neoliberal consensus are often able to work with similarly inclined opposition civil-society organizations. Groups like Public Citizen’s Global Trade Watch have made strategic use of leaked draft documents. Famously, disruptive tactics caused the Seattle meeting of the WTO to fail in 1999.

Professor Richard Stewart, an authority on global administrative law, writes in an extensive law review article on due process in the WTO:

The WTO administrative bodies operate in a rel-atively opaque and closed fashion, notwithstand-ing the broader normative significance of their ac-tivities. The administrative law-making functions carried out by these organs are eminently suitable and ripe for application of GAL procedures for transparency, participation, reason giving, and review, yet, in practice; such procedures are almost wholly absent.26It would not be too cynical to conclude that the opacity in the WTO persists, even as its authority expands, because this suits the leading nations and corporate interests that dominate the WTO agenda.

The World Bank, IMF and Monitoring by NGOsSince the several policy debacles of the 1990s, in which IMF sta-

bilization packages made a bad situation worse, these international financial institutions have become somewhat more permeable to NGOs. The failure of IMF policies in Latin America in the 1980s and East Asia in the late 1990s created a political backlash from third world nations, which has combined with greater and more sophisti-cated involvement of NGOs as well as internal criticism from within the IMF, to modify policy.

The IMF is an interesting example of the interaction between pressure from NGOs on member governments, direct NGO engage-ment with the institution, and pushback from governments that were victims of perverse IMF policy. For example, when senior IMF officials, with the encouragement of the US Treasury, sought in 1997 to formally commit the IMF to the principle that “the liberalization


of capital flows is an essential element of an efficient international monetary system in this age of globalization,” member-govern-ment and NGO opposition killed the idea. This language would have blocked the ability of governments to use capital controls in emergencies, which several have done to good effect. Interestingly enough, one of those governments was the Congress of the United States, where senior Democrats warned that such language could cost the IMF its appropriation, and sponsors backed off.

Though the IMF is ordinarily even more orthodox than the (de-velopment-oriented) World Bank, a combination of policy changes demanded by member states, pressure from NGOs, and shifting views by senior economists has led to somewhat more heterodox policies. In recent years, the IMF’s independent evaluation unit has often been scathing in its criticism of the IMF formulas. Critics of the prevailing orthodoxy have sometimes held senior positions at these institutions, such as Joseph Stiglitz who served as chief economist and senior vice president of the World Bank in the late 1990s. Stiglitz was able to work with NGOs and dissenting member governments to modify Bank policy. In January 2013, Olivier Blanchard, senior vice president and chief economist, issued a withering report on the perverse impact of austerity imposed on several European nations by the IMF, EC, and ECB. The IMF’s own official reports have called for respite from austerity.

Because of the relatively greater transparency of the IMF and World Bank, and their willingness to engage with critics, as well as their structure and sympathy of some of their senior profession-al staff, NGOs that monitor these institutions have had somewhat greater access and substantive success than those that monitor, for example, the Basel Committee or the World Trade Organization.

For example, the Bank Information Center (BIC) works with other CSOs and closely monitors the World Bank and other Inter-national Financial Institutions. In addition to pushing the Bank on a variety of substantive policy areas and facilitating action by other NGOs, the BIC has had some success in getting the Bank to engage with CSOs via joint meetings and to increase the transparency of its materials. Since the Bank is a major development funder, the BIC and other NGOs press it on a range of environmental, energy, and human rights issues. A smaller Washington-based NGO, New Rules for Global Finance, focuses on greater transparency as well as substantive policy reform for the International Monetary Fund, and other official international financial institutions as well.

It appears that the World Bank and IMF, though involved with

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finance, are more permeable than governance bodies like the Basel Committee for several reasons. First, they are directly involved with development finance which necessarily raises environmental, human development, and social justice issues; secondly, they have represen-tation from the entire range of nations while the Basel Committee is a club of big banks and wealthy nations; and finally, both the Fund and the Bank have been stung by their policy failures in a way that the Basel Committee has not. It’s also the case that some engagement with civil society, if it leads to greater transparency, can logically produce more engagement. The World Bank also cannot avoid engaging with entities such as UNCTAD, UNDP, and UNEP.


V I I . “M U LT I-S TA K E H O L D E R” P R O C E S S E S A N D M O N I T O R I N G R E G I M E S

I n recent decades “multi-stakeholder” monitoring and certifica-tion bodies have created a new template for corporate account-ability around social and environmental needs. These efforts, intended to induce voluntary reforms by corporations based on

appeals to reputational concerns and enlightened self-interest, have a mixed record at best. The first model for this approach was the Sullivan Principles, created in 1977 by the Reverend Leon Sullivan as part of the pressure by the anti-apartheid movement on multi-na-tional corporations doing business with or in South Africa to press the Pretoria government for specific reforms. The original Sullivan principles asked corporations to commit to a code of equal employ-ment opportunity that, if actually implemented, would have reversed core tenets of the apartheid regime. Rev. Sullivan had some leverage because he was a prominent African American leader and a member of the board of General Motors, which had extensive operations in South Africa. Eventually more than 150 corporations committed to the Sullivan Principles, and over 100 others pulled out of South Africa. By the time this occurred, the anti-apartheid movement had moved well beyond piecemeal reform demands.

The Sullivan Principles seemingly demonstrate the value of such voluntary codes of conduct. However there were key differences that explain the weakness of most monitoring initiatives. The Sullivan Principles were not just about altering corporate behavior. Ulti-mately they were part of a movement for revolutionary change, a movement that included pressure on Western governments, a divest-ment campaign, as well as radical agitation and civil disobedience on the ground. The existence of international bodies from which South Africa’s apartheid regime could be criticized or ostracized was also key. No small effort, of course, was contributed by South African in-surgents themselves, and it is perhaps misleading to categorize a rev-olutionary movement as part of “civil society”. This rare convergence of forces, coupled with the personal courage and moral witness of Nelson Mandela and thousands of others, produced transformative change that few believed possible. Ironically, however, the Sullivan Principles inspired an elaborate ideology and practice of certification regimes whose goals were more modest and incremental.

Since the 1990s, hundreds of monitoring and certification regimes

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have been created by corporations seeking to insulate their brands from reputational damage.

Others have been created by NGOs. Some of these systems involve corporations working with NGOs partners in relationships that range from tame to adversarial. Others, such as the recent program for factory inspections in Bangladesh created by Walmart and the Gap, were entirely the work of the corporate sponsors, with nominal involvement of a friendly think tank (funded in part by Walmart), the Bipartisan Policy Center, but no meaningful involvement by civil society critics or trade unions.

These regimes, by definition, are voluntary. They require corpo-rations to cooperate and depend on activating a global public more in their role as consumers than as citizens. This difference is key. A citizen can elect a government with the power to enact a law that is a mandatory constraint on corporate behavior. A consumer or group of consumers can pressure a corporation to follow the norms of a certification regime, using reputational concerns as political leverage. The latter is weaker than the former because it leaves mon-itoring and enforcement to NGOs and corporate self-policing rather than to the direct legal and police power of states.

The certification approach seeks to raise standards within market norms, rather than by state regulation that explicitly alters market practices. As one scholar observes, this strategy inverts the schema made famous by Karl Polanyi, who observed that the goal of a managed form of capitalism is to “re-embed economic transactions in social relations.”27 But certification regimes, by contrast, proudly attempt to use market forces—consumer pressure, corporate en-lightened self-interest--to achieve social goals. Benjamin Cashmore, a supporter of this approach, enthusiastically describes such certifi-cation regimes as “non-state, market-driven forms of governance.”28 This is quite the opposite of Polanyi’s sensibility, since it acknowledg-es and even reinforces the hegemony of markets as the mechanism for making even social decisions required by systematic market failures. As Michael Conroy writes, in an book celebrating the success of certification regimes, these are “non-state, market-driven” strategies that rely entirely on market forces to achieve social goals.29

In practice, certification and monitoring programs have experi-enced a wide variety of outcomes. They range from pure window dressing to moderately effective bodies that have changed corporate behavior for the better. They also consume a huge amount of citizen energy and resources. This can be seen as a plus—more activation, consciousness, and publicity. This can also be seen as a minus—the


diversion of efforts that might be better spent elsewhere if global regulatory standards were mandatory.

