"It is important that leaders who come here go back and work on ways of finding far-reaching policies that will allow us to create sustainable economic growth, create jobs and coordinate macroeconomic policies." Kofi Annan, Secretary-General, United Nations (1997-2006), Member of the Foundation oard of the World Economic Forum, and Co-Chair of the Annual Meeting 2009

On the first day of the Annual Meeting, participants very quickly focused on a major challenge facing the world that has been made even more pressing by the suddenness and severity of the global economic crisis: How to improve global governance so that the international community can better deal with the issues confronting it. "We are facing a crisis of governance at a national and international level," said Kofi Annan, Secretary-General, United Nations (1997-2006), Member of the Foundation Board of the World Economic Forum, and Co-Chair of the Annual Meeting 2009. "The world has changed, but are we capable of changing fast enough to save the planet?"

After years of mere talk about the need to reform or expand global governance institutions such as the International Monetary Fund (IMF), the World Bank, the United Nations Security Council and the G8, the hope is that the crisis will be the necessary fillip to finally get results. "The case for a regulated world economy and multilateral governance is made forcefully by the financial crisis," argued Prime Minister Syed Yousaf Raza Gillani of Pakistan. "We should renew our commitment to equitable global rules and institutions, and the participation of all developing countries in international economic decision-making and norm setting."

Yet, it would seem impossible to recast the global governance system as quickly as the need to deal effectively with the economic crisis requires, particularly as there are many non-economic challenges such as nonproliferation and terrorism that also fill the global agenda. While there is consensus for change and general agreement that new institutions have to be more representative and effective, there are few concrete proposals on the table despite a growing realization that existing models are flawed. While the World Trade Organization (WTO) is often held up as an example of a highly inclusive global organization that successfully manages a set of international rules of the game agreed by all its members, resolves disputes and imposes penalties on members that break commitments, it is just as frequently derided by critics as dominated by powerful developed economies and large and influential developing countries. Sceptics also point to its consensus system, which they say has led to painfully slow progress on the Doha Round.

Given the economic crisis, the case for global governance reform is certainly most obvious in the financial sphere - and in the structure and function of the multilateral lending institutions in particular. The flaws in the system, a number of participants noted, have been obvious for years, but the crisis has given new urgency to the task of correcting them. "We need to draw lessons for the future," urged German Chancellor Angela Merkel and "ensure that such a crisis never happens again" as well. This means, however, establishing new rules not only for the international finance system but also for the global economy as a whole. To this end, she proposed at Davos that the United Nations create an Economic Council that would oversee the global economy in the same way that the Security Council addresses geopolitical crises.

"We have tended to treat states as either creditors or debtors, instead of being co-responsible partners. That has to change." Trevor Manuel, Minister of Finance of South Africa

What is required, above all, is a change in perspective, one that recognizes the realities of an increasingly interdependent world, said South African Finance Minister Trevor Manuel. "We have tended to treat states as either creditors or debtors, instead of being co-responsible partners," he argued. "That has to change."

For the so-called Bretton Woods institutions, such as the IMF, participants agreed, this change should involve a complete overhaul of the governance structures and operating procedures put in place by their creators, the victorious powers in World War II. "What we have been doing is taking the IMF that was created in 1945 and putting bandages on the various parts that are broken," argued Montek S. Ahluwalia, Deputy Chairman of India's Planning Commission. "We need something more fundamental."

The most obvious IMF reform, participants agreed, would be to readjust the voting rights of member states to reflect the changes in the global balance of economic power. This should not only include greater influence for - and capital contributions from - emerging giants such as China and India, but also, in keeping with Manuel's prescription, an increased role in decisionmaking by the less developed countries. "Many countries today feel they have no voice at all, that their views are never taken on board," observed President Kgalema Motlanthe of South Africa. However, he added, many developing countries will need to put their own political houses in order if they wish to be accorded a bigger say in the global system. "There is no way we can have transparency and accountability [at the multilateral institutions] if we don't practice them in our own countries."

Further reforms may also be needed at the top of the global governance structure, contended Professor Joseph E. Stiglitz of Columbia University. While the G20 is clearly an improvement over the old G7 in that it includes both developed and developing countries, it too primarily represents the interests of the creditor nations, he argued, making it a problematic forum for tasks such as debt renegotiation. President Gloria Macapagal Arroyo of the Philippines suggested that the world might have to think along the lines of an even broader G30.

"President Obama is encouraged by this Forum that is dedicated to galvanizing global action on behalf of the common interests of people around the world." Valerie Jarrett, US Assistant to the President for Intergovernmental Relations and Public Liaison

2009 World Economic Brainstorming

Wider representation, however, will only be valuable if the multilateral institutions themselves can be made more effective. Prime Minister Gordon Brown of the United Kingdom said the speed of financial contagion in a globalized system makes it imperative that the IMF take a more proactive role in preventing crises rather than just responding to them.

Expanding the IMF's financial resources and mission, other participants noted, would give the Fund a global role closer to the original vision of one of its key architects, British economist John Maynard Keynes, who saw the Fund's lending facilities as mechanisms that would allow governments to maintain full employment without triggering a balance-ofpayments crisis.

