TThe world is on fire. The world has never looked so dangerous since the Cuban missile crisis of 1962, and an end to the 56 conflicts – the highest number since World War II – has never seemed so far away or so elusive.
Distracted by national election campaigns, preoccupied by internal divisions, and blindsided by the seismic geopolitical shifts unfolding beneath our feet, the world is sleepwalking into a one world, two systems, China versus America future. And the cooperation needed to fight the fires is proving so elusive that even now an international agreement to prepare for and prevent global pandemics is beyond our reach. And even with the existential problem of climate change (the planet is heading for a temperature rise of 2.7°C above pre-industrial levels), many cannot hope that COP29 in Azerbaijan will be up to the challenge. At a time when global problems desperately need global solutions, the gap between what we need to do and our ability—or more accurately, our willingness—to do it is growing by the minute.
We are at a global turning point, not only because crises are multiplying far beyond the high-profile tragedies of the Ukraine and Israel-Gaza wars, but because in a year when almost half the world went to the polls, few political candidates were willing to acknowledge the changed geopolitical landscape. For three seismic shifts that are ending the unipolar, neoliberal, hyper-globalized world of the last 30 years make a complete rethinking imperative.
First, we are moving from a unipolar to a multipolar world, not one in which the great powers are equal—the US will dominate militarily and economically for decades to come—but one with multiple competing centers of power. As US hegemony is challenged, countries freed from their unipolar straitjacket have become undeciders, hedgers, and swing states, and many are entering into opportunistic and potentially dangerous liaisons. A few, like India and Indonesia, are playing the great powers off against each other. Equally worrying, the global South—now looking back on a lost decade of development without a global financial safety net and angry at how little has been done to support it on vaccines, climate change, and humanitarian crises—is turning away from Western leadership.
But a second seismic shift has taken the world from a neoliberal or free trade economy to a neomercantilist protectionist economy that includes not only rising tariffs (and more will follow if Donald Trump imposes 10% tariffs worldwide) but also bans on trade, investment and technology. Free trade was once seen as the key to higher standards of living; today trade restrictions are seen as the key to securing them. A zero-sum view of the world – “I can only succeed if you fail” – explains the eruption of anti-trade, anti-immigration and anti-globalization sentiments, while not only the US but 15 other countries plan to build or strengthen border walls.
Hyperglobalization, or borderless globalization, has now become constrained globalization, as security considerations or so-called risk minimization dominate the political agenda. For 40 years, economic considerations drove political decisions. Today, politics drives economic policy. And globalization is now turning out to be a free game that is not “fair for all” – and an open but not inclusive game, while inequality within nations is increasing. Few today believe that a rising tide will lift all boats. And there is a tragic irony to all this. At a time when we are on the verge of the most innovative advances in medicine, artificial intelligence (AI) and environmental technology that the world has seen since the advent of electricity, and which could herald the greatest increases in productivity and prosperity in decades, we risk losing the benefits by falling into protectionism, mercantilism and nativism.
Fortunately, if we recognize that the world has changed, there is a way forward. One way to address the new ideological, military, and geopolitical challenges is to show that multilateralism, even in its most minimal form, can work. The stark truth is that every country, for individual reasons, needs multilateralism today. Europe needs a stronger multilateral order because, without its own energy supply, its prosperity depends on trade with the world; the global South needs it because it cannot advance quickly without some redistribution of resources from the global North; and the middle or emerging powers like India, Indonesia, Mexico, and Vietnam need it because they do not have to choose between America and China and would be better off under a multilateral umbrella. Importantly, the United States, which acted multilaterally when we had a unipolar order, must now recognize that it cannot act unilaterally in a multipolar order. It should become the champion and leader of this new, more diverse world.
China, which still needs export-led growth to become a high-income country, says it will work within the framework of the UN Charter, but if that is a bluff it should be called out. I am not arguing for more multilateralism than is necessary, because countries rightly value their autonomy, but I am in favour of as much multilateralism as we can achieve, because in a world that is so inescapably interconnected, not only interest rate hikes and currency fluctuations but also fires, floods and droughts cast a dark shadow everywhere.
Protectionism must be combatted by a World Trade Organization that, under a strong leader like Ngozi Okonjo-Iweala, is able to move from its decades-long, useless fixation on remedies to negotiations, arbitration and mediation.
High interest rates and bond and loan repayments resulted in nearly $200 billion flowing out of developing countries to private creditors in 2023, far dwarfing the increased financing provided by international financial institutions. The IMF and the World Bank remain the main tools for dealing with financial crises. But indebted countries are cutting spending on health and education. 3.3 billion people now live in countries that spend more on interest payments than on these two basic services.
A comprehensive debt relief plan – which must go beyond the inadequate G20 common framework – should include restructuring of existing loans, debt swaps, loan guarantees and – as in 2005 – debt relief for defaulted loans.
Just as important, the IMF already has a method of supporting the poorest countries: special drawing rights (SDRs), which provide unconditional liquidity to all member countries in amounts based on their quotas. Yet while the IMF allocated $650 billion worth of SDRs in August 2021, only $21 billion went to the poorest countries that needed the help most. The effort, led by IMF Managing Director Kristalina Georgieva, to transfer more SDRs to developing countries and then increase their membership quotas (and make the institution’s decision-making more representative) are the first steps toward a fairer global financial safety net.
To achieve recapitalisation of the World Bank, multilateral development banks must make greater use of their innovative financial instruments such as guarantees, risk reduction instruments and hybrid capital. Its President, Ajay Banga, has rightly called for the largest increase in the International Development Association (the main global fund supporting low-income countries) in history. With the number of people living in extreme poverty on the rise – 700 million – we cannot settle for less. That is why President Lula has set three main priorities for the G20 summit in Brazil on 18 November – by which time the new US president will probably be known –: fighting hunger, poverty and inequality; promoting sustainable development; and reforming global governance. All three priorities would push back xenophobia and pave the way for a new decade of cooperation.
The world is indeed on fire. For too long, too many politicians who should have been firefighters have acted as arsonists, stoking the flames of unrest. It is time to put out the fire. Our future depends on it.