There are three large challenges: the relative ease with which certification regimes are co-opted by industry, the fact that corporate strategies keep changing and certification regimes need to change with them, and the extensive effort needed to adequately monitor paper commitments. In addition, for all of the effort behind certi-fication and monitoring, there are huge areas of global commerce, such as labor standards and financial practices, where it has not been possible to establish such regimes at all, or where regimes are partial at best. Turning to some prominent examples, we can see how the limits of this approach have played out.

Certified CoffeeFair-trade coffee, seemingly, is a good example of progress. Fair

Trade International and Fair Trade USA have sought to brand fair-traded coffee, combining environmental and labor goals. Consumers in wealthy nations willing to pay four dollars for a cup of premium coffee tend to be politically conscious. Because of the high retail price and the heightened sensitivity of corporations such as Starbucks for their reputations as good corporate citizens, there was economic and political room to demand that “fair trade” coffee justify its premium price with decent labor and environmen-tal standards. Growers could gain by being certified and thus get a higher wholesale price for their coffee.

However, more than twenty years experience with fair-trad-ed coffee has led critics—many of them veterans of the fair trade movement—to point to the several deficiencies that seem endemic to the approach. Only about five percent of world coffee is fair-trad-ed. The cultivation practices are a gain for sustainable agriculture, but there is controversy about how much of the premium price results in improved net compensation for farmers, who incur added costs in gaining certification. The higher prices paid growers, some critics contend, destabilized a reasonably effective price-stabilization regime, the International Coffee Organization, which was aimed at preventing world coffee overproduction. Growers, attracted by the premium prices, increased the land under cultivation, adding to supply and depressing prices worldwide for the vast majority of coffee farmers not under the fair trade regime. There is now a pro-liferation of certification labels (four major international fair trade networks), leading to consumer confusion about what fair trade actually means. There is also controversy about the adequacy of

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compliance monitoring. FLO-CERT, which monitors compliance, is both a for-profit company and a subsidiary of Fair Trade Interna-tional rather than an independent, arms-length monitor. Because the whole fair trade regime is voluntary, it is weaker than national regu-lation of labor or environmental standards. Some corporations, such as Starbucks, invite consumers with social consciences to pay extra for coffee that is branded as fair traded, but the same customers are free to pay less and drink Starbucks’ other premium, non-fair-trade fare. This is a far cry from a regulatory regime, such as OSHA or the Fair Labor Standards Act, that sets universal mandatory minimums.

Sustainable ForestryForest certification programs, one of the oldest such initiatives

of international civil society, attempt to brand forest products that follow sustainable practices. The creation of the Forest Stewardship Council (FSC) in 1993 grew out of the Rio Earth Summit of 1992 and 18 months of consultation between industry and environmental groups. What is noteworthy is that the FSC has brought together major industry players and the industry’s fairly radical critics such as Greenpeace. The FSC has enlisted not only major logging companies, but retailers such as Home Depot and Ikea. It has an elaborate system of governance, accreditation, and chain-of-cus-tody certification. Its members range from environmental groups to major producers and end users such as Kimberly Clark. The FSC claims 181 million hectares of certified forest as of July 2013. However, that number should be placed in the context of 130 million hectares lost to deforestation in the past decade alone.30 It is also noteworthy that the FSC operates in partial symbiosis with a U.N. agency, the FAO, which provides an independent source of data and research. Unlike some U.N. agencies, however, the FAO has not been aggressive. For the most part, it has worked, for with international agribusiness on projects like the Codex Alimentarius, while also serving as a voice for sustainable forestry and fisheries practices and relief of hunger.

The FSC has been widely hailed as a success story, though some critics point to cases of certification of harvesting that uses clear cutting, as well as “laundering” of wood products that do not follow FSC practices. There are no penalties for cheating. On balance, the FSC process has raised consumer awareness and has slowed but not reversed the process of global deforestation, which has now destroyed more than half of the world’s forests. Sustainable practices still cover only a small fraction of tree-harvesting. What we do not


have is an enforceable global Convention on forest standards. While FSC claims that about 15 percent of global timber sales now are covered by one certification regime or another, deforestation is still proceeding at the rate of 16 million hectares a year, according to the FAO, down slightly from 13 million hectares a year in the 1990s.31 Though branding campaigns can have helped, much of the credit goes to deliberate policy changes by two national governments, Brazil and Indonesia, which reversed earlier policies of promoting rapid deforestation. The FSC regime illustrates how certification can raise consciousness and demonstrate tangible progress, while the broader problem still requires broader regulatory remedies. There is literally no certification regime that has “solved” the problem that it set out to address in the way that, say, the ban on CFC’s solved ozone depletion.

Labor Standards

Yet another example of a certification regime is the anti-sweat-shop movement. In the United States, two rival organization have used the purchasing power and idealism of college students to boycott branded products that fail to carry a logo certifying that they have been produced in factories that provide minimally decent standards of pay and working conditions. For the most part, success on this front has been a moving target. One of the two U.S.-based organizations, the Fair Labor Association (FLA), partners with major corporations. The FLA was created in 1999. It grew out of a consultative process brokered by President Clinton and originally included unions as well as industry. But the industry couldn’t agree on binding standards and the unions soon left, criticizing the FLA for settling for only token changes in third-world working condi-tions. FLA has as members 34 multinational corporations, some 200 universities, and over 1,000 licensees that make products branded by universities. When Apple selected FLA to monitor its plants in China after revelations of gross abuses in the factories of its supplier, Foxconn, critics noted that it had picked an entity partly funded by corporations and not noted for tough, independent scrutiny.

In 1999, unions and United Students Against Sweatshops created an independent group, the Worker Rights Consortium. The WRC has had some successes but also encounters great difficulty getting multinational corporations to fundamentally change labor practices, most notably their refusal to accept workers’ rights to organize or join a union. The WRC, however, sometimes uses the leverage provided by the FLA process. For example, in 2008 a member

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company of the FLA, Russell Athletic/Fruit of the Loom, closed a factory in Honduras rather than recognize the workers’ decision to unionize. The FLA resisted taking any action against Russell. Even-tually some 100 universities, mobilized by the WRC and United Students Against Sweatshops, denied Russell licenses to make products with their logos, and the company finally agreed not only to reopen the factory but to allow others in Honduras to unionize.

Another potential breakthrough occurred in May 2013 after a building collapse in Bangladesh killed more than 1,100 garment factory workers producing for major fashion brands in Europe and the United States. The global labor movement and NGOs such as the WRC and the Europe-based Clean Clothes Campaign enlisted more than 70 mostly European major fashion brands led by Sweden-based H&M and Spain’s Indetex (the two largest European garment retailers.) The agreement, signed on May 15, 2013, creates a contrac-tual obligation for the participating retailers to assume responsibil-ity for safety conditions in the Bangladesh plants from which they source garments. In cases of dispute, there is a binding arbitration process. The Accord on Building and Fire Safety in Bangladesh neither address wages nor organizing rights per se, nor organizing rights, but does commit the companies to allow in union represen-tatives to train workers in health and safety. The Accord is governed by a seven-member board, which includes three from industry, three from labor, with an ILO representative as chair and tie-breaker. Every major European fashion brand signed, but most US retailers did not. The two largest, Walmart and the Gap, created their own safety certification system with no NGO representation. The more robust Accord portends a somewhat more effective form of certifica-tion, yet everything will depend on enforcement. Key is the presence on the governing board of two of the most effective of the global union federations, UNI (representing the world’s service unions) and IndustriALL (representing manufacturing unions.) However, it remains to be seen whether the Bangladeshi government, whose economic development strategy has been to position Bangladesh as the world’s low cost garment producer, will work to implement or frustrate the Accord.

Global union federations (GUFs) have had occasional successes in putting pressure on transnational corporations to recognize the rights of workers. One surprising if partial victory was the success of global maritime unions in compelling some Western owners of “flag of convenience” ships to sign master collective bargaining agreements. The very existence of “flag of convenience” vessels,


which are nominally chartered in countries such as Liberia and Panama, mainly to escape decent (or any) labor standards, is itself a case of the failure (or capture) of international law. The United Nations Convention on the Law of the Seas (UNCLOS) in Article 91 provides that ships must have the nationality of the flag they fly. It further stipulates that the ships that fly the flag of a state will be under the “exclusive jurisdiction” of that state and there shall be a clear link between the state and the ship. But this is a fiction, since owners of flag-of-convenience ships invari-ably reside elsewhere. Shipping companies have simply found it expedient to flag their ships in nations without serious regulato-ry or labor standards. The reflagging of ships, beginning in the 1920s, was one of the early cases of outsourcing to evade labor and environmental regulation.

