Updating Globally

(This book review appeared in the January 1999 issue of the Monthly Labor Review, published by the Bureau of Labor Statistics of the U.S. Department of Labor)

Global Public Policy: Governing Without Government?  By Wolfgang H. Reinicke, the  Brookings Institution Press, 1998, 337pp. $42.95 ($18.95 paper).
Long before U.S. Treasury Secretary Robert Rubin and other top policymakers from the G-7 nations began talking about a "new architecture" for global financial markets, Wolfgang H. Reinicke, an economist and political scientist specializing in international institutions, was busy devising a new model for globalization as a whole. The result is this book, written while Reinicke was a senior scholar at the Brookings Institution (he is now with the Corporate Strategy Group at the World Bank and remains a nonresident senior fellow with Brookings).[See note at end.]

    Reinicke's model takes into account what he describes as a "sweeping, radical transformation" in the world from economic interdependence to globalization.   He draws a careful distinction between the two. Interdependence, in his analysis, refers only to a quantitative intensification of international commerce, a trend going back to the 1960s.  But more recently much of the world economy has undergone a qualitative change--a  transformation involving not only an explosive growth in trade and investment but also, more importantly, a vast expansion of corporations across national borders.   He cites an important indicator of this development: intra-firm trade across borders in 1994 accounted for about 40% of total U.S. trade.  "Globalization," he writes, "is for the most part a corporate-level phenomenon."

    Reinicke does not deplore this corporate expansion.  Rather, he sees it as a natural outcome of technological innovation, deregulation, and liberalization of cross- border economic activities, which in combination have not only permitted but even compelled companies to adopt global strategies.  On the other hand, says Reinicke, corporate expansion across borders--i.e., globalization--has created a split between the world's economic and its political geography, to the point that governments can no longer fully determine public policy within their own borders.  Thus, contrary to economic interdependence, which evolved around challenges to a country's external sovereignty, globalization challenges a government's internal sovereignty.

    Reinicke argues that the institutions and principles that have governed the international economy since World War II are no longer adequate because they are based on economic interdependence structures, where  the lines of political and economic geography were identical and sovereignty was univocal. Short of an alternative, he argues further, governments often react with approaches based on a notion of national sovereignty that is tied to the continued territorial integrity of the state.  He cites two traditional ways that governments try to cope: by intervening defensively to aid domestic business (e.g., through protectionism) and by intervening offensively (e.g., through aggressive export promotion and subsidies to aid home corporations abroad). Neither is sustainable as countries retaliate.

    The appropriate alternative, Reinicke writes, is to "rebundle" the diverging political and economic geographic lines by evolving toward international "networks of governance" that include not just governments and inter-governmental agencies but private-sector organizations such as corporations, consumer groups, foundations, and unions.  Instead of global government, which he dismisses as utopian and undesirable (a "top-heavy, imposed construct"),  he proposes a global system of  "public-private partnerships" that involves delegating to non-state actors some responsibility for writing and enforcing agreed-upon rules and standards internationally.  Such  partnerships would take advantage of "these [non-governmental] actors' better information, knowledge, and understanding of increasingly complex, technology-driven, and fast- changing public policy issues," and would "generate greater acceptability and legitimacy for [global] public policy."

    To illustrate the realistic basis of his proposed architecture, Reinicke devotes long chapters to three case studies covering issues in which global public policy is already gradually being developed in accordance with his model, though still in a fragmented way.  These three international examples are the supervision of banking and finance, the control of money-laundering, and the management of trade in dual-use (military and commercial) technology.   In an analysis written before the economic turmoil in Thailand and Indonesia exploded into an international crisis, he hails financial markets as the pioneers in setting global public policy, but adds that they still have far to go: for example, in achieving coordination among competing international institutions with overlapping responsibilities in the same area.

    Through public-private partnerships of some kind, global rules are being developed in areas beyond those documented in Reinicke's book.  A very recent example is the new international convention against bribery, adopted by governments in the framework of the Organization for Economic Cooperation and Development with the advice and blessing of both business and labor groups. Further, global rules on worker rights are now being addressed in the International Monetary Fund and other institutions beyond the tripartite (worker-employer-government) framework of the International Labor Organization.  It can be logically inferred from Reinicke's  analysis that social justice issues like international labor standards would also be part of his  architecture.  Indeed, the scope for global public policy  is potentially as broad as globalization itself.

    Reinicke recognizes that there are dangers to granting non-state actors some power, along with government, to formulate and implement global rules.  But he sees that as a necessary risk for averting serious chaos as globalization grows.  Further, he holds that spreading these responsibilities around could foster the development of a global civil society, countering the "democracy deficit" (as it is called in Europe) that is inherent in letting unelected international bureaucracies assume larger and larger roles under globalization.

    Global Public Policy has no blueprint.  Its paradigm of democratic governance, Reinicke points out, needs much further work to "find new avenues, institutions, and instruments that reach beyond the current political geography of the nation-state."  Exploring that territory is especially complex because the end of the 20th century is characterized by "a coexistence of interdependence and a globalization that cuts across both countries and industrial sectors."

    Reinicke's book is not an easy read, but it deserves careful study by anyone who suspects that the present world architecture needs updating and that the incumbent chief architects may not have all the answers.

 --Robert A. Senser, 11/02/98

Note: Dr. Wolfgang Reinicke is director of the Global Public Policy Project. For updated biographical information, see http://www.globalpublicpolicy.net/Reinicke.htm.

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