The Economic and Social Council, the Group of Eight and the constitutional paradox.

AT A GUEST LECTURE I gave at the University of Stockholm in 2004 on the European Union's constitutional development, the audience was fascinated by the description of the discrepancy between "competitive Europe" and "social Europe" as it had developed over time.

On a global scale, the United Nations constitutional paradox can be summarized by the observation that, despite the initial fervour of majority of nations at the United Nations Conference on International Organization in San Francisco in 1945 for a much more equitable distribution of scarce resources, the Charter of the United Nations and its subsequent evolution have given rise to a worldwide setting, where the dominant allocating mechanism of scarce resources is worldwide markets. At the Conference, the United States Secretary of State expressly mentioned the United Nations Economic and Social Council as being of the utmost importance. "Widespread economic insecurity and poverty, ignorance and oppression breed conflict and give aggressors their chance." (1)

Despite the fact that an overwhelming majority shared this view, it was paradoxical that in the UN Charter the Council's powers were merely recommendatory and were not strengthened by the General Assembly's recommendatory powers. In addition, the "relationship agreements" between the Council and the UN specialized agencies were not conducive to its effective coordination of the International Monetary Fund (IMF) and the World Bank Group. What is equally striking is the constant reluctance of the developed nations to endow the General Assembly, and indirectly the Council, with effective powers on the allocation of international funds while still in favour of retaining the power of the Bretton Woods institutions, over which the Group of Eight (G-8) has effective control.

A complementary development was the establishment of the G-8 in 1975 at the Conference of Versailles and its ascendancy. The conference soon became a yearly event, where Heads of State and Government of Canada, France, Germany, Italy, Japan, the Russian Federation, the United Kingdom and United States, together with representatives of the European Union, meet in a private setting in order to discuss the most pressing economic and financial policy issues. Because of its enormous influence in the Bretton Woods institutions, the G-8 has been able to effectively coordinate economic and financial developments on a global scale, such the 1985 Louvre and 1987 Plaza Accords.

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In contrast to the Economic and Social Council, the Group of Eight is endowed with certain effective institutional characteristics: the small number of its members, which facilitates decision-making by consensus; direct implementation of decisions by the national administrations of its members; and shared interests as major industrialized nations. However, in contrast with the G-8, Gunnar Myrdal's observation concerning the Council is still valid: that it had "sunk to a level of unimportance, which must appear in view of the declared purposes of the Charter". (2) Any Charter or contract between nations or individual/collective parties can be viewed in terms of constitutional investment. If we approach "economic prosperity" in a broader sense, (3) the benefits anticipated at the San Francisco Conference were of "future peace and prosperity".

Constitutional investments are distinguished by three characteristics: Firstly, constitutions, contracts and laws derive their "raison d'etre" from the characteristic that they are not readily renegotiable. The consequence of this inertia, is that constitutional investments become risky. Secondly, they have a "foundation characteristic" to the extent that they serve to effectuate an unknown quantity and quality of other rights, and thereby increasing the uncertainty of future benefits. For instance, once a body is provided with certain mandatory powers, it is not clear how these powers will be used and in what circumstances. Thirdly, the number of variations of a constitutional investment is reduced. The riskier a constitutional investment is, the more prone parties are to reduce the risk by promoting a more pronounced constitutional variation in order to remain "on the safe side". This limits the proposed variations and thus equally limits the scope for bargaining between investing parties.

In the context of the UN Charter, the following paradox is encountered: despite the strong motivations by representatives at the San Francisco Conference to attain a world "free from want" and perceive the Economic and Social Council as an organ of utmost importance, the Charter gives the Council the power only to make recommendations and hardly any to coordinate effectively the specialized agencies, notably the IMF and the World Bank. More specifically, it is astonishing that, despite the overwhelming majority in terms of the number and population, the essential constitution of the United Nations did not essentially change in fifty years in favour of developing countries.

When two parties engage in a constitutional investment, the particular constitutional variation preferred by the party, whose opportunity cost related to non-investment is relatively lowest, will become the variation governing the common investment. For example, country A, which is situated on the continent, and country B, which is an island, want to invest in public transportation between them. Country A wants a ferry so that it can easily regulate the flow of goods and passengers, while country B prefers a bridge. Assuming that both countries are equal in size, population and wealth, if we define the non-investment opportunity costs as loss incurred when one or both parties will not engage in any kind of common investment, these opportunity costs are obviously greater for B. Without any transportation link to the continent, country B would be isolated and therefore more vulnerable, while A could still trade with its neighbours. As the opportunity costs in this case are unevenly allocated, country A's choice of a ferry is likely to be implemented. There are two important factors to consider here, which are quite similar to the choice of a constitution: that the number of alternatives are small; and that the risks of a bridge, in contrast with a ferry, stem from its "inertia", as well as its "foundation characteristic". Once a bridge is built, the number of people, the value of goods and services, and its long-term economic consequences are incalculable.

The constitutional paradox as to the United Nations Charter can be explained as follows: both developed and developing countries desired a common constitutional investment-the United Nations. As security was an issue, where apparently the opportunity costs of non-investment were reasonably evenly allocated between developed and developing countries, the Security Council was endowed with considerable powers. As to economic issues, the common interest from both developed and developing countries as to coordination-in the form of the Economic and Social Council-was clearly present, although the opportunity costs were unevenly allocated. The prospect of facing complete uncertainty in the realm of international economics without any coordination was riskier for the developing countries than for the developed nations.

As the non-investment opportunity costs for developed countries were lower, the constitutional variant was chosen in accordance with their preferred variant: the Economic and Social Council with relatively few powers. An interesting aspect in this context is that despite the relative increase in the number of developing countries, two UN Charter revisions increased the number of membership but not the powers of the Council. The G-8, however, was able to compensate for the lack of global economic coordination from the point of view of major industrialized countries, while making use of the existing autonomy of the Bretton Woods institutions in the context of the UN Charter. The Council, despite an increase in its membership, the status of its representatives or the intensity of its dialogue with the Bretton Woods institutions and the World Trade Organization, does not have by far, due to its very limited powers, the political and operational "clout" of the Group of Eight.

The constitutional paradox can be of guidance as to new possibilities to enhance the role of the Economic and Social Council. If it were possible to discover a policy area within the Council's competencies in relation to which the opportunity costs of non-investment were evenly allocated between developed and developing countries, then the Council would be endowed with more powers. An example could be the perceived link between poverty and international security. It is in this context that Secretary-General Kofi Annan could be quoted: "If not now, when?"

NOTES

1 Department of State, The United Nations Conference on International Organization, San Francisco, California, April 25 to June 26, 1945: selected documents, United States Printing Office, Washington, 1946, p. 254.

2 Quoted by Sharp, Walter, "The United Nations Economic and Social Council", Columbia University Press, New York, 1969, p.1.

3 Heertje, Arnold, "Echte Economie", De Arbeiderspers, Amsterdam, 1979, p. 109.

Sybren Elias Hannema, former Editor-in-Chief of "Nouvelles universitaires europeennes"--the official English/French publication of the European Commission--has been a visiting professor in international law and economics in several European countries. He is currently doing research on the Group of Eight and the UN Economic and Social Council.

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