While working conditions on most flag-of-convenience ships are dismal, shippers who have signed these master collec-tive bargaining agreements pay wages comparable to those in unionized Western industries. The master agreements reflect a long-standing campaign by seafarer and dockworker unions in major nations and their global union federation, the Interna-tional Transport Workers Federation. Consultations under the aegis of the ILO have also been important. These agreements rely largely on the political power of dockworker unions based in nations that recognize union rights and their willingness to resort to occasionally extra-legal tactics such as harassing or even refusing to unload cargos of ships that have not signed on to master agreements.

The global union federations have also had some scattered successes in inducing multinational corporations to sign global “framework agreements,” respecting the rights of workers to organize or join unions anywhere in the world. Often, the cor-porations that sign are based in European nations with tradi-tions of tripartite social bargaining (labor, management and government) tripartism and corporate toleration of unions. For example, US unions such as SEIU and UNITE HERE have been able to make gains in the hotel and janitorial industries thanks to neutrality agreements signed by European multinationals that have U.S. subsidiaries, such as French Accor, a hotel company, whose U.S. brands include Sofitel and Novotel. Despite these limited successes, however, consumer awareness (in the sense of union-approved corporations getting an international union label welcomed by global consumers) has played almost no role

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in this process. Rather, the unions’ ability to get corporations to obey their own national laws and to tolerate unions in third-world nations with anti-labor governments has been almost entirely a function of the capacity of unions to do damage or to influence national law-enforcement of labor rights. The willing-ness of some national governments, such as China’s, to support modestly improved labor standards, has also been important.

Citizenship, Politics and Civil SocietyIt is a staple of the political science literature that “associa-

tionalism”—the creation of issue-groups as a form of citizen activism—is a poor substitute for politics.32 The traditional mechanisms for aggregating the interests of non-elites—parties and elections—tend to produce more durable and enforceable change than issue-groups. This critique traditionally has been directed at the warm embrace of “pluralism” in the context of the nation state—the proliferation of advocacy groups and associ-ations first celebrated in the 1830s by Tocqueville as something quintessentially American and expressive of democracy, and embraced again in postwar America by many commenta-tors and scholars. The political scientist E.E. Schattschneider, Jr. took exception. He famously wrote that “The flaw in the pluralist heaven is that the heavenly chorus sings with a strong upper-class accent,” meaning that pluralism—as opposed to politics--tends to give disproportionate power to elites. Parties and trade unions, Schattschneider argued, are far more effective aggregators of non-elite coalitions than a proliferation of issue organizations. Especially compared to business groups, which are much better positioned and financed, fragmented citizens, even citizens working through NGOs, are relatively powerless.33 It is interesting that European parliamentary systems, historical-ly with less dense networks of civil society groups but stronger parties and trade unions, tend to have substantively more effective constraints on capital, higher voting turnout, and less direct influence of campaign finance on politics.

At the global level, as noted, there is no state and no citizen-ship. NGOs can play a modestly constructive role. But a review of several certification and monitoring regimes leads one to wonder whether all of this energy might have been better spent on politics—electing progressive national governments that might then challenge the current ground rules of national and global governance.


On the plus side of the ledger, a huge amount of NGO activity aimed at the creation of certification and monitoring regimes has increased public awareness of these issues in some product areas such as coffee, furniture, or clothing, and has brought large numbers of people into organizations that represent civil society. On the minus side, the substantive progress is glacial. Changes in public reg-ulatory policy by governments seem to produce more tangible and durable gains.

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V I I I . C A S E S T U DY: E X T R A C T I V E I N D U S T R I E S, C A R B O N E M I S S I O N S A N D C L I M AT E C H A N G E

H istorically, the “global governance” regime for extractive industries was western colonialism. Nations, and nation-ally affiliated corporations, gained concessions to extract everything from diamonds and gold to petroleum. By

the 1880s oil companies affiliated with major nations were already jockeying to assure the supply and control the price of oil, with the Americans reliant mainly on domestic fields while the British pursued concessions in Persia and the Far East, and the Dutch drilled in Sumatra. In some regions, such as sub-Saharan Africa and the Dutch East Indies, the colonialism was explicit. In other regions, such as the Middle East after World War I, the British carved nominally independent nations out of the former Ottoman Empire, with the League of Nations blessing the affair, and petroleum politics influencing the dynasties and boundaries in the region. In Latin America, U.S. and British companies dominated extractive indus-tries, sometimes with local partners. Nationalization of mineral resources was extremely rare, a notable exception being Mexico’s nationalization of oil resources in the 1930s. President Roosevelt, despite immense pressure from US oil companies, chose not to intervene. Often, however, nationalist efforts to take back control of local mineral resources whose concessions had been sold on the cheap or via bribery and corruption were met with military force or covert coups d’etat, as in Iran.

When the OPEC nations pushed back in the 1970s, gaining greater control of production and price and successfully demanding a larger share of the profits, the move triggered conflict about pricing, royalties, control of extraction, security of energy supply and financial “recycling” of petroleum profits. However, other issues related to oil, such as pollution, impact on the land and on indige-nous peoples, emerged only in the late 20th century. We are still a long way from a global regime for governing the terms of extractive industries, but we do have a patchwork of trans-national institutions that have created some space for civil society to influence actual industry practices.


Global Climate ChangeOf the several issues related to extractive industries, by far the

most important is carbon emission and global climate change since it presents an existential threat to our survival. The climate change debate underscores a theme of this paper: despite the proliferation of international bodies and opportunities for NGOs, the power emphatically resides with national governments. Yet the new con-stellation of global bodies does produce opportunities for citizen organizing and for building a scientific case to influence the debate, and ultimately, policy.

Standing groups such as the Intergovernmental Panel on Climate Change, established under the auspices of the U.N., have created an authoritative venue for both the diplomacy and the science and have helped isolate industry-funded, pseudo-scientific deniers of climate change. The IPCC, created in 1988 by the World Meteorological Organization and the United Nations Environmental Program at the request of member states, is a fine example of how U.N. institutions “create space” for global society to influence public attitudes and governments, and ultimately, to influence policy and practice. It is in no way a governing body, but it has had substantial influence.

The IPCC publishes reports that inform the debate generally and the work of the U.N. Framework Convention on Climate Change, the entity that was approved at the Rio Earth Summit in 1992 and was subsequently ratified by every U.N member nation except South Sudan. The Framework Convention (which became effective in 1994) in turn led to a series of annual meetings resulting in the 1997 Kyoto Protocol, which required wealthy industrial nations to reduce greenhouse gas emissions to at least 5 percent below their 1990 levels by 2010, and the subsequent Cancun agreements, providing that global temperature rise should be limited to 2 degrees Celsius above pre-industrial levels.

The Kyoto process has been widely criticized because it lacked teeth, left out developing countries, and set goals far too feeble relative to the problem. Still, an embryonic form of global gov-ernance—the Rio Earth Summit and the process that it set in motion—served three important goals. It raised visibility and con-sciousness of the issue of climate change, enabled global civil society to speak with a louder voice and set in motion a series of meetings that at least produced the beginning of a template for remediation.

These global institutions, of course, stop well short of “gover-nance,” but they do create venues for diplomatic discussion, expert review of goals, and development of possible strategies for reducing

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carbon emissions. They also create a political arena for civil society to mobilize public opinion and press demands, and serve to focus energy around possible solutions. Yet at the end of the day, key decisions will be made, or not, by national governments. None of the venues for climate-change diplomacy rises to the level of global gov-ernance until binding treaties are achieved. The United States never ratified the Kyoto Protocol both because of domestic political resis-tance to serious carbon reduction and the diplomatic concern that developing nations with increasing high emission levels were not to be held to the same standards, or to any standards.

Resource TransferA related issue is resource-transfer. The Global Environmen-

tal Facility (GEF), created in 1991, was initially a $1 billion World Bank pilot program to transfer resources to help developing nations pursue a cleaner development path, with the UNDP and the UNEP as initial partners. In 1994, following the Rio Earth Summit, it was re-established as a free-standing program. Though it has spent $11 billion over two decades, its promise has not been fully realized. It would cost many times the current scale of spending to allow or incentivize developing nations to leapfrog over the carbon-intensive development path pursued by the West, and the resource-trans-fer mechanisms and financial incentives are grossly insufficient. Although global financial institutions such as the World Bank have committed limited funds to promising projects, the scale of resource transfers needed to move the larger developing economies away from a carbon intensive growth model is exponentially larger.

