CHAPTER 12
Time to Adjust, Though
Historically, international cooperation has been built on economic and financial cooperation. The institutions of 1944– 1945 still stand as proof of this. More recently, the creation of the G20 showed that, in the event of an emergency, the global community still knows how to cooperate. The emergency, as it happens, was the financial catastrophe of 2007–2008, to which the world responded by strengthening the G20, made up of ministers of finance and central banks and itself created to respond to the 1997 Asian crisis, with a G20 made up of heads of state. The scale of the crisis called for a commitment from our top leaders. While this institutional innovation was later claimed by multiple leaders, in truth a first attempt was made back in 2003 in Évian, with an invitation by Jacques Chirac to leaders outside the G8 (such as Hu Jintao of China and King Abdullah of Saudi Arabia, as well as five African heads of state leading the New Partnership for Africa’s Development). In any event, the creation of the G20 made up of heads of state largely succeeded in its response to the global financial crisis in that it avoided a complete collapse and the fragmentation of the global economy.1
Ready for Action!
Between 2008 and 2010, we lived through an enchanted period when the world had its back to the wall and world leaders finally tackled the financial and macroeconomic cases they had put aside until then: regulation of banking activities, the fight against tax havens and tax base erosion (a project conducted jointly by the OECD and the G20), and even the campaign against financing terrorism. The summits in London and Pittsburgh in 2009 marked the peak of this glorious G20 period when the international community displayed vision, will, and leadership, when it knew it was up to the task and avoided the shipwreck of the 1930s, with the failure of the London conference.2 Europe itself knew how to act in concert, by completing its very first union in the eurozone: the banking union (a highly improbable prospect 25 years earlier, yet it seemed obvious in 2010–2011!).
Momentum and Leadership, However Welcome
The extraordinary spirit that had animated the international community is deflated today, to say the least. Despite the 2015 rebound and the economic slowdown that occurred, it is now obvious that the G20 has become more and more a “talk shop” where domestic agendas are carried out, as the global crisis is perceived to be less acute and less pressing than before. The G20 is not far from looking like a “G-Zero” where the O-H-I-O strategy reigns. The ineffectiveness is particularly flagrant regarding a matter particularly dear to me, that of infrastructure financing: no progress has been made despite the strength of the evidence, that being the vast amount of global liquidity available compared to the immense need. What are we waiting for?
I hope American readers will forgive a European detour: The European problems, exacerbated by the euro and refugee crises and brought to a boil by the referendum on Brexit and the decision of the British to leave a European Union denounced by populists, should not cause us to disregard the progress made by what we have built together since 1950. Because the European framework is a complicated idea that tends to get separated into technique and superstructure—to the detriment of the original spirit nourished by twin cities and exchanges between schools and students—supporters often find themselves on the defensive, while they should be proud of what they have made. Moreover, these hesitations tend to obscure the important part: Europe has the means to act! If the Brexit crisis revealed one thing, it is that Europe’s best chance is the Franco– German pairing: the original alliance of the economic leader (Germany) and the military and diplomatic leader (France), who have now become two powerful engines between east and west, north and south, who can pull up the rest of the EU, enabling it to make its mark on the world stage. The world does not have the luxury of a weak Europe while fires rage from Ukraine to the Sahel. This continent that dreamed, 20 years ago, of an “ever closer union among the people,” embodied a project that became a model for the world: a model of common values, built on democracy, human rights, industry recognition, a laboratory for learning to live together. This project remains a model for the future that we have the duty to protect. If we do not succeed in Europe, what other group of countries could we expect to manage it? We have the tools, the ideas, the institutions. We have the means to achieve our goals. But these tools are worthless if Europe does not find leaders to provide direction, or support from its people to encourage them and move them in the right direction.
