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Review by Stephen Kirchner

Guiding Global Order: G8 Governance in the Twenty-First Century
John J. Kirton, Joseph P. Daniels and Andreas Freytag (eds)
Ashgate, Aldershot, Ê2001, US$74.95,Ê 368pp,Ê ISBN 0 7546 1502 2

THIS VOLUME is the fifth installment in Ashgate's G8 and Global Governance Series. Previous volumes have proven a valuable resource for those with an interest in the activities of the G7/8. The G7/8 is not a standing institution with a secretariat or even a web site. This can make it difficult to obtain much of the primary source material that has been collected in these volumes.

This collection has its origins in a number of academic seminars and public fora held around the G7/G8 meetings in Germany in 1999, in addition to a number of contributions flowing from the activities of John Kirton's G8 Research Group at the University of Toronto.Ê The collection contains a wide range of perspectives on global governance issues in the G7/8 context. It suffers from the usual flaws of an edited collection, but makes a useful contribution nonetheless. In particular, some of the contributors adopt an explicitly classical liberal perspective.

Perhaps the most interesting contributions in this regard are Andreas Freytag's chapter on macroeconomic policy coordination and Razeen Sally's on global governance. Freytag discusses the role of international institutions such as the G7 as external commitment devices, which allow governments to adopt policies that might otherwise be successfully challenged by domestic rent-seeking behaviour. In particular, Freytag suggests that international macroeconomic policy coordination should be based on agreement on 'an economic policy framework committed to stability' (p. 26) that enables governments to commit to non-inflationary monetary and exchange rate policies that might otherwise succumb to domestic political pressures.

However, this is more of a normative analysis of what G7 cooperation could be, rather than a positive analysis of what the G7 have come to represent. As Freytag would no doubt concede, macroeconomic policy coordination among the G7 has more often than not taken the form of ad hoc discretionary policy interventions rather than a commitment to a rules-based framework for international monetary stability. Freytag also fails to give due recognition to the trade-offs underlying the rules versus discretion debate. Commitment to a rule-based framework for international macroeconomic policy coordination may involve some loss of flexibility and interfere with market-based adjustment mechanisms. The challenge is to constrain the discretionary powers of policymakers, while at the same time not interfering with the market's own adjustment mechanisms. This points to a minimalist framework for international monetary stability that is more proscriptive than prescriptive.

Razeen Sally's chapter contains a more realistic assessment of the current state of the institutions for global governance. Sally argues persuasively that many of the recent efforts to enhance global governance serve merely to graft existing domestic government failures on to the international system (p. 55). Sally maintains that the contemporary debates about global governance can be usefully evaluated from the perspective of the debates between Lionel Robbins and Hayek on the one hand and Wilhelm Ropke on the other about the institutions required to promote a liberal international order.

Robbins and Hayek argued for a multilateral approach to the promotion of a liberal international order, reflecting their inter-war idealism and disaffection with the international depredations of national governments. Ropke, however, did not see national sovereignty as the key problem with the international order. Rather, the problem was the invasion of civil society by politics within nation-states, which then spilled over into conflict in the international arena. Ropke consequently argued for a bottom-up rather than a top-down approach to building a liberal international order. In Ropke's view, the focus should be on 'unilateral, example-setting measures at the national level rather than concerted intergovernmental action' (p. 58). This view finds a more contemporary exemplar in the form of Jan Tumlir, who made a number of important contributions to these debates in the early 1980s and served as research director for the GATT. One suspects that the later Hayek would also be sympathetic to this view.

Sally evaluates a wide range of institutions for global governance from this perspective, including the G7/8, IMF/World Bank and the WTO and finds them wanting in important respects. Sally argues that the WTO 'comes closest to a classical liberal conception of how an international agency should behave,' although concedes that 'the negotiating process has a pre-programmed mercantilist logic' (p. 66). Sally's chapter demonstrates that the classical liberal tradition has a distinctive contribution to make on issues of global governance, a contribution that deserves a wider audience.

Juergen Donges and Peter Tillmann's chapter on Challenges for the Global Financial System is a useful examination of recent efforts to enhance international financial stability. They argue for a stronger focus on issues of governance at the expense of proposals for capital controls, managed exchange rate regimes and the perennial Tobin tax. While the authors are appropriately dismissive of the latter proposals, the same cannot be said of international policymakers. The Tobin tax has been revived once again this year in European policymaking circles, while as recently as 1999, the Lafontaine-Strauss-Kahn initiative sought to establish a target zone for the euro-dollar exchange rate. Subsequent developments in the market-determined exchange rate for the euro demonstrate how disastrous such a managed exchange rate regime could have been for the Eurozone. Much of the contemporary interest in the Tobin tax is as a simple revenue-raising exercise, the implicit argument being that the intended beneficiaries of the tax are inherently more worthy than the profitability of the financial sector.

John Kirton's chapter on the G20 is a useful antidote to some of the exaggerated claims made by Australian politicians, Treasury and RBA officials about Australia's role in this institution. Kirton's chapter makes clear how marginal this role has really been. Indeed, the original plans for the G20 did not include Australia at all. Australia has sought to play an active, intermediary role between the more liberal Anglo-American countries and the less market-oriented Europeans and emerging market economies in international financial institutions. But little of that role is evident in this chapter. A crude quantitative analysis also makes the point. Australia scores 11 entries in the index to this volume. Canada, a comparable country in most respects, scores more than three times as many entries, although its membership of the G7 largely accounts for this.