The political refusal of the United States to make a serious effort to reduce carbon emissions or to cede sovereignty has been a major obstacle to progress through new forms of governance. Beyond the resistance of the United States, there remain broader divisions between the wealthy nations and leading developing countries over who should bear the cost of global emissions reduction. These divisions continue to prevent a remedy commensurate with the scale of the problem. This is less a problem of inadequate of global governing institutions than a failure of the major nations to make climate change a high priority and to seek the necessary diplomatic compromises.

The refusal of the U.S. and China to take global climate change seriously reinforces both countries’ intransigence. Each has higher diplomatic priorities relative to the other. If, in the oft-cited words of Lord Nicholas Stern, global climate change is history’s greatest case


of market failure, the inability of the U.S. and China to make this planetary threat a paramount object of diplomacy could be history’s greatest failure of collective action. In the U.S., despite democrat-ic accountability, neither major political party has been willing to push the issue with a public that doesn’t want to pay higher taxes on carbon fuels. It is not possible, as Brecht once facetiously wrote, for the government to fire the people and get another one, but it is possible to move public opinion. However, neither party has spent much political capital trying to educate the American public on the stakes of global climate change, because neither party is prepared to get serious about the necessary remedy.

The government of China, meanwhile, remains a one-party autocracy determined to give priority to economic development. Its current plan for the forced urbanization of another 250 million Chinese shows just how far removed it is from democratic account-ability. Despite China’s dominant position in production of wind turbines and solar cells, China’s strategy of economic development is heavily based on carbon fuels. China now consumes more than half the world’s coal. According to a report by McKinsey Global Institute, by 2025 China is expect to build new coal fired plants that roughly equal the entire annual electricity generation of the U.S. With its burgeoning middle class, China’s vehicle fleet has grown from just 15 million in 2000 to 125 million today (about half the size of the US fleet), and is projected to grow to 600 million by 2030.34

As China and India aspire to Western standards of consumption and continue to base their development mainly on carbon fuels, the global climate crisis will worsen in the absence of far more imag-inative political leadership and North-South diplomacy. No issue has attracted more interest on the part of global and national NGOs than climate change. Their tactics have ranged from polite to con-frontational. Global civil society can try to motivate public opinion and influence the policies of national governments, but the instru-ments of global governance are too weak to serve as vehicles for drastic reform in the absence of a grand bargain between the biggest emitters, the U.S. and China, which together account for close to three quarters of global carbon emissions.

In their historic and failed meeting at the United Nations Climate Change Conference in in December 2009 in Copenhagen, President Obama and Chinese Premier Wen Jiabao discussed the possibility of an agreement committing both nations to serious reduction of carbon emissions. The U.S. had come into the meeting proposing a 17 percent reduction by 2020, 42 percent by 2030, and 83 percent

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by 2050. Beijing had released a climate change plan spelling out how China might reduce its carbon intensity by at least 40 percent in a decade. But President Obama could not credibly commit the United States because even the Waxman-Markey cap-and-trade bill, with far weaker emissions targets, was being blocked in the Senate. Wen told reporters he doubted that the Senate would pass the bill. As the meeting closed, Wen insisted that there had to be “consis-tency of outcomes” in any carbon reduction pact, recognizing the historic reality that China was a far poorer country that only recently had become a major contributor to the global carbon problem. As China doubled down on development goals, worrying about slowing growth, and Obama’s Democratic allies lost control of the House, no further diplomatic progress was forthcoming. The meeting, which committed to carbon reduction goals in principle, including a goal of holding temperature rise to 2 degrees Celsius, was widely consid-ered a fiasco.

Only in June 2013, after extensive criticism from environmental groups and many leaders of his own party, did President Obama announce a plan to pursue the 2020 carbon reduction goal via executive action, relying on the authority of the 1970 Clean Air Act to order reduced emissions from coal-fired electric power plants.35 Obama picked a moment when the U.S. had a tailwind in the effort to reach its goals. The shift to natural gas, roughly half as carbon-in-tensive as coal, will reduce CO2 emissions, other things being equal, and is likely to intensify even absent new regulations. The new proposed rules could accelerate this shift without raising costs to consumers making it an easier sell politically. Some observers expressed guarded hope that the new Obama initiative, hailed by environmentalists, could re-start diplomatic efforts. However under President Obama’s plan, final regulations are not planned until 2015 and they are likely to be extensively litigated. It is noteworthy that this shift in the U.S. position reflected mainly domestic politics, not global pressure.

Climate change is surely the most serious issue we face without adequate systems of global governance. However, it is far from the only one. Other issues related to the extraction and exploitation of natural resources include the impact on the immediate natural environment and its peoples and related human rights questions, including labor conditions and standards in resource-extraction industries.


Blood DiamondsAs in the case of the convention on ozone depletion, narrower tar-gets are sometimes better candidates for incremental progress than a cause as enormous and multi-faceted as climate change. A seem-ing success for civil society organizations was the ban on “blood diamonds” or “war diamonds” pressed by a coalition of groups. In several African nations, the sale of diamonds was financing murder-ous wars. A UK-based NGO, Global Witness, published an influen-tial report in 1998, which helped lead to the passage of U.N. Security Council Resolutions 1173 and 1295, which in turn led to the Kim-berley Process for certifying that diamonds in international trade were not contributing to the financing of wars. The process, volun-tary to the industry, was reportedly successful in its own terms. Ac-cording to the World Diamond Council, the industry group created partly to enforce the Kimberly Process, the share of blood diamonds in world diamond trade was reduced from around 20 percent in the 1980s to between 1 and 3 percent after 2000.

However, Global Witness, the London-based group that played a key role in instigating the monitoring and certification program and creating publicity and pressure for the industry to cooperate, has lately termed the monitoring regime a failure and ceased col-laborating with it. The group’s chair, Charmian Gooch, declared in December 2011, “It failed to deal with the trade in conflict diamonds from Ivory Coast, was unwilling to take serious action in the face of blatant breaches of the rules over a number of years by Venezuela and has proved unwilling to stop diamonds fuelling corruption and violence in Zimbabwe.”36 Similar criticisms have been raised by Human Rights Watch and other groups. Even if it did reduce the traffic in blood diamonds, what the Kimberly Process did not do, or even seek to do, was to improve the dismal labor or environ-mental conditions in diamond mining. There is no treaty or other mechanism to create, let alone enforce, global standards for diamond production. The diamond industry, famously, is a private cartel, all but impervious to regulatory constraints. To the extent that working conditions have improved at all, this is the result of organizing activity in nations that permit free trade unions to operate, such as South Africa.

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Extraction, Pollution and CorruptionSome 50 countries rely on payments from extractive industries

as their principal source of foreign exchange. Many are poor and few are democracies. So the temptation to sacrifice both the envi-ronment and the labor force is immense. Widespread corruption in the flow of corporate payments to host governments only exacer-bates the problem. This syndrome is often known as the “resource curse.” Resource-rich developing countries are typically clustered at the bottom of the UNDP’s Human Development Index and Trans-parency International’s Corruption Perceptions Index. Oil money rarely flows to help the majority of the nation to develop and often underwrites wars. According to the World Bank, countries with few natural resources grew at two to three times the rate of resource-rich countries between 1960 and 2000. Of 45 countries heavily dependent on non-fuel mineral resources , only six experienced positive GDP growth per capita during this forty-year period.

The link between corruption and wretched labor and environ-mental conditions in the extraction of raw materials has been the target of numerous NGOs. An example of positive momentum is the campaign to increase the transparency of payments by extractive industries to governments, mainly in developing nations reliant on mining and petroleum. The Publish What You Pay campaign has succeeded in creating, defining, and mobilizing support for a public issue where transparency is the main instrument against corrup-tion in host governments. More broadly, mandatory disclosure also shines a light on the financial operations of large multinational cor-porations and banks and ultimately provides leverage for improved labor and environmental conditions and better use of oil revenues on the ground.

