As world leaders meet in Davos to discuss “The Great Transformation: Shaping New Models”, a central question is how to grapple with the rise of regionalism – a consequence of a system of global governance that increasingly seems to have fallen short of expectations.
The effectiveness of many global institutions is under severe strain, as they remain largely unchanged from their postwar forms. Newer institutions have not filled the gap, because, since its largely-successful 2009 response to the global financial crisis, the G20 has been increasingly ineffectual as well.
The dearth of truly effective global institutions is consistent with a broader geopolitical trend, one in which the global agenda is increasingly influenced as much on a regional level as on a global one. With general agreement that the unbridled pursuit of individual national interests would produce suboptimal results, regionalism, while far from ideal, is emerging as a stopgap to the shortage of effective global decision-making.
But while the trend towards regionalism is real, many of these newer alliances, both formal and informal, remain nascent, and are at best, marginally effective. Many serve as little more than high-level discussion groups with rudimentary governance structures and skeletal institutions. They are seemingly unable to tackle the common challenges facing their regions. They also suffer from hang-ups stemming from bilateral differences, in particular questions of financing commitments and support.
Despite these shortcomings regional alliances continue to gain traction. Look at the increasingly assertive role of the Arab League in both Libya and Syria, the emphasis placed by the US on the Trans-Pacific Partnership and continuing efforts to shore up regional financing arrangements, such as the Chiang Mai Initiative in Asia.
The challenge is to manage the rise of regionalism in a way that helps us solve systemic and far reaching global problems. Seamless co-ordination between and among regional organisations and global ones is by no means assured. This presents a good opportunity to craft these evolving regional alliances and institutions to boost their ability to co-ordinate with one another, as well as with existing global institutions.
Europe, of course, remains the most developed example of institutional regionalism. To date, it has been the only area in the world where countries have successfully pooled sovereignty on the principle that all countries are (more or less) equal and they should all follow collectively agreed rules and work through supranational institutions. Whether and how Europe emerges from its current crisis is crucial to the future of how other regional organisations develop.
Even with its influence in decline, the EU model of regional co-operation is still the most highly developed in the world. The evolution of its governance structures, rules, institutions and power dynamics that emerge from the current crisis will be looked upon with great interest by those contemplating regional alliances of their own. While the future shape of the EU is currently more uncertain than it has been for decades, there is already increasing doubt that the EU will remain as concerned with equality for smaller countries, which may well find themselves less influential.
We have already seen the de facto creation of a smaller steering group – the Frankfurt Group – which allows stronger and more influential leaders to discuss issues in a less formal setting than the EU or eurozone treaties prescribe. While smaller countries may not like this, this more realistic approach to decision-making could, in the end, allow the EU to emerge stronger and with greater influence.
As for global institutions themselves, they find themselves increasingly integrated with these regional organisations – if not trailing behind them. For example, while the involvement of the International Monetary Fund in Portugal and Ireland was, and remains, crucial, its role has been as part of a ‘troika’, where its partners are regional actors – the European Commission and the European Central Bank. Similarly, in Libya, the UN Security Council played an important role but it was through the Arab League and the ad hoc alliance of the British, French and Americans via Nato, that concerted action was brought to bear.
The problem is that while demands on global institutions have increased, their ability to respond effectively and quickly has stagnated and even weakened. This is due, in part, to governance structures that lack legitimacy and insufficient support from today’s great powers, namely the US and China.
The G20, today’s premier “global” institution, is prone to all of the above, as well as a host of unique factors that make it a less than ideal organisation to confront today’s most pressing problems.
Its agenda has been expanded repeatedly, undermining its ability to focus and address any individual issue. Its membership is not comprehensive or representative, thereby calling into question its legitimacy. It lacks coherence, given that there is no consensus on fundamental political and economic values. It requires unanimity on every issue, thereby restricting its ability to make difficult decisions. It also lacks resources, as it has no permanent staff and often calls other institutions to undertake efforts to support its commitments.
A world where regional groupings and organisations address regional, and sometimes wider issues, is clearly second-best to a world of effective global governance. But it is nevertheless preferable to raw nationalism and reflects the broader diffusion of international power away from a pure “might-makes-right” system. The trick for global leaders is to recognise this new reality and try to ensure that the emerging institutions and alliances can work together. Global governance should not be allowed to go the way of the electric outlet with multiple, independent and inconsistent standards that vary region by region.
This article is co-authored by Ian Bremmer, president of Eurasia Group and vice chairman of the World Economic Forum’s geopolitical risk council, and Douglas Rediker, former member of the executive board of the IMF and chairman of the WEF geopolitical risk council. The full report is available on the WEF website.