Commission on Global Governance

THE WORLD ECONOMY

The Commission urges a fresh initiative to constitute stronger and more representative structures of global economic governance: an informal discussion - or a sequence of discussions - between the G8 and a matching number of developing countries of economic and systemic importance which could lead to a unified body to deliberate on international economic matters from the perspective of global economic security.

A priority of this group should be to review developments over the last two years in standard setting for financial institutions, emergency lending arrangements for governments affected by "contagion", and other responses to instability in the world financial system.

Developed countries whose aid for development falls far below the UN target of 0.7% of GDP should make a fresh commitment to substantial additional aid flows.

Creditor countries should ensure more far-reaching and quicker implementation of debt relief to HIPC countries, as delivery has lagged far behind the generosity of public pronouncements.

An international group of experts should be commissioned to make a rigorous technical study of the feasibility of the Tobin tax proposal to raise modest sums to finance global public goods and to reduce the "churning" of foreign exchange markets.

International financial institutions should adopt a pragmatic approach to governments' attempts to minimise the disruption caused by short-term financial inflows and outflows.

The review of the roles of the Interim and Development Committees and the reassessment of the international financial architecture should be conducted in the context of a comprehensive assessment of the IMF's mandate, including its roles in the surveillance of major economies and in acting as a lender of last resort.

The new round of multilateral trade negotiations should give priority to trade liberalisation in those areas where barriers are still serious, such as agriculture. There should be full participation by developing and transitional countries, including such countries as China which are not currently members of the World Trade Organisation (WTO).

As recent instability in the world economy and unbalanced global growth reinforces the case for a mechanism which can highlight systemic risks and potential crises in a way that specialist institutions and piecemeal initiatives cannot, the concept of an Economic Security Council - however it is designed or constructed - should be further pursued.

THE UNITED NATIONS AND CIVIL SOCIETY

One of the central themes flagged by the Commission on Global Governance in its report Our Global Neighbourhood was the growing importance of trans-national civil society in shaping both the conditions for and the results of global governance. Increasingly, it noted, people with "common interests irrespective of their national or other identities ... are coming together in an organised way across borders to address these". It underlined that "a major challenge for the international community is to create the public-private partnerships that enable and encourage non-state actors to offer their contributions to effective global governance". The Commission concluded, moreover, that "to be an effective instrument of global governance in the modern world, the United Nations must also take greater account of the emergence of global civil society". At the same time, while these conclusions are even more evident today, so too is the Commission's caveat that "issues of legitimacy and accountability will continue to arise everywhere as assessments of the NGO sector become more careful and nuanced". In considering the architecture and priorities of the world body in the 21st century, it has become increasingly apparent that both sides of this equation - making a place for non-state actors at the UN and expecting fuller transparency from them - demand the concerted and balanced attention of the member states.

EXPANDING HORIZONS

Five years after the completion of Our Global Neighbourhood, on the eve of a new millennium, the challenges and opportunities presented to the United Nations by the increasing activism of civil society loom even larger. In championing the call for a new partnership between the world body and civil society, Secretary-General Kofi Annan has taken a series of ground-breaking steps to begin to give content and substance to this evolving relationship. Yet inter-governmental deliberations on ways of enhancing the status of non-governmental organisations at UN headquarters have stalled, as a number of political, bureaucratic and structural obstacles have intervened. Unless these are overcome, the Secretary-General's vision of a closer working relationship between civil society and the UN is in danger of slipping away, jeopardising a prime opportunity for multiplying the organisation's reach and for strengthening its capacities for addressing the challenges of the 21st century.

As governments, the UN Secretariat and NGOs prepare to consider the future of the UN at next year's millennium events, the Commission urges them to assign a high priority to developing fresh and forward-looking ideas for building a closer and more sustainable working relationship between the United Nations and civil society. Both the UN and civil society would benefit.

The Millennium Forum, to be convened by a large group of NGOs in late May 2000, will provide an ideal venue for reflecting on the current state of, and future prospects for, relations between civil society and the United Nations. Though the Forum can no doubt make important contributions to the development of UN policies in other substantive areas, in this field it can make a uniquely valuable contribution. Given the uncertainty and flux that currently characterises UN-civil society ties, we would urge the Forum to make this question its first order of business.

As technology has made worldwide communications cheaper, quicker and more reliable, the scope and reach of civil society have been globalised. More and more, activists and experts alike are discovering colleagues in other parts of the world who share their values and interests. A dense and complex array of formal and informal networks of knowledge and information-sharing has developed in defiance of national boundaries and identities. As a result, substance, not geography, is coming to define the dimensions and pathways of civil society. Beginning in functional and technical fields, but now increasingly in social and political matters as well, the communications revolution is fostering the kinds of co-operation among the peoples, if not always the governments, of the world envisioned in the high ideals of the Preamble to the UN Charter. Yet the highly uneven distribution of computer and telecommunications resources threatens to exacerbate, rather than narrow, the gap in the degree of influence exercised by developed and developing countries.

While the United Nations was established primarily "to be a centre for harmonising the actions of nations" - not of peoples - in the attainment of their "common ends", it has become more and more evident that in the communications age reinforcing progress must proceed on both levels simultaneously. Even relatively repressive governments cannot fully seal their borders from the flow of information and ideas, nor can they perpetually ignore the views of their citizens. The UN cannot begin to fulfil its noble ambitions, or even to implement its programme mandates, without the support of both governments and a range of civic and private organisations. And non-governmental groups should recognise that their growing influence has naturally triggered demands from people as well as from governments for a higher standard of responsibility, transparency and accountability. All three sides of this emerging global governance equation - member states, the UN Secretariat and trans-national civil society - have come to appreciate their interdependence in forwarding those goals they have in common. They have worked together, in fact, to make the 1990s the most productive period ever for the development and codification of international law in fields as diverse as arms control and disarmament, war crimes, human rights, trade, environment and sustainable development. To be sure, stubborn differences remain, within and between countries, on many points of this global agenda. But the scope of multilateral agreement and the degree of co-operation among governments, civil society and international organisations are unprecedented.

The communications revolution has accentuated the centrality of timely information and ideas - two of civil society's prime assets - both to economic development and to the political process. Whether information equals power, it certainly can temper, instruct and guide its use. Likewise, the rise in civil society activism has compelled governments to be more transparent and accountable for their use of power internationally and domestically. In region after region, private enterprise has come to replace the state as the prime engine of growth and prosperity, even as adept information management has become essential to economic success. In the developing world, foreign direct investment by private firms now exceeds official development assistance (ODA) from governments by a factor of six to one. These developments help to explain why civil society and the private sector are coming to play a more influential role at all levels of governance, whether local, national, regional or global. For the UN, these non-governmental forces could represent the wave of the future, if the complex ties among governments, civil society and the world body are handled adroitly.

INTEGRATION AND INDEPENDENCE

An informed, independent and vocal civil society demands greater responsiveness, transparency and accountability from governments, inter-governmental organisations and non-governmental organisations alike. Independent organisations, working with the media, can serve a critical whistle-blower function, both in terms of uncovering malfeasance or incompetence in all three sectors and in terms of drawing attention to emerging policy issues. Though some officials may find this annoying or distracting in the short run, in the long run this process can provide a mechanism for self-correction and periodic adjustment that will produce healthier, more viable and more responsive institutions, just as the establishment of the Office of the Under-Secretary-General for Internal Oversight Services has provided a channel for such concerns at the UN. Over time, this process of independent monitoring tends to enhance the legitimacy, as well as the effectiveness, of public and civic institutions. It is in the long-term interests of national governments and international organisations to encourage the unhindered development of an active, independent and dynamic civil society sector and to build a close working relationship with it based on mutual respect and a natural division of labour.

At the national and international levels, legislators, officials and inter-governmental bodies should adopt standards, rules and legislation to protect the freedom of speech, assembly and petition of civil society organisations, so that they can carry out their work without undue hindrance from official quarters. Efforts to compile, publish and disseminate information on best practices in national legal standards for civil society groups, such as have been undertaken by CIVICUS and by the World Bank and the International Centre for Not-For-Profit Law, should be encouraged.

Civil society groups cannot contribute effectively to the resolution of global problems unless they operate from a sound, secure and respected base within national societies, as well as within international organisations. Where these independent groups lack a solid political and legal footing, the UN and their counterparts in other countries should make a special effort to reach out to them and to involve them in trans-national dialogue.

