A new and better globalized world
Ian Goldin, the author of the “Butterfly Defect,” argues that multinational institutions have not kept up with the rapid evolution of globalization. As a result, the world is dealing with increasingly complex systems without the appropriate tools to manage their risks. Why didn’t institutions adjust to the new globalized world? There are four reasons, argues Goldin: short-termism, nationalism, cost, and capture. Yet the COVID-19 crisis showed that urgent reform of these institutions is needed in order to better manage global risk and mitigate the butterfly defect of globalization. International cooperation is key. His suggestions:
- Countries should yield some autonomy to supranational institutions since overarching principles are necessary for risk management;
- Establishment of a global institution with decision-making and enforcement power to coordinate responses to climate change;
- China-centered institutions are becoming increasingly important, including the Asian Infrastructure Investment Bank and the constellation of bilateral agreements forming the Belt and Road Initiative. Working with these institutions, rather than against them, is essential, as solving global problems requires more firepower and coordination.
Rethinking global resilience
By: Ian Goldin – Oxford University
…but the current deglobalization trend points away from multinational institutions
A final form of deglobalization is the retreat from multilateralism more broadly. With some countries (namely, the US) actively undermining global institutions, it has become increasingly difficult to establish any new institutions capable of tackling today’s most pressing problems, from climate change to decelerating trade growth. Following the lead of the major powers, more countries are preparing to go it alone in pursuit of narrower national agendas.
The Post-Pandemic Economy’s Barriers to Growth
By: Dambisa Moyo
…and China prefers a limited role in international economic institutions
David Dollar argues that China has generally lived up to its commitments in multinational institutions, but has been reluctant to take on the stronger responsibilities that fall on developed countries. For example:
- In the IMF, China has resisted capital account convertibility so that it can manage capital inflows and outflows and the level of its exchange rate;
- In the WTO, China has dragged its feet on its commitment years ago to join the Government Procurement Arrangement, which is mostly a club of rich countries that have opened up government procurement markets to each other;
- In the World Bank, China’s contribution is not proportional to the size of its economy;
- China has similarly been reluctant to join the Organisation for Economic Co-operation and Development (OECD)’s Development Assistance Committee (DAC), which sets standards for transparency of foreign aid, or the Paris Club, which coordinates official debt reschedulings;
- As for the Paris agreement, China recognized the need to reduce emissions but supported voluntary pledges.
Finally, China’s greater involvement in multinational institutions will not happen against the background of a US-China trade war.
Reluctant player: China’s approach to international economic institutions
By: David Dollar – Brookings