In December 1999 Global Witness hit on these linkages and their cumulative potential almost by accident. The group published a report titled “A Crude Awakening,” an exposé of the multinational oil and banking industries’ role in the plundering of public assets in Angola. The report contended that multinational oil companies were complicit in the embezzlement of oil revenues by local elites, providing huge sums that went to finance Angola’s three decades of civil war. The report called on the oil companies operating in Angola to “publish what you pay”. The London-based campaign soon enlisted such NGOs as Oxfam GB, Catholic Relief Services, and Human Rights Watch. British Petroleum broke ranks in 2001 and agreed to disclosures. Specifically, BP committed to publicly disclose its total net production, payments to the Angolan state-owned oil


company, Sonangol, as well as total taxes and other levies paid to the Angolan government. As a consequence, the Angolan government threatened to withdraw BP’s license to operate in Angola. The gov-ernment claimed that disclosure would violate existing confidential-ity agreements. This in turn created pressure for the other major oil companies in Angola, such as Shell and Statoil (two-thirds owned by the Norwegian government), to sign on. Prime Minister Tony Blair embraced the cause as a way of combining corporate responsibility, poverty reduction and energy security.

These efforts grew into a free-standing campaign, launched in 2002, aimed at extractive industries generally. In 2003, orga-nizers created the Extractive Industries Transparency Initiative (EITI), a watchdog that analyzes company payments and govern-ment revenues from mining, gas, and oil. Today, Publish What You Pay and EITI claim a network of at least 350 affiliated NGOs worldwide.37 Revenue transparency has now become a norm, if not always a practice, in extractive industries. At the same time, there is powerful pushback both from the industries and from allied govern-ments. CSOs complain that immense time and effort is spent “down in the weeds” of contract and disclosure detail, but that the process is better than nothing since it gives them both information and a forum to press and publicize demands.38

Human rights and environmental groups also pressed the World Bank to condition its financing of oil, gas, and mining investments on enforceable requirements consistent with the Bank’s mandate. These included stronger environmental safeguards, informed consent of local peoples before projects went forward, and a decent share of the revenues for social purposes. In response, the Bank launched the Extractive Industries Review in 2000. After several contentious meetings the one demand that the World Bank and the human rights groups could agree on was greater transparency in the flow of mineral revenues, which is now a requirement of the World Bank and the European Bank for Reconstruction and Development in their lending requirements to private sector entities. Transpar-ency also promotes democracy, in that it enables the local citizenry to monitor how government is spending the money, leading to a virtuous circle. While transparency as a general objective has had mixed results because of the gross disparity of corporate and civic resources and attention spans, in this case it has nourished a strategic campaign.

A broad NGO coalition was possible because this cause was of interest to a wide range of groups that don’t always collaborate—

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environmental and labor groups concerned that lax or corrupted regulatory standards allow environmentally destructive practices in drilling and mining as well as human exploitation of workers in ex-tractive industries; social justice and antipoverty groups interested in assuring that government funds in poor countries go more to human development and less to corrupted government officials; war-peace groups eager to reduce the flow of illicit funds that finance regional and tribal conflicts; and other NGOs pursuing transparency and honest government as both ends and as means.

The Publish What You Pay campaign suggests how what is osten-sibly a single issue that is hard to argue with in principle—disclo-sure of corporate payments to governments—can have multi-issue synergies. The presence and activism of the PWYP campaign also set the stage for a fortuitous breakthrough in the context of the 2010 financial reform legislation in the United States. Had PWYP not been mobilized, this legislative gain would not have occurred. In the final round of jousting over the particulars of the Dodd-Frank Act, Republican legislators were mostly opposed to the bill. Sponsors were frantically lining up a handful of Republican votes in order to avoid a filibuster in the Senate. One Republican senator, Richard Lugar of Indiana, was not particularly friendly to the overall bill but had an interest in anti-corruption measures in third world countries and was a supporter of publish-what-you-pay legislation. So a publish-what-you-pay provision not included in either the House or Senate bill was added by sponsors to the final conference draft in hope of enlisting Sen. Lugar’s vote for the whole package. Multina-tional corporations were caught off guard. The fact that this was a total surprise to the corporate community meant that there was no time for the usual corporate lobbying, and the final bill did include the publish-what-you-pay requirement.

In the end Sen. Lugar did not vote for the Dodd-Frank bill, but the publish-what-you-pay amendment became law.39 A critic might point out the irony of a less than fully transparent legislative maneuver leading to a great victory for transparency in the area of tax and royalty payments. Multinational companies in extractive industries must now include in their public filings with the U.S. Se-curities and Exchange Commission their payments to governments. This breakthrough will facilitate gains in other countries and on other issues. The measure would never have been added to the bill but for the prior organizing and publicity work of the campaign.

Today disclosure of corporate mineral royalty payments (and pre-sumably bribes) to governments is not just a demand of civil society


trading on the reputational concerns of large multinationals but also a provision of U.S. securities law. This requirement, in turn, makes outright corruption more difficult to hide, and in turn opens the way to greater substantive progress on labor and environmental condi-tions in mining and petroleum production. However, use of the dis-closure law to generate publicity around corrupt or badly managed use of royalty payments still requires extensive NGO efforts, which can be viewed as a plus or a minus—a plus in that it energizes civil society, a minus in that it is immensely time-consuming and a second best relative to mandatory legal standards. Transparency remains mostly a means to substantive gains. It is valuable as an end in itself, but not as the final end.

The success of Publish What You Pay in requiring disclosures to the SEC occurred at the level of national law. Internationally, the UN General Assembly has passed a resolution calling for disclosure of payments by corporations to governments as a procedural reform. It’s an instructive example of the synergy between organizing efforts by civil society groups and changes in both corporate behavior and national and global policy. But these successes are only a start. Sub-stantively, there is still no global convention or set of trans-national rules defining acceptable environmental terms for the extraction of fossil fuels and minerals, or standards for pipelines, or water-impact constraints, much less labor standards. Exploitation of workers and destruction of the natural environment in natural resources both remain immense and worsening global problems. Disclosure opens space for further organizing and further reform, but does not by itself produce substantive reform, even as the challenges intensify.

Industry Public Relations: The Equator PrinciplesAn instructive contrast with the PWYP campaign is the financial

industry’s creation of the Equator Principles for large project finance. In response to the increased pressure from civil society on the World Bank’s project finance and the ostensible receptivity of the Bank itself, ten large commercial banks led by Citigroup, Credit Suisse and Barclays, created the Principles in 2003. This was done, nominally in consultation with civil society as well as the World Bank, but without serious involvement of independent NGOs. The Principles were written entirely by the banks and there is no meaningful sanction for non-compliance.

In principle, the provisions were formidable. They committed signatories to follow guidelines in their large project finance that parallel World Bank principles. The Equator Principles apply to

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projects with capital costs of at least $10 million, and have been signed by 67 financial institutions. Their provisions include an Environmental Assessment, which reviews baseline environmental and social conditions, applicable requirements under local laws and international treaties, protection of human health in the proposed project, as well as biodiversity, use of hazardous substances, occu-pational safety and health, land acquisition and cultural issues, and impacts on indigenous communities including involuntary resettle-ment. The review also addresses consideration of feasible environ-mentally and socially preferable alternatives, pollution prevention, waste minimization, as well as solid and chemical waste manage-ment. Based on the Environmental Assessment, Equator banks then make agreements with their clients on how they mitigate, monitor and manage those risks through a “Social Environmental Manage-ment Plan.” But unlike the use of Environmental Impact Statements in U.S. law, this impressive set of goals does not lead to a legally binding process of project revision.

An early test of the Principles came with the financing of the $3.9 billion Baku-Tblisi-Ceyhan (BTC) pipeline. The project to run a pipeline through Azerbaijan and Georgia and through Turkey’s Kurdish lands to the Turkish coast had been highly controversial ever since it was proposed in 1992. The pipeline ran through three nations with problematic human rights records. A coalition of NGOs issued its own findings in a 220 page report, which found 153 viola-tions of the World Bank’s own lending principles, including forced expropriations and relocations, watershed and geological risks along the route of the pipeline , fraudulent elections (in Azerbaijan), and various conflicts between Kurds and the Ankara government. The pipeline through Turkish Kurdistan will be guarded by the Turkish Gendarmerie, which has been repeatedly criticized by the European Court of Human Rights and other human rights groups for abuses such as forced relocations, destruction of villages, and torture.40

However, with BP as the lead petroleum industry sponsor and EU nations deeming the project essential to their oil supply, and with the European Bank for Reconstruction and Development (EBRD) co-fi-nancing the project with the IFC and private banks, there was little chance that voluntary principles created by large commercial banks with no legal anchor or meaningful civil society involvement would kill or significantly modify the pipeline. With the process firmly under the control of industry and state sponsors and participating banks, despite the apparent violations of the Equator Principles and


the pressure of outside NGOs, the Principles had no notable impact on pipeline plans on the ground. The Principles were revised in 2006, but only in token respects that did not increase accountability. In general, the Principles have sensitized the large banks to the need to avoid projects that involve gross environmental assaults, but their impact has been limited.

