Globalisation and the new nationalism collide

We are saved. Amid the rubble of the world’s financial markets, we can catch sight of the foundations of a new international order. The big lesson of the crisis has been learnt: we cannot escape our mutual dependence. Global markets require multilateral rules.

Why am I so upbeat? Well, only this week that great internationalist President George W. Bush announced he was summoning world leaders to Washington to “advance common understanding” of the causes of the crash. In the words of the White House, these leaders will frame “a common set of principles for the reform of the regulatory and institutional regimes for the world’s financial sectors”. That is a bit of a mouthful, I know. But, hey, multilateralism is a long word too.

Some readers, I suspect, may be a little more sceptical about the outcome of what breathless European leaders have billed as the new Bretton Woods. How, others may ask, will France’s Nicolas Sarkozy and Britain’s Gordon Brown share the plaudits? We cannot have two heroes of the hour – not, anyway, when one happens to be French and the other British.

I would also be the first to admit that the timing of the summit, coming 10 days after the US presidential election, is not ideal. Mr Bush will have reached the last lap of a broken presidency. His successor, presumably, will attend as an observer.

Barack Obama has given his blessing to the gathering. I am not entirely sure, though, that the Democratic candidate sees eye to eye with the president on the shape of a new global system. Mr Obama, after all, has campaigned on a promise to repair the immense damage Mr Bush has done to US standing in the world.

Come to think of it, given the nasty things John McCain has been saying on the campaign trail about Mr Bush’s record, it must be doubtful that he would be any more welcome ahead of inauguration day.

Never mind. At least the invitation list shows that the rich nations have woken up to the fact that the world is no longer a private club. Financial crises used to be things that happened to poor nations. The epicentre of this one was in the west. So the old stagers from the Group of Seven leading industrial nations will be joined not just by Russia’s ever-scowling Vladimir Putin, but also by a dozen leaders from the emerging powers.

The so-called Group of 20 may be a cumbersome group, but at least it holds up something of a mirror to the world. Many of these countries lent the rich nations the money with which they financed the boom. They deserve a say when it comes to any discussion of the lessons of the bust.

If Mr Obama does win on November 4 – and the polls are beginning to point towards a landslide – one of his first acts should be to cement this change with an act of unilateral multilateralism. He should announce that, as US president, he will absent himself from the cosy conceit of the G7 and G8. He will be ready, though, to join meetings of a G13 or G20.

I have to confess that here my optimism begins to ebb. This has nothing to do with Mr Obama. As president, he would have a better chance than any of his predecessors to lead an effort to reshape the global order. He also gives the impression that he understands that this may be a last chance for the US to imprint its values on such a new system.

No, it is when you look closely at how most leaders have behaved in response to the storms on financial markets that the gulf emerges between lofty expressions of solidarity and miserly intent. Mr Bush’s view of a new financial order is that the US sets rules and others follow them. Come to think of it, Mr Brown thinks much the same about Britain’s role.

The mantra, in Europe at least, has been that global problems require global solutions. As a statement of fact, that is indisputable: the world was pulled back from the brink of the financial precipice only when governments of the largest economies finally agreed to act in concert.

Look, though, at what they have been saying since. Mr Sarkozy wants Europe to set up its own sovereign wealth fund to buy stakes in European companies during the recession. The aim, needless to say, is to protect European, and French, industrial champions from foreign ownership. For foreign we should presumably read Arab or Asian.

The French president put forward his idea, incidentally, in the very same breath as a demand that these foreigners be offered seats at the summit. We will talk to them but they cannot buy stakes in our companies? Others, such as Italy’s Silvio Berlusconi, have seen an opportunity to construct a new state capitalism to shield their industries from outsiders. It will not be long before Mr Berlusconi is leading calls for Europe to shut out immigrants.

Angela Merkel’s German government has criticised some of these ideas. More generally, though, Berlin has been as reluctant as any to see beyond the narrowest of national interests. Mrs Merkel insisted, for example, that not a single euro of German money be used to help rescue anyone else’s bank. So much for European solidarity.

The underlying problem here is a big disconnection between an analysis that sees all these governments agree that they must work together and a politics that drives them to guard jealously their national prerogatives. Economics and finance may be global, but politics is still local.

Step back from the maelstrom, and what the financial crisis and its aftermath (though I am not sure it is over) have done is to illuminate the two forces shaping the modern world. Globalisation now co-exists, and often collides, with rising nationalisms.

These nationalisms come in different forms. On the one side there are the emerging powers – China, India and the rest – that have never really felt part of a multilateral order designed and dominated by the west. Why, at the moment when they are becoming great powers, should they surrender sovereignty to others?

Alongside them are the rich nations that, while speaking the language of mutual interest and dependency, are just as jealous of their present privileged positions. They are all for a more inclusive global order; just as long, that is, as the addition of new members to the club in no way dilutes their own authority.

By now, as you will have guessed, my optimism has been more or less drained. The financial crisis has described a much broader collision between the mutual dependence of globalisation and the rise of nationalisms. Thus far no one has owned up to the danger. The summit would be a success if the leaders did no more than reach the beginning of understanding.

philip.stephens@ft.com

More columns at www.ft.com/stephens