France in particular, in light of the election of Emmanuel Macron and the symbol it represents, has a specific responsibility in this in the sense that it still has a chance to exert real—and in truth largely disproportionate with respect to its economic and demographic weight—influence on global governance. Whether it is the IMF with Christine Lagarde, until recently at the ECB with Jean-Claude Trichet, at the WTO with Pascal Lamy, at the World Bank with the position I held, or even from our highly coveted permanent seat on the UN Security Council, France still controls a set of attributes that we can mobilize to make our voice heard within globalization. But this voice will be heard only if it uses Europe as its amplifier. Seen from Washington, Europe is self-evident, just as France is self-evident within the European Union. Let us rise to the occasion! French weakness in Europe explains some of the European weakness in the world, at a time when Europe’s need is immense. The French influence is positively, as well as negatively, disproportionate.
I belong to the generation that breathed a united Europe into life. We are not going to be the ones to break the chain. After Brexit, we have to avoid rancor and simplicity. Let’s be an example to others! Assume the historic responsibility that is ours to exercise our prerogatives, use our capacity for action to grant new life to a project that, for many of us, has inspired our professional callings and obligations. As I had the chance to say at a conference, half formally and half flippantly: “We’ve been dating long enough, it’s high time we got a room!”3 It is time to finally take a quantum leap toward a new type of federalism, perhaps in concentric circles, to choose the revolution of the United States of Europe instead of the end of the Roman Empire. In a way, Europe was constructed out of a series of crises and has always, up until now, found the energy to rebound at the last minute. But the fact that it has managed to do so for 60 years is not proof that it can continue to do so for 60 more, and beyond. History has not been written. It is up to us.
What is true for Europe is to a large extent true for the rest of the world. The tools that we use to work together, as imperfect as they are, are crucial. Our current hesitations should not cause us to shun the G20’s capacity for action, even if this model of cooperation would be infinitely less integrated and advanced than the European model. In either case, we have the people at the table who have the capacity to make decisions and therefore to get things done. The members of the G20 are majority shareholders of the IMF and the World Bank, as with most international financial institutions. They have a global and regional ability to lead. They are able to influence international financial regulation through the FSB. The weight of their economies confers powerful clout and mobilization on them. This is not nothing and suggests how, by providing precise objectives, these countries and this forum could contribute to advancing the common good.
Making Finance a Global Governance Tool and Not an Agenda Item
The G20, even if it is not perfect, is now the most effective and representative forum for global economic governance available. It is the only globalization location where markets meet institutions. What are we waiting for to make it something more than a place for finance ministers and central bankers to meet three or four times a year or for heads of state to meet once a year—something more than a place for technical discussions on exchange rate policies, banking regulations, or inflation rates? To deal with the real questions that affect the future of humanity? To make finance something more than a mechanism, an agenda item? To bring to the table the fact that we have the resources to act, and ask ourselves, in practical terms, how do we harness the energy? How do we encourage cooperation between public, private, and community players? What methods of cooperation do we use? How do we adapt regulations? What controls and incentives do we use? What instructions do we give to institutions in which G20 members are majority shareholders, such as the World Bank and the IMF? How do we mobilize all these resources for the 2015 commitments?
I cannot emphasize often enough how perfect the case for dealing with infrastructure is. Separately and all together, G20 members are able to take all the regulatory and financial obstacles into account, mobilize expertise, train talent, and define how to create a new and recognized “infrastructure asset class,” able to attract a significant amount of the world’s savings under the best conditions, far from zero, or even negative rate investments.
What are we waiting for to make the G20 and its train of international institutions real leadership centers—for shared leadership? To make them decision-making and implementation centers, force mobilization and intelligence mobilization sites? To make them integration and convergence forums, places for practical consideration of expectations and needs? To make them innovation and economic, regulatory, financial, and social centers for testing ideas and defining standards, global laboratories for the painful but profitable public– private cooperation?4
A series of satellite organizations around the G20 are just waiting to be better used: the B20 (Business 20) brings together companies from member countries, the L20 (Labor 20) gathers unions, the T20 (Think 20) combines think tanks, not to mention the W20 (Women 20) and the P20 (Public 20). What are we waiting for to make these global gatherings into practical work sites, and not just talk shops and platforms for declarations of principle? These are training centers for the silent revolution with the potential to change the world. Let’s lead the system with a vision and a philosophy—that of makers, inventors, builders, drivers, and catalysts—that give it flesh, meaning, substance, heart! This is the best way we currently have to avoid seeing the world shattered by the forces of fragmentation. We have had the intelligence to create the tools; let us grab them and use them.
