The world is on fire. It has never looked more dangerous since the Cuban Missile Crisis of 1962, nor has an end to our 56 conflicts — more than any other time since World War II — seemed more distant or inaccessible.
Distracted by domestic election campaigns, preoccupied with internal divisions and alarmed by the geopolitical upheaval unfolding beneath our feet, the world is sleepwalking toward a “one world, two systems” “China vs. America” future. And the cooperation needed to put out the fires is so elusive that even now, an international agreement to prepare for and prevent a global pandemic is beyond our reach. And even in the face of the existential challenge of climate change (the planet is on track for a 2.7°C warming above pre-industrial levels), not many are hopeful that COP29 in Azerbaijan will rise to the challenge. At a time when global problems urgently require global solutions, the gap between what we must do and our capacity (or, more accurately, our willingness) is widening by the minute.
We are at a global turning point, not only because crises have proliferated far beyond public tragedies like the Ukraine war or the Israel-Gaza war, but also because in a year in which almost half the world went to the polls, few political candidates were prepared to acknowledge the changed geopolitical situation. Three major shifts that put an end to the unipolar, neoliberal, hyper-globalized world of the past three decades make a total rethink mandatory:
First, we are moving from a unipolar to a multipolar world, not one of great powers of equal status (the United States will remain militarily and economically dominant for decades to come), but one of multiple competing centers of power. As U.S. hegemony is threatened, countries freed from unipolar constraints have become neutrals, hedges, and swing states, many of which are entering into opportunistic and potentially dangerous relationships. A few, such as India and Indonesia, are pitting great powers against one another. Equally worrying is the global South, facing a lost decade without a reliable global financial safety net and exasperated by the lack of support on vaccines, climate change, and humanitarian crises, is turning its back on Western leadership.
However, a second dramatic shift has taken the world from a neoliberal or free trade economy to a neo-mercantilist protectionist economy, accompanied not only by rising tariffs (which will rise further if Donald Trump imposes a 10% tariff worldwide), but also trade embargoes, investment bans, and technology. Whereas once free trade was seen as the key to raising living standards, now trade restrictions are seen as the key to protecting living standards. This zero-sum worldview of “I can't succeed unless you fail” explains the rise of anti-trade, anti-immigration, and anti-globalization sentiment as the United States, as well as 15 other countries, plan to build or strengthen border walls.
Hyperglobalization, or globalization without constraints, has become globalization with constraints as security considerations, or risk aversion, have come to dominate the political agenda. For 40 years, economics has determined political decisions. Today, politics determines economic policies. And now, globalization is exposed as laissez-faire, open but not inclusive, rather than “fair for all,” and inequalities within countries are growing. Few now believe that a rising tide floats all boats. And there is a tragic irony in all this: at a time when we are on the brink of the most transformative medical, artificial intelligence, and environmental technological advances the world has seen since the introduction of electricity, and which could herald the greatest gains in productivity and prosperity in decades, we are in danger of losing those gains by succumbing to protectionism, mercantilism, and ethnocentrism.
Fortunately, there is a way forward, provided we recognize that the world has changed. One way to address new ideological, military, and geopolitical challenges is to show that even minimal multilateralism can work. Frankly, each country needs multilateralism for individual reasons. Europe needs a stronger multilateral order because it does not have its own energy supplies and its prosperity depends on trade with the world. The Global South needs a multilateral order because it cannot move forward quickly without a redistribution of resources from the Global North. Mid-size or emerging countries such as India, Indonesia, Mexico, and Vietnam need a multilateral order because they do not want to have to choose between the United States and China and would be better off living under a multilateral umbrella. The point is that the United States, which acted multilaterally in a unipolar order, must now recognize that it cannot act alone in a multipolar order. The United States should be the defender and leader of this new, more diverse world.
China, which still needs export-led growth to become a high-income country, has declared that it wants to operate under the UN Charter, but if this is a bluff, it should be exposed. I am not advocating more multilateralism than necessary; it is natural to respect the autonomy of each country. But I support all the multilateralism that can be achieved, because in such an inevitably interconnected world, rising interest rates and currency fluctuations, as well as fires, floods and droughts in one place, cast a pall everywhere.
The fight against protectionism should be fought by a World Trade Organization, with strong leadership like Ngozi Okonjo-Iweala, that can shift the balance from a decade of fixation on unworkable legal remedies to negotiation, arbitration and settlement.
High interest rates and bond and loan repayments will drive nearly $200 billion out of developing countries to private creditors in 2023, completely outpacing increases in lending from international financial institutions. The IMF and World Bank remain the primary tools for dealing with the financial crisis. But debtor countries have drastically cut spending on health and education, and 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 must go beyond the inadequate G20 common framework but should include restructuring of existing loans, debt swaps, credit guarantees, and, as in 2005, debt forgiveness for loans that cannot be repaid.
Equally important, the IMF already has a tool to help the poorest countries: Special Drawing Rights (SDRs), which provide unconditional liquidity to all member countries according to their quotas. But of the $650 billion in SDRs allocated by the IMF in August 2021, only $21 billion went to the lowest-income countries that need the assistance most. Efforts led by IMF Managing Director Kristalina Georgieva to transfer more SDRs to developing countries and subsequently increase member quotas (and make IMF decision-making more representative) are a first step toward a more equitable global financial safety net.
Expanded use of innovative financial tools by multilateral development banks, such as guarantees, risk mitigation instruments, and hybrid capital, is essential to achieving a recapitalization of the World Bank. Ajay Banga, president of the International Development Association, has rightly called for the largest capital increase in history. With the number of people living in extreme poverty rising to 700 million, we cannot be satisfied with anything less. That is why, at the G20 meeting in Brazil on November 18 (by which time we should know who the new US president will be), President Lula has laid out three main priorities: fighting hunger, poverty, and inequality; promoting sustainable development; and reforming global governance. All three will roll back xenophobia and pave the way for a new decade of cooperation.
The world is on fire. For too long, our leaders have acted like arsonists, fanning the flames of insecurity. It's time to put out the fires. Our future depends on it.
