This article is part of a series by openDemocracy and the Bretton Woods Project on the crisis of multilateralism. The views expressed are those of the author's only, and are not necessarily representative of either organisation.
Antonio Gramsci could recognise an interregnum when he saw one; and he would certainly have little problem identifying “the great variety of morbid symptoms” that have emerged since the Global Financial Crisis. Over the last decade, as policy makers in rich and poor countries alike have clung to the hope of returning to the halcyon days of the “great moderation”, they have largely failed to address the persistent problems of increased economic polarisation, heightened social insecurity and globalized environmental breakdown.
The accentuation of these crises is in part a result of the unbalanced policy mix of bank bailouts, light touch financial regulation and austerity in all but a few nations in the aftermath of the crisis. Given the interconnected nature of the crises we are facing, it also reflects a failure to build effective cooperation across national borders. Since Gordon Brown led the G20 charge to stem the advent of a global depression, trade tensions have paralysed the World Trade Organization (WTO); migration crises have stoked political division at the UN; rising indebtedness has pitted lenders against borrowers at the IMF; tax evading corporations have triggered a fiscal race to the bottom everywhere; and some of the world’s largest emitters of carbon dioxide are either rejecting the Paris Climate Accord outright or quietly blowing its targets.
There is no shortage of pundits willing to pronounce on the crisis of multilateralism, but whether they place the blame on local politicians, distant rivals or rootless technologies, the talk invariably revolves around saving the “liberal international order” that emerged 75 years ago from its grandiose New Hampshire provenance.
The Bretton Woods system promised a value-driven, mission-oriented and rules-based international economic order, tasked with promoting coordinated actions to deliver full employment, prevent imported deflation and austerity, and pre-empt beggar-thy-neighbour policies that could upset the stability of the global economy. It provided institutional and ideological support for governments to raise the living standards of their populations while leaving policy space for sovereign states, at all levels of development, to pursue their particular national priorities.
In practice, multilateralism in the three decades after the Bretton Woods conference never lived up to this ideal. Managed capitalism coexisted with a persistent and widening technological divide between North and South, while wasteful military spending under a tense East-West divide led to proxy wars that crippled economic prospects in many developing regions. Lingering colonial vestiges, racial prejudice and unequal trade relations inhibited productive diversification in many countries, and carbon-heavy growth was pursued heedless of the environmental cost. Yet its core principles did provide a rough template for a more balanced form of economic development in an interdependent world. The goal, as stated by Henry Morgenthau, the US Treasury Secretary at the time of the Bretton Woods conference in 1944, was a “New Deal in international economics” based on the fundamental principle that “prosperity, like peace, is indivisible.”
Little of this framework survived the combined assault of the neoliberal ideologues, financial interests, and corporate predators who emerged from the economic and political dislocations of the 1970s and 1980s. These forces were intent on reversing the post-war social contract that had underpinned the Bretton Woods system, and replaced it with a set of rules and principles designed to allow business to pursue profits where they wanted, how they wanted and when they wanted.
As footloose firms and insomnious financial markets helped to move production and investment around the globe, the bargaining power of capital increased greatly compared to that of labour. This has allowed corporations to repress wages, make working conditions in both developed and developing countries more flexible, and boost their profits through a variety of rent-seeking practices. As the below figure shows, as global corporate profits rise, the labor share of income declines.
Extremes of inequality both within and between many countries have hit grotesque heights. Investment in public goods, at the global as well as the national level, has stagnated. Growth has become dependent on punishing levels of debt and with a pace of resource extraction and energy consumption that is threatening the survival of the planet itself.
These same rules and practices produced the global financial crisis, a moment of deep distress that should have discredited hyperglobalization, just as the Wall Street Crash of 1929 and the ensuing depression disgraced the sponsors of that era’s laissez-faire. But such is the political power of global elites that no fundamental reforms have ensued.
The problem then is less one of people being unwittingly left behind by the technological exuberance of a globalised world, and more of a rigged system that has left too many people in too many places vulnerable to the predatory corporate behaviour that has flourished under hyperglobalization.
Where it has been effectively managed, as in the case of China, finance has been a major contributor to economic transformation. But that is the exception that proves the rule; multilateralism works when it helps to counterbalance the most powerful players, not when it is captured by them.
Tinkering with the existing rules cannot provide a way out of the current interregnum. The 2030 Agenda forged by the United Nations offers a 21st century mission statement analogous to that developed 75 years ago at Bretton Woods. But it is in urgent need of a set of design principles that can help build a new multilateralism to guide the global community toward its mission.
Such a value-driven multilateral order must prioritise the role of global public goods that are needed to deliver shared prosperity and a healthy planet, promote cooperation and collective actions to bring fairness and balance to market outcomes, coordinate policy initiatives to mitigate common risks, and ensure that no nation’s pursuit of these broader goals infringes on the ability of other nations to pursue them.
In short, we need a global Green New Deal to reclaim multilateralism. After convening a number of stakeholder meetings between policymakers, experts and civil society organizations from across the globe, we have set out a set of “Geneva Principles for a Global Green New Deal” to lay the foundations for a new multilateralism that rebuilds the rules of the global economy towards goals of coordinated stability, shared prosperity and environmental sustainability, while deliberately respecting the space for national policy sovereignty.
A global Green New Deal will need to promote the values of a productive and inclusive economy, a just society, a caring community, a participatory politics and a sustainable future. It will need to boost productive investment, beginning with a strong public footprint in clean transport and energy systems to establish low carbon growth paths, transform food production for a growing global population, and address problems of pollution and environmental degradation more generally. It will need to expand social care and establish a mix of creative economic activities that place a premium on nurturing human talent. It will need to regulate the movement of capital and design effective financing institutions with longer time horizons attentive to social returns, and it will need to promote accelerated investments in research, development and technology adaptation, and a new generation of intellectual property and licensing rules that ensure affordable access to cutting edge technologies.
There will, no doubt, be an opportunity to recover lost initiatives, such as an international trade organisation tasked with advancing industrial policies and controlling monopoly power, but a good deal of creative energy will need to be channelled into designing smarter regulations and institutions tailored to contemporary challenges.
In that spirit, we have proposed a set of principles that can help restore trust in the multilateral narrative and move the discussion forwards in a progressive direction. These include:
- Calibrating global rules to the overarching goals of social and economic stability, shared prosperity, and environmental sustainability, and protecting them against capture by the most powerful players.
- Recognising common but differentiated responsibilities among the states in a multilateral system built to advance global public goods and protect the global commons.
- Enshrining the right of states to policy space to pursue national development strategies.
- Designing global regulations both to strengthen a dynamic international division of labor and to prevent destructive unilateral economic actions that prevent other nations from realizing common goals.
- Ensuring global public institutions are accountable to their full membership, open to a diversity of viewpoints, cognizant of new voices, and have balanced dispute resolution systems.
The big obstacles to these are as much political as economic, but discussion around a Green New Deal – which is now being picked up in Brussels and Beijing as well as Washington – provides grounds for optimism. However, turning to Gramsci again, there is still a lack of “good sense” at the international level.
Whether it is finding better ways to reform the WTO to make trade work for development, rethinking the role of the IMF for managing the next financial crisis, or extending China’s drive for greater connectivity along its Belt and Road initiative, these “Geneva Principles for a Global Green New Deal” can help advance an urgent research and policy agenda for a new multilateralism to recalibrate the global economy for a 21st century vision of stability, shared prosperity, and environmental sustainability.