Choosing an Existing Path
The G20 summit in September 2016 in Hangzhou in southwest China represented an important moment in global economic governance in several respects. Not only was it the first time that China, the second-largest economy in the world, hosted such a summit, but it was also the first time that the G20 foresaw defining an action plan for the application of the SDGs set in the 2030 Agenda for Sustainable Development. Back in spring 2016, led by China, the G20 published its first declaration by the presidency on climate change. This plants the seeds of a promising future for international cooperation in this effort, which we should encourage. This message was echoed in the speech of President Xi Jinping in Davos in January 2017, when, in the marked absence of US and EU leadership, he celebrated the benefits of globalization.
The G20 is starting to take the full measure of its capacity for action, its obligation to show leadership and mobilization, and its ability to serve as an example. China knows, in part because of its self-interest, that it has an important role to play in encouraging other emerging countries to a shared consensus on international economic cooperation—not necessarily the same policies, as the British economist Jim O’Neill noted recently,5 but appropriate policies to implement in various parts of the world. In this case, during China’s presidency of the G20, they urged all participants of the future summit to include strict application of SDGs in their medium-term to long-term national development goals, aligning domestic efforts precisely with the international agenda. It is engaged in a major development promotion campaign, encouraging leaders to reconnect with their populations. This unique opportunity represents application of the 2030 agenda, refocused on the human element—scientific research, interconnectivity, institutional innovation,6 improved governance—and facts; participants in the working group ahead of the summit in Hangzhou praised the openness and transparency of China during these preparations. Finally, and most importantly, it has made infrastructure investment a priority (particularly industrialization in Africa and less advanced countries), designed as a pillar of sustainable global growth in the short and long term. I welcome these efforts and give my loud and earnest support for shared and responsible leadership from China and the United States!
Infrastructure: What’s the Hold-up?
In Chapter 9, I discussed my view that the issue of financing infrastructure is the best path for humanity to succeed, in practice, in working in concert for a sustainable future. In this field, as with others such as climate change or big data, multilateral development banks (MDBs) and the G20 offer valuable laboratories of planetary consensus.7 There is no better place in the world to test tools and ideas, to take a few risks, to agree to make mistakes, and to try again another way. But to do this, we need to be capable, as I said in a 2015 interview, “of testing an idea in one country, without a uniform vision.” You need to “ask what is specific to each country, understand what can be replicated elsewhere or needs to be adapted. Some companies are more successful than others by encouraging this capacity.”8 MDBs have an essential role to play at the world, regional, and national levels in developing new models and paradigms and forging holistic approaches. Beyond their obligation to innovate, they have been entrusted with a coordination mission that is crucial to encourage the harmonization between the new and old initiatives supporting the SDGs, but also to encourage the exchange of information between all actors of global governance—governments, the private sector, development banks, international organizations, and civil society. That is the beating heart of consensus within humanity.
This historic role of MDBs will be adopted by the establishment of the Global Infrastructure Forum, which launched officially in April 2016 and is set to meet every year. Enrolled by the international community in the Addis Ababa Action Agenda, this forum is co-organized by the MDBs based on a rotating presidency, in partnership with G20, G24, G77, and G7+ representatives, as well as United Nations agencies, among others. Such an association should enable states and development partners to work together to overcome existing shortcomings in infrastructure on the global scale by relying on existing multilateral collaboration mechanisms. As its president noted in a short speech, the forum “will encourage a greater range of voices to be heard, particularly from developing countries”; it will “support country-led approaches to planning, executing, supervising, and evaluating sustainable, resilient, inclusive, and well-prioritized infrastructure programs and robust infrastructure frameworks”; it will “systematically [encourage] the participation of all stakeholders—namely public authorities, users, the private sector and civil society—[in] scheduling, financing for domestic resource mobilization as well as national and international financing, and operating infrastructure services.”9 This type of gathering place is crucial to nourish the spirit of cooperation. It is not a new tool per se but the appropriate coordination of existing ones.
