April 7, 2013 8:09 pm

An optimist’s view from the edge of the abyss

An insider’s take on floundering global bodies depicts a world as endowed as it is endangered by rapid integration

Divided Nations: Why Global Governance Is Failing, And What We Can Do About It,, by Ian Goldin, Oxford University Press (RRP£12.99, RRP$21.95)

What is the link between malicious computer hackers, pollution-spewing power stations, bird flu and complex financial products? All pose potential threats to the planet, its climate and inhabitants that no single government could tackle alone. Collectively, they provide doomsters with reasons why the 21st century could be as blighted by war, plague and economic depression as in the first half of the 20th.

 

Anyone wanting their spine chilled by things that might go wrong in a world of “turbocharged globalisation” could do worse than read Divided Nations, which examines why global governance is failing and possible remedies. A former World Bank policy director and adviser to Nelson Mandela, Ian Goldin takes the benefits of globalisation as given – yet sees a planet as endangered as it is endowed by its rapid economic and technological integration.

Hackers can plant Trojan horses in computers on the other side of the world. Climate change pits poor nations against the rich, big business against environmentalists. In the run-up to the financial crisis, collateralised debt obligations “played the role of the pathogen”. Flu pandemics, spread by globe-trotting humans carrying treatment-resistant viruses, could pose still greater dangers.

Almost as scary is his insider’s view of international organisations’ lack of readiness to deal with such threats. He questions the future effectiveness of the UN, and the legitimacy of the International Monetary Fund and World Bank, created at the 1944 Bretton Woods conference. “The picture of global governance today is one of duplication, ambiguity, overlap and confusion,” he concludes. Tax-free salaries and comfortable career paths encourage entrenched views and organisations out of step with modern working practices.

The EU, the largest and most comprehensive of the world’s regional organisations, has proved unable during the eurozone crisis to rise above national interests and short-term imperatives – an impression not helped by its botched handling of the Cyprus crisis. At the global level, the Group of Seven leading industrialised powers, constrained by debt problems, have lost authority, while Brazil, Russia, India and China have yet to provide constructive leadership. “That this hiatus in global power is occurring precisely at a time when issues are bubbling up that need urgent attention is a source of grave concern,” Goldin frets.

Widespread reform may begin after the next global disaster. “The financial crisis is only the first of what will be an increasingly severe set of destabilising shocks in the 21st century. New institutions will emerge out of these crises, just as the key elements of our current institutional structure – including the UN and the Bretton Woods institutions – rose phoenix-like from the second world war.”

Yet Goldin professes himself “an op­timist” who believes in the “creative power of humanity”. Eurozone leaders have shown politicians can take tough decisions when looking into the abyss, for instance in Greece. Moreover, he presents plenty of examples of nation states co-operating successfully. He might have explored in greater depth why the world was able to agree cross-border rules on air traffic that have created a robust, reliable system; if only banks could be made as safe.

Although his career as an international civil servant has jaded his views on global organisations and rendered his prose liable to unwieldy English and truisms (“The future ... will be unlike the past”), he provides a useful speed read of the literature on global governance.

Goldin considers reasonable principles for improving the effectiveness of global action, looking at legitimacy, coverage and enforceability. But he does not discuss sufficiently whether the excesses of globalisation will prove to be self-correcting. The financial crises of the past six years, for instance, have already led to substantial – and arguably healthy – falls in speculative cross-border capital flows.

Crucially, global networks have created ways of mobilising popular opinion as a force for change and correcting deficits in governance – whether enabling the Arab uprisings or ad­vancing gay rights and environmental sustainability. As Goldin says: “While connectivity puts us in greater danger by empowering our would-be aggressors, it simultaneously empowers individuals with positive and more benevolent aims... vital to addressing the challenges of the 21st century.”

This book’s contribution to the policy makers’ lexicon is the idea of “genius unlocked”, by which hyper-connectivity brings together concerned, intelligent people. Globalisation provides unrivalled opportunities to collaborate, innovate and leverage popular pressure for action. The world may yet avoid catastrophe.

The writer is the FT’s capital markets editor

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