Global Economy B: Topic 1 - International Institutions and their Role in the Global Economy

Question 1

What’s North’s quote for defining institutions?

Answer 1

The rules of the game in a society or, more formally, the humanly devised
constraints that share human interactions”
(North, 1990)

Question 2

Describe the types of institutions

Answer 2

What type of institutions?
* Formal institutions:
- The legal system
- The political system
- The economic system
- The education system
- The health care system
* Informal institutions:
- Culture – morals, customs, norms

Question 3

Describe the 4 approaches to formation of institutions

Answer 3

• Efficiency: People will choose the least costly way of transacting.
• Accidental: Institutions result from random or unpredictable influences.
• Cultural: Societies, ethnic groups, or religions hold beliefs that determine
  institutional rules. An example is the fact that the Commonwealth countries are unified from the colonial history of the British Empire
• Conflict: Different beliefs create conflict which determines institutional
  development

Question 4

Describe and show the common elements for different definitions of international institutions

Answer 4

• “… relatively stable sets of related constitutive, red ~regulative, and procedural norms and rules~
  that pertain to the blue ~international system~, the green ~actors in the system (including states~ as well as
  nonstate entities), and their activities.”
  (Duffield, 2007)
• “… an red ~institutional agreement~ between members blue ~of an international system~ purple ~in order to
  achieve objectives~ according to systemic conditions, reflecting attributes, aspirations and
  concerns of green ~its members~.” (Gabriela, 2013)
• International institutions are organisations red ~established by a treaty~ or other instrument
  blue ~governed by international law~ and possessing its own international legal personality (e.g. UN,
  WHO, etc.). International organisations are composed of green ~member states~.
  (Wikipedia, 2020)
• Common Elements:
  1. red ~Institutional agreement~
  2. blue ~International system/law~
  3. Green ~International member states~
  4. Purple ~Its serves a purpose~ (Gabriela, 2013)

Question 5

Describe what international institutions form

Answer 5

• They form the basis of global governance
• Global Governance:
  (UN, 2014)
  Global governance encompasses the totality of institutions, policies, norms,
  procedures and initiatives through which States and their citizens try to
  bring more predictability, stability and order to their responses to
  transnational challenges.
  Global governance implies an absence of central authority and the need for
  cooperation (Krahmann, 2003).

Question 6

What does effective global governance need?

Answer 6

Effective international cooperation

Question 7

Explain why there is a demand for global governance

Answer 7

• Research done by Koenig-Archibugi (2003)
• The state has multiple functions: Military defence, Infrastructure, Relief from and
  protection against
  natural disasters
  and disease, Preventing physical
  violence among
  citizens, Ensuring poverty
  relief, Securing property
  rights, Provision of Education. Sometimes, it can fail to provide these functions.
  This can happen for 3 reasons:
• External effects (interdependence): Reciprocal circumstances, e.g.
  Climate change, can’t do it alone, it does not depend only on me!
• Resource deficiency: e.g. Not enough money or technology, inadequate
  resources
• Unwillingness: States may have resources, but governors may be
  unwilling to deliver the needs of certain groups of citizens

Question 8

What is the role of global governance?

Reference

Answer 8

• Koenig-Archibugi (2003)
• A state’s nterdependance, resources and willingness all play a part in determining the role of global governance:
  1. If state has resource and is willing, then no institute needed
  2. If state has all 3 factors, then problem = multiple equilibria, so role of global institution is coordination & mediation
  3. 2. If state has interdependance and resources but willingness is conditional, then problem = free riding, so role of global institution is monitoring & sanctioning
  4. If state has willingness only, then problem = resource deficiency, so role of global institution is assistance & substitution
  5. If state has no resources only, then problem = resource deficiency with spillover effects, so role of global institution is assistance & substitution
  6. If state has resources only, then problem = dysfunctional goals, so role of global institution is persuasion, compulsion and substitution
  7. If state has no willingness only, then problem = dysfunctional goals with spillover effects, so role of global institution is persuasion, compulsion and substitution
  ⇒ International institutional arrangements represent the link between the
  demand and the supply of global governance

Question 9

Describe & explain Koenig-Archibugi (2003)’s research on classifying international institutions

Answer 9

Koenig-Archibugi (2003) suggest three dimensions to classify international
institutions:
1. Publicness: refers to the nature of the active participants in the governance
arrangement.
- Type of participants: whether the participants are governments or private actors (e.g.
firms, NGOs).
- Spectrum in this order:
1. State centred
arrangements
(no private actors)
2. State centred
arrangements
(private-actor access)
3. Private-public
partnership
4. Private governance
with public
supervision
5. Purely private
regimes
2. Delegation: refers to the nature of the functions that can be performed by the
institution.
- Independence: level of autonomy and discretion that the institution has.
- Spectrum with these extremes:
1. All policies are decided through negotiation and
implemented by participating actors (e.g. The Intergov. Panel
on Climate Change ).
2. Legislative, executive and judicial functions are performed
by autonomous supranational agencies (e.g. EU)
3. Inclusiveness: refers to the share of individuals with decisional power.
- Access: share of actors affected by a rule/policy that participate actively in
determining its content.
- Weight: How equally influence is distributed among the active participants.
The three dimensions form an attribute space in which all actual governance
arrangements can be located

Example

International Monetary Fund (IMF): High publicness, high delegation, low inclusiveness.
Overall goal: To stabilize the global monetary and financial system.
Activities of the IMF include:
- Close surveillance of economic policies of the member states.
- Design of structural adjustment packages (policies)
- Coordination of emergency rescue operations of countries hit by financial crises
- Technical assistance and training to member state officials.
By January 2023 there are 190 countries members of the IMF:
- The power to create and modify rules is very unequally distributed among its members.
The voting power of each country depends on its financial contribution to the
organisation (and therefore on its economic strengths).
* The US and the EU member states together control more than half of the votes in the
Fund’s executive board.
* Special majority requirements on certain policy matters increase the influence of big
contributors.

Why to join IMF despite low inclusiveness?
* Because member countries are known to be following the IMF
code of conduct,
* Membership encourages investment and trade, leading to fuller
employment.
* The IMF also provides technical assistance and financial support
when the member country needs it

Question 10

Cite the researcher who came up with classifying international institutions into 3 key dimensions

Answer 10

Koenig-Archibugi (2003)