Towards a Reformed Multilatteral System; Ideas in the Political and Economic Domains

    Towards a Reformed Multilateral System; Ideas in the Political and Economic  Domains

                            by

                 Dr. Michael Sakbani*

The multilateral system is currently under attack and in financial distress. as a result of some member states reducing unilaterally their budgetary contribution and the emergence of nationalism in the programs of many populist parties in various countries. This system is more needed than ever, yet it is in many respects an aged one in need for reform. While the present time might be inopportune to undertake important reforms for fear of weakening the existing system as a result of placing it under examination at a time of political ill will towards it, it is important to put forward some ideas for serious reforms where the system has failed.

The multilateral system of has many parts, but they can be grouped under four headings: the political-humanitarian in the UN, the economic and developmental part in the IMF, the World Bank Group, WTO-UNCTAD, DESA, UNDP and UNIDO, the technical specialized organizations mainly in the ILO, UNESCO, UNICEF, WHO, WFP, WIPO, FAO, ITU and UNDP. Finally, the legal part of the International Court of Justice and the International Criminal Court.

The reform involves a new reading of the entire Charter with an eye on the current and future major problems and the failures, abuses, and mistakes of the past. It should also review all the activities of the UN to discard obsolete parts, add new parts only if there is a need for new intergovernmental

machinery. In other words, follow the principle of subsidiarity while never losing track of global imperatives.

Any serious reform must deal with three issues: 1. how can governments pursue peace and security through cooperation within the multilateral system which places limits to their sovereignties; 2. what norms and behavioral modes are compatible with the purposes and spirit of the Charter, absence of which the multilateral system can interfere in domestic state matters principally to protect people and human rights thereof; 3. how can the multilateral system be financed with some degree of autonomy and stability.

Evidently, the reform of the entire system is not a practical proposition and it goes beyond the competense of this author.s therefore, this paper will only deal with the political and economic parts. 
In recent years, experience indicates the need to look into the functioning of the Security Council, the central executive body of thepolitical part. The Security Council failure in dealing with collective security issues and security crises like Syria and  Ukraine is patent. The repeated and narrowly centered use of veto has paralyzed the institution. The system forged in 1945 pertained to a world quite different from ours. Today, the victors of WWII are not all superpowers. Many other powers have emerged and must be added to the list to truly represent the world.

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* Dr. Michael Sakbani is a professor of finance and economics at Webster University -Europe and former professor of finance and economics at thunderbird _Europe. a former UN director with 22 years of UN experience. He is a senior consultant to the UN system, the EU and international private banks. He is a co-author of six books and published more than 140 professional papers and co-authored six books. The views expressed in this paper are personal.

 The organization has kept the world peace for 73 years and has produced work indispensable to all peoples. But it has failed in resolving chronic regional conflicts such as the Palestinian issue, the Kashmir issue and the Korean issue

Maintaining international peace and security leads today into areas not contemplated in San Francisco such as sustainable development, climate change and large scale humanitarian crises that affectglobal  peace and security. Some original mandates like human rights are now very extensive. 

The United Nations

The purposes and most of the provisions of the Charter of the UN remain valid in our days. However, several aspects of the Charter need revision in light of the experience of the last 73 years. There are also chapters like 11,12 and 13  which are obsolete.

Sanctity of the Sovereignty Principle:

The Charter conferred upon the UN the responsibility to settle disputes and preserve international peace and security among states outside the boundaries of internal state matters. This absolute respect of the sovereignty of members has proven to clash in some countries with the protection of the individual rights articulated by the Charter and the sanctity of life of peoples in accordance with the purposes of this founding document. There have been instances where Governments committed sever violations of the human rights of their people and practiced atrocities against populations within their jurisdiction. The example of Syria, the Rohingya Muslims in Myanmar, ex- Yugoslavia, the ex-Soviet Union, the occupied territories of Palestine and Iraq under Saddam Hussain, are readily demonstrative situations.

In the late 1960s at the time of the Biafra crisis and again in the early 1990s at the time of the Kurdish crisis in Iraq the General Assembly (GA) adopted resolutions on intervention to stop crimes against humanity and genocide. Again in 2005 under the resolution “ the protection of  people” the SC was empowered to intervene in domestic matters. which implies what is called in French “ le Droit d`Ingèrance Humanitaire”[1] These resolutions express the realization that when state behavior violates the fundamental spirit and letter of the Charter, there should be a role for the UN to interfere in what is considered heretofore sovereign matters. A community of nation-states pledged to civilized norms and ideals should not stay off its hands regarding violations on the mass scale of such norms. The Charter should provide for such exceptions upon recommendations by the GA to the Security Council (SC), who in turn may approve action with a certain qualified majority.

