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Can we understand the prospects of development without understanding its environmental dimension?

13. Februar 2019 - 12:48

Development studies aim to understand the root causes of poverty and its reproduction and how social inequalities emerge and are stabilized. This is a broad endeavour with a number of academic disciplines contributing, with quite a few success stories if we look at the economic and the social dimensions. However, while maintaining the focus on human wellbeing, we ought to change the mainstream understanding of this task and need to include the natural environment and its threats in the research on development.

In mainstream development studies, economists focus on economic structures and incentives that keep productivity and growth rates low, and at factors that make it difficult for developing countries to establish sectors with a higher valued added, either by integrating themselves in global value chains or into regional markets. They may also look at labour markets and at social policies in the broadest sense and their (in-)effectiveness in reducing poverty and inequality. Political scientists, for their part, are concerned with institutions and governance relations for similar reasons while other social scientists want to understand the social categories and processes that originate discrimination of specific groups of people and thus impact on their political and economic participation – understanding societal power relations is important to them.

How does the environment come into this line of research? The disciplines established subdisciplines that specialise on the environment. Some examples: economists look at efficiency in natural resource use and at the most effective policy instruments for decarbonizing production and consumption. Political scientists are interested in the negotiation dynamics of multilateral environmental agreements and institutions that facilitate their implementation, and in the factors that promote or hinder environmental policies and their implementation at national and local levels. Sociologists, in turn, analyse the distributive effects of environmental policies, be they global or national, or linked to external interventions by conservationists or development cooperation.

The mainstream perspective needs to shift

This specialization was helpful, but did not change the mainstream of development studies. Most research on poverty and social inequalities – be it in the North or in the South – ignores the environmental dimension of changes in human development. This is dangerous. The cumulative environmental impacts of human activity since the industrial revolution are likely to make the earth uninhabitable for the human species within this century if business as usual continues

Global warming due to high levels of greenhouse gas emissions reduces agricultural productivity in most regions of the world and increases water stress; increased frequency and intensity of extreme weather events may have disruptive effects on infrastructures and stability of supply with food and energy. Global warming alone may thus lead to radical destabilization of societies that increasingly face situations of stress.

Adaptation to global warming is made more difficult by other environmental stressors such as decreasing availability of sufficient water in good quality; decreasing soil fertility; increasing loss of biodiversity; rising levels of pollution in the oceans (which also are increasingly acid due to rising absorption of CO2 from the atmosphere).

Development successes – and resulting challenges

In the last 20 years, the world has seen incredible rates of poverty reduction and of rising incomes for large shares of populations in Asia, and also in Latin America (less in Africa). This is what development studies and policies are about. At the same time, however, we have seen that the unmitigated environmental impacts that go along with the growth of production and consumption have added to the threats for global and local ecosystems and their vital functions.

Social environmental research has shown that those affected by socio-economic and political exclusion are generally more vulnerable to the effects of environmental pollution and change. We are facing a world where the advances in poverty reduction may fall victim to disastrous environmental change. As Dipesh Chakrabarty wrote the future of humanity as a species is in danger, and this is a threat that forces social science to also consider dynamics beyond power differentials between social classes, and between rich and poor countries.

Avoiding this scenario requires a drastic reduction of the environmental damage associated with human prosperity in high and middle-income countries, and prospectively also in poor countries where “catching-up” development based on conventional technologies cannot be relied on anymore. Strategies to address poverty and inequalities cannot ignore the sustainability of ecosystems and natural resources. At the same time, strategies for protecting the environment and the global commons cannot ignore the needs of poor people and countries.

Future strategies

Future strategies for ensuring human prosperity at global level will thus require considerable investment in research that improves understanding of the social practices, rules and institutions, and power relations that define human use of nature and the dynamics of its transformation (and this research in itself is subject to power relations). Social environmental research offers insights that are crucial for development studies in the 21st century – if we manage to understand development as being part of a transformation process that decarbonizes production and consumption, and that invests in the protection of ecosystems and nature-based solutions.

Three areas can be emphasised where research and teaching are needed but certainly there are more:

Transformation pathways and transformation governance (such as the work of Julia Leininger and Ines Dombrowsky with colleagues from “The World in 2050”), international cooperation for global sustainable development, and inter- and transdisciplinary research questions and methods.

This post is also published on, the blog run by the European Association of Development Research and Training Institutes, EADI


Der Beitrag Can we understand the prospects of development without understanding its environmental dimension? erschien zuerst auf International Development Blog.

Global Innovation System Design: The G20 as a knowledge catalyst

31. Januar 2019 - 14:00

The evolutionary approach highlights education and innovation as a central means of welfare and growth. The transformation of the productive sphere and the development of society are depended upon knowledge generation and learning. An effective innovation system, which enhances knowledge generation and learning through increasing the interaction among the actors, provides a favorable environment in this regard. That is valid at the global level as well.

A global innovation system (GIS), which we define as a globally governed network of collaborative relations between different actors in updating knowledge base, may promote the generation and diffusion of relevant knowledge to enhance welfare and growth at the global level. In this way, we could systematically develop solutions for the existing and emerging global challenges from climate change to global inequality.

We argue that creating a GIS is possible via the transformation of the existing socio-technical system. In this, the G20 countries are argued to be the most fitted actors to design and govern a GIS not just because of their economic and social influence but also of their scientific and technological competence. We also identified three starting intermingled postulates for the design of GIS, namely openness, bottom-up decision-making mechanism, and consensus-building approach.

Knowledge: a global common good?

First of all, an attempt to create a GIS necessitates a new design of global knowledge pipelines and local buzz in a more densely manner via policy intervention at the global level. The knowledge flows among countries through all kinds of channels (such as scientific publications and patents, scientific and technological partnerships, mobility in higher education, and international trade) needs to be promoted. The G20 appears as the most fitted actor in that purpose since both scientific and technological activities and international trade and cross-border investments around the world are mainly driven and realized by G20 countries.

However, data shows that trade and foreign direct investment (FDI) largely remain as intra-group transactions. That applies to scientific and technologic activities, too. Both academic and industrial knowledge generated by G20 economies mainly circulate within the group. A well-functioned and successful innovation system, which promotes the diffusion of knowledge (particularly from developed economies to less developed ones), is only possible with openness, that makes an ever-increasing update of the knowledge base possible.

Governance of a GIS

For the second and third postulates, the European Union’s (EU) efforts through its framework programmes for research and innovation set a good case. The framework programmes aim to help “tackling societal challenges” through enhancing collaboration and cooperation, in addition to its emphasis on “excellent science and industrial leadership”. The proposed design of the next research and innovation framework programme (Horizon Europe), which pursues a mission-oriented policy approach, may make the pavement for organizing a collaborative effort for innovation policies to mitigate global challenges. Due to its members’ socio-economic influence and scientific and technological competence, the G20 can be a suitable catalyst for designing such a collaborative framework at the global level.

An effective GIS should include actors from other countries including LDCs and connect them to the global knowledge and innovation pipelines, in addition to those in G20 economies. The governance mechanism should also be inclusive and based on a bottom-up approach. The United Nations’ (UN) agencies and affiliated organizations (such as Technology Bank for LDCs) may facilitate the interaction between the G20 and other economies. That would also help in prioritizing the challenges and building consensus on policy tools through linking GIS with Sustainable Development Goals.

