Global institutions need to be accountable - Judge Davis
May 27, 2009
By Etienne Swanepoel
Dennis Davis is a judge of the High Court and the president of the Competition Appeal Court, the chief competition authority in South Africa. He is a professor of commercial law at the University of Cape Town, where he taught for many years. He still teaches part time.
Davis has published widely on competition law, income tax, labour law, insurance law, estate duty and legal theory. He is much liked and respected for the television programme Future Imperfect, which he hosted in the 1990s, and for his present programme, Judge for Yourself. He recently returned from Brown University in the US, where he taught a course on international human rights law and global regulation.
I spoke to him on May 11 to ask for his views on the current global financial crisis.
"You have to start with the global conceptual framework which is in place today," he says. Since the days of former UK Prime Minister Margaret Thatcher and US President Ronald Reagan, "neo-liberalism has been the dominant philosophy in developed countries… In essence, it postulates that control of the economy should be transferred from the state to the private sector. This means that vast swathes of the economy should be liberated from state control. The underlying premise, of course, is that the private sector is more efficient in allocating resources than the public sector.
"The Washington consensus, a term coined in a 1989 paper by (UK economist) John Williamson, has become a synonym for the market fundamentalism advocated by neo-liberalism. Williamson proposed policy prescriptions that he considered should constitute the 'standard' reform package for crisis-racked developing countries by Washington-based international economic organisations such as the World Bank and the International Monetary Fund (IMF). In the last 20 years or so, neo-liberalism has dominated the world order. It has succeeded in reducing regulation and promoting free operation of markets.
"The world has increasingly become one, whether one speaks about banking, trade, technology, or the environment … The world has become smaller due to globalisation. On the other hand, globalisation has weakened national sovereignty, particularly of developing countries or the so-called South.
"Much of the current global order is determined by international institutions such as the IMF, the World Bank, the World Trade Organisation, the International Labour Organisation and the Basel Committee on Banking Supervision. These are all regarded as being subject to the control of developed countries or the so-called North. They affect the South in a massive way.
"The World Bank, for example, when it publishes its national or country reports, has a direct impact on investment in the countries in question.
"The question now being asked is whether these institutions should not be subject to the same rules of transparency and accountability as those applicable to national governments. The latter are constrained by what we refer to as administrative law. This provides an elaborate framework in terms of which a state cannot make decisions which affect the rights of individuals in an arbitrary manner.
"If states do make arbitrary decisions, it becomes subject to challenge, usually through the courts. We live in an environment in which it is inconceivable that capricious conduct by states, insofar as it affects the rights of individuals, will be tolerated. Yet, when international institutions behave in a questionable manner, there is no system of international or global administrative law which provides a framework for challenge. So, if developing country A wants to challenge its country report issued by the World Bank, where does it go to do so? What is its redress, where are the principles of natural law?
"It's a fallacy to say that the world has not been regulated under neo-liberalism. Of course there have been rules, much of them unwritten and unspoken. These have typically just favoured the North.
"If you think about it, the economic development of the South is almost entirely dependent on these institutions and multinational companies. They are generally perceived by the South to be acting in the general interests of the North.
"Administrative law, at the end of the day, is just a technique to make the workings of public bodies transparent and accountable. So there is no reason why it should not also apply to these institutions. Their decisions impact the lives of about 3.5 billion people.
"These issues have recently come to the attention of a number of scholars. One is David Kennedy of Brown University, a prominent international law academic. He has started a project to examine how governance can be applied at a supranational level, including how the current rules applicable to global institutions can be reconfigured. It is an attempt to make these institutions more accountable to the world.
"The general view today is that the deregulation of financial services in the North is largely to blame for the current global financial and economic crisis. A lot of people are saying that we have been let down by neo-liberalism. There seems to be recognition that there is a need for an alternative system. The question being asked is what can get us out of this mess.
"The crisis is, of course, driving this response, but the broader concern is how we can reconfigure the global economic order. Even (Timothy) Geithner, the new US Treasury Secretary, has said that what is needed now is greater financial regulation."
There are three powerful developing country democracies, Davis says: South Africa, India and Brazil. "In reconstituting the global economic order, we have an important contribution to make. It's time for us to now punch according to our weight. For example, our labour law is one of flexible regulation as opposed to the contract-at-will system adopted in developed countries, where you can fire people at will. Our government should think more globally. We also depend on global rules AND we must make a contribution."
He continues: "It seems that the Washington consensus passed into history in the last 12 to 18 months. That passing is illustrated by a recent book on the crisis by Judge Richard Posner of the US."
This point, he adds, was well made by Robert Solow, the Nobel Prize-winning economist, who reviewed Posner's book in last month's New York Review of Books.
"Posner is a prominent member of the Chicago School of Economics," Davis says. "It is regarded as the key proponent of minimal antitrust regulation to promote the free market. Posner writes that the crisis was caused by market failure and questions the social value of a deregulated financial system. Solow is not a member of the Chicago School. The point Solow makes is that if he said this, it would not be news. The fact that Posner makes the statement is news."
Davis is a legal polymath. He is warm and funny; he is a mensch. He taught me at UCT. The one thing I took away from many years under his tutelage was to question every assumption, every assumption.
Etienne Swanepoel is a partner at Webber Wentzel. The opinions expressed are his own
|
|
