GLOBAL AGENDA | ECONOMY
<nyt_headline version=”1.0″ type=” “>Let’s Stick Together
Published: November 30, 2012
WHEN I was asked a few years ago what the financial crisis taught me, I replied, “It’s the global economy, stupid.” Well, what I actually said was it taught me that “global problems need global solutions.”
I would now go further: My 13 years in government have taught me that the pre-eminent international issue is whether we can develop a level of global cooperation that matches the global dimension of our problems.
We need little proof that our world is more interdependent than ever. As Britain’s prime minister in 2008, I saw how reverberations from a banking collapse anywhere can affect stability everywhere. I found that leaders, who previously had talked only intermittently, were in constant telephone contact. As chairman of the G-20 at the height of the crisis, I found myself working the phones on a near 24-hour cycle, moving through time zones from Asia to America.
Since then, we’ve seen how a nuclear disaster in Japan can send shock waves across every land; how economic difficulties in Greece can hurt confidence across the globe; how protectionism in just a few countries can disrupt the whole of world trade.
We’ve also seen evidence that international cooperation on economic issues is not working well. The year 2009 should have brought an era of enhanced cooperation. Instead, that cooperation hit a high-water mark, then receded. Global coordination is still regarded by too many countries as an optional extra, a sideshow compared with domestic issues.
From my own experience I can see that there are changes we can make, institutional reforms we can embrace, and specific policies that we can adopt that would improve cooperation and make for a far healthier, more prosperous world.
Let me focus on the five great economic and social challenges of our time — all global in nature, all requiring coordinated action, all matters on which the world community has been called upon to act but has failed to do so effectively: financial stability, climate change, global growth, open trade and the Millennium Development Goals.
The failure to coordinate global finance
Given the global financial crisis — which cost $4 trillion in lost output and an estimated 28 million jobs, as well as surging debt and deficits (much of the cost borne by countries, businesses and individuals who did not directly cause the crisis) — the case for global financial coordination is indisputable.
As Mark Carney, the chairman of the Financial Stability Board set up in 2009 to monitor and make recommendations about the global financial system, has said, “Given the reality of global finance, it is not enough to have our own house in order — unless we seal ourselves off from the world, and if we were to do that we will end up much poorer. An open, resilient global financial system will be central to the transformation of the global economy. In order to achieve that, financial sector reform is a must.”
Yet while much has been promised, Europe, America, Switzerland and other financial centers are today regrettably agreeing to their own separate and distinctive financial regimes. The world is at risk of a race to the bottom in financial standards, with the good undercut by the bad and the bad by the worst.
There has yet to be agreement on the oversight and regulation of shadow banking, the terms of securitization, how money-market funds are managed, and how we manage the links between the regulated banking sector and shadow banks.
The failure to coordinate global action on climate change
No matter what action a nation seeks to take on climate change, its policy outcomes are influenced by other nations.
When Copenhagen failed in December 2009, it was not because of a failure to reach any agreements. In fact, we achieved agreements in four major areas — on national carbon-reduction plans, on transparency requirements, on immediate help for poorer countries to mitigate climate damage, and on a long-term framework for transferring resources from rich to poor.
Yet because we could not agree on a treaty or even on an overall framework we could not usher in what was needed — a carbon price guaranteeing sustained investment in renewable industries. The result is that aside from China (where a state decision has been made to sponsor renewables) investment in that industry is flagging. While there was some progress in Durban, South Africa, with an agreement about standards on transparency, and in Cancún, Mexico, where new standards were set for corporate social responsibility, the much-promised decade of low carbon investment has been postponed, a victim of an international failure to agree.
The failure to coordinate growth strategy
The world is also unable to agree on what to do about stalled global growth amid the fallout from the euro zone crisis. In 2009, when world leaders agreed on a bold strategy, I and others insisted that first aid measures were not enough. The G-20’s Action Plan included a commitment by its members to coordinate fiscal, monetary, trade and structural policies and to use the I.M.F.’s mutual assessment process as its vehicle.
What was intended to be a global growth pact quickly bogged down in “currency wars.” The result is that growth is much lower than it need be and I estimate we have lost between 25 and 50 million jobs. Much-needed global initiatives, such as an infrastructure plan to mobilize private savings and generate higher growth, are stillborn.
The failure to secure a world trade agreement
Negotiations on a new world trade round have also broken down. Some may argue that it’s impossible to agree on what to do because the nature of imports and exports — and of global supply chains — is changing so fast. Yet each successful trade round since the 1940s has had to deal with a rapidly changing world.
Today the world is being remade yet again. Intra-Asian trade, which is now about a third of intra-European trade, will surpass European trade before 2030. China, which has less than 5 percent of world trade today, will have 15 percent by 2030. India’s share will rise from less than 2 percent to 5 percent.