The Creation of GIS

Interaction within GIS will enhance the innovative performance of the actors and increase the welfare of humanity. The challenge here is to create a governance mechanism to increase the supply of global public goods. Such a governance structure would construct a more level playing field for all involved actors and could also be used to mitigate trade disputes and reduce overcapacities while speeding up policy learning and transition dynamics in various parts of the world by G20 labeled as innovation elites.

The promotion of GIS needs a more systemic approach. The major problem in this process is the existence of complex spaces in which global innovation networks and national systems are complicated to govern. The EU’s experience may provide valuable insights into the creation of GIS. The global attempt to construct a GIS can be shaped through the seven pillars of the Global Innovation Index: institutions, human capital and research, infrastructure, market sophistication, business sophistication, knowledge and technology outputs, and creative outputs.

Establishing a fund to support studies of GIS is the first step. Then, working and steering committees should be formed in order to conduct studies of GIS. As indicated, Sustainable Development Goals may help the process of prioritization for global socio-economic challenges. The formation of expert panels toward policy making for prioritized problems to determine policy aims, recommendations and tools is the next step. A collaborative project financing mechanism should be designed to carry the determined policies into effect and conduct projects.

Constructing an effective GIS which is built upon a participatory bottom-up decision-making process and based on the consensus-building approach rather than conflict resolution is not an easy task. However, the creation and governance of a GIS are possible through the transformation of the existing global socio-technical system with small starting steps and well-defined mechanisms as summarized in the previous paragraph. Considering the existing challenges, such an approach needs urgent action.

Der Beitrag Global Innovation System Design: The G20 as a knowledge catalyst erschien zuerst auf International Development Blog.

The year ahead in 2019 – Think local when acting globally

9. Januar 2019 - 15:09

For 2019, the global challenges are unlikely to become fewer than in 2018, based on the past experiences. The post-cold war international order as we knew it has taken a few blows again in 2018. Some key pillars and narratives are being shifted and challenge the stability of the international architecture. As often with foreign relations, it takes place in a context that consists of both global challenges and domestic priorities. Indicators for change will thus be located in domestic politics of some key countries. Without wanting to sound overly optimistic for a surely difficult year to come, some elements for a change are visible.

Multilateralism under pressure – with “go-alone” increasingly to hurt own interests

On multilateralism, we face ongoing challenges by the once-guarantee power for the international order, the USA. The ongoing trade dispute between the US and China is a key example for “my-country-first” policies. US-China trade relations have suffered already, exacerbating a difficult economic situation in China. It has, overall, dimmed the global economic prospects for 2019, with German Finance Minister Scholz warning that “the fat years” are over. Some hope is in the fact that bilateral discussions are continued and negotiations between the US and China may lead to a beneficial understanding.

The stronger pressure for change is, however, domestic. Yet, the US President is under increasing domestic pressure in particular due to a change in the composition of Congress, where Democrats have gained a majority in the House of Representatives. While President Trump’s hands are increasingly tied domestically, he may increasingly focus on issues of international relations picking quarrels with old allies and new rivals. At the same time, the other great power, China, continues to develop its reach, portraying itself as a new guarantor of the international order (remember President Xi speaking in Davos in 2017). Yet, Beijing applies multilateralism only very selectively, rather favouring China-to-region relations, not least so under the narrative of the Belt-and-Road Initiative (BRI) and in its relations to African countries, too. Related to this, in 2018, we have seen some debt challenges in African countries such as Ethiopia and Kenya as a result of Chinese loans. Debates on this are likely to continue and will put China’s rise and Xi Jinping’s BRI under more pressure in partner countries. Chinese commentators are likely to cry “Western interference”, but debates are mostly domestic in African countries (never mind “Westeners” to pick up on it).

Populism likely to continue in 2019

While populism is alive and kicking, key Southern states face elections in 2019: South Africa, India and Indonesia, inter alia. South Africa politics has gotten on a more stable path, in time before elections in April this year. Similarly, and around the same time, India and Indonesia are facing elections. In South Africa and India, the incumbents are likely to win a new mandate, but the interesting part will be if they get an outright majority or face difficulties in forming a government. In Indonesia, the incumbent also appears to be the front-runner. Populism (and nationalism) is likely to mark all campaigns. Brazil and Mexico, for their part, have already seen the change of power to (radically different) populists in 2018. Electoral debates in Brazil in 2018 were shocking. In Brazil, established legislative and judicial institutions as well as the civil society will have to ensure that democratic processes continue to function and individual rights remain guaranteed. In Mexico, a month earlier (December 2018), a left-leaning populist took over the presidency, promising radical change from a different direction. In both countries, the new administrations will have to deliver on bold election promises. We can expect the seeds of discontent in their electorate to sprout in the future.

The European Union, for its part, will have to live up to a number of challenges in 2019, including elections and a new commission. However, first and foremost, 2019 will continue as most of 2018, with debates around “Brexit”, which is bound to happen in March this year. Well, will it? Uncertainty around the process is high – and everything seems possible in the domestic policy gambling in an unstable government in London. Germany, for its part, has seen the beginning of a change-over in power, with the announced departure of Chancellor Merkel, and faces challenging regional elections. These elections – European in May and German regional in autumn – could still derail the coalition in Berlin. Internal challenges to the European liberal order are continuing in Hungary, Poland, but also strong populist politics in Italy, Austria and others. In a number of these countries, civil society increasingly challenges populist governments, but it is still open how these debates play out.

At the supranational level, the elections to the European Parliament in May 2019 is likely to see the far-right strengthened, but also offer an opportunity for public discussions on the benefits of the Union to societies of its member states. On the positive side, rates of approval for the Union are going up throughout the EU and societies appear to re-discover the value of a unified Europe. The fault-line within the European Parliament will be even more pronounced between those wanting more cooperation– and those critical of further integration.

Preserving or rebuilding a rules-based international order?

With these challenges, a retreat to cyncism is the wrong answer. 2019 will require active shaping of policy spaces, because they become smaller. There certainly is no natural culmination point (or “end”) of history. Political solutions are negotiated internally, and democracy constantly remains to be defended. And with more polarized national debates, the international setting is not becoming easier.

Multilateralism always results in compromises and thus is difficult to argue for during heated debates. Hotheads, however, eventually also realise that consultations and compromises might be at times cumbersome, but are, overall, less expensive than driving an agenda on testosterone. Working in a rules-based environment allows for time to focus on content, rather than who’s loudest. This will be an important pre-condition for significant UN summits ahead of us in 2019, such as the SDG and Climate Summits. The G20 will meet in Osaka, Japan, in June and the G7 in August in Biarritz, France. ‘Club governance’ comes with obvious limitations over truly multilateral mechanisms, but we argue that the setts such as the G20, with 19 states plus the EU meeting in various formats, continues to have its benefits.

In current times, multilateralism is not fashionable. We are often thrown back to the logic of the nation state, and we need to reconnect with parts of the population that feels left out. However, simply hanging on to “the olden days” was never a receipt for long-term success. In our current world, contacts across borders are more intense than ever. “Think global, act local” is a well-seasoned slogan – and we should also consider “think local while you are busy acting globally”. Solutions to very local problems are to be found in global cooperation – and this needs to be explained ever more. And while preserving key global achievements, new narratives and new mechanisms in the political discourse well have to be found. Every new year comes with challenges – and every future needs to be shaped.

Der Beitrag The year ahead in 2019 – Think local when acting globally erschien zuerst auf International Development Blog.