The other major global challenge where the G20, as well as development banks, could be better used is that of financing climate change mitigation. As Mark Carney emphasized in his London speech, “an effective market response to the risks of climate change, as well as technology and policies to confront it, must be based on information transparency” and an improvement of this “on costs, opportunities, and climate change risks.” While “there are already close to 400 initiatives aimed at providing this information,” such as the Carbon Disclosure Project, which provides investors, businesses, and policy makers with information on the environmental impact of companies, cities, states, and regions at risk of exceeding limits on carbon emissions, the G20 must “do more to publish consistent, comparable, reliable, and clear information concerning the carbon intensity of various assets.” Meeting these standards requires “coordination that only organizations like the G20 and Financial Stability Board can implement.” Hence, the Task Force on Climate-Related Financial Disclosures was established in January 2016, presided over by Michael Bloomberg, to publish climate information and “to design and propose a voluntary standard for publication of information on carbon producing or emitting companies.”10 First deliverables have been discussed and implemented throughout 2017. While MDBs have a key role to play as an effective catalyst for a reliable and resilient carbon economy, they also have a key mission to ensure coordination on a global scale. This is the aim of the Carbon Pricing Leadership Coalition, created by the World Bank Group—in collaboration with more than 90 companies and 20 governments, among other private and public actors—to respond to the need to accelerate global action on setting a price for carbon.11 Meeting first in Washington and then in Paris in spring 2016, the Carbon Pricing Leadership Coalition quickly took advantage of the energy created by the Paris climate accord to gather an increasing number of partner countries, promote effective carbon pricing, and distribute information on these mechanisms, via new “principles for effective carbon pricing” in particular.
In terms of collective action, big data is another future field where MDBs have a strategic role to play, as data managers for development. Not only is big data a “common good” that is important to manage as such, appropriately freed from the GAFA monopolies and open to all, but the construction of reliable data, accessible to all, is an essential raw material for establishing effective development policies on a global scale, making suitable decisions, and being accountable. Also in this field, MDBs are committed to developing global consensus on the principles and standards for consolidating development data and continuous improvement in knowledge-sharing methods. Priorities to enable everyone to contribute to solving global development challenges include helping countries obtain measurable results, improving information access, and encouraging use of open-source software and open development. The new World Bank Live platform—which enables Internet users around the world to participate in online discussions—is now an important part of the meetings held with the IMF.
As you can see, there are practical approaches opening up to us at all levels of society and in all countries of the world to make the international commitments of 2015 something more than pious vows and enable the forces of unity to overcome the forces of entropy.
These forums and places are critical places. They are far from perfect, and much needs to be done to improve both legitimacy and effectiveness. They are where we have avoided the sinking of the world by finance. They are where we have acknowledged that we need to regain control over the system and where we have started to move, albeit not as fast and as effectively as one could have wished. They are where a consensus can be built around common good. But they are also where doubts resurfaced in 2017, sometimes in a brutal and direct manner. They are thus where the crossroads we are facing is made visible.
Our responsibility now is to get everyone involved: national and international leaders must lead by example and mobilize while profiting from the best of the institutions they direct and participate in; companies, investors, international organizations, associations, and citizens must use the various instruments and networks available today (every day there are more and more) to help the “silent revolution” grow that will change the world. We are all key players in global governance. If we all consciously consent to act, we will learn to understand one another. Regulatory tools, financial incentives, means of exerting pressure on stakeholders: all the pieces of the puzzle are there. Don’t throw them away—these pieces will build our future.
Our future starts with our capacity to finance a sustainable development of our planet, core to common good today, as will be discussed in Part 4.