Global Governance in Transformation Challenges for International Cooperation
The system of global governance rests on the liberal world order at the heart of international politics since the end of World War II and especially since 1989—notably the United Nations and the Bretton Woods institutions. But the liberal model of globalisation and Western-dominated multilateral organisations are increasingly at odds with non-liberal conceptions of multipolarity and civilisational diversity of non-Western powers. While the institutions of global governance will likely endure, the five fundamental forces of capitalism, statism, technology, liberalism and globalisation have hollowed out the political culture and the substantive values on which it depends.
Just as the liberal world order is in reality illiberal and tends towards disorder, so too global governance is less a worldwide system of cooperation to address transnational problems than it is an arrangement that suits the interests of Western ‘great powers’. Moreover, the dominant system of global governance will not resolve the pressing problems of economic injustice, social dislocation and ecological devastation until it tames the five forces and embeds them in relationships and institutions that can democratise and domesticate them. The growing backlash against neo-liberal globalisation in the West and elsewhere highlights the need for constructive alternatives to the liberal world order.
This chapter speaks of a transitional moment triggered by, among others, three forces: the slow decline of the global hegemon and the concentrating aspects of modern capitalism and science; simultaneously alienating segments of society, via income inequality; and groups of countries, by the asymmetric distribution of information processing capabilities. I venture that the transition will involve a more chaotic, dangerous period of poorer governance, in which the key feature will be a proliferation of states, either claiming a greater voice in world affairs or defying hegemonic intentions. The way to back such behaviour, and protect a disputed or menaced sovereignty, is to arm oneself with nuclear weapons. This would maintain and increase a state of flux in global governance (GG), beyond dominating and conditioning other transformations and processes—most importantly that of capitalism itself or its oft-predicted demise. If the hard times ahead do not lead to the end of the world, new forms of governance might eventually emerge. The transition would then have been concluded, and a new cycle could begin.
The US rejection of multilateralism in favour of a unilateral, ‘America First’ strategy is exemplified by Washington’s increasing reliance on sanctions, including extraterritorial or secondary sanctions that prohibit US companies from conducting business with third parties dealing with sanctioned firms, effectively shutting them out of the US financial system. As the EU has become increasingly exposed to various US-led sanction regimes, its leaders have appealed for the construction of a ‘sovereign Europe’ fortified by a closer military and economic integration. Yet, US structural power remains—at least for the present time—very strong and in many respects decisive: there remains a wide gulf between the rhetoric of European assertiveness and the realities of power and economic interest. In the short term, it is highly unlikely that the EU can mount a successful challenge to the United States with respect to either sanctions or more general trade and monetary policies. However, in the longer term, it is possible that continuing US unilateralism will undermine the basis of its own legitimacy and power and that the EU can at least partially free itself from the American superpower.
Because of the state’s unique role in China’s national system of capitalism within the post-Cold War international system, state capitalism in catch-up development, as practised by China, is different from the historical patterns in the previous two rounds of ‘state capitalism’. In particular, the state is in command of new tools and instruments to control and coordinate the behaviour of national capital, making it possible for a genuine model of national development to emerge. Meanwhile, the hybrid nature of state capitalism of China implies that it is interested in promoting a set of ‘parallel structures’ in global governance without mounting a full-scale challenge to the current institutional structure of the global system. The nature of the domestic complex of state capitalism in China foresees that these ‘parallel structures’ will continue to exist without directly replacing Western-dominated structures in global governance. However, the long-term sustainability of such parallel structures is highly contingent upon China’s relative position within the capitalist world system and the nature of global capitalism.
That the world is going through a transition to a multipolar order is now indisputable. This new order will require new rules of engagement. Can the two Asian giants, China and India, help frame some of these rules? Have they been able to cooperate on any issues of global governance so far? These are some of the questions we explore in this chapter. The chapter begins with a definition of ‘international order’. It then examines the transition to a multipolar world order and the challenges to global governance in this new order. It then looks at areas where China and India have cooperated and can cooperate. It concludes that while they could cooperate and set the rules in areas where they do not have core interests, it is unrealistic to expect them to help in framing rules of high politics because, as two rising powers, their goals are inherently irreconcilable and contradictory: while China appears to be seeking hegemony in Asia, India, too, has ambitions to be a great power.