Prospects and Possibilities for Japan’s 2019 G20 Osaka Summit

19. Dezember 2018 - 14:00

We hosted a one-day international conference at Soka University in Tokyo on December 10, 2018, on the theme “Prospects and Possibilities for Japan’s 2019 G20 Osaka Summit.” This was held shortly after the inauguration of the Japanese Presidency of the Group of Twenty (G20), which will be compressed by holding an early summit, on 28-29 June 2019. Conference participants stressed their doubts about the capacities of the G20 to meet contemporary global governance challenges, especially due to failures to implement previous summit commitments and the growing tensions between members. They emphasized the important role of stakeholders in holding the G20 to account, by focusing on policy compliance and implementation.

The event brought together international and Japanese scholars, representatives from the Think20 (T20) and Women20 (W20) official G20 engagement forums, and diplomats and officials from member states and international organizations. Panel discussions focused on the G20’s role in global governance, especially since its inaugural summit in November 2008, during the global financial crisis (GFC). There were also thematic panels on the key issues of G20 economic governance, gender governance, and climate, energy, and sustainability governance. Two further sessions focused on the prospects and possibilities for Japan’s G20 Presidency. The conference was organized by the Soka University Peace Research Institute, in collaboration with the G20 Research Group of the University of Toronto; Griffith Asia Institute at Griffith University; and the Russian Presidential Academy of National Economy and Public Administration (RANEPA).

G20’s role in global governance

One conclusion from these discussions was that the G20’s role has substantially shifted over the past decade, from crisis cooperation to an increasingly complex policy agenda. Some participants emphasized its importance as a global governance “hub,” guiding interactions between diverse global actors and organizations on several policy areas. There was greater skepticism about whether the G20 constituted a ‘club,’ whether multilateral or plurilateral, the latter emphasizing legitimacy concerns about its restrictive membership. This was due to the perception, among some speakers, that normative divergence undermined the potential for a collective G20 sense of ‘we-ness’ as a like-minded club; however, others also indicated the growing normative divergence among Group of Seven (G7) members since 2016. Arguably, even the smaller number of BRICS members only share a normative commitment to gaining a greater voice in global governance.

G20’s growing agenda and new actors

Conference participants noted that the G20 agenda greatly expanded over the past decade, especially due to the influence of non-G7 member states. South Korea’s G20 Presidency in 2010, which included economic development, was considered the key moment when the forum’s agenda began to diversify beyond the initial priorities of its leading wealthy states, centered on financial governance reform and an economic recovery strategy during the GFC. Policy areas such as food security, employment, climate change, and gender economic equity were subsequently incorporated in the agenda, especially through the host presidencies of Mexico, Russia, Turkey, China, and Argentina. Important G20 contributions also were noted from Australia and Canada, the latter especially on gender equity issues; and from cooperating international organizations, such as the Organisation for Economic Co-operation and Development. A couple of speakers debated the potential for a greater focus on security at the G20, whether conceived in conventional military terms or linked more broadly to climate, food, energy, and other issues. This indicated how the forum influenced both narrower and broader dimensions of global security, though it remains significantly less of a focus than economic governance.

There was some debate about how the G20’s agenda expansion influenced its efficiency and legitimacy, in terms of its organizational capacity to progress on a range of policy issues, hence efficiency effects; but, also, legitimacy gains from the G20 prioritizing broader issues, many of them priorities for developing-state members. This issue has been a point of contention among G20 stakeholders and experts since the GFC; arguably, the expanded G20 agenda has become too established for any significant reduction to be feasible, absent another crisis, which could lead to a narrower focus in future. Another key legitimacy and efficiency issue was the restricted G20 membership, and trade-offs between size and coordination capacities.

Several participants stressed the importance of intensifying efforts to enhance summit commitment compliance, a growing topic of debate in recent years. There have been some notable G20 failures to comply with summit commitments, including the failure to implement the fossil-fuel subsidy phase-out, pledged at its Pittsburgh Summit of September 2009. Conference speakers noted the value of the compliance analysis and reports from the G20 Research Group at the University of Toronto and RANEPA in Moscow. One speaker noted the data indicated that holding ministerial meetings tended to raise G20 compliance scores in related policy areas. This might encourage future host presidencies to continue to increase the number of G20 ministerials, a trend among recent host presidencies.

On the significance of the official G20 engagement forums and other forms of outreach, participants indicated the public diplomacy benefits from these activities. Some contextualized G20 outreach within the broader global governance trend since the 1990s of increasing engagement with non-state or civil society actors. One speaker perceived a new normative principle of growing inclusivity in global governance, though several noted that the role of engagement groups like the Civil20, T20, and W20 remains ambiguous, and their forms of engagement and composition rather arbitrary.

Japan’s G20 Presidency

One important issue was the truncated time-frame for Japan’s G20 Presidency, due to the Osaka Summit being held in June, seemingly to avoid the busy schedule later in the year, with the new emperor’s enthronement ceremony on October 22. Many participants at our conference, as well as at the T20’s Inception Conference in Tokyo on December 4-5, argued that the effectively-shortened presidency meant there should be greater emphasis on implementing the existing policy agenda, rather than adding new topics. The G20, as well as the T20 and other engagement groups, would have little time to develop ambitious new proposals or conduct new research.

The conference included discussions of Japan’s G20 policy agenda. It was noted that only half the scheduled ministerial meetings would occur before the Osaka Summit, which might diminish progress on issue areas where relevant ministerials were held afterwards. Japanese priorities for the summit would include, for the Sherpa Track, free trade, science and technological innovation, quality infrastructure investment for development, global health, climate change, aging populations, and promoting the Sustainable Development Goals. The Finance Track would prioritize debt sustainability and transparency, plus focus on the effects of immigration and demographic shifts on the tax base. This would constitute a continuation of key aspects of the existing G20 agenda, with some new focus on demographic issues such as aging and migration. The Buenos Aires Summit leaders’ declaration emphasized World Trade Organization reform, so the Japanese agenda on promoting free trade would likely be influenced by this inherited issue.

One speaker said that the Argentine G20 Presidency had been “bottom-up” in its agenda deliberations, incorporating suggestions and policy priorities from G20 stakeholders. It was noted that the Japanese have been more “top-down” in constructing their agenda for the Osaka Summit. However, as experienced by the Australians in 2014, when trying to narrow the scope of the agenda to their core priorities for the Brisbane Summit, it is sometimes difficult to keep tight control of the G20 agenda. This top-down approach might also be counter-productive, if it undermines cooperation or decreases constructive policy inputs from G20 stakeholders.

G20 challenges

The discussions left the impression that the G20 faces an uncertain future. There were strains in relations between key G20 members during the Argentine host year, though a couple of speakers noted the relative success of the Buenos Aires Summit. Despite prior concerns about tensions between the American and Chinese governments, especially on trade, fears that a leaders’ declaration would not be agreed were unfounded.

The Japanese G20 Presidency comes at a time of growing doubts about the forum’s capacities to manage global economic uncertainties, security tensions, and global environmental threats. The coming months provide an opportunity for the Japanese hosts, and other G20 governments and stakeholders, to improve multilateral cooperation across the diverse policy agenda.

Der Beitrag Prospects and Possibilities for Japan’s 2019 G20 Osaka Summit erschien zuerst auf International Development Blog.

