The crisis that multilateral institutions are experiencing could have serious repercussions on the world’s stability. The system seems unable to manage the challenges posed by globalisation. The European Union must pull its socks up.
- Wednesday, 31 October 2018
The global financial crisis has developed and spread since 2008.It has left an unfortunate legacy in economic, social and political fields. Ironically, in spite of the global nature of the events to be managed, the leaders of the main countries involved tended to pursue policies that favoured national interests in the short term instead of leveraging on international cooperation.Political opportunism and lack of understanding the real nature of global challenges produced very piecemeal, often contradictory,and ineffective strategies. Political leaders wrongly believed that imbalances, inequalities and turmoil would self-adjustedover time.
READ MORE: In cyberspace, nothing is as it seems
The system of multilateral institutions, the "armed wing" of international cooperation, became the main victim of this regression. The crisis affecting multilateralism can have serious consequences on economic and political stability at global level. Therefore, it should be closely monitored and duly opposed. Through this contribution, I am hoping that Eastwestwill be spurred to assess the current situation of individual multilateral players operating in different sectors of international cooperation, as well as to gather proposals to support their activities and revamp their role.
Globalisation has gradually enlarged the cooperation system towards new geographic areas and sectors, reflecting the changes in the geopolitical framework and the need for a new supervision and management approach to address unexpected developments having a systemic impact. This also meansbroadening thescope of the structures behind international cooperation. Historically, first instances of international cooperation involved the field of trade and were mainly designed to promote and finance exchanges in raw materials and goods, as well as to provide guaranteesovercommercial transactions. We then moved on to cooperation in the monetary and financial field, aimed at avoiding broad and sudden swings in the value of the currencies used in international trade. Over time, cooperation in these fields became more and more formally establishedthrough the creation, after the Second World War, of the United Nation's network of specialised agencies. Among them, the International Monetary Fund, the World Bank and the World Trade Organisation. Overall, the agency networkcurrently includes 15 different entities, such as the Food and Agriculture Organization, the World Health Organisation and the International Labour Organisation.
Globalisation has progressivelyput under pressure the multilateral institution system grown under the umbrella of the United Nations.
There's been a strong increase in the number of member countries now registered with these organisms. For example, in 1944 only 45 countries took part in the Bretton Woods Conference.Nowadays, the IMF and the World Bank haveover 180 members. After the 2008 crisis, the system seemedunable to handle the wave of negative reactions to globalisation. At the same time, it failed in developing a strategy to tackle the unresolved structural weaknesses and to meet the new requirements of an increasingly interconnected and therefore interdependent planet.
A first inventory of "things to be done" was approved on 25 September 2015 by the United Nations with the launch of the Global Agenda for Sustainable Development. It identified 17 sustainable development goals associated with 169 targets to be achieved by 2030.
This is a list of fundamental priorities, each of which requires exceptional effortsby the international community, for both the single countries and the multilateral institutions. A few priorities specifically concern less developed countries and areas (ending poverty and hunger; guaranteeing clean water and sanitation; providing clean and affordable energy; promoting good health and well-being). However, most of the goals are related to the whole planet (combating climate change; protecting life on land and in the sea; promoting balanced growth and decent working conditions; investing in industry, innovation and infrastructure, quality education; reducing inequalities and fostering gender equality; building sustainable cities and communities). The agenda also includes two political objectives which play an instrumental role in achieving main priorities: peace, justice and strong institutions; partnerships between governments, the private sector and civil society in order to achieve the objectives. Summing up, the agenda confirms the range and the extent of challenges that the international community has to face to protect our planet and ensure global prosperity.
In the economic field, the development of information technologyand artificial intelligence presents new challenges for the security of the information systems that run the activities of industrial and financial sectors in the main countries. Unsafe systems make slower, uncertain and onerousthe creation of new jobs replacing ones missed due to technological progress. Managing the socio-economic consequences will be costly for both public finance and private companies. To provide effective answers to the challenges posed by globalisation, it is becoming increasingly clear that two conditions must be met: convince main players on the global stage they have to cooperate;raise the resources needed to finance the essential development, recovery and investment programmes.
On the monetary and financial stage, international cooperation has wavered but never ceased. Even the G-20, originally created as an informal occasion for discussion between the G-7 and the developing economies finance ministers, has been promoted to a primary forum for international economic cooperation at a political level between Heads of State and Government. Main initiatives to rebuild the foundations of global financial stability have been carried out by this Group. In 2009, the G-20 introduced measures that prevented the collapse of the global financial system. More recently, in 2017, the G-20 established a workinggroup to which I am a member(Eminent Persons Group on Global Financial Governance), with the aim of making proposals to improve global financial system’s operation. Indeed, the system of international financial institutions has an essential role to play. Three priority areas have been identified. The first area is thesupport frommultilateral development banks to foster sustainable and inclusive growth in developing countries, under the supervision of the World Bank. The second is the definition of a jointly agreed procedure to identify and manage excessive volatility of capital flows and exchange rates, in orderto prevent and mitigate financial crises. The third is the creation of a global financial safety net able to face a systemic liquidity shock.
Specific and actionable proposals have been made for each of these three areas. Such proposalshave been generally endorsedby finance ministers and central bank governors of the G-20 at their meeting in Bali last October (the full report of the EPG is available on the website www.globalfinancialgovernance.org). It is desirable that the competent institutions will agree on a realistic agenda for their implementation. It is essential for the European Union to play an active role in this debate and to speak with one voice.