Can multilateralism evolve?

• Author: Kharas, Homi
• Position: SPECIAL REPORT

Over the last 75 years, multilateralism has been a powerful driver and pillar of global integration, peace, and prosperity. However, recent disaffection with globalization and with existing forms of global governance threatens the foundations of the rules-based multilateral order.

Growing political discontent with multilateralism, most notably in the United States, is associated with the failure of the post-Bretton Woods system to stem the tide of slow growth, rising inequality, migration, social fragmentation, and job insecurity associated with skill-biased technological change, offshoring and financialization.

In addition to its failure to deliver shared prosperity, the ever-widening scope of globalization also undermined democracy by reducing nations' sovereign policy autonomy, inhibiting often desirable policy diversity and experimentation in the process. As Dani Rodrik has argued, there is a trilemma preventing the simultaneous achievement of deep globalization, national sovereignty, and democracy. Far too often, small and medium-sized nations--particularly in the Global South--have been forced to choose between gaining access to global markets and keeping policy space for the pursuit of their national development strategies.

Global challenges predate COVID-19

The COVID-19 catastrophe has piled on by exposing key vulnerabilities in today's hyper-globalized mode of production as well as important gaps in the global governance architecture. The current configuration of economic globalization was designed to maximize short-term efficiency, Minimize transaction costs, and reap the benefits of scale, at the expense of robustness and security.

In return, politicians promised that the rising tide would lift all boats. But while global GDP has risen quite rapidly over the past decades--with China and, to a lesser degree India, achieving particularly rapid growth--globalization has resulted in widening inequalities within most countries and exposed nations to unquantifiable levels of systemic fragility. Not surprisingly, COV1D-19 and the resulting economic downturn are only aggravating existing social cleavages within and across countries.

But while COVID-19 has poured jet fuel on deep and hard-set fault lines, even before its emergence the world was already fast approaching irreversible thresholds and tipping points on several global challenges, most notably in the realms of climate change and artificial intelligence. The window of opportunity...