The G20 after Buenos Aires: Continuity and discontinuity

12. Dezember 2018 - 14:00

Positive comments on the G20 summit in Buenos Aires, held on 30 November and 1 December 2018, mostly point to the instances where leaders have reaffirmed positions taken in earlier meetings. But critics underline how little, in their view, this summit has added in substance. They obviously use different standards. This piece takes a systematic look at the roles of continuity and discontinuity in the G20 process, as it presents itself after Buenos Aires. It tries to explain why there is demand for continuity in the G20’s work and describes circumstances under which continuity might still break down.

A comparison of selected G20 texts shows some examples of continuity and discontinuity on the way from last year’s G20 summit in Hamburg to the Buenos Aires summit. Reflections on the extent as well as the limits of the G20’s power to solve problems follow. The piece offers a rough framework to approach questions of G20 effectiveness and closes with some ideas on the way forward.

Why continuity matters

Ensuring continuity matters mostly for reasons outside the G20, there are strong expectations that leaders stand by their previous commitments and even develop them further. This has to do with the G20’s traditional role as an anchor of global economic governance. With rising uncertainty, the group should not be seen as backtracking from agreements economic actors (banks, exporters and importers, regulators in non-G20 countries) depend upon. As countries change their policies, G20 summit language serves as a snapshot showing where there is still consensus and which member disagrees. So there is pressure on all to stay the course.

The 2030 Agenda for Sustainable Development is another driver of continuity. Here, the G20 have made a commitment supporting the implementation of the 2030 Agenda they can only live up to by staying engaged. “Further aligning” all G20 policies with the 2030 Agenda cannot be outsourced to an international organization. It requires the G20 itself to shift towards a more holistic way of working. Given that the 2030 Agenda sets out a long term global path for sustainable development, the shift within the G20 also has to be permanent.

Apart from the G20’s role in the global context, continuity has internal reasons. G20 ministers with responsibilities ranging from trade and investment to health and education find value in ongoing issue specific cooperation within their respective portfolio, most prominently in the finance track, witness the G20 finance ministers’ work on the international tax agenda. A long term cycle of G20 engagement can also be used to showcase an item and raise its political profile. Germany’s G20 presidency in 2017 used this potential in order to highlight global health issues. The interest of former G20 presidencies in keeping the outcomes of the summit they hosted on the agenda inevitably plays a role.

Discontinuity in the G20 – bug or feature?

But discontinuity is also built into the G20 ever since it was established as a leaders group. Its agenda is neither constrained by an institutional mandate nor does it stop at the limits of any ministerial portfolio. Every presidency uses this discretion to raise its profile and pursue its priorities. Just following up on what previous presidencies have introduced will not serve that purpose. This is why the G20 has a new agenda every year. However, to the extent priorities set at an earlier time call for ongoing further steps, active G20 commitments accumulate. The 2017 Hamburg Update compiling G20 actions that contribute to the 2030 Agenda, features 123 items. The 2018 Buenos Aires Update adds 48 more. With this range, it is difficult to expect that leaders’ support is equally robust on every commitment. There may be cases where consensus only means that members have accepted the incumbent presidency’s language, acknowledging a common goal or just as part of a bargain. Not every G20 commitment is necessarily the product of an active, detailed and positive meeting of minds

among all G20 leaders. If conditions for a robust consensus are not met, members may always accept different language proposed by a new presidency. Discontinuity will in fact occur if expectations of continuity do not prevail.

Countries can change their policies. But they cannot entirely get rid of their interdependence with the outside world. Development economics has long tried to capture this tension through the notion of policy space. Today the question is how to reconcile G20 members’ policy space with the group’s capacity for effective collective action. It is a hard question because domestic politics in many G20 countries have not always caught up with the rising levels of global interdependence. Continuity and discontinuity in the G20 is an exact measure of whether this accommodation still works.

G20 language – old and new

Public attention is naturally drawn to the instances where language in the Buenos Aires communiqué substantially differs from its predecessor in Hamburg. Most important are probably the changes in wording on multilateralism and trade. Having underlined “the crucial role of the rules based international trading system” in Hamburg (para. 4), leaders could only bring themselves to “recognize the contribution that the multilateral trading system has made” in Buenos Aires (para. 27), although their Finance Ministers had “reaffirmed” Hamburg language on trade in March and July, and Agriculture Ministers still recognized “the importance of an open and transparent multilateral trade system, based on rules as agreed by WTO members” (para. 23) only four months before the summit in Argentina.

Also, the Hamburg concession “that the benefits of international trade have not been shared widely enough” (para. 3) has turned into a reproach of the system “currently falling short of its objectives” (para. 27). The call for WTO reform, while preserving its substance, has become markedly sharper in tone, from “we will cooperate to … improve … functions” (para. 4) in Hamburg to “We … support the necessary reform” (para. 27) in Buenos Aires. Perhaps most importantly, the traditional G20 pledge against protectionism, balanced in Hamburg with a recognition of legitimate trade defense (para. 2), has now fallen away.

But there are important elements of continuity as well. In Buenos Aires leaders have again confirmed the commitment to “refrain from competitive devaluations” and to not “target our exchange rates for competitive purposes” (para. 4). In addition they agree that “an open and resilient financial system, grounded in agreed international standards, is crucial to support sustainable growth” (para 25). It is perhaps no coincidence that those stable parts of G20 language both originate in the finance track. This may have to do with the high frequency of meetings and the largely technical nature of the issues in the finance track.

“For everything to remain the same, everything must change”

Why did continuity break down on trade? After all the G20 is positioned to manage global economic conflicts and mobilize collective action, even if member counties’ policies change. But some policy changes go deeper than others. The strongest G20 member has now begun to question the incumbent order, putting in doubt either the current rules of the game or the very merits of multilateral cooperation. Its preferred remedies are terminating agreements or pressing for reform, “exit” and “voice” in Albert O. Hirschman’s terminology. Those remedies change the environment of cooperation. Power that was somewhat inconspicuous as long as it was used to work with others, is there for all to see once cooperation stops. Its use is now either to try for self-sufficiency or to force a change in the rules of the game. Either way, cooperation is reduced.

The G20 can solve a problem if all of its members largely agree on what the problem is, witness its management of the 2008 crisis. If there is disagreement on the effects of global interdependence or the merits of the way they have been managed so far, this amounts to fundamentally different perceptions of the problem. For the G20 to operate on it, perceptions will first have to converge. Meanwhile the group will mostly be silent or evasive on the sensitive issues and refrain from shaming a member.

All this might explain why Buenos Aires was widely seen as an occasion for bilateral meetings. With power relationships starkly exposed and collective action partly blocked, it was in fact leaders dealing with each other. But this is definitely not the whole story. The Buenos Aires outcome still features strong elements of collective continuity, from the G20 Partnership with Africa to Health and Food Security.

Role, language and behavior

G20 language is always drawn in two opposite directions: It has to be ambitious or at least continuous, in order to anchor expectations as to the G20’s role, if only to show that there is a working cooperation structure in place when the next crisis strikes. But it must also fit with the G20’s actual behavior, in order to remain credible. From this angle, the G20’s new silence on protectionism might be seen as a due correction, adjusting language to long standing bad behavior.

