The current global institutional order is in urgent need of reorganisation, and it is imperative space is created for newer institutions driven by emerging economies
A host of problems already plagued the world when we bid farewell to 2019. The US-China trade war, the drama around Brexit, and the mass exodus of migrant populations across the globe were just a few among numerous pressing issues. While policymakers around the world were consumed by these crises, little did they know what lay in store for them.
COVID-19 has since snowballed into a crisis of mammoth proportions. At the time of writing, the virus has affected almost every country in the world, and has already accounted for over 420,000 deaths. Its impact on human life, healthcare systems, businesses and supply chains globally has been profound.
While governments’ actions across the world have been encouraging, they have been individual in nature. The efforts to combat what is now a global pandemic have been disjointed, with each country acting of its own accord and with scant regard for broader implications or even the efficacy of their actions. Nations have imposed lockdowns and stringent travel bans on their own, but there has been little to no collaboration between countries in countering the spread of the virus. Some are emerging gradually from the shadow of the lockdowns, and that too is happening without any collaboration or dialogue.
It beggars belief that the fight against COVID-19 is mostly national in nature, and we haven’t seen the semblance of any respectable global or regional measures to counter its threat.
The COVID-19 pandemic is but the most recent issue that demonstrates the complexities of the current global international order, particularly at a time when the world is so deeply interconnected in every manner possible. It beggars belief that the fight against COVID-19 is mostly national in nature, and we haven’t seen the semblance of any respectable global or regional measures to counter its threat.
Failing to prepare for the future by looking into the past
The institutional structures that govern global order are largely led by the US and other key Western powers. The institutions at the centre of this global order had their merits when they were first built after World War II, but increasingly since the collapse of the erstwhile USSR—and particularly since the Global Financial Crisis of 2008—their impacts have diminished. Their significance on the global stage, however, has not.
And this is a dichotomy.
These institutions remain surprisingly West-centric, and in many ways, overlook the ground realities of the global economy and demographics. The rule book continues to belong to them, and they still offer little say to important economies such as China, India, Indonesia and Brazil, among others. This is a travesty for it means that a majority of the world’s population continues to be unrepresented or underrepresented at global forums, despite growing economic clout.
China may have a permanent seat on the UN Security Council, but has little else to show despite the most stunning economic transformation of a society in human history. The UN system more broadly, the G20, the G8, the World Bank and IMF, have all served their purpose at various points in time, but given today’s global context, they cannot continue to form the basis of the international order.
With reference to the COVID-19 outbreak, the G20 stated, “Combatting this pandemic calls for a transparent, robust, coordinated, large-scale and science-based global response in the spirit of solidarity.” It went on to add: “We are strongly committed to presenting a united front against this common threat.” If only it practiced as it preached.
It is, however, encouraging to see G20 leaders pledging to inject $5 trillion into the global economy to deal with the social, economic and financial impacts of COVID-19. French President Emmanuel Macron and German Chancellor Angela Merkel are seeking to bring the EU out of its slumber with the unveiling of a €500 billion ($543 billion) recovery fund to help countries and industries in the EU that are hardest hit by the pandemic. But it begs the question: Couldn’t this have come much earlier?
So what do we do?
It is imperative that within this umbrella of global institutions, space is created for newer institutions such as the Asian Infrastructure Investment Bank (AIIB), the New Development Bank (NDB) and the ASEAN+3 Macroeconomic Research Office (AMRO), among others. These are examples of institutions that work within the sphere of the global international order, but are driven largely by emerging economies from the East and the Global South. These are also institutions that represent the views—and interests—of significant chunks of the global population and a large (and growing share) of economic output.
In little time, the China-led AIIB has become one of the world’s premier lending institutions, almost at par with the World Bank in terms of the money it hands out for infrastructure development in developing economies. Similarly, AMRO (which oversees the Chiang Mai Initiative Multilateralization), is a home-grown regional institution that acts as a safety net and aims to secure macroeconomic and financial stability in the ASEAN+3 economies (Plus 3 refers to China, Japan, South Korea). It does so by addressing balance of payments and short-term liquidity difficulties across the region.
While initiatives such as these are young in comparison to initiatives led by Western economies, they are growing in prominence because they are fulfilling important roles in their respective regions. Importantly, they provide a platform for all members to have a say in shaping their futures.
An amorphous framework?
Indeed, what we are seeing emerge is an amorphous global governance framework that is more reliant on regional cooperation at various levels. As many Western economies start to look inward, other nations are assuming the mantle to push for all that has traditionally been the preserve of Western powers. This holds true particularly for multilateralism and globalisation, which emerging global powers are now steadfast supporters of.
As such, there is need for a framework that is built on a foundation of common goals, its pillars being reliance on regional cooperation and diplomacy at every level. This could possibly yield a new international order where the old accommodates the new to deliver a vibrant and prosperous global system.
Indeed, what we are seeing emerge is an amorphous global governance framework that is more reliant on regional cooperation at various levels.
It is also important there is deeper cooperation between not only countries but also regional frameworks that are assuming increasing importance. A case in point is how COVID-19 played out initially – if countries openly shared information with one another and if regional or global frameworks were used to address the issue, we may have had a situation wherein the spread of the virus was better contained.
It is easily understood that such massive collaboration will have its challenges, but big challenges require big responses.
Multi-stakeholder dialogue is the way forward to deliver a comprehensive new framework – and indeed, such a framework cannot overlook the role businesses have to play in bringing change. Large corporations wield (perhaps disproportionate) influence, but they also have the resources to mobilise against major challenges such as the one the world is confronted with today. Their resources must be tapped. Moreover, they have a transnational presence, and have an imprint on large number of employees and their families. It is a folly to underestimate their significance.
Preparing for a future of complexities
To prepare for the future, we must break the shackles of the past. We must create room for new players—both countries as well as institutions—that have more economic and strategic clout.
Accommodating the rise of Asia has been long overdue. Giving the region its due will result in the rebuilding of the global international order that is so desperately required.
We do not need to reinvent the wheel. This can be achieved within the existing institutional framework provided it evolves to include the new. A framework that has the wisdom of the old and the enthusiasm of the new is one that can see us through testing times such as these.
Horasis will convene its first virtual and annual Horasis India Meeting on 22 June.
Frank-Jürgen Richter
Frank-Jürgen Richter is the founder and chairman of Horasis: The Global Visions Community. He was earlier a director of the World Economic Forum. He has lived, studied and worked in Asia for almost a decade, principally in Tokyo and in Beijing. Mr Richter has also authored and edited a series of books on global strategy and Asian business. His writing has appeared in The International Herald Tribune, The Wall Street Journal, The Far Eastern Economic Review, The Straits Times and the South China Morning Post, among others.
