FOREWORD
Gordon Brown
Few have done more to expose the challenges globalization throws at us than Bertrand Badré. And few have come up with more positive proposals for how to manage globalization in the interests of those who need our help most than he has done—first in his capacity as Chief Financial Officer of the World Bank and then as the inspirational architect of the “From Billions to Trillions” proposals, which were agreed at the Addis Ababa Conference as a means of financing the Sustainable Development Goals. He now challenges us with his plan for managing international finance and as the author of this new book, which introduces us to new thinking about globalization, he suggests how it can be made to work for the poorest of the world.
Dean Acheson spoke about his role as a US diplomat and later Secretary of State in evolving the new institutions of the post-1945 world and said it felt like being “present at the creation.” Then the task was to create multilateral institutions for what was still a world of detached nation states. Now in a new generation—the post-millennium interdependent world where we need global solutions to global problems—Badré and other leading economists are present at the creation, or at least at attempts at the creation, of a new more relevant global architecture for this still young century.
New thinking at the turn of the century influenced the introduction of the path-breaking Millennium Development Goals, which were kicked off in 1999 when the then UN Secretary General, Kofi Annan, called for a “global compact of shared values.” In a visionary speech, Annan argued that “the spread of markets [was outpacing] the ability of societies and political systems to adjust to them.” His warning, that globalization was fragile and “vulnerable to backlash from . . . protectionism, populism, nationalism, ethnic chauvinism, fanaticism and terrorism” as extremists exploited discontent, led him to propose new ways of dealing with poverty, malnutrition, disease, illiteracy, and inequality.1
And the process he initiated that was formally launched with the commitment to the MDGs in 2000 had to be rethought, adapted, and streamlined in the wake of the global financial crisis of 2008, and as we came to understand the urgency of co-ordinating global efforts to deal with climate change. This evolution in the world’s thinking is charted by Badré in his book.
Finance is, as he says, a good servant but a poor master and the global financial recession exposed the reality that while we had global banks and financial institutions, they were inadequately supervised by purely national regulatory systems. But the crisis asked even more profound questions: it challenged the very idea of self-adjusting financial markets and was so all encompassing that it forced world leaders to agree to the biggest rescue operation ever attempted.
To underpin the recovery of the world economy, one trillion dollars in grants, loans, and trade support guarantees was made available, but as Badré suggests a lot more has to be done to turn a rescue operation into an exercise in repairing the world’s financial system. Even after the welcome strengthening of the global Financial Stability Board no one can be sure that we have done enough to protect ourselves against the next financial crisis.
And in our journey from Copenhagen’s failed climate change summit of December 2009 to the success recorded at Paris in December 2015, new thinking has had to be developed to reduce global carbon emissions. Some of the results of these efforts are contained in the Sustainable Development Goals agreed on unanimously by the United Nations in September 2015 after the Addis Ababa Conference in which Bertrand Badré played such a large part. The new SDGs now see economic growth, social justice, and environmental sustainability not as antithetical to each other but as complimentary objectives. But the question remains as to how we can realize them in difficult financial times and to what extent we can enhance the multilateral co ordination necessary to do so.
For although we all agree that the world is more interconnected and interdependent, our collective ability to tackle urgent issues has been weakened as a result of trade protectionism and cuts in international economic support and aid. As Georg Kell, the former head of the UN Global Compact, has recently argued, the case has again to be made for multilateralism. Perhaps in every generation we have to make anew the arguments for co ordinated multilateral action. At no time is this more true than now and reinventing multilateralism is what Badré seeks to achieve in his set of essays: they set out to develop better ways of mobilizing finance for public good, so that instead of finance being a threat to the stability of the global economy, it can become the key that unlocks economic and social problems.
The new thinking which stresses the urgency of enhanced global co-operation is underpinned by Badré’s analysis of what globalization means and how it can be better managed. Globalization can be described in many ways: some see it as an economic phenomenon only; some as a cultural phenomenon—that we eat the same global foods, we watch the same global TV programs, and so on; and others see it simply as a new phase in the evolution of capitalist economies and the development of markets.
If, however, we start by identifying the seismic shifts we have recently witnessed in the international economy, we can come closer to understanding the discontents that arise from it and the challenges that those of us who believe in enhanced global co-operation have to surmount.
Of course, we have seen a revolution in communications since the 1980s empowering us to connect instantaneously across borders, but two other big changes have swept the world since the 1980s—the move from what were primarily national flows of capital to global flows, and from the national sourcing of goods and services to their global sourcing. These shifts have had a dramatic effect on the industrial and occupational structure of modern economies. Industrial change has reduced the share of mining and manufacturing in modern economies from the peak of 40 percent of all jobs reached at the height of the British industrial revolution. According to Professor Tyler Cowan: “In the United States the proportion of the work force engaged in manufacturing peaked at about 25–27 percent in the 1970s. In Sweden manufacturing employment peaked at about 33 percent of the work force in the mid-1960s, and for Germany manufacturing employment rose as high as 40 percent in the 1970s. South Korea managed a manufacturing share of employment of 28 percent in 1989.”
