By Yaroslav Lissovolik
The need for changes in the current system of global economic governance appears to be increasingly recognized in expert circles, though still too often such changes are viewed as being destructive and conducive to economic fragmentation. In this respect, multipolarity as a paradigm that may become the lodestar of the reconstruction of the current global economic architecture is mostly assessed through the prism of geopolitical rivalry rather than the economic foundations that may support the evolution of the new framework of global governance. In what follows I briefly attempt to sketch some of the economic features of the nascent multipolarity and the systemic elements that may characterize this emerging system in the long term.
At the micro-level of basic microeconomic assumptions and behavioral models, the centrality of profit-maximization and self-interested individualism may need to be re-evaluated towards according more weight to the utility of attaining balanced and sustainable economic outcomes. This is particularly important at the international level of corporate and economic diplomacy, where taking into account spillover effects and externalities becomes increasingly pressing – the current state of international affairs and the risks posed by Realpolitik (policy of narrow/exclusive national interest) and unilateralism amply show that diplomats should not be simplistically equated in their motives with the extreme cases of avaricious “utility-maximizing” consumers or the myopic profit maximizing companies.
Accordingly, at the international level, a multipolar orientation needs to balance national interests with contributions to global economic sustainability and welfare. This in turn implies that extreme forms of Realpolitik are to be eschewed in favor of a more enlightened stance on the international arena that involves an active participation in international economic organizations and palpable contributions to the common efforts and initiatives of the global community.
This point about the need to avoid the extremes of Realpolitik in building a multipolar world economy calls for a wider circle of participants and contributors from the international community to this collective construction process. Indeed, the pursuit of the multipolarity project is too important to be left solely to the devices of nation states. The excesses of Realpolitik on the part of national economies are likely to feed beggar-thy-neighbor policies such as trade protectionism – there need to be actors on the international arena that may attenuate such rivalries. This is where the regional integration arrangements and their development institutions come in.
What the regional organizations and integration arrangements bring to the table is not only a moderation in the pressures associated with “economic nationalism” – these arrangements allow for greater inclusivity and the participation of not only the largest heavyweights, but also their smaller regional partners. The elevation of economic diplomacy to the level of regions rather than nation states serves to lower the asymmetries and inequalities that are more extreme at the country level, thus allowing for more balanced and equitable cooperation.
A greater prominence of regional arrangements in the global economic architecture and international economic diplomacy in turn would call for the creation of a horizontal platform for regional integration arrangements – such a platform could potentially be set up within the G20 (as a regional 20/R20 engagement group) or it could be established within the United Nations framework. This could in effect constitute the launching of a new, regional layer of global governance that would serve as the key foundation for advancing mutipolarity in the world economy. For such a platform to operate seamlessly, it would need to be closely integrated with global institutions such as the WTO; another important pre-condition is greater connectivity between regions/regional arrangements via the “integration of integrations” track as well as via the cooperative mechanisms and links between adjacent regional integration blocs.
At the level of international institutions, a more decentralized system of quota/vote distribution needs to be pursued, with sufficient scope for small and emerging economies to have a greater impact in the world economy. Regional integration arrangements as well as their development institutions could further increase their presence among the core members of key organizations and forums such as the G20. New regional and global platforms of economic cooperation should further expand to accommodate the rising needs of greater connectivity across the main regions of the world.
A key element in a multipolar system is the legal mechanism that places limits on the excesses of unbridled Realpolitik, unilateralism and monopolism in international markets. In this respect, a reinvigorated world trade system represented by the WTO and its fully operational dispute settlement body (DSB) would be an indispensable part of the new multipolar order. In a multipolar setting, such an international legal framework of institutions would be akin to an Anti-trust system that places constraints on the monopolistic excesses of any one single economic power.
In a multipolar system, economic policy and strategy need to become more forward looking and more sensitive to cross-border spillover effects and negative/positive externalities. Scenario analysis and projections undertaken by leading international organizations need to focus on the detailed evaluation and estimation of externalities and spillover effects across a wide range of policy areas – from environmental and industrial policies to common efforts such as anti-crisis stimuli undertaken to counter risks of economic depression/slowdown.
In terms of the macroeconomic policy mix, fiscal policy should have a greater scope in a multipolar setting to target more connectivity projects via infrastructure development at the expense of less productive, low-return outlays. In the monetary sphere, there may be more scope for actively exploring the possibilities for greater macroeconomic/monetary policy coordination and the creation of new regional or global reserve currencies. Emerging markets may then advance a wider array of investable assets, raising the optionality and breadth of choice for consumers and portfolio investors across international markets.
Finally, if the economics of mutipolarity at the international level were to be carried fully to its logical conclusion, the decentralization and greater optionality in economic architecture could be carried through to the national and sub-national levels. Such a multipolar paradigm at the level of national economies would call for a more diversified structure of regional economic development, with more wealth generation, GDP growth and fiscal resources coming from a wider array of regions within individual national economies. The national systems of fiscal federalism would need to support such economic diversification through providing scope for greater convergence across the various regions of the country. A more active competition policy pursued at the national and regional levels could also support the process of greater economic decentralization/diversification within national economic systems.
In the end, the creation of a platform for the regional integration arrangements is the key step that the world economic community could make in advancing the emergence of a multipolar world economy. The most powerful appeal of a multipolar economic system is that it seeks to counter monopolism, while expanding the possibility set for the global economy in terms of the modernization models and back up options that could be pursued in adverse scenarios. Most importantly, such a setting favors consumers by boosting fair competition and widens the possibilities for investors in terms of new reserve assets, new regional/global currencies, and other financial instruments. For the overall framework of global governance as viewed in terms of AI learning analogy, a multipolar system with multiple inter-connected nodes is likely to prove superior to a system with several isolated/”privileged” neurons – the inclusivity and interconnectedness of the multipolar system is likely to deliver the dividends of better learning and more informative feedback loops undertaken by the system of global governance.
Yaroslav Lissovolik worked in the International Monetary Fund, in Washington, where he was Advisor to the Executive Director for the Russian Federation (2001–2004). In 2004 he joined Deutsche Bank as Chief Economist and became Head of Company Research in Russia in 2009, and then a member of the Management Board of Deutsche Bank in Russia in 2011. In 2015–2018 Yaroslav Lissovolik was Chief Economist and subsequently Managing Director of Research and Member of the Management Board at the Eurasian Development Bank (EDB). From 2018 to 2022 he has been Senior Managing Director — Head of Research at Sberbank Investment Research (CIB). In 2023 he founded BRICS+ Analytics to conduct in-depth research on the future trajectories of BRICS+ development. Yaroslav Lissovolik graduated from Harvard University (magna cum laude) with a BA degree in Economics, and received an MSc in Economics degree from the London School of Economics (LSE). He also received his PhD degree in Economics from the Moscow State Institute for International Relations (MGIMO, red diploma) and a Doctorate in Economics from the Diplomatic Academy. Yaroslav Lissovolik is also a member of the Russian International Affairs Council (RIAC). Senior member of the Advisory Council at the Center for Russia-China Strategic Cooperation of the CITIC Foundation on reform and development.
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