Today’s international organizations are criticized as obsolete and even useless. Is change possible and, if so, what would it look like?
In a nutshell
- Some international organizations have outlived their usefulness
- Inertia, bureaucracy, patronage keep them alive
- How can they rise to the challenge of solving global problems?
In a world struggling with new approaches to globalization and conflict resolution, what is the role of international organizations and multilateral bodies? This report is the first installment of a two-part series on their effectiveness.
In recent decades, the number of international governmental organizations has increased dramatically. In general, the birth of these organizations was motivated by a genuine desire to enhance interaction and dialogue among countries and find global solutions to political and economic problems.
In many cases, however, these organizations have evolved into a network in which the participants are often persuaded to give in to powerful interest groups on selected issues, possibly in exchange for benefits and rewards in other contexts. Different from those who believe that international organizations are vulnerable to cronyism, others argue that such agencies are the neoliberal instrument by means of which the “rich” exploit the “poor,” or that these bodies are the tool through which politicians and bureaucrats try to expand their regulatory and taxation powers, choke growth and violate individual freedoms.
Most pundits would agree that some of these organizations are in fact all but useless and should be drastically reformed, if not jettisoned.
Regardless of their views and of the purpose of international organizations, most pundits would agree that some of these organizations are in fact all but useless and should be drastically reformed, if not jettisoned. Will these changes take place?
The world of international organizations and agencies is rather interconnected. Some of them are little more than an event-organizing committee (e.g., the G20, an intergovernmental forum of 19 countries and the European Union), while others are much larger and often include several layers.
For example, the United Nations (UN) comprises 17 “specialized agencies,’’ among which are the International Labour Organization, the Universal Postal Union and the World Bank.
The World Bank has three agencies, the best known of which is perhaps the International Bank for Reconstruction and Development. These agencies are unlikely to implode. Their employees usually enjoy generous remuneration packages and are highly motivated to expand their powers and range of action. Understandably, they oppose all proposals for downsizing.
Reasons for inertia
Politicians face a more complex set of incentives, which nonetheless go in the same direction. They are usually open to the idea of giving birth to new agencies or giving new life to those already in existence since these offer new opportunities to engage in normative bargaining, expand public expenditure programs, and create jobs for their clientele. By contrast, proposing to overhaul or break up an international agency is a game that only a superpower or a determined leader with a strong agenda and solid national support can play. A minor player would risk isolation internationally and a harsh critique at home if it leaves the club, while its representatives would suffer from loss of reputation and hostility from the technocracy if the nation loses the fight to exit and stays on with a grudge.
Different categories of international agencies exist. Their future depends on a very limited number of major actors when their role is political, and on their success when their nature is defined by a clear purpose. Of course, we exclude nongovernmental organizations: although they are transnational (their activities are not limited to a single country, they are not international (i.e., originated by international agreements).
UN, IMF roles
For example, the UN is essentially a political institution. Although some of its agencies were originally created with a global economic mission, they have gradually acquired a different role. In this vein, the International Monetary Fund (IMF) became operational in 1946 as a sort of international bank that would provide temporary liquidity to governments with balance-of-payments difficulties. However, today’s context is different. The major central bankers have moved toward a flexible exchange rate regime within which foreign exchange imbalances lead to changes in the exchange rate, rather than to foreign currency shortages. The supply of international liquidity is no longer an issue.
As a result, the IMF has moved from being the world’s central banker to being a peculiar advisor with undeclared political clout. In recent times, it has taken the stage when bankers involved in large-scale rescue operations need an external body that would dictate the conditions to the potential borrower and help with the monitoring once the loans are disbursed. In contrast with the current narrative, therefore, today the IMF is not an advisor to the borrowers. Rather it provides a service to the lenders by carrying out part of the negotiations and shielding them from attack.
These organizations are unlikely to disappear anytime soon. Regardless of their merit, they serve a purpose, and the pressure groups supporting them are strong and cohesive. They include both governmental and nongovernmental actors. The long-run outlook may be different, though. After all, the present role of the IMF is built on prestige and shared political consensus about its activity. Should such features fade and one or two key members withdraw, the IMF would be perceived as a bankers’ club, and possibly become a liability for its supporters of a time.
The Organisation for Economic Co-operation and Development (OECD) represents organizations of a different sort. It was created in 1948 as a technical body to manage the European Recovery Program, better known as the Marshall Plan. The OECD was then overhauled in 1960 and became more like a research center that provides statistics, economic analyses and policy recommendations in a variety of areas. Its financial firepower has thus been limited. It is closer to a club’s meeting room with highly educated back-office staff. The club members debate and might agree on policy measures, but the very fact that it is a club undermines its global legitimacy and weakens its operational role.
The OECD can and will probably survive as a club, but would meet trouble if it tried to extend its competencies. More generally, clubs can become “global” if they can count on their past prestige, but they would lose legitimacy if they became a way of enforcing policies dictated by their key members. This explains why nobody really questions the OECD, why many people have doubts about the IMF, and why the World Trade Organization (WTO) no longer plays a significant role. The upshot is that many international agencies inherited from the past are obsolete.
Many international agencies inherited from the past are obsolete.
Patronage and privileges
If they are prestigious, these clubs can offer external support to national governments that lack domestic consensus on selected issues and are eager to obtain some sort of authoritative external approval. In some respects, this is still the case of the WTO. On the other hand, the survival of organizations with tainted prestige depends on the countries’ reluctance to question a network that provides personal privileges to politicians and their clientele, at the expense of taxpayers. Many would argue that the Food and Agriculture Organization (FAO) and the World Health Organization (WHO) belong to this category.
Many international organizations present a partial lock-in feature, depending on expedience: sometimes countries claim that they cannot violate an international agreement, but other times they do not hesitate to circumvent the spirit of the agreement or ask for exceptions when doing so better suits their purposes.
Not surprisingly, avoiding flexible lock-in features will likely be the major challenge that future organizations will face, and a different architecture will eventually emerge. In the past, compliance with economic agreements was typically enforced by means of fines or some sort of retaliatory behavior. The history of the WTO offers major examples in this respect. It did not work.
One likely scenario is for the status quo to hold for the foreseeable future. But eventually, a likelier, though not more promising scenario is a future recipe based on a system of subsidies.
Agreement and compliance will be traded. The future agency designed to manage and mitigate climate change will probably follow these guidelines, and the burden for the taxpayer will be particularly heavy. Two consequences will ensue. Since the taxes necessary to finance the subsidies and the activities of the agency will be levied by an international body, taxpayers will not be able to blame (and restrain) local politicians. Expenditures will soar.
Moreover, the eventual development of a system of global subsidies will be the source of new tensions: the beneficiaries will keep asking for more, while the donors will probably ask for geopolitical compensation. Slogans about the uncertain public goodwill, regrettably, justify further burdens on ordinary people.