Globalization’s Democratic Deficit: How to Make International Institutions More Accountable

Joseph S Nye Jr. Foreign Affairs. Volume 80, Issue 4. July/August 2001.

It is becoming difficult for international economic organizations to meet without attracting crowds of protesters decrying globalization. These protesters are a diverse lot, coming mainly from rich countries, and their coalition has not always been internally consistent. They have included trade unionists worried about losing jobs and students who want to help the underdeveloped world gain them, environmentalists concerned about ecological degradation and anarchists who object to all forms of international regulation. Some protesters claim to represent poor countries but simultaneously defend agricultural protectionism in wealthy countries. Some reject corporate capitalism, whereas others accept the benefits of international markets but worry that globalization is destroying democracy.

Of all their complaints, this last concern is key. Protest organizers such as Lori Wallach attributed half the success of the Seattle coalition to “the notion that the democracy deficit in the global economy is neither necessary nor acceptable.” For globalization’s supporters, accordingly, finding some way to address its perceived democratic deficit should become a high priority.

It’s a Small World

Globalization, defined as networks of interdependence at worldwide distances, is not new. Nor is it just economic. Markets have spread and tied people together, but environmental, military, social, and political interdependence have also increased. If the current political backlash against globalization were to lead to a rash of protectionist policies, it might slow or even reverse the world’s economic integration—as has happened at times in the past—even as global warming or the spread of the aids virus continued apace. It would be ironic if current protests curtailed the positive aspects of globalization while leaving the negative dimensions untouched.

Markets have unequal effects, and the inequality they produce can have powerful political consequences. But the cliche that markets always make the rich richer and the poor poorer is simply not true. Globalization, for example, has improved the lot of hundreds of millions of poor people around the world. Poverty can be reduced even when inequality increases. And in some cases inequality can even decrease. The economic gap between South Korea and industrialized countries, for example, has diminished in part because of global markets. No poor country, meanwhile, has ever become rich by isolating itself from global markets, although North Korea and Myanmar have impoverished themselves by doing so. Economic globalization, in short, may be a necessary, though not sufficient, condition for combating poverty.

The complexities of globalization have led to calls for a global institutional response. Although a hierarchical world government is neither feasible nor desirable, many forms of global governance and methods of managing common affairs already exist and can be expanded. Hundreds of organizations now regulate the global dimensions of trade, telecommunications, civil aviation, health, the environment, meteorology, and many other issues.

Antiglobalization protesters complain that international institutions are illegitimate because they are undemocratic. But the existing global institutions are quite weak and hardly threatening. Even the much-maligned World Trade Organization (WTO) has only a small budget and staff. Moreover, unlike self-appointed nongovernmental organizations (NGOS), international institutions tend to be highly responsive to national governments and can thus claim some real, if indirect, democratic legitimacy. International economic institutions, moreover, merely facilitate cooperation among member states and derive some authority from their efficacy.

Even so, in a world of transnational politics where democracy has become the touchstone of legitimacy, these arguments probably will not be enough to protect any but the most technical organizations from attack. International institutions may be weak, but their rules and resources can have powerful effects. The protesters, moreover, make some valid points. Not all member states of international organizations are themselves democratic. Long lines of delegation from multiple governments, combined with a lack of transparency, often weaken accountability. And although the organizations may be agents of states, they often represent only certain parts of those states. Thus trade ministers attend WTO meetings, finance ministers attend the meetings of the International Monetary Fund (IMF), and central bankers meet at the Bank for International Settlements in Basel. To outsiders, even within the same government, these institutions can look like closed and secretive clubs. Increasing the perceived legitimacy of international governance is therefore an important objective and requires three things: greater clarity about democracy, a richer understanding of accountability, and a willingness to experiment.

We, the People

Democracy requires government by officials who are accountable and removable by the majority of people in a jurisdiction, together with protections for individual and minority rights. But who are “we the people” in a world where political identity at the global level is so weak? “One state, one vote” is not democratic. By that formula, a citizen of the Maldive Islands would have a thousand times more voting power than would a citizen of China. On the other hand, treating the world as a single global constituency in which the majority ruled would mean that the more than 2 billion Chinese and Indians could usually get their way. (Ironically, such a world would be a nightmare for those antiglobalization NGOs that seek international environmental and labor standards, since such measures draw little support from Indian or Chinese officials.)

