Global Economic Order or Disorder?
The Strategy Group is part of the larger Geoeconomics Project that AGI has launched this month in order to help shape transatlantic policy development on the role of international economic engagement as a new U.S. President takes office and Germany exercises the Presidency of the G20. You can find more information about the project here.
The discussion was launched with an assessment of the causes of the current lack of support for the global economic order. On the populist Right in the U.S. and Europe there appears to be a belief that the global economic order is either a) self-governing; b) unnecessary; or c) counter to the national interest—in the U.S. this would be the idea that the U.S. loses and China wins.
The populist Left appears to share these assumptions, but with a greater emphasis on the lack of justice in the current global economic order—the idea that it benefits corporations and financial institutions rather than the average citizen. In Germany and the EU, this idea was behind much of the opposition to TTIP.
Other key points:
- It is not just trade, but also cultural issues like immigration, a greater acceptance of authoritarianism, and a general turning inward that have led to decreased support of the liberal economic order.
- While people are more connected than ever, global institutions can’t keep up, making them seem less useful.
- On the populist Right, there is the sense that “we pay, but get no benefits, so we’re suckers,” particularly as most of these voters are not globally connected.
- Recent and widespread immigration into the U.S. and the perceived threat coming from abroad has made Americans turn away from global cooperation.
- While European Union countries have done more on trade adjustment than the U.S., the global economic order has also become less popular there—perhaps because of immigration or the euro crisis.
- The global economic order has not benefited from strong recent support from the business community, which since NAFTA and the founding of the WTO has perceived only incremental gains to be had from subsequent efforts to create a more open and rules-based global economy.
The meeting also addressed the policies that could help make the global economic order more effective and that would engender more public support. China was a major focus of the discussions. It was seen simultaneously as: potentially replacing the current liberal economic rules with a China-centric hub and spoke system; an engine of economic development in Africa; a roadblock to the emergence of Latin American economies as global players since its investment can stifle indigenous industrialization.
Other key points:
- The U.S., Germany, and the EU need to step up their policy cooperation and engagement with the open economies in Latin American and Asia that support the global economic order—the E7 (emerging seven) who will grow to become the “new G7” within 30 years, and other countries.
- If the U.S. takes a pause from its role as driver of the global economic order, the EU and other liberal economies should continue to negotiate free trade agreements, coordinate their approaches among themselves as much as possible, and shore up the WTO.
- In addition to trying to anticipate and avoid threats to the global economic order, a focus can be placed on making it more resilient to such threats—a rules-based system can adapt in a crisis better than one based on economic nationalism.
The members of the group also devoted much of the discussion to a consideration of the narratives that can help communicate the value of a reformed global economic order. Foreign policy and trade policy experts need to adopt a single geoeconomic narrative, as do the business community and think tanks, as well as other groups that seek to engage officials and legislators.
Other key points:
- How can the public be convinced that international public goods are in the national interest and not just a giveaway to free riders in other countries?
- Focus on “what would happen if” the liberal economic order deteriorated rather than saying “it’s not as bad as you say,” which by sounding condescending risks turning away potential supporters of an improved international economic system.
- The EU’s contribution to global economic burden-sharing needs to be better explained—its role in development aid, the stability provided by EU institutions in a crisis, its World Bank and IMF contributions—these are the EU geoeconomic equivalents to the NATO “2 percent.”
- Instead of “global economic order,” which sounds remote and impersonal, a phrase like “cross-border engagement” would be more appealing, particularly to Millennials who take globalization as a given. Particularly as the “disruption” phenomenon means people don’t care about order—it’s security they want.
- The business community needs to do more to make employees aware of the value of the global economic order, fight for broader liberal values, and have answers to the claim that companies are separating from countries.
- There need to be simpler ways to describe complex international economic realities like global value chains, and to explain that there is no automatic link between a trade deficit and economic growth.
- The U.S. public needs to understand that the current economic system is seen by much of the world as U.S.-dominated, as de facto supporting “America First,” and not as an internationally-imposed hardship on the U.S.
- In addition to government policymakers and national parliaments, state and local governments need to become first-order communication targets.
- To develop support for the global economic order, the focus can’t just be on the old economy because then the West loses—the new economy shows advanced economies are winning.