The Private Side of Global Governance: The Traditional Role of Institutions on the Public Side of Global Economic Governance Has Been in Meting out Development Assistance, Not Managing Private Sector Activity. but New Definitions of Development and Human Security Have Pushed Public Institutions into Uncharted Terrain

By Hertel, Shareen | Journal of International Affairs, Fall 2003 | Go to article overview

The Private Side of Global Governance: The Traditional Role of Institutions on the Public Side of Global Economic Governance Has Been in Meting out Development Assistance, Not Managing Private Sector Activity. but New Definitions of Development and Human Security Have Pushed Public Institutions into Uncharted Terrain


Hertel, Shareen, Journal of International Affairs


Globalization is not new. (1) People have exchanged ideas, goods and services across borders for centuries. The modern state system owes its development in part to the existence of firms that financed territorial and human conquest, settlement, infrastructure-building and development of financial services, communication and transportation links. What is different is the pace and density of contemporary globalization, and the changing normative consciousness of the stakes involved in this process.

The speed at which funds, ideas, goods, services and people cross borders dramatically accelerated in the late 20th century. Literally trillions of dollars in commerce take place daily, instantaneously via "real-time" electronic transfers of funds. (2) Today, the annual earnings of the world's largest companies dwarf the gross domestic product of many less-developed countries. Ideas about who benefits and loses in the process of interaction among states and firms have also begun to change, as income gaps between nations and among people within them widen. (3)

Karl Polanyi first warned of the risk of distorting the balance between social and market forces in the 1950s. (4) Protestors who have massed outside meetings of public and private sector leaders--such as the World Trade Organization's Third Ministerial at Seattle or the World Economic Forum at Davos, Switzerland--have echoed his concerns. This article explores the challenge of global economic governance in the 21st century. Although states and public institutions are likely to retain a key role in such governance, this article makes the case for new thinking about the role of non-state actors, such as, private businesses and nongovernmental organizations (NGOs)--actors on the private side.

There are several key terms used in developing this argument. Discussions of global governance have traditionally been state-centric, focused on the management of peace and development among states. They have focused on global rules, norms and institutions primarily developed by states and for states. This article departs from the state-centric focus and analyzes instead the role of business and civil society actors in global economic governance. The public sector is the governmental sector; it is the arena of the state. The private sector is the business or "for-profit" sector, and is the arena of the market.

Civil society is a very contested term. (5) I define it here as the non-state, non-market sphere of human interaction. Civil society can include a wide range of actors--unions, churches or NGOs, like the Red Cross or Girl Scouts, to name a few. Some typologies include private sector actors within civil society; based on the argument that any entity that is not part of the state sector is part of civil society. However, here business is not included within the larger category of civil society.

The title of this article is thus a play on words: the "private side of global governance" centers on business--but the article also touches on themes related to how civil society actors interact with business, and discusses the shared challenges facing these non-state actors. The following concepts are integral to those challenges.

Representation is the process by which some individuals select others to take their place in formal decision-making. Who represents whom (and how adequately) in the process of decision-making on global economic issues is a key issue discussed in this article. Legitimacy means conforming behavior to recognized principles or accepted rules and standards. (6) For global governance to be legitimate, Robert Keohane has argued, actors and institutions must "facilitate persuasion rather than coercion or reliance on sanctions as a means of influence ... voluntary cooperation based on honest communication and rational persuasion provides the strongest guarantee of a legitimate process." (7) Accountability is synonymous with responsibility--the ability to answer for one's conduct and obligations. …

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The Private Side of Global Governance: The Traditional Role of Institutions on the Public Side of Global Economic Governance Has Been in Meting out Development Assistance, Not Managing Private Sector Activity. but New Definitions of Development and Human Security Have Pushed Public Institutions into Uncharted Terrain
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