At the same time, representatives of civil society need to recognise that with rights and powers must come responsibilities. Their organisations, as well, must maintain high standards of accountability, transparency and integrity if they are to maintain public confidence and are to be treated as full partners in the shaping and implementation of public policy. Closer scrutiny is a sign of being taken seriously. As Our Global Neighbourhood noted, the NGO "sector includes a huge range of bodies, not all of which are democratic in structure or broadly representative in participation". Civil organisations that are neither democratic in their internal practices nor representative of public attitudes in their countries will hardly be in ideal positions to chastise governments or inter-governmental organisations for being insufficiently democratic or responsive. All groups, whether governmental or non-governmental, seeking to play a role in the political process must be fully credible and accountable. When mistakes are made, all parties to the decisions or actions should bear their share of the burden of responsibility. Ultimately, the legitimacy of governmental, inter-governmental and civil society institutions alike derives from "we, the peoples", whose needs, interests and aspirations should be the foremost concern of the political process.

It is the responsibility of civil society to organise itself in a manner consistent with the highest standards of transparency, accountability and integrity. By exercising self-monitoring and by accepting full scrutiny by the media and public watchdog groups, civil society has the best chance of avoiding unwanted interference by governments and inter-governmental organisations.

In the five years since Our Global Neighbourhood was issued, one of the most welcome and promising trends has been the evolution and maturation of ties among the UN, governments, and civil society. With this growing intimacy, however, has come a new set of problems and opportunities. In the view of the Commission, it is time to take a fresh look at how to extend and deepen this process, even as mid-course corrections are considered. At the UN, as in most capitals, officials have come to recognise that civil society has an integral, and sometimes indispensable, part to play in the conduct of international relations. As Our Global Neighbourhood pointed out, non-governmental groups "can offer knowledge, skills, enthusiasm, a non-bureaucratic approach, and grassroots perspectives, attributes that complement the resources of official agencies". Even in security-related fields, once thought to be the primary or exclusive province of governments, civil society groups have assisted in conflict resolution, early warning, and the monitoring of arms transfers and of compliance with arms control agreements. As major service providers, they have been full or even leading partners in carrying out programmes in fields as diverse as humanitarian assistance, scientific co-operation, health, election monitoring, refugee relief, education, post-conflict nation-building, codification of international law, and the monitoring of human rights, environmental and labour standards. Both UN and national officials depend heavily on the expertise, information and ideas produced by civil society. Private organisations are often asked by the UN Secretariat or by national delegations to convene groups of member state representatives, international officials and outside experts to consider issues too controversial or forward-looking for official gatherings.

In recent norm-building efforts, there has been a natural and growing tendency on the part of like-minded NGOs and national delegations to work together to build broader international support for those negotiating objectives they share. In two recent cases, the International Criminal Court and the ban on landmines, the results have been particularly remarkable, advancing two of the goals endorsed by the Commission in Our Global Neighbourhood. Such co-operation across civil society/official lines is commendable, so long as the independence and credibility of the civil society organisations are not compromised. If the non-governmental groups receive substantial financial or logistical support from governments or inter-governmental organisations for carrying out policy-related advocacy or lobbying work, however, then their independence would inevitably be called into question.

The closer civil society organisations and coalitions work with like-minded governments, the more careful they should be to assert their independent status. In particular, they should not accept financial or other material contributions from governments or from inter-governmental organisations for carrying out policy-related advocacy or lobbying work.

Trans-national groups devoted to strengthening civil society, such as CIVICUS, should develop and publicise a common code of conduct concerning appropriate and inappropriate sources and uses of funding. For example, such a code should recognise that it is perfectly appropriate for those civil society organisations engaged in operational, research, educational and field work to receive governmental support. It is chiefly in the domain of policy advocacy and lobbying that NGOs should adopt rules to reinforce their credibility and effectiveness as independent voices of the people. Governments and inter-governmental bodies should respect these distinctions.

Within the United Nations, the emphasis on democratisation and the building of a civil society infrastructure in post-conflict societies has reinforced the trend towards accepting a larger place for these groups at the international level. In his July 1997 reform package, Secretary-General Kofi Annan called on every substantive department to "designate a non-governmental organisation liaison officer to facilitate access by civil society to the United Nations", for greater "tripartite co-operation with Governments and civil society" at the country level, and for staff training programmes to "include a component dedicated to co-operation with civil society". Many inter-governmental bodies, even including the Security Council, have established civil society counterpart groups or mechanisms for assuring a regular input from non-governmental voices. Despite some setbacks, discussed below, overall there has been substantial progress in recent years in integrating civil society more fully into the everyday activities of the UN, as well as into the series of global conferences that have done so much to set the international agenda. Though Secretary-General Annan has been a highly visible and articulate advocate for this trend, the growing role of civil society has largely come about through a natural process of evolution and adaptation, spurred by the energy and initiative of the citizens groups themselves. It has not required resolutions of inter-governmental bodies or any significant restructuring of UN organs or bureaucracy for the persistent voices of civil society to be heard in the work and deliberations of the world body.

At this point, priority should be given to steps designed to accelerate and deepen the process of integrating civil society into the daily work of the UN's structures and programmes. As a first step, considerable effort will be required to consolidate and protect the gains already achieved and to extend them to new areas of UN work.

It is a fact of life these days, throughout much of the world, that the most dynamic elements of society arise and function outside formal government structures. In part, this is because some of the most interesting and consequential matters facing national societies are in fact trans-national in scope. The more dynamic and successful governments, in turn, have sought to enlist or co-opt civil society's energies and ideas on issues of common concern, often reaching across borders for the best talent, the latest data or the freshest ideas. The lesson for the UN - as the Secretary-General seems well aware - is clear: its future vitality and relevance will depend, to a substantial extent, on how fully and effectively it manages to rally civil society to its side as it seeks partners in tackling the challenges and opportunities of the new century.

THE DIMENSIONS OF CIVIL SOCIETY

Though there is little dissent about the growing importance of civil society, there is no generally agreed definition of the term or classification system for the disparate kinds of groups that it encompasses. It is a narrower concept than the more generic term "non-state actor," and broader than "non-governmental organisation" (NGO), which includes some 3,000 non-profit groups either granted consultative status with ECOSOC or associated with the UN Department of Public Information. The core of civil society includes those citizen-based associations devoted to advancing any of a wide range of civic, cultural, humanitarian, technical, educational or social purposes, whether at a local, national, regional or global level. These groups are the embodiment of citizen activism, from which they draw their vitality and their legitimacy. They grow out of the popular or professional concerns of groups of people, not because of government edicts. While they may actively lobby governments and inter-governmental institutions, their primary purpose should not be to represent the financial interests of a particular firm, industry or agricultural sector. In most cases, civil society groups operate on a non-profit basis and receive the bulk of their resources from non-governmental sources, though some humanitarian and development-orientated organisations receive substantial government and UN support for their important operational activities. The participation of for-profit firms in broader issues and coalitions sponsored by civil society, however, should be welcomed and encouraged. Likewise, there should be no political litmus test for inclusion in the ranks of civil society, which should reflect all of the political diversity of national and international society.

Civil society groups have two essential characteristics: first, they operate and make policy decisions with complete independence and without instructions from governments, inter-governmental organisations or private for-profit firms; and second, their funding and decision-making processes are sufficiently transparent to assure concerned citizens that they are indeed independent entities without hidden agendas or bias.

In recent years, the pronouncements of leaders of the UN have been imprecise, even inconsistent, about the limits and characteristics of civil society. At times, they have contended that national parliamentarians and local government officials should be included, along with the private sector and the media. Taken to the extreme, such an overly expansive view could imply that everyone and everything is part of civil society except for the executive branches of member governments and their representatives who populate UN meeting halls. This would appear to be neither a workable nor a politically propitious formula, since it would suggest that the UN Secretariat is in partnership with everyone other than the member states in whose name the organisation was created.

The Secretary-General and his aides should enunciate a clear definition of their conception of the characteristics and dimensions of civil society and observe it consistently in their public statements and policy planning in the months and years to come. Before they can properly assess the Secretary-General's call for a new partnership with civil society, the public, the press and member state officials need to have a more precise sense of what he has in mind. Such a clarification would reduce the likelihood of dissonance within the UN system or of public controversies as different UN bodies develop alliances or programmes with various private groups under the rubric of building partnerships with civil society.

As discussed below, the private sector and the media are very important non-state actors with whom the UN has had unnecessarily awkward and distant relationships. All sides could benefit from greater dialogue and mutual understanding. But neither the media nor the private sector picture themselves as part of civil society; both cherish their independence from governmental or inter-governmental control and are likely to be uncomfortable with the notion of a full-fledged partnership with the UN. It would be a serious mistake, moreover, for the UN to treat parliamentarians or local governmental officials as part of civil society. They are integral components of the governance structure of member states and should be treated as such.

