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International finance and human rights

 

March 7, 2006
iranian.com

Excerpts from chapter 3 of “THE IMF, THE WORLD BANK GROUP AND THE QUESTION OF HUMAN RIGHTS” by Bahram Ghazi, Transnational Publishers, Ardsley, New York, 2005. Bahram Ghazi received his PhD. from the Graduate Institute of International Studies at Geneva. He is a human rights officer at the Office of the High Commissioner for Human Rights, Geneva.

Introduction
When I started my research on the question of human rights in international financial institutions, the debate was not yet launched. I encountered much scepticism and many people questioned the existence of any link between human rights and international financial operations, the IMF and the World Bank. Now, this debate has an important place inside international forums and is seriously considered by civil society and scholars. But before explaining the legal aspects of this research, an overview of the context is needed.

Globalisation, Finance and Economy
It is a truism to say that, since the conclusion of the Bretton Woods agreements in 1944, the world has evolved drastically. International relations have undergone great changes. Politically, we have witnessed the shifts in the polarity of power centres. The evident rift between Industrialised and rich countries and the Least Developed Countries (LDCs) and Developing Countries having, at one stage, been put aside because of the political battle between East and West, is now evident in an even more dramatic way. At the same time, actors within the international arena have changed in nature and in relative power. New non-state actors such as Trans-National Corporations (TNCs) or individuals have become important elements of the international system, although their place in it is still not well defined.

The concept of globalisation is the most important issue in international relations today. Historically, the process is not new, and can be traced back to the development of elements such as international trade, travel, the creation of international structures and inter-state relations. Actually, globalisation is used to designate a global trend for economics and finances to be integrated within a unique international system. Thus the economic aspect of globalisation is important, although it is not the only one, as it touches all other aspects of international relations.

In order to be viable, the process necessitates globalisation in all areas of international relations: politics, law, co-operation, etc. But the pace of globalisation in economic sectors is faster than in other sectors, such as international law. This situation creates subsequent problems and conflicts. For the moment, globalisation could be seen as a process without a conscience because norms issued from humanist values have not been applied to it. It seems unavoidable that a co-operation framework with all the actors concerned, and a legal framework to establish the norms and institutions to implement it, should be set up.

In this context, the implementation of human rights raises numerous questions. International actors are facing the challenge of adapting to changes, whether economic or legal. Some have recognised that the individual should be at the centre of the system, thus putting the emphasis on human rights.

Organisations such as the World Trade Organisation (WTO), the World Bank and the International Monetary Fund have taken a predominant position in the economic and financial system in this “globalisation” process. The result has been a tendency for some people to blame these actors for some, if not all, of the world’s problems. The debate is very chaotic and controversial. Because of the complexity of the issues at stake, a widespread lack of comprehension rules the debate, as if opposing sides were living in different worlds with no common language to communicate. On the one hand, international relations, international organisations, their functioning and activities, and political and economical issues are rarely explained to, or understood by, the average citizen. On the other hand, the lack of global view, old ways of working and thinking, and political interference makes it almost impossible to cope with inter-related problems and with the new global situation for governments and civil servants.

The Interdependence of Issues
The complexity of globalisation and of the international world’s system draws attention to the interdependence and inter-relation of the various elements of the system. As Bradlow and Grossman explain in an article (Bradlow and Grossman, 1995), one of the most important shifts in international relations is that nowadays almost all issues have transboundary effects. There are hardly any problems that have no transnational effect. As Rodrik puts it: “Whether it is labour standards, environmental policy, competition policy, or corruption, differences in domestic practices have become matters of international controversy... The central trade issues of the future are ‘deep integration’, involving policies inside the borders, and how to manage it” (Rodrik 1994, p. 37).

As long as international law “only” covered inter-State relations, and States were responsible for the way in which such law affected individuals, the situation was clear and exceptions could be interpreted under State-to-State relations. The situation evolved drastically when individuals were awarded human rights under international law. A fracture appeared because of the existence, on one hand, of decisions and activities directly affecting individuals and, on the other, the incapacity of the latter to affect these decisions (or only through democratic internal channels, if they exist) or to have effective protective procedures in cases of abuse. The boosting of international activities, the appearance of new international actors and the weakening of State made this separation even more dramatic.

