Strenghtening the Rule of Law in Global Finance

The second document prepared by The Group of Lecce.Our ambitious step moved from our belief that the global economy needs today a system of governance that is both effective and legitimate. Only a governance system that is perceived as legitimate by the world nations and their citizens—we stressed in our document— can ultimately make choices that are accepted and effective: legitimacy and effectiveness, while trading each other off in the short term, are mutually complementary in the long haul.In such a spirit, our proposal aimed to transform the International Monetary and Financial Committee of the IMF and the Development Committee of the World Bank and IMF into “the” universal forums where state ministers and governors carry out global financial and development policy cooperation. Unlike any “G” and their derivative country groupings, the two committees truly originated within the framework of the Bretton Woods system to oversee international finance and economic development policies, and were endowed with an internal governance structure that, while requiring major improvements today, was intended all along to give voice to all member countries in a way that has remained unequalled by any of the “G’s” so far mobilized. Our proposal, also, included many elements to reform the corporate governance system of the IMF and the World Bank, with a view to enhancing their legitimacy and the effectiveness of their operation at the core of the global economy.As you prepare to meet in Pittsburgh, we wish to solicit your attention to aspects of a fundamentalcomponent of global policy in our times: the effectiveness and legitimacy of “soft law”. Soft law isessential to achieve economic and financial stability in a world of nations without a global government. Although inherently flexible and voluntary, very often many new soft-law provisions in finance generate obligations to which governments and peoples become subject. But the making of soft law at a time when it is increasingly accepted that all nations and individuals possess the right to a voice and for their voice to be heard requires that the processes leading to the formation and implementation of soft law reflect criteria of procedural openness and transparency, participation of nations and peoples, and accountability vis-a-vis the global community of those involved in handling the processes. The soft-law making practices currently adopted by the international financial community do not reflect these criteria (far from it, in fact).