The same justification is found in permitting decisions with a qualified majority by the Security Council to refer matters to the ICC in case of war crimes and crimes against humanity and in matters within the jurisdiction of the ICJ.

Composition and Modus Operandi of the Security Council:

The present composition of the SC is no longer representative of the economic and population weight of the various states in our time. Furthermore, S.C, the central executive body of the UN, has been paralyzed by the repeated use of vetoes by the US and Russia on respectively the Palestine-Israeli problem and on Syria. This paralysis at the center renders the UN impotent in the face of great security issues.

 It is proposed that the SC should have 9 permanent members and 8 non- permanent members[2]. The choice of PM`s is predicated on multiple criteria, namely, the record of adherence to the Charter; their capacity to contribute to the UN work; their financial contribution to its expenses and the proportionate size of their population and economies in the world both at present and in the foreseen future. The list involves many compromises due to historical circumstances and the realpolitik of reform. The permanent members  prposed in this paper are: the USA, China, India, Japan, Germany, Brazil, Indonesia, Russia[3] and the UK and France as one member in alteration of the lead representation[4]. 

The selection of the non- permanent members is the result of dividing the world, outside the permanent members, into constituencies by a rough guiding principle: that their economies constitute no less than 5% of the world economy and their population is about 350 million or more..

 The 8 non-permanent members would be elected by their respective  constituencies, which are demarked as follows:

-        One constituency for other Europe (other than Germany, france and the UK), including Turkey.

-        One constituency for the Arab League members

-        Two constituencies for sub-Sahara Africa.

-        One  constituency for Spanish speaking  Latin America, including Mexico.

-        Three  constituencies for other Asia and Oceania [5].

-         A subsidiary criterion is that any constituency elected member should have no less than 1 % contribution to the UN budget.

Thus, the proposed composition would include seven members from Asia and the Pacific rim, four  from Europe, three from the Americas, and three from Africa and the Near East. This composition corresponds more or less to the relative economic and population weights of these countries in the world today.

Simple and Qualified Majorities:

The Charter might be modified to provide a specific characterization of simple and qualified majorities in all possible situations to face the SC and the GA. It is proposed that the Security Council should have double majorities: a simple majority in what it deems regular matters which obtains when the majority of permanent members and non-permanent members are fulfilled at 10. However, no SC decision may be taken if two or more permanent members plus two non-permenant members vote negatively.  Decisions under Chapter 7 and other decisions with qualified majorities must include in the majority of 12 at least five permanent members. This implies that the right of veto regarding chapter seven can only be exercised when three permanent members or more plus at least three non permenant members vote negativily.[6].

UN Membership:

The current UN is purely intergovernmental. Neither Business nor civil society bodies have a formal role to play. Naturally, in our world, both civil society organs and big businesses play critical and considerable roles. They command also very large financial resources and have sway on public opinion in the age of the Internet. The difficulty of allowing such bodies to play a role in UN decision making and financing is that there must be a non- self -selecting procedure. This means that a body appointed by the SC with state representation and possibly private expertise should oversee selecting qualifiers. Some criteria come to mind such as the size of membership, the financial resources, the type of objectives they might have in relation to the UN Charter and the professional caliber of their cadres. In this respect, civil society should not include syndicate and professional bodies but organs of concerned individuals.

The intergovernmental decision-makers (GA and SC) should decide the scope and modalities of participation of business and civil society in the UN decision making and in its budget. The latter however should be free to contribute any amounts under specified arrangements. Their participation may be to the general budget, to a specific body or organ, or to a specific activity or task.   

Decentralization:

The UN is a large bureaucracy with a variety of activities and organs located all over the world. There is a widespread public impression that it is an overstaffed organization operating with great inefficiency and pursuing many outmoded activities. There are three principal reasons for this perception. The first is misinformation. The second is that the UN, which is an intergovernmental entity, is held responsible when its decision-makers, i.e. member states, do not decide matters or make the wrong decisions. In other words, the UN organization is blamed for the failures and shortcomings of its member states' decisions. And the third has a grain of truth in that it is a duly centralized institution with far-flung parts.

The UN is a centralized administration with uniform rules and common personnel policies and guidelines. This centralization creates difficulties for local managers to run efficiently their organizations and control the performance of their respective personnel. There is a demonstrative need for decentralizing the organization and giving discretion and local authority to organs which are not an integral part of the Secretariat in New York to recruit their personnel in accordance with their needs and have the final say in managing their careers and carrying out their responsibilities.  

