Center for Governance and Sustainability

at the University of Massachusetts Boston

Lack of Effectiveness

The efficiency criteria for WEF is, however, quite different in character from the focus on the loss of legitimacy. WEF’s principle concern is that the current system has become unmanageable, particularly in times of serious crisis. The 2008/2009 financial crisis exposed the institutional weakness of the prevailing system.  For example, the collapse of one firm (Lehman Brothers) produced a serious of quite unexpected consequences that left major central banks, global financial institutions, major treasury departments, leading stock exchanges unsure what would happen next. The tools for managing such crises and even the analytic capacities to forecast such events were too ineffective for the nature of the global crisis. For WEF, this lack of effective policy tools for maintaining order demonstrated a structural weakness inside the global economy.

In this situation, the informal network of financial banking institutions, central bankers, the UN system, the OECD countries, and the Financial Stability Forum were clearly too weak. They were also too fragmented into specialized units and too autonomous from each other to deal with big globalization challenges. In WEF’s view, the entire international system lacks effective policy incentives to grapple with such major global matters.

In part, GRI considers that the fragmentation of decision-making among existing international organizations is a derivative problem from the fragmentation of decision-making in national capitols.  1   At the national level each ‘topic’ is managed by a separate staff which has relative independence from the top and elected leadership. This has created institutional policy silos and a complementary de facto hierarchy between the various policy bodies at the national level.

At the international level, WEF argues that this makes it is very difficult to formulate clear and coherent policies on tough global issues. 2  In its view, this long standing silo structure, which has been a nuisance in the past, has created a burdensome obstacle to state-centric global leadership in today’s world.

GRI also notes that “the international system lacks adequate built-in incentives "to focus disparate, but relevant, resources and capabilities on common, complex challenges. One important source for effective incentives for the Davos community are ‘messages’ and ‘signals’ from the market. 3  The global market, however, also seems to have failed in its job of sending the correct price, performance, and market incentives to key actors in the finance community, to the elites of key countries, to the senior echelons of government, and to the leadership of international organizations. Without sound incentives, WEF asserts the Actors in global governance are likely to make incorrect assumptions and to act in ways that are not conducive to the long term structural stability. 

In general, intergovernmental policy space has become significantly smaller than the policy space ‘managed’ by international commercial markets. For all its separate parts, the official international system is, for WEF, too marginal to real power to deliver what is needed to manage a global economy, a global population, global wars, and a global ecosystem. 4  As an example, the WTO remains years behind on revising international trade rules that were supposed to better stabilize the 100-plus developing countries. And the international system at the heads of state level can declare priorities for Millennium Development Goals that have minimal impact on the behavior of the international market and on most OECD countries themselves. The relatively small policy space for bilateral relations by nation-states and the multilateral system means that it cannot function effectively as a counter-weight to the self-interested demands of the global market, particularly in times of crisis.   

WEF’s approach is to bring key firms in the international market and the institutions of the formal global governance system better in alignment with each other. By stressing ‘can-do’ corporate pragmatism as a replacement for ‘failure mentality’ abounding in the state-centric system, WEF sends a positive message about a new cooperative world involving multinational corporations, the nation-state, and the leadership of civil society working together more effectively.

 

Related Ideas: Missing sense of ownership; Migration; Dual-oversight agency

The Readers' Guide welcomes comments with alternative examples or counter examples and commentary – critical or otherwise – of the above interpretation of GRI’s perspective.

  • 1. ^ See  similar conclusions by Institute for Environmental Security, The Hague in its  Global Policy Coherence project (2009/2010) http://www.envirosecurity.org/gpc/ (accessed July 10, 2012)
  • 2. ^ A view also shared by the Helsinki Process. "The multistakeholder approach can help provide a more robust interdisciplinary flavour to discussions and address the problem of strict boundaries between actors dealing with different global problems, thus bringing parallel discourses into one. These divisions are very clear for example in the economic sector, where there are separate international organisations for trade, finance and aid, and mostly also different ministers in different countries for each issue, giving very little consideration to improving coherence.” Helsinki Process, pg 28.
  • 3. ^ One of the strongest dissents from a key GRI recommendation is by  Ashok Khosla, Chairman, Development Alternatives, India, and Caio Koch-Weser, Vice-Chairman, Deutsche Bank Group, Deutsche Bank, United Kingdom.  They argue in their introductory essay “ . . . our current systems of governance, finance, production, and consumption create perverse incentives for the over-exploitation and degradation of natural capital. These systems and our incentive structures need to be reoriented.” Ensuring Sustainability : Leadership and Action for a Sustainable World Pg 374
  • 4. ^ “Although global governance institutions have racked up many successes since their development after the Second World War, the growing number of issues on the international agenda, and their complexity, is   outpacing the ability of international organizations and national governments to cope.”, Global Governance 2025, pg iii

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