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Economic globalization has intensified on the basis of new international links, especially in the field of foreign direct investment, financial capital flows and telecommunications liberalization. These and other developments have reinforced international interdependence and raise new issues for international organizations as well as for strategic behavior of major actors. Based on historical perspectives of evolution of major organizations and the latest developments in the 1990s the analysis focus on financial market dynamics, monetary issues and labor market aspects. Reform options for selected international organizations are discussed including aspects of trade, foreign investment and international externalities. Game theoretic concepts are also applied.

Inhaltsverzeichnis

Frontmatter

Introduction

Introduction

Abstract
Economic globalization has a long history. The end of the 20th century witnessed a spurt in internationalization in many fields and the economic opening up of many countries in Eastern Europe plus China. A century ago economic internationalization stimulated economic growth, but it also created new interdependencies in a world economy which was dominated by the United Kingdom. In this century the US has become the global economic and political leader. The US has been rather pragmatic in creating and using international organizations in both a regional and a global context as a means to provide stability and incentives for cooperation. However, the growing number of member countries has made many organizations rather inflexible and led to bureaucratic inefficiencies, and sometimes — as in the case of the UN or the UNESCO — organizations have also suffered from major countries withholding contribution payments temporarily.
Richard Tilly, Paul J. J. Welfens

Early Internationalization and Present Policy Coordination

Frontmatter

A. Globalization of the Economy and International Organizations: Developments, Issues and Policy Options for Reform

Abstract
Rising international trade, increasing foreign direct investment, more intensive international technology transfer and a faster global exchange of information via telecommunications and the internet characterize the world economy at the end of the 20th century. With increasing international transparency of markets in the Internet World, falling costs of communication and deregulation of fmancial markets in OECD countries, eastern Europe and some NICs, there is an unprecedented international interdependency — certainly with many asymmetries — which renders traditional small country models obsolete. The Asian exchange rate crisis of NICs in 1997/98 showed a negative international fall-out and reinforced the role of the IMF; the IMF is acting as an international lender of last resort thus pursuing a similar role as in the Mexican crisis of 1994/95 when the IMF together with the BIS and US rescued the Mexican government from falling into bankruptcy due to its external debt. Strong US economic growth certainly facilitated Mexican economic recovery. This is in stark contrast to the crisis of the Asian NICs whose major export partner and source of FDI inflows, Japan, is facing a crisis itself in 1997/98.
Paul J. J. Welfens

B. The Emergence and Growth of International Organizations

Abstract
Almost one thousand years ago, an army of Danes camped on Blackheath, straddling the old road to Dover and overlooking London. They demanded a large sum of money (by then known as Danegeld) in return for the Archbishop, captured during the sack of Canterbury. Below the heath in Greenwich, a church now bears the name of their captive, St Alphege (Glencross, 1974). St Alphege (at the time called Aelfheah) told the English not to pay ‘Danegeld’ for him, and was duly murdered after seven months in captivity.
James Foreman-Peck

C. Does Integration Globalize? Financial Crises and Financial Geography 1831–1914

Abstract
The current trend towards international fmancial integration is commonly described as “globalization”. A recent book has made of “globalizing capital” the driving force shaping the changing fortunes of international monetary relations.’ But one may wonder what kind of geography does globalization imply? Does it give rise to a tabula rasa of horizontal “market” relations, as assumed by neoclassical economists? Does it instead produce vertical power relations between lenders and borrowers as hypothesized by an old Marxist tradition dating back to Rudolf Hilferding? This short paper is an attempt at looking at the experience of the XIXth century to shed some light on this issue. We claim that during this period, technological change and the growth of international banking reduced the transaction costs of arbitrage between fmancial markets, thus contributing to bring the world fmancial system closer together, along both horizontal and hierarchical lines. On the other hand, we argue that this tendency towards “globalization” in turn exacerbated problems of contagion, thus placing monetary authorities in front of a difficult trade-off between domestic and external equilibrium. The dilemma was partly mitigated by the development of central banks as ways to deal with fmancial crises. But because central banks were being organized on a national basis, fmancial segmentation proceeded, with monetary authorities attempting to provide a measure of insulation of domestic markets through either economic or more political means. With its superficial appearance of a largely globalized regime, the pre-1914 international banking system in fact concealed a complex political construct.
Marc Flandreau

D. Globalization and the Market for International Organizations: The OECD Case

Abstract
The market for international organizations (IOs) has changed radically in the past fifty years, partly in response to the success these organizations have achieved. This paper focuses on one important organization, the Organization for Economic Cooperation and Development (OECD), with the objective of ascertaining whether its current and prospective structure is well suited to the new environment of increased market integration in the world. Thus, the paper has a normative content and will conclude with a set of policy recommendations.
John Pattison, Michele Fratianni

