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Financial governance and transnational deliberative democracy

Published online by Cambridge University Press:  23 April 2010

RANDALL GERMAIN
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Abstract

Recent concern with the institutional underpinning of the international financial architecture has intersected with broader debates concerning the possibility of achieving an adequate deliberative context for decisions involving transnational economic governance. Scholars working within traditions associated with international political economy, deliberative democracy, cosmopolitanism and critical theory have informed this broader debate. This article uses this debate to ask whether the structure of financial governance at the global level exhibits the necessary conditions to support deliberative democracy. In particular, it considers the extent to which publicness and a public sphere have become part of the broader structure of financial governance. Although in some ways financial governance is a hard case for this debate, an argument can be made that a public sphere has emerged as an important element of the international financial architecture. At the same time, the analysis of the role of the public sphere in financial governance reveals important lessons which public sphere theorists and deliberative democracy advocates need to consider in order to extend their analysis into the realm of global political economy.

Type
Research Article
Information
Review of International Studies , Volume 36 , Issue 2 , April 2010 , pp. 493 - 509
Copyright
Copyright © British International Studies Association 2010

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References

1 Geoffrey G. D. R. Underhill, and Xiaoke Zhang (eds), International Financial Governance Under Stress: global structures versus national imperatives (Cambridge: Cambridge University Press, 2003); and Duncan Wood, Governing Global Banking (Aldershot: Ashgate, 2005).

2 Louis W. Pauly, Who Elected the Bankers? (Ithaca: Cornell University Press, 1997); and Philip G. Cerny, ‘Webs of Governance and the Privatization of Transnational Regulation’, in David M. Andrews, C. Randall Henning and Louis W. Pauly (eds), Governing the World's Money (Ithaca: Cornell University Press, 2003).

3 This national dimension is explored in Randall Germain, Global Politics and Financial Governance (Basingstoke: Palgrave, forthcoming 2010).

4 See for example Andrew Walter, Governing Finance: east Asia's adoption of international standards (Ithaca: Cornell University Press, 2008); and David Andrew Singer, Regulating Capital: setting standards for the international financial system (Ithaca: Cornell University Press, 2007).

5 Jonathan Kirshner, ‘The inescapable politics of money’, in Jonathan Kirshner (ed.), Monetary Orders: ambiguous economics, ubiquitous politics (Ithaca: Cornell University Press, 2003).

6 Susan Strange, Mad Money (Manchester: Manchester University Press, 1998); and Randall D. Germain, ‘Globalising Accountability within the International Organisation of Credit: financial governance and the public sphere’, Global Society, 18:3 (2004), pp. 217–42.

7 See for example, Charles P. Kindleberger, Manias, Panics, and Crashes: a history of financial crises (New York: Basic Books, 1978); Strange, Mad Money; Pauly, Who Elected the Bankers?; Michael Moran, The Politics of Banking, 2nd edition (London: Macmillan, 1986); and Anastasia Nesvetailova, Fragile Finance: Debt, Speculation and Crisis in the Age of Global Credit (Basingstoke: Palgrave, 2007). This literature will be significantly expanded over the next few years as scholars digest the governance implications of the 2008/2009 credit crisis.

8 For example, the 1907 and 1932 financial crises in the US produced the Federal Reserve system and the separation of commercial from investment banks respectively; the secondary banking crisis in the UK in the 1970s resulted in a much stronger supervisory regime separate from the Bank of England; and the international banking crisis of 1974, which claimed the Franklin National Bank in the US and Bankhaus Herstatt in Germany, culminated in the formation of the Basle Committee on Banking Supervision (BCBS). For relevant histories, see Randall D. Germain, The International Organization of Credit (Cambridge: Cambridge University Press, 1997); Richard J. Herring and Robert E. Litan, Financial Regulation in the Global Economy (Washington: The Brookings Institution, 1995); and Wood, Governing Global Banking.

9 As Barry Eichengreen carefully explains, although financial crises will undoubtedly be with us as long as capitalism survives, there is much we can do to ameliorate their worst consequences with suitable reforms. Barry Eichengreen, Financial Crises and What to do About Them (Oxford: Oxford University Press, 2002).

10 Much research has been published recently on this subject: William D. Coleman and Tony Porter, ‘International Institutions, Globalisation and Democracy: assessing the challenges’, Global Society, 14:3 (2000), pp. 377–98; Randall D. Germain, ‘Global Financial Governance and the Problem of Inclusion’, Global Governance, 7:4 (2001), pp. 411–26; Tony Porter and Duncan Wood, ‘Reform Without Representation: the international and transnational dialogue on the global financial architecture’, in Leslie Elliot Armijio (ed.), Debating the Global Financial Architecture (Albany: State University of New York Press, 2002); Susanne Soederberg, The Politics of the New International Financial Architecture (London: Zed Books, 2004); Jacqueline Best, The Limits of Transparency: Ambiguity and the History of International Finance (Ithaca: Cornell University Press, 2005); Tony Porter, Globalization and Finance (Cambridge: Polity Press, 2005); Ngaire Woods, The Globalizers: the IMF, the World Bank and their Borrowers (Ithaca: Cornell University Press, 2006); and Andrew Baker, ‘Deliberative Equality and the Transgovernmental Politics of the Global Financial Architecture’, Global Governance, 15:2 (2009), pp. 195–218.

