Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Tuesday, November 22, 2011

Fairness and Financial Stability

While Canadians are proud of the critically important international role their central bank governor will play in his role as chair of the Financial Stability Board, they are generally less aware of the organization’s limitations, constraints, and legitimacy issues. In the process of taking the bold action necessary to address the volatility of global finance, Bank of Canada Governor Mark Carney should take this opportunity to infuse the governance of this important international financial institution with a Canadian brand of respect for values of inclusiveness and fair play.

The G20 created the Financial Stability Board to replace its precursor, the Financial Stability Forum, at its London meeting in April 2009. This move increased the representative reach of the organization in a manner that mimicked the expansion of the G7 to the G20.

But while the legitimacy as well as the efficacy of the G20 are often questioned and suggestions are made for both its expansion (G31) and contraction (G2), due to its much more technical mandate, we hear too few parallel concerns regarding the FSB.

Unlike the G20, the FSB is intended to be a regulatory agency and as such, it promotes common rules and standards, and fosters compliance, not only among its members, but also internationally.

The organization currently boasts 23 country members and 12 international institutional members, yet seeks to generate regulatory and surveillance systems that apply to all countries participating in the global financial system.

While the intricacies of the rules and regulations pertaining to international financial activity are complex, often beyond our grasp and outside our interests as we go about our daily lives, the centrality of the concept of democratic representation within rule-making institutions is completely in line with Canadian expectations regarding the way the world should operate. So when members of the FSB create and/or endorse global financial regulations and standards with which non-members are expected to comply, we should detect some dissonance.

In addition, compliance with the international standards promoted by the FSB is monitored by peer review, and decisions are reached by consensus among FSB members. This means that member countries under review have the ability to veto decisions about themselves, while non-member countries have no voice.

For maximum inclusivity, legitimacy, and basic buy-in, all countries participating in, benefiting from, or suffering due to the operation of the global financial system should be accorded membership in the body that creates and endorses its rules. One could argue that participation in rule-making does not matter as the FSB holds no formal legal standing, which of course makes enforcement of its rules problematic. And yet, precisely because the body tasked with keeping the global financial system stable operates by consensus and without legal recourse, its effectiveness relies on participants’ voluntary compliance.

If that compliance is not forthcoming, the FSB will be unable to fulfil its mandate. Let us hope, for the sake of the global financial system, that Governor Carney can put the Canadian stamp of inclusivity on this multilateral forum.

Origin
Source: CIC 

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