Domestic Ideas and Interests in Global Governance: Comparing German and U.S. Preference Formation

Abstract

Part Two of the Germany in Global Economic Governance SeriesFinancial crises underline the necessity for more effective governance of global markets. While the New Basel II Accord showed the possibility of multilaterally creating better governance, no agreement has been reached on the reform of the International Monetary Fund (IMF). Why do governments agree on a reform of global financial governance in some cases, but not in others? I argue that convergence and divergence of governmental positions towards new governance cannot be explained solely by the logic of the international system nor by globalization, but instead strongly reflect domestic ideas and interests. In addition, I argue that variation in success in achieving new governance is shaped by the different impact of ideas versus interests on the ability of governments to compromise internationally. But when do ideas prevail over interests and vice versa? In this regard, I argue that ideas prevail when new governance initiatives affect lobby groups only diffusely and concern fundamental questions on the role of politics in governing the economy. Interests prevail when specific lobby groups are affected directly and when new governance initiatives try to administer the distribution of costs and gains sectorally. The arguments are tested in case studies on the preference formation of the U.S. and German governments on the reform of the IMF and on Basel II in 2001-2007