THE U. N. AND BRETTON WOODS: RETHINKING GLOBAL GOVERNANCE

PCDForum Column #74,  Release Date May 15, 1994

by David C. Korten

The world now has a half century of experience with global governance. First came the Bretton Woods institutions the International Monetary Fund, the World Bank, and subsequently the General Agreement on Trade and Tariffs (GATT, about to become the World Trade Organization). They were created with minimal fanfare as instruments for managing the global economy following a meeting in Bretton Woods, New Hampshire in July 1944. Agreements creating the United Nations to address issues of global peace and security were signed in June of the following year in San Francisco.

The need for a meaningful system of global governance was self-evident to those who had lived through two world wars and the great depression. Such a need is even more evident now. Our interdependence has become so great that nearly every local problem has global causes and consequences that cannot be isolated within national borders. A rapidly growing gap between a tiny rich minority and a vast poor majority makes it imperative that the interests of the latter be more fairly represented in global decision making through open democratic processes.

While many proposals have been forthcoming on the bicentennial anniversaries of Bretton Woods and the United Nations for the reform of global governance, most only partially address two fundamental flaws in the existing structures.

• Compartmentalized Problem Solving: In a world in which economic, political, social, and environmental issues have become so intertwined as to be virtually inseparable, it is inappropriate to assign responsibility for economic affairs to one set of institutions (IMF, World Bank and GATT), while responsibility for political, environmental, and social affairs resides in a completely separate institution (United Nations).
• Unaccountable Power: In a world in which global economic forces have a substantial influence on the well-being of nearly everyone, it is unacceptable that the responsibility for global economic affairs resides in a group of institutions (IMF, World Bank, and GATT) that are secretive, undemocratic, and dominated by the world's most economically powerful countries.

The recently finalized GATT agreement signed in Marrakesh on April 15, 1994 illustrates the problem. It will transform the GATT into a powerful World Trade Organization (WTO). The original mandate of the GATT dealt with the rules of trade. The current agreement will expand the mandate of the GATT/WTO to cover a wide range of issues relating to international investment, services, and intellectual property rights.

The GATT/WTO will remain, however, an organization dedicated to expanding international trade and investment as its paramount goal with little regard for the economic, political, social, and environmental consequences. Yet trade is only one of many world concerns and should not be given priority over others of equal or greater importance, such as the environment, employment, food security, poverty alleviation, health and human rights. Because trade rules are so central to the relationships among nations, as well as to the ability of any given nation to productively employ its own people and set high health, safety, and environmental standards, trade issues cannot responsibly be separated from other public policy priorities.

The search for a solution to this need for a multisectoral perspective has centered on expanding the mandate of the GATT/WTO to include environmental and labor concerns. Some refer to this as "Greening the GATT." Unfortunately, such a solution is unsound for two basic reasons. The GATT is perhaps the least democratic of all the multilateral institutions. Its decisions are dominated by the United States, the EEC and a small group of predominantly Western transnational corporations. And its mandate is to pursue a single issue free trade and investment. For these reasons it is a wholly inappropriate institution to assume responsibility and authority for taking a holistic view of the global public good. Much the same may be said for the other two Bretton Woods institutions.

There is another, more satisfactory answer. For all its obvious limitations, the United Nations was created as a relatively democratic representative body with a broad intersectoral mandate. It is time to bring all three of the Bretton Woods institutions under the authority of the United Nations and make them accountable to its governance processes. This is an essential first step toward creating a coherent and democratic governance structure capable of addressing complex global issues in a just and holistic manner.

David C. Korten is president and fellow of the People-Centered Development Forum. 

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