The Equator Principles have been repeatedly criticized by a coalition of NGOs that includes Friends of the Earth, Rain Forest Action network, and several others, operating via the Nether-lands-based group, BankTrack. When the participating banks issued their third version of the Principles, Equator III in 2012, Yann Louvel, BankTrack’s climate and energy campaign coordina-tor, observed: “It is astonishing and disappointing that the Equator Principles banks, while claiming to adhere to the gold standard for managing environmental and social risk by banks, continue to turn a blind eye to the severe risk they pose on the planet and on them-selves by financing projects that exacerbate and accelerate climate change such as tar sands, coal fired power plants or Arctic drilling.”41

This observation takes us full circle to the climate change question. Major financial institutions providing large-scale finance may improve extraction conditions around the edges, but the very nature of their project finance worsens reliance on fossil fuels.42

Among the other extractive industry projects partly financed by Equator Principles banks that have been criticized by NGOs are:

• The Kainantu Gold Project in the Eastern Highlands’ Province of Papua New Guinea.

• The Lukoil D6 oil drilling project on the Baltic Sea• The Mindanao coal fired power plant in the Philippines• The Trans-Thai-Malaysian Pipeline• Expansion of the Transredes pipeline in Bolivia

One can debate whether these projects should go forward at all. But the Equator Principles have not even led to meaningful im-provement of their environmental and human rights impact. A vivid example of the problem is the $12 billion Sakhalin II project, Russia’s first liquid natural gas ( LNG )export facility with an annual capacity of 9.6 million tons, in partnership with Shell. The project was initially denounced by the EBRD as “unfit for purpose” in its own environmental impact statement. Yet with only minimal mod-ifications, Sakhalin II went forward with the participation of the EBRD itself, as well as the Japanese Bank for Reconstruction and

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Development, the U.S. Eximbank, and prominent Equator Principles signatory ABN Amro. A $1.3 billion development bond was under-written by Goldman Sachs.

Other projects with financing from Equator Principles banks and challenged by NGOs on multiple grounds include the Omkareshwar Dam in India, which raises issues of displacement of local peoples, destruction of sacred cultural sites, as well as multiple failures to follow India’s own laws regarding environmental impact reviews. The East Siberia Gas Pipeline in Russia, and the Rio Blanco copper mine in Peru are also examples. In fairness, all large scale projects for extraction of minerals entail some displacement and environ-mental impact. But the Equator process has been stunningly feeble in minimizing such impact or vetoing projects that are inconsistent with the Principles by their very nature.

In theory, the involvement of the World Bank, a more transparent and permeable international financial institution, might logically have provided some leverage for NGOs in the enforcement of the Equator Principles. Conversely, there was no formal governance structure involved in the original Publish What You Pay Campaign. However, PWYP proved more robust. One notable difference between the Publish What You Pay campaign and the Equator Prin-ciples is control of the process. From the beginning PWYP operated as an outside publicity, pressure, and lobbying campaign controlled by NGOs, without industry groups as formal partners or “stakehold-ers”. PWYP simply reported on which nations and multinationals were providing adequate disclosure and kept the pressure on ones that were not. By contrast, the Equator Principles were always under the control of the banks, which attempted to enlist NGOs (nearly all of which declined to be co-opted) but gave them no meaningful role.

A Role for Regional Governance?Regional governments, in principle, can function as a partial

form of globalization on a scale more conducive to civil society and counterweights to the predations and pricing failures of market actors. This premise makes the recent history of the European Union all the more worthy of careful analysis, in that the E.U. has gradually shifted from a quasi-polity that defended the capacity of its member states to operate advanced welfare states into an ally of intensified laissez-faire. In prior incarnations, the original common market of the 1957 Treaty of Rome gradually promoted more liberalized trade, while the member states had the policy space to operate and regulate managed market economies. Even relative conservative


member states such as the Federal Republic of Germany embraced this social settlement as a Soziale Marktwirtschaft—a somewhat oxy-moronic “social market” economy. But as the European Economic Community of 1957 grew into the European Union of the 1993 Maastricht Treaty and then the Euro currency regime of 2001, the market part overwhelmed the social part. Member states lost the capacity to regulate markets while the EU did not significant-ly gain it. And when the financial crisis of 2008 hit, followed by the sovereign debt crisis of late 2009, EU institutions were used to enforce austerity policies in service of appeasing the bond market—using a draconian playbook that even the IMF has discarded.43 In theory, regional polities could be friendlier to managed capitalism and broad democratic participation, but there are no live examples.

Some enthusiasts have pointed to the promise of cities and city governments as exemplary cases of good public policy and civic en-gagement. For example, Benjamin Barber’s highly informative book, If Mayors Ruled the World44, describes model strategies pursued at the city level and imagines a globalization based on collaborations of cities. Barber notes that while policy responses to urgent problems are blocked both nationally and internationally, many major cities are beacons of practical progress. While cities are immensely valuable as laboratories and as sources of civic energy and even of trans-national synergies, they remain nation-bound and ultimate-ly subject to both national constitutions and laws, as well as to the global agreements that national governments negotiate. Barber’s proposal is a “global parliament of mayors,” purely voluntary at first, with the promise of growing into an institution with real power. But for the foreseeable future, it is somewhat utopian to hope that cities could fill the democratic governance vacuum at the global level.

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I X . C O N C L U S I O N S

O ther things being equal, the intensified globalization of commerce and its governance under the current set of rules and institutions is not good for political democracy. However, this review of a wide variety of

issues, groups and architectures suggests that some forms of global governance and systems of accountability and participation are clearly better than others. Some kinds of NGO activity produce little durable change, while others do have modest incremental impact.

Privatized law and its ally, pseudo-public global governing in-stitutions, present a particular challenge. Converting even public institutions of global governance into bodies of democratic account-ability comparable to the democratic institutions of nation states is immensely difficult and may be structurally impossible absent a drastically different set of policy goals on the part of the national governments that are the architects and prime constituents of global governing bodies. Gaining public access to private systems of law is even more difficult.

At the same time, global civil society has made some progress in some areas of human rights. Even in the absence of a global government and global citizenship, collaborative efforts by global NGOs representing civil society have toppled dictatorships and intensified worldwide demands for basic liberties. The Internet, as a great leveler, has played a major role in this process, though it is no panacea.

Some critics contend that the cyber revolution will help restive citizens seeking more democratic voice. Others contend that the capacity to spy and monitor makes the Internet more a tool of repressive governments. There is evidence that it can be both, and the devil is in the details.45 In the pre-digital period of decoloni-zation after World War II, and in the 1989 mass uprisings against communism, citizens were successful using more conventional political organizing strategies.

In trans-national citizen politics, global civil society has had far less success in serving as an effective counterweight to resurgent market forces and players. To an increasing degree, recent trade agreements, both global and regional, have deliberately increased the ability of corporations and banks to undermine purely national social and economic regulations necessary for managed capitalism.


The premise is that these regulations are illegitimate barriers to trans-national commerce. These shifts have weakened democracy at the national level without replacing it at the trans-national level.

In principle, regional government holds out some promise for reg-ulating the market while adjusting to increased cross-border flows of capital and trade in goods and services. In practice, however, nascent polities such as the European Union have been substantial-ly captured by the ideology and institutional politics of intensified laissez-faire. Other regional trade agreements such as NAFTA are not polities at all, and offer neither civic rights not space for civil society to push back against market claims. Some south-south trans-national institutions, such as the new BRICS development bank—capitalized at $50 billion— are still in their infancy.46 These hold some promise as collaborative efforts of national governments with strategies and self-interests that run somewhat counter to the prevailing neo-liberal consensus, but their limited mandates and resources typically fall well short of creating new powers of popular governance in the global economy.

