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Gordon Brown

Gordon Brown

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Global 'Mini-Lateralism' Will Get Us Nowhere

Posted: 04/22/11 11:11 AM ET

Two years ago the formal creation of the G20 helped prevent the world recession from becoming a world depression. World leaders agreed to a one trillion dollar underpinning of the world economy, and strengthened the World Bank, the IMF and the World Trade Organization. In its concluding statement, however, the G20 promised more: that it would work towards implementing new global standards and regulations across the world's banking system and that it would be the architect of a global growth agreement designed to deliver rising prosperity and create jobs in the decades ahead.

Two years on, what some now call mini-lateralism, seems to be the order of the day. The immediate crisis has passed and despite outstanding leadership in our international institutions and bold international initiatives by some national leaders, many governments have retreated into their national shells. We cannot agree on the proposed 'global growth pact', a world trade agreement is yet again stalled, risking the first failure of a planned trade agreement since 1948, and, even after a nuclear catastrophe in Japan and a period of violent volatility in oil prices, there is still insufficient momentum for a global climate change agreement.

So what has happened? The need for cooperation cannot be in dispute. Indeed this year the world is facing an unremitting onslaught of new challenges - food shortages, commodity price rises, youth unemployment and social unrest ; and large imbalances even as inflation reappears. Some now talk not of a crisis but of crisis-ism, a state of ever recurring crises that cannot easily be resolved by nations acting autonomously.

Our interdependent world means that our problems are no longer just problems we share in common but are global, interwoven between countries and only concerted action across continents can effectively tackle them. The IMF has already shown that we might have been in a position to raise world growth by an extra 3 per cent by 2015, and create anything between 25 and 50 million new jobs if the enhanced global cooperation that the G20 promised in 2009 had happened.

But we need better global coordination not just to address the problems of today but the challenges of tomorrow, triggered by the next revolution ahead in global markets. Indeed, this generation finds itself in a unique place -- at the vanguard of the biggest transformation of the world economy in history.

In the last twenty years, two billion men and women have joined the ranks of industrial producers, trebling the size of the world's industrial economy. In the next ten to fifteen years this revolution will be augmented by at least two billion people joining the ranks of the world's middle-class, trebling its current numbers. So the recent shift in producer power will soon be matched by a coming shift in consumer power, and we will see and feel this transformation powering through our lives and shaping our national fortunes with an irresistible force. The world's biggest market, for instance, will no longer be in America but in Asia and it will grow to around 40 percent of all consumer spending, twice the size of the American market, and substantially bigger than the German market (4 percent) and the British market (3 percent).

So who will be the biggest beneficiaries of these changes? With the right opening up of trade, European and American brand names, with high value added, and technology driven, niche and custom-built products and services, could be providing us with engines of growth and employment as demand for these products and services rises in Asia (as well as in other areas with increasing consumer power, like Brazil, Turkey, Indonesia and parts of Africa).

Yet without enhanced international cooperation the west will not be in the best position to take advantage of these changes. Indeed unless we enshrine market access in a global agreement we will lose out on some of the greatest economic opportunities for rising standards of living we have ever seen.

And global coordination is necessary for other reasons, too. The world has been too ready to unlearn the lessons of the financial crisis and there is a danger that we are sowing the seeds of the next financial crash. Without agreement on global financial standards -and currently individual continents and even countries are going their own way- finance will be in a race to the bottom with the good financial centers at risk of being undercut by the bad and the bad by the worst.

And of course, if present trends continue, if markets remain closed to certain countries or operate randomly and in an unfettered way, the world will become structurally more unequal -- India, China, Indonesia, Brazil and Russia will see inequality grow and Africa will become more isolated.

The economic discontents of the peoples of North Africa and the Middle East will not be met without international support. Enhanced cooperation is essential in helping to prevent embryonic problems in poorer parts of the world from escalating into crises that could threaten the security of and through mass migration risk the stability of all the peoples of the world. Without global flows of investment to empower entrepreneurship in Africa and to facilitate economic and educational development, the region will become the source of new migration, climate change and security crises that will threaten us all.

Today, the responsibility to pick up the reins of global cooperation falls on all of us. We need to argue more strongly than ever for the employment benefits that will flow from a world growth plan. Civic organizations, especially churches and faith groups, often underestimate the resonance of their collective voice: their voice should be listened to as they demand action against poverty and youth unemployment. There should be a stronger partnership with business which, in a world of heightened risk, needs avoidable uncertainty removed not least the stable environment that comes from a clean banking system operating to global standards.

Business benefits too when we act to end the volatility in energy prices, when we organize effectively to increase food production and reduce food prices and when we take active steps to raise employment levels. Enhanced global cooperation needs to be championed by a strengthened coalition of business, NGOs, international institutions and public leaders working together on global issues. That opportunity is being championed today by the vision of the World Economic Forum led by Professor Klaus Schwab, which is already part of the business outreach President Sarkozy has championed for the G20, following President Obamas lead in 2009. Today there is, indeed, too much mini-lateralism: we cannot succeed without enhanced cooperation and it's time once again to raise our ambitions on what global co-operation can achieve.

Gordon Brown is the former Prime Minister of the United Kingdom and author of Beyond the Crash; Overcoming the First Crisis of Globalisation. He is to be Chairman of the Global Policy Coordination Board of the World Economic Forum in an unpaid capacity.