Power and Responsibility: Building International Order in an Era of Transnational Threats

9. Strengthening the Pillars of Economic Security

234 IN THE AFTERMATH of the global depression of the 1930s and World War II, forty-four nations agreed to create the Bretton Woods institutions and the General Agreement on Tariffs and Trade (GATT) to promote economic stability and peace. As the principal architect of the Bretton Woods system, Harry Dexter White, put it, “The absence of a high degree of economic collaboration among the leading nations will . . . inevitably result in economic warfare that will be but the prelude and instigator of military warfare on an even vaster scale.”1 More than sixty years later, the nature of international security threats may have changed, but White’s premise still holds. Countering twentyfirst -century security threats and promoting prosperity in the coming decades will require international cooperation and global institutions designed to sustain open yet stable systems of trade and finance, build resiliency to economic shocks, tackle the poverty that still traps billions of people, and ensure that the benefits of globalization are shared more equally. Global institutions and the international cooperation they foster, though, must be geared to a new economic landscape. The rise of new economic powers—China, India, the Gulf States, Brazil, Mexico, and many countries across East Asia—has shifted patterns of capital concentration and natural resource consumption. With globalization and STRENGTHENING THE PILLARS OF ECONOMIC SECURITY NINE 09-4706-2 ch09 12/15/08 11:16 AM Page 234 greater integration, volatility in the international financial and trade system is increasingly shared. As exemplified by the 2008 mortgage and financial crisis in the United States, economic calamity in a single sector or country can reverberate throughout the world, underscoring the need for effective oversight and regulation—not just at the national but also at the global level. Countries that have taken advantage of the international trade and financial system have reaped vast benefits. Yet fear of instability and the impact of globalization on the competitiveness of domestic products and labor are giving rise to a tide of protectionism that threatens to block further progress on liberalizing trade. This is happening precisely when further gains in the international trading system would begin to make the benefits of globalization more accessible to the poor. Despite the booming global economy of the last decade, much of sub-Saharan Africa and substantial populations in the Middle East and West Asia have been left behind.2 At the beginning of the twenty-first century, many countries are worse off—in absolute terms—than they were in the 1960s. Poverty in these countries remains a direct threat to their populations. Globally, 30,000 people die as a result of poverty every day.3 Moreover, the cyclical effects of poverty pose a direct and immediate challenge to global stability. Extreme poverty has been both cause and consequence of state weakness, undermining the basic unit of the international system.4 Poverty can erode a state’s ability to exercise good governance , undercut human capital, ignite grievances about inequalities, and challenge individual freedom and dignity. Poor and poorly governed states are the least able to safeguard the well-being of their own citizens and to fit cooperatively into a community of nations. Put another way, they are the least able to uphold the demands of responsible sovereignty. Combating poverty and promoting well-governed states tied to a stable and prosperous global economy promises to become even more complex as resource scarcity, population growth, and climate change become more acute. The United Nations projects that the world’s population will reach 10 billion by mid-century. Limited supplies of oil, food, water, land, energy, and “atmospheric space” to absorb carbon emissions mean that the world is poised for severe economic and social adjustment problems .5 Already, food shortages caused unrest across dozens of countries in 2007 and 2008. Issues of scarcity and strategies for building resilience STRENGTHENING THE PILLARS OF ECONOMIC SECURITY 235 09-4706-2 ch09 12/15/08 11:16 AM Page 235 to those issues are likely to emerge as increasingly central to sustainable development. Promoting and sustaining economic security will depend on four interconnected pillars: (1) a stable financial system; (2) an open and resilient trading system that benefits the poor; (3) more robust and effective delivery of international assistance; and (4) improved governance and democratic institutions. These four pillars rely on one another for success. Globalization has resulted in record levels of wealth, but the international system needs mechanisms...