Why International Organizations Are Good

International Organizations are, in general (not denying there are some bad ideas out there), good because the vast number of them tackle the problem of asymmetric information that is necessary for Capitalism to operate freely and for political collective action conundrums to be solved.



One of the key factors that is necessary for capitalism to work is information, perfect capitalism would need perfect information. What is this? In order for me to buy the cheapest good I need to know what is the cheapest good, in order to produce the cheapest means of production I need to know where to produce and with what (along with a host of other examples). The degree to which we deviate from perfect information is the degree to which we stray from perfect capitalism.
This occurs as some people know the cheapest means of production/purchase while others don't. This results in producers being able to charge higher prices than the "invisible hand" would price (since other producers don't know how to produce as cheaply or have access to the resources the advantaged producer does). We allow this to occur in certain circumstances, inventions/new management techniques, etc, as a reward for innovation. But even these protections are given a limited temporal protection since we recognize the greater good of society is served by allowing every producer to eventually use previous innovations and adapt them to make new ones. This is why a Copyright doesn't last forever. Secondly, if we come up with a common set of rules that businesses have to follow, we need something capable of ensuring that everyone is complying to prevent collective action collapse. In order for all of this to occur we need some type of regulatory body. If it's domestic, it's a type of government organization, internationally, it's a supranational org. Otherwise, none of the above would occur. The concept of the "unfettered market" is misleading in the sense that without regulatory bodies, the producers will exploit information advantage and the market wouldn't be able to operate at its maximum capacity. People wouldn't innovate since everyone else would steal the idea; countries would allow their businesses to compete unfairly relative to their competitors which would compel countries to institute stiff protectionist measures. In the international state of nature, everyone would be acting in their own self interest and we would be worse off. Short of conquering the world, we need international organizations.

(the other instances in which they help the asymmetry of information is standardizing various international goods making it easier for everyone to compete, see the UN's International Telegraph Union , or all the work the World Bank and the IMF do to shape the economies of the developing world to be more open to globalization)

So how does this translate into International Organizations (IOs) and the hypothesis that IO's grow beyond our capability to control? (For some reason, this seemed to be important when we were talking about Copenhagen back in November)

I say, IT IS ABSOLUTELY NECESSARY for market oriented bodies to grow beyond our perceived ability to control. I'll deal with the phantom menace of Copenhagen and the UN after I drive this home.

In order for actors/nations to be willing to buy into an IO, they have to believe in the legitimacy of the organization in question. If I'm po-dunk country X trying to join the WTO, I have to believe that my goods will be treated just as fairly as US/European goods, otherwise, it makes absolutely no sense for country X to open their markets while being excluded from ours (and if it were the case, they would be justified in remaining closed to us). It's real easy for us to SAY we are going to be fair, every treaty since the dawn of time pledges fraternity between nations, but only the ones with teeth are able to fulfill their purpose. The teeth are the bureaucrats that are more concerned with their organization over their nationality. This is why the Dispute Mechanism in the WTO is viewed to be fair by everyone: China, US, EU, etc. We've won and we've lost (in fact I think we've lost a little more than we've won in quantity of cases) losing is neccessary to make it fair: fairness = legitimacy (which means other nations participate in the face of the Collective Action problems), fairness = loss of our national sovereignty (when we comply with WTO arbitration), fairness = Capitalism.

In another example, the European Court of Justice created within the European Coal and Steel Community was given authority over the member state governments pertaining to lawsuits that would inevitably arise from the construction of the Coal and Steel free market, small members (the Benelux Countries) had to believe that their interests would be just as equitable as the large ones (Germany/France). And despite de Gaulle's best efforts, the supranational authority of the court has proven very successful in ensuring that the ECSC, the EEC, and the EU operates relatively fairly. Any perception that is different, that is, the large and powerful country's are able to "control" an IO would make it prohibitive/expensive for smaller countries to participate in. They're willing to surrender their sovereignty to an IO, but not necessarily, to the IO that is perceived to be a stooge of the powerful. If the WTO couldn't defy the US, what would be the point in opening up competition to free trade yet allow the US to skew the rules? If the EU common market primarily benefits France and Germany, why would Slovakia, Poland, and Romania want to join? Only those organizations that provide an enforcement mechanism that is capable of enforcing the equitable distribution of goods to members will be able to get countries to overcome collective action problems and induce countries to surrender their sovereignty to join. That means there needs to be checks on our own as well. Yet such checks are preferable to the economic "state of nature" that would exist without them.

How does this translate to the litany of failed organizations and Copenhagen?

Easy: it has to profit the big countries as well. We don't allow organizations to exist that will cost us more than we will gain. All the biggest countries in the world have a vested interest in ensuring that the UN doesn't check their power and that is why they have a veto. When Coophenagen couldn't agree on a mutual payment/enforcement mechanism (because the Europeans were unwilling to pay without China opening itself to inspections), there was no point to the summit. This is why non-economic organizations are so difficult to establish and generally fail if they do so: there's is no benefit (in Europe's case through harsh payments for C02 reduction, or China --> inspection teams). In order for organizations to have meaning, the major powers have to participate, this gives them the ability to ensure that rules of the road won't injure them, or at least, that it won't injure them more than they will gain. But people won't simply hand over sovereignty because we ask for it, we actually have to make something productive.