New perspectives on democracy and the global financial crisis

Just as my watering poor eyes are beginning to tell me that I should be dramatically cutting back on the time I spend in front of this screen (and blogspot helped by going offline for 36 hours!), good internet articles seem to be increasing. In the last hour, I’ve encountered several fascinating pieces.
First the good news. I’m glad to see that I’m not the only person who has felt unease at the exploding number of indices of good governance and democracy. Open Democracy has just sent me their latest batch of thought-provoking articles – one of which by Jorge Heine puts the issue very clearly Another article on the same site introduced me to a new democracy manifesto which at last moves the focus away from the West.
And Anthony Barnett – the driving force behing the Open Democracy site (which I have now rather belatedly added to my links) – also has a good piece on the manifesto.

Democracy is spreading and it will be with us to stay. That is the good news. The bad news is that, through some sleight of hand, this powerful idea that has mobilized so many people and so much human energy around the world, has been turned by some into a highly parochial, procedural version of what self rule is all about. It is the specific political practices of a few (ironically) self-appointed countries around the world, mostly in the North Atlantic, that have come to be defined as setting the tone and the parameters for what democracy is and is not.

Globalization, by spreading the idea of democracy, has helped to liberate people from many a dictatorial yoke. But globalization also embodies the danger that a ‘one-size fits all’ model of democracy be imposed from abroad and from above. an upsurge of efforts to categorize, classify and rank countries around the world according to a variety of ‘democracy indexes’, which purport to tell us how democratic any given country is.

And this is not a mere academic exercise. Real-life consequences flow from it. Funds are disbursed, loans are approved or rejected and countries are suspended from international organizations as a result of these rankings. One of the great paradoxes of all this is that movements and governments that empower people and bring large numbers of the formerly disenfranchised into the political realm are often the targets of these self-appointed ‘democracy policemen’.

A number of countries in Latin America, like Bolivia, Ecuador, Venezuela and others have experienced this treatment. New leaders, new constitutions, new rights for the hitherto marginalized aboriginal peoples have brought about enormous changes in these countries in the course of the past decade.

Bolivian President Evo Morales is the first Amerindian to be elected head of state in the Americas. Lula was the first trade union leader to become president of Brazil. Rafael Correa has brought political stability to Ecuador and a willingness to stand up against the oil majors to defend his country’s rights.

Yet, far from being welcome as major architects of the deepening of democracy in South America, some of these leaders are often demonized as populists by this fake international consensus about what democracy is and is not.

I was going to say that the bad news is that a special poll for the Labour parties of Sweden, Germany and UK (all of whom lost power recently) has revealed the extent of the distrust in these countries for these parties (despite the global conditions in which they should be thriving). But, as the poll reports a lack of faith in the ability of governments to stand up to vested interests (just 16% believed they could in the UK, 21% in Germany and 27% in Sweden).

That could actually be good news. If a significant percentage of the public understand that the parties have in fact sold the pass and cannot stand up to corporate interests, this could pave the way to stronger political demands. However it is not easy to overcome fataliasm. 29% in the UK were scepticical about the ability of government-led action to improve societies, with and 27% in Germany questioning whether governments can be an effective force.
It’s time parties which purport to be left use arguments and facts such as the following

And another post from Real World Economics reminds us of the strong report on the global financial crisis which came from a UN Commission of Experts (helped by Joseph Stiglitz) in September 2009 which had suggested the establishment of a panel of experts modeled after the Inter-governmental Panel on Climate Change (IPCC).

This summer the UN is to decide whether it should implement this. Should there be a panel? And if so what would its function and structure be? The last thing the world needs is yet another glossy report with yet another take on the financial crisis. And why bother if such an effort gets mired in UN bureaucracies and is not fashioned into a voice that would have traction with governments across the world?

The UN is the most legitimate and among the most qualified global bodies to weigh in on the global economic system and it would be ridiculous for it to sit on the sidelines. The UN has economists and experts in numerous global agencies such as UNCTAD, DESA, UNDP and beyond, as well as regional efforts such as ECLAC, ESCAP and others. If the UN does not weigh in, the only other options are the G-20 and the IMF. The G-20 as an institution does not include more than 170 countries in the world, and the IMF has a very poor track record on analyzing, preventing, and mitigating financial crisis. The UN is looked to for balance.

We very much need a meta-analysis of the global state of understanding on the causes of financial crises and measures to mitigate them, with the goal of making suggestions for reforming global economic governance—as recommended by the Stiglitz Commission. The UN has the track record here. The UN has already created two (while not perfect) efforts on climate change and on agricultural development. The IPCC is a body that analyses the state of climate science and its impacts, and the Intergovernmental Assessment of Agricultural Knowledge in Science, Technology, and Development (IAASTD) analyzed the state of knowledge on agriculture from the perspective of fighting hunger and poverty in a manner that can improve human health and environmental sustainability. 

What would an inter-governmental panel do? Like the IPCC and the IAASTD, an Intergovernmental Panel on Systemic Economic Risk would perform a meta-analysis of the state of knowledge on the causes, impacts, and implications of financial crises. This would not be just another report; rather, like the IPCC effort it would be the “report on the reports” where eminent persons make sense of the thousands of peer reviewed articles and agency (UN, IMF, etc) assessments that have been done. This would synthesize the similarities and spell out the differences in thinking about these issues to help policy-makers make better decisions about reform.

One of the volumes would look at causes and impacts, while another could serve as a clearinghouse for financial regulatory reform efforts. Nations and regions around the world are reforming their financial systems but there is no single place to catalogue and make sense of these new regulations. This is important for investors and policy makers as they seek to maneuver in a post-crisis world. It will also help stimulate policy diffusion whereby innovative regulation from one country can be applied to another.

If such an effort gets bogged down in UN processes it will be doomed to fail. Like the IPCC and the IAASTD the effort will need to have relative autonomy from the standard UN process. It should also engage with the International Monetary Fund and World Bank. The IAASTD has a Panel of Participating Governments (governments of all participating agencies) but also has a 60-person “Multi-stakeholder Bureau” that formally advises the plenary. Thirty of the members are governmental officials, 30 are from civil society, the private sector, and academics. Furthermore, IAASTD has seven cosponsoring agencies: the FAO, UNDP, WHO, UNEP, UNESCO and yes even the World Bank.

A UN panel on the financial crisis could model itself on IAASTD to some extent, having some of the governmental officials in a stakeholder bureau come from Central Banks and Finance Ministries, and having the sponsoring agencies be among UNCTAD, UNDP, UNDESA, some of the regionals, such as ECLAC, ESCAP, and the IMF, and World Bank.
It seems clear that at present the UN is not weighing in with a clear voice on the reform of the global economy. This is a pity. The world’s most powerful leaders and the press that follow them have found solace in the G-20 and the IMF, which are not delivering either. The UN is among the most qualified and certainly the most legitimate bodies to deal with the truly global nature of economic crises and their development implications. It started off better than any other body with the establishment of the Stiglitz Commission. Let us hope the UN is up to the task of following through on the Commission’s recommendations. The health of the global economy depends on it.

The painting is another Nenko Balkanski - which I came across on Thursday in the great Kazanluk municipal Gallery. It's of the painter's wife - and is quite similar to a painting in the Smolyian Gallery.