North-South Balance

The increasing activism of civil society is a global phenomenon. Yet, judging by participation in events and programmes at UN headquarters, one would get the impression that this movement was largely confined to North America and Europe. Just as the lack of universality narrowed the UN's vision at its founding, so too do geographical barriers continue to restrict the organisation's appreciation of and interactions with the global dimensions of civil society. The inadequate representation of Southern civic groups is doubly worrisome because so much of the UN's agenda concerns the problems confronting developing countries, and the organisation needs to hear more directly from those people most affected. The UN's deliberations - both among non-governmental groups and among the member states - are impoverished substantively when the voices of those who have the most to gain or lose from the international community's choices are under-represented. It is one more way in which the halls of the UN are removed several steps from the reality of the world outside. It has been a goal of the UN, moreover, to encourage the development of a stronger and broader civil society base in those parts of the developing world in which democratic values and practices are not yet firmly in place. Over time, this should serve all three of the UN's core goals: security, development and human rights. Bringing these civic groups more fully into global networks and UN circles also may serve both to encourage their efforts and to impart greater legitimacy to them in their domestic struggles.

As noted above, the communications revolution offers more accessible, reliable and affordable means for North-South, as well as South-South, dialogue. Non-governmental groups have been quick to take advantage of the Internet to build coalitions and networks, nationally and globally, as well as to disseminate their work. Researchers readily tap information from throughout the world through the worldwide web, while keeping in regular contact with colleagues the world over. Yet the communications revolution remains a work in progress, far more developed in the North, especially North America, than in the South. As noted above, the new technologies, in fact, have served to exacerbate the economic and information gaps between the more- and less developed countries. Furthermore, e-mail is hardly a politically effective way to participate in a negotiation or debate at UN headquarters, particularly because of the number of players in the multilateral decision-making process and the practice of acting by consensus. There is no substitute for personal interaction, whether in key capitals or at the site of UN meetings, if one hopes to have a voice in global decision-making.

Correcting the North-South imbalance among NGOs at international meetings, however, has proven to be a difficult challenge. Most civil society groups in the South either lack the resources to send substantial delegations to UN meetings or question whether this would be the best use of such large expenditure, given more pressing needs at home. Through its Non-Governmental Liaison Service, the UN has been able to provide some financial support for NGO representatives from developing countries to attend UN meetings. But the UN has not had the resources for a major effort, nor should it be put in a position, year after year, to decide which groups - and views - deserve to be represented. Some governments, foundations and non-profit groups also have assisted Southern NGOs to attend various international meetings, but the numbers have been far too small to redress the balance, and such ad hoc approaches cannot provide the kind of year-round presence that is needed.

As a matter of high priority, governments, the UN Secretariat and, most of all, relatively affluent civil society and private sector groups should consider innovative means of increasing the participation of NGOs from developing countries in UN-related meetings and conferences. It is not enough to rely on global NGO coalitions to represent the views of their Southern members.

A privately administered, voluntary fund should be established to support capacity-building efforts for civil society organisations in developing countries, with an emphasis on enabling them to participate more fully in the activities and information networks of global civil society and the United Nations. This could include the provision of high-capacity computers and word processors, as well as travel support. While governments would be encouraged to contribute to such a fund, its management and finances should be overseen by a private, geographically representative and politically balanced board. Relatively affluent non-governmental groups in the North should be encouraged to develop working relationships with and to provide assistance to organisations in the South working on similar issues.

Regional organisations and the UN's regional economic commissions, which usefully hosted the UN-sponsored preparatory hearings for the Millennium Assembly, should do much more to encourage the development of and to interact with civil society groups within their areas. They could act as a link between local and global NGOs, as well as fostering co-operation among governments, civil society and inter-governmental organisations within their regions. While some regional bodies have made an effort to reach out to civil society, most lag behind the progress unfolding on the global level.

These avenues should be pursued simultaneously, since they would have mutually reinforcing effects. While governments can help the process, the initiative and funding should largely come from independent, non-governmental sources.

National Foundations

It is the responsibility of governments to represent the interests of the people within their borders, sorting out the competing needs and agendas of different domestic constituencies in an equitable, balanced and democratic manner. Civic groups both help to ensure that governments are held accountable and act to advance particular agendas and causes that they believe have received insufficient attention or resources. While these groups should have grass roots support and should advocate positions they perceive to be in the interest of the public at large, it is not their role or responsibility to seek to displace governments as the voice of the people in international fora. Civil society draws its strength from serving as an independent external critic of government, not from emulating its official functions. Unlike governments, non-governmental groups do not need to balance all the issues and trade-offs on the broader public policy agenda. As Our Global Neighbourhood cautioned, "the focus on single issues that gives some of them strength and expertise may also block out perspectives on wider concerns". Indeed, the most influential voices of civil society, nationally and internationally, tend to be those that focus on a particular cause or that reflect the views of a particular constituency, leaving it to officials to weigh up competing claims for resources, action or priority. In democratic systems, of course, it is ultimately up to the public as a whole to decide whether their elected representatives have made the right choices in selecting priorities and courses of action.

For civil society, one lesson is clear: the surest way to move the UN and the international community is first to build a strong political foundation within the member states, including the most powerful ones. The quickest way to foster dissonance and discord within the world body, on the other hand, is to seek to achieve at the UN what one has failed to achieve in capitals.

As long as, and to the extent that, world affairs are built on the nation-state system - and we see no reason to anticipate that it will fade away any time soon - advocacy groups should place their highest priority on effecting change at the national level.

The practice of including representatives of civil society on member state delegations to UN meetings and conferences should be encouraged. This is the most direct and appropriate way for these groups to influence the international policy-making process, with real benefits both for civil society and for governments.

If the more internationalist NGOs gather at the UN, and the more nationalist ones in capitals, as sometimes seems to be the case, then they will in effect push international and national decision-makers in opposite directions, weakening support for the world body. On the other hand, it would reduce dissonance between the two levels of decision-making if the political mix of civil society groups at the UN and in capitals were to be similar, reflecting the full range and diversity of viewpoints and interests within the body politic.

Non-governmental fora sponsored by the UN should welcome participation by civil society groups representing a variety of viewpoints, including those critical of the world body and its policies. It is more important that these fora reflect the vibrant policy debates that characterise a fully functioning civil society than that they be able to reach consensus positions, which is the task of inter-governmental, not civil society, bodies. The UN cannot be considered truly democratic if it does not welcome dissent.

Given the diversity of civil society, its wariness about official bodies and the number of single-interest groups within it, its support for the UN as an institution has been sporadic, uneven and issue-driven. In that sense, it would be unrealistic to expect the development of any sort of permanent alliance between the UN (or its Secretariat) and civil society, a sector which treasures its independence from governments or inter-governmental institutions in any case. As Our Global Neighbourhood and the Secretary-General have asserted, however, the prospects for public-private partnerships across national boundaries on a range of specific issues and activities continue to grow. It is in the long-term interest of both sides, as well as of governments, to foster such partnerships.

UN-NGO RELATIONS: FORWARD OR BACKWARD?

Paradoxically, at a time of high expectations about new forms of partnership between the UN and civil society, relations between the world body and the NGO community are undergoing a worrisome degree of stress and controversy. On the one hand, a number of NGO leaders have complained that the Secretary-General's bold rhetoric and forward-looking vision have not been uniformly reflected in the attitudes and actions of the heads of many UN programmes and departments. On the other hand, partly as a backlash to the strides NGOs have already made at the UN, many governments have recently expressed reservations about going further down the road towards greater NGO access. Though consultative arrangements for NGOs with the UN Economic and Social Council (ECOSOC) were established under Article 71 of the Charter, how these should be carried out and over what range of subjects have always been matters of debate among governments, along with recurrent questions about which groups should be accredited. As a result, the set of arrangements adopted by ECOSOC in 1968 (resolution 1296 (XLIV)) stood for almost three decades despite the growing involvement of NGOs in many aspects of the organisation's work. In a step welcomed by the NGO community, these rules were finally updated and enumerated in considerable detail by ECOSOC in 1996 (resolution 1996/31).

