Under the German presidency, G20 members should commit to give international governance a strong social dimension to address populism, writes Bernard Spitz.
New opportunities to start the 21st century with a fresh impetus open up to us on the occasion of the 2017 G20 in Germany, and the 2018 G20 in Argentina. The time has come to seize the occasion and achieve a junction of the social and the economic dimensions for global governance.
What had the world governments accomplished in 1945? Gathering the best economists and highest representatives of the planet at the Bretton Woods conference, they had re-cast the rules of a new world order. It is this very order which today needs to be completed, taking better account of the social dimension, the forgotten relation of the last century’s multilateral system.
This can be achieved as early as 2017, if, during the German G20, we show enough political will, in line with the agreement first signed at Cannes between the B20 and L20 partners, i.e. employers’ and employees’ representatives.
How? By offering to join the social and economic concerns, “above” and “below”, just as, in 1869, the American railroads, started simultaneously from both coasts, reached the junction of thrust of the Eastern and the Western tracks. The “junction” would consist in redrawing an integrated political, economic and social governance for the multilateral system (the “top”), while at the same time deploying a similar integration in the different countries concerned (“below”).
To illustrate: in 2012, Egypt sought a $ 3.5 billion IMF loan for an ill-defined project, which furthermore stood at risk of being cancelled by the new government about to seize power a few weeks on. There was no transparency, no political accountability from either lender or borrower. Nor was there any consultation with the Arab League, the UN, the ILO, or the WTO, even though any loan from the IMF has not only strong consequences but also clear social goals. In other words, no governance, as we were about to intervene massively in one of world’s powder kegs.
In a properly-functioning “social junction” system, a financial intervention of this magnitude – expected to affect the region’s fragile balance and at risk of being diverted from its original purpose considering the current instability of its beneficiary – would require “double checks”, nationally and internationally. The first checks would ensure that the loan was issued to known political forces, in power or likely to be, and the procedure would involve effectively seeking, in a non-binding way, expertise from the country’s major players to ensure economic and social viability. If large private investments assess political risk, how could international public officials be exempt from such elementary prudence? The second verification should be performed by an alliance of the major operators (mainly the IMF, WB and UNDP) and the major regulators (primarily the UN, ILO and WTO), gathered as a consortium of experts and held to a defined schedule so that the system does not tend to being bogged down.
Each of these two levels should be separately piloted, so as not to fall back into the failures of a kind of economic SDN. The “below” pilot would be the government; the “top” one remains to be decided upon; but it is clear that after such an unprecedented scrutiny, the lender should have the last word, except in case of a unanimous block from the UN .
Other decisions should be taken to ensure that this new governance system offers all guarantees of efficiency and coherence.
A first example. To begin with, this “junction” must also exist within the institutions concerned. Thus, in 1996, South Korea saw its entry into the OECD made conditional on social democratization, which was monitored for several years. Korea’s growth of Korea did not suffer. Even better, its democratic system ended up reinforced. Why should such a procedure not exist in the WTO? Is it realistic to impose constraints ex post facto on countries which were not asked similar ones when they first joined the club? ILO core standards should be required from the beginning, with obviously the progressive and qualitative adjustments that history, geography or culture demand. Recognition of the market economy should also be a clear precondition, with its general principles: right of ownership, freedom of enterprise, transparency, freedom of competition and trade, etc.
A second example. The role of the social partners should also be recognized. It has been part of the European treaties since 1992, it has its place in the elements of a modernized world governance. The G20 can play a pathfinding role in this regard, and the ILO become a privileged place for such a dialogue. A modernized, forward-looking ILO, which could, on behalf of its constituents (the 187 member states and their social partners), establish contacts to this effect with the IMF and the World Bank: not only to share analyses, as it does today, but to work on pilot projects integrating economic and social aspects.
A third example. On shared topics of interest — and they are many — an international organization cannot work alone. The ILO devotes considerable energy to the fight against child labour. But it does so outside its regular budget, thereby setting itself at the mercy of a decline in voluntary contributions, as has been the case at the WHO. Above all, everyone understands that it is useless to try and prevent children from working – sometimes depriving them of future employment, and their families from a much-needed income – if the organization behind such work restrictions does not provide education to the children left to their own devices, as well as some kind of financial benefits to their parents. But to render this possible, the ILO needs to bring about a further junction of policies, with UNICEF, into a social (ILO), economic (a financial institution or a regional bank) and educational partnership. The private sector has a central role to play in this process by providing strategies for training choices, as well as acting as a partner to provide credibility and strengthen this alliance.
So what is to be done? There are two possible dimensions: the grand design, and the “small” design, which would already constitute a huge step forward. The grand design would aim to bring together the main areas of international regulation and to launch a major international conference under the leadership of the G20, in order to update each of the existing institutions’ governance, and, equally importantly, to define the relationship between them. The “small” design would mainly draw up the mainstays of this new social governance and map out how it could be integrated into the present system, supposedly stable.
Large or small, the effort should start from the G20 and end under the auspices of the UN — with a deadline without which the exercise would lose all credibility — in order to ascertain that a shared global vision exists. The United Nations would facilitate a debate, which would include the heads of major international agencies, members of the United Nations or other bodies, and would consult separately with international employers and labour organisations. The “preparatory” work of the G20 in Germany, to be concluded a year later in Argentina, should be inclusive, ie involve key non-G20 states. On each continent one country could be the pioneer group. This work would lead to a new conference, as ground-breaking as Bretton Woods, but with a wider geographical and thematic ambit.
The COP21 success should convince us that we can, in fact, achieve a reset in the world, to move toward better shared growth. The bitterness, jealousy, lack of economic lucidity and subsequent terrifying consequences threatening the world order, so brilliantly identified in his time by John Maynard Keynes, could then be dismissed.
Bernard Spitz is in charge of International and European Affairs at the head of MEDEF, the French employers’ organisation
Published in March 2017