Council of Councils Tenth Regional Conference

On November 5–7, 2017, the Argentine Council for International Relations (CARI), in collaboration with the Council on Foreign Relations (CFR), hosted the tenth regional conference of the Council of Councils (CoC) in Buenos Aires, Argentina. The CoC initiative is funded by a generous grant from the Robina Foundation for CFR’s International Institutions and Global Governance program. The views described here are those of workshop participants only and are not CARI, CFR, or Robina Foundation positions. The Council on Foreign Relations takes no institutional positions on policy issues and has no affiliation with the U.S. government. In addition, the suggested policy prescriptions are the views of individual participants and do not necessarily represent a consensus of the attending members.

Introduction

As the world experiences a resurgence of populism, nationalism, and authoritarianism, previous orthodoxies—from the overall benefit of open trade to the importance of global institutions—are now being questioned. Donald J. Trump’s America First policies and skepticism of the liberal international order have intensified uncertainty about prospects for international cooperation, given the United States is heavily involved in the existing order. Moreover, as globalization and rapid technological innovation have helped create immense wealth in advanced and emerging economies, they have also resulted in economic dislocations and broad income disparities. The tenth regional conference of the Council of Councils held separate sessions on how to revitalize the Bretton Woods institutions, reverse the fade of liberal democracy, combat transnational organized crime and corruption, and mitigate the humanitarian and political crises in Venezuela. To discuss these issues, thirty-one delegates from twenty countries gathered for the conference in Buenos Aires.

Reforming the Bretton Woods Institutions

The diffusion of economic power and emergence of regional institutions is changing the global financial architecture. While the International Monetary Fund (IMF) has instituted changes in its quotas and voting power to more accurately reflect the current global balance of power and economic realities, conference participants agreed that further reform is necessary to preserve the institution’s political legitimacy. One participant argued that without further reform, Western-dominated multilateral institutions associated with Bretton Woods risk becoming archaic, as they would be playing a twenty-first-century game by twentieth-century rules. Unfortunately, deep reforms are extremely difficult to enact because countries that hold more power are unlikely to give it up willingly. One participant noted that the United States may not remain the IMF’s largest shareholder forever, and therefore giving up its veto now, before other countries gain that power, could serve U.S. interests better.

On infrastructure and connectivity, participants noted that although policymakers had placed significant hope on the ability of the Bretton Woods institutions to fuel public-private partnerships for infrastructure development, the cost of capital and assumption of risk proved too high for many private sector companies. The perceived failure of the Bretton Woods institutions to get the private sector involved, the lackluster results of its so-called Washington Consensus policy model, and increasing infrastructure needs in Asia have spurred the emergence of regional bodies such as the BRICS New Development Bank (NDB) and the Asian Infrastructure Investment Bank (AIIB).

While some participants viewed the new regional institutions as rivals to established institutions, others argued that no one institution can finance the kind of investment that the world requires—especially developing nations in Asia. China’s Belt and Road Initiative (BRI) will help create much-needed infrastructure for many developing countries, but BRI faces economic and political challenges as well as governance and implementation issues, and it cannot meet all regional infrastructure demands without international support. In addition, many participants worried about the geopolitical and geostrategic implications of the ambitious project.

Recommendations

• The Bretton Woods institutional processes and leadership roles need to take into account new geopolitical and geoeconomic realities. Priorities should include creating a formal process for selecting the IMF’s managing director and further reforming the quotas and voting rights systems to give emerging countries greater voice. Delaying reforms increases incentives for emerging economies to turn to new institutions.
• Bretton Woods institutions should bolster cooperation with new regional development and financial institutions such as the NDB and AIIB. This move will not only allow for pooling of resources but also sharing of geographic and sectoral expertise.
• Public, private, and multilateral funding institutions should create and promote better hybrid risk-sharing models among themselves to boost public and private financing for infrastructure projects.
• The IMF should increase the involvement of civil society and nongovernmental organizations in its policymaking. The fund should promote citizen-based accountability and transparency in its loan programs by working with civil society organizations to strengthen country ownership of its reform policies.