E. The Asian Development Bank in the Context of Rapid Regional Development

Abstract
Regional development banks are a frequently overlooked layer of institutions among international organizations. However, their financial power is considerable. Through 1995, the respective regional banks including their soft loan windows have approved loans totaling $78ón for Latin America and the Caribbean, $57ón for Asia, $30bn for Africa, and $10bn for Europe. Even when compared to the more prominent World Bank group, these amounts are not tiny. The ratio of regional development bank loans to World bank loans in the respective region is 86%, 40%, 38% and 23% respectively2. For recent years, the figures are even closer together. As for 1995, and mentioning only Asia, the Asian Development Bank (ADB) and its soft loan wing Asian Development Fund (ADF) approved loans totaling $5.5bn, compared to $8.7bn for the World Bank group’s IBRD and IDA, i. e. the ratio had become 63%. For some countries, ADB is actually a more important source of help than the World Bank. In 1992, this held for Pakistan and Sri Lanka, for example (Culpeper, 1997, p. 40).
Werner Pascha

F. A First Draft of Six Major Elements of a Federal European Constitution: Some Thoughts Using Political Economy

Abstract
We are currently observing the end of the process of forming the European Monetary Union — a step which takes well beyond an mere economic union. In order to enable a long-term functioning of such a dual union, some (minimal) European federal union will be necessary. In this paper six basic elements of a federal European constitution, like a two chamber system, direct democratic institutions and an European federal tax are suggested. In section 2 six elements, which should be key propositions of an European constitution, are introduced and in sections 3 to 5 an attempt is made to scientifically justify these propositions, e.g. the design of the European legislation (section 3), the subsidiarity and federalism principle (section 4), and direct democratic institutions (section 5). Finally, section 6 provides a summary and gives some conclusions.
Friedrich Schneider

Theory of Policy Coordination and Impact of International Organizations

Frontmatter

G. Globalization and the Changing Character of the International Monetary Fund

Abstract
The rapid reemergence of an integrated world economy in the last third of the twentieth century has raised questions about the suitability and adaptability of institutions for global economic management created in the very different circumstances of mid-century. Two major features characterize the new integrated world economy and require an institutional response: the first is the liberalization of capital movements; the second is the dramatic political realignment of 19891991 following the end of the Cold War. With the collapse of the Soviet bloc, the Bretton Woods institutions became for the first time genuinely universal. This paper examines how one quite central institution, the International Monetary Fund, has responded to these developments, and also reflects on how it is likely to evolve in the future. In particular, it is argued here that supply and management of economic information and of financial supervision has become an increasingly important task (one that was largely not envisaged at Bretton Woods). The gold-dollar standard has been replaced by an information standard, which requires new techniques of management. Secondly, the rise of a new consensus about the management of economic policy has brought about an involvement of the IMF in questions that are much more politically sensitive and problematical — because they involve intrusions on national sovereignty — than anything that could have even been debated at Bretton Woods.
Harold James

H. The Many Lives of the International Labour Organization (ILO)

Abstract
The effort underway since the completion of the Uruguay Round of negotiations to include a “social clause” in the new World Trade Organization (WTO) has rekindled the interests of both policy-makers and scholars in the sometimes dormant 2500 person bureaucracy created to set workplace standards globally, the International Labour Organization (ILO) headquartered in Geneva. In the heavenly firmament of international organizations the ILO should be likened to like a meteor arcing over the horizon — not a star held in dynamic equilibrium by surrounding planets but something which in passing from view though still aglow is already dead, its terrestrial destination undetermined, its impact, if any, unknown. The brief survey of the organization’s history presented in this paper will argue that the ILO can book few solid and lasting accomplishments in the field of its official operations, has at times made much mischief both in that area and collaterally, and, over the course of its long life, responded opportunistically to change rather than in any serious way shaped it. That though burned out the ILO still appears to survive, is the real measure of its success.
John Gillingham

I. Specific Institutional Aspects of International Cooperation - A GAME Theoretic Account -

Abstract
Traditionally the theory of international trade has been dominated by extending general equilibrium analysis, i.e. by assuming competitive markets in all countries without international factor mobility, but more or less international mobility of products. This led to well-known reasons for international trade like comparative cost advantages, elaborated by the traditional theory of international trade. Notice, however, that international trade can already be triggered by different market organization in different countries. An extreme case would be a centrally planned economy facing a market economy. Here the centrally planned economy would choose its optimal point on the offer curve of the market economy and thereby induce international trade even when the two countries are otherwise completely identical (GüTh, 1976).
Werner Güth

J. Globalization and the Environment: Trade, FDI and International Co-operation Issues

Abstract
Globalization has been defined as “the growing economic interdependence of countries world-wide through the increasing volume and variety of cross-border transactions in goods and services and of international capital flows, and also through the more rapid and widespread diffusion of technology” (De Jonquières, 1997). Globalization can be thought of as a process involving two broad components. First, globalization causes the structure of markets to change. Markets will generally become both broader (more horizontal integration in production, more consumer access to a wider range of products and services) and deeper (more vertical integration in production, involving new forms of inter-firm co-operation). Second, globalization will cause the rate of technological change and diffusion to increase. These two components of the globalization process will also tend to reinforce each other, with a more rapid rate of change in market structure leading to more rapid technological development (and vice versa).
Tom Jones, Joaquim Oliveira Martins

