Managing Economic Globalization
One of the most dynamic international changes in the post-WWII period has been the evolution of economic globalization. However one defines it, globalization marks a step change from prior systems of international commercial and business relations. In the years since WWII, multinational corporations have created their own ad hoc market-based governance system for this space.
At the national level, economic policy, industrial policy, and sector development (call it what you wish) are normal features of a national economic governance system. OECD governments use a mixture of policy tools to advance domestic economic growth and to redirect it in different directions. They can stimulate using tax incentives, state-subsidies, large scale state purchasing, research and development underwriting, patent protection rules, state guarantees and loans, alone or in combination with other economic policy tools. These governments can also redirect economic growth through land use regulations, consumer safety standards, environmental protection rules, tax policy, workers safety standards, and many combinations of these economic-social policy tools. Some of the market encouragement tools have the net effect of dis-incentivizing economic activity in other related sectors and vice versa.
What is abnormal is that there is no equivalence to state-based economic governance systems at the international level.
The official international system for managing economic affairs is very limited, except in three areas – trade, patents, and trade-related investments. For trade there is a well developed set of rules at the WTO; for patents there is the cross-registration system of World Intellectual Property Organization (WIPO) and the International Convention for the Protection of New Varieties of Plants (UPOV Convention); and for trade-related investments there is a WTO agreement on that subject and a large number of bilateral agreements (BITs). Some UN system agencies provide advice to developing countries and small and medium enterprises on international market arrangements and technologies (e.g. UNIDO, UNCTAD),. Some UN intergovernmental bodies receive reports about economic matters (i.e. ECOSOC and the Second Committee of the General Assembly). A number of intergovernmental and voluntary guidance documents have been developed relating to international investment and business (e.g. OECD Guidelines for Multinational Enterprises; 1 UN Principles for Responsible Investment [UN-PRI]) ).
The ad hoc sector governance system is the de facto norm in this area. Its mechanisms consist of:
- A series of interlinked sector understandings on normal and routine practices in that sector;
- A large collection of highly specialized trade associations that provide a forum for the coordination of sector-specific practices;
- A number of very highly concentrated international markets which are ‘governed’ by a very limited number of key firms (e.g. the oil industry, agribusiness, diamond industry);
- International product standard bodies which define the engineering scope of a diverse range of products and services in international trade (e.g. International Standardization Organization, ISO);
- An advertising and media component to generate needs and to define the satisfaction of wants on the regional and global scale; and
- Tax, legal, and accounting professions that help manage the location and movement of economic funds to minimize/avoid taxes and domestic legal oversight while maximizing returns in preferred currencies and related transactions.
The civil society component of economic governance comprises:
- Alliances between civil society organizations across countries to restrict the market on specific products and services (e.g. tobacco, dam construction, conflict minerals);
- Associations of civil society bodies advocating for the expansion of certain classes of products and socially relevant niche markets (e.g. organic foods, fair trade products); and
- Multi-stakeholder consortiums for setting socially responsible trade standards (e.g ISEAL).
This section continues with Options for the Future.
The Readers' Guide welcomes commentary – critical or otherwise – of the categorization and descriptions above as well as the identification of related issues and case studies.