The global energy landscape is undergoing tectonic shifts. Growth in energy demand and the revolution in unconventional oil and gas supply are restructuring world energy flows and geopolitics. At the same time, climate policies push for a decarbonised global energy mix. The resulting decentralisation of energy production and consumption is aided further by the digitalisation of energy systems. Other technological innovations are also driving the process and causing significant changes in, for instance, renewable energy and low-carbon vehicles—but also in oil and gas production.
All these shifts in global energy have fundamental implications for not only energy economics but also energy geopolitics and related global governance issues. Hafner and Wochner take a scenario approach to model the strategies of major geopolitical blocs in the age of climate change: humanity might achieve a coordinated global effort for climate change, take only weak action on the climate or simply muddle its way through in dealing with the central threat of this century. In each of those scenarios, the major geopolitical blocs hold differing strategic positions, with the outcomes benefiting some more than others.
The energy governance landscape is now highly fragmented, and this chapter analyses which mechanisms will help govern the coming transition.
Global climate change is a key challenge to the global economy in the twenty-first century. To address it properly, a combination of mitigation and adaptation strategies is required. Although the responsibility for adaptation lies primarily with national governments (though, even here, poorer countries need international support), mitigation is one of the key fields of international cooperation. There is little chance that the fundamental objective of stopping global temperatures from rising more than 2 °С can be reached without a stable and comprehensive global governance system. The current international climate change regime based on the Paris Agreement is insufficient to prevent catastrophic climate change. Deeper cooperation between leading economies is especially necessary, including among those that are now reluctant to reduce greenhouse gas emissions.
The debate on the increasing income and wealth inequalities in the USA and some other advanced economies often disregards the opposite trend, i.e. decreasing income inequalities between individuals throughout the entire world. The purpose of this chapter is to examine the potential trade-off between both trends and the role of globalisation in such a trade-off. Another important question relates to the impact of this trade-off on global governance. On the one hand, catch-up growth in emerging-market economies and the resulting decrease in global inequality can help reduce the economic and social sources of political conflicts and tensions between countries and enable their cooperation on various issues such as trade, environment, climate change, health, fighting terrorism, managing migration and many others. On the other hand, growing income inequalities within advanced economies can undermine the existing global political and economic order and boost protectionism and nationalistic egoism in many areas.
The modern system of global governance consists of a number of regimes in different issue-areas: security, finance, trade, investment and many other areas of global competition and cooperation. Despite a seemingly inexhaustible variety of those regimes, all of them may be classified by a finite (and small) number of governance structures. In our research, we defined seven types of governance structures, top–down: from global hierarchical coordinating bodies with powerful enforcement tools to a free international market. International actors based their choice of governance structures on a countable number of factors. Academic researchers working within the framework of transaction cost economics, primarily at the micro-level, investigated these factors.
This chapter seeks to identify the set of factors that played an important role in the choice of current modes of global governance, to trace their recent changes and to elucidate the economic rationale for the apparent or forecasted evolution of those governance structures. We focus our investigation on several global governance regimes—for energy, the environment and trade. Although these areas are transforming as the economic environment shifts, they nevertheless display patterns common to the general evolution of governance structures.
Existing research on global financial architecture typically focuses on downside corrections in the eventuality of a crisis or on the contribution of financial flows to aggregate economic growth. Such accounts are of limited relevance if the composition of financial flows and aggregate economic growth are heterogeneous. For example, the factors that attract foreign direct investment, foreign portfolio investment, foreign reserve investment and other foreign investments, and the mechanism through which they contribute to economic growth, are often varied. This chapter, by looking at the relationship between the components of financial flows and those of aggregate economic growth, aims to fill a longstanding gap in the literature. Our exposition focuses on two groups of countries, BRICS and the G7, that have notable contrasts across several attributes such as the aggregate growth rates, levels of incomes, patterns of financial flows and demography. The results offer some pertinent guidance for the future development of financial architecture and complementary growth imperatives within both the groups.
