Ian Goldin Book: 'Divided Nations' Discusses Global Governance (EXCERPT)

Why Global Governance Is Failing (EXCERPT)

Globalization increasingly presents a paradox: it has been the most progressive force in history, but the most severe crises of the 21st century will arise due to the very success of globalization. Unless we are able to manage these threats, there is a real danger that globalization will have given birth to its own downfall. A succession of crises that result from increased integration will lead to a backlash. Citizens will see increased integration as too risky. They will become increasingly xenophobic, protectionist, and nationalist. Our integrated financial and trade systems, and other networks such as energy systems and the internet, could become fragmented into silos.

This would be disastrous, as it would lead to a downward spiral and the arresting of the opportunities offered by globalization. Poor people, as always, would be the first to suffer the consequences, with their livelihoods and prospects undermined by slower global growth and the perversely regressive impacts of insularity. The stakes could not be higher. Unless we are able to more effectively manage the risks associated with globalization, they will overwhelm us. This is the core challenge of our times.

New Global Governance Challenges
The 20th century was characterized by at least four terrible global tragedies. Two brutal world wars, a global pandemic, and a worldwide depression affected almost everyone on the planet. In response to these and other crises the United Nations (UN), Bretton Woods (the World Bank and International Monetary Fund), and other international institutions were created which aimed to ensure that humanity never faced crises on the same scale again.

These institutions have enjoyed some success. After all, we are yet to witness another global conflict despite decades of Cold War tension between competing superpowers. Until 2008, modern-day recessions had not come close to the deep worldwide contraction created by the Great Depression, for which the International Monetary Fund (IMF) and World Bank can claim some credit. The World Health Organization (WHO) and other agencies may also take pride in having overcome polio, smallpox, and a number of other devastating communicable diseases and preventing a significant global pandemic despite increasing connectivity and population density.

The future, however, will be unlike the past. We face a new set of challenges. The biggest of these is that our capacity to manage global issues has not kept pace with the growth in their complexity and danger. Global institutions which may have had some success in the 20th century are now unfit for purpose. The repurposing of global governance to meet the new challenges is a vital and massive undertaking. Responsibility for this revolution lies not just with the global governance organizations themselves, or indeed with national governments. Nations are divided and cannot agree a common approach, and within the leading nations there is no consensus or leadership on critical global issues. The continued failure to resolve the financial crisis which started in 2007, the impasse in climate and environment negotiations at the Rio+20 conference in 2012 and the Durban conference in 2011, as well as the stymied ‘development round’ of trade negotiations initiated in Doha in 2001 should be a wake-up call to us all.

Global governance is at a crossroads and appears incapable of overcoming the current gridlock in the most significant global negotiations. The number of countries involved in negotiations (close to 200 now) and the complexity of the issues and their interconnectedness have grown rapidly, as has the effect of instant media and other pressures on politicians. These and other factors have paralysed progress, so the prospect of resolving critical global challenges appears ever more distant. We have reached a fork in the road. New solutions must be found.

Resolving questions of global governance urgently requires an invigorated national and global debate. This necessitates the involvement of ordinary citizens everywhere. For without the engagement and support of us all, reform eff orts are bound to fail. Structural changes in the world have led to fundamental shifts in the nature of the challenges and their potential for resolution. In this book I select five key challenges for this century—climate change, cybersecurity, pandemics, migration, and finance—to illustrate the need for fundamental reform of global governance. I am not suggesting that these issues are completely new. It is the radical change in the nature of these challenges and the complexity and potential severity of their impact that defines them as 21st-century challenges.

The UN, WHO, IMF, World Trade Organization (WTO), and other institutions charged with global governance have undertaken reform at a painfully slow pace. The growing disconnect between the need for urgent collective decision making to meet 21st-century challenges and the evolutionary progress in institutional capability has led to a yawning governance gap.

A Hyper-connected Age
During the latter half of the 20th century, cross-border connections between individuals multiplied. As interconnectivity mushroomed, so did the mandates facing the international institutions. Technological change coupled with the toxic politics of the Cold War threatened the lives of individuals across the world. Nuclear proliferation and the rising pressures of the Cold War brought with them the real and ever-present possibility of mutually assured destruction.

In the two decades since the fall of the Berlin Wall, fundamental political, economic, and technological changes have led to a step-change in global connectivity. Interdependence and innovation have brought unprecedented benefits, and led to the most rapid global rise in incomes and health in history. However, the same processes of integration and innovation have also greatly increased the potential for systemic risk and global crises. Globalization is leaping ahead of the lethargic institutions of global governance.

In politics, the collapse of the Soviet Union, the opening up of China, the integration of the EU, and the ending of totalitarian regimes in over seventy countries, have facilitated both physical and virtual connectivity. They have also meant that citizens are now aware and potentially engaged with matters that are beyond the borders of their nation states. Technological change, and notably the development of fibre optics, the internet, containerization, and cheaper flights, have brought people physically and virtually closer together. Economic reform has been associated with the reduction in barriers to trade and financial flows. A virtuous circle of increasing levels of education and infrastructure in emerging economies has been associated with rapidly rising living standards and incomes through much of the developing world.

Despite all the progress made in development, intractable poverty must remain a central concern of a civilized world. Over a billion people still live on a dollar a day or less, and over two billion on less than two dollars. For many of these people, the problem is too little, not too much, connectivity. They are isolated by geography, lack of infrastructure, or illiteracy. Too many governments also fail to transmit the benefits and possibilities of globalization to their citizens, as is the case, for example in resource-rich countries where a small elite group capture the benefits of oil, minerals, or other exports.

Fortunately, even for people living in totalitarian and isolated places, the walls which divide are crumbling. We now live in an age of hyper-connectivity: states, institutions, and individuals are connected to each other as never before. The trends which first emerged in the latter half of the 20th century—increased linkages through transport and trade—have accelerated. Integration has brought immense benefits to many, but has created a new breed of risk at the same time as it creates new opportunities. Actions taken by any one country, and indeed by a single individual or firm, now have the potential to cascade globally. The level of interdependence has multiplied. So too have the externalities, or spill-over effects, arising from turbo-charged globalization.

While the physical and virtual connections have multiplied, the necessary political and institutional reforms required to manage increased integration have lagged. Urgent attention needs to be given to both the upside and downside of increasing connectedness. At the national level, the biggest challenge for politicians and policy makers is the need to balance the enormous benefits that global openness and connectivity bring, with national politics and priorities. This also is a major concern for citizens, who are torn between the benefits of imported goods and services, and their worries about local jobs, illicit flows, and other implications of more open borders. These concerns are universal and affect all societies.

Globalization is a generator of tremendously positive but also highly negative forces. For example, the increasing openness and integration of the Chinese economy has been associated with over 600 million Chinese people escaping dire poverty and the Chinese economy tripling in size over the past twenty-five years. China will, over the coming decades, overtake the US to become the largest economy. While the beneficial effects of growth include poverty reduction and the stabilizing role of China in the world economy, the downside risks have also multiplied. Already, the associated growth in carbon consumption has propelled China to become the world’s largest emitter of greenhouse gases. Global governance will have to confront the escalating dangers of climate change, collapsing biodiversity, and other failures of the global commons that result from the combination of long-term increases in consumption in the richer countries and the now rapid acceleration of consumption in emerging markets.

The escalation of the global challenges is in large part the underbelly of accelerated globalization. Unless these can be managed more effectively and proactively, nations and citizens around the world will turn their backs on global integration. Divided Nations throws light on the fragility and threat posed by current practices and provides a framework for citizens, business and governments to address this critical challenge of our time.

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