Given their need to sell to rising Asian markets, my view is that more than ever before free trade is in the interests of America and Europe. Yet we face the prospect that, for the first time in 40 years of trade negotiations, protectionist pressures will make a world trade deal impossible.
The failure to deliver the millennium development goals
In 2000 every major world leader and every significant international institution agreed to deliver, by 2015, education for every child, a two-thirds reduction in infant mortality, and a three-quarters reduction in maternal mortality on top of a halving of poverty in every continent. They promised to secure gender equality by 2005.
Despite big progress in reducing poverty in China, none of these bold health and education goals are on track to being met. One reason I have accepted the U.N. secretary general’s offer to be his special envoy for global education is that, unless we fast track resources to meeting these goals from now to the end of 2015, one generation’s betrayal will haunt the next. The credibility of the post-2015 goals will depend on how much we do in the next three years to meet the current goals.
In five central areas where policy coordination is essential, the world has not moved forward with sufficient force; indeed, in certain important respects it has moved backward.
Where are the powerful, globally minded voices that can do something about this?
Certainly, what China does will matter more than ever before. Zheng Bijian, a prominent adviser to the government in Beijing, argues that there is now a “convergence of interests” across the world but that the immediate challenge is whether global governance can be established without one dominant power or set of interests insisting on calling the shots. In other words, China wants global cooperation to work. It does not want to overturn the current global system, but to reform it, and it wants America and Europe to engage in that process of reform without trying to dominate it.
Events, however, are forcing Europe to retreat from its long-held desire to deliver a joint approach to global cooperation. While emerging markets outside Asia want to embrace global economic integration, at least in theory, Brazil and South Africa are not especially interventionist on global issues, and India and Russia, both with historically strong world-views, have become self-absorbed. When the BRICS meet, their lofty communiqués disguise widespread internal disagreements about how to engage. This is also true in the United States, where people are divided not so much on whether America should engage in the world, but on what terms.
In every country, politicians are having to deal with the nationalist and protectionist impulses that arise in difficult economic times. In a recent study of global public opinion, Jeffery Sellers of the University of Southern California found that there is a shift — not toward a stronger sense of global or even national citizenship, but to a “stronger territorial attachment” at the local level.
Problems may be increasingly global but politics remains local. I’ve found to my cost that while I talked to domestic audiences about the benefits of global cooperation, there were far more votes in redefining a global problem — low growth — as a national problem — high public debt. Even when a problem was beyond the control of one country’s leadership, it was much easier politics to hold the national government responsible.
A pessimistic conclusion would be that governments will turn to international action only when they are unable to solve domestic problems by the old methods. I am far more optimistic, not least because we have had some experience of global action that has worked.
Nevertheless, international institutions built in 1945 are now wholly inadequate for the challenges of a global economy. We must make the I.M.F. a more effective tool for global surveillance, give the G-20 teeth to coordinate international economic policy, ensure that all non-G-20 countries are included in consultations; and set detailed timetables for agreements on global bank rules, on growth and trade, and on fast-tracking progress toward the Millennium Development Goals.
The stakes are high, our collective prospects depend on what we do. Despite our first faltering steps to forge the first truly global civilization, the prize is great. Without diminishing the vitality of our national identities, we are on the way to creating the first global system of governance.
Brown was the prime minister of Britain and Labour Party leader from 2007 until 2010. He previously served as chancellor of the Exchequer from 1997 to 2007, becoming the longest-serving holder of that office in modern history. Currently serving as U.N. Special Envoy for Global Education, he also is the author, most recently, of “Beyond the Crash: Overcoming the First Crisis of Globalisation.”
The global economy is not able to work without the cooperation of the countries all around the world. There are issues that face the global economy, but without a global answer, there will be nothing that will be able to be done with the problem. This article goes in to how a nuclear disaster in Japan and the mess that Greece is in can affect everyone, and everyone has to try and figure out a solution to help the problem, not just one country.
Global finance and the ability to coordinate all of that with one another is key. If countries cannot get on the same page, they will not be able to correct figure out the problems that are facing our world today. Also, if the world does not have a plan that will help grow the countries all around the world and try to work together to get that done, it will be very difficult for some countries to start to prosper. A world trade agreement is needed, and the fear is that if they do not do something about the agreements now that are slowly starting to digress, that world trade will be very difficult to accomplish.
The article is basically saying that all countries across the world need to be on the same page or we will never go anywhere with the world economy. The best thing that we can do is try and work together and make this a better place to live and make the world work as well as possible. While in theory I agree with the ideas that are presented in this article, I don’t know how feasible it is that all of these can really work out. Yes it would be great to have one vision as a world economy, but I do not really think that is possible. There are too many countries out there, probably more of them than not, that are looking out for themselves and only want what is best for their people and for the country in general. This article makes some good points, and I do agree that we should be working towards a common goal and trying to figure this out to the best of our ability, but at the same time with some of the knuckleheads that we have in the world, I really don’t know how possible it is to achieve it.