The pace of globalization over the recent years has been particularly outlining the way at which trade and economic integration is being widely spread across countries throughout the global economy. The ultimate driving source behind globalisation is technology. The improvement in technology has developed highly sophisticated industries which have lead to better economic growth. Moreover, there has been questions raised as whether globalisation has a positive impact on the global economy? In emerging markets and highly industrialised countries, people and companies enjoy the benefits of globalisation as it allows them to have a more efficient lifestyle. Much poorer countries suffer from its challenges as they are unable to keep up with the rapidly increasing global economy. They are also unable to implement the use of advanced technology, mainly because they just cannot afford it. The most important fact about globalisation is that it should work for people and not just profits.
Firstly, we look at the defintion of global economic governance. Global economic governance refers to the institutions, norms, practises and decision-making processes from which rules, guidelines, standards, and codes arise in order to manage the global economy. There are various actors who can be identified in the global economic governance landscape. In the case of this discussion we focus mainly with intergovernmental organisations such as the IMF, World Bank and World Trade Organisation (WTO). These three institutions warrant specific attention as they have emerged as central pillars of global economic governance. As such, they are an essential and obvious starting point for considering any improvements to governance of the world economy.On the one hand, poverty and inequality continue and in fact are on the rise in much of Africa and parts of Latin America and Asia, covering a third of the world’s population, whilst on the other hand, the global economy proceeds to evolve in a rapid and complex manner in the absence of any institutional framework to regulate it.
Trade liberalisation, together with the explosion in international finance through deregulation of the financial sector and capital account liberalisation, have worked to promote global interdependence, therefore presenting developing countries with a heightened level of vulnerability in the form of volatility, contagion, and marginalisation, or in some cases, exclusion. These trends have become salient features of the global economy and pose a serious challenge to the current institutional arrangements of global economic governance.
The spillover of US debt crisis and the Europe crisis did not affect the South African economy much. Instead it was the downgrade of Moody’s that resulted in the slowdown of the economy. The main driver for the downgrade of South Africas ratings is Moody’s lowered assessment of institutional strength from high to moderate, an important factor in the rating agency’s judgment of a sovereign’s economic resiliency. The revision reflects Moody’s view of the South African authorities’ reduced capacity to handle the current political and economic situation and to implement effective strategies that could place the economy on a path to faster and more inclusive growth.
There are various problems with the current working of global economic governance. Therefore, two questions to answer are: should we have more regulation or better regulation?
The current system of economic governance is characterized by governance structures which work to the detriment of developing countries. This includes the exercise of unilateral power and veto power by the most powerful countries through subtle and less than subtle ways in terms of agenda setting and decision-making; intrusive and asymmetrical rights and obligations through the domination of three institutions; and Northern driven ‘network governance’ (i.e. BIS etc). It follows then that the focus of this type of system is more on output rather than process. However, the universal character of the Bretton Woods institutions and WTO require them to fulfil this aspect of governance, and the power and influence of the Northern driven organizations require them to take into account this aspect of governance.
There is an assymetry relationship in various economies. This means that many governments collaborate because of their aligned policies. Clearly, a fundamental overhaul of these institutions is necessary. In order for that to be achieved, their internal governance structures and processes must be drastically changed in order to include developing countries as active and equal participants. Otherwise the existing asymmetry in the global economic agenda will continue to exist. Looking at Africa and its economic governace, it is clear that a leadership problem exists and the continent needs more enabling capacity. This means that there should people creating more and better systems.
There needs to be a willingness to strengthen or create new institutions, rules, processes at various levels (eg. regional) as required, whether to compliment, enhance, or act as healthy competition, as a way to build a more pluralistic system. Moreover, in order for this to be effective, it requires the strengthening of national regulatory institutional structures as a way to foster stability and reduce vulnerability.
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