The important question of scope, however, remains unresolved. Article 71 stipulates that ECOSOC "may make suitable arrangements for consultations with non-governmental organisations which are concerned with matters within its competence", but over the past decade pressure from many member states, as well as from NGOs, has grown to extend consultative arrangements to groups focused on peace and security issues - issues outside ECOSOC's domain. ECOSOC, of course, has no authority over the practices of the General Assembly or the Security Council, each of which will have to determine on its own what course to take. During the first half of 1997, ironically at the time the Secretary-General was assembling his proposals for a stronger partnership with civil society, a General Assembly working group on reform failed to agree on whether, or how far, to extend the ECOSOC rules and procedures to other inter-governmental bodies. While there was broad agreement on extending them to the main committees and working groups of the Assembly, there were deep divisions over mandating similar changes in the Security Council, the specialised agencies and the Bretton Woods institutions, bodies over which the Assembly lacks authority. The resulting deadlock has persisted since, leaving UN-NGO relations beyond ECOSOC in an uneasy political limbo.

The General Assembly should act as expeditiously as possible to extend the rules and arrangements for NGO participation established in ECOSOC resolution 1996/31 to the General Assembly, its main committees and working groups. No other step would have such a positive impact - in terms of both symbolism and substance - on putting UN-NGO relationships back on track. Whatever policy innovations are announced by the Secretary-General, it is up to the governments - first and foremost - to demonstrate a willingness to give civil society a larger voice in the world body.

Throughout the UN system, other inter-governmental bodies should review their rules and arrangements for NGO participation. Where these fall short of the provisions set by ECOSOC, steps should be taken to bring them into conformity as fully as possible, so that a system-wide standard will be in place.

In the light of the variety of procedural and institutional innovations adopted in recent years by different components of the UN system and the Bretton Woods institutions to enhance their relations with civil society, it would be timely for the Secretary-General to launch, through the Administrative Committee on Co-ordination (ACC), a UN family-wide lessons-learned exercise to highlight those steps that have proven most effective, as well as those that have fallen short. The results could prove reassuring to those governments and parts of the bureaucracy that have been reluctant to move forward, as well as suggesting directions for further action.

As a general rule, NGOs should be permitted access to all formal meetings of UN bodies that are open to all member states. In limited membership bodies, such as the Security Council, however, NGOs should not be extended rights of access denied to most UN member states. Nor should the member states feel reluctant to call informal sessions, beyond public scrutiny, whenever this is clearly required to facilitate agreement on sensitive and urgent matters. This practice should be resisted, of course, if some governments are simply reluctant to have their positions and tactics exposed to the light of day.

In considering innovative arrangements for NGO access, the first rule is that they should be designed to further the UN's fundamental objectives of identifying common areas of purpose among the member states and of then defining courses of action for achieving these ends. Civil society groups can make important contributions to both parts of this equation, and on both the national and international levels. They can play a catalytic role in spurring agreement and then in monitoring the progress of implementation by the member states, in whose hands the success or failure of the world body will ultimately rest.

Nowhere has the question of how to put these various principles into practice been more sensitive than in the Security Council. The five permanent members have been cautious about changes in the Council's procedures in general, and decidedly so in the case of opening up its deliberations, especially its crucial informal consultations, either to non-members of the Council or to civil society. Some small fissures have begun to appear, however, in their wall of resistance to NGO access. In recent years, the Council has held formal meetings to hear from selected NGOs regarding developments in troubled regions. From time to time, Presidents of the Council have helped to organise unofficial exchanges with civil society groups and experts. The Council recently went on a retreat, organised by the Secretary-General, at which outside experts spoke. And the members of the Council now hold regular sessions with a group of selected NGOs to discuss questions of common interest. None of this constitutes a radical departure, but rather the kind of steady progress on which mutual confidence and further progress can be built.

The Security Council should take further steps towards regularising procedures for gaining the substantive and timely input of NGOs and other civil society groups with expertise on the issues on its agenda. One possibility would be to assemble panels of non-governmental specialists - on such issues as regional crises, preventative diplomacy, the spread of weapons of mass destruction, arms trafficking, the implementation of economic, financial and diplomatic sanctions, humanitarian affairs and post-conflict peace-building - who could be consulted by members of the Council and its staff as needed. Another option would be to assign a small staff from the Secretariat to conduct civil society liaison for the Council and its members on substantive matters. These measures would seek to supplement, not supplant, the expertise provided by the Secretariat and governments. The current effort, aided by governments and the Secretariat, to involve international specialists in the analysis of possibilities for targeted sanctions is an encouraging model for civil society-member state-UN Secretariat collaboration on questions before the Council.

Though NGO-UN relations have made important forward strides over the past five to ten years, more recently there have been troubling signs of possible slippage, even backsliding. A major government proposed, and then withdrew, the notion that the UN conduct a study of the costs of the services it provides to NGOs in order to calculate a set of fees to charge them for participation in the activities of the organisation. The UN Secretariat considered levying a hefty fee for NGO access to the Optical Disk System (ODS) of the UN Information System and to the Treaty Database of the Office of Legal Affairs. NGOs charge that the UN's accreditation system has become increasingly arbitrary and politicised, with long backlogs. Some of them complain bitterly of new security regulations at UN headquarters, which limit their points of entry and prohibit bringing a guest into the building. Of these concerns, only the potential fees would significantly hamper the ability of NGOs to do their work. However, the timing of the other steps, when added to the uneven implementation of the Secretary-General's call for a new partnership with civil society, suggests ambivalence on the part of both member states and Secretariat officials. In the current uneasy atmosphere, NGO leaders are understandably prone to read larger political messages into petty annoyances.

At this point, NGOs should focus on the central dimensions of the relationship, acting to consolidate the gains they have made, even as they consider ways of moving forward in the years ahead. In particular, they should be vigilant in resisting any attempts to curtail their access to information and meetings.

So far, despite some inconveniences imposed for security purposes, little, if any, ground has been lost on these key issues. In fact, the Secretariat has developed some extensive and easily accessible web sites, which serve the public, media and Southern NGOs well beyond the limits of the headquarters-based NGO network. NGO facilities at New York headquarters have also been upgraded. Given the financial stringencies under which the UN is operating, the organisation continues to provide an impressive array of services to the NGO community.

The UN should continue to provide, without the imposition of fees or new restrictions, a full range of information services to the NGO community and to the public at large. The member states and the Secretariat should recognise that the provision of public information serves the core purposes of the organisation, while undue restrictions on access would only raise further doubts about its credibility. In serving the public, the UN in essence is serving its own best interests, as well as the fundamental aims of the Charter. At the same time, UN and national officials should bear in mind that information sharing is a two-way street and that they, too, require access to the ideas, information and fora of civil society. In the information age, the UN and some of its member states will be left behind if they fail to take full advantage of the new possibilities for information sharing among civil society, the Secretariat and the member states.

The issues of access are felt much more acutely by those NGOs that are focused on the policy-making process at UN headquarters than by those concerned primarily with implementation efforts in the field. The latter work with UN programmes and operations on a daily basis, often carrying much of the burden of the activities. These working relationships involve continuing readjustment, as the division of labour and the relative responsibilities are worked and reworked in changing, and often very trying, circumstances from one theatre to another. In the field, where the international community - official and unofficial - is faced with trying to repair some of the deeper scars of war and poverty, it is more clearly understood that all helping hands are needed, regardless of distinctions of status, accreditation and access. And it is here where the true value of partnership and of civil society can be seen most directly and powerfully.

BEYOND CIVIL SOCIETY: PRIVATE SECTOR, MEDIA, ACADEMIA, AND PARLIAMENTARIANS

In his July 1997 reform plan, Secretary-General Annan suggested that it was time to reach out to influential constituencies beyond the traditional confines of NGOs and civil society. He emphasised, in particular, the benefits of involving four groups of non-state actors - the private sector, media, academia and parliamentarians - with which the UN had had an overly distant relationship in the past. In his view, the growing role of civil society could be traced "to two interlocking processes: the quest for a more democratic, transparent, accountable and enabling governance and the increasing preponderance of market-based approaches to national and global economic management". These trends have compelled governments and inter-governmental institutions alike to recast their attitudes towards these four groups and towards their potential roles as partners in governance. Not only do these sectors command enormous financial, intellectual and communications capabilities, but their very independence also has contributed to a degree >

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that few governmental institutions can match. None of these groups, however, are organised along NGO lines or see their primary mission as one of public advocacy of a particular cause. With the end of the Cold War and with moderate politics prevailing through much of the developing world, there are fewer political obstacles in the way of closer working relationships with these four groups, though each poses a particular set of challenges and sensitivities.