But in emerging markets like Brazil and India, manufacturing has barely exceeded 15 percent of employment, and writers like Dani Rodrik talk of “premature deindustrialization.”2 The figures suggest that the old model of modernization through export-led manufacturing growth is becoming a less crucial path out of poverty for developing economies; fading questions about what kind of economic future lies ahead for today’s low-income countries.
Occupational change has been if anything more dramatic creating a polarized labor force, as many traditional skilled jobs from typists, secretaries, clerks, administrators, to draughtsman and boilermakers have declined in importance and the labor force has become divided between an elite of highly educated professionals who can command high salaries (at least for now) and a mass of unskilled and semi-skilled whose bargaining position is weak, whose job security is limited, and for whose children opportunities appear to be poor.
This is not just the kind of problem that is unique to the advanced economies. In country after country, the gap between the promise of globalization and people’s day-to-day experiences of insecurity, joblessness, and stalled living standards is so stark that we are almost certainly likely to see more Arab Springs, more Occupy movements, and more “take back control” protests.
What is the fall out? Globalization creates the need for co-operation but also awakens in people the need to belong. For while the logic is economic integration, the emotional response is to demand that we “bring control back home”—a slogan that has become commonplace in protectionist movements in many continents. Such discontent demands a political response. In recognition of both the importance of identity and the imperative of co-operation nation states must strike the right balance between the national autonomy people desire and the border sharing we need. It is indeed a balancing act: too much integration and people feel their culture and identity are at risk. Too little integration and their prosperity is at risk.
So the policy imperatives are two-fold: as a world economy to show we can manage globalization well by co-ordinating polices where appropriate; and as individual nation states to get the balance right between autonomy and integration. To quote a recent article by the NYU academic Jonathan Haidt: “The great question for Western nations after 2016 may be this: How do we reap the gains of global co operation in trade, culture, education, human rights, and environmental protection while respecting—rather than diluting or crushing—the world’s many local, national, and other ‘parochial’ identities, each with its own traditions and moral order? In what kind of world can globalists and nationalists live together in peace?”3
Across Europe and beyond countries are now having to respond to nationalist and protectionist pressures and show they have struck the right balance. Much has been written of how national government should help those who feel they have lost out from global change with training, employment, and income support policies. Much less has however been written about how we can finesse the international architecture. Here Badré’s work can help as he shows us in his essays where and how global co-operation can be enhanced to best effect. It is not a choice between whether we have open and closed societies: the real choice is between those like Badré who want to lead, manage, and tame what should always be an open global economy; and those who oppose intervention—either because they favor a neo-liberal global free-for-all or are globalists who wish to shelter, insulate, and protect themselves against change.
Badré’s focus on how we can strengthen global co operation through the repair and reform of the global financial system and how we can raise the funds necessary to finance the SDGs leads him to make innovative proposals. His work that started in the 1990s with innovative initiatives in global health has now been extended to proposals for financing other public goods including infrastructure and global education. A further set of proposals revolve around a new role in infrastructure and other areas for public– private partnerships.
When Kofi Annan spoke of a global compact in 1999, he called on businesses, both on their own and together, to “embrace, support and enact a set of core values in the areas of human rights, labour standards, and environmental practices” and to “use these universal values as the cement binding together your global corporations, since they are values people all over the world will recognize as their own.” He added: “unless those values are really seen to be taking hold, I fear we may find it increasingly difficult to make a persuasive case for the open global market.” He might have referred not only to human rights, labor standards and environmental practices but also to how business approaches issues of democracy and the rule of law. Since then the UN global compact led by Secretary General Ban Ki-moon and stewarded by Georg Kell has expanded our ideas of what is possible. As Kell has put it: “A growing number of companies across all continents have started the journey of reconciling societal priorities with corporate missions, strategies and operations based on universal principals . . . [In] an era of transparency, the societal and environmental implications of investor behaviour can no longer be externalized. They must be accounted for and priced. Doing well and doing good can happen together.”4
How the public sector can aid private– public co operation is explored in Badré’s essays below, as it is by the work of Klaus Schwab at the World Economic Forum and in the new thinking that has arisen from Larry Summers’s contention that the world has to break free from what he calls “secular stagnation.” We have to take into account the new institutions now in the process of being born—like the BRICS Bank (Brazil, Russia, India, China, and South Africa), the Asian Infrastructure Investment Bank, and the Silk Road Fund. The challenge now is bringing our thinking on these new initiatives together in a more concerted and co-ordinated way and, in encouraging wider debate about the future of the Bretton Woods institutions, investigate whether we can find a consensus on the new international architecture needed to cope with wave after crushing wave of global change. Right across the world in the immediate aftermath of 1945 there was a ferment of new ideas and initiatives: we need the same explosion of new thinking now.