Towards this end, the following suggestions might be considered:

-      -- Recruitment for regular professional posts may be carried out in two ways: recruitment through the competitive examinations, and recruitment at the discretion of heads of organs. While the UN administration sets up the academic, compensation and professional standards for recruitment, heads of local organs, especially specialized ones, would have latitude in choosing their staff within broad limits of the quota restrictions.

-        -- All career management within the organization is the prerogative of the head of the organization in accordance with the UN standards.

-         - The respective administrations and finance services of such organs would not be a part of the UN central administration and finance Department.

-        - All the work programs of such organs would have to be periodically reviewed and continued or discontinued by their governing bodies.

Financing the UN budget and its extra-budgetary activities:

Financing the UN has fallen heavily upon the main developed countries. It is important that middle-income countries take a financial stake in a reformed UN. At one time in the 1990`s, 87 countries contributed less than 1 % of the budget. In 2018, the 20 top contributors, led by the USA contributed 83.78 % to the UN budget, while 173 countries, including India and Pakistan, contributed only 16.22 % to the budget.[7] Such asymmetry harms the UN in the eyes of the taxpayers in advanced countries. It should be changed over, say, two assessment periods.  The assessment period takes place every three years[8].

Aside from the regular budget, peacekeeping and humanitarian efforts are at present financed voluntarily. This undermines their efficacy as their budgeting is unpredictable. Perhaps something like the Tobin tax on capital exports, or other ideas should be considered as a partial source.

Finally, to couple financial responsibility to decision making, all permanent and elected non-permanent members in the reformed SC should contribute no less than 1 % of the UN budget.

Human rights:

The increased importance of human rights in the work of the UN is a reflection of the intrinsic significance of these issues in the UN mission and the observed violations of these rights by some member states.  

The following suggestions might be considered:

-        --The Human Rrights Council should be empowered to report investigated violations of human rights to both the SC and the ICJ and the ICC. The former would have sixty days to express its disapproval by a decision of a qualified majority. Absent that, the respective  courts would take up the case involved[9]

-       --States investigated for violations should recuse themselves from an active role in the Council till the next election period.

-        --The Council should be empowered to receive a contribution to its regular budget from businesses and civil society bodies.

-    --Permanent member of the SC should have ex-officio representation in the Council

Reform of the Economic Organs

The reference focal body in the UN system for social and economic matters is now the Economic and Social Council. Although the Charter confers limited executive powers on this organ of the GA, its role in coordination and follow up remains important and should be reinforced, especially after the adoption of the 2030 sustainable development agenda (ASD).

The World Bank Group:

The World Bank Group and regional development banks along with the UNDP are the primary development institutions of the UN system. They have extended valuable development financing and produced empirical output on various aspects of development and countries' experiences therein. This intellectual work of the Banks should receive increased emphasis in the future.   

The World Bank has had evolving stances in its 73-year history. In the first period, it concentrated on infrastructure building in developing countries. Later, it moved to policy- guided market-oriented long-term lending mainly to middle and low-income countries. What is needed in the future is an orientation towards lending to countries unable to borrow on the financial markets and a re-emphasis of infrastructure lending but for new technologies of positive ecological content. Since the financial resources of the WB group are limited in relation to the needs, the Banks should try as much as possible to put in the seed money necessary to attract private investment thereby leveraging their financing. The policy orientation should emphasize also good and transparent governance considering market failures and the pattern of income distribution and employment in the supplicant country.

The UN General Assembly(GA) adoption in 2017 of 2030 agenda for sustained development (ASD) should place the ASD at center-stage of the work of all development institutions.  The World Bank Group is no exception. In his report entitled  Repositioning of the UN Development System to Implementing the 2030 Agenda, the Secretary-General has proposed many organizational adaptations to the UN efforts under the auspices of ECOSOC [10]. His suggestion for appointing resident coordinators for implementing and reporting the GA is ambitious but might face nonacceptance by leading budgetary contributors. They also might run against the will of the governing bodies of the Bretton Woods institutions. Until that suggestion is implemented, the WB would be a logical focal point for coordinating the implementation of e ASD and for coping with its sectoral spillovers. 

In recent years, the question has been raised whether the presidency of the Bank should be the exclusive privilege of the US, the Bank`s largest contributor, and share-holder. It is a common opinion that one country's dominance is not a good thing. However, for this increased openness to be sustainable, other countries than the US should raise their relative contributions to the capital of the Bank[11].