The Secretary-General has paid the greatest attention to repairing ties with the private sector. Although the International Chamber of Commerce (ICC) was one of the first NGOs to be granted full consultative status with ECOSOC in 1946, relations between the business community and the UN have since soured over time. Differing views about the relative roles of the state and private enterprise in economic development accounted for much of the mutual distrust that came to characterise the relationship. But in recent years, with an evolving political climate and a higher place for the market in economic thinking throughout most of the world, opportunities have grown for a more productive relationship, if not yet a full partnership. The thaw in relations, however, seems to be proceeding more rapidly on the official level than between business and UN-linked NGOs, many of whom remain deeply suspicious of the profit motive.

We applaud the initiatives taken by the Secretary-General to build a new relationship with the private sector, including the principles he enunciated in his Global Compact speech at Davos in January 1999, his continuing dialogue with the International Chamber of Commerce, and the growing ties between individual UN agencies and private firms. These steps were long overdue. At the same time, it should be recognised that there are bound to be limits to the budding partnership between the UN and the private sector given the different perspectives and motivations of the two sides. These should be weighed carefully by both parties at each decision point in order to minimise the possibility of false expectations.

In seeking to involve the private sector more fully in the development, humanitarian relief and peace-building work of the UN in the field, the Secretariat and member states should recognise that firms have much more to offer than just capital and investment. On a range of functional, financial and managerial questions, private companies have a great deal of expertise and experience to offer. This is particularly true in the critical area of human resource management and training.

Those NGOs that have taken a consistently harsh stance towards the private sector should reconsider their attitudes in the light of changing circumstances. It would be ironic if the NGO community lagged behind the Secretary-General and the bulk of the member states in taking a fresh look at the prospects for the constructive involvement of the private sector in the work of the world body.

To many in the UN community, the media have long been something of a puzzle. There has been an inclination to blame poor or insufficient reporting for the inadequacy of political and financial support in key member states. The UN has - often with good reason - felt misunderstood and misrepresented in the press. Most Secretaries-General have not been especially media-savvy, nor has the nature of their work been easy to relate in headlines or sound bites. Some, though not most, governments tend to distrust an independent and assertive press in the first place. The organisation has mounted any number of communications strategies through the years to try to address its chronically troubled relationship with the media. But as each has fallen short, it has become more and more evident that institutional quick fixes cannot resolve the endemic tensions and pressures that separate - quite properly - governments and inter-governmental bodies from a free press.

For the first time in many years, the UN has - in Kofi Annan - a leader who is media friendly, an adept and credible spokesperson for the organisation and its causes. Yet even with an articulate leader, it should be recognised that there are real limits to how far UN-media relations can, or should, progress.

It would be unrealistic for the UN to try to build a partnership with the media, whose job it is to be independent of government institutions and to keep a certain objective distance from its subjects. Though the UN could be doing - and is doing - a better job of presenting itself to the public and the media, it should not expect the media to serve as its messenger on a consistent basis. Each side has a right to expect a good, professional working relationship with the other, grounded on a realistic set of mutual expectations.

This Secretary-General, more than his predecessors, has projected the vision of the UN as a centre for ideas, information and analysis concerning global issues. While this goal may be hard to reconcile with the organisation's inter-governmental character, the UN does have a unique range of interests, experiences and sources of information. The analytical piece of this equation has been harder to assemble, though a modest start has been made in the Secretary-General's creation of a small Strategic Planning Unit in his office. A number of UN agencies and the Bretton Woods institutions have developed credible reputations as centres for world-class data and analysis in their respective fields. And the UN itself is an important source for statistics on national economies, resources and demographics. For small states, in particular, the UN family has become an important source for information and ideas on global trends and developments.

If the UN's existing information base and global reach could be combined with the analytical capabilities present in the world's universities, research centres and think tanks, then one could imagine the UN evolving into a global marketplace for ideas and information, a centre for the collection and incubation of ideas without borders. Whether governments would welcome or permit such a development, of course, remains to be seen. Past experiments aimed at giving the UN a first-class in-house research and analytical capability have not fared well, given the bureaucratic rigidities and political constrictions that seem to be endemic to the UN system. A fully-fledged marriage between the UN Secretariat and academia is also not yet in the works. Yet programme by programme, a natural courtship between the UN and elements of the independent research and academic community seems to be unfolding, with individual scholars and research centres now involved in the work of the organisation across the board.

If the UN is to become a world-class knowledge centre, its ties with the academic and research communities around the world must be strengthened and expanded as a matter of priority. In particular, the Secretary-General and the Secretariat should encourage foundations, individual scholars and international scholarly networks, such as the Academic Council on the UN System (ACUNS) and the International Studies Association (ISA), to accelerate their efforts to foster collaborative work between researchers from the South and the North on important issues facing the world body. Whenever possible, these projects should be undertaken in collaboration, or at least in consultation, with those in the UN with responsibilities for those subject areas.

The developing of ties with parliamentarians, as noted earlier, raises some sensitive issues for the UN. Parliamentarians are an integral part of governments, and should not be treated as a component of civil society. On the other hand, their actions and attitudes can have a defining effect on what the UN can and cannot accomplish in many areas of its work. The UN needs to be responsive to the inquiries and concerns of parliamentarians, since it is essential that they fully understand how the organisation works and what it seeks to achieve. Informal exchanges with parliamentarians, some of whom serve on national delegations to the UN, also permit UN officials to get a better sense of how the organisation is perceived in national capitals. Individual parliamentarians, moreover, have valuable expertise and experience in important areas of public policy.

For a number of years, the UN has carried on a dialogue with the Inter-Parliamentary Union (IPU), as have a number of UN agencies. The IPU opened a liaison office at UN headquarters in March 1998 and plans to hold a conference of speakers of national parliaments at the UN in August 2000, just before the Millennium Assembly. Among the priority topics on which the agendas of the IPU and the UN overlap is the promotion of representative democracy.

The practice of including parliamentarians in member-state delegations to UN meetings and conferences should be encouraged. It would also be helpful if more of them were given opportunities to undertake study trips to UN operations in the field, whether focused on development, humanitarian affairs, peacekeeping or post-conflict peace building.

The growing co-operation between the Inter-Parliamentary Union and the UN should be encouraged, as long as governments are kept fully informed. Since the UN and the IPU share a commitment to good governance and representative democracy - likely to be a central challenge of the 21st century - this would be an especially appropriate focus for the IPU conference of speakers of national parliaments, to take place on the eve of the Millennium Assembly.

On the eve of a new millennium, the UN community faces a series of critical choices about what kind of a world body it wants and needs for confronting the growing range of challenges that defy national boundaries. One of the more fundamental, but least understood, choices concerns the place of civil society in the United Nations of the 21st century. In one field of UN endeavour after another, non-state actors have come to play more significant, and more substantive, roles in the shaping and implementation of public policy. While national governments remain, and will remain for the foreseeable future, the central actors in global governance, they are no longer the kind of dominant players that they were at the UN's founding in 1945. Though some member states would prefer to turn the clock back, the only realistic question at this point is how, not whether, the dynamism of civil society will be taken into account in the UN and other inter-governmental bodies. This should be a central concern at both the inter-governmental and non-governmental events marking the millennium. In that context, the Commission submits the proposals on the preceding pages for consideration by the Secretary-General, member states and civil society alike. They reflect both a forward-looking spirit and a recognition that what is needed most at this juncture is not a radical departure, but a consolidation of the gains that have been achieved and a plan for building on them in the promising years ahead.

THE WORLD ECONOMY

When the Commission on Global Governance reported five years ago, a central theme was the imbalance between the high and growing levels of economic integration and "the lack of structures for managing the system in a stable, sustainable way".

The Commission warned that "as economies become more interdependent, it is not only the opportunity for wealth creation that is multiplied, but also the opportunity for destabilising shocks to be transmitted from one country to another" and that "no satisfactory mechanism exists to anticipate or respond properly to future shocks".

At that time it was not obvious where and how these shocks would manifest themselves. There was in Europe and North America a strong sense of optimism arising from the peaceful end of the Cold War and the success of the Western model of economic organisation. In East and South East Asia, including China, rapid growth continued inexorably. Any suggestion of far-reaching international economic reform would meet the objection, "If it ain't broke, why fix it?"

In some respects, globalisation has continued apace in the five years since. World trade has continued to grow at roughly twice the speed of global output. The combined turnover of the two largest foreign exchange markets - London and New York - has more than doubled in six years from $440 billion to around $1 trillion a day. Corporate reorganisations, alliances and mergers in oil, telecommunications, investment banking, vehicles, pharmaceuticals and information technology reflect the fact that economic activity and investment flows are predicated on a global marketplace.