The widening political gap between the West and Russia is symptomatic of a broader unravelling of the post-Cold War order that has imperilled global governance. Positioned between a unipolar and multipolar system, the world is being pulled in each direction. Russia’s rejection of the unipolar order has contributed to widening the political gap with the West, yet the gap can be narrowed if Russia doubles down as a multipolar system based on multilateralism establishes itself. The foundation for a multipolar order is emerging, creating political incentives to develop global governance that address the new realities. Russia’s vision of a multipolar and balanced international system is founded on geoeconomic inter-regionalism in Greater Eurasia, a goal it pursues by diversifying its economic connectivity and developing new trade blocs, transportation corridors and financial instruments. As the political dogmas of the post-Cold War era lose force, new political voices are also emerging across the West that support the embrace of a new order. Yet, until a new order establishes itself, the stakes will grow higher, the willingness to take greater risks increases and the possibilities for miscalculations continue to multiply.
The USA is in the midst of a very difficult and protracted revision of its place in the international system. Its role as a global leader, a major pillar of international security and centre of the global economic and political order is unsustainable and is increasingly rejected from both outside and within. Adapting to this new role will not be linear and will develop at different paces in different regions. In the middle term, it will proceed with a harsh and prolonged confrontation with Russia and China as well as with a substantial increase in the US foreign policy unilateralism. The latter will fluctuate from administration to administration, but the common denominator will be a less multilateralist and benign approach than that in the Obama era. Because the USA remains the most powerful player militarily, and diplomatically, retains the dominant position in global finance and has been the centrepiece of the prevailing global governance system for decades, both the international order and global governance will suffer negative consequences until the USA completes its transition to new modalities of participation in the international system. Only when the USA finally accepts rules for equal relations with the other poles can a new international order and a new pattern of global governance emerge.
During the last decade, international trade has undergone many shocks of different kinds that have dramatically changed the nature of trade itself. Now international trade has come to a triple crossroads.
First, international trade had grown at a higher rate than GDP for many decades, a trend that was interrupted by the global financial and economic crisis in 2010. The recent study of the IMF (2016) cast doubt on whether trade would remain a driving engine of the world economy. It is also unclear how digital technologies might change the features of world trade. Second, the leading nations have responded to the crisis by imposing massive trade restrictions (that the G20 had initially managed to avoid). As a result, the multilateral system of trade regulation has been plunged into a deep crisis.
Finally, global governance in trade itself is at a crossroads, with nationalistic feelings on the rise and the threat looming of widening trade wars. Worse, it remains unclear whether this situation will stabilise any time soon.
This book analyzes the state of global governance in the current geopolitical environment. It evaluates the main challenges and discusses potential opportunities for compromise in international cooperation. The book’s analysis is based on the universal criteria of global political stability and the UN framework of sustainable development. By examining various global problems, including global economic inequality, legal and political aspects of access to resources, international trade, and climate change, as well as the attendant global economic and political confrontations between key global actors, the book identifies a growing crisis and the pressing need to transform the current system of global governance. In turn, it discusses various instruments, measures and international regulation mechanisms that can foster international cooperation in order to overcome global problems.
Addressing a broad range of topics, e.g. the international environmental regime, global financial problems, issues in connection with the energy transition, and the role of BRICS countries in global governance, the book will appeal to scholars in international relations, economics and law, as well as policy-makers in government offices and international organizations
In the modern world, competition policy is an important part of global governance. Coordination of efforts between different countries is not an easy task, because the distribution of gains and losses from anticompetitive conducts is uneven across the globe. We identify joint interests of BRICS to influence international competition policy regime and analyse the effects of domestic enforcement on global markets. Among the targets of competition enforcement with large effects on global markets are conducts of international property rights holders. BRICS authorities apply remedies in order to weaken intellectual property rights (IPR) protection, both under merger approval and infringement decisions on unilateral conducts.
Similarity of the rules on merger control in BRICS gives reason to believe that global governance in the form of a supranational advisory body with the right of legislative initiative is possible in this area. On the other hand, a review of existing legislation and the institutional structure of BRICS enforcement indicates that enforcement against anticompetitive conducts is unlikely to become the focus of coordinated action.