A new world order

A new world order

The financial crisis afflicting much of the world is part of more fundamental shifts in the world's economic power-balance. It is time for a new model of global governance that recognises the reality of current trends - starting with the creation of a Global Strategic Council, says Krzysztof Rybinski

What is and should be the future of global governance? Who should make the key decisions and in what institutional frameworks? The answers to these questions may be approached via a retrospective glance at an epochal moment when they might have seemed far clearer than they do today: the "diamond jubilee" of 1897 which marked Queen Victoria's sixty years on the British throne. Fareed Zakaria brilliantly evokes the scene on 22 June 1897 which conjoined London and much of the globe:

"(About) 400 million people around the world, one-fourth of humanity, got the day off. (The jubilee) stretched over five days on land and sea, but its high point was the parade and thanksgiving service on this midsummer day. The eleven premiers of Britain's self-governing colonies were in attendance, along with princes, dukes, ambassadors and envoys from the rest of the world...Krzysztof Rybinski is a partner in Ernst & Young and assistant professor at the Warsaw School of Economics.This article is (with minor editorial changes) the text of a talk delivered on 25 November 2008 at a seminar on "Reforming International Organisations" in Warsaw, co-organised by the British embassy and the Unia & Polska Foundation
"The jubilee was marked with great fanfare in every corner of the empire. In Hyderabad every tenth convict was sent free. There was a grand ball at Rangoon, a dinner at Sultan's palace in Zanzibar, a salute of gunboats in Table Bay, a monster Sunday-school treat at Freetown, a performance of the Hallelujah Chorus in Happy Valley at Hong Kong....

"In today's world it is difficult to imagine the magnitude of the British empire. At its height, it covered about a quarter of the earth's land surface and included a quarter of its population. London's network of colonies, territories, bases, and ports spanned the entire globe, and the empire was protected by the Royal Navy, the greatest seafaring force in history...
"Over the preceding quarter century the empire had been linked by 170,000 nautical miles of ocean cables and 662,000 miles of aerial and buried cables, and British ships has facilitated the development of the first global communication network via the telegraph. Railways and canals (the Suez canal, most importantly) deepened the connectivity of the system. Through all of this, the British empire created the first truly global market. Moreover, 2% of the world population produced more than 30% of global GDP, its energy consumption was five times that of United States and Prussia, and it accounted for two-fifths of the world manufacturing trade" (see "The Future of American Power: How America Can Survive the rise of the Rest", Foreign Affairs, May-June 2008).

But hubris was being shadowed by nemesis. The bitter wars against the Afrikaaners ("Boers") of South Africa in 1899-1902 - waged in the teeth of opposition from France, Germany and United States - were an early signal. The beginning of an end of the 19th-century superpower - already anticipated by Rudyard Kipling at the time of the 1897 jubilee - was in sight.
openDemocracyKerry Brown, " writers analyse the search for new forms of global governance amid financial turmoil:China goes global" (2 August 2007)Robert Wade, " The financial crisis: burst bubble, frayed model" (1 October 2007)Andras Ortega, " The power of the few" (4 October 2007)Ivan Krastev & Mark Leonard, " The world's choice: super, soft, or herbivorous power?" (26 October 2007)David Hayes, " A world in contraflow" (3 January 2008)David Held, " Global challenges: accountability and effectiveness" (17 January 2008)Ann Pettifor, " The week that changed everything" (22 September 2008)Fred Halliday, "The revenge of ideas: Karl Polanyi and Susan Strange" (24 September 2008)Rein Müllerson, "The world after the Russia-Georgia war" (5 September 2008)Godfrey Hodgson, "The week that democracy won" (29 September 2008)Tony Curzon Price, "Unprincipled madness" (1 October 2008) Grahame Thompson, "Deglobalising the crisis" (3 October 2008)Will Hutton, "Wanted: a fairer capitalism" (6 October 2008)Avinash Persaud, "Europe's financial crisis: the integration lesson" (7 October 2008)Paul Rogers, "A world in flux: crisis to agency" (16 OctoThe title of

Fareed Zakaria's essay from which the above extracts come - and the fact that in turn they are drawn from a book called The Post-American World - is an indication that these questions have found a fresh relevance today. Now, however, they refer not to the coming of a United States-dominated world but to its ending - and in particular, to the rise of China (or "Chindia"). Will a country of 300 million stand the competition of a charging dragon (albeit a troubled one) and racing elephant (albeit a wounded one) with 2.5 billion inhabitants; will this relatively small country be able to remain the global superpower?

