Building Collaboration Without Crisis
IMF Blog, September 30, 2016
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Bibliographic details
- Authors: Ian Bremmer, David Lipton
- Published: September 30, 2016
Overview
- Authors: Ian Bremmer, David Lipton
- Date: September 30, 2016
- Core message: International cooperation often evaporates when most needed, producing crises that force belated cooperation. To avoid repeating past mistakes, the world must revive cooperation proactively to protect gains from globalization and address intertwined economic, political, and security challenges.
Growing discontent and economic drivers
- Causes of rising discontent in advanced economies:
- Damage of the global financial crisis.
- Slowing income growth.
- Technologies that make many jobs obsolete.
- Individual and community displacement from global interconnectedness.
- Social effects:
- Stagnant middle class wage and job growth and rising inequality are fraying the social contract.
- Opportunistic political leaders exploit fear of rapid change.
- In the United States, economic progress by minorities and women has provoked a backlash among those who feel they are falling behind.
- Some emerging market economies face a gap between rising middle-class expectations and governments’ ability to deliver amid slowing global and domestic growth.
- Importance of interconnectedness:
- Advanced economies cannot afford to discard gains from trade despite maturity and slowing productivity growth.
- Emerging markets depend on trade, capital, and technology to sustain high growth and converge living standards.
- Specific numeric claims:
- China still accounts for 37 percent of all global growth.
Geopolitical and security drivers
- Political shifts and constraints:
- For almost a decade, the United States and Europe focused on recovery from the global financial crisis, reducing proactive engagement.
- Emerging market countries demand greater influence in international fora and institutions.
- Emerging powers named: Brazil, India, China, Russia, and South Africa.
- New geopolitical complications:
- Emergence of non-state actors, failed states, the rise of ISIS, and refugee flows from Middle East wars.
- Terrorism and cyber threats are pervasive and require international cooperation.
- Resentment of United States tactics, including frequent use of sanctions (viewed as a “weaponization of finance”), unmanned drone attacks within other countries, and surveillance on foreign leaders.
- European leaders face internal problems: managing the refugee crisis, negotiating Brexit, controlling terrorism, and placating populations weary of reform.
- Technological disruption:
- Advances in information, distributed ledger, and big data technologies, as well as artificial intelligence, raise questions about profitability and sustainability of existing institutions and companies and may erode effectiveness of legal and regulatory systems.
- These trends create uncertainty that can stunt demand via precautionary savings and deter investors.
Policy recommendations and prescriptions
- Reinforce cooperation to revitalize growth:
- The Group of Twenty advanced and emerging market economies remains essential.
- Member countries should implement and accelerate the group’s growth initiative from this year’s Hangzhou summit, using all policy levers—monetary, fiscal and structural—to lift the global economy.
- Recent IMF analysis shows large synergies from comprehensive, consistent and cooperative action: “By acting together, much more is possible and feasible.”
- Make globalization more inclusive:
- Lift growth while adopting policies that support the poor and those displaced or negatively affected by change.
- Be more open to redistributive policies.
- Focus on providing displaced workers in industry and services with skills to compete in the 21st century economy.
- Where governments meet citizens’ expectations for rising living standards and enhanced personal security, populist messages lose urgency and appeal.
- Strengthen international financial and regulatory firewalls:
- Better coordination to limit spillovers from economic vulnerabilities.
- Stronger financial regulations to prevent banking and capital market abuses.
- Tax cooperation and harmonization to limit revenue erosion from cross-border profit shifting by corporations.
- Embrace multipolarity and reform multilateral institutions:
- Protect and, where necessary, reform core multilateral institutions like the IMF, World Bank, and United Nations; let governance evolve to reflect changing global power realities.
- Support and integrate new institutions and initiatives promoted by emerging markets.
- Enhance existing regional financial arrangements, such as the Chiang Mai Initiative, through greater cooperation and coordination.
- Integrate economics and security policy:
- Break down the longstanding divide between economics and security in national and international policymaking.
- Adopt an integrated approach recognizing that security threats have economic repercussions and economic instability generates security threats.
Concluding observations
- The present irony: there is more to be achieved by interconnectedness and cooperation than ever, yet rising fragmentation risks losing those gains.
- A defensive “wall” needed is an improved international firewall against future crises, not isolationist walls.
- The time has come for serious dialogue and a renewed spirit of cooperation to avoid repeating historical mistakes and succumbing to economic and political fragmentation.
Source: Building Collaboration Without Crisis — Ian Bremmer, David Lipton (September 30, 2016).
Content in this bundle
- After_the_GZero - Executive summary