The Financial Express

Wanted: A new world order

| Updated: November 17, 2020 21:20:57

Wanted: A new world order

Whatever the ultimate costs to nations and its duration, Covid-19 will leave planet earth one day, hopefully soon. But when it does, it will not be with a whimper but after blazing a trail of death and damages the like of which has not been seen since the second world war. Moreover, it will leave after giving a stern warning of reappearance if things remain the same as before. These two lessons, the fact of unprecedented deaths and destruction and the possibility of a repeat performance by the deadly virus or its new incarnations, should be enough of a spur to rethink urgently the global political economic order. After the harrowing experience that countries have gone through and are still being subjected to because of the pandemic, it can not be business as usual for the global order of governance that prevails at present.

After the end of the second world war that caused millions of deaths and widespread destruction in Europe and Asia and pulverised the global economy so severely as to cause the Great Depression, the prevailing global order of governance  became obsolete. In its place a new order with a network of new international institutions was felt urgently necessary to reconstruct and help develop the countries of the world affected directly and indirectly by the devastating war. The world leaders put their heads together to devise a new architecture of governance and came up with a number of new political and economic institutions. It was the finest hour for international cooperation geared to the promotion of common welfare of people everywhere. The collective action taken led to the establishment of the United Nations (UN) and the various agencies under it like WHO, UNICEF, ILO etc. On the economic front, the initiative saw the establishment of the World Bank, IMF and General Agreement on Tariff and Trade (GATT) that were mandated to promote economic development, financial stability and free trade. Never before in the history of mankind had so many new institutions come into being in such a short time. It all happened because of the sense of urgency engendered by a global cataclysm.

Covid-19 pandemic may not be of the same duration as that of the second world war but its geographical coverage is more comprehensive and the economic damages inflicted on countries is no less severe. Since much of the damage caused by the pandemic have been because of the way most of the international institutions function and the prevailing system of global cooperation, it is necessary to review this and reset their agenda with consequent implications for their functioning.

Looking at the prevailing global international institutions it appears that it is not so much the fact of their irrelevance but their inadequacy and dysfunctional status that aggravated the crisis caused by the pandemic. As such there is no need for new global institutions to be established as was the case after the second world war. What is needed now is strengthening and fine-tuning the existing institutions so that they are better positioned to address a global crisis like covid-19. These institutions need to re-set their  goals and agenda. Secondly, some of them are badly in need of re-structuring to reflect the present reality of global powers. Both call for reforms of the institutions, in one form or another, that have become overdue.

Calls for reform or re-structuring of the governance of the World Bank have been frequently made in the past with no significant changes forthcoming in response. The global crisis of Covid-19 should reactivate the process of reform in greater earnest now than was taken half-heartedly from time to time in the past. An international organisation like the Bank cannot function if it remains mired in internecine wrangling and recriminations among its members. Enhancement of funds through increase in contributions by members depends on the satisfactory resolution of the simmering dispute over restructuring. In terms of agenda and strategy, the bank need to shift its focus from physical infrastructures to social infrastructures that came under spotlight during the pandemic. Social sectors like health, education, gender development and poverty alleviation should receive greater priority, attention and funds than before. The Bank should have a special window for giving loans to developing countries affected by natural disasters, climate change and pandemics.

Like the Bank, its sister organisation IMF also requires structural reforms to satisfactorily resolve the issue of representation by member countries on the basis of their economic strength. Some changes have been made recently in terms of voting rights but more needs to be done to settle the issue of restructuring once for all. As the lender of the last resort, the IMF should have more resources at its disposal so that it can extend help to countries badly in need of such help after a crisis like the covid-19. It has already announced loans to a number of countries including Bangladesh to give budgetary support. But the fund is limited as the need for such emergency lending was not foreseen. The IMF should have a special window for giving loans to countries that are leveraged with considerable public debt, particularly in times of emergencies so that the necessary fiscal measures can be undertaken by them to stabilise the economy and to sustain employment. In her latest report (October 4) the Managing Director of IMF has noted with satisfaction that $12 trillion in stimulus packages undertaken by developed countries will be helpful in effecting recovery quickly but the developing countries may not be in such a fortunate position because of limited fiscal space. She has predicted that the unemployed in the developing countries are facing  a bleak future and may  become, what she called, 'the lost generation'. The IMF, cognizant of the crisis, should revise its lending policy in times of emergencies like Covid-19 and give loan expeditiously without waiting for conditions to be fulfilled.

Among the international institutions that can play an important role in reviving the world economy after Covid-19 is the World Trade Organisation (WTO). The pandemic has seen world economy being battered, with economic growth plummeting in all countries in various degrees of severity. Free trade can promote world economic growth by expanding demand for goods and services. In recent years shift towards bilateralism and protectionism has shrunk world trade with negative impact on global growth of output. According to Anne Krueger, the dollar value of world trade reduced by 3 per cent in 2019 even as world GDP was growing because of protectionist measures adopted by countries, particularly America (Anne Krueger, Project Syndicate, 2020). The Doha Round initiated by WTO for reduction of tariff that is now sputtering should be given a new thrust through multi-lateral negotiations so that freer trade helps in the quick recovery of economies during and after the pandemic is over. Greater reliance should be made on using rule-based multilateral trading system, as promoted by WTO, rather than through bi-lateral trade agreements.

Covid-19 exposed the weakness of international cooperation as each country scrambled to address the problem strictly from a nationalist point of view. This led to lack of coordination among countries that resulted in shortages of health equipments and medicines even when there was no global shortages and scarcity in these respects. Even within the EU, a close-knit community of nations, the problem was so acute that the organisation had to apologise to the countries that were worst hit. The pandemic has highlighted the need for greater international cooperation to gave the maximum out of global resources. This cooperation in the case of pandemic like Covid-19 should be ensured through WHO.

Of all the UN agencies that showed the need for reforms to strengthen the capacity for dealing with a crisis like covid-19, the WHO clearly is on top. Its failure to collect data from the field, regularly monitor and announce the findings timely was partly managerial and more importantly for lack of support given by member countries. The WHO must be given more powers to collect data from members countries and monitor their health situations independently. The fiasco that was seen after the outbreak of Covid-19 in respect of timely global monitoring calls for an overhaul of the functioning of the organisation and a review of the powers accorded to it. Withdrawing from the organisation because of frustration about its performance is not the answer. Instead the organisation should be strengthened with more power to function independently.

In the back drop of covid-19, the international organisations that exist today should undergo a review of their functioning, working capacity and financial powers. If this is done a new world order will emerge, not in terms of new organisations, but in the form of vigorous and effective working of the existing ones. The deaths of millions of people across the globe calls for nothing short of this.


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