A strengthened Global Economic Governance: Part 1 New global dynamics

Pedro_SOUSABy Pedro Sousa our Vice President,

The first in a series 4 articles entitled ‘The global economic disorder calls for a strengthened Global Economic Governance’

 

“The political problem of mankind is to combine three things: economic efficiency, social justice and individual liberty.” – John Maynard Keynes

 

1. NEW GLOBAL DYNAMICS

During the last decade, emerging markets have been growing at a fast pace and closing the globalization gap with advanced economies. New regional hubs are being created around the world to facilitate flows of goods, services, and money in an expanding global network. Emerging players are now sources of consumption and innovation as well as production. New types of flows are growing rapidly: information is now gushing to often-underserved areas, while knowledge-intensive goods have become the fastest-growing traded flow across the globe. The prevailing narrative is one where emerging powers are acquiring what they view as their rightful place, where great power relations are increasingly dominated by strategic competition in the face of eroding strategic trust. In a way, this might seem like a positive development, more varied perspectives could enrich multilateral processes and generate more comprehensive solutions to global problems, but that is not what we are experiencing. This multipolar dynamic also generates instability. International stability has been compromised and several more potentially destabilizing developments are on the horizon. Though the world is becoming increasingly interconnected, and challenges are no longer confined to national or even regional borders, major powers are becoming increasingly reluctant to assume global responsibilities. The rise of strategic competition and geopolitics is reshaping the global economy and unravelling global power relationships and governance.

The perception today is that America’s unipolar moment has ended and Europe is on economic decline while a new group of countries is rising, bringing their own worldviews to global affairs. In the developed world, US President Barack Obama’s presidency will soon end. European politics are, too, undergoing a potentially significant transition, with austerity measures not having the desired outcome and Greece’s new left wing government challenging Germany to find a new compromise on how to reboot the Greek economy. There is also a worrying trend of rising nationalism in European Union member states. Two leaders who will remain in power for the foreseeable future are Russian President Vladimir Putin and Chinese Premier Xi Jinping. They also have their regional issues to handle with Russia allegedly invading Ukraine, and China engaging in territorial disputes with several of its neighbours, most notably in the East and South China Seas. Russia and China are also pushing back against traditional Western dominance in multilateral institutions. Alongside Brazil, India, and South Africa, they have established the BRICS development bank.

In international politics, perceptions matter. Clearly, the global balance of power has changed. In the absence of global leadership, the erosion of global norms and standards and the ensuing shift towards a multipolar, regionalized power dynamic are apparent. Given their frequent unwillingness to accommodate one another’s interests, impasses and even clashes become likely. Great powers are looking at issues through a more zero-sum lens, so they only work together when their interests are very closely aligned. This is exacerbated by a widespread turn inwards as populism and nationalism rise, and governments try to establish measures to give them more control over their affairs. Increasingly, multilateral institutions are seen as instruments of power projection and there is less interest in tackling shared problems. Something will have to maintain coherence in management of global political and economic affairs now that these emerging countries are reaching a relative level of political and economic maturation. With globalization and technological advancements, the pace and scale of such transformations in global economic dynamics have accelerated considerably. Therefore there is an urgent need for strengthened global economic governance, something that should be in the forefront of policymakers’ minds. Urgency to deal with matters such as: the slowing of global growth and sluggish productivity rates; inequality between rich and poor is at its highest level in 30 years in most OECD countries while inequalities traditionally stand at even higher levels in emerging countries – and Thomas Piketty’s now famous work shows it will likely increase even further; the demographic change, including issues relating to ageing, health, youth employment, and migration; and worrying trends in climate change and resource depletion, and their potentially devastating impacts on wellbeing and growth.

 

 

 

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