We are living at the intersection of three tectonic shifts: a digital revolution which is changing the way we produce, trade, and work (Baldwin 2019); an environmental revolution, as the strained ecological boundaries of our planet oblige us to review how we produce and consume (Nordhaus 2019); and a social revolution, as economic insecurity drives angry politics and a mismatch between expectations and reality fuels voter dissatisfaction across the world (Guiso et al. 2017). On top of these three revolutions, geopolitics are back: growing strategic competition between the US and China threatens to derail progress achieved in the last 70 years (Crowley 2019). How we respond to these changes will shape our future.
Women Shaping Global Economic Governance, a new book from CEPR, the International Trade Centre and the European University Institute, brings together contributions from leading women policymakers and thought leaders on global economic governance, with concrete proposals for how to navigate this period of turbulence (González and Jansen 2019). As such, the book attests to the growing role in economic governance of women in government, academia, business, the media and international organisations – even if gender equality remains a considerable distance away. The book is not about women. It is a book written by women to draw attention to their role in shaping global economic governance.
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The book is organised into four sections, introduced by Christine Lagarde, Cecilia Malmström, Sharon Burrow, and Ngozi Okonjo-Iweala, respectively. A common thread running through their contributions is the call for a rethink of international economic governance in this period of change. Christine Lagarde explains the role that new financial instruments can play in facilitating a better distribution of the gains from open markets. Cecilia Malmström emphasises the role of new partnerships in maintaining the momentum for global integration. Sharan Burrow invites us to rethink the role of the century-old International Labour Organization along with that of its significantly younger counterpart, the World Trade Organization. The Africa-focused introduction by Ngozi Okonjo-Iweala is a reminder that in some parts of the world change is welcomed, not feared, and is contributing to new and strongly positive dynamics.
Four concepts recur throughout Women Shaping Global Economic Governance: restoring trust, going beyond policy coherence, new partnerships, and bold new thinking.
Where trust in economic governance has been lost, voters demand change. Sharan Burrow refers to a generalised fracturing of trust in globalisation and considers it a determinant of several political phenomena currently observed in the industrialised world. She warns that if trust in institutions is not restored, people may lose faith in democracy itself. In her piece on populism, Erica Owen concurs, pointing to distrust in both globalisation and national governance as key determinants of voter behaviour.
Trust is the lifeblood of the financial system, notes Christine Lagarde, reminding us that the term ‘credit’ stems from the Latin word for ‘trust’. Without trust, financial systems cannot function, and this explains the conscious efforts that have taken place over the past years to rebuild trust in global finance. One such initiative is on international tax cooperation. Monica Bhatia emphasises the importance of effective taxation for more inclusive and sustainable growth.
Building trust, however, is not an easy task. Elvira Nabiullina and Linah Kelebogile Mohohlo remind us how much time and work it takes to build trust in institutions that previously lacked it. Based on their experience as central bank heads, they describe in detail the steps and persistence required to build a reputation for being the ultimate guardian of stability. Reading their contributions, it becomes very clear that it is much easier to lose trust than to restore it. The task ahead of restoring trust in global economic governance is therefore not to be underestimated.
The media plays a key role in building and maintaining trust. The role of traditional and social media in influencing opinions and election outcomes is currently on every policymaker’s mind. Soumaya Keynes explains what this implies for journalists focusing on evidence-based news. In her piece, she highlights the importance of always taking into account the interests of the source of evidence or information.
To restore trust, the next generation of economic governance will have to fully integrate new areas of concern and to credibly signal that societal concerns are built into economic policies. More comprehensive governance is likely to imply a blurring of the lines between ‘hard’ economic themes such as finance and trade and ‘soft’ societal themes such as gender and the environment.
This becomes explicit in the contribution by Katy Matsui. She argues that one of the biggest game changers in Japan’s attitude towards gender issues was the shift from diversity being a human rights or social issue to an economic and business imperative. This drew corporate managers’ attention to the fact that gender diversity can play a role in driving growth.
Comprehensive approaches are also the way forward in international policymaking. Cecilia Malmström highlights the importance of trade being beneficial ‘to all’, and of trade contributing to positive change in areas such as gender equality. Ana Novik, meanwhile, looks back on early attempts to build multilateral investment agreements and argues that future efforts should pay more attention to the sustainability and distributional effects of investment. Institutionally, this may imply closer alignment among institutions that in the past were worlds apart. This would, for instance, be the case if the financial system were required to contribute to the achievement of the Sustainable Development Goals, as suggested by Christine Lagarde.
