Friday, November 14, 2008

GAL and the "New Bretton Woods": Unrealistic expectations and conflicting governance logics

With the heads of the "G-20" States meeting in Washington DC tomorrow to discuss a global response to the current financial crisis, calls for treating these talks as a new "Bretton Woods" conference, in which the institutional framework of global financial governance would be radically restructured, have grown. As I posted previously, two things are striking about the current debates: firstly, that there appears to be a significant degree of consensus that increased global administration is required to deal with the crisis; and secondly, that almost all of the reforming voices, be they governmental or from civil society, explicitly endorse at least some form of administrative-law type regulation of the reformed administration. It is worth, however, making a couple of more cautionary points in this regard, relating in particular to the unrealistic expectations of major progress being made in Washington over the weekend; and the second, mroe conceptual, relating to the importance of differentiating the demand for global administrative law in function of the governance logic that lies behind it.

Unrealistic expectations
The folks over at Opinio Juris have a couple of posts cautioning that, whatever the desires of certain - in particular European - leaders, it is extremely unlikely that any radically or even major restructuring of the current institutional setup for governing international finance will be agreed upon this weekend. The Washington Post has more detail on precisely why this might be:

Different leaders bring to the meeting different perspectives and expectations.

"That's the dangerous part in trying to achieve a common agenda. They'll try to push their own perceptions of what a global architecture should look like and who should be the dominant players," said Charles Freeman, a former Bush administration trade official now at the Center for Strategic and International Studies.

"I'm not sure that even an Obama team wants to see the United States' style and method of capitalism and financial markets converted. We value our flexibility here, and I don't think we're willing to capitulate to as much regulation as the Europeans are suggesting, particularly the French."

Sarkozy and other European leaders are proposing an early warning system to watch for imbalances in financial markets. They also want an expanded role for the International Monetary Fund as the world's financial watchdog, improved supervision of financial players and action to close loopholes that let some institutions avoid regulation.

"We need monetary and fiscal policy coordination across the world," said British Prime Minister Gordon Brown in outlining his own broad proposals for the summit to address. Among other suggestions, he wants China to use its nearly $2 trillion in reserves to help top up an IMF emergency loan program.

But China indicated on Tuesday that its focus is on its own economy. Beijing unveiled what amounted to a $586 billion two-year economic stimulus package that includes more spending on construction, tax cuts and social programs in China - but no mention of efforts abroad to lift other economies out of the ditch.

Russia, meanwhile, doesn't want to expand the IMF's powers as European leaders propose. Instead, Moscow wants the IMF's role reduced to make way for entirely new international financial institutions.

Amid high-flying but dueling rhetoric, prospects for major breakthroughs at the summit seem scant.

This is before we even get to the desires of those not invited to Washington this weekend - which include, it should be recalled, the vast majority of the world's States. Moreover, as the IFIWatchnet and Bretton Woods Project websites amply demonstrate, global civil society actors are taking more than a passing interest in the outcomes of any talks. For example, in parallel to the G8(+) moves to deal with the problem, Miguel D'Escoto, the President of the UN General Assembly, has established a task force to review the global financial system, arguing that any efforts to deal with the crisis should be "inclusive, not exclusive", and noting further that "The place to discuss is neither the G8, nor the G20, nor the G25 or the G63. It is the G192, which is the General Assembly of the United Nations".

Given the vast array of different views, even amongst powerful actors, as to what the correct course of action should be, not to mention the Presidential situation in the most powerful actor of all, it is not in the least surprising that prospects of any lasting progress at all in Washington seem slim. At present, it would appear that we have universal consensus on only the major premise of what the classic British comedy series Yes Minister memorably referred to as the "politician's fallacy": "some thing must be done; this is something, ergo this must be done". It seems that it may will take some time and much negotiation before a sufficient amount of agreement exists on the minor premise for any actual action to be taken...

Conflicting governance logics
These, then, are the practical reasons why we should not expect a huge amount of GAL-signifcance to emerge from this weekend's summit. As I have suggested previously, however, one of the most striking features of the buildup has been the near-ubiquity of global administrative law-type rules and principles in the various reform proposals that have been put forward - further evidence, perhaps, of the emergence of GAL culture or sensibility as part of an increasing regulatory common sense. In the remainder of this post, however, I want to begin the necessary task of nuancing this claim a little, as it seems abundantly clear that, although there may be increasing convergence on a few key slogans (Accountability! Transparency! Participation!), it is equally clear that these do not mean the same thing to all of those rallying around. Rather, their meaning - and, crucially, the ways in which these abstract principles will "cash out" into concrete rules and mechanisms - will varying according to the dominant governance logic driving the claim.