K. Strategic Aspects of IIASA’S Food and Agriculture Model

Abstract
International agencies, sponsored by national governments, should fmally help to improve the welfare, either of certain regions, of certain people or, if possible, of the whole world. In case of hunger one might, for instance, try to smooth supply by an international agency which buys excess supply in years with rich harvests and sells its stocks in case of bad harvests. Such an institution can help both producers and consumers by guaranteeing the former stable prices and thus more reliable expectations for remaining in business, the latter no suffering from hunger. Since the institution will typically buy food when prices are relatively low and sell when prices are relatively high and since modern storage facilities are rather cheap, this may allow a considerable improve in the state of the world at relatively low costs.
Werner Güth, Reinhard Selten

L. Trade Liberalization and Prudential Regulation: The International Framework for Financial Services

Abstract
Beginning in the mid-1990s, international efforts to open and restructure markets for financial services and to ensure adequate regulation and supervision of fmancial firms have taken on a new prominence. The General Agreement on Trade in Services (GATS), which was negotiated in the Uruguay Round, marks the first time that services have been covered by a global trade agreement.2 As a result, fmancial services liberalization now falls within the purview of the World Trade Organization, where the next set of negotiations on fmancial and other services is scheduled to begin in 2000. In 1’995, primarily in response to the Mexican fmancial crisis, the Group of Seven (G-7) economic summits initiated what has now become a well-established process of setting goals and giving mandates to other fora for work on strengthening prudential regulation and supervision.3 Previously, such issues had been dealt with almost exclusively in specialized fora such as the Basel Committee on Banking Supervision.4 More recently, with the onset of the Asian crisis in 1997, the ’conditionality’ of International Monetary Fund stabilization programs has been extended well beyond traditional macroeconomic policy measures to encompass the fmancial infrastructure, including both liberalization and prudential regulation.5
Sydney J. Key

Panel Discussions

Frontmatter

The Role of the BIS

The Role of the Bank for International Settlements in the 1930s and 1990s

Abstract
The Bank for International Settlements (BIS) is the oldest international fmancial institution and has, since its foundation in 1930, been the principal center for cooperation among central banks. The Bank has been able to play this role by combining its operational banking and agency functions with that of a meeting-place for central bank officials.
Gunter D. Baer

Reflections on the Early History of the Bank for International Settlements

Abstract
The Bank for International Settlements (hereafter BIS), one of the oldest existing international organizations, has doubtlessly become a major vehicle for international cooperation among the central banks of the world’s richest countries. From the point of view of our conference, however, the relevant question is whether the BIS has been and still is an effective organization for coordinating international fmancial flows and for helping to prevent systemic breakdown. Answering that question should involve examination of what the BIS contributed to those two tasks but, in addition, an assessment of how its organizational structure (its „architecture”) was and is related to that contribution. In this short statement I focus only on the early history of the BIS, on its founding and performance during the crisis of the early 1930s. Nevertheless, I believe that this early experience does help shed some light on that institution’s subsequent development and policy stance.
Richard Tilly

Integrating Eastern Europe into the World Economy

Association with, Hopes for Joining the European Union

Abstract
Over the next decade, the great challenge for the world economy will be learning how to manage the process of integrating the large number of economies in transition (Ets) into the global system. Throughout Central and Eastern Europe, countries are transforming their economies by implementing far-reaching, outward-oriented policies. The world market is therefore the fulcrum by which these countries will elevate themselves out of a low-growth, mostly inward looking economic development. A friendly global market and international organizations responding to the economic, political and social aspects of these economies will be essential to their prospects.
András Blahó

Integrating Eastern Europe into the World Economy

Abstract
Before any discussion can begin on the extent to which the countries of Central and Eastern Europe are integrated into the world economy, we must decide which criterion to use to measure efforts towards integration. Probably the simplest method is to relate a country’s imports and exports to its total economic performance. This can be done for each individual Eastern European country as well as for the Central and Eastern European countries as a whole. The result will be that the value of exports and imports as a percentage of gross domestic product varies greatly from country to country. In other words, it is impossible to judge the Eastern European countries’ level of integration into the world economy using this criterion.
Heinrich Engelke

Integrating Eastern Europe into the World Economy: The Relations between the EU and Russia

Abstract
The relations between the EU and Russia are presently marked by a series of significant factors which must not be neglected by either political practice or analytical examination. Let me therefore begin with a necessarily brief outline of these factors, of which the following four are especially important (Hohmann and Meier, 1997):
  • the extent to which Russia has been integrated into foreign and security political structures of the Euro-Atlantic region;
  • the differing degree of intensity in the rapprochement between EU and East European transformation countries;
  • Russia’s historic, national and economic particularities that do not conform to “European normalcy” despite the fact that Russia belongs to Europe and finally
  • the level of economic consolidation and systemic transformation in Russia.
Christian Meier

Integrating Eastern Europe into the World Economy

Abstract
Gone are the days when two economic systems were competing for predominance. However, the fact that one system has collapsed does not testify to the quality of the other system. It merely proves that the show goes on in some way or another.
Werner Varga

Backmatter

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