A rebalancing
My answer to these questions is simple. While the United States is very likely to retain a big part of its political influence over the next decades, its economic and financial influence will rapidly diminish. The US's continued political influence will be related to its massive defence budget, one that dwarfs all other countries' put together. But in economic terms the restoration of the world order that prevailed until the early 19th century is likely. In 1820, Chindia accounted for 50% of the world's GDP, but both countries missed the industrial revolution and Chindia's share of the world's GDP dropped to less than 10% in mid-20th century. Since then it recovered to 20% and (according to IMF estimates) China had the highest contribution to the world GDP growth in 2007 and in the same year accounted for 25% of global growth on a purchasing-power parity (PPP). The "BRIC" countries, meanwhile - Brazil, Russia, India, China - accounted for almost half of global growth.
In the early 20th century, the United States replaced Britain as the world's only superpower. With the US's economic and financial power fading in relative, and recently also in absolute terms, the world faces two options:
* Design the new world order, the new vision
* Let the market and non-coordinated political processes determine the new world order.

A rising tide
The second option may be very costly. This claim can be illustrated with a few examples:
* Oil prices have topped $140 per barrel in 2008, then receded to $50 amid cyclical factors; but according to an International Energy Agency (IEA) forecast published in November 2008, the price of oil will soon exceed $100 again. The emerging markets' - and China's in particular - appetite for energy will continue to rise at a very fast rate, much faster than the pace of innovation allowing to reduce energy consumption and to use the new, non-fossil fuels based sources of energy.

The IEA predicts that in 2030 energy demand will be higher by 45% than in 2007, with Chindia responsible for 51% of that increase. Without globally coordinated massive policy intervention, fossil-fuels will retain its dominant share in energy generation accounting for 80% of world energy production cannot be ruled out. With a high risk of excess demand for energy, there may be massive and frequent blackouts around the globe in the future. The current recession may make matters worse, because the credit-crunch reduces investments in the energy sector. Energy may become a very powerful political weapon, helping to shift global power from energy-deficit countries to energy-surplus countries. This is of particular importance in Europe, which heavily relies on gas imports from Russia.

Climate disasters have become much more frequent in the past two decades, jeopardising the life and well-being of millions of people on all continents. Yet despite strong evidence that human industrial activity is contributing to this trend, the world's biggest countries cannot agree on the set of measures that will prevent humanity destroying itself. Europe's lonely fight against climate change is meaningless without US and China coming on board. Even if the European Union cuts emissions as planned by 20% by 2020, the cumulative reduction over fifteen years will be smaller than a single year greenhouse-gasses emissions by China in 2020.
China has amassed more than $2 trillion of foreign-exchange reserves. An estimated $1.5 trillion has been invested by the Chinese in US assets, mostly US government debt or US government guaranteed debt. Nowadays Chinese leaders can crash the dollar and send the US economy into a tailspin recession with just one comment - namely that China will stop buying dollars. At the same time the leading 20th-century economic powers refuse to recognise the key role that China plays in the world of politics, economics and finance. The best example of that is the fact that Belgium and Netherlands together have more votes on the boards of the IMF and the World Bank than China.

The global push to a switch from fossil-based fuels to biofuels has contributed to a global rise of food prices - so-called agflation. In 2007-08, the food-import bill of the poorest countries has risen by 75%, which combined with rising climate-related disasters may bring famine to many developing countries, killing millions. There is no coordinated action to face this problem, and countries respond by prohibiting food exports, which only makes the global food situation even worse. The Food & Agriculture Organisation (FAO) summit in Rome on 3-5 June 2008 was a formidable event. While zipping Brunello di Montalcino and chewing Bistecca Fiorentina, participants agreed to chip in some money and pretended the problem is over.
If you google "world vision" or "global vision", 2.4 million and 1.1 million entries respectively will be returned. It means that this phrase is very popular and used frequently. One could argue that the United Nations' Millennium Development Goals (MDGs) constitute such a world vision.

The world has agreed to improve the living conditions in poor countries between 1990 and 2015, and the United Nations set a series of indicators to measure this progress. Details of MDGs are presented in Table 1:
Millennium Development Goals (MDG) and selected numerical targets, and the progress achieved so far (east Asia, west Asia and sub-Saharan Africa)

Krzysztof Rybinski

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