For the sake of argument, I will identify two such broad logics here (there may well be good grounds for disaggregating these further, but they will serve to illustrate my point): a technocratic efficacy logic (which aims at simply securing the most effective way of dealing with a problem) and a justice logic (which posits that certain procedures or mechanisms - foten rights-based - should be observed, regardless of their effect on governance outcomes, for reasons of fairness, etc.). Consider, firstly, the following excerpt from the common position of the EU States for tomorrow's summit:

The new international financial system must be based on principles of accountability and transparency.
- Transparency of financial transactions must be ensured by means of a more comprehensive information system, which no longer omits vast swathes of financial activity from auditable, certifiable accounts.
- Arrangements conducive to excessive risk-taking must be overhauled, particularly debt securitisation procedures and pay policy.
- Both prudential and accounting standards applicable to financial institutions will have to be revised to ensure that they do not contribute to creating speculative bubbles in periods of growth and make the crisis worse at times of economic downturn.
- Standards bodies, in particular in the area of accountancy, will have to be reformed to allow a genuine dialogue with all the parties concerned, in particular prudential authorities.

And compare it to, for example, the following common proposal launched by IFI-watching and debt activist NGOs:

The statement supports the fundamental and far-reaching transformation of the international financial and economic system and a major international conference convened by the UN to review the international financial and monetary architecture, its institutions and its governance, but only if the meeting follows a process that:

- is inclusive and participatory of all governments of the world;
- includes representatives from civil society, citizen's groups, social movements and other stakeholders;
- has a clear timeline and process for regional consultations, particularly with those most affected by the crisis;
- is comprehensive in scope, tackling the full array of issues and institutions;
- is transparent, with proposals and draft outcome documents made publicly available and discussed well in advance of the meeting.

The civil society statement further lists among its goals for the architecture of the new system

- To create a new set of principles in which finance should be aimed at, and linked to, strengthening national and local real economies to meet the requirement of sustainable and equitable development.
- To move away from the market fundamentalism driving the recent past.
- To curb the power of the World Bank, the IMF and the WTO, and to enhance the accountability of global, regional and national economic governance institutions.
- A call for governments to take immediate action to develop a new international regulatory architecture with democratic checks and balances that is aimed at promoting the interests of workers, small-hold farmers, consumers, and the environment and preventing future financial crises, in which the United Nations should play a central role in its development.

Same words (accountability, transparency); really quite different meanings when we dig a little deeper. On the one hand, we have the apparent idea that all we need is "effective" technocratic regulation, and the powerful states more committed to holding financial institutions to account in terms of these standards. On the other, a whole host of substantive concerns - about fairness, sustainability, equity, inclusion, and, indeed, a direct challenge to the technocratic orthodoxy - are presented as absolutely central. Of course, these different logics cash out in various different answers to the recurring "to whom, for what?" questions that invariably (should) accompany discussions of accountability; however, they are by no means exhausted by this. Indeed, it seems arguable that almost all administrative law mechanisms will have qualitative differences in function of the governance logic that was dominant in their establishment. In order to illustrate this, I'll take a brief excursion into the transparency/participation mechanism - very prominent within US administrative law - of the "notice and comment" procedure.

A brief(ish) excursion: competing logics in notice and comment
At the beginning of The Hitchhiker’s Guide to the Galaxy, a group of aliens from the Galactic Hyperspace Planning Council come to Earth, and announce that, in order to encourage the development of the outlying regions of the galaxy, the planet will be destroyed in two minutes’ time to make way for a new hyperspatial express route through the solar system. When the howls of complaint begin from the understandably aghast earthlings, the aliens reply:

There's no point acting all surprised about it. All the planning charts and demolition orders have been on display in your local planning department in Alpha Centauri for fifty of your earth years, so you've had plenty of time to lodge any formal complaint and it's far too late to start making a fuss about it now.

