Summary:

• Global governance structures since WW2 have been found wanting, as  security and economic failures in recent years have shown
• New economic models have arisen in Asia, and the Middle East is increasingly seen as the pivot between the four compass points of the globe
• Financial flows from west to east, or Global North to Global South, have stagnated, causing many in developing countries to reconsider their reliance on north America and Europe
• An opportunity exists for a new global governance architecture more suited to the needs of the whole planet.

6 September 2023, The architecture of global governance is more fluid than at any time over the past half-century. With good intentions and good planning, and perhaps just a little good luck, policymakers have the opportunity to create a global infrastructure that is more equitable and inclusive, and which more accurately reflects the economic and political realities of the 21^st century.

The governance structure put in place at the end of the Second World War – largely by the victorious USA and its European allies – is unravelling. The crowning feature of that edifice was the United Nations, which so far has succeeded in preventing another world war, but which has fallen short of its goal of saving “succeeding generations from the scourge of war” in conflicts from Korea to Iraq through to Ukraine.

If the political machinery for international governance has been found wanting, so too has the economic and financial infrastructure. The Global Financial Crisis of 2008-9 exposed the inherent weaknesses of western-style capitalism and its susceptibility to boom-and-bust cycles, and tarnished the image of the American financial system, where the crisis originated.

New economic models emerged to challenge the orthodoxies of the past 50 years. The dynamic export-led growth of China – which enjoyed double-digit GDP growth for many years and rapidly rose to challenge the USA as the world’s biggest economy – showed that there were alternative economic models to the Washington consensus for developing nations.

All the while, rising inequalities in wealth and prospects, which were actually exacerbated by the crisis, seemed to demonstrate to many in the emerging markets that existing economic and financial infrastructure would not be trusted to do the job of enhancing global development.

Financial flows from the west to the east, or broadly from the northern hemisphere to the “Global South”, have stagnated, causing many in the developing countries to reconsider their reliance on north America and Europe as trading partners and investment providers.

The Middle East – at the geographical crossroads of the world between east and west – is increasingly regarded as the pivot on which this great realignment is turning.

According to consultancy Asia House, trade between the Gulf Co-operation Countries (GCC) and Asian emerging markets is set to surpass commerce with the “developed” world by 2028. GCC-China trade reached a record high and surpassed GCC trade with the US and Euro Area combined for the first time in 2021.

And it is becoming increasingly diverse. What began as a simple swap of Arabian oil for Asian manufactured goods has become a sophisticated exchange of advanced technology, refined energy derivatives, infrastructure investment and high-value consumer goods like electronic vehicles.

This global realignment offers the possibility of creating a new global architecture that is more suited to the needs of the whole planet, not just the traditional powers in the west, many of whom were former colonial occupiers and resented as such.

On a whole range of strategic issues – from infrastructure investment to wealth inequalities, through to social, health and educational development – these new orientations could be the conduits for a more just and inclusive model of international development.

On perhaps the biggest issues of all, climate change and global warming, it seems impossible to imagine a global solution without the core involvement of the Global South.

The recent expansion of the BRICS organization to include important members of the emerging markets – notably Saudi Arabia and the UAE – could be an indicator of how this realignment might go. But the BRICS is still very much work-in-progress, and it will have to seriously step up its game if it is to become a serious challenger to the existing, creaking world order.

The urgent need is for a more just and inclusive global governance structure, not one that will further divide the world into mutually hostile camps with their agendas set in Beijing and Washington.

Those who are fashioning this new global reset should perhaps bear in mind that other aim of the United Nation’s Charter from half a century ago: “to practice tolerance and live together in peace with one another as good neighbours.”

The Future Investment Initiative’s flagship conference, FII7, takes place 24-26 October 2023 in Riyadh, Saudi Arabia, six weeks after the G20 summit in New Delhi. 

It will address global governance arrangements, with an emphasis on equitable and positive outcomes for all corners of the globe; the macroeconomic headwinds faced by all societies; climate finance and government action in the weeks before COP28; and it will address what policy makers must do to harness technology, education and health to make the planet fairer, safer and more prosperous, ensuring all humanity can flourish.