25 Dec 2011

I happened to be in Paris on October 27, the same day that EU leaders announced at 4am a breakthrough agreement to save Greece, the euro, and possibly the European Union. I was attending a meeting of the 21st Century Council, founded by Nicolas Berggruen, which included global luminaries such as Al Gore, Gordon Brown, Gerhard Schroder, “Mo” Ibrahim, Pascal Lamy, Nouriel Roubini and George Yeo. It was as good a setting as any to reflect on the state of the world.

Most participants of the 21st Century Council meeting reacted positively to the October 27th agreement. There was relief that the world economy had once again been pulled back from the cliff. Yet, in private, there was also scepticism about whether this agreement provided a long-term solution. Roubini, better known in public as “Dr Doom” for his prediction of the 2008 global financial crisis, was particularly doubtful whether this patchwork agreement provided a solution to the long-term challenge of restoring economic growth to Greece and the other peripheral economies of Europe.

The other participants, especially the senior global statesmen, were more diplomatic and restrained in their responses. Nonetheless, when they analysed the state of our world, they also suggested that the world faces real structural problems, not just a temporary crisis. Gordon Brown put it bluntly that our global problems require global solutions. He pointed to many global structural imbalances that had arisen in recent times. He said that it was only in the last two or three years that the West had been out-produced and out-traded by the rest of the world. Despite this, the West was still out-consuming the rest of the world. This was clearly not sustainable. It was also not sustainable for all countries to push export strategies if no major countries wanted to import more.

Gordon Brown therefore strongly advocated that the G-20 work out a global growth pact. He said the US and EU should undertake to build more infrastructure to stimulate growth while China and India should consume more and create, in his words, a “self-reinforcing circle”. In short, the world should act in unison. Yet, as several members observed, after the successful G-20 meeting in London, subsequent G-20 meetings in Pittsburgh and Seoul had failed. Ernesto Zedillo, the former President of Mexico, pointed out that the Pittsburgh meeting had agreed on a mutual assessment process (MAP) to assess whether the fiscal, monetary, trade and structural policies of the G-20 were on a sustainable trajectory. Despite this clear commitment, the Seoul meeting ignored the MAP decision, demonstrating the inability of the G-20 to even abide by its own commitments.

There is a simple reason why global leaders ignore their global commitments. They are not elected by any global constituency. Instead, they are elected by their local citizens who want immediate attention paid to their local concerns. Virtually no major global leader has the courage to explain to local citizens that the world has changed fundamentally. And how has it changed fundamentally? As I explained in an International Herald Tribune article on 18 August 2011, in the past when the 7 billion citizens of Planet Earth lived in 193 separate countries, it was like living in 193 separate boats. The global order only needed rules to ensure that the boats did not collide and instead promote cooperation among them. However, with the world having shrunk, the 7 billion people no longer live in 193 separate boats. Instead, they live in 193 separate cabins on the same boat. There is one fundamental problem with this boat. We have captains and crews taking care of the cabins. Yet we have no captain or crew taking care of the boat as a whole.

The world has crossed a significant threshold. None of the major problems we face can be solved by any country alone, whether they are financial crises or pandemics, terrorism or global warming. This was also a point that Al Gore put across forcefully at the Paris meeting. After giving a passionate address on the danger of global warming, he stressed that what the world needed most was a “unified earth theory”.

In short, when retired global leaders meet in private, there is no disagreement in their analysis of the state of our world. They all agree in private that global problems require global solutions. The big tragedy for the world is that they are not able to persuade their successors, who are still in office, to be equally wise globally. If they can succeed in doing this, then we may finally get on to the road of fixing the key global problems we face.