On 23 and 24October 2018, I attended the conference “The G20@10: Benefits, limitations and the future of global club governance in turbulent times” at the German Development Institute (Deutsches Institut für Entwicklungszusammenarbeit, DIE) in Bonn, Germany’s former capital city (my presentation is available here). The purpose of the conference was to reflect on the achievements of the G20 since its inception 10 years ago, to address current debates around its structure, its role in world politics and around the issues it currently addresses. Reuniting scholars and policymakers alike, discussions about the G20’s way forward were also an important part of the agenda. In this short blogpost I would like to briefly discuss my two takeaways, one on the trade-off between legitimacy and effectiveness, the other on prioritization and interaction between policy fields. I will present some results of the research I did for this conference in a separate blogpost.
The legitimacy – effectiveness trade-off (?)
At the conference I learned that the relationship of G20 and third countries is a central preoccupation of many scholars working on international club governance. Much debated in that context was the question of the trade-off between legitimacy and effectiveness in global policy making. Should matters of global importance be discussed in small clubs or in large multilateral organizations? How can the G20 implement policies that take into account the needs of countries that are not part of it? How can it make effective policies that still protect (unrepresented) minorities. There is probably some truth in one participant’s statement that the difficulty to reach consensus on a question increases with the number of participants in the discussion – this is also the key rationale for the existence of clubs like the G8, the G20, the UN Security Council or the 44 countries that set the agenda in the BEPS process. Thus decision-making will be more effective in such a setting. But is an effective decision always a good decision? Countries or individuals that feel negatively affected by such a decision will not think so, especially if they were not involved at any moment in the process. Some questioned that there is actually a trade-off: “effectiveness” for whom and to reach which goal? Perceptions of fairness of an outcome probably have a lot to do with the process that led to the outcome, even if the outcome might not be optimal with regards to some external standard of fairness.[i] However, I had the feeling that this was rather a minority opinion at the conference in Bonn. The reason for this most likely was a perception that the world is in a very serious state of crisis (climate change, populism, migration, looming next financial crisis…) and that some urgent and effective action is needed. And one frequently mentioned idea was that this effectiveness can only be harnessed through stronger prioritization and a recognition of the interactions between various policy fields.
Prioritization and interaction of policy fields
There is a growing consensus that if we (as humanity) cannot tackle climate change, every other problem will become more difficult to solve as conflicts around economic resources intensify, which in turn leads to more pressure on systems of redistribution (and thus also on tax systems). Does this mean that we should all stop what we are doing and become climate scientists now? Clearly not. But I think it means that we should take on the challenge and reflect on what our work (for example as scholars of law, taxation, investment, trade, etc.) and the issues we discuss mean in light of other issues such as the rising temperature of the earth or the Sustainable Development Goals’ principle of “Leave No One Behind”. We clearly need to break up the siloes[ii]. One participant of the conference stated “You cannot reform the trade system if the reform hurts the climate system”. Maybe it’s time to start thinking in similar terms about the tax system? Although making “smarter” decisions in the sense of taking interactions of policy fields into account will probably never solve the dilemma of the trade-off between legitimacy and effectiveness, it may nevertheless increase the credibility of the club governance model.
[i] Richard M. Bird provides a positive interpretation of the BEPS Inclusive Framework in that sense. See Richard M. Bird, “Reforming International Taxation: Is the Process the Real Product?,” Revista Hacienda Pública Española 217, no. 2 (June 2016): 159–80, https://doi.org/10.7866/HPE-RPE.16.2.5.
[ii] At a workshop in Bruges on 14 January 2019 we will be attempting to do so and discuss “tax” and “development” together and reunite researchers from various fields as well as representatives of two EU departments of the EU commission, namely taxation and development cooperation.