11 See for example, David Held, Democracy and the Global Order: from the modern state to cosmopolitan governance (Cambridge: Polity Press, 1995); James Anderson (ed.), Transnational Democracy: political spaces and border crossings (London: Routledge, 2002); Bruce Morrison (ed.), Transnational Democracy in Critical and Comparative Perspective (Aldershot: Ashgate, 2003); and James Fishkin and Peter Laslett (eds), Debating Deliberative Democracy (Oxford: Blackwell, 2003).

12 Mark Warren, ‘Deliberative Democracy’, in April Carter and Geoffrey Stokes (eds), Democratic Theory Today: Challenges for the 21st Century (Cambridge: Polity Press, 2002).

13 See Philip Petitt, ‘Deliberative Democracy, the Discursive Dilemma, and Republican Theory’, in Fishkin and Laslett, Debating Deliberative Democracy; and Simone Chambers, ‘Behind Closed Doors: publicity, secrecy and the quality of deliberation’, Journal of Political Philosophy, 12:4 (2004), pp. 389–410.

14 James Bohman, ‘The Coming Age of Deliberative Democracy’, Journal of Political Philosophy, 6:4 (1998), p. 400.

15 See for example the arguments in Craig Calhoun (ed.), Habermas and the Public Sphere (Cambridge: MIT Press, 1992). Simone Chambers provides a useful qualification to such arguments by recognising that the claim for publicity also contains within itself the possibility of a slide towards what she identifies as plebiscatory reasoning. Chambers, ‘Behind Closed Doors’.

16 Amy Gutmann and Dennis Thompson, ‘Deliberative Democracy Beyond Process’, in Fishkin and Laslett, Debating Deliberative Democracy.

17 See for example Held, Democracy and the Global Order; Anthony McGrew, ‘Transnational Democracy,’ in Carter and Stokes, Democratic Theory Today; and Danielle Archibugi, ‘Cosmopolitan Democracy and Its Critics,’ in Morrison, Transnational Democracy.

18 McGrew, ‘Transnational Democracy’. Some scholars may hold to a distinction between deliberative and cosmopolitan democracy advocates at the transnational level. While this may have some merit, both are concerned with the role of publicity and the public sphere as part of the solution to the problems they identify. For my purposes, therefore, I will consider them interchangeable.

19 For formulations along these lines, see Calhoun, Habermas and the Public Sphere; Dana R. Villa, ‘Postmodernism and the public sphere’, American Political Science Review, 86:3 (1992), pp. 712–21; and Molly Cochrane, ‘Conceptualizing International Public Spheres’, paper presented to the annual meeting of the International Studies Association, Chicago (2001).

20 James Bohman, ‘Citizenship and norms of publicity: wide public reason in cosmopolitan societies’, Political Theory, 27:2 (1999), p. 183.

21 The seminal volume edited by Craig Calhoun, for example, remains focused exclusively on the national level. Calhoun, Habermas and the Public Sphere.

22 See for example, James Bohman, ‘The globalization of the public sphere’, Philosophy and Social Criticism, 24:2/3 (1998), pp. 199–216; Marc Lynch, ‘The Dialogue of Civilisations and International Public Spheres’, Millennium, 29:2 (2000), pp. 307–30; and Jennifer Mitzen, ‘Reading Habermas in Anarchy: multilateral diplomacy and global public spheres’, American Political Science Review, 99:3 (2005), pp. 401–17.

23 Nancy Fraser, ‘Rethinking the Public Sphere: a contribution to the critique of actually existing democracy’, pp. 132–34, in Calhoun, Habermas and the Public Sphere.

24 Hauke Brunkhorst, ‘Globalising Democracy Without a State: weak public, strong public, global constitutionalism’, Millennium, 31:3 (2002), pp. 676–80.

25 James Bohman, ‘Cosmopolitan Republicanism: citizenship, freedom and global political authority’, The Monist, 84:1 (2001), pp. 3–21.

26 Villa, ‘Postmodernism and the Public Sphere’, p. 712. This representation is preferred over those who advance a conception of a public sphere without any clear institutional components. John Keane, for example, sees a public sphere in operation whenever a dialogic relationship between two or more citizens emerges, which is a definition that strips the public sphere of any kind of deliberative context. Simone Chambers, on the other hand, while including a strong deliberative dimension, abandons the necessity of an institutional context by identifying the democratic public sphere as a ‘huge and amorphous entity’. While useful in their different ways, both reduce a public sphere to a public space. John, Keane, Civil Society: old images, new visions (Cambridge: Polity Press, 1998), pp. 169–70; and Chambers, ‘Behind Closed Doors’, p. 409.

