Wednesday, March 31, 2021

Globalisation, a global compact and who writes the rules - familiar terrain

Some recent readings bring out interesting perspectives on globalisation, who sets the rules, what should the global order look like and why developmental economics is ignored!

The Economist has a piece on the importance of globalization and supply chains inspite of nationalistic rhetoric and going local in most large economies. Diversification of supply chains rather than closing down on them is what "Message in a bottleneck" tries to convey:

Such a lurch towards autarky would not be justified. One reason is that government-administered, domestic supply chains are even less resilient than global ones. For all its drama, the saga of the Ever Given will be only a blip in the trade statistics. As demand surged in the pandemic, China’s mask output rose by ten times. After the panic buying of beans and pasta, the $8trn global food supply-chain rapidly adapted, keeping most supermarkets stocked. While arguments rage over how to allocate doses, global networks stand to supply 10bn shots of brand new vaccines this year. Self-reliance sounds safe, but politicians and voters must remember that their meals, phones, clothes and jabs are all the product of global supply chains.

Stephen M.Walt has this forceful piece on who writes the global rules. The issue of who sets the international agenda and how rule takers are now challengng status quo is depicted by the present geopolitical rivalries that are playing out:

The differences between the American and Chinese conceptions are relatively straightforward. The United States (generally) prefers a multilateral system (albeit one with special privileges for some states, especially itself) that is at least somewhat mindful of individual rights and certain core liberal values (democratic rule, individual freedom, rule of law, market-based economies, and so on). These ideals may be applied imperfectly at home and pursued inconsistently abroad, but the U.S. commitment to them is not just empty rhetoric. Among other things, it underpins U.S. efforts to persuade or compel other states to alter their own domestic arrangements. Not surprisingly, the United States also likes many existing institutions (the IMF, NATO, the World Bank, the reserve role of the dollar, to name a few) because they give the United States greater influence.

By contrast, China favors a more Westphalian conception of order, one where state sovereignty and noninterference are paramount and liberal notions of individual rights are downplayed if not entirely dismissed. This vision is no less “rules-based” than the United States’, insofar as it draws on parts of the United Nations charter, and it would not preclude many current forms of international cooperation, including extensive trade, investment, collaboration on vital transnational issues such as climate change. China is also a vocal defender of multilateralism, even if its actual behavior sometimes violates existing multilateral norms. Nonetheless, a world in which China’s preferences prevailed would be different than one in which the U.S. vision proved to be more influential.

The next question perhaps is how other larger economies fit into this divergent dynamic.That brings us to the question of allies and coalitions. What should the basis be for the superpowers to form coalitions - democracy, common values or the end goal of a common enemy? Jana Ganesh summarises it in this piece in the Financial Times where he emphasies that the battle is not easily one by stressing on common values.

So what kind of compact should a global order be? This Project Syndicate piece calls for a a concert of powers for a global era with a grand vision of informal negotiation amongst old and emerging powers to ensure coherence and progress.Richard Haass and Charles A Kupchan argue that it is possible to bring about such a concert and would be aboon for global governance:

A global concert offers the best vehicle for managing a world no longer dominated by the United States and the West. The members would be China, the European Union, India, Japan, Russia, and the US, collectively representing roughly 70% of world GDP and global military spending. Including these six heavyweights would give a global concert geopolitical clout while protecting it from becoming an unwieldy talking shop.


          Establishing a global concert would be no panacea, however. Convening the world’s heavyweights hardly ensures a consensus among them, and success would often mean managing, not eliminating, threats to regional and global order. The proposed steering group would accept both liberal and illiberal governments as legitimate and authoritative, implying abandonment of the West’s longstanding vision of a global order made in its image. And restricting membership to the most important and influential actors would sacrifice representation in favor of efficacy, reinforcing hierarchy and inequity in the international system. 

Grand thoughts for a weekend read?

To end it all, Arvind Subramanian and Devesh Kapur are critical of the dominance of the north in opinion making institutions of economics. They argue, unsurprisingly, that many of these institutions underrepresent the interests and voices of the south. Fair enough, but how are the alternative voices to be heard - only in increasing representation in the institutions of the north or by building an alternative institutional ecosystem? Their comments on RCT, I will leave for another day, for I am no expert on it!

Development economics focuses on improving the well-being of billions of people in low-income countries, but the Global South is severely underrepresented in the field. Unfortunately, a small number of rich-country institutions have appropriated it, with serious consequences. And the problem appears to be getting worse.

All in all, an interesting amalgam of scattered thoughts.But this sure is familiar terrain with the no easy answers.