Vera Songwe contributes to this discussion from a somewhat different angle – that of a region that appears to be embracing integration more enthusiastically than ever before. Yet she establishes a clear order of priorities by putting her contribution squarely under the heading of poverty reduction.
Bold new thinking
Fixing systems and institutions that are in ‘crisis’ – a term used by several contributors – needs bold new thinking and, above all, action.
This is the case for the WTO’s dispute settlement system. Yuejiao Zhang presents a list of concrete possible actions that could bring what many call the ‘crown jewel’ of the multilateral trading system out of its current conundrum, caused in part by the blockage of appointments of new Appellate Body members.
Where governance has to become more comprehensive, thinking out of the box may be required. With a view to increasing the role of finance for sustainable development, Stephany Griffith Jones argues in her piece in favour of a larger role for national development banks. This would, in her view, help create a financial system that is more diversified and that better serves the needs of the real economy and society, contributing to more dynamic, greener, and fairer economies.
Bold thinking is also necessary in another field of public policy that has been drawing a lot of public attention in recent years: migration. Here, Leila Baghdadi invites readers to no longer see migrants as people who have left a home country to live in a host country but as people who are ‘here and there’. This reflects how modern technology and transport costs allow migrants to have links to both their homes and host countries. She points to the potential of migrants as agents for increased trade and investment. Bold thinking in terms of acknowledging the substantial social and economic contributions made by migrants to their host societies is also encouraged by Sara Pantuliano, though she also recognises the political and economic complexities of large-scale migration.
The difficulty of the tasks ahead is compounded by dramatic technological change. A new industrial revolution may indeed have already started, with important implications for our societies. According to Anabel González, “the time for business as usual is over”. In her view, the ongoing technological disruption requires a rethink of the global governance structure, including an entirely new role for competition policy, given the levels of market power in high-tech markets.
In her contribution, Nuria Oliver makes concrete policy proposals for the global governance of the internet. She organises her proposals around the abbreviation ‘FATEN’: fairness, accountability, transparency, education, and non-maleficence. One particularity of this technical revolution is that it has triggered new contributions to regulation and policymaking from across the globe, as illustrated by the case of Rwanda, a front-runner in the regulation of drone transport, as described by Ngozi Okonjo-Iweala.
Rapid action combined with bold new thinking may also be required in the field of education. Despite many developing and emerging economies having not yet built ‘schools for the 20th century’, it is essential to start building schools for the 21st century, according to Claudia Costin. She stresses the urgency to start preparing future generations for the technological disruptions that have already begun.
The complex new agenda leaders confront will likely require a rethinking of partnerships in order to meet new challenges. Cecilia Malmström describes the European Commission’s efforts to keep alive the spirit of international collaboration through negotiations with new partner countries in different parts of the world. Partnerships are absolutely critical for small states, as described eloquently by Mia Amor Mottley. Her contribution illustrates what it takes for a small state to navigate an increasingly power-based international system.
New types of partnerships between the public and the private sector may also be required. Indeed, taking social and environmental imperatives into account may increasingly become a necessity for business. Teresa Ribera points out that environmental objectives and commercial objectives are increasingly aligned, and that business is starting to realize that climate change should be seen as an opportunity to move into new lines of business.
Both national governments and private business have roles to play in restoring trust in the social aspects of globalisation. The role of national governments is emphasised by Gabrielle Marceau, who examines the linkages between trade and labour through a WTO lens. Drusilla Brown hints at the role that private initiatives can play in building trust, focusing on the social aspects of global value chains. Erica Owen goes further, arguing that it is in the private sector’s vital interest to contribute to trust building. Both agree that governments also have a central role in building trust.
Ways forward to redefine global economic governance
In sum, new partnerships, bold thinking and comprehensive approaches to policy will be necessary to rebuild trust in international cooperation and to reinvent a system of global governance that ensures globalization is both inclusive and sustainable.
Baldwin, R (2019), The Globotics Upheaval: Globalization, Robotics, and the Future of Work, Oxford University Press.
Crowley, M A (2019), Trade War: The Clash of Economic Systems Endangering Global Prosperity, CEPR Press.
González, A and M Jansen (2019), Women Shaping Global Economic Governance, CEPR, ITC and EUI.
Guiso, L, H Herrara, M Morelli and T Sonno (2017) “Populism: Demand and Supply”, CEPR Discussion Paper 11871.
Nordhaus, W (2019), “Climate Change: The Ultimate Challenge for Economics”, American Economic Review 109(6): 1991-2014.