There is probably a connection between unsolved social issues within countries and waning support for multilateral solutions by those countries. There is also a growing consensus that multilateral collective action can be strengthened if generally social and distributional issues are better addressed. This normally leads to calls for the multilateral system itself to take more distributional goals on board. Inequality for instance is an emerging issue on G7 and G20 agendas. While multilateral groups and institutions certainly have to contribute to an enabling environment for the fight against inequality, they cannot substitute for national governments when it comes to distribution goals at the domestic level. Problems at home should not be offloaded to multilaterals on a wholesale basis. If a country wants the G20 to deliver in terms of its own national interest, it will take responsibility for the G20 and its ability to function. Just blaming the global order for problems you could solve yourself may be good politics. But it will not produce results. The question for the G20 now is whether they can agree on an achievable new state of affairs or whether conflict prevails.

This text reflects the author’s personal views only. By no means does it indicate the official positions of Germany’s Federal Government.

Der Beitrag The G20 after Buenos Aires: Continuity and discontinuity erschien zuerst auf International Development Blog.

The G20 after the Buenos Aires Summit: It’s still relevant!

5. Dezember 2018 - 13:59

The assessments of global summits seem to be measured by new minimum standards, given the current state of international cooperation: The G20 concluded its summit in Buenos Aires on 1 December 2019 without any significant ruptures and with a joint declaration. This outcome was all but self-evident, after President Trump withdrew his consent to the communiqué of the last G7 Summit in Charlevoix, Canada, via Twitter while flying back to Washington. And at the recent APEC summit, the US and China clashed over trade issues and the meeting ended without a joint declaration – usually a diplomatic given. The recent intensification of the tensions between Russia and Ukraine as well as the international outcry against the killing of the Saudi government’s critic Jamal Khashoggi added to the challenges. G20 summitry watchers were therefore all but certain that the Buenos Aires summit could be concluded in an orderly fashion. It is a success for the Argentinian host that it did despite all the headwind.

Meager results

If the biggest success of a G20 summit is that it didn’t collapse, then one shouldn’t expect too much in terms of substantial outcomes. The G20 is struggling to produce the kind of policy outcomes that are needed to tackle global challenges from climate change, migration, to digitalization. In that light, it might seem surprising that the Buenos Aires summit concluded with a commitment to reform the World Trade Organisation (WTO), a deadline for a quota-reform in the International Monetary Fund (IMF) to increase the say of developing and emerging countries and the commitment to implement the Paris Climate Agreement. Yet, the notion of WTO reform means very different things to different G20 countries, the quota reform is long overdue and the US continues to stay outside of the G19 consensus on the need of climate action.

In light of the meager result of the Buenos Aires summit, some commentators, including one of the main public broadcasters in Germany, called to abolish the G20. This, however, ignores important functions of the G20 meetings. Dissolving the G20 would be throwing out the baby with the bathwater.

Five arguments why the G20 stay’s relevant

First, the international political crisis that prevents stronger action is not unique to the G20. In fact, the will to underwrite international cooperation is waning in many corners. In such circumstances we should have more fora where leaders can meet and discuss, not less. They need to engage with each other, even if they cannot reach a consensus.

Second, judging the effectiveness of the G20 depends on the expectations. It sounds far-fetched in 2018, but in a way the G20 has become the victim of its own success: It has been the key forum to prevent the meltdown of the international financial system in 2008 and 2009. However, as the global financial crisis was successfully mitigated, the world turned to new challenges that require strong and much more long term action – just think of climate change and sustainable development. The firefighting role of the G20 during the global financial crisis then cannot be fairly compared with the facilitating role it plays today with regard to enhanced multilateral cooperation on issues such as tax, trade or global health.

Third, the G20 has more layers than the annual summit meetings of leaders. In fact, government officials and line ministers, academic experts as well as business and civil-society organisations are meeting regularly in between the summits building up international networks of expertise, communication and trust that are key as a basis for international cooperation.

Fourth, the G20 is reflecting the changing power structures in the world economy. This is not a club of like-minded countries. It does include difficult partners – and needs to do so! Besides Europeans and its increasingly difficult partner USA, important emerging powers are sitting at the table. There are more stakeholder in the international system nowadays than 20 years ago, which makes discussions more complex. And this makes the exchanges ever more important! The future task to integrate African representation, beyond South Africa as a formal member, would help to reflect the growing importance of the continent, even if this would add further complexity to deliberations.

Fifth, and lastly, even if the G20 summit at times rather seemed like bilateral “speed-dating” between world leaders, it is good to have such a forum. It will be better when acting multilaterally – specifically if worst comes to worst and another financial crisis hits the global economy. But meanwhile, it keeps the communication going and ideally builds some mutual understanding, if not trust, between key global actors.

No sitting back

Overall, the G20 is far too important for us to allow it to go into hibernation and have the nationalists have their own ways. The G20 forces key actors to engage with each other regularly. Its engagement processes like Think20, Business20 or Civil20 can do more to communicate to the broader public what the G20 has achieved. Yet, such a communication also needs to reflect the peculiar nature of the G20 as an informal forum without a mandate or secretariat, operating on the basis of annually rotating national presidencies. There are limits of what the G20 can do – and what it should do.

Japan took over the annual presidency from Argentina on 1 December 2019. It should not shy away from putting thorny issues on the agenda, such as support for multilateralism in trade, sustainable development and climate action. The exchange on these issues is needed, and it is needed amongst the key actors assembled in the G20, too. On a number of major global challenges, we need common understanding and agreement on actions. And we can only establish this common ground by continuous discussions, particularly in difficult times.

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International Economic Cooperation in Troubled Times: A Call for Strong Action by the G20

26. November 2018 - 12:00

The leaders of the G20 will meet on 30 November and 1 December in Buenos Aires for their annual summit. They need to acknowledge that the last two years have been characterized by strong headwinds for the world economy. This time, however, it is not a mixture of poor macroeconomic policies and bad business decisions – as in 2008 when they met in Washington for their first summit – that endangers the well-being of billions of citizens around the globe. This time the threat stems from deliberate political decisions, in particular on trade.

The danger emerges from an unholy trinity of insufficiencies in the trade book to address persistent trade distorting practices in major players, primarily with respect to a revival of mercantilist ideas, populist governments championing economic nationalism and uncompetitive advantages of State Owned Enterprises (SOEs). The climate of cooperation has given way to beggar-thy-neighbor-policies on trade, investment and tax. The G20 trade ministers’ meeting in mid-September in Mar del Plata concluded with a plea to modernize the World Trade Organisation (WTO), however, without providing guidance where this path of reform should lead to. In fact, G20 countries differ substantially with regard to the main deficiencies of the system and in turn solutions for reform. Individual governments know the virtues of the multilateral economic order, praise it if it appears appropriate and at the same time act against this order by pursuing narrow national interests. Whether or not such actions are responses to other countries’ actions, they contribute to an erosion of the multilateral order.

The G20 summit in Buenos Aires presents an eleventh hour opportunity to stop or at least mitigate these destructive forces, by taking strong action in favor of an open and rules-based system multilateral cooperation on trade, investment and tax matters.

Key reforms on trade

Unmistakable evidence demonstrates that G20 members routinely violate their “no protectionism” pledge. The scale of trade affected should concern senior officials: by March 2018 over 80% of G20 goods exports competed against trade distortions implemented since November 2008 that were still in force.

Concerns that the current G20 approach does not address the full range of policy intervention that distort 21st century commerce should be addressed by leaders taking two steps: expanding the scope of the G20 protectionist pledge and calling for upgraded monitoring that goes beyond conventional barriers to trade and doubles down on efforts to track new barriers across all sectors of the economy, including the services sector. Rather than engaging in another fruitless debate about what constitutes protectionism, an approach based on the principle of non-discrimination should be pursued that condemns any protectionist policy intervention.

