Back | Programme Area: Special Events (2000 - 2009) | Event: Regulating Global Institutions: Financial, Corporate and Non-Governmental Organizations

Regulating Global Institutions: Financial, Corporate and Non-Governmental Organizations

Date: 3 - 4 Feb 2002
Location: Porto Alegre, Brazil
Speakers: Deborah Eade, Peter Evans, Reinaldo Gonçalves, David Korten, Thandika Mkandawire, Peter Utting
Counterpart(s): Brazilian Institute of Social and Economic Analyses (iBASE)
Project Title: Geneva 2000: The Next Step in Social Development

Summary of Presentations

At this year’s World Social Forum in Porto Alegre, Brazil, UNRISD and the Brazilian research and advocacy NGO, IBASE, co-hosted a seminar on “Regulating Global Institutions”. The meeting brought together a group of scholars and activists concerned with issues of global governance and development. Six speakers discussed and debated the types of reforms that were needed in relation to international finance and trade organizations, transnational corporations and large non-governmental development organizations.

The seminar began with a discussion on the role of the World Bank and IMF. Thandika Mkandawire, Director, UNRISD, noted the way in which the Bretton Woods institutions had adjusted their policies in recent years to address issues of poverty alleviation and “good governance”. He pointed out, however, four limitations of this shift in policy: such issues tend to be dealt with in a technocratic way; these organizations continue to ignore important issues such as income distribution and social equity; their focus on targeting has created a dual structure of social services which works poorly in many countries; and their increasing recognition of the role of the state is undermined by the fact that neoliberal policies have greatly weakened state capacity in many countries. Mkandawire called on such organizations to recognize the need for questions of redistributive justice and social policy to become an integral part of the debate on development and not simply add-ons to a policy approach that remains fundamentally unchanged.

Peter Evans, Professor of Sociology at the University of California, Berkeley, suggested that the World Bank and the IMF have a role to play in promoting development but that countries of the south need to have a much greater say in the governance structures of these organizations. Referring in particular to the IMF, Evans argued that the dominant views of Southern governments as either passive victims of IMF policies or passive clients being saved by the organization were misleading. Improvements in South-IMF relations needed to be grounded on the more active, organized and collective efforts on the part of countries of the South to reshape the IMF’s policies. Despite the undemocratic structure of governance in the IMF, some spaces exist for the South to increase its power and influence within the organization.

Reinaldo Gonçalves, Professor of Economics, Federal University of Rio de Janeiro, argued that both the IMF and the World Bank were powerful instruments of foreign policy of the developed countries, notably the United States, and that these institutions have created more problems than they have solved. He identified key problems that needed to be addressed, including the lack of transparency in the institutions and organizations that make up the international financial and monetary systems; the lack of regulation of certain areas of international financial operations, such as off-shore centres; and the negative conditionality and “moral hazard” associated with IMF loans. He called for a reversal of the process of financial liberalization with greater capital controls and certain restrictions on both outflows and inflows of currency and goods and services. He also called for the replacement of the World Bank and the IMF by an International Development Fund oriented to finance social, economic and environmental projects in developing countries. Governments from developed and developing countries alike should not participate in the decision-making process of this Fund. Rather the Board should be composed of representatives of international civil society chosen democratically on a world scale.

The seminar sent on to address issues related to the reform and developmental impact of transnational corporations (TNCs) and large NGOs. Peter Utting, research co-ordinator, UNRISD, assessed the effectiveness of recent attempts to improve the social and environmental performance of TNCs via “multistakeholder” standard-setting, monitoring and certification schemes, which involved NGOs and multilateral organizations. Some of these initiatives were an improvement on certain voluntary initiatives associated with “corporate self-regulation” such as company codes of conduct, which were generally weak in terms of design, implementation and impact. Nevertheless he noted certain weaknesses of multistakeholder initiatives and limits to the extent to which such schemes can be scaled up. Not only are relatively few firms currently involved but the monitoring, reporting and certification processes they promote tend to be complex and costly. Utting argued that such an approach is unlikely to evolve into an effective global system of TNC regulation, and that more attention needed to be given to the creation or expansion of “complaints procedures”, where specific breaches of standards by TNCs can be identified and addressed. Complaints-based systems of regulation would involve various types of institutions and actors, for example, UN organizations, national legal processes, watch-dog NGOs, trade unions, the media, ombudsman-type institutions, and shareholder and consumer activism.

David Korten, President, People-Centered Development Forum, called for more far-reaching reforms in the global governance and accountability of TNCs. He argued that the publicly traded, limited liability corporation is a legal institutional form that was established historically to exploit the people, markets and resources of colonial territories and to shield the economically powerful from accountability. As such it should have no role in setting or shaping public policy and priorities in democratic societies. Korten argued that neither voluntary initiative nor piecemeal public regulation would be able to solve the environmental and social problems associated with TNCs. What was required was the elimination of institutional form that concentrate economic power and shield it from public accountability; breaking up monopolies; the equitable redistribution of ownership rights; the strengthening and democratizing of the United Nations, and dismantling of the World Bank, IMF and the WTO.

Turning to the issue of large NGOs, Deborah Eade, Editor, Development in Practice, identified recent trends in the approaches and role of NGOs. These included a growing recognition of the limitations of project-based anti-poverty work and the increased need for advocacy to change the policy environment; the increasing emphasis on democratization and good governance; pressures on NGOs to become involved in service-delivery; and increasing competition among NGOs for access to the media and public limelight to gain influence and resources. These trends raise important questions about how agendas are set, the legitimacy of NGOs to advocate on behalf of others and their accountability to a diverse set of stakeholders, and the division of labour between Northern NGOs involved in high profile advocacy and Southern NGOs which are left implementing projects and supplying information. Eade called for a decisive move away from “paternalistic advocacy” to “participatory advocacy”, involving broad coalitions of civil society and grassroots voices, and “people-centred advocacy” whereby people negotiate for their rights on their own behalf and where international NGOs act in solidarity rather than set agendas and disburse resources accordingly.