Benjamin Faude and Kenneth W. Abbott examine ‘Low-Cost Institutions’ and their impact on global governance.

The Covid-19 pandemic has made the world increasingly aware that contemporary global governance takes place not only through formal intergovernmental organisations, but through diverse institutional forms. While global health governance remains centred (somewhat controversially) on the World Health Organization (WHO), it includes a host of varied institutions. Informal intergovernmental organisations (IIGOs) such as the G20 coordinate national responses; trans-governmental networks (TGNs) harmonise and strengthen regulation of pharmaceuticals, medical devices and other products. Transnational public-private partnerships (TPPPs) and multi-stakeholder institutions, such as GAVI – the Vaccine Alliance, play prominent roles in delivering medicines and vaccines, including through a new Advance Market Commitment to finance Covid vaccines for developing countries. Finally, civil society and professional organisations directly provide health services (e.g., Médecins Sans Frontières), respond to disease outbreaks (e.g., Global Outbreak Alert and Response Network [GOARN]), and engage in research, advocacy and funding. The Bill & Melinda Gates Foundation plays a central role, shaping the agenda for global health governance, and supporting development and deployment of new vaccines and other health technologies.

Global health governance points to a larger trend. Over the past three decades, the number of informal intergovernmental organisations (IIGOs) rose from 27 to 72, a 167% increase; transnational public-private partnerships (TPPPs) increased from 26 to 167, a 542% increase; and trans-governmental networks (TGNs) expanded from 25 to 141, a 464% increase.

In a new paper, we treat IIGOs, TGNs and TPPPs as important members of a common and distinct class of transnational institutions we call “low-cost institutions” (LCIs). In this blogpost, we explain what different forms of LCIs have in common, why governance actors choose to create them, and how their proliferation impacts global governance.

What do LCIs have in common?

All LCIs share two characteristic institutional features. First, they are relatively informal, compared to treaty-based institutions. Informality reflects two major traits. LCIs are created by non-binding agreements or understandings, not by legally-binding treaties, and have authority to adopt only non-binding standards, not legally-binding rules; they also feature relatively uncomplicated decision-making procedures. Their second characteristic feature is participation by executive, bureaucratic and societal actors, rather than or in addition to states. Together, these features constitute LCIs as a distinct class of international institutions, notwithstanding the differences among individual forms.

Why do states and other governance actors choose to create LCIs?

Decisions to address emerging cooperation problems through LCIs are based on four common rationales.

• First, the costs of creating, operating and changing LCIs, as well as the sovereignty costs they impose and the costs of exit from them, are all, on average, substantially lower than those of treaty-based institutions. All of these low costs derive primarily from LCIs’ informality.
• Second, LCIs provide specific governance benefits – not equally available through treaty-based institutions – that derive directly from their low costs. These include malleability, flexibility and reduced risk, as well as relaxed constraints on state action. Participation by executive, bureaucratic and societal actors (in IIGOs, TGNs and TPPPs respectively) contributes governance competencies and enhances LCIs’ ability to target and engage infra- and non-state actors.
• Third, LCIs offer many of the general governance benefits provided by treaty-based institutions, although sometimes in attenuated form. For example, LCIs can reduce the transaction costs of cooperation, mitigate asymmetric information, enable working relationships among officials, establish relatively stable behavioural expectations, and construct actor reputations.
• Fourth, LCIs empower their infra-state and non-state participants by enabling them to play direct roles in global governance: IIGOs empower executive officials (e.g., vis-à-vis legislatures), TGNs bureaucratic actors, and TPPPs societal actors. Empowerment incentivises those actors to favour the creation of LCIs (of the appropriate type) when they pursue transnational cooperation.

Taken together, these four factors – low costs, specific and general governance benefits, and empowerment – explain why states create LCIs and thus why LCIs have proliferated.

To be sure, the same institutional features responsible for LCIs’ low costs and specific governance benefits constrain their ability to address demanding cooperation problems. LCIs are relatively weakly institutionalised, and so cannot adopt legally-binding rules or implement strong monitoring and enforcement. As a result, they cannot tackle issues that require highly credible commitments to overcome incentives to defect, as in dilemmas of common interests where distributional conflicts are strong, defection is likely, and noncompliance is difficult to detect. Yet they can effectively address dilemmas of common aversions, and are beneficial where cooperation problems are uncertain or dynamic, or involve non-state actors.

Moreover, the current interstate polarisation and gridlock in many treaty-based institutions render those institutions less able to address cooperation problems of any kind. LCIs can be especially conducive to facilitating cooperation when political opportunity structures are malign. First, even where relations among national leaders are polarised, leaders may accept the need for continued international cooperation in limited areas, e.g., technical cooperation on cross-border interactions. LCIs are well-suited to advance such cooperation, and to do so with limited publicity, minimising leaders’ audience costs with supporters. Second, even where national leaders are polarised, lower-level officials and non-state actors may retain more cooperative preferences; they can advance these preferences through LCIs to the extent they have political space for independent action.

LCIs are also used by sub-groups of states that seek outcomes others oppose. For example, states that support a particular level of cooperation can create a new LCI to (at least partially) bypass defenders of the status quo – or those lacking the political will for enhanced cooperation – in an incumbent treaty-based institution. LCIs are well-suited to this strategy because they lack strong norms of multilateralism, allowing states to exclude “spoilers” while including like-minded actors. LCIs are thus often used to organise “coalitions of the willing.” Similarly, states may use an LCI to bypass opponents of the status quo, who might otherwise force unwelcome change in an incumbent institution.

How do LCIs impact global governance?

Our analysis suggests that the composition of global governance institutions will continue to change over time to include an expanding proportion of IIGOs, TGNs, TPPPs and other low-cost institutional forms. LCIs provide states and other actors an expanded palette of governance options. They are highly malleable, allowing actors to fine-tune governance arrangements to the substantive and political characteristics of particular problems; they are also highly flexible, allowing actors to modify arrangements as problems or demands for governance evolve. Over time, the emergence and differentiation of LCIs should facilitate more nuanced global governance.

LCIs offer pathways for states to at least partially overcome the dysfunctional procedures and gridlock that currently characterise many treaty-based institutions. They allow states to bypass burdensome decision procedures, avoid veto players, and increase support for cooperation by fine-tuning governance arrangements to problem characteristics, contextual features and political sensitivities. LCIs also facilitate compromise among states with different circumstances, preferences and power.

Contemporary global governance is highly institutionalised, so most LCIs are intended to complement incumbent treaty-based institutions. Such layering further broadens the palette of governance options, and often produces the best outcomes, especially for multi-faceted problems, as each institutional form can address those aspects of the problem for which it is best-suited.

At the same time, LCIs are in some sense competitors to treaty-based institutions. While direct competition is rarely intense, LCIs do provide alternatives to incumbent treaty-based institutions for states choosing governance arrangements. Where states prefer LCIs, their choices weaken the authority of incumbent treaty-based institutions, such as the WHO. They also increase governance complexity, which may have negative as well as positive consequences. Finally, states may choose LCIs for political reasons – e.g., to reduce constraints or to signal action without taking costly steps – where treaty-based institutions would govern more effectively. In the aggregate, however, the proliferation of LCIs is likely to produce a more variegated global governance system with beneficial divisions of labour.

This article summarises the research and findings of, ‘Choosing low-cost institutions in global governance’, a paper co-authored by Benjamin Faude and Kenneth W. Abbott and published in International Theory.

Note: this article gives the views of the authors, and not the position of the LSE Department of Government, nor of the London School of Economics.