Saving globalization from itself

After World War II, the United States and other advanced democracies pushed for the integration of the global economy spurring a process that has improved the lives of billions of people. Trade barriers came down and security networks embraced a growing percentage of the world’s nations. Even former adversaries such as Japan, and eventually China, joined this system of open trade that prompted unprecedented peace and prosperity. Yet, the primary force behind all of this remarkable progress—namely, globalization—has never been so reviled.

In many ways, the problems caused by globalization stem from the tension between an increasingly integrated global economy and an international political system that remains characterized by the interaction of nation states with conflicting interests and values. While international institutions were erected to deal with such tension, both the power and the legitimacy of these institutions are eroding.

Recent years provide many examples of failure. Due to the inconsistent beliefs and aims of its members, the United Nations Security Council was unable to prevent a humanitarian crisis of tragic proportions in Syria. Brexit may catalyze the dissolution of the European Union as other countries—many of whom are also shirking on their obligations to NATO—come to view their relationship with Brussels as counter to their national interest. Brazilian finance minister Guido Mantegna's declaration in 2010 that the world was in “the midst of an international currency war” pointed to the failure of the International Monetary Fund (IMF) to harmonize international monetary policy coordination. In an integrated world economy, the effects of a country’s economic policies are not isolated. Donald Trump’s denunciation of China’s currency devaluation and its detrimental effects on the American economy is not without basis. Similarly, the Federal Reserve’s quantitative easing produces inflated asset values in emerging debt and equity markets, as well as currency appreciation in countries like Brazil, causing these countries’ exports to fall.

Though these challenges are daunting, the United States and its allies cannot afford to retreat. If they do not assume a leading role in the reconstruction of the global architecture for cooperation, other countries will. With an increasing percentage of global Gross Domestic Product concentrated in authoritarian countries, it is likely that these alternative leaders will construct a system that will be at odds with Western values.

At the same time, international institutions will only have the sufficient legitimacy and resources to be effective if they become more inclusive and representative. Over the past few decades, countries that played no role in constructing the rules of the current global system have gained enormous wealth and influence. China, for example, feels vindicated in disregarding the rulings of international institutions because it had no part in designing these bodies. If the institutions aren’t modified to accommodate China, the Asian behemoth will take matters into its own hands. In response to the American monopoly on the presidency of the World Bank and similar European control over the managing director position at the IMF, China launched the Asian Infrastructure and Investment Bank in 2014.

Greater inclusiveness within our international institutions will surely make them stronger and more effective, but it will also make consensus more difficult. Such a consensus is necessary because, as Henry Kissinger explains in his book World Order, any system of international order that “is built on power, but lacks legitimacy, will destroy itself.” For a global order—and the institutions that underlie it—to be considered legitimate, they must reflect moral values that resonate with individuals in all parts of the world. The differences between the fundamental values of the United States and China—the two countries that must buttress any global order for it to be worthy of that title—highlights the difficulty of this endeavor. In his recent United Nations address, President Obama expressed the belief shared by many Americans that “the principles of open markets and accountable governance, of democracy and human rights and international law that we have forged remain the firmest foundation for human progress in this century.” This stands in stark contrast with the Chinese view articulated by Deng Xiaoping that "national sovereignty is far more important than human rights [and that] talk of human rights, freedom and democracy is designed only to safeguard the interests of the strong, rich countries.”

Still, nations with competing ideologies can find a common goal in the advancement of the human condition. While there may be large disagreement on how to achieve such an end, there will also be areas of consonance. In a communique from the recent G-20 meeting, world leaders affirmed their commitment to "a rules-based, transparent, non-discriminatory, open and inclusive multilateral trading system." Further, they acknowledged that improved international policy coordination as well as greater inclusiveness and integration are essential to further growth.

The world will become more peaceful and prosperous if its leading nations bind their power to international laws and institutions that are widely recognized as legitimate. New powers such as China will do so only if institutions are reformed as to become more inclusive and representative. For advanced economies, the challenge will be overcoming the recent wave of anti-establishment movements. All parties must recognize that compromise is a necessity and that it is better, as Edmund Burke remarked, “to acquiesce in some qualified plan that does not come up to the full perfection of the abstract idea, than to push for the more perfect.”