The IMF:

This paper will not delve into the question of reforming the international monetary system. Several publications by this author and a rich literature on this topic are available to the interested reader[[12]. Our emphasis here is to place the IMF as a monetary institution in the spectrum of up to date financial institutions.

 A good start has been marked at the election of the current Managing Director Ms. Christine Lagarde, that the next MD will be from developing countries rather than from Europe. But this will not hold if countries other than the Western powers do not raise their relative contribution to the IMF pool.

The IMF has advocated since its inception the market system and regulated private capitalism. This was affirmed in the late 1980`s by substantivily adopting the Washington Consensus. Its stance on these matters has been rather ideological. While the market system and its price and resource allocation mechanisms have proven themselves in the world experience as better than the alternatives, private capitalism as a societal organization is not without faults. The experience of states like China, Vietnam, South Korea, Singapore and to an extent, Malaysia, Indonesia and Brazil, offer successful examples of state intervention within a market system with an active private sector[13]. It would be counterproductive for the IMF to have a closed mind about these matters.

If this change of policy orientation is approved, then the IMF would need to establish a facility for extending technical assistance in policy matters to countries asking for help in industrial policy, state investments and financing state investments[14]

The consequences of climate change might lead to necessary modifications in the scope of the CFF to bridge over falls in exports or rise in imports consequential upon environmental crisis.  

WTO, UNCTAD and DESA:

The establishment of the World Trade Organization (WTO) as a specialized trade organization in the early 1990`s replaced the old GATT and took off a significant part of UNCTAD work. WTO laid out the law of world trade and provided mechanisms for settlement of trade disputes. It also anchored free global trade as the world system. Global free trade is a product of the economic doctrine of comparative advantages.  Many economists, including this author, have shown that comparative advantage is a model that posits fundamental assumptions, often violated in the present world[15]. Our experience with free global trade shows also persistent surpluses run by countries who use mercantilist practices, employ numerous non- tariff barriers and pay no regard to intellectual property rights. These are all distortion of free trade, and their persistence implies that the system has no equilibrating mechanisms. Thus, WTO should enlarge its focal view to extend in cooperation with relevant institutions, as and when appropriate, technical assistance on technological retooling and retraining discharged workers and should establish time-horizons for eliminating the persistent surpluses by member countries.

WTO followed the GATT model on being an organization at the service of the contracting parties. It did add dispute settlement mechanisms, but it did not cross the line to becoming a Secretariat with views, recommendations and studies on trade. When problems arose as in President Trump tariffs action on steel and aluminum, the organization founds itself impotent. The impotence of WTO is simply due to the refusal of major contracting parties to do business through the organization. This is similar to what happened to UNCTAD after 1981. There is however one difference: there is no bloc of developed countries with the same negative view as group B in UNCTAD. Furthermore, the developing countries are fully engaged as long as the organization promotes development through trade and recognizes that trade between developing and developed countries is trade among nonequals; developing countries have the weaker trading capacity and unequal power to retaliate. Thus, the future of WTO depends on whether it can move beyond what GATT used to be and on the continued willingness of some advanced countries to do business through the organization.

UNCTAD was established in 1964 as an organ of the GA in matters of development to fill the gaps left by the GATT. Its mandate covered trade in manufactures, commodities and services, financial development matters and technology in the exchanges among developed and developing countries. This mandate conferred on UNCTAD three functions: a negotiating function, a development forum function and a Secretariat function. Over the years, many other international bodies took over aspects of the UNCTAD mandate and their demarche was supported by the developed countries exploiting divisions within the group of 77.  The list includes the World Bank Group, the Development Committee, the IMF, DESA and finally the WTO.

In 1992, the Cartagena Conference of UNCTAD effectively rendered the negotiating function of UNCTAD no longer operative. With the effective loss of negotiations, the Secretariat work shrunk in significant ways. As a development forum, however, UNCTAD is still important but it is a reduced version of its former self. Still, UNCTAD`s annual Development Report and the Report on the LDC`s are unique contributions to the development debate. UNCTAD has in the 1990s added Investment to its mandate. In this regard, it issues the World Investment Report, the acknowledged reference on international investments.

DESA is another economic organ of the GA with a mission overlapping with that of  UNCTAD and involves at this point, obvious duplication of many functions. It is suggested here to merge DESA with UNCTAD in one body as an organ of the GA on development and international economic and social affairs, thereby avoiding duplications, cutting down costs and keeping the viable development functions of the two organizations.. 

