May 22, 2023:
Clearing House -- "Last
week, in Mumbai, I attended the Think 20 interim conference. It describes itself
as an “idea bank” for the G20 that brings together think tanks and high-level
experts to discuss policy issues relevant to the group.
The recommendations involved are far from trivial. The world is in a series
of simultaneous structural crises right now: the economy, debt levels,
sustainable development goals and, separately, climate change. Above all, it is
also engulfed in a crisis of global governance, the basic architecture of which
was developed in a different era (when there was a different balance of power
between countries, in which they had different objectives).
The main target of criticism were international financial institutions. The
problem is not so much the effectiveness with which they are run by developed
countries (although this has also been much debated), but that they are not up
to the task of pooling large amounts of money for common purposes. The world has
sufficient financial resources to address many sustainable development issues,
but they cannot be directed to where they are needed.
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For example, the cost of capital in the developed (mostly Western) world has
averaged 1.5-2% over the past five years, but it has been at 8% in Asia, 16% in
Africa and 22% in sub-Saharan Africa. Tightening monetary policy in the West
only exacerbates the situation for developing countries. The role of
international financial institutions is not so much to provide aid to poor
states but to help channel sufficient private savings around the world into
development projects, taking on some of the risks of investors.
India, as it happens, complains that the World Bank has provided only peanuts
in funding (just a few billion dollars), relative to its over $3 trillion
economy, in nominal US dollar terms.
The second necessity is digitization. The focus is on digitizing services and
public infrastructure (as opposed to the manner in which it can be used for
industry in the US and Europe). An example of how this can work is the digital
ID system being developed in India, which is linked to a bank account. As a
result, there are now four times more digital transactions in the South Asian
country than in China, and 11 times more than in the US and Western Europe
The aim is twofold: to make it easier to include more people (especially
women) in economic activity, and to stimulate innovation. Developing countries
will be less and less able to host Western industries (which was the Chinese
growth model), so innovation will have to be built up through services,
especially as new technologies will allow global companies to outsource more and
Multilateralism is essential. However, the question is to what extent the US,
on the one hand, and China, on the other, are ready for it.
The former is more interested in the results of its next election, and the
cycle itself, than in global problems; while the latter sees its participation
in solving them so far only in the form of China-centric formats such as the
Belt and Road Initiative. There was one attempt to attack Russia for undermining
a well-functioning world order – by an Anglo-American participant, who was
immediately rebuked rather harshly by a Brazilian and then an Indian moderator.
In general, any talk of a “rule-based order” in Mumbai was visibly tiresome.
In just a few years, I have seen a clear shift from delegates declaring the
crisis of this kind of order to key people asking who should actually make the
The general impression is that the successive presidencies of Indonesia,
India, Brazil and South Africa, from 2022-2025, (with very active interaction
between them) of the G20 will be maximized by these countries to shape a new
narrative, which of course will not automatically translate into reforms of
global governance, but will serve as constant pressure for these changes.
Igor Makarov, Associate Professor
at the Higher School of Economics (HSE), head of the Research and Educational
Laboratory for the Economics of Climate Change, and the editor-in-chief of HSE’s
Contemporary World Economy