That said, while overwhelming evidence establishes that overall nations gain from trade, there are disruptions through trade that need to be addressed. While many gain from trade, import surges have sometimes undermined the economic viability of whole communities.

Gradualism in trade liberalization combined with preemptive measures to strengthen competitiveness, can help mitigate such trade adjustment costs. Displaced workers are best helped using generally applied safety nets, not those specific to trade, as trade shocks are only a part of the economic uncertainty affecting workers. International coordination is required to support an open and predictable trading system under the World Trade Organization (WTO), as the greatest future source of trade shocks could be protectionism, not trade liberalization.

In addition, there are major challenges for the governance of the digital economy and digital trade. Rule-making processes currently in course, such as those at the WTO, need strengthening. Such attention also needs to effectively address the risks of a widening digital divide in particular in the Global South. The G20 is best placed to provide direction for global governance actions that address the multifaceted relationship between digital technologies and trade, the digital divide, and the incorporation in rule-making and implementation of distributive ledger technologies and artificial intelligence, among other strategic trade related issues. These issues comprise international cooperation, digital connectivity and the need for liberalization and facilitation of trade in goods and services.

The G20 should reaffirm the facilitating role of the WTO in global governance on digitally-enabled trade, and suggest a WTO Facility on Digitally-Enabled Trade as a focal point to initiate information-sharing, cooperation, and coordination among international agencies related to digitally-enabled trade. A strengthening of aid for trade and other forms of technical assistance to low income countries is key to bridge the digital divide.

Cooperation in tax matters is crucial

The world is facing a new round of international tax competition that may result in a ruinous race to the bottom, undermining the fiscal capacity of states to respond to global challenges and to implement the Agenda 2030 for Sustainable Development. G20 leaders must take action to strengthen multilateral and cooperative approaches to taxation, curtail harmful tax competition and protect their own tax base as well as that of developing countries.

Governments use tax expenditures to boost investment, innovation and employment. However, these schemes are largely opaque, costly and often ineffective in reaching their stated goals. In order to improve the performance of these tools, first, G20 governments should increase transparency on tax benefits. G20 members should for example take the lead on this with frequent and comprehensive tax expenditure reports. Second, G20 governments should improve the design of tax incentives with the aim of minimizing the generation of windfall profits and negative spillover effects within and across (in particular, on poorer) countries. Third, G20 governments should phase out tax expenditures that are environmentally harmful, including tax incentives for fossil fuels and other schemes that promote an unsustainable use of natural resources.

Fourth, a priority of the international community is how to best address the tax challenges of digitalization within the current framework of international taxation. G20 leaders need to work towards a joint framework of value creation in the context of digital business models and to promote international agreements on the treatment of economic activities based on digitalization, rather than engaging in short-sighted unilateral action and protectionist policies.

Investment policy reforms

It is of paramount importance that the G20 pay attention to the mounting challenges facing the international investment regime, a regime that regulates an activity that is more important than trade in delivering goods and services to foreign markets and integrating these markets.

This is all the more important because international investment is crucial to advance sustainable development, especially in developing countries. For both immediate and long-term reasons, investment policies should, therefore, be a core item on the agenda of the G20. The G20 should therefore continue its important work on international investment policy reform and initiate steps to operationalize the Guiding Principles for Global Investment Policymaking adopted during the Chinese G20 presidency in 2016. Also, the G20 should support ongoing WTO discussions on investment facilitation, suggesting that investment facilitation discussions should not only aim at facilitating more FDI, but sustainable FDI. The deliberation of a set of Guiding Principles for Global Investment Facilitation may provide overall guidance for the discussions starting on investment facilitation at the WTO.

Long-run Perspective

We realize that a number of these proposals, submitted by the T20 Task Force on Trade, Investment and Tax Cooperation to the G20, require actions that go beyond Argentina’s Presidency. However, they are in line with the desirability that international trade, investment and tax issues constitute a core item on the agenda of the G20. It is up to the G20, which describes itself as the premier forum for international economic cooperation, to take the lead in advancing these reforms.

This article is based on the policy proposals put forward to the G20 by the T20 Task Force on Trade, Investment and Tax Cooperation which brings together more than 100 researchers from nearly 80 think thanks and universities representing 14 G20 countries. The Task Force is co-chaired by Axel Berger, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE), Christian von Haldenwang, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE), Raul Ochoa, Argentine Council on Foreign Relations (CARI), and Ricardo Meléndez-Ortiz, International Centre for Trade and Sustainable Development (ICTSD).

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The G20 @ 10 conference: Assessing the benefits, limitations and the future of global club governance in turbulent times

19. November 2018 - 15:58

In Buenos Aires on 30 November and 1 December 2018, the G20 is having its 10th anniversary as a summit format at the leaders’ level. On 14 and 15 November 2008, this previously-obscure group of finance ministers and central bankers of the nineteen most “systemically relevant” countries and the EU was transformed into a forum for international leaders to meet with a view into the abyss of the global financial crisis that originated in the US and spread fast across the world. Ten years and 12 leaders’ summits later, the G20 has moved beyond its 2008-09 role as a crisis-management forum and became the self-described “premier forum for […] international economic cooperation.” In this capacity it is now facing new demands to tackle global challenges such as climate change, digitalization and pandemics. As its agenda has expanded and the urgency of the crisis fades, the G20 faces questions regarding its relationship to other formal institutions of global governance, such as the United Nations, its effectiveness in dealing with global challenges as well as its legitimacy and accountability vis-à-vis its people and the 174 non-members.

At the G20 @ 10 Conference, organized by the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE), together with Chatham House and the Shanghai Institutes for International Studies (SIIS), we took the occasion to reflect on the role of the G20 in its tenth year of summitry from both academic and policy-making perspectives. The conference brought together researchers of various disciplines, high-ranking government officials and experts from international organisations representing a broad range of G20 and non-G20 countries.

Looking back

One of the purposes of the conference was to take stock. There are quite a number of policy areas where the G20 achieved results fall short of its ambitions. A prominent example is the anti-protectionism pledge adopted during the crisis, which may have been successful in averting a trade-war in 2009, but was never adhered to as rigidly as the language implied, and in 2017 was removed from the annual communique entirely. Yet, the G20 has achieved significant policy successes, beyond their crisis-management role in coordinating large stimulus packages and regulating financial markets. The G20 has helped to bring about the Base Erosion and Profit Shifting (BEPS) initiative to prevent the eroding of tax bases, installed an agriculture market information system with a view to reduce food speculation and helped to build a consensus on the need to reform international investment policies to facilitate investments. Above all, the G20 has become the most visible forum for integrating rising powers into the global governance framework, and acknowledging the fundamental shifts in global power in a way that institutions such as the G7, UN Security Council and IMF were either unable or significantly delayed in doing. The G20 has also developed a structure of engagement groups and observer statuses that allow it to engage with non-members and societal actors such as business, labour, non-governmental organisations and think tanks.

