The Future Global Economic Leadership panel discussed the new focus on multilateral collaboration and the need to reform institutions such as the IMF, World Bank and WTO. They spoke of how the response to this global economic crisis differs from those that came before, including recognition of the shifting economic power structure, the importance of the G20 going forward; the need for vision and shared purpose; and the need to think in terms of globalization rather than regionalism.
Future Global Economic Leadership Panel
Chair: Andrés Rozental, chairman of the board of trustees of the Mexican Council on Foreign Relations; non-resident senior fellow, the Brookings Institution
Debra Steger, CIGI senior fellow, leader of the EDGE Network Projects on Global Economic Governance, EDGE network
Andrew F. Cooper, CIGI associate director and distinguished fellow
Paola Subacchi, research director, International Economics, Chatham House
The financial crisis has catapulted leaders out of complacency, and there is a new focus on multilateral collaboration, Debra Steger explained. Extra time is needed to reform the international economic architecture. She noted that strong multilateral institutions are the key to a successful global economy in the future. She also referenced the G20, which has become the “premier forum for international economic cooperation,” but which cannot implement its own directions without cooperation from the existing international organizations, including the IMF and World Bank.
Before the current crisis, the IMF, World Bank and WTO faced their own crises of legitimacy. All three institutions have outdated governance structures; they also require expanded mandates to deal with today’s challenges. Ms. Steger called for stronger global institutions and stated the need to remain focused on reforming the governance structures of the international economic institutions and to look at the system as a whole, not as silos. She called for leaders to not forget about the WTO, which is the “poor sister” she said, that suffers from a lack of resources and a bad image.
Each institution has its own governance and legitimacy challenges. The IMF and World Bank fail in the areas of representativeness and accountability but are strong in effectiveness and efficiency, while the WTO fails with regard to efficiency and effectiveness but is stronger in representativeness. Ms. Steger emphasized the need for coherence among the international economic organizations as global problems require global solutions. Overlapping mandates can create conflicts and there are gaps which none of the existing organizations fill, so the interfaces between the organizations need to be managed, she concluded.
Andrew F. Cooper
In his presentation, Andrew F. Cooper examined the role of multilateral leadership in the response to the economic crisis. He noted that the current experience is markedly different from prior transformational periods where significant reordering of the international order, such as Bretton Woods, followed large-scale conflict. Instead, it was the onset of the crisis that sparked recognition of the shifting economic power and the rapid transition to the Group of 20 (G20) as the hub of international cooperation. However, he stressed that lessons must be learned from previous summits, particularly those deemed to have failed - such as the 1933 London Conference on the world economy and the 1981 Cancun Summit on North-South dialogue.
The initial successes of the international response to the crisis can be seen from the culmination of five factors: above all else, active engagement by the United States; second, an agenda for problem solving and a willingness to negotiate; third, buy-in to the process from big rising powers, especially China, India and Brazil; fourth, mobilization by the middle powers, such as Canada, Australia and South Korea, to broker solutions; and finally, a coalescence of good policy ideas from states and civil society.
The first three G20 Summits – Washington, London, and Pittsburgh – have each been considerably different in style and substance, yet Dr. Cooper suggested that the process has matured quickly. Early identification of the core concerns allowed for reporting on progress and, most recently, the adoption of mutual assessment mechanisms. In this spirit, the Pittsburgh Summit signaled a shift from ad hoc or ‘club’ diplomacy to ‘network’ governance, deepening activity among officials on technical details with annual reporting to the leaders. Organizational support for the G20 was extended beyond the US and UK, where South Korea and Australia positioned themselves for future leadership.
All of this is not to suggest that the way forward on the G20 will be a straightforward process, Dr. Cooper stressed, nor have the questions of legitimacy and effectiveness been resolved. As the crisis begins to subside, fatigue in the process and contestation on agenda issues have crept in. Furthermore, the future of the G8 and rising power groupings – BRICs and IBSA – linger at the margins of the G20 alongside neglected global public goods, such as health, climate change and development aid.
In the wake of Pittsburgh, the future of global economic leadership is becoming clearer, Dr. Cooper concluded. Not only has the G20 developed mechanisms for systemic reform, the crisis has fostered a renewal of diplomacy and multilateralism. Though a global new deal has yet to be settled, momentum is building.
There is no grand moment we were expecting a year ago, but we have seen moves some moves in the right direction, said Paola Subacchi. A year ago, the crisis appeared to be a catalyst for change; the synchronized dive into recession also stressed how much the world economy is integrated. While nations have responded to the crisis with bailouts, Dr. Subacchi emphasized the need for coordinated effort to avoid protectionism.
She spoke of the importance of having both the US and China engaged, and wondered whether the G20 is actually a “G2” where the US and China play the major role and the other countries contribute to the dialogue but in a less prominent role. Dr. Subacchi said she sees a lot of national interest, but stressed the need for vision and shared purpose, a minimum common denominator and cooperation in terms of timing, goals and purpose. Bretton Woods had a shared purpose; however, she sees a dichotomy between the G20 as a steering committee and Bretton Woods institutions (the IMF and World Bank), and asserted the need to build a chain between the two.
Furthermore, leaders need to think in terms of globalization rather than regionalism. Global governance — as in the version proposed in Pittsburgh by President Obama — is a zero-sum game: somebody has to give. Currently, Europe is overrepresented: Dr. Subacchi called for collapsing France, England and Germany into one seat to rebalance the distribution of power within the IMF. She concluded by advocating a new vision of economic governance and a supernational structure or post-modern framework (like the EU) that goes beyond the nation state.