The Commission's warnings of deficient governance have, however, gained credibility as a result of two factors. The first is the vulnerability of the international financial system to shocks and crises, highlighted by the financial crisis in SE Asia, Russia and, subsequently, Latin America. The other is the flagging international commitment to poverty reduction reflected in the fact that aid flows (0.23% of donor GNP in 1998) have reached a new low and in the slow progress even in such fields as low-income debt relief where there is a broad political consensus.

As to the first, the emerging markets' financial crisis did not develop into a full-blown global economic crisis largely because its deflationary effects were offset by continued expansion elsewhere, mainly in the USA and some Asian economies, for example, India, China and Taiwan. The world economy as a whole is expected to grow by 2% in 1999, and while this is half the 1997 level, there has been no global recession, let alone a collapse like that of the 1930s. While relief and some limited self-congratulation may be in order, recent events have been a sobering reminder of the power of contagion in financial markets and of the unbalanced nature of rich country growth that is highly dependent on favourable conditions and enlightened policy in one developed country.

A long forecast, major correction in the US stock market still has the potential to precipitate a serious global downturn. Moreover, significant numbers of people are still mired in poverty generated by recession in emerging markets. The five worst affected Asian economies lost 8-10% of their GNP in 1998, with Indonesia losing 15%, though some, particularly South Korea, are recovering fast. A deep recession, resulting from the spread of financial weakness, has spread to Latin America, engulfing, in particular, Brazil, Argentina, Venezuela, Chile and Colombia, making it likely that for a second decade in succession per capita incomes will not have risen in Latin America. Russia was thrown into economic and political turmoil with potentially alarming consequences for global security. Commodity prices - even allowing for some recovery in oil prices - have slumped to an historic low, with severe consequences for many commodity exporting countries.

The second trend is more long-standing: the continued, and arguably growing, economic marginalisation of the world's poorest people. After two decades in which per capita private consumption in sub-Saharan Africa actually fell by almost 2% per year there is little sign of recovery. Projected growth on a trend predicted by the World Bank of 3.4% per year barely keeps pace with population growth. Although there is measurable progress in poverty reduction in some important low-income countries such as India, China and Bangladesh, this progress is very uneven, somewhat precarious, and does not invalidate the broader conclusion that the number of very poor people - the 1.4 billion living on $1 per day - is still rising. While the solutions for the most part lie in improved governance and policies in poor countries themselves, a supportive international economic environment is an essential ingredient. And in some key respects - aid flows and debt relief - there is a wide gulf between aspiration and delivery.

Triggered in part by the emerging world's financial crisis last year, there has been a revival of interest in global economic governance. The Commission's report envisaged, at the apex of a reformed system, an Economic Security Council with a wider and more balanced membership than the G7 and an integrated approach to international finance, trade and environmental concerns. Little progress has been made towards that specific objective. But there has been growing recognition of the desirability of a fresh look at the "architecture" of international economic institutions. And some positive developments in economic governance have taken place elsewhere: in developing co-operative arrangements for financial supervision; in reforms within the IMF to create a more representative board structure; in preliminary work being done for a new round of trade negotiations, the Millennium Round; in the agreement, albeit circumscribed, to set quantitative objectives for the emission of global greenhouse gases; and, at a regional level, the creation - on time, in good order, and against fashionable predictions - of Monetary Union in Europe. However, as previously noted, these advances are offset by the disappointingly modest progress in fields such as debt reduction for low-income countries, despite G8 declarations in Cologne and at the September 1999 Washington meetings, the growing evidence of "aid fatigue", and the continued marginalisation of the poorest countries from the international economic system.

The Commission argues for stronger global economic governance not as an end in itself but because closer international economic integration - or globalisation - through the opening up of markets in goods and services and private capital flows has generated a demand for public goods: financial stability; the rule of law to govern trade and investment flows; standard setting; and environmental protection. We start with the basic issue of how poverty and development is being dealt with in the evolving system of governance.

GLOBALISATION AND POVERTY

The Commission's genesis lies in a succession of reports dating back to Brundtland in the 1980s, Brandt in the 1970s and Pearson in the 1960s, all of which in different ways posed the same dilemma: how can a world which is becoming more integrated economically, and ecologically, deal with enormous - and seemingly growing - disparities in income and wealth, and the instability which these disparities could bring?

The specific focus and context of this discussion has, of course, changed. Initially, emphasis was placed on the roles of development and of developing countries in a world polarised between East and West. In turn, it was then moved to the issues surrounding commodity and oil prices in the wake of the two oil "shocks", to the bank debt crisis of the early 1980s and, finally, in the mid-1980s, to the challenge posed by such global environmental threats as global warming. But there has been a common thread: the need for structures of global governance which could properly address issues of sustainable growth, development and poverty.

The particular circumstances of the late 1990s have added a new dimension to this underlying problem: the impact of globalisation and the burgeoning of information and communications technology which is both a cause and effect of it. First, there has been a big step forward in the wealth-creating potential of knowledge-based activities. Economists argue inconclusively about the contribution made by new technologies to growth. It seems inherently likely that the new knowledge-based information and communications systems make it possible for already developed societies to grow faster without hitting against constraints of labour supply, physical capacity or pollution. There are some instances where poor countries are also becoming integrated into the global knowledge economy - most notably through the software engineering capacity of India and China - but international disparities in information - as in access to telecommunications and personal computers - are far greater than other international inequalities. More generally, developing economies have 80% of the world population, around 40% of GDP, but well under 20% of published material of all kinds, and only around 2% of scientific patents.

Second, new communications and data management systems have enormously increased the speed and volume of financial and other information flows, creating what has been called "the end of geography". It may well be that deeper, wider and more mature global financial markets will contribute to greater stability, in general and in the long term. But the 1998 crisis also highlighted the risks of contagion and the vulnerability of many emerging economies to sudden flights of capital for reasons unconnected with their economic fundamentals.

Third, while conventional wisdom suggests that global economic integration will speed up the eradication of poverty by creating trading opportunities and easier access to technology and capital, experience has been mixed. There is something of a globalisation "backlash" amongst the losers from some intense competition in rich countries and amongst parts of the developing world. No one is seriously advocating the "North Korean model" but restrictions on capital flows and trade have forceful advocates and, unless the process of globalisation can be better managed, there will be a damaging reversion to more autarkic approaches.

Last, global inequalities are more visible. Famine and extreme poverty are broadcast to the rich, and the lifestyles of the rich broadcast to the poor. The extremes are more evident. There is a category of super-rich individuals who have been able to benefit enormously from the existence of global markets, exploiting proprietary knowledge and "star" appeal, who can largely evade national tax jurisdictions, and who can take advantage of globally integrated capital markets to maximise returns on their financial assets. The World Wealth Report of Merrill Lynch and Gemini estimates that the world's six million millionaires are now worth $21.5 trillion, their wealth having grown strongly - by 12% - throughout last year's financial crisis.

The long-term consequences of extreme and highly visible global inequalities between countries, classes and individuals are difficult to predict. The social fabric of some countries has proved extraordinarily elastic in the face of economic extremes, the US being the most obvious case. But it is difficult to believe that global structures are similarly stable since there is no unifying political consensus and only a weak structure of global governance.

Development Assistance

There are two specific respects in which the issue of global poverty - if not inequality - is being addressed. The first is through aid. However, official development assistance (ODA) is at an all-time low: 0.23% of developed country GNP, 30% of the UN target, and half the level of a decade ago. In sub-Saharan Africa net official flows have fallen in real terms by a third since 1991 and now barely cover interest to official creditors. Arguably there has been an improvement in quality to offset the decline in quantity. There is no longer the same degree of aid tied to the pursuance of Cold War security objectives or to the promotion of exports. The proportion of grants has risen relative to loans. Aid is more explicitly targeted on poverty reduction. IDA - the World Bank facility for concessional loans to the poorest countries - has completed its latest replenishment. But the hope that improved policies would lead to aid being replaced by private capital flows has been belied. Sub-Saharan Africa attracted net private flows of only $3 billion in 1998 out of $150 billion to all emerging markets.

However, after a decade in which "aid fatigue" has become an excuse for dwindling commitments, this may be the time to try to reverse the trend. Now that ODA is accepted to be better targeted and better managed, it should be possible more easily to counter political resistance in donor countries. In some countries - the UK, for example - ODA as a share of GDP is now rising again with added political commitment, despite tight budgetary constraints. Aid flows have been sustained at around the UN target in Scandinavia and Holland. One way of galvanising greater enthusiasm could be to mobilise additional resources for a specific crusade - to address, for example, the problem of public health in poor countries, utilising new technology (currently overwhelmingly concerned with rich world diseases). A Millennium Vaccine Fund to create a market for malaria, TB and AIDS vaccines - proposed by Jeffrey Sachs - is one possibility. Such an approach poses challenges to global governance because it involves both public-private sector partnership at a global level and the lead UN agency - the WHO - working alongside the World Bank and bilateral donor agencies. It is to be hoped that this will create a model for other global agencies.

