Civil Society and Global Finance

Albrecht Schnabel, Jan Aart Scholte

• Publisher: Routledge
• Year: 2003
• ISBN:
  9781134467075
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

This key text brings together twenty activists, officials and researchers from the five continents to discuss this burning question of today's globalization debate. Providing rare, authoritative analyses by those who deal with the issues first hand, Civil Society and Global Finance is rich in insight and policy ideas for decision-makers, students and concerned citizens.

Part I

General Issues

1 Civil Society and the Governance of Global Finance

Jan Aart Scholte¹

Summary

• Introduction
• Globalization and governance
• Financial globalization
• Governance of global finance
• Key issues for the governance of global finance
• Civil society initiatives on global finance
• Civil society and global finance: potential benefits
• Civil society and global finance: possible problems
• Conclusion

Introduction

Civil society has figured with increasing prominence in the recent history of global governance. The Secretary-General of the United Nations, Kofi Annan, has declared that “there are few limits to what civil society can achieve,” while the President of the World Bank, James Wolfensohn, has affirmed that “civil society is probably the largest single factor in development.”² The recently retired Managing Director of the International Monetary Fund, Michel Camdessus, has similarly applauded “the valiant efforts of NGOs” in the area of social development.³

Such public pronouncements are perhaps tinged with hyperbole, but it is clear that civil society matters in contemporary world politics. Countless civil society organizations (CSOs) have taken initiatives to shape global rules and institutions.⁴ Most major transworld governance agencies have established special mechanisms for interaction with civil society bodies.⁵ Various theorists of world politics have in this regard described the emergence of an “enlarged” or “complex” multilateralism marked by intricate networks of relationships between state, substate, suprastate, and nonstate actors.⁶

Yet, as the Introduction to this book notes, very little research to date has considered the role of civil society in one of the principal areas of contemporary globalization, namely finance. Various previous studies have assessed the involvement of civil society associations in other issues of global governance, including the HIV/AIDS challenge, humanitarian relief, the status of women, and trade.⁷ However, the nexus of civil society and global finance has been left largely unexplored.

The task of this opening chapter is to outline some general parameters for an investigation of civil society engagement of global finance. The first section below describes certain changes in governance, consequent upon contemporary globalization, that have encouraged the rise of civil society activity in world politics. The second and third sections review, respectively, globalization in the realm of finance and the arrangements that have emerged to govern it. The fourth section identifies the main policy challenges that currently face the governance of global finance, while the fifth section surveys the initiatives taken by civil society actors to meet these challenges. The final two sections outline potential benefits as well as possible problems of civil society activity in the area of global finance.

In short, this general chapter sets the scene for more specific investigations of civil society and global finance. Subsequent parts of the book offer accounts of concrete experiences from different regions of the world, different governance institutions, different sectors of civil society, different disciplinary perspectives, and different political persuasions. Collectively, these analyses offer rich evidence for determining to what extent the promises and perils of civil society involvement in global finance have been realized in practice thus far and how maximum benefits might be achieved in the future.

Globalization and Governance

Globalization means many things to many people, but most will agree that, broadly speaking, the trend involves a growth of social connections on a planetary scale. As noted in the Introduction to the present volume, this greater interconnectedness has several aspects. For one thing, globalization brings increased interaction and interdependence between countries: there is more international communication, investment, trade, and travel. In addition, globalization involves reductions in statutory barriers to cross-border flows: fewer tariffs, fewer foreign-exchange restrictions, fewer capital controls, and (at least for citizens of some states and certain classes of workers) fewer visa requirements. Furthermore, globalization increases the numbers of objects and experiences that spread to most, if not all, corners of the inhabited earth: the Gregorian calendar, McDonald’s restaurants, etc. And, with globalization, people acquire various social connections that largely transcend territorial geography, for example, in regard to telecommunications and global ecological changes.

Thus globalization has several interrelated facets: internationalization, liberalization, universalization, and deterritorialization. Different commentators give one or the other of these aspects more attention. My own emphasis goes to the fourth: that is, globalization as the proliferation and expansion of relatively deterritorialized spaces. Global relations can on these lines be characterized as “supraterritorial”, “transworld”, or “transborder” relations.⁸ This is not to discount the reality and importance of present-day internationalization, liberalization, and universalization. However, these three tendencies have appeared in substantial measure in earlier history, long before talk of “globalization” became popular in the late twentieth century. Concepts of globality give new, distinctive and important insights into the contemporary world when they are formulated in terms of supraterritorial connectivity. In global relations of this kind, terrestrial distances can be covered in effectively no time, and territorial frontiers present no particular impediment. Thus supraterritorial connections unfold in the world as a single place.

Supraterritoriality has become commonplace for hundreds of millions of people in recent decades. For example, humanity is today interconnected through over a billion telephone lines, a billion television sets, two billion radio receivers, and 250 million Internet users.⁹ At the same time the contemporary world is marked by pervasive transborder production processes, global marketing of thousands of goods and services, unprecedented levels of anthropogenic transworld ecological changes, a substantial rise of global consciousness among people, and (as elaborated below) an immense globalization of finance.

To be sure, global relations have spread unevenly. They have concentrated more in countries of the North, in professional and wealthier classes, and in urban centres relative to rural areas. However, globalization has left few inhabitants of today’s world completely untouched.

Nor does this globalization thesis maintain that territorial spaces no longer matter. On the contrary, territorial economies, territorial governments, and territorial identities continue to exert very significant influences on contemporary society. However, social geography is today no longer wholly territorial. We have moved from a territorialist world to one where territorial realms co-exist with (rapidly expanding) global spaces.