The serious point to take from this vignette is, of course, that, where major development projects involve significant implications for both human rights and substantive justice, the bare elements of a notice-and-comment procedure may simply not be sufficient. Something more is required.

In many ways, the Aarhus Convention, with its explicitly provides us with an illustration of what a human rights driven administrative procedure might look like in such a case. Consider, for example, Article 5(1)(c), which deals with the collection and dissemination of environmental information. It states that

In the event of any imminent threat to human health or the environment, whether caused by human activities or due to natural causes, all information which could enable the public to take measures to prevent or mitigate harm arising from the threat and is held by a public authority is disseminated immediately and without delay to members of the public who may be affected.

Article 5(8) provides that

Each Party shall develop mechanisms with a view to ensuring that sufficient product information is made available to the public in a manner which enables consumers to make informed environmental choices.

Lastly, Article 7(2), which deals with public participation in decisions on specific activities, provides that

The public concerned shall be informed, either by public notice or individually as appropriate, early in an environmental decision-making procedure, and in an adequate, timely and effective manner, inter alia, of:
(a) The proposed activity and the application on which a decision will be taken;
(b) The nature of possible decisions or the draft decision;
(c) The public authority responsible for making the decision;
(d) The envisaged procedure…

These provisions give us some useful insights into what a notice-and-comment procedure intended to further or respect human rights might resemble. Crucially, the obligation to provide notice is framed as a positive obligation to disseminate, rather than merely publish (a proposition further bolstered by the requirement in Article 7(2) that the public be informed in an effective manner); moreover, Article 5(8) suggests that not only should steps be taken to ensure that potentially affected members of the public receive such information, but also that it is imparted to them in terms that they can understand. Given the overwhelmingly technical nature of much global regulatory governance, it is difficult to overstate the importance of this last point; without it, even stringent positive dissemination obligations are often likely to prove utterly ineffective.

By way of comparison, consider the notice-and-comment procedure initiated by the Basel Banking Committee in its preparation of the Basel II regulations. In order to take advantage of this procedure, concerned members of the public simply had to go to the Committee’s website – which is, I suspect, for the average citizen a fairly exact functional equivalent of the planning department in Alpha Centauri – and read, digest and reflect on a set of documents totaling a “mind-numbing” five hundred and forty-one pages of highly technical and complex banking and financial regulations.

It seems fairly clear, given the foregoing, that it is not a justice logic that has driven the establishment of notice-and-comment procedures within the Basel framework; rather, it is that of technocratic efficacy – designed, in particular, to head of increasing dissatisfaction with the main targets of the regulation (banks and banking regulators) with the previous arrangements under the 1988 accord. Of course, whether or not the Basel regulatory processes actually requires a human rights-driven administrative law framework is debatable; many feel that this is a prime example of a field in which technocratic processes should be allowed full reign, although some authors have suggested that more effort to engage with the general public and developing countries could improve the process (and, of course, whether the establishment of this notice-and-comment procedure did in fact lead to a gain in terms of the technocratic efficacy of banking regulations seems, given the current situation, at best an open question).

The important lesson to draw from this context, however, is how the meanings of transparency and participation differ depending upon the basic normative logic that is driving them, and how this change is embodied in the obligation to give “notice” intended to embody them. It is also worth noting that, were steps to be taken to introduce a human rights element by imposing a positive obligation to disseminate the relevant information in a generally digestible form, this would almost inevitably involve a loss in terms of technocratic efficacy – the very base upon which the administrative law mechanism was founded in the first place. Thus, not only do the different logics lead to different administrative law mechanisms, the they are also - often - mutually incommensurable.

The point is not to suggest that one logic is necessarily "better" than another in all contexts; simply to emphasise that, even if I am correct in my claim that we are witnessing the emergence of a culture of administrative law within global governance as part of a regulatory common sense, this common sense itself - the field of GAL - must be the subject of a whole set of different and complex distinctions and classifications. Not all of those currently rallying around the slogans of accountability and transparency in the reform of the global financial infrastructure are on the same side; often, indeed, it is quite the opposite.

Not much hope, then, despite the noise, for significant GAL-related developments at this conference, although "something must be done" at some point, and one suspects the eventual "something" will have some elements of (likely technocratic efficacy-driven) GAL incorporated within it. Of course, by this time tomorrow, I might have been proved wrong...

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