Debt Relief

The second specific initiative addressing the issue of global poverty is (official) debt relief for low-income countries. In Our Global Neighbourhood, the Commission emphasised, in common with other reports over the last decade, that, though the mechanisms for alleviating problems of debt owed by middle-income countries to commercial creditors could be further improved, there had been progress on that front, while there had been much less progress in relation to the mainly official debt of low-income developing countries. Over the last decade there has been a stream of initiatives ("Toronto", "enlarged Toronto", "Trinidad", now the HIPC initiative) announced amid considerable fanfare but producing little in aggregate terms.

Debt relief is one development issue on which there is real political pressure in rich countries, due in part to the Jubilee 2000 coalition launched by civil society groups. Responding to it, G7 governments promised to improve the concessionality of debt relief culminating in the agreement at the G7 summit in Cologne to extend debt relief more widely on official, including multilateral, debt. It has to be said, however, that even in its latest form - after fifteen years of rescheduling initiatives and numerous summit declarations - the HIPC initiative is modest in relation to the scale of the problem. Until Cologne the HIPC initiative, then three years old, had produced three beneficiaries (Uganda, Bolivia and Guyana), with another (Mozambique) close to agreement, out of 41 countries affected (with another four in line before 2002). Of the three former success stories, two have since relapsed into unsustainable debt. The Mozambique deal would save only $20m a year out of $120m debt service. The Cologne package, which was fleshed out in agreements at the IMF/World Bank meetings in September 1999, will implement debt relief more swiftly (reducing the six-year probation under IMF supervision to a possible three years), pay more attention to debt service rather than the stock of debt and to the fiscal position of government, and raise revenue for HIPC countries through gold sales. But it will probably do no more than cut by a quarter the $250 billion or so of external HIPC debt.

While the debt relief campaign has been enormously important in reviving flagging interest in rich countries in development and in reinstating a moral imperative into relationships between rich and poor, the HIPC initiative taken in isolation is in danger of detracting from wider aims. What matter financially for highly indebted countries are the net transfers they receive which involve additional concessional inflows as well as debt relief.

SYSTEMIC STABILITY AND FINANCIAL AND ECONOMIC CRISIS

A central concern of the Commission's report was that "the pace of globalisation of financial and other markets is currently outstripping the capacity of governments to provide the necessary framework ... to ensure stability". It highlighted, as an example of both the opportunities and the risks presented by globalisation, the "veritable explosion of portfolio investment in emerging markets ... as stock markets became truly global in reach". Much of the drama - and instability - of the last two years has stemmed from this particular manifestation of global economic integration and lending by Western banks to companies and governments in those developing countries.

Like avalanches, financial crises have small beginnings and grow rapidly in intensity. The recent global financial crisis started with the loss of confidence in the Thai baht in July 1997, with capital flight leading to enforced devaluation and a succession of comparable financial crises in Indonesia, South Korea and Malaysia. Russia was similarly caught in the summer of 1998 in what appeared to be a generalised lack of confidence in emerging markets and the crisis then shifted to Brazil and elsewhere in South America where the consequences are now being felt most acutely.

There is a thread - a "contagion" effect - in the succession of financial crises and some common lessons which we discuss below. But there are some crucial differences too. Although the crisis was described as an "Asian crisis", the big closed economies of China and India were scarcely affected, although China independently faces a major problem of economic restructuring and also deflation, while Japan continues to struggle with a long-standing domestic financial crisis and slow growth. Other Asian economies - Hong Kong, Singapore, the Philippines - have been hit by fallout from the regional crisis but Taiwan has been largely unaffected and Australia, despite extensive trade and investment links to Asia, is growing more strongly than any other OECD country except Ireland. The response to the crisis has also differed, with Thailand and South Korea seeking to restore confidence with IMF support and implementing severe but, so far, successful adjustments, Indonesia trying the same strategy but facing much bigger obstacles, Malaysia adopting heterodox policies including capital controls, and Russia seemingly facing continued economic decline.

Despite these differences there were common elements in the recent succession of crises:

• All the countries were seeking to maintain a fixed exchange rate peg (on advice from the IMF and private investors that this was desirable to underpin financial stability). All collapsed.

• None of the five Asian countries most damaged by the crisis had perpetrated failures of macroeconomic management which would, in the past, have precipitated a crisis of external financial confidence. South Korea was commended by the IMF a few weeks before the crisis. Indonesia had a current account deficit of 4% of GDP throughout the 1990s, no budgetary imbalance, 10% inflation, and no evidence of real exchange rate overvaluation. Thailand, notably, and Malaysia had large current account deficits but also high domestic savings rates and no prior indication that their external creditworthiness was seriously in doubt. Even Russia, despite its profound problems, had done enough to justify an IMF loan. With the subsequent spread of the financial crisis to Latin America, there have been serious repercussions - currently in the form of deep recession - in such countries as Argentina and Chile which had been regarded as examples of prudent economic policy.

• All the countries had liberalised capital flows resulting in a gradual, stable build-up of long-term direct investment and capital market borrowing (for example, bonds). There was also a large and sudden build-up of mostly short-term bank lending and portfolio equity investment which, in the five crisis-hit Asian countries, rose from $32 billion (net) in 1994 to $67 billion in 1996 followed by a net outflow of $34 billion in 1997. This sudden turnaround of $100 billion - 10% of their combined GDP - precipitated the crisis.

• The only practical response available to the governments, in the absence of external support of a comparable magnitude to the capital outflow, was a sharp increase in interest rates precipitating company insolvencies and recession, and enforced devaluation leading to further insolvency amongst companies with foreign debt exposure.

Some observers with unusual perspicacity, such as economist Paul Krugman of the Massachusetts Institute of Technology, could reasonably claim to have foreseen the crisis gestating in the form of "crony capitalism", over-investment in projects with poor returns, and weak, poorly regulated banking. But, for the most part, wisdom came with hindsight. And those countries like Argentina and Chile which did most to remove these weaknesses have been hit nonetheless. As the economic journalist Martin Wolf put it, "Such faults hardly justify the enormity of the punishment".

Even if the emerging market crisis spreads no further it has raised fundamental questions about the structure of global governance, discussed below.

"Contagion" and Lenders of Last Resort

From the South Sea Bubble and the Dutch "tulip economy" to the present day, history is replete with examples of rapidly escalating financial claims built on self-fulfilling confidence in ever rising values which then collapse and, in collapsing, drag down "innocent" institutions and individual lenders or investors who have played little part in the speculative bubble. Such "contagion" effects have led governments to assume a "lender of last resort" function to stand behind banks, particularly those whose collapse might cause a "domino effect", and also to safeguard bank depositors who might otherwise be tempted to withdraw savings in a panic, precipitating a run and a liquidity crisis for the banks.

It could be argued that since recent financial crises have been contained (the equity market crash of 1997, the Savings and Loan debacle in the US, the Scandinavian banking crisis of the early 1990s and now - arguably - the 1998 crisis) without serious damage to the world economy, there is no cause for radical action. Indeed, there is a view that attempts by governments, singly or co-operatively, to provide greater financial security by providing a lender of last resort will - if they result in imprudent investors being "bailed out" - merely aggravate the problem by encouraging more imprudent transactions in future: the so-called "moral hazard" problem.

The answer to those who believe that these "moral hazard" problems are of over-riding importance comes in two parts. The first is that the degree of international integration and the volume of cross-border financial transactions are now so large that an enormous amount of economic damage can be experienced if crises of confidence are allowed to run their course. The scale of resources available is vast. Hedge funds alone - by no means the only contributors to the recent wave of speculative investment in emerging markets - had unleveraged resources worth perhaps $400 billion which were then leveraged by a factor of 5 or 6 - enough to buy out the total stock markets of the countries affected by the crisis.

The second is that there are large "spillovers" not just from badly managed companies and banks to better managed suppliers and customers but from badly managed to well managed countries as well. The spread of the recent financial crisis to the Southern Cone of Latin America exemplifies this problem. There is now a growing volume of theory explaining why financial markets can behave in "irrational" ways, or in rational but herd-like ways, spreading financial instability more widely than the original source of the loss of confidence.