This reconfiguration of geography has far-reaching implications for governance, that is, the ways that people manage their collective affairs. Global flows defy effective management through the statist mode of governance that prevailed during most of the twentieth century. The old model of sovereign statehood – where a centralized national government holds singular, comprehensive, supreme, and absolute authority over a given territory – is plainly not suitable for the management of transborder air traffic, transworld disease, and many other policy matters, including supraterritorial finance. Contemporary governance has to entail more than government as traditionally understood.

This is not to suggest that states are on the verge of demise. On the contrary, most states across the world are today as large and active as ever. However, it is equally clear that territorially discrete states cannot by themselves effectively handle the many and large global flows that impact upon their jurisdictions. Major innovations are necessary in the ways that we manage many problems of collective concern. Indeed, globalization has already prompted some shifts in the contours of governance, trends that seem likely to unfold further in the future.

For instance, states in the contemporary globalizing world have increasingly turned from unilateral to multilateral approaches to many policy issues. This trend has been apparent in, among other things, the expansion of interstate consultations at ministerial level, including special conferences of the United Nations (UN) since the 1960s and meetings of the Group of Seven (G7) since the 1970s. The rise of multilateral governance has also occurred through the growth of transstate networks, where civil servants from parallel agencies in multiple states develop close regulatory collaboration in a particular policy area.¹⁰

In addition, multilateral governance has seen considerable transfers of regulatory competence to permanent suprastate institutions. Some of these agencies, like the European Union (EU), have a regional scope. Others, like the International Monetary Fund (IMF), operate on a transworld scale. “Suprastate” does not mean “nonstate”, in the sense that these agencies have gained full independence from and control over their state members. However, like most organizations, suprastate bureaucracies have acquired some initiative and power of their own, particularly in respect of weaker states.

Globalization has encouraged not only a shift of many regulatory competences “upwards” to suprastate bodies, but also various moves “downwards” to substate agencies. In recent decades most states have pursued some degree of devolution from national to provincial and local authorities. Sometimes these transfers have been specifically prompted by a judgement that certain global problems (for example, transborder crime or transworld ecological degradation) can in some respects be tackled more effectively at a substate level.

Along with the dispersion of authority “upwards” and “downwards” from the state, globalization has also promoted “lateral” shifts of governance from the public sector to nonofficial quarters.¹¹ This privatization of governance has transpired, for example, in increased reliance on nongovernmental organizations (NGOs) to implement development cooperation projects and several multilateral environmental agreements. As detailed below, considerable private governance has also arisen in respect of global finance.

Together, the developments just described have brought an end to the statist governance that accompanied the territorialist geography of old. Theorists have variously dubbed emergent circumstances as “multilayered”, “post-sovereign”, “post-Westphalian”, “neo-medieval”, or “networked” regulation. Whatever label one applies to it, governance in the context of contemporary globalization is different from the territorialist-statist mode that predominated for some 300 years from seventeenth-century Europe to the mid-twentieth-century world.

Much post-statist governance of global relations remains ad hoc, experimental, and problematic. On the technical side, the new conditions of more dispersed authority have raised major challenges of efficiency and coordination. On the normative side, globalization has raised substantial challenges to human security, social justice, and democracy. Indeed, it is widely felt that currently prevailing approaches to the regulation of global spaces are wanting on both efficiency and normative grounds.

These circumstances have spurred a notable growth of civil society involvement in the governance of global relations. As already indicated, in certain cases civil society associations have even acquired the role of direct policy executors. More often, civil society organizations like business forums, local community associations, NGOs, religious groups, think tanks, and trade unions have pursued advocacy campaigns to improve the capacities of governance to deliver efficiency, stability, equity and/or democracy in respect of global flows. Frustration with these governance deficits has in recent years drawn substantial numbers of civil society critics into a so-called “anti-globalisation movement” that has attracted much media attention.¹²

This rise of civil society activism has had a mixed reception. Enthusiasts have placed high hopes on the contributions of civil society to enhance management of global issues with invaluable information and expertise as well as greater democratic credentials and more equitable policy outcomes. Other commentators have been less sanguine. For the sceptics, civil society interventions in global governance tend to be disruptive, ill-informed, unrepresentative, self-serving, and unaccountable. These potential positive and negative effects are elaborated in the final sections of this chapter.

Financial Globalization

Before proceeding to that step, however, we should relate the general themes just outlined concerning globalization and governance to the specific area of finance. Indeed, the financial sector has shown some of the most far-reaching globalization in recent history.¹³

For one thing, globalization has given certain monies a substantially supraterritorial character. Several national denominations like the US dollar and the Japanese yen have become global currencies. They circulate just about everywhere on earth and move instantly by electronic transfer anywhere in the world. In addition, the euro and – on a much more limited scale – the Special Drawing Right (SDR) have emerged through the EU and the IMF, respectively, as suprastate monies with transworld use. Many bankcards (such as those connected to the Cirrus network) can extract cash in local currency from over 400,000 automated teller machines across the planet. Meanwhile, global credit cards like Visa and MasterCard are used to make payments at millions of establishments spread over 200 jurisdictions.

Financial globalization has also transpired in the ways that money circulates. For instance, foreign-exchange trading today occurs through a round-the-world, round-the-clock market that connects dealing rooms in London, New York, Tokyo, Zürich, Frankfurt, Hong Kong, Sin...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of tables
• List of figures
• Notes of contributors
• Foreword
• Acknowledgements
• Introduction
• Part I: General issues
• Part II: Regional experiences
• Part III: Perspectives from multilateral institutions
• Part IV: Perspectives from civil society sectors
• Part V: Looking ahead
• Index