A new world economic order is needed for the future of globalisation.
Op-ed by Katja Gentinetta, published at NZZ Magazin
The war shows that global rules for the economy are needed so that its beneficial effects – prosperity, progress, freedom – benefit as many people as possible.
It is becoming increasingly apparent that the Corona pandemic was possibly a prelude to what awaits globalisation in the years ahead. After companies and states have had to come to terms with reducing their dependencies on raw material suppliers and reorganising their supply chains and production sites over the past two years, they are now confronted with the task of also taking a political stance on the Ukraine war. Depending on the course of the war, this will have far-reaching consequences for globalisation. The tough sanctions imposed by Western countries in a show of rare unanimity, along with the decisions of companies in recent days to withdraw from Russia entirely or partially, are leading to Russia being cut off from globalisation. It is unlikely that this isolation would be quickly lifted even after the war has ended. It must first become clear how Russia will politically position itself after the war.
Dangerous expansion
In this, China’s new power both economically and politically is clearly revealed. The way the global economy is organized in the coming years depends on China’s decisions. If it supports Russia, corresponding sanctions from the West will likely follow soon . This would make a dangerous acceleration of the war more likely. Not only China’s economy, but that of all countries embedded in a globalised world would be massively weakened for years, if not decades. A division of the world economy into blocs would be foreseeable: liberal democracies here, authoritarian regimes there. If the latter combined their military and technological competencies, they would pose a threat to the West that should not be underestimated. The result would be a division of information, communication, financial and trade flows.
Alignment with state action
Nevertheless, this would not simply strengthen liberal democracies. For one thing, any form of protectionism is accompanied by medium-term losses in prosperity. This is not only because it inhibits the exchange of ideas and goods and slows down progress, but also because companies orient themselves more to states than to markets, making subsidies more attractive and, in extreme cases, even corruption necessary for survival. Secondly, the Indo-Pacific region is developing into the most important growth market in the coming years. The mere possibility of being excluded from the trade routes in this region for political reasons is likely to cause serious disruption to Western economies. Industrialized nations would do well to use the willingness of companies to take political risks seriously to underpin free and fair global trade. What’s more, climate change, whose political and financial dimensions can now no longer be concealed by even the most benevolent policies, cannot be tackled by liberal democracies alone. Any global agreement without the largest emitter, China, would yield half-baked effects. The fact that Western countries would have to turn to autocratic regimes in the Arab world and South America to bridge this gap would not make their efforts any more credible. The fact that so many companies, even without the pressure of sanctions, have withdrawn from Russia based on a clear stance and a well-considered decision, in turn accepting greater business risks and write-offs, is a visible indication that they are willing to weigh political and social risks highly alongside actual economic risks. ndustrialized nations would do well to take companies’ willingness to consider social-political risks seriously and use it to underpin free and fair global trade.
Global coordination involving corporations
Since the 2008 financial crisis, there has been a growing need to underpin the global economy with a global regime that makes it more robust. The Corona crisis has once again demonstrated the importance of global coordination that involves large corporations. The war in which the West is now using its strongest weapon – the economy – should definitely make it clear that global rules for the economy are needed so that the beneficial effects of globalised economies- prosperity, progress, freedom and thus the further development of our species on this earth – benefit as many as possible. Now that the global peace order as featured in the UN Security Council has definitely come to its end, this could be the next important task for the WTO and its liberal-minded members.