Legitimacy of the club

One of the core debates at the conference evolved around the very legitimacy of this “club” and how it was derived. While the G20’s policy outcomes were undoubtedly helpful in immediate response to the global financial crisis, the current mandate to undertake action on the broad range of current global challenges is significantly less clear. The annual rotating presidency of the G20, has led to a proliferation of policy initiatives being adopted at the leaders’ summits, waiting for follow-up during subsequent presidencies. However, it is not clear the extent to which this format creates peer pressure to deliver on these relevant policy challenges, or diluted the ambition of the proposals. Additionally, the transmission mechanism to expand these policy innovations beyond the G20 was often either unclear or depended simply on leveraging the G20’s bias towards ‘bigness’ at the expense of non-members. Conversely, some voices suggested that the peer pressure mechanism may be especially effective in motivating emerging countries, incentivizing them to “present something” during global meetings such as G20 summits in order to be accepted as truly global players.

Legitimacy might also be provided by the (supposed) efficiency of its informal format for deliberations. This is an oft-repeated argument in debates about the club governance, in particular in contrast to the UN system with its 193 members and a vast number of sub-organisations. However, the G20 process is increasingly institutionalized too, calling into question its advantage of informality and agility. For example, in preparation of the Buenos Aires Summit at the end of this month the Argentinean host counted more than 50 meetings including finance ministers and central bank governors, Sherpa’s and finance deputies, line ministers and delegates of various working groups. Some conference participants, therefore, argued that the G20’s agenda should be reduced to the items that leaders find relevant and want to actually talk about in a kind of informal “fireplace chat”. Others stressed that the value-added of the G20 as a group of major economies should be on “actions” setting examples for others.

Furthermore, can the G20 still bank on its efficiency with a highly reluctant US government at the table? A term often used during the conference was that of “G19+1” as a makeshift in highly contentious policy areas. However, an increasing number of G20 members are leaning towards my-country-first policies, and the weakening of the importance of the unanimity of the comminque may weaken the effectiveness of the whole institution, as it would open the door to more G 20-minus-X coalitions with increasingly large X’s. It is far from clear why reluctant members would come back in line with the rest of the G20 once this principle is breached, while at the same time undermining the G20’s importance in issues where global cooperation is necessary for success such as how climate change can be avoided. The fate of the G20 as an effective forum in this my-country-first environment therefore remains an open question.

The G20 as a governing system

An alternative view discussed at the conference was the increasing formalization of the G20 as a governing system, with additional deliberations at working-group level and in an increasing number of “outreach groups”, such as Labour20, Women20, Business20, Youth20 or Science20. The Think20 in particular, a network of think tanks that provide policy advice for the G20, was discussed as a particular forum of transnational deliberations which might provide a more rigourous source for globally-accepted evidence-based recommendations that would be harder for leaders to ignore.

However, to actually serve this purpose to hold the G20 to higher standards, the Think20 needs to further professionalise its research and policy analysis process and increase the incentive for more high-ranking think tanks and experts to participate and engage thoroughly in the process. Furthermore, in particular in light of the demands of the Agenda 2030 for Sustainable Development, breaking up silos is not only necessary for the G20 and its work streams but also for the Think 20 researchers which also often still work exclusively in topical areas and do not mingle across disciplines.

As a sub-grouping of sorts, the T20 Africa Standing Group was discussed as a specific forum of transnational interaction, where G20 and African think tanks discuss the impact of the G20 on the African continent, both the G20’s dedicated actions and the unintended consequences of its (in)action on certain matters relevant to the continent’s development. While recent initiatives of the G20, such as the Compacts with Africa, were considered a step up in G20 engagement with Africa, it was highlighted by several speakers that African concerns are not separate from other workstreams across the T20, and it is unwieldy for these concerns to either be dealt with separately, or advocated disproportionately by South Africa, as the one African G20 member. One speaker highlighted the need for African leaders to engage more with the G20 and other international fora with the words “If you are not at the table, you find yourself on the menu (of deliberations)”.

The next 10 years

Summitry might have its shortcomings and can be mocked as a mere photo opportunity. Yet, however imperfect the setting of the G20: the continued dialogue amongst the largest economies and various bilateral meetings at the occasion of G20 summits seem to make the setting useful for policymakers – and for analysts who engage with global governance. The G20@10 conference aimed at building on the success of the Think20 by offering a space for researchers to engage with each other and policy makers. We indeed saw the exchange as stimulating and aspire to continue the exchange on a number of aspects of the G20 and its engagement with and role in global governance.

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The possibility of global economic governance in a period of great power rivalry

14. November 2018 - 14:00

A structural shift is underway, running much deeper than the so-called trade wars that have been triggered by the US administration. Evidence of this trend starts to abound. In the past months, measures have been taken in places such as the US and the EU which will discourage the inflow of certain foreign investments, global companies have been induced to restructure their supply chains following geopolitical considerations and an increasing number of countries have been dismissing infrastructure projects with foreign funding.

These events defy the rationale that has underpinned economic relations for the past decades. We expect countries to go to great lengths to attract foreign investment, that global supply chains are structured across the world according to cost-effectiveness criteria, and that funding for needed infrastructure is received with open arms.

Welcome to globalization in the age of great power rivalry.

This age seems to be defined by the US-China dispute for the (re)organization of the global economy. It has much more to do with the control of strategic assets —technologies such as artificial intelligence, key inputs such as energy sources for electric vehicles, and command over connectivity, physical and digital— than with moving goods globally. This dispute is creating ripple effects, as witnessed by the debates in the EU on the establishment of an investment screening mechanism.

 A new normal in global politics?

We are witnessing what might be the first steps in a new stage of globalization. Still, some of its features are becoming gradually salient. Prominent among them is the assertiveness of states in trying to unilaterally reduce or manage in some way their exposure to the interdependence underlying the global economy. Thus, for instance, governments increasingly tighten control of mergers and acquisitions or public procurement bids with the purpose of inhibiting access of foreign firms to crucial technologies. Additionally, the internet, once hailed as a space deprived of borders, is now fraught with digital fences that suggest the rise of spheres of influence for both strategic and non-strategic purposes. Finally, states seek to enlist private companies in the pursuit of strategic, non-market-oriented, goals.

Even when supported by carve-outs in international rules, such as national security exceptions, a different game is underway. It is playing out in an arena that merges economic and strategic elements and employs different assumptions from the ones we grew accustomed to observing in economic relations until now.

These events put global economic governance under strain. It is telling that most of these shifts are taking place outside the existing global governance settings, such as the WTO —with the notable exception of the debate on the measures applied by the US under Sections 232 and 301.

Challenges to a new global economic governance

Yet, for all their shortcomings, the institutions, rules and processes that shape global economic policies have provided a sufficient degree of stability and widespread benefits for all countries, albeit unevenly distributed. Can global economic governance continue to perform this role?

The possibility of global economic governance hinges on its capacity to adapt to persisting, current and future challenges, as detailed below. It will need to be a different governance. But, as Amrita Narlikar rightly points out, there is a “demand for a re-thinking and re-negotiation of globalization”. This demand will need to be met.

Firstly, one of the most immediate challenges is precisely the clash between the two types of capitalism that underlies the US-China rivalry. To be sure, state capitalism has existed for long and, while it has gained more visibility in the aftermath of the 2008 financial crisis, it is particularly the Chinese state-led model that has been singled out as a reason to update a number of economic rules.

The conflicting views of US and China were on display at a recent WTO General Council session, where the US Ambassador charged that “China has not been moving toward a fuller embrace of market-based policies and practices since it joined the WTO in 2001.” In response, the Chinese Ambassador stated that “China has been vigorously exploring a road of market economy which suits China’s own national situation and circumstances (…)”.