In a democratic system, minorities acquiesce to the will of the majority when they feel they are generally full-fledged participants in the larger community. There is little evidence, however, that such a strong sense of community exists at the global level today, or that it could soon be created. In its absence, the extension of domestic voting procedures to the global level makes little practical or normative sense. A stronger European Parliament may reduce the “democratic deficit” within a union of relatively homogeneous European states, but it is doubtful that such an institution makes sense for the world at large. Alfred, Lord Tennyson’s “Parliament of man” made for great Victorian poetry, but it does not stand up to contemporary political analysis. Democracy, moreover, exists today only in certain well-ordered nation-states, and that condition is likely to change only slowly.

Still, governments can do several things to respond to the concerns about a global democratic deficit. First, they can try to design international institutions that preserve as much space as possible for domestic political processes to operate. In the WTO, for example, the procedures for settling disputes can intrude on domestic sovereignty, but a country can reject a judgment if it pays carefully limited compensation to the trade partners injured by its actions. And if a country does defect from its WTO trade agreements, the settlement procedure limits the kind of tit-for-tat downward spiral of retaliation that so devastated the world economy in the 1930s. In a sense, the procedure is like having a fuse in the electrical system of a house: better the fuse blow than the house burn down. The danger with the WTO, therefore, is not that it prevents member states from accommodating domestic political choices but rather that members will be tempted to litigate too many disputes instead of resolving them through the more flexible route of political negotiations.

Clearer Connections

Better accountability can and should start at home. If people believe that WTO meetings do not adequately account for environmental standards, they can press their governments to include environment ministers or officials in their WTO delegations. Legislatures can hold hearings before or after meetings, and legislators can themselves become national delegates to various organizations.

Governments should also make clear that democratic accountability can be quite indirect. Accountability is often assured through means other than voting, even in well-functioning democracies. In the United States, for example, the Supreme Court and the Federal Reserve Board respond to elections indirectly through a long chain of delegation, and judges and government bankers are kept accountable by professional norms and standards, as well. There is no reason that indirect accountability cannot be consistent with democracy, or that international institutions such as the IMF and the World Bank should be held to a higher standard than are domestic institutions.

Increased transparency is also essential. In addition to voting, people in democracies debate issues using a variety of means, from letters to polls to protests. Interest groups and a free press play important roles in creating transparency in domestic democratic politics and can do so at the international level as well. NGOs are self-selected, not democratically elected, but they too can play a positive role in increasing transparency. They deserve a voice, but not a vote. For them to fill this role, they need information from and dialogue with international institutions. In some instances, such as judicial procedures or market interventions, it is unrealistic to provide information in advance, but records and justifications of decisions can later be disclosed for comment and criticism—as the Federal Reserve and the Supreme Court do in domestic politics. The same standards of transparency should be applied to NGOs themselves, perhaps encouraged by other NGOs such as Transparency International.

The private sector can also contribute to accountability. Private associations and codes, such as those established by the international chemical industry in the aftermath of the Bhopal disaster, can prevent a race to the bottom in standards. The practice of “naming and shaming” has helped consumers hold transnational firms accountable in the toy and apparel industries. And although people have unequal votes in markets, the aftermath of the Asian financial crisis may have led to more increases in transparency by corrupt governments than any formal agreements did. Open markets can help diminish the undemocratic power of local monopolies and reduce the power of entrenched and unresponsive government bureaucracies, particularly in countries where parliaments are weak. Moreover, efforts by investors to increase transparency and legal predictability can spill over to political institutions.

New Democrats

Rather than merely rejecting the poorly formulated arguments of the protesters, proponents of international institutions should experiment with ways to improve accountability. Transparency is essential, and international organizations can provide more access to their deliberations, even if after the fact. NGOs could be welcomed as observers (as the World Bank has done) or allowed to file “friend of the court” briefs in WTO dispute-settlement cases. In some cases, such as the Internet Corporation for Assigned Names and Numbers (which is incorporated as a nonprofit institution under the laws of California), experiments with direct voting for board members may prove fruitful, although the danger of their being taken over by well- organized interest groups remains a problem. Hybrid network organizations that combine governmental, intergovernmental, and nongovernmental representatives, such as the World Commission on Dams or U.N. Secretary-General Kofi Annan’s Global Compact, are other avenues to explore. Assemblies of parliamentarians can also be associated with some organizations to hold hearings and receive information, even if not to vote.

In The End, There Is No Single Answer

To the question of how to reconcile the necessary global institutions with democratic accountability. Highly technical organizations may be able to derive their legitimacy from their efficacy alone. But the more an institution deals with broad values, the more its democratic legitimacy becomes relevant. People concerned about democracy will need to think harder about norms and procedures for the governance of globalization. Neither denying the problem nor yielding to demagogues in the streets will do.