Postscript

Amending the UN Charter for instituting new reforms is under the Charter the prerogative of a qualified majority of the GA and approval by the SC where the permanent members have the right of veto. It is natural that permanent members might not accept reforms that undercut their existing privileges. It is in this spirit tha t his paper preserves, but modifies, the right of Veto. The reinforcement of the authority of the SC under the reform ideas of this paper should give more authority and better representation to the SC. Permanent members must be convinced that there is in the reform a trade-off between legitimacy and authority and that a reformed institution is also in their own interest.

The reform will not be moved forward by the states alone. A public opinion mobilization campaign would be a part of the collective effort to reform the UN. But all of this requires an organized focal body. An international steering committee with eminent personalities financed by civil society groups and businesses plus whatever states voluntarily give should lead this double effort: lobbying governments and mobilizing public opinion. The UN remains indispensable in every sense of the word.
                                                               Notes

[1] See the GA`s decision at its 2005 summit regarding “responsibility to protect”

[2] In forming constituencies, the above-mentioned guideline was followed. And it was not only the current weight of a country that was considered but the future prospects as well ( e.g. Brazil and Indonesia)

[3] Not all the permanent members are of the same weight economically and demographically. Several of them fail to meet the conceptual criteria used for non -permanent countries. Nonetheless, reforming the machinery of the UN will not come to pass without special compromises due to historical and political reasons. This is particularly the case of the Russian Federation. Russia succeeded the Soviet Union as a permanent member of the SC. It has neither the economic weight of its predecessor (its GDP is ranked  13^th) nor its population weight (144 million). However, it is a super military power with a gifted and educated population. Reform would be impossible if Russia does not keep its SC position..

Germany, the fourth largest in the world economy, has a relatively small population of  84 million. But it is the major economic and political power within the European Union, a group that has the second-largest economy in the world. Its selection gives the EU representation on the SC.

[4] The UK and France are victors of WWII and thus permanent members of the current SC. Their population size and relative economic powers do not place them now in the same relative position as in 1945. But they are still major countries and both rank among the top 8 positions economically. The two countries are allies, economic partners, and share the same values. Their incorporation into one constituency would imply coordination and abstention of voting when there is disagreement.

[5] They comprise the Pacific rim countries: Canada, Australia, New Zealand, North and South Korea, the Philippines, Vietnam, and Pacific Island countries.

South-Eastern Asia comprises Cambodia, Laos, Myanmar, Thailand, Malaysia, Bangladesh, Singapore, Srilanka, Bhutan, Brunei and Nepal.

Central and Western Asia comprises Pakistan Afghanistan, Iran, Mongolia and the six central Asian republics.

[6] A variant that makes the modifications more palatable to the original five permanent members is to grant veto power if two or more permanent member and two non PM vote negatively.

 

[7] Wikipedia,, contribution of countries to the UN budget consulted on April 2, 2018.

[8] A proposal would be to require from all countries a minimum contribution of .02 % of the regular budget. An exception may be made for countries that cannot afford that according to a decision by the GA.

[9] This naturally does not apply to states not a member of the International criminal court convention.

[10[ See the SG report in ECOSOC, A/72/654/E/2018/7.

[11] There is no magic figure to propose. But something like 15 % might be a sensible order of magnitude. Naturally  a transition period should be provided to reduce the contribution.

[12C See Michael Sakbani,  A Rexamination of the Architecture of the International Economic System in a Global Setting: Issues and proposals, UNCTAD Discussion paper no. 181, Geneva , July 2006.;idem, “The International Economic System under Globalization: System Problems and Reform Proposals in the Monetary System”. International Development   Economic Associates (IDEAs.), www.networkideas.org, www.ideaswebsite.orgJanuary, 2006. idem, “the Global Economic System: Asymmetries and Inconsistencies”, FORESIGHT, vol.7, number 1, Emerald Group publishing, Cambridge ,February, 2005. These papres have rich bibliography on the topic.

[13] For a detailed narration of the development of Singapore, see Lee Kuan Yew, From Third World To Firast ,Singapore and the Asian Economic Boom.,   Harper Collins Publisher, NYC. 2000.

[14] See the report of the Eminent Persons Group of the G :20 on Global Financial Governance,  October 2017.

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[15] See Mchael Sakbani, Free Trade in the Age of Economic Discontent; Comparative Advantage under Globalization, in www.michaelsakbani.blogspot.com, September 2016