But what is good for the goose should also be good for the gander, developing world officials argued. If the IMF is going to play a larger role in ensuring the stability of the global financial system, it will need to pay particularly close attention to the countries that underpin that system - and their financial institutions. "We should expand the regulation coverage of the international financial system, with particular emphasis on strengthening the supervision of major reserve currency countries," suggested Chinese Premier Wen Jiabao.

Leaders at the Annual Meeting focused on the need to create closer monitoring and quicker crisis response mechanisms. Some focused on how to expand or strengthen the Financial Stability Forum (FSF), a grouping of national financial authorities, international financial institutions and international regulators that was convened in the aftermath of the Asian financial crisis in the late 1990s. Based in the Bank for International Settlements in Basel, Switzerland, the FSF includes representatives from 26 countries. President Felipe Calderón of Mexico - a country that has endured several financial crises over the past 25 years - stressed the importance of crafting forceful policy responses as quickly as possible.

H.E. Sheikh Hamad Bin Jassim Bin Jabr Al Thani, Prime Minister and Minister of Foreign Affairs of Qatar; Klaus Schwab, Founder and Executive Chairman, World Economic Forum; Micheline Calmy-Rey, Federal Councillor of Foreign Affairs of the Swiss Confederation; and Yaacob Ibrahim, Minister of the Environment and Water Resources of Singapore during the session "Why We Need a New System of Global Cooperation"

In the debate over global governance reform, a key priority is clearly the need to balance interests. There is certainly deep concern among developing economies that developed countries are reluctant to give away their power. Yet, even business and political leaders in the United States acknowledge that the centre of economic and, though much more slowly, geopolitical influence is shifting from West to East. Meanwhile, parvenu nations such as China and India are reluctant to take up formally, or even informally, the mantle of power since they are preoccupied with serious domestic development challenges such as poverty alleviation and the need to avert social unrest. With the current crisis still unfolding, governments together have to consider "radical options" such as risk-sharing schemes that would insure banks and other investors against further losses on toxic assets, United Kingdom Prime Minister Brown reckoned.

The question is whether expanded and reformed global governance organizations or structures will be any more effective than the legacy institutions. The WTO has both its supporters and detractors. The expansion of the European Union (EU) has raised questions about its effectiveness and the capacity to reach meaningful consensus. That not all EU members have adopted the euro single currency underscores what can happen when some members of the club are not ready or are unwilling to move forward. When the Association of South-East Asian Nations (ASEAN) increased its membership to 10, strains due to differences in economic and political development surfaced. ASEAN has since moved to apply an "ASEANminus- X" approach that allows as many countries as can agree on a policy to move forward, with the rest following when they are ready. Such a scheme may work for a 10-member group, but may not be feasible as a model for global governance.

"This may even lead to a UN Economic Council, just as the Security Council was created after the Second World War." Angela Merkel, Federal Chancellor of Germany

Prime Minister Syed Yousaf Raza Gillani of Pakistan with Minister of Foreign Affairs Ali Babacan of Turkey

Some participants warned that if a global governance institution does not have real enforcement mechanisms - penalties for bad behaviour that have impact - it will not be effective. While there is enthusiasm for change, the prospects for significant global governance reform are not good. At the Annual Meeting 2009, the World Economic Forum launched the Global Cooperation Project, a multistakeholder international study that will look at how the global governance system can be widened and made more effective. To be conducted using the Forum's new virtual interaction platform for leaders, WELCOM, the project is spearheaded by the governments of Qatar, Singapore and Switzerland. "There is a serious deficit in global cooperation when compared to the wide range of pressing challenges such as climate change, energy security, food security, terrorism and proliferation of nuclear weapons," said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum. "With new players emerging on the world stage and a continuing mismatch between 20th century institutions and 21st century challenges, the international system needs to intensify collaboration and develop innovative solutions."

Effective global government is clearly a very long way off. Today, effective national leaders struggling to deal with the complexities of modern governance have to be pragmatic - balancing national, regional and global interests and obligations. Consider the views of Guyana's President Bharrat Jagdeo. Nations, particularly the small ones, he says, have to do what they can in cooperation with other willing countries, especially in the absence of a global or regional framework to address the impact of the economic crisis or climate change, a pressing issue for Guyana. Jagdeo pursues cross-border collaborative solutions with specific countries as far away as those in Scandinavia and China to deal with such problems as deforestation at home. At the same time, he focuses on "transformational" domestic priorities such as the development of agro-processing to increase the value of exports and the expansion of bandwidth to boost the potentially lucrative business process outsourcing industry. He works as much as possible with the international partners he can bring to the table, but with Guyana's specific needs at the forefront - good governance at the national level with an international reach whenever necessary. Delivering results, after all, is what ultimately builds the confidence and trust of the people in their leaders.

"We should renew our commitment to equitable global rules and institutions, and the participation of all developing countries in international economic decisionmaking and norm setting."
Syed Yousaf Raza Gillani, Prime Minister of Pakistan