This is a critical debate that begs the question on the need to adjust the current trade rules. Are they balanced and effective? Will a solution be possible at the WTO?

A second, and persistent, challenge is that of inequality —both across and within states. Global economic governance still lacks a proper response to it. It raises the legitimate question of whether the rules as they stand cater to the interests of the majority of the population or of a small number of actors well-equipped to lobby their governments. This is not a new a question, as a number of developing countries have been contesting what they consider unbalanced rules in areas such as patents for pharmaceuticals and investment protection – not to mention agricultural subsidies provided by rich countries.

This brings forward the third challenge to be addressed by global economic governance: inclusiveness. Although the relations between the US and China will necessarily be a key factor in understanding the future of the global economy, the world is likely to become even more multipolar than it already is. Decision-making in global economic governance should also be multipolar. The upgrade of the G20 to a forum at the highest political level is an example in this direction. It would therefore be an unfortunate step backwards to believe that fundamental debates —such as the WTO reform— should be dealt with as if the world still revolved around a small number of developed countries plus China.

The emergence of great power rivalry, such as the recent US-China trade war, does not remove from the table the need to address concerns with inequality and inclusiveness as conditions for the persistence of global economic governance.

Finally, global economic governance should be able to provide responses to the challenges that begin to emerge from the digital economy. The dissemination of many of its applications —e.g., artificial intelligence, 3D printing and big data— is likely to bring about considerable disruption to the global economy, in particular for developing countries that have joined global value chains as providers of cheap labor.

A different global economic governance

In sum, there is no shortage of challenges. What seems to be elusive is a consensus to update and reinforce global economic governance. It will take leadership to confront both the domestic discontent with globalization and the great power struggle we witness. But if recent history serves as an indication, the establishment of the G20 as a forum for world leaders shows it is possible to shape up to collectively address problems of a global scale.

The persistence of global economic governance is by no means a foregone conclusion. An alternative scenario is that we see the emergence of spheres of influence on certain issue-areas, where actors with power to go it alone opt for dismissing any multilateral solution.

It is not only possible but highly desirable to have global economic governance. But it will likely be a different type of governance, and we should be ready to embrace it. The alternative of a fragmented order is hardly a better option.

The views and opinions expressed in this article are the sole responsibility of the author and do not necessarily reflect the positions of the Government of Brazil.

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Digitalisation and exponential technological Change: Challenges and Opportunities

8. November 2018 - 14:00

The word digitalisation is on its way to become a buzzword that is not only used by techies but also by development professionals around the world.  Just two years ago, in 2016, the World Bank devoted the World Development Report (WDR) to Digital Dividends, referring to the distribution of digitalisation benefits to a broader population. The WDR suggested inclusion, efficiency, and innovation as the main mechanisms through which digital technologies can promote development.

The potential is enormous and covers a plethora of sectors, from finance, industry, and agriculture, to education and political participation. However, is digitalisation the panacea to achieve a broader set of development goals such as those included in the Agenda 2030? The answer to this question depends on which drivers underpin technological change.

Digitalisation vs. Exponential Technological Change

The concept of technological change is much broader than digital change or digitalisation – i.e. converting information in ways that are readable by a computer and usable for intelligent purposes. The main reason is that, even when digitalisation is often analysed on its own and used to refer to a limited number of technological applications (mainly mobile phones, internet and, more recently, big data), it has underpinned exponential changes in other areas of technological development. Increased computing capacity at lower costs has favoured innovations in nanotechnology, biogenetics, optics, neurology, chemistry, robotics, and artificial intelligence, among many other areas.

Digitalisation has in fact favoured a tree-like system of technological change that boosts innovations across different fields. An example is the convergence and synergy between digitalisation, nanotechnology, and biogenetics, triggering significant progress in medical diagnosis.

Following Niklas Luhmann, the system is autopoietic: innovation itself bring more innovation. The system of technological change features a positive feedback mechanism and yields outputs that increase exponentially. In other words: Innovation brings about twice as much innovation, not only within the field of digitalisation but across many other fields, and so on. This is what we call exponential technological change (ETC).[1]

Market-Driven vs. Development-Driven ETC

Without adequate governance, the practical applications of ETC will most likely respond to market needs and not necessarily to broader human development goals. Many contributions of digital technologies to date are centred on fostering productivity, efficiency, and growth. This applies to both economies in the Global North and economies in the Global South. Digital platforms may be supported by data mining tools and weak artificial intelligence (A.I.),[2] useful for identifying behavioural patterns and understanding the profile of consumers. This allows the supply of a broader variety of goods and services that are individually tailored at lower costs, benefiting consumers around the globe.

The fact that ETC is often profit-driven is not necessarily bad news for the achievement of sustainable development goals (SDGs). However, the net costs and benefits depend on a number of factors. For example, ETC is already triggering automation in many industries. This phenomenon has increased labour productivity in some cases; but in others, especially for manual and repetitive tasks, labour has actually become redundant. Depending on the country, between 50% and 85% of current jobs will disappear or will be transformed in the next decades due to automation. Any replacement requires a different set of skills, placing a high importance on education and training systems.

If societies are not ready to cope with short-term technological unemployment, this could increase current income inequalities, cancel benefits, fuel nationalist movements, undermine global governance, and thus overall hamper the achievement of sustainable development goals (SDGs).

As a general rule, when ETC is market-driven it requires

  • designing better regulations at the global level (to avoid concentration or at least to make sure that concentration does not create broader socioeconomic inequalities),
  • public-private partnerships (to make possible applications of ETC which are more accessible), and
  • to support technological training while maintaining a human-centred education, which is vital so that individuals remain citizens, able to flourish in more comprehensive ways than simply as technological users and consumers.

Development-driven ETC tends to be citizen-oriented. Examples include the use of digital technologies to increase government transparency, the application of weak A.I. to improve urban management, or cheaper apps that allow medical diagnoses among vulnerable groups.

The Challenges for Global Governance

The difference between market-driven and development-driven innovations will become even more relevant in the next decades. Exponential innovations will continue to be so complex and dynamic that a number of unexpected breakthroughs could happen across different technological areas. Depending on public policies, international cooperation, knowledge-sharing, and global governance agreements, this could mean that innovations are only available for very few individuals with market power or that benefits are somehow shared more universally.

In the case of more universal sharing, with a more even distribution of ETC benefits, we could achieve many SDGs and witness a generalised raise of living standards among the global population. But this scenario will depend on pushing forward a broad cooperation agenda to maximise the benefits of ETC and minimise the adjustment costs. For example, states, corporations, and other non-state actors will need to cooperate closely to find ways to protect intellectual property rights, promoting innovations competitively and yet, allowing universal access. Cooperation will also be necessary to identify ways to prize development-driven vis-à-vis market-driven innovations without hindering innovation altogether.

[1] I owe the concept of ETC and some ideas on its associated challenges and opportunities to José Ramón López Portillo. See López Portillo (2018), La gran transición. Retos y Oportunidades del Cambio Tecnológico Exponencial, FCE and CONACYT, Mexico.

[2] Weak artificial intelligence, or A.I. for specific purposes, refers to computing processes that are designed to solve problems within specific contexts and to optimize specific tasks. In contrast, strong A.I. or general-purposed A.I., includes the ability to learn and apply intelligence across different fields.

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