Global governance and multilateralism in an age of anti-globalists

Martin Heneghan - Research and Impact Associate, Department of Sociological Studies, University of Sheffield

The post-1945 global liberal economic order fostered the creation of three major international organisations to ensure global economic stability. The Bretton Woods Conference led to the formation of the World Bank, the International Monetary Fund and the World Trade Organisation. The role of the World Bank was to provide loans for reconstruction and development. Its focus has since expanded to include poverty alleviation, and it has become a key source of finance for developing countries.  The mandate of the IMF was originally to offer loans to countries experiencing a balance of payments problem, but in an era of flexible exchange rates its role has broadened to act as a firefighter in times of economic crisis, providing liquidity to cash-strapped governments, often with conditions attached. The General Agreement on Tariffs and Trade evolved to become the World Trade Organisation (WTO), fostering a rules-based system for international trade. Each of these organisations are underpinned by the principle of multilateralism as an approach to international economic relations. Multilateralism means that national sovereign states confer authority and legitimacy to international rules, principles or organisations. Trump has shown disdain for multilateralism during his tenure in office, espousing an ‘America first’ approach to international relations. On issues of security he has poured scorn on the North Atlantic Treaty Organisation (NATO) and in international trade has ignored the WTO by sparking a trade-war with China, raising tariffs on goods that are primarily imported from China. In addition to this, the two IFIs have been dependent on US financial backing. The election of Trump set alarm bells off in international headquarters across the globe as they feared imminent funding cuts. 

What does all this mean for the IFIs and global governance in general? International organisations can be thought of as actors, arenas or instruments. With their bureaucracies and rational-legal authority, constructivists have argued that these organisations represent independent actors in the global economy with autonomy from the nation states that fund them. They have power through their expert authority, which is presented as objective and neutral. This authority gives them the power to classify the world, to set the agenda and orient action from national policy makers. For example, as I explained in  a previous SPERI blog post, the World Bank was able to use its expert authority to influence the pension reforms of a number of countries across the globe. In addition, international organisations speak in a language of universal rights and responsibilities; they can compel states to act in certain ways through the use of moral suasion, which gives them the power of independent actors. Neoliberals conceive international organisations as arenas where multilateral diplomacy takes place in a setting of norms and formal rules, which enhance gains for states through cooperation. For example, the international trade negotiations take place under the rules set out by the WTO. International organisations may also be thought of as instruments of powerful states. Realists have traditionally been sceptical of the role of international organisations in international relations, believing them simply to be the puppets of their paymasters. They therefore view the activities of international organisations as simply furthering the interests of powerful states.

The rhetoric of Donald Trump has not yet been met with action in his dealings with the World Bank. Indeed, the international development community was somewhat surprised when Trump authorised a $13-billion capital increase to the World Bank in the spring of last year. This capital increase was granted under the agreement that lending to middle income countries (read China) would be scaled back by the Bank with lending channelled more exclusively towards low income and fragile states. The move away from simply cutting funding for IFIs hints at a more nuanced strategy for the anti-globalists. The $13 billion increase was split between two constituents of the World Bank. The International Bank for Reconstruction and Development (IBRD) received a $7.5 billion increase and the International Financial Corporation (IFC) received a $5.5 billion enhancement. The latter oversees private sector investment in developing countries. This may have appealed to Trump as it offers opportunities for US capital to find new markets in developing countries. It is therefore a fair assumption that Trump will attempt to steer the World Bank to be an instrument of US economic policy, facilitating new markets for American goods and services.

The internal politics of international organisations is extremely important in understanding the future direction of global economic and social governance, and in a newly published article, I demonstrated that internal disputes could hamper the effectiveness of international organisations in pursuing their own goals and interests. In recent years, the World Bank has been inward looking as a result of controversial reorganisations and disagreements about its future direction. This certainly constrained its effectiveness on the global stage. The role and autonomy of the World Bank going forward will largely be determined by the extent to which Malpass remains aligned with Trump and how much authority he has as the president of the Bank. Scholars of international political economy should watch with interest on how the new appointment plays out and how other international organisations respond. Will the World Bank continue to act as an independent actor on the global stage? Or will it simply become an instrument of the Trump administration serving as an outpost for the US Department of Commerce?