Lack of global leadership is destabilising economies of the world

IT IS now 21 years since US president George Bush triumphantly announced the end of the Cold War and the dawn of a new world order.

Responding to Bush’s remarks, the French scholar Thierry de Montbrial said it was not a new world order, but a “chaotic transition to uncertainty”. Never has the global order been as unstable and volatile as it is today.

Amid the excitement of the early 1990s, there was hope that the implosion of the Soviet Union, the extraordinary transformation and incorporation of previously inwardlooking developing countries (such as China, India, Brazil, Mexico and SA) into the world economy as well as the onset of the internet boom would usher in an era of unprecedented global co-operation, economic integration and prosperity.

But the giddy optimism of the 1990s has been replaced by deep disenchantment, disaffection and even fear. It’s not hard to understand why.

A range of factors has conspired to erode confidence in the international system, including: the Iraq and Afghanistan wars; a series of financial and economic crises; a strong social and political backlash against globalisation; the unravelling of the post-1945 multilateral rules-based regime; the toppling of unpopular political regimes in the Arab world; the continuing instability and geopolitical tension (manifested lately in the threat of war against Iran) in the wider Middle East region; and protracted civil conflicts in many parts of the globe.

Against the backdrop of this troubling “big picture” loom other pressing challenges and risks that demand attention from the international community. These encompass, among other things, high levels of poverty, unemployment and inequality; climate change; demographic shifts; rapid technological changes; as well as insecurity bred by rising crime, terrorism, human, arms and drug trafficking; and the spread of communicable diseases.

At the core of the dismal state of the current world order is the failure of global governance. The problem is that the seismic global economic power shift – from industrialised to emerging economies – we are seeing is taking place within the context of a glaring leadership vacuum.

Over the past decade, emerging countries, led by China, have become a formidable force in the global economy. Thanks to rapid population growth, sustained economic development and soaring middle classes, these countries have become the engine of the world’s economic growth.

It is estimated that 70 percent of global growth over next few years will come from emerging markets, with China and India making up 40 percent of that growth. Moreover, not only are these economies sucking in large chunks of foreign investment, they are increasingly providing investment to other countries, rich and poor alike.

Importantly, they played a pivotal role in cushioning the effects of the 2008/09 economic recession.

The remarkable rise of emerging powers has coincided with a relative decline in the US and Europe’s influence in world affairs. This decline, in turn, has been accelerated by the effects of both the American financial crisis and the euro zone debt crisis. These crises, and the inept manner in which they have been managed, have plunged the two traditional powers into a state of policymaking paralysis.

Despite this, the established powers have tried to cling to their power.

This state of policy drift and impotence has accentuated the leadership deficit that is bedevilling the international system. In light of the Western powers’ ineptitude, one would have expected the emerging countries to seize the moment and fill the void. But this has not happened. For all their economic strides and global aspirations, China and

Past experience has shown that they have failed to act in unison

other major developing economies have been more concerned with attending to their domestic developmental challenges and less with providing global leadership.

Granted, there are issues – such as trade and climate change – on which emerging powers have collaborated and exercised collective influence, with varying degrees of success. Overall, however, past experience has shown that they have failed to act in unison on critical issues.

A case in point is the ineffectual manner in which the so-called Brics (Brazil, Russia, India, China and SA) handled the issue of successor to the International Monetary Fund’s former managing director Dominique Strauss-kahn.

Having previously slammed the domination of international financial institutions by the US and Europe, they were presented by Strauss-kahn’s departure with an opportunity to rally behind and campaign for a candidate from the developing world. Alas, their disjointed and hesitant actions put paid to that: they were outsmarted by the EU, which took advantage of their indecisiveness and successfully canvassed support for its preferred candidate, the former French finance minister Christine Lagarde.

Given the global governance hiatus, some commentators are looking to the G20 to provide much-needed direction. A group of finance ministers and central bank governors from the 20 major economies, the G20 has become an important forum for collective policy decision-making. It has been rightly praised for its role in containing the 2008/9 financial meltdown. But it appears to have lost momentum.

The turbulent multipolar world demands visionary political and economic leadership, supported by institutions well attuned to contemporary conditions. Such leadership is presently in short supply.

Nor is the existing institutional architecture sufficiently equipped to deal with the complex array of economic, social, environmental, technological and demographic challenges. Unless the established and emerging powers show greater commitment to working together in shouldering the burden of global leadership and in recasting international institutions to respond effectively to present-day problems, the “chaotic transition to uncertainty” will continue to be an unnerving facet of the world.

Soko is an associate professor of international political economy at the University of Cape Town’s Graduate School of Business