27 This paragraph draws on Lynch, ‘Dialogue of Civilisations’; Mitzen, ‘Reading Habermas in Anarchy’; Bohman, ‘Globalization and the Public Sphere’; Bohman, ‘Citizenship and norms of publicity’; Villa, ‘Postmodernism and the Public Sphere’; and Held, Democracy and the Global Order.

28 These themes are pursued in Nicholas Garnham, ‘The Media and the Public Sphere’, in Calhoun, Habermas and the Public Sphere; Keane, Civil Society; and Nick Stevenson, ‘Media, Cultural Citizenship and the Global Public Sphere’, in Randall D. Germain and Michael Kenny (eds), The Idea of Global Civil Society: politics and ethics in a globalizing era (London: Routledge, 2005).

29 Paul Langley, World Financial Orders (London: Routledge, 2002); and Germain, The International Organization of Credit.

30 See especially Bohman, ‘Globalization and the Public Sphere’; Lynch, ‘Dialogue of Civilisations’; and Mitzen, ‘Reading Habermas in Anarchy’.

31 Germain, ‘Globalising Accountability’; and Randall D. Germain, ‘Financial governance and the public sphere: towards a global modality of governance’, Policy and Society, 23:3 (2004), pp. 68–90.

32 Michel Camdessus, ‘International Financial and Monetary Stability: a global public good?’, remarks to the IMF conference Key Issues in Reform of the International Monetary and Financial System (Washington, 28 May 1999), accessed 15 January 2008 at {http://www.imf.org/external/np/speeches/1999/052899.html}; cf Inge Kaul, Isabelle Grunberg and Marc Stern (eds), Global Public Goods (Oxford: Oxford University Press, 1999).

33 See for example Geoffrey Cameron and Eric Helleiner, ‘Another World Order? The Bush Administration and HIPC Debt Cancellation’, New Political Economy, 11:1 (2006), pp. 125–40; Andrea Durbin and Carol Welch, ‘The Environmental Movement and Global Finance’, in Jan Aart Scholte and Albrecht Schnabel (eds), Civil Society and Global Finance (London: Routledge, 2002); and Zie Gariyo, ‘Civil Society and Global Finance in Africa: the PRSP process in Uganda’, in Scholte and Schnabel (eds), Civil Society and Global Finance.

34 See for example Ethan Kapstein, Governing the Global Economy (Cambridge: Harvard University Press, 1994); Michael R. King and Timothy J. Sinclair, ‘Private Actors and Public Policy: requiem for the new Basel Capital Accord’, International Political Science Review, 24:3 (2003), pp. 345–62; and Wood, Governing Global Banking. Furthermore, we can see a mode of public reasoning also at work in debates about capital account liberalisation and prudential supervision. See for example, Tony Porter, ‘The Democratic Deficit in the Institutional Arrangements for Regulating Global Finance’, Global Governance, 7:4 (2001), pp. 427–39; Joseph Stiglitz, Globalization and Its Discontents (New York: WW Norton & Company, 2002); and Rawi Abdelal, Capital Rules: the construction of global finance (Cambridge: Harvard University Press, 2007).

35 Louis W. Pauly, ‘Good Governance and Bad Policy: the perils of international organization overextension’, Review of International Political Economy, 6:4 (1999), pp. 401–24; cf Pauly, Who Elected the Bankers?.

36 The evolution of American power in this regard is an important part of the narrative provided by Wood, Governing Global Banking.

37 Sarah Eaton, ‘Crisis and the Consolidation of International Accounting Standards: Enron, the IASB, and America’, Business and Politics, 7:3 (2005), 4th article.

38 Recent developments in the wake of the 2008/2009 credit crisis with respect to financial regulation reform reaffirm this conclusion: American, British and Euro-area authorities are all pulling in quite different directions. See for example, The Economist, 34:8667 (30 January – 5 February 2010), pp. 79–83. For a broader consideration of this crisis see Randall Germain, ‘Financial Order and World Politics: crisis, change and continuity’, International Affairs, 85;4 (2009), pp. 669–87.

39 John Braithwaite and Peter Drahos, Global Business Regulation (Cambridge: Cambridge University Press, 2000).

40 See for example, Kees van der Pijl, Transnational Classes and International Relations (London: Routledge, 1998); Stephen Gill, Power and Resistance in the New World Order (Basingstoke: Palgrave, 2003); and William Robinson, A Theory of Global Capitalism (Baltimore: Johns Hopkins University Press, 2004).

41 Many of these themes are pursued in Germain, Global Politics and Financial Governance; see also ‘Special Forum: crisis and the future of global financial governance’, Global Governance, 15:1 (2009), pp. 1–28.

42 This conclusion echoes the call recently put forward by Andrew Baker to make ‘deliberative equality’ a central feature of financial governance reform. Baker, ‘Deliberative Equality’, p. 215.