Strengthening Liberal Democracy

Despite an increase in their numbers since the end of the Cold War, democracies face several challenges today: rising inequality and a perceived loss of national and cultural identity, decreasing commodity prices (in emerging Latin American economies), increasing social and political polarization, and the growing influence of authoritarian regimes. One result has been a reduction in the proportion of young people who believe it is essential to live in a democracy. Liberal democracies also face the challenge of populism. The relentless news cycle and the proliferation of social media diminish the tone of public debate and make it easier for people to insulate themselves from other points of views.

A cohort of nationalist strongmen across the globe also presents a significant challenge to liberal democracy and the liberal international order. Insular and illiberal tendencies suggest that the most salient political divide today is not between the left and right but between open and closed. This trend harms prospects for international cooperation. For example, Trump’s dismissive tone toward international cooperation is deepening the uncertainty about the future of the liberal order because the United States is involved in almost every element of international cooperation. As one participant put it, when “the leader of the free world doesn’t believe in the free world,” there is a demonstration effect.

Participants argued that other countries need to respond to the illiberal challenges or they would risk the relative stability that the democratic world has enjoyed for the past seventy years. Participants also discussed the “continued doublespeak” of some supporters of liberal democracy who too often ignore or tolerate terrorism, growing inequality and unemployment, and the waning influence of international law and institutions—developments that are detrimental to liberal democratic politics.

Recommendations

• National governments and think tanks need to improve their educational efforts. Better education in civics, debate, ethics, and history will enable a more reasonable and less polarized political sphere. Think tanks in particular have an important role to play in providing a forum where divergent ideas can be discussed and nonpartisan, fact-based analysis can counter the spread of disinformation.
• National governments and thought leaders in countries with long-lasting liberal democratic traditions should not take for granted the continued acceptance of liberal democratic principles among their population. They should advocate for, defend, and debate the principles of liberal democracy. Forums such as the Council of Councils and its member institutions should launch a global debate on the principles of liberal democracy—its origins, history, and results—to showcase the economic growth and stability it has helped ensure for nearly three-quarters of a century.
• Governments should improve domestic policies to promote macroeconomic stability; social inclusion; political participation; and effective, accountable, and transparent institutions.
• Multilateral institutions such as the International Monetary Fund, Organization for Economic Cooperation and Development, and World Bank should coordinate policies and share best practices with countries on how to combat inequality and promote macroeconomic stability.

Combating Transnational Organized Crime and Corruption

Transnational organized crime (TOC) and corruption threaten peace and human security globally, impede growth, exacerbate inequality, worsen poverty, and play a major role in armed conflicts. Unfortunately, transnational criminal enterprises are one of the biggest beneficiaries of globalization. National law enforcement agencies function within sovereign borders while criminal networks take advantage of the greater mobility of goods, capital, people, and ideas. Several participants argued that efforts to combat TOC should be implemented at the regional—rather than global—level to better reflect and adapt to local circumstances. Furthermore, because international institutions have only modest power to enforce laws or constrain behavior, national governments need to develop and implement such programs with an emphasis on local capacity building. International coordination can also support region-specific policies through enhanced information sharing, among other efforts.

Domestic political will is crucial in combating TOC and corruption and addressing their underlying causes. Recurrent causes include inadequate laws, bad governance, poorly paid officials, and a political culture that incentivizes citizens to bribe officials. Without sustained effort from national governments, necessary reforms will not happen. Governments and donors also need to harmonize security and development approaches to combating organized crime.

Sovereignty remains a barrier to international and regional efforts to combat organized crime. One participant argued that international institutions could provide a counterweight by mandating external audits of government finances to confirm national commitments to fight TOC and corruption, with noncompliance resulting in expulsion from international institutions. However, other participants objected to this proposal, noting that countries sensitive to perceived international interference would resist such naming-and-shaming efforts. Finally, because the growth of TOC in one sector frequently accelerates organized crime or corruption in other sectors, one participant proposed that combating illicit trade in wildlife should be given the same priority as the fight against arms, narcotics, and human trafficking.