Evolving Human Rights and the financial system
All the above-mentioned elements appeal to the international lawyer. The place of international standards in this worldwide debate on the economic, financial and trade system is sometimes uncertain. This is especially evident when it comes to human rights norms without strong structures of implementation. “From an examination of the international scene today, it may be surmised that we are entering an era of a veritable 'clash of globalisations'”. This is a situation in which the quest for a more vigorous regime of trade and investment is being countered by calls for more rigorous standards of accountability, transparency and democratic methods of operation, from what has become an increasingly “'globalised' civil society”.

Questions to be answered
An important task would consist in looking at these “clashes” from a human rights perspective. Several angles can be tackled: international economics, trade, investments, etc. I have chosen to analyse the field of international finance through the two main international financial institutions (IFIs), namely the World Bank and the IMF. This choice has been determined by several factors. First, these two institutions have been targeted as human rights violators on many occasions. Second, when I started this research, there was hardly any literature or research on the international human rights obligations of these organisations. Third, these institutions have gained a predominant position in international relations, and the impact of their work is vast and affects large sectors of the world’s population, especially in developing countries.

Because of the lack of a legal framework on the topic I will analyse in this work, I must begin by answering some basic questions:

  1. Do IFIs have international human rights obligations?
  2. If yes, what is the extent of these obligations?

Of course, subsequent questions will arise. What is the applicable responsibility regime for a human rights violation committed by an IFI? Is the IFI exclusively responsible or do its members share in the responsibility? What obligations prevail for a member: its obligation to respect human rights or its obligations toward the IFI?

A clear definition of the various concepts and terms used in this research is essential. First of all, and because it is used most of the time in an unrelated manner, we should define what is meant by human rights. “In the most general sense, human rights are understood as rights which belong to any individual as a consequence of being human, independently of acts of law. In stating the existence of human rights, we state that every human being, simply because he or she is a human being, is entitled to something”(Piechowiak, p.3).

But this something must be defined in a legal way for us to analyse in this work. A common legal definition of human rights would be: “human rights are those liberties, immunities, and benefits which, by accepted contemporary values, all human beings should be able to claim “as a right” of the society in which they live”. I would add that these human rights find their concretisation in international legal norms, especially the two main international covenants. In chapter 6, I will further define levels of human rights obligations. In this work, human rights norms are accepted as a legal concept, not a political concept.

The other set of terms to clarify are Economy, Finance and Foreign Direct Investments (FDIs). Economy can be considered as the control and management of the money, goods and other resources of a community via micro and macro-level strategies. It is a global concept that includes trade, finance, investments, etc. Finance, on the other hand, is the management of money and the various means to achieve this management. Finally, FDIs are the flow of money allowing a business to create a branch outside its country.

I will often use the terms International Financial Institutions (IFIs) or the Bretton Woods Institutions (BWI) to name the IMF and the World Bank Group institutions. Of course, this is not quite exact, as there are regional financial institutions too. But as matter of weight, and as models for regional financial institutions, the IMF and the World Bank are the most important. Throughout this work, I will often examine these institutions grouped together. This does not mean that all the remarks are equally valid for all these institutions. We should therefore keep in mind the scope of their work and activities.

A strict legal analysis is not enough to describe the question of human rights for these institutions. That is why an interdisciplinary approach is necessary and, beside strict legal considerations, the historical, political, economic, financial and institutional aspects will also be taken into account.

One of the goals of this study is to clarify the issue of human rights and IFIs to two different types of person. That is why the two first chapters will give a basic overview of these institutions, their structures and functioning for non-specialists in financial institutions and human rights activists. Similarly, chapter 3 will give examples of various activities in which IFIs have been accused of violating human rights norms for non-specialists in human rights, economists and persons unfamiliar with human rights norms.

In order to understand the actual situation of human rights inside IFIs, chapter 4 will summarize the activities of the World Bank and the IMF activities related to human rights, and chapter 5 will be devoted to the political perspective of this debate inside the Bretton Woods institutions. Chapters 6, 7 and 8 will analyse IFIs’ human rights obligations and their extent from a legal perspective. Chapters 9 and 10 will look at the IFIs’ responsibility regime for non-compliance with their human rights obligations and the existing accountability mechanisms. In the light of the first ten chapters, chapters 11 and 12 will try to propose ways in which the situation of human rights inside these institutions may be improved.

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