IS THE IDEOLOGY OF OUR AGE
At the very moment, the world needs to work together to address global problems that cannot be resolved without global solutions, it is being pulled apart not just by conflicts but also by a rising protectionism. And while it is not difficult to blame poor leadership, an outdated geopolitics is threatening a decade of perma-crises.
Pillars of the post-cold war world order are tumbling down as we leave behind the unipolar, hyper-globalised, neoliberal era. Those who try to build the present in the image of the past are finding themselves wholly ill-equipped to meet the challenges of the future. As Mohamed El-Erian and Michael Spence have written, we need new models for growth, national economic management and global cooperation.
No one can deny the significance of the emergence of new power centres around the world, the growing importance of services and the digital economy at the expense of manufacturing; the education-rich and education-poor divide that is replacing the old manual/non-manual divide, and the serious, existential threats to our planet. No growth model can meet the needs of the 21st century without incorporating rising concerns about environmental and economic equity and re-evaluating the role of finance. And the manufacturing-led, export-driven, low-wage models of development that until recently served every industrialising country are being overtaken not just by demographic shifts but also by technological advances that mean more goods can be manufactured by a markedly smaller workforce.
All this is determining the seismic shifts in our geopolitics. First, as we move from a unipolar to a multipolar world, no single country – no matter the size of its military or economy – has the power to command and control us, only the power to propose and persuade. Second, there is now no consensus that open markets benefit all. The hyper-globalisation of the last 30 years is not giving way to de-globalisation or even slowbalisation, but lowbalisation: a globalisation-lite defined by near-shoring, friend-shoring and shortening supply chains. Policies promoting privatisation, deregulation and liberalisation, which became popularly known as the Washington Consensus, now have few supporters – even in Washington.
Most important of all, nationalism has replaced neoliberalism as the dominant ideology of the age. If, for the past 30 years, economics drove political decision-making, now politics is determining economic decisions, with country after country weaponising their trade, technology, industry and competition policies. The win-win economics of mutually beneficial commerce is being replaced by the zero-sum rivalries of “I win, you lose”, as movements such as “America first”, “China first”, “India first” and “Russia first”, “my tribe first”, threaten to descend into an US versus THEM geopolitics of “my country first and only”. And with national security establishments now freezing the central bank reserves of hostile regimes and limiting access to global payments systems, trade, technology, and capital wars are set to intensify.
The one hopeful sign of cooperation is Nato unity over Ukraine. But this should not blind us to the scale of global disunity, with almost all of Africa, Asia, Latin America and the Middle East standing aloof from sanctions against Russia and even condemnation of its war crimes.
Very few can ever benefit from this fragmentation, and almost everywhere inequality is on the rise. Warehouses in Asia, America and Europe have sufficient grain reserves to feed the world, and yet there is no global distribution plan and the World Food Programme struggles with only half the finance it needs to prevent famines. Energy producers are making unprecedented profits while consumers struggle with unpayable bills. Yet there is no plan before the G20 to address this, or the halving of global growth, inflation, currency imbalances and debt, or to undo some of the damage done by resistance at COP27 to even honouring the promise of $100bn a year for the developing world. There are rising dangers from this unilateralism: the risk of monetary and fiscal overkill – and a global recession – if one country after another pursues its own monetary and fiscal tightening, with little thought given to the spillover effects on each other. Lost jobs and lost prosperity – and more poverty – are the prices we will pay if the very countries that created the international institutions to deliver cooperation behave uncooperatively.
In 2009, when recession threatened to become depression, a G20 leaders group was formed and backstopped the world economy with $1tn. During the 1970s oil crisis, a G7 comprising the West and Japan was established, with a plan to redirect oil surpluses and stabilise currencies. And in 1945, to rebuild a crisis-torn world and root out poverty and hunger, the Marshall Plan and a new array of institutions from the UN to the IMF and World Bank were born.
But even if, in 2022, there is no modern Marshall, and no plan to deal with a similarly perilous world, we are not powerless. The US holds the key. Having generally acted multilaterally in a unipolar era, it must resist the temptation to act unilaterally in a multipolar era. President Biden and G20 leaders should direct the IMF to make operational the 2009 “multilateral action process” to coordinate a global push for non-inflationary growth. A strengthened early-warning system should be forged to head off the threat of the kind of global shadow banking crisis feared by the Bank of International Settlements. Reintegrating global supply chains can happen if we empower the World Trade Organization to stand up to protectionism.
Debt relief is essential to prevent a breakdown in the internal social and political fabric of more than half the world’s developing countries. The IMF has the capacity to more than double its outlays and to lend into arrears and corral absent partners – China and the private sector – into orderly debt restructuring. Developing countries, who are not to blame for the interlocking global crises destroying their prosperity, should be subject to less conditionality and have longer repayment periods. The G20’s review of the World Bank should recommend the use of guarantees and the more efficient use of its capital, and offer not billions but trillions in the long-term finance needed for climate health and education. And leaders should examine how other struggling international institutions can be updated; seek wider agreement on capping energy prices to tame inflation; release food reserves to avert a famine while helping Africa become more self-sufficient; and stand ready to deal with currency volatility. Past mistakes have put us on this bumpy journey. But if global leadership and cooperation finally rise to the occasion, we can guide our world to a better destination.
(Courtesy: The Guardian)