In any event, the role Australia aspires to play in this context sits ill at ease with its own experience. Australia has been a significant beneficiary of international and domestic financial liberalisation. Yet Australian officials have been very active in promoting the idea that a less liberal approach to the governance of international capital markets is required to underpin international financial stability. Many of the contributions to this volume illustrate why this approach is mistaken. It is certainly true that the current framework for the governance of the international financial system has promoted financial instability. But many of the proposals for reform fail to address these problems because they are motivated by a deep suspicion of the self-ordering properties of markets.

Perhaps the most disturbing aspect of many of the debates about global governance is the fact that many policymakers appear to have such a weak commitment to the intellectual underpinnings of a liberal international order. For its part, the hostility of the anti-globalisation movement (rather politely referred to on page two of this volume as 'civil society actors') is often directed at institutions such as the IMF/World Bank and WTO that have little or nothing to do with a liberal conception of the institutions appropriate to the task of global governance. It is in this context that the classical liberal tradition has a distinctive and compelling contribution to make. This volume is to be commended for including this perspective.

Review by Sarah Tyrrell

The Satanic Gases: Clearing the Air About Global Warming
By Patrick J. Michaels and Robert C. Balling, Jr.
Washington, Cato Institute, 2000, US$10.95, 234 pp., ISBN 1 882577 92 2

'GLOBAL WARMING-get over it' is the theme for this concise and timely coverage of the climate change debate. Patrick Michaels, of the University of Virginia and Robert Balling, Jr., of Arizona State University, work methodically through both the political and scientific aspects of the global warming issue.

An interesting feature of this book is while the authors don't question that global warming is occurring, they do question the predictions of impending disaster made by the United Nations, US Government and other entities involved in the debate.

The Satanic Gases fundamental theme is the relationship between science and politics. The authors frame this relationship using Thomas Kuhn's theory from his 1962 work, The Structure of Scientific Revolutions, which postulates that scientists perform research and experiments to verify that the 'current paradigm' for a field is indeed correct. In this way, nature is forced into the preformed and relatively inflexible box that the paradigm supplies. The 'boxed' scientific paradigm, in this case, is that human activity has led to climate changes in which a hellish climate catastrophe for the planet is imminent.

Politics has greatly influenced the global warming issue, and consequently much time is spent discussing the relationship between government and funding for research with reference to James Buchanan's public choice theory. The US federal government is the single largest provider of funds to global climate change research in the USA, and Buchanan theorises that when a monopoly source of funds is present, and that source is biased toward a particular political view, then the recipients of the funds will support that political view. Such is the case for the global warming issue.

The authors make it clear that they support the view that there is human influence on the climate. Their counter-argument is that the result of this human influence is just not that bad and, in many ways, warmer temperatures and increased carbon dioxide concentrations will have positive results for the planet and its inhabitants.

A large portion of the book is devoted to explaining and discussing the scientific aspects of climate change, which at times, for the layman, can be hard going. The clear overriding point however is that the climate models used by most national entities and the UN Intergovernmental Panel on Climate Change (IPCC) are shown to have vastly overestimated predictions of temperature increases, sea level rises and the frequency of storms, flooding and drought due to climate change.

The other pertinent point discussed is the benefit of an increased carbon dioxide concentration in the atmosphere. The positive effects of increased carbon dioxide concentrations are greater crop productivity, increased plant mass and growth rate, as well as enhancing a plant's ability to grow in the presence of environmental hazards. This has benefits not only in the production of food for an ever-increasing number of people in the world but also for environmental aspects such as the reduced need for water, pesticides and land area.

The Earth's climate is not constant and since the 'Little Ice Age', which ended in the mid-19th century, planet surface temperatures have been steadily rising although there has been little net change in the 'free troposphere' (being the atmosphere not affected by surface disturbances).

Predictions in the IPCC 1990 report indicate warming rates of between 2.5¡C to 4?C per decade. In reality, we have seen an increase in temperature of 0.15¡ per decade and this is largely confined to a very small cold area in the depths of winter. The IPCC, in an attempt to retain its paradigm of rapid climate change, blamed the lack of warming on the countering cooling effect of sulphate aerosols. However, Michaels and Balling tell us that there is good reason to suspect that sulphate aerosols are not able to explain the errors in the initial climate models. For example, this theory would mean that greenhouse warming should be highest in the Southern Hemisphere where there are less people and consequently fewer sulphates but in reality, warming is occurring more rapidly in the Northern Hemisphere.

Lengthy discussion surrounds the alternating predictions of increased drought and torrential flooding. Considerable evidence shown in graphs and diagrams suggests that there is a trend away from droughts and that warmer air will produce conditions conducive to heavier precipitation. Here the authors suggest that most parts of the world would benefit from more precipitation but they seem a little tentative in addressing the effects of increased rainfall on countries which are increasingly urbanised and where natural systems of flood checks are altered or removed.

They do, however, dispel the myth of unprecedented melting of glaciers and polar ice-sheets causing catastrophic rises in sea levels. The IPCC has modified its initial unrealistic forecasts to a range of between one and three feet. This level is based on overestimated predictions of temperature rises which do not take into account that the greatest increase in temperatures will occur in winter. The largest cause of glacial melting is prolonged warming of summer daytime temperatures. Winter temperatures have little effect on melting.

The Satanic Gases offers an excellent insight into the scientific and political aspects of the climate change debate. The data and discussion is based on American examples and there are many references to American academics and national bodies associated with climate change that have little meaning to the outside observer. Whilst reading this book may be hard work for those not versed in climatology and American politics, the effort is extremely worthwhile for anyone concerned about global warming. A broad range of issues are developed and discussed in a logical and succinct manner, despite the tendency for technicalities. The main message of the book is an optimistic one and a welcome relief from the populist rhetoric of the doomsayers.

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