In the absence of revolutionary change, all democratic progress is necessarily incremental. In such areas as reduction of poverty or improvement of public health, most advocates and activists would conclude that even incremental progress is worth the effort. However, in the area of global climate change, incremental progress may be worse than nothing if it creates the illusion that we are taking steps to solve an existential crisis that is in fact steadily worsening. Likewise, in the effort to re-regulate speculative finance, weak incremental gains may create a comforting sense of progress while only seeding the conditions for the next financial collapse. This doesn’t mean that the only worthwhile form of NGO activity is purely confrontational, but it does suggest the need for a clear-eyed appraisal of which activities are worth the trouble. The framing of the French theorist, Andre Gorz, is useful. Gorz called for “non-re-formist reform,” meaning reform that seems merely incremental but whose cumulative logic contains the seeds of more drastic, systemic change.47

Transparency is always to be desired and creates the opportunity for civic activism, but does not by itself produce better substantive policy. Progress on the most important global issue, climate change, remains weak—both because of conflicting national interests (or the perception of such) and because of the power structure within states.

The most reliable form of international law and governance is the use of binding conventions and treaties. These instruments are more

august 14 • 70

robust because they have the force of domestic law, and domestic due process.

To conclude: There are severe limits to the approach that seeks to produce change in corporate behavior via the role of people as consumers. Usually, it is more effective to impose rules and other constraints on corporate actions in our role as citizens—by altering the legally enforceable rules of the game. It is worth the effort to press for global governing institutions that are relatively more accountable to the democratic public. However, the most effective change comes from influencing the architecture of global gover-nance and the behavior of states and corporations by changing the global policies of national governments.

Appendix

Chart 1: Issues, Players, and Strategies

Issue Major Nation-al Players

Key Private Players

Global Gov. Inst’s.

Civil Society Inst’s.

MechanismsInitiatives,Strategies

Outcomes,Comments

Trade US, EU, BRICS, JapanAsian tigersind EurNations,

Banks, corps. Ag lobby

WTOBilateral trade dealsUNCTADUNDP

Very weakNGOsector: UnionsGTWSCWSFTUAC

DisruptionDemands for trnspcyInsertion of human dev’t, labor, env issues.

Industry sets agendas.Main divisions between US/EU and north-south. Social stan-dards in trade can’t gain much traction

FinancialRegulation

US, EU,BRICSJapanUKAsiantigers

BanksShadwbanks

Very weakand ad hocBasel process;Ctrl bankcollab’n.

Very weak:F-WAFRunions

Influence on do-mestic regulationAd hoc campaignsNo global NGO

Process is opaque, heav-ily captured by industry; Scant insurgent govts.Much pvt law.

Dev’t Finance

US, EU,BRICSG-77

Banks,Inv.Banks

IMF, WB,RegionalDevt BanksNational Funds

WSFSCTWN

Jubilee campaignMillennium Dev’t GoalsAd hoc campaigns on project finance.Env conditions on project finance,

Increased pvt’n of finance is still the trend.Scattered progress.

Labor Standards

US, EU,NordicsBRICS

ILOOECD

WRCGUFSunionsTUAC

ILO protocolsCertification cam-paigns

Weak enforce’t of natl and GG law.

ClimateChange

US, EUJapanBRICS,Other global south

Extr.Inds.Insurn IndFin. Ind.

Kyoto processUN agenciesNat’lstandards

Long list. See text

Citizen campaigns such as 360; exemplary national policies

Progress at glob-al level largely blocked; see case study


Chart 2: Institutions, Actors, and StrategiesInstitution Captured/Open?

Transparent/Opaque?

Key Issues NGO Players and Tactics

Gains, Losses

Binding Conventions andProtocols

Transparent, at both global and national level

Entire range of envi-ronmental,labor, human rights issues, etc.

All major NGOs. Con-crete organizing target.

Some binding proto-cols have force of law (see text). Oth-ers week because not ratified.

WTO and Bilateral orRegional TradeAgreements

Mostly captured.Agenda setting by industry and Western gov’ts.Social questions sel-dom addressed.Process is anti-demo-cratic, opaque.

Race to the bottom in anti-regul’ntrade deals.South access to North consumermarkets.Social standards

Limited NGO pres-ence.GTWSCTWNOWINFS

WTO system is driv-er of laissez-faire. Some gains for South access to North markets.Few social stan-dards.

IMF andWorld Bank

Relatively open be-cause of broad mem-bership and access by NGOs. Dominated by rich countries. Reflects orthodox perspective.

Env. and soc. stan-dards in development finance.Conditionality and austerity demands.

Bank Info. CtrNRGFOWISNSTWWEURODAD(see expandedchart and key)

Some gains in WB project finance, and IMF and WB increased tolerance of heterodox devel-opment models.

ILO Open and transparent Labor rights;Enforcement of ratified protocols

GUFS, national unions,TUAC

Protocols have some value; ILO also important venue for issue development (see text)

UNSpecializedAgencies

Open and transparent, but some are more ad-versarial than others.

Wide range Wide range(see text)

Creates political space for pluralist views(see text)

Certification Regimes Relatively open except for ones that are purely creatures of industry.

Social, labor and en-vironmental standards in diverse industries that produce consumer products

See text: extensive set of NGO partners and critics

Basel Process Opaque. Dominated by financial industry and central banks and finance ministries of rich nations

Regulation of financial industry. Prevention of future crises.

Very limited NGO presence.F-WATTACAFR

Creates perception of progress, but is no threat to current business model of banks

Private Regulation Opaque and captured Standards for global commerce and proper-ty rights

Limited NGO presence Puts entire areas of law off limits to democratic delib-eration

august 14 • 72

Chart III: CSOs and Financial issuesNote: Coalitions/networks are in Bold; free standing research/advocacy groups are plain type; labor organizations are in italics. Glossary is at the bottom.Reform Issue Natl/Intl Coalitions,

SynergyKey NGOs NGO Engagement

Financial System Reform Capital standards, financial market super-vision, basic rules of banking system

Both Some AFR, EFR, EURODAD, Third World Network, AFL-CIO, CTW, TUAC, UNI, GW, Roosevelt Inst., TNI, SOMO, BankTrack, Public Citizen, Financial Markets Center, Finance-Watch, Demos, New Rules for Global Finance, WEED, CRBM, Levy Inst., CEPREMAP, PERI

Efforts present but outmatched and fragmented

Governance of IFIs Some BWP, TWN, EURODAD, OWINFS, F-W, BIC, NRGF, WEED,

Active campaign

Transparency of central bank policies

Nat’l None AFR, AFL-CIO, PC, NRGF, F-W, BIC, NRGF Low

Transparency of sovereign wealth funds

Both Yes GW, Peterson Inst., Carnegie Endowment. No active campaign

Low

Standards for credit rating agencies

Both No ETUC, PC, Demos, BankTrack, PERI, FMC, Finance-Watch

No active cam-paign

Regulation of hedge funds & private equity

Both Weak AFL-CIO, CTW, ETUC, IUF AFT, EFR, TWN, EURODAD, CMOC, Finance-Watch

Low

Regulation of derivatives

Both Some AFR, EFR, TWN, AFL-CIO, CTW, IUF, ETUC, SOMO, EURODAD,CMOC,CEPREMAP, Finance-Watch, Levy Inst.

Low

Financial standards in WTO rules

Both Yes OWINFS, TWN, SOMO, PCGTW, FOE, PSI, WOW, Via Campesina,

Active campaign

Consumer Protection Nat’l Some CFA, PC, AFR, Finance-Watch, single-issue groups

Active but fragmented

Securities Regulation Nat’l No AFL-CIO, CTW, AFR, EFR, Finance-Watch, BankTrack, Council for Institutional Investors, CEPREMAP

No active campaign

Debt and Development Increased ODA Both Yes TWN, South Centre, BWP, EURODAD, Oxfam,

Jubilee Debt Campaign, Action AidActive Campaign

IMF and World Bank Reform

Int’l Yes OWINFS, TWN, BWP, EURODAD, CRBM, BIC, NRGF, GSF, South Centre

Active Campaign

Trade, finance and development

Both Yes OWINFS, IUF, PCGTW, SOMO, EURODAD, TWN, Via Campesina, Seattle to Brussels Net-work, Greenpeace, GSF, South Centre

Active Campaign

Food speculation Some SOMO, Oxfam, CMOC Fragmented campaign

Capital Flight Yes GW, BWP, BankWatch, GFI, BIC,South Centre

Active campaign

Privatization ofDev’t finance

Some SOMO, BankWatch, BWP, BICEURODAD, TWC, South Centre

Fragmented campaign

Finance and sustainable dev’t

Yes BankTrack, WEED, Make Finance Work, Jubi-lee Debt Campaign, EURODAD, GSF, South Centre

Active campaign

Debt relief and restructuring

Yes OWISFS, EURODAD, TWNm BWP, Oxfam, Jubilee Debt Campaign, GSF, South Centre.

