Multilateralism, or a rules-based international order, was a late entry into the toolkit of ways in which countries interacted with each other. Its roots lie in the Pragmatic Treaty of Münster-Westphalia, signed in 1648, to avoid the war of conflict between military-matched states that arose after the breakup of the Roman Empire. Global peace and prosperity have been major spin-offs, though both weakened during the interlude of heightened nationalism. These dynamics are working to this day.
Starting with the principle that states were free to choose their official religions without outside interference, over time this transformed into an acceptance of ‘Westphalian sovereignty’: violence of international borders and non-interference in the internal affairs of others. . There have been two major phases of multilateral cooperation. First Westphalia was dominated, followed by Europe’s concerts. Economic cooperation dominated the second phase, with the reconstruction of war-ravaged economies in Europe and Japan, the repair of the international monetary system, and the revival of world trade. Centered on the Bretton Woods system, multilateralism expanded to include newly colonized developing countries.
The G-7, an informal governing group of seven major global powers (bit.ly/3kOe3cO), is the mastermind of both political and economic cooperation. Despite the impotence of the United Nations and the Cold War, global peace prevailed. Economic cooperation paid rich dividends through global prosperity. Global growth, which averaged 2% per year between 1870 and 1950, doubled to 4% between 1950 and 2000, helped by a boom in trade, which doubled its share of global output to more than 60%.
Growth acceleration was heavily skewed in favor of emerging and developing economies (EMDEs; bit.ly/2XY66Jt), shifting the economic weighting relative to advanced economies (AEs) and EMDEs, with emerging Asia at its center. This asymmetry sowed the seeds of a post-war crisis of multilateralism that threatens both global development and peace. On the one hand the AEs became disillusioned with globalization, which were once its strongest advocates. On the other hand, the Bretton Woods system’s failure to accommodate the shifting weights made it lose its validity. It seemed that history had come to a complete halt. The former colonies, which were initially wary of globalization because of their imperial experience, defended it, even as the commitment of the West weakened. In this division are non-governmental organizations and international companies (TNCs), whose resources, global reach and influence are increasing relative to nation states (fam.ag/3zPo65v). Their interests appear to align more with EMDE’s interests on globalization.
The loss of legitimacy led to the emergence of alternative EMDE institutions that tried to imitate the G7 (BRICS), the IMF (CMIM) and the World Bank (NDB, AIIB, BRI) and sought to revive multilateralism through a new governance structure. resulted in initiative. With regard to multilateral economic cooperation. The G-20 (g20.utoronto.ca/), raised to peak levels after the 2008 global financial crisis, accommodated emerging powers, notably China, and effectively overtook the G7.
The G20 has had success in coordinating policies to avert the Second Great Depression, but has had little success in resolving long-standing issues as the old north-south fault lines resurfaced after the crisis. In addition to wanting to join the G-20 on issues dealt with by institutions such as the IMF and the World Bank, EMDEs were reluctant to engage on issues dealt with by the WTO and others where they had similarities. Voting power. The original forum remained his negotiating forum of choice on matters such as trade and climate change, as his numerical strength allowed special carvings.
The G-20 was reduced to issuing frivolous statements, with the focus being on bilateral meetings and a resurgent G-7. The trade and geopolitical rivalry between the US and China has now taken center stage. Brexit has weakened multilateralism in Europe and Trumpism in America. Multilateralism has defeated this with arrangements such as the CPA-TPP, TTIP and RCEP. Neither of these include both the US and China, exacerbating the dualistic view of a new Cold War and Thucydides Trap (on.ft.com/3ulR8IL). Average annual economic growth has declined by 3.5% since 2010, with trade declining. The growth gap between AE and EMDE has also narrowed.
Asia, closely linked to China via supply chains but wary of its imperial ambitions, and dependent on the West for export markets and security, finds itself between a rock and a hard place. The rapid revival of multilateralism is in its interest. This revival is likely to be shaped by the resolution of four major frictions. First, rebuilding the G20 through harmonization of pressure groups so that globalization appears to be working for all key stakeholders. Second, China’s adjustment to global governance through the G20 or similar body. Third, by bridging the fundamental ideological divide, as many emerging powers such as China, India, Russia and Brazil have taken liberal and nationalist turns, despite their open markets. And finally, tackling climate change, fleeing failed states and pandemics by re-implementing the Westphalian notion of sovereignty on the one hand, and engaging non-state players (including TNC) in a new multi-stakeholder paradigm on the other. . of multilateralism. Neither can flow under the carpet anymore.
Alok Sheel, RBI Chair Professor of Macroeconomics, Indian Council for Research on International Economic Relations
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