Recommendations

• Civil society and private sector actors, local agencies, and international organizations should collaborate to incorporate more creative responses to TOC and corruption. Initiatives could include creating a trust fund to ramp up the UN Office on Drugs and Crime’s data collection capability and better integrating law enforcement agencies dedicated to counterterrorism and organized crime. However, states should avoid over militarized responses that do not target the root causes of crime.
• Governments should modernize domestic judicial and police services. Potential initiatives include the professionalization, education, and modernization of police forces—such as by increasing police salaries, which would enhance accountability of officials and strengthen governments’ hand against corruption and infiltration by criminal networks. Another initiative is the regional unification of transnational criminal codes for better coordination.
• States and international organizations should increase coordination to combat TOC; for example, states could work with Interpol to create a universal database to exchange information and best practices to combat transnational criminal activities.
• States should prioritize efforts to combat cybercrime in response to technological developments that have shifted the balance of power between transnational criminal organizations and state governments. Whereas organized criminal groups worldwide have been quick to adopt the internet, many countries lack agencies to counter cybercrime.

Responding to the Venezuelan Crisis

Venezuela is experiencing a profound economic, humanitarian, and political crisis. The country’s economy is in technical default, hundreds of thousands of Venezuelans are fleeing the country, and President Nicolas Maduro is stifling political dissent and threatening basic freedom of expression and human rights. Despite condemnation from forty nations and even Pope Francis, all diplomatic initiatives to alleviate the Venezuelan crisis have failed. Because governments in the region and international institutions have limited influence on Caracas, their capacity to respond is severely restricted. Moreover, no regional consensus exists on how to act, including on the level of sanctions to impose. Even if countries imposed more severe sanctions, such as a ban on the sale of U.S. crude oil and diluents that Venezuela needs to extract its heavier crude, those would most likely not result in regime change, could prolong the crisis, and would harm innocent Venezuelan civilians, as well as increase oil prices in the United States. To date, no outside action has exerted sufficient pressure to persuade Maduro to give up power. Conference participants asserted that any amnesty offered in exchange for the resignation of Maduro and his associates would not be acceptable to the opposition or international groups. All participants agreed that any resolution to the Venezuelan crisis needs to adhere to international law and that military action should be ruled out.

Two additional elements make resolving the Venezuelan crisis difficult. Latin America currently lacks regional leadership, as countries like Brazil are focused on their domestic agendas. In addition, the Maduro regime is financially supported by China, Cuba, and Russia; the support counters economic and political pressure from other countries. Participants also noted the geostrategic importance of Venezuela for China and Russia, whose leaders will continue to support Maduro. One participant made the case for doing nothing about the Venezuelan crisis, because the cost of regime change would exceed the potential benefits. For instance, if the United States imposed stricter sanctions or took a more aggressive stance on Venezuela, that move could poison U.S.-Latin American relations for an entire generation.

Recommendations

• Governments and international institutions should continue diplomatic efforts to mediate the political crisis, initiatives to empower the opposition, and pressure to hold free and fair elections.
• States should rule out military intervention. Previous experience has shown U.S. military intervention generates anti-American sentiment, which could be used by Maduro as a rallying cry to acquire public support. Additionally, widespread opposition to a military resolution in the region means a unilateral intervention could sour relations between the United States and countries in Latin America.
• Governments in the region and the United States should increase targeted, individual sanctions and redouble efforts to name and shame prominent regime figures.
• Latin American countries should increase policy coordination among themselves to deal more effectively with the humanitarian dimension of the crisis—particularly the refugee situation evolving in neighboring countries.
• The United Nations should review the possibility of an oil-for-food program, similar to the one implemented in Iraq from 1995 to 2003, as cutting off Venezuelan oil revenue would further disrupt food imports and deepen an already severe humanitarian crisis. A UN-run program that controls the export revenue to ensure that the money can only be spent on humanitarian priorities such as food and medicine could work, provided it is run with greater accountability than in Iraq.