Active campaign

FINANCIAL FLOWS Taxation of financial transactions

Yes ATTAC, F-W, GW, TJN, Robin Hood Tax, CTJ, CRBM, SOMO, Make Finance Work

Active campaign


Tax Reform and Regu-latory Havens

No ATTAC, EURODAD, EFR, GW, TJN, Robin Hood Tax, SOMO, CTJ, CRBM, GFI

Fragmented efforts

Disclosure of Pay-ments to States

Yes PWYP, GW, SOMO, TI, Action Aid, GFI, EITI Active campaign

Accounting Reforms No GW, TA, SOMO, GFI Fragmented efforts

Pension Reforms No AFL-CIO, CTW, ETUC, PRC, CDSS Fragmented efforts

Abbreviations:AFL-CIO: American Federation of Labor/Congress of Industrial OrganizationsAFR: Americans for Financial ReformATTAC: Association pour la Taxation des Transactions pour l’Aide aux Citoyens BIC: Bank Information CenterBWP: Bretton Woods ProjectCEPREMAP: Centre pour la Recherche Economic et ses Applications (FR) CMOC: Commodity Markets Oversight Coalition (Mostly US)CRBM: Campagna per la Riforma della Banca Mondiale (IT)CTJ: Citizens for Tax Justice (US)CTW: Change to Win federation (US)EFR: Europeans for Financial ReformETUC: European Trade Union ConfederationEURODAD: European Network on Debt and DevelopmentFMC: Financial Markets CenterFOE: Friends of the EarthF-W: Finance-WatchGFI: Global Financial IntegrityGSF: Global Social ForumGW: Global Witness (UK)ITUC: International Trade Union ConfederationNRGF: New Rules for Global FinanceOWINFS: Our World is Not For SalePC: Public Citizen (US)PCGTW: Public Citizen Global Trade WatchPERI: Political Economy Research Institute (US)PRC: Pension Rights Center (US)PSI: Public Services InternationalPYWP: Publish What You PaySC: South CentreTA: Transparency internationalTUAC: Trade Union Advisory Committee (to OECD)TWN: Third World NetworkIUF: International Union of Food WorkersSOMO: Center for Research on Multinational Corporations (NL)WEED: World Economy Ecology and Development (GER)WOW: War on Want

august 14 • 74

E N D N O T E S

1. Gosta Esping-Andersen, Politics Against Markets: The Social Democratic Road to Power, (Princeton: Princeton University Press, 1985).

2. John Braithwaite and Peter Drahos, Global Business Regulation, (New York: Cambridge University Press, 2000) Chapter 7

3. Federico Sturzenegger and Jeromin Zettlemeyer, Debt Defaults and Lessons from a Decade of Crisis (Cambridge: MIT Press, 2006).

4. Mark Mazower, Governing the World, (New York: The Penguin Press, 2012).5. The key figures in the French regulation school are Robert Boyer, Alain Lipietz, and Michel Aglietta.6. T.H. Marshall, Citizenship and Social Class, (Cambridge, England: Cambridge University Press, 1949.)7. Rawi Abdelal, Capital Rules: the Construction of Global Finance (Cambridge, MA: Harvard University

Press, 2007.)8. See Paul Blustein, The Chastening (New York: Public Affairs Press, 2001).9. “The E.U.’s Generalised System of Preferences,” European Commission Directorate-General for Trade,

2004.10. “A Fair Globalization: Creating Opportunities for All” (Geneva: ILO, 2004).11. “Trade and Employment: Challenges for Policy Research” (Geneva, ILO and WTO, 2007). 12. James Gustave Speth, Red Sky at Morning (New Haven: Yale University Press, 2005), especially chapter 4.13. Author’s interview with Coulter14. Inter-American Court of Human Rights, Case of the Saramaka People v. Suriname (Judgment of

November 28, 2007).15. See Indian Law Resource Center, “International Law Principles for REDD+” (Helena, MT, 2012).16. Harm Schepel, The Constitution of Private Governance (Oxford and Portland, Oregon: Hart Publishing,

2005), 1. 17. Ibid., 260[A.L.A. Schechter Poultry v United States 295 US 295 (1935)].18. Katherine V.W. Stone, “Signing Away Our Rights,” The American Prospect, March 5, 2011.19. Susan Franck, “The Legitimacy Crisis in Investment Treaty Arbitration,” Fordham Law Rev., vol. 73

(2005), 1524-1625.20. Schepel, op. cit., 21 and 34.21. Ibid., 145.22. John Braithwaite and Peter Drahos, Global Business Regulation (Cambridge: Cambridge University Press,

2000), 3.23. Tim Buthe and Waltwe Mattli, The New Global Rulers (Princeton: Princeton University Press, 2011).24. See Daniel K. Tarullo, Banking on Basel (Washington: Institute for International Economics, 2000).25. Ibid. 26. Richard B. Stewart, “The World Trade Organization and Global Administrative Law,” New York University

School of Law, Working Paper 09-71 (2009), 9.27. Daniel Jaffee, “Weak Coffee: Certification and Co-optation in the Fair Trade Movement,” http://libarts.

wsu.edu/soc/people/jaffee/Soc%20Probs%202012--Weak%20Coffee--Jaffee.pdf.28. Benjamin Cashmore et al, Governing Through Markets: Forest Certification and the Emergence of Non-

State Authority (New Haven: Yale University Press, 2004.).29. Quoted in Ibid., 430. FAO, State of the World’s Forests, 2012, (New York: United Nations, 2013), 24, at http://www.fao.org/

docrep/016/i3010e/i3010e.pdf31. FAO, “Deforestation and Net Forest Area Change,” [no author]/ http://www.fao.org/forestry/30515/en/32. E.E. Schattschneider, Jr., The Semi-Sovereign People (New York: Holt, Reinhart and Winston, 1960).33. Kay Schlozman et al, The Unheavenly Chorus (Princeton: Princeton University Press, 2012).34. Jonathan Woetzel et al, “Preparing for China’s Urban Billions,” McKinsey Global Institute, March 2009.35. Remarks of the President on Climate Change, June 25, 2013 http://www.whitehouse.gov/the-press-

office/2013/06/25/remarks-president-climate-change.36. Theo Leggett, “Global Witness Leaves Kimberly Process Diamond Scheme,” December 6, 2011http://www.

bbc.co.uk/news/business-1602701137. “Publishing What We Learned.” London (2009). at http://www.publishwhatyoupay.org/sites/pwypdev.

gn.apc.org/files/Publishing%20What%20We%20Learned%20-%20EN.pdf. 38. See “Enhancing the EITI,” position paper submitted by CSO board members, Olso, February 18, 2013,

at http://www.publishwhatyoupay.org/sites/publishwhatyoupay.org/files/EITI%20civil%20society%20position%20paper%2018Feb13.pdf.

39. “”Section 1504, the Dodd-Frank Wall Street Reform Act,” July 1, 2010 http://resources.revenuewatch.org/en/official-document/us-pwyp-law-2010-sec-1504-dodd-frank-wall-street-reform-act.

40. “Principles, Profits, or Just P.R.?”, BankTrack, Amsterdam (2004).41. “BankTrack Critiques New Draft Equator Principles,” October 23, 2012 at http://www.banktrack.org/

show/news/banktrack_comments_on_draft_equator_principles_iii.42. “BankTrack Comments on Draft Equator Principles III,” October 11, 2012 http://www.banktrack.org/

show/news/banktrack_comments_on_draft_equator_principles_iii.43. See Robert Kuttner, Debtors’ Prison (New York: Knopf, 2013), especially chapters 4 through 6.44. Benjamin Barber, If Mayors Ruled the World: Dysfunctional Nations, Rising Cities (New Haven: Yale

University Press, 2014).45. Evgeny Morozov, The Net Delusion, (New York: Public Affairs Press, 2011).46. Simon Romero, “Emerging Nations to Open Development Bank,” New York Times, July 15, 2014 http://

www.nytimes.com/2014/07/16/world/emerging-nations-bloc-to-open-development-bank.html47. Andre Gorz, A Strategy for Labor (Boston: Beacon Press, 1964).

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