There is then a risk of widespread systemic collapse as defaulting financial institutions trigger a radical change in consumer and investor behaviour - i.e. panic - leading to conditions of slump; in this case, global slump. The risks of a global meltdown are probably very low, if only because governments and central banks have learnt how to manage incipient crises over the last half century and have developed habits of co-operation and experience of crisis management. But it is possible to see some challenging problems ahead: a sharp fall in US and other equity prices with consequent "wealth effects" on consumption; a deterioration in the deflationary experience now affecting China; or a future serious downturn and deflation in Western Europe to which the European Central Bank produces an inadequate monetary response.

The mere fact that these threats are discussed and responses rehearsed suggests that policy makers would be well prepared. Nonetheless there are serious weaknesses. What has been exposed by the recent crisis is the worst of all possible worlds: financiers who acted as if there were a global lender of last resort to bail them out combined with the lack of a lender of last resort when the crises actually struck. The former illusion was fostered mainly by the "bail-out" of investors in Mexico in the crisis of 1994/5 following the IMF rescue. The resulting "moral hazard" is credited with a lack of prudence in investments in Asia and in Russia. But in reality, in a major crisis, the IMF was not able to perform a lender of last resort function and in any case its method of operation made it unsuitable for the task. As was demonstrated in Russia, it lacks the resources to stem panic: its carefully negotiated conditional loans disbursed in tranches are inappropriate for this task which requires large-scale immediate lending. Concern over Brazil did lead to arrangements closer to those of a proper global lender of last resort: a rapidly assembled package of loans secured through the General Agreement to Borrow, plus some private bank loans to ensure that banks also shoulder risk, so reducing "moral hazard". The Brazilian package did not, however, stop forced devaluation although it did limit the crisis.

In the wake of the recent financial instability, one lesson to be learnt is that the IMF is seriously ill-equipped and under-resourced to handle a series of major crises simultaneously. Its resources - now $284 billion after quota increases, plus $45 billion under the new Agreement to Borrow - seem large but the Fund is only a third as large in relation to world output as it was when it was established. IMF resources are tiny in relation to those of the world's foreign exchange markets - a third of their daily turnover. This might matter less if governments allowed their exchange rates to float or fixed them permanently (as in the EMU). Indeed that may be a lesson from the recent crisis. But as long as governments try to maintain fixed pegs in the interest of domestic financial stability, the Fund cannot realistically be expected to provide large-scale financing on the scale required of a true global lender of last resort. Other approaches are also required, of which more below.

Global Financial Regulation

Prevention is invariably better, and cheaper, than cure. If imprudent lending behaviour is prevented, then the risks of "contagion" with the disastrous effects seen in Asia are reduced. All major financial markets are subject to prudential regulation: sufficiently light to encourage financial innovation and competition but sufficiently tough to prevent reckless behaviour which threatens the stability of the system. There is no comparable system of prudential regulation at a global level. There is a club of central bankers, and other financial regulators, who work through committees of the Bank of International Settlements (and, for securities markets, informal groups of regulators such as IOSCO). The bank regulators have made some headway. The Basel Committee has set global capital adequacy ratios for banks which have gone some way to reduce the vulnerability of the global banking system to a loss of confidence. Best practice is encouraged. There is a voluntary code of disclosure for banks' derivatives risks. The risk of a collapse of foreign exchange markets if settlements fail has been confronted. The club, originally ten developed country institutions, has been partially opened to Brazil, Russia, China, India, South Korea and four other countries.

But the system of international financial regulation lags behind technology and market innovation. Bank lending to hedge funds has not been subject to prudential regulation. The three main international regulatory bodies (for banking, securities and insurance) have headquarters in different parts of the world though the companies they deal with are now integrated financial conglomerates. Although Asian and other emerging markets have been pressed on broad ideological grounds to liberalise their financial markets, there appears to have been little interest in, or understanding of, how these countries might be helped to develop adequate supervision, lack of which contributed heavily to the Asian crisis.

There is a substantial agenda for both formal and informal international co-operation. First, it is necessary to do more to strengthen international standards for banking regulation, auditing and accounting, and corporate governance in fields such as reporting practice and bankruptcy law. The purpose of such standards is to ensure that countries and companies which choose to operate in globalised markets conform to standards of good practice. Bodies such as the International Accounting Standards Committee, the International Bar Association and the United Nations Commission looking at model bankruptcy laws (UNGTRAL) are currently facilitating this work but one of the tasks of the IMF is to police it (and reward good practice).

Second, arrangements for international financial supervision need strengthening and updating. It has been argued, for example, that the IMF and the Bank of International Settlements (BIS) should be brought together to form a single "super regulator" of financial markets. It has to be recognised, however, that prudential regulation requires both great technical skill and political independence (the difficulties involved in establishing a unitary regulator in the UK with a sufficiently "light touch" for the markets to work well but sufficiently tough to catch crooks and pre-empt crises illustrate the point). With or without a "super regulator", there is an urgent need for new capital adequacy rules to give greater weighting to risk and to short-term cross-border loans, and the BIS has formulated proposals to this end as well as to give greater attention to the supervisory problems of emerging markets.

Private Capital Flows and Controls

One of the practical consequences of global liberalisation has been the removal of exchange controls (around 150 countries have currencies which are fully convertible for trade purposes) and - less widely - capital controls on asset movements. There is a broad and growing consensus that capital controls on foreign direct investment have damaged development by deterring inflows of capital, technology and know-how. But one important consequence of the Asian financial crisis has been a questioning of the desirability of unfettered inflows of volatile short-term investments especially by, and to, banks.

This new questioning has often been put in the language of nationalism or socialism which is unhelpful since most governments remain committed to the broader process of economic and financial liberalisation. But, even within that framework, free capital mobility can undermine otherwise prudent policy. Large rapid inflows complicate monetary policy and can lead to real exchange rate appreciation, making tradable production uncompetitive. Large rapid outflows can force governments to raise interest rates to stabilise their exchange rates when other domestic conditions require interest rate cuts. Some provisional conclusions are emerging from the debate on capital controls:

• There may well be a good case for controls on short-term capital inflows to make them less volatile, especially when domestic banks are weak. The Chilean model (which involved a year's interest-free deposit at the Central Bank of money borrowed abroad) is widely praised, but has actually been scrapped in Chile, which no longer feels the need for such controls. Similar market-friendly controls - in Germany and Switzerland - have also been used, but dropped, in recent years.

• Controls on capital outflows, such as the Malaysian restrictions on convertibility (involving a year's "lock-in" for foreigners), are more controversial. They may be valuable in stemming a panic, but in the longer term may discourage inward investment generally and may be ineffectual as loopholes are found and exploited; there has been a large amount of capital flight from China and India where such controls have been in place for long periods.

• Capital controls are more necessary for countries trying to fix their exchange rates (which is one reason why China has not moved to liberalise capital movements). In recent years, the IMF has insisted that such countries should establish market confidence through robust fiscal and monetary policies. While necessary, these policies might be insufficient. The case for capital controls is much weaker for countries with floating exchange rates.

• The worst of all approaches would seem to be to liberalise short-term capital flows but restrict direct foreign investment (as South Korea did before the crisis).

One issue for the Commission is the so-called Tobin Tax - a global tax on financial transactions designed to "throw sand in the machine". The Commission urged the UN and the Bretton Woods institutions to investigate the feasibility of such a tax partly on revenue grounds and to pursue more independent monetary policies. Recent events have strengthened the broad intellectual case for such a tax but have also raised additional practical difficulties: the proliferation of derivatives which could be used to evade any tax and the scale of "offshore" transactions outside clearly defined jurisdictions. The current state of debate on the Tobin Tax is highly unsatisfactory. The tax is widely endorsed in rhetoric but then damned with faint praise. It should either be taken forward, or buried, after a detailed enquiry by an international group of experts who should rigorously examine its technical feasibility. It would perhaps be more plausible as a mechanism for raising modest sums for global public goods than, as is often portrayed, as a cure-all for financial market instability.

International Economic Co-operation and Exchange Rates

In Our Global Neighbourhood, the Commission commented on the need for "a capacity to ensure that domestic economic policies in major countries are not mutually inconsistent or damaging to the rest of the international community". The broad argument for policy co-ordination is strengthening with greater globalisation since with deeper integration the greater are the "spillovers" from one country's economic policy into another.

The financial crisis over the last two years has highlighted three respects in which policy co-ordination is crucially important: one recognised, one partly recognised, one overlooked.

It has been recognised that the world was in danger of sinking into recession as the Asian crisis spread through contracting